ADDRESS OF THE PRESIDENT OF THE REPUBLIC OF INDONESIA ON THE PRESENTATION OF THE GOVERNMENT STATEMENT ON THE BILL ON THE STATE BUDGET FOR THE 2016 FISCAL YEAR AND ITS FINANCIAL NOTE

By Alfurkon Setiawan
Date 18 Agustus 2015
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ADDRESS OF

THE PRESIDENT OF

THE REPUBLIC OF INDONESIA

 

ON THE PRESENTATION OF

THE GOVERNMENT STATEMENT ON

THE BILL ON THE STATE BUDGET

FOR THE 2016 FISCAL YEAR

AND ITS FINANCIAL NOTE

 

 

BEFORE THE PLENARY SESSION OF

THE HOUSE OF REPRESENTATIVES OF

THE REPUBLIC OF INDONESIA

 

 

Jakarta, 14 August 2015

 

MINISTRY OF THE STATE SECRETARIAT OF THE REPUBLIC OF INDONESIA

Bismillahirrahmanirrahim,

Assalamu’alaikum warahmatullahi wabarakatuh,

May peace and prosperity be bestowed upon us all,

Om Swastiastu,

Namo Buddhaya,

Honourable Speaker, Vice-Speakers, and Members of the House of Representatives of the Republic of Indonesia,

Honourable Speaker, Vice-Speakers, and Members of the Regional Representatives Council of the Republic of Indonesia,

Distinguished Chairperson, Vice-Chairpersons, and Members of State Institutions,

Fellow countrymen,

Ladies and Gentlemen,

It is imbued with all our gratitude to Allah SWT, that, this afternoon, we are able to attend the Plenary Session of the House of Representatives of the Republic of Indonesia.

In observance of the mandate of the law, I will deliver the Government Statement on the Bill on the State Budget and its Financial Note for the 2016 Fiscal Year.

On behalf of the Government, I wish to thank all the factions of the House for the various inputs they have delivered in the Preliminary Discussion held recently that enabled the formulation of the 2016 State Budget that is of quality.

God willing, what we are endeavouring together will be beneficial to the entire people and make the lives of the Indonesian nation more prosperous and dignified.

Honourable Leaders and Members of the House,

 

By taking into account the entire global and national economic dynamics, as well as the national economic prospects, the macroeconomic assumptions for 2016 are as follow.

First, economic growth in 2016 is targeted to reach 5.5 percent. The global economic condition is projected to recover so that the performance of exports and imports and the global demand for Indonesian products are also increasing. The infrastructure development is also expected to bolster the performance of the Gross Fixed Capital Formation and the national consumption.

Meanwhile, the national connectivity improvement and expenditures reallocation to productive sectors are expected to be able to stimulate the national economy, maintain the purchasing power of the people, and control inflation rate.

 

Second, the inflation rate in 2016 is estimated to reach 4.7 percent. This inflation rate is subject to the influence of a number of factors, among others, the price fluctuation of world food commodities and energy, the shifting rupiah exchange rate, and climate change.

For these reasons, the Government will persevere in coordinating with the Bank of Indonesia and motivate regional governments to participate in the drive for national inflation control. The Team for Regional Inflation Monitoring and Control continues to be activated. The Government will also keep the prices of foodstuffs and energy in check in the domestic market by providing a budget allocation and reserve fund in the framework of national food security.

Third, the rupiah exchange rate is projected to reach Rp 13,400 to the U.S. dollar. The improvement in the global economic performance that is driven by United States, and the economic slowdown of China, the yuan depreciation, as well as the economic recoveries of the European Union and Japan, are also predicted to exert influence on the rupiah exchange rate in the forthcoming year.

Fourth, the average rate of the 3-month Government Treasury Bills in 2016 is assumed to be at a level of 5.5 percent. The Government Treasury Bills should remain attractive to investors.

Fifth, the assumption of the average price of Indonesian crude oil in 2016 is projected to stand at US$60 per barrel. This assumption takes into consideration several impacting factors, such as supply and geopolitical factor.

Sixth, the oil and natural gas lifting throughout 2016 is projected to reach 1.985 million barrels of oil equivalent per day, consisting of oil lifting amounting to 830 thousand barrels per day and natural gas totalling 1.155 million barrels of oil equivalent per day.

The basic macroeconomic assumptions that have been set are expected to reflect a more realistic economic condition so as to generate a higher level of market confidence.

 

Honourable Leaders and Members of the House,

 

The 2016 Bill on the State Budget is drawn up based on the main fiscal policies that are correlated to the theme of “strengthening fiscal management in the context of solidifying the development fundamentals and qualified economic growth”. The strengthening of fiscal management is directed through the revenue, expenditure, and funding aspects.

