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Business Desk

The Jakarta Post

Publication Date : 08-01-2013

Indonesia would unlikely be able to meet its 2012 gross domestic product (GDP) growth target partly due to the low realisation rate of the government’s capital spending, Finance Minister Agus Martowardojo said in Jakarta yesterday.

The finance minister said he estimated that the year-on-year GDP growth would range only between 6.2 and 6.4 per cent in the fourth quarter, which would result in an annual growth of 6.3 per cent, lower than the government’s target of 6.5 per cent.

Consumer spending and investment remains the main drivers of the economy amid the fall in exports.

Agus, however, said that although it did not meet the target, the growth of 6.3 per cent would be good enough for Indonesia since the growth rate was achieved amid uncertainties in the global economy.

The government’s inability to meet its 2012 growth target was mainly due to the slow disbursement of capital spending, said the Finance Ministry’s interim head of fiscal agency, Bambang Brodjonegoro.

In 2012, Indonesia only managed to disburse 79.6 per cent of the 176.1 trillion rupiah (US$18.5 billion) allotted for capital expenditure.

“If we had recorded a higher disbursement rate for capital expenditure — say close to 100 per cent, for instance — then our economy would have expanded by 6.4 to 6.5 per cent,” he said during the press briefing.

In the 2013 State Budget, the government has upped infrastructure spending by 15 per cent to 193.8 trillion rupiah. But many fear that the increase will not affect the economy on account of the slow disbursement rate.

Due to the slow disbursement rate, as of December 2012, the idle funds stood at 34 trillion rupiah.

Deputy Finance Minister Anny Ratnawati urged ministries and relevant government institutions to have a better organised budget disbursement plan this year. Indonesia should at least have a 90 per cent capital spending realisation rate if the country wants to meet its 2013 growth target of 6.8 per cent, she added.

“This issue is important because we may see a negative growth in exports this year because of the prevailing uncertainties in the global economy that could consequently drag down our economic growth,” she said.

The deputy minister, however, was optimistic that the capital spending realisation rate this year would be higher than in 2012, citing the issuance of several regulations to cut down on excessive bureaucracy.

In August last year, the government issued a technical regulation on the Land Acquisition Law to accelerate the procurement of land for public infrastructure projects. In the same year, the government also revised the 2010 Presidential Regulation on public goods and services procurement, upping the threshold for direct procurements to 
200 million rupiah from the previous 100 million rupiah.

Nevertheless, the Finance Ministry is optimistic that Indonesia will remain strong this year despite the global slowdown as the country is bolstered by significant growth in investments, besides the economy’s major driver of domestic consumption.

*US$1=9,660 rupiah