Abdurahman Fiscal Policy Office/PhD Student at ANU. Presented at Indonesia Forum Seminar Series University of Canberra 31 January 2012

Transcription

1 Abdurahman Fiscal Policy Office/PhD Student at ANU Presented at Indonesia Forum Seminar Series University of Canberra 31 January 2012

2 Outline Growth and its potential Infrastructure challenges Investment on infrastructure Problem of government investment Limited resources or low priority? Inefficiency Role of parliament in budgeting PIMI index Concluding remark

3 Growth and its potential (1) Despite hit by two crises in a decades (AFC 1998 & GFC 2008) the economy grew well Some concerns: Economic Growth: Indonesia, China & India (%) Slower rate than pre-afc periods 12.0 Average = 10.3 Slower than other emerging peers (China & India) Average = 7.4 Mostly backed by consumption. 6.0 Unsustainable in LR Less create job 4.0 India 2.0 China Indonesia

4 Economic growth and its potential (2) The economy could grow faster at its potential rate - 8% The main hurdle is inadequate infrastructure Table 1 Infrastructure Quality in ASEAN Country Roads Rail road Seaport Air transport Electricity Score (out of 7)* Singapore Malaysia Thailand Indonesia Philippine Source: The GCR 2011 Indonesia s infrastructure is ranked 82 nd among 139 countries Singapore (5th), Malaysia (30th), and Thailand (35th), China (50th)

5 Infrastructure challenges Rapid population growth Need new health facilities, sanitation etc. Only 60% are electrified Middle income class growth almost 1 million new cars every year Around 6 million new motor bike every year Demand for Infrastructure increases Shortages Supply bottleneck Rapid economic growth Need more infrastructure High cost economy Limiting economic capacity

6 Investment on Infrastructures Infrastructures is a typical public goods Non exclusionary Non rivalry Limited incentive for private provision Mostly rely on government investment A breakthrough: public-private partnership (PPP) Has not been successful: institutional and regulatory issues Problem with government investment (capital spending) Limited government resources or low priority? Lack of efficiency: Weak budget execution Poor project management (corruption?)

7 Limited resources or low priority? 180, , , , ,000 80,000 60,000 40,000 20,000 - Government Capital Spending: Pusat vs Daerah (Rp Billion) Ratio Capital Spending to Central Gov Spending (%) 0 Pusat Daerah Source: MoF, own calculation

8 Limited resources or low priority? APBD Profile: Capital vs Personnel Spending (average % to total spending) Description Capital spending Average Maximum Minimum Personnel spending Average Maximum Minimum # of Regions Above average # of regions Above 60% # of regions Above 70% # of regions Above 80% Number of regions observed Proportion of capital spending is shrinking Personnel spending is soaring Personal spending reaches more than 70% or even 80% of total spending in some regions Source: DJPK, own s calculation

9 93/94 94/95 95/96 96/97 97/98 98/99 99/ Efficiency: Weak execution (1) Big gap between planned vs realized Poor planning wasteful Gap Between Planned and Realized Capital Spending (%)

10 Efficiency: Weak execution (2) Skewed to the end: Less efficient Poor quality 70.0% Quarterly Disbursement (% to total) 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Q1 Q2 Q3 Q

11 Role of Parliament in Budgeting Under New Order s regime Budget proposal was never questioned nor amended by parliament Post 1998 reform (Transition to democracy) DPR has unlimited power to amend budget proposal Deeply involved in every stages of the budget process from formulation to implementation Budget scrutiny by DPR up to detail project Blondal et al (2010) Indonesia is the unique case DPR has the power to scrutinize budget up to project level None of OECD countries has such power Implications: Multilevel brokerage (budget mafia): - Broker for Line Ministry/Pemda at formulation stage - Broker for corporate at procurement stage Overall budget policy is neglected

12 Efficiency: PIMI Index (3) Dabla-Norris et al (2011) construct an index to measure the quality of government investment management 4 components: Project appraisal Selection (bidding process) Implementation Evaluation Scoring: Scaled between 1 4 (higher score reflects better quality management)

13 Efficiency: PIMI Index (4) Rank Country Overall Sub Index Appraisal Selection Managing Evaluation 1 South Africa Brazil Colombia Tunisia Thailand Peru Bolivia Armenia Kazakhstan Botswana Philippines Indonesia Belize Source: Dabla-Norris et al (2011)

14 Efficiency: PIMI Index (3) 9.0 Government Investment: Actual vs PIMI - Adjusted (% to GDP) o o Follow Gupta et al (2011) use PIMI to construct government capital stock However, look at: 8.0 Wisma atlit case (Kemenpora) 7.0 PPIDT case (Kemenakertrans) 6.0 PLTS (PLN), etc. 5.0 In all cases: broker fee: 13 20% 4.0 In implementation stages: 3.0 Reduced specs Partly sub-contracted: another broker fee DPR s Renovation: Banggar room (Rp20 M), toilet (Rp2 M), & parking (Rp3 M) total budget Rp500 M (Majalah detik Jan 2012) Public Investment PIMI Adj- Public Investment Cases in regions could be even worse (less KPK, ICW & other related NGO).

15 Concluding Remark

16

17

18 Kursi Kontroversial DPR ID Concept Vittro berharga Rp24 juta/unit Harga resmi menurut penelusuran majalah Detik dari situs resmi Vittro berharga Rp7-9 Juta (60% mark up).