From the aspect of state revenues, the provision of fiscal incentive is intended for strategic economic activities to support the investment climate and business world. The tax policy that will be implemented by the Government is optimizing tax revenues without disrupting the investment climate of the business world.

In addition, the tax policy is also aimed at increasing the stability of the national economy in order to maintain the purchasing power of the people, and increase the competitivity as well as added value of the national industry.

Within the 2016 Bill on the State Budget, the state revenues are targeted to reach Rp 1,848.1 trillion. Out of this amount, the tax revenues are projected to amount to Rp 1,565.8 trillion, an increase of 5.1 percent from the target of the 2015 Revised State Budget. With such an amount of tax revenues, then the ratio of tax revenues to the Gross Domestic Product reaches 13.25 percent.

On the other hand, the Government also continues to optimize Non-Tax State Revenues. The Natural Resources Revenues, especially oil and gas, are expected to account for a large share of the Non-Tax State Revenues, although their realization still encounters numerous challenges such as the constantly volatile world oil price.

 

Ladies and Gentlemen,

From the expenditure aspect, the increase in fiscal space will be achieved through subsidy efficiency, operational expenditure efficiency, and the mandatory allocation for expenditure control. Moreover, it will also be achieved through an increase of productive expenditures that are focused on infrastructure development and food as well as energy security in order to enhance the competitivity and capacity of the national economy.

With due regard to the national development strategies, the need for the funding and running of the Government, the Central Government expenditures in the 2016 Bill on the State Budget will be directed towards the following policies:

First, continue with the policy of subsidy efficiency that is well-targeted and infrastructure development in order to support the development.

Second, enhance the effectiveness of the service and continuity of the National Social Insurance System (SJSN) programme in the health field.

Third, support the efforts to allocate a health budget amounting to 5 percent and an education budget amounting to 20 percent of the State Budget.

Fourth, improve the people’s welfare through well-targeted social assistance programmes.

Fifth, maintain the welfare level of the government apparatus by taking into account the inflation rate to spur productivity and improve public services.

Sixth, support fiscal decentralization by transferring the allocation of the Deconcentration and Assistance Duty Fund to the Special Allocation Fund.

Seventh, continue with the policy of efficiency in operational expenditures and more focused non-operational expenditures.

Eighth, provide support for the implementation of the One Million-House Programme for the Low-Income People.

 

 

Distinguished Ladies and Gentlemen,

 

In the effort to support the implementation of the state expenditures policy, the Government allocates a budget for infrastructure amounting Rp 313.5 trillion or 8.0 percent. This budget is higher compared to the budget allocation for infrastructure in the 2015 Revised State Budget. This allocation will be utilized for, among others, the construction of roads, bridges, ports, and airports, including pioneer airports so that interregional connectivity and equitable distribution become much better.

Meanwhile, the budget allocation for subsidy in the 2016 Bill on the State Budget amounts to Rp 201.4 trillion. This subsidy is allocated for energy subsidy amounting to Rp 121.0 trillion and non-energy subsidy amounting to Rp 80.4 trillion. In this connection, the Government restructures the subsidy policy by devising a selection system to determine the well-targeted recipients.

In order to support that policy, the Government will utilize a transparent database, and will restructure the system for subsidy distribution that is more accountable. In this manner, it is hoped that the subsidy budget could be converted to more productive expenditures so that the efficiency and quality of the state expenditures can be improved in order to accelerate the realization of the Nawacita (Nine Priorities).

Another domain that shall also receive the attention of the Government is related to food sovereignty, particularly in relation to the production of rice, corn, soya, sugar, meat, and fish. With a view to achieving the target of food sovereignty, the Government provides support through, among others, the expansion of agricultural fields and their supporting infrastructures, including the construction of irrigation networks.

 

Honourable Leaders and Members of the House,

 

The Government also continues to allocate a budget for social security, especially for the underprivileged people. This is carried out by enlarging the scope of assistance for very poor families through the expansion of the conditional cash assistance to cover 6 million families, increasing the participation of recipients of premium assistance for the National Health Insurance to 92.4 million participants and adjusting the premium amount for the Premium Assistance Recipients, and implementing the One-Million House Programme for low-income people.

Other social security programmes, such as the Smart Indonesia Card and Healthy Indonesia Card naturally remain the focus of the Government.

In the upcoming 2016, the Government also seeks to increase budget quality by implementing several measures.

First, direct all Ministries/Institutions to formulate development programme planning and budget that are better and more effective on the basis of performance.

Second, ask all Ministries/Institutions to initiate at an early stage the project pre-auctions and activities in 2016, so that development activities can effectively start running in January 2016.

Third, maintain control over the budget for consumptive and less productive activities, particularly operational expenditures.

Fourth, improve monitoring and evaluation measures on the implementation of government expenditures, both at the center and in the regions.

Through these measures, it is expected that development programmes in 2016 can truly achieve the development goals in spurring economic growth, reduce poverty and unemployment, as well as equitably distribute national development.

 

Honourable Speaker, Vice-Speakers, and Members of the House,

 

As elaboration of the Nawacita namely to develop Indonesia from the peripheries, from the regions and villages, a number of changes would be made:

First, increasing the budget allocation for the Transfers to the Regions and the Village Funds so as to be larger than the budget for Ministries/Institutions. This measure accelerates the strengthening of the region’s role in providing public services and improving public welfare.

Second, making changes in the structure and scope of the Transfers to the Regions and Village Funds so as to be more in tune with the division of authority between the central and regional governments, as well as with the financing needs for regional development.

Third, reformulating and strengthening the allocation policy for the Transfers to the Regions, particularly the policy of the Special Allocation Fund and the Regional Incentive Fund.

Fourth, increasing the allocation of the Village Funds in order to gradually meet the mandate of Law Number 6 of 2014 on Village.

In the year 2016, the Government will make a policy change for the Special Allocation Fund with the mechanism of submitting activity proposals and funding needs from the Regional Governments to the Central Government. Those proposals are utilized as bases for determining the allocation for Special Allocation Fund in accordance with the needs of the respective region. In addition, the Village Funds will be focused on reducing the village-city gap and promote village independence.

On the basis of the policy directions and targets that I have just expounded, the state budget in the 2016 Bill on the State Budget is allocated in the amount of Rp 2,121.3 trillion, which consists of the Central Government expenditures amounting to Rp 1,339.1 trillion that comprise expenditures for Ministries/Institutions of Rp 780.4 trillion; and expenditures for Non-Ministries/Institutions of Rp 558.7 trillion; and allocation for the Transfers to the Regions and Village Funds amounting to Rp 782.2 trillion.

 

Distinguished Ladies and Gentlemen,

 

From the financing side, the adopted policies are, among others, directed at utilizing debt for productive activities, empowering the roles of the private sector, State-Owned Enterprises (BUMN) and Regional Governments in the acceleration of infrastructure development, as well as applying creative innovations on financing instruments.

In consequence of the acceleration on infrastructure development, the government is in need of an expansive fiscal policy, resulting in a budget deficit. In order to support the implementation of fiscal policy, the budget deficit will be reduced from domestic and foreign financing sources. The sources of foreign financing are chosen selectively so that they are not binding and have lower costs.

 

Distingushed Ladies and Gentlemen,

 

On account of the elaboration of the 2016 Bill on the State Budget that I have just expounded, the broad outlines of the posture of the 2016 Bill on the State Budget could be presented as follows.

The total state revenues is projected to amount to Rp 1,848.1 trillion that consists of tax revenues amounting to Rp 1,565.8 trillion, Non-Tax State Revenues amounting to Rp 280.3 trillion and grants amounting to Rp 2.0 trillion. Meanwhile, the total state expenditures amounts to Rp 2,121.3 trillion, consisting of the Central Government expenditures amounting to Rp 1,339.1 trillion and the Transfers to the Regions and the Village Funds amounting to Rp 782.2 trillion. Consequently, the budget deficit in the 2016 Bill on the State Budget amounts to Rp 273.2 trillion or 2.1 percent of the Gross Domestic Product. The 2016 State Budget deficit will be financed from domestic sources amounting to Rp 272.0 trillion and from foreign net sources amounting to Rp 1.2 trillion.

 

Honourable Speaker, Vice-Speakers, and Members of the House of Representatives,

Distinguished Chairperson, Vice-Chairpersons, and Members of State Institutions,

Fellow countrymen,

 

I wish to conclude my statement on the overarching principles of the 2016 Bill on the State Budget. I express the hope that deliberations on the Bill on the State Budget and its Financial Note for 2016 would proceed smoothly and timely.

May Allah SWT always bestow His mercy and grace upon all of us, in our endeavours towards a nation and state that is politically sovereign, economically independent, and culturally distinct in character.

 

Long live the Republic of Indonesia!

I thank you.

Wassalamu’alaikum Warahmatullahi Wabarakatuh.

Om Shanti Shanti Shanti Om,

Namo Buddhaya.

 

 

 

 

Jakarta, 14 August 2015

THE PRESIDENT OF THE REPUBLIC OF INDONESIA,

Sgd.

JOKO WIDODO

 

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