1

Connectivity and Infrastructure

towards Sustainable Agriculture Development

Mahendra SiregarVice Minister of Finance, Republic of Indonesia

The economy in 2011:New historical high

• GPD per capita: US$ 3,542.9

• Total GDP: US$854 bn

• Growth rate: 6.5%

• Exports: US$ 203.6 bn

• Budget deficit to GDP: 1.3%

• Debt to GDP: 24%

• Tax and non-tax revenue: Rp1,196 Trillion

As a result: Return to Investment Grade!2

927065-004 3

Crisis Mitigation in Budget 2012

Budget allocated for macroeconomic risk Rp15,8T;

Budget allocated for social expenditures (PNPM, PKH, Public health and natural disasters Rp47,8T ;

Budget allocated for non energy subsidy