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 2017 FISCAL YEAR AND ITS FINANCIAL NOTE
Date 16 Agustus 2016
Assalamualaikum Warahmatullahi Wabarakatuh,
May peace and prosperity be bestowed upon us all,
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 Chairpersons, Vice-Chairpersons, and Members of State Institutions.
Ladies and Gentlemen.
It is imbued with our profound gratitude to God the Almighty that, this afternoon, we are able to attend the Plenary Session of the House of Representatives of the Republic of Indonesia, on the occasion of the presentation of the Government Statement on the Bill on the State Budget and its Financial Note for the 2017 Fiscal Year.
On behalf of the Government, I wish to thank all the factions of the House for the numerous feedbacks they have presented during the Preliminary Discussion held recently. Infused with these insights, the Government was able to draw up the 2017 Bill on the State Budget with an increasingly superior quality.
God Willing, these endeavours that we undertake collectively shall be beneficial to the entire people and be able to transform the Indonesian nation into a victorious nation in the global competition, and shall better enable the nation to become politically sovereign, economically self-sufficient, and culturally distinctive in personality.
Honourable Speaker, Vice-Speakers, and Members of the House,
The 2017 Bill on the State Budget is drawn up on the basis of the achievements we have made in 2015 and the factual developments transpiring in 2016. In 2015, we have laid down a foundation by carrying out a fundamental transformation of the national economy. The development paradigm that was consumptive in nature has been transformed into a productive one. Additionally, we have also begun to instil an Indonesia-centric paradigm, whereby the development is not solely conducted on the Island of Java but more equitably dispersed throughout the Homeland. In the absence of the courage to make such a paradigm leap, we shall never be able to lay a solid and robust foundation for the national development.
Furthermore, in ushering the year 2016, the Government wishes to move more swiftly by launching the year 2016 as the year of accelerated development. These acceleration measures are implemented through, among others, the acceleration of the procurement of goods and services that has been initiated within the fourth trimester prior to the current fiscal year. In addition, an acceleration is also carried out through the establishment of the Public Services Board for State Assets Management Agency as an effort to accelerate the provision of land intended for infrastructure development.
The amelioration measures for the budgeting processes are also carried out more comprehensively in order to accelerate the absorption of the budget and ensure that the State Budget and Regional Budgets are well-targeted. The Government also safeguards the State Budget so that it remains healthy, qualified and credible. The Government continues to carry out effective government expenditures, maintain the trust of the market and improve the business climate.
In the second semester of 2016, the Government implemented a fiscal consolidation measure in order to safeguard the implementation of the Revised State Budget, maintain the trust of the market and the business community, and become the basis for a more realistic fiscal planning and development in 2017. The budget allocation is further prioritized to the efforts in poverty alleviation, inequality reduction, and job creation. In the same breadth, steps are undertaken to cut back on operational and goods expenditures. The derived savings are subsequently allocated to finance priority activities, notably to sustain the peoples welfare and provide stimulus to economic activities.
The various measures implemented by the Government to sustain fiscal stimulus, in the midst of pressures from the global economic growth slowdown, have begun to bear fruit. In this Second Trimester of 2016, economic growth has reached 5.18 percent, which is an increase when compared to the economic growth posted in the First Trimester of 2016 that only expanded by 4.91 percent. In the Second Trimester of 2016, the largest sectors such as agriculture, forestry and fisheries, manufacturing industry, and trade have grown faster when compared to the growth they posted in the First Trimester of 2016. On the other hand, the inflation rate, which affects the peoples level of welfare, has been relatively kept in check. The inflation rate in July 2016, as compared to the same month in 2015, stood at 3.21 percent. Consequently, the cumulative inflation rate from January up to July 2016 reached 1.76 percent. The actual inflation in July of this year constitutes the lowest figure posted in the last 5 years.
The Indonesian social welfare indicators in the last two years have also showed continuous improvements. The data in March 2016 shows that the poverty level has been successfully reduced to a level of 10.86 percent. The inequality level measured by the Gini ratio has also been brought down to a level of 0.40. In addition, the unemployment rate has been successfully reduced to a level of 5.5 percent. Meanwhile, the Human Development Index, which indicates the peoples accessibility to economic, education, and health resources, has experienced continued gains to reach a figure of 69.55 in 2015.
Nevertheless, we should be cognizant of the fact that we would still face daunting challenges ahead. The still unrealized recovery of the global economy, and that of a number of our main trading partners, coupled with the lingering low commodities prices, remains a potential risk that could disrupt the national economic performance. In addition, the developed countries are still struggling to surmount the challenges of economic recovery. Therefore, uncertainty persists in the financial policy, including the fact that a number of countries apply the policy of flooding the market with liquidity.
Honourable Speaker, Vice-Speakers, and Members of the House,
In the midst of the global economic condition that has yet to be fully normal, the State Budget must be able to become a fiscal instrument to support endeavours in poverty alleviation, inequality reduction, and employment creation. In order to support those efforts, the forthcoming State Budget also needs to be realistic, able to shore up priority activities, credible, resilient, and sustainable both in the short- and medium-terms.
Therefore, the 2017 Bill on the State Budget is drawn up while still guided by 3 (three) major policies.
First, a tax policy that is able to provide a room for manoeuvre to the economy. Apart from serving as a source of revenues, taxation is also expected to provide incentives for economic stimulus.
Second, the expenditure policy would give emphasis on improving the quality of productive and priority expenditures, which, among others, are focused on bolstering the acceleration of infrastructure development, social protection, better-targeted subsidies, and the reinforcement of fiscal decentralization.
Third, a financing policy intended to strengthen the resilience to, and management of, risks by keeping the deficit and debt ratio under control.
In line with the medium-term fiscal policy, the Government has designated a theme for the 2017 fiscal policy, namely Consolidating Fiscal Management in order to Improve Competitiveness and Accelerate a Sustainable and Just Economic Growth.
Distinguished Ladies and Gentlemen,
By taking into account the entire prevailing dynamics and the challenges to be addressed, the Government presents the following macroeconomic assumptions for 2017:
First, economic growth in 2017 is estimated to reach 5.3 percent. Global economic prospects are predicted to get brighter. However, we must exert our utmost efforts to address the uncertainties originating from the economic slowdown in various developing countries, and the prospects of economic recovery in developed countries that have yet to meet expectations. Nonetheless, the positive impacts of the implementation of the Government Policies, as formulated in the Economic Policy Packages I to XII, are expected to serve as stimuli for an economic growth that is more just and equitably distributed all across Indonesia, especially through the sustainability of infrastructure development.
Second, the inflation rate in 2017 is estimated to hover at a range of 4.0 percent. The strengthening national connectivity is projected to enable the creation of an efficient national logistics system that could support the achievement of a commodity price stability. As its commitment to controlling the inflation, the Government also provides for reserve funds to maintain food security and prices stabilization. The allocation of these funds will, among others, be allotted to the food subsidy policy, the food security programmes such as the market operations, and to the provision of rice for the poor.
Third, the rupiah exchange rate is estimated to reach a level of Rp 13,300 per US dollar. The efforts to strengthen the financial sector are undertaken by the Government jointly with the Bank of Indonesia and the Financial Services Authority. The framework for financial market deepening is expected to influence capital inflows to the Indonesian financial market and could reduce pressures on the rupiah exchange rate.
Fourth, the average interest rate of the 3-month Government Treasury Bill, in 2017, is assumed to be at a level of 5.3 percent. The response of the market in coping with the policy of the United States Central Bank and the manageable domestic inflation condition contribute to the efforts in lowering the interest rate of the 3-month Government Treasury Bill.
Fifth, the assumption of the average price of Indonesian crude oil is estimated to be at US$45 per barrel. The increase in energy needs in the context of the global economic recovery constitutes a factor that could influence oil prices in 2017.
Sixth, the volume for oil and gas that would be available for sale during 2017 is estimated to reach 1.93 million barrels equivalent to oil per day, consisting of crude oil production to the tune of 780 thousand barrels per day, and natural gas of approximately 1.15 million barrels equivalent to oil per day.
These basic macroeconomic assumptions that have been set reflect the latest economic condition and take into account future economic projections, so they are expected to be more realistic and credible.
Distinguished Ladies and Gentlemen,
The 2017 Bill on the State Budget is drawn up with a fiscal policy strategy that is intended to strengthen fiscal stimulus, reinforce fiscal resilience, and maintain fiscal sustainability in the medium-term. With respect to the strategic policies elaborated in the 2017 Bill on the State Budget, they are as follow:
Higher state revenues provide certainty and generate momentum for greater flexibility to the economy. From the sector of tax revenues, increases are achieved through various policy breakthroughs, among others by commencing the implementation of the tax amnesty policy in 2016. This policy is expected to solidify the foundation for broadening the tax basis and at the same time improve the compliance of taxpayers in the future. Subsequently, the Government will also implement the law enforcement programme in the field of taxation. The taxation policy is also geared towards stimulating the people’s purchasing power, improving the investment climate and competitiveness of national industries through the provision of fiscal incentives for strategic economic activities, as well as managing the consumption of certain goods that have negative externalities. In addition, Non-Tax State Revenues are aimed at enhancing the quality of public services while being heedful of environmental conservation efforts.
Meanwhile, in the sector of state expenditures, the strategic policies that we have formulated include, among others:
First, increasing productive expenditures for infrastructure development and interregional connectivity. The infrastructure development is necessary to improve the quality of the development and realize food sovereignty. The Government will increase its spending for the development of the sea toll and the peoples traditional shipping, the development of facilities and infrastructures for the sectors of electric power, housing, sanitation and clean water; the construction of new roads and toll roads, as well as the development and expansion of the railway transport, and the opening up of new paddy fields;
Second, improving the efficiency and prioritization of goods expenditures in order to enhance fiscal space;
Third, increasing the quality and effectiveness of social protection programmes, among others, by expanding the target for the aspiring family programme, improving the quality of health services, and sustaining the National Health Insurance programme, and improving the Rice for Family Welfare programme. Additionally, improvement to the education tuition assistance is carried out by improving the distribution system and the data accuracy of the programme recipients.
Fourth, strengthening the implementation of priority programmes in the fields of education, health, food and energy sovereignty, maritime and marine, as well as tourism and industry.
Fifth, distributing better-targeted subsidies and non-cash social assistance programmes. The effectiveness of subsidy distribution is achieved by improving the database to become more transparent and revamping the subsidy distribution system to become more accountable. The Government will continue to verify the identity of recipients, add up information to complete their data, and revise their addresses. These efforts are undertaken to ensure that the distributed subsidies and non-cash social assistance are genuinely received by the rightful people in need.
Sixth, supporting law enforcement and efforts to maintain the stability of defence and security. In law enforcement, we shall focus on the eradication of drug trafficking, corruption, and on the efforts to combat terrorism. We shall also continue to build a defence power in line with the Minimum Essential Force posture through the modernization of the primary weaponry defence system, which is conducted in line with the reinforcement of the national defence industry.
Honourable Speaker, Vice-Speakers, and Members of the House,
Being guided by the theme of the 2017 fiscal policy and its supporting strategy, the state revenues in the 2017 Bill on the State Budget are targeted to reach Rp 1,737.6 trillion. From this total volume, the tax revenues are projected to amount to Rp 1,495.9 trillion.
Moreover, the 2017 Non-Tax State Revenues – despite facing quite considerable challenges with the persistently low prices of several mining commodities, such as crude oil and coal – are targeted to amount to Rp 240.4 trillion.
In the meantime, the budget allocation for state expenditures in the 2017 Bill on the State Budget amounts to Rp 2,070.5 trillion, which consists of the Central Government expenditures amounting to Rp 1,310.4 trillion, and the allocation for the Transfers to the Regions and Village Funds amounting to Rp 760.0 trillion.
On account of the various agenda and development targets that I have just outlined, the fiscal policies in 2017 remain expansive in nature and are directed towards boosting the production capacity, with a budget deficit in the 2017 Bill on the State Budget targeted to amount to Rp 332.8 trillion or 2.41 percent of the GDP.
In general, the 2017 budget financing policy will be directed towards developing and optimizing creative and innovative financing as well as increasing financing access to Micro, Small, and Medium Enterprises, opening a wider access to financing the development and to investment, supporting the programme for the enhancement of access to education and to the provision of housing for low-income people, and improving the quality of government investment planning, and managing the debt ratio to the GDP within safe and controllable limits. In addition, the involvement of the private sector in financing the development will be enhanced through a scheme of cooperation between the government and business entities.
Honourable Speaker, Vice-Speakers, and Members of the House of Representatives,
Distinguished Chairpersons, Vice-Chairpersons, and Members of State Institutions,
I have thus concluded my statement on the major points of the 2017 Bill on the State Budget. I am of the hope that the deliberations on the Bill on the State Budget and its Financial Note for 2017 would proceed smoothly and timely. I firmly believe that with the trust and support of the people, the Government would be able to perform better, and work more effectively in achieving our common progress.
May God the Almighty always be present with us all, as we strive to realize the aspiration for turning Indonesia into a developed country, into a victorious nation that is politically sovereign, economically self-sufficient, and culturally distinctive in personality.
Long Live the Republic of Indonesia!
Long Live the State of Pancasila!
I thank you.
Wassalamualaikum Warahmatullahi Wabarakatuh,
Om Shanti Shanti Shanti Om, Namo Buddhaya.
Jakarta, 16 August 2016
PRESIDENT OF THE REPUBLIC OF INDONESIA,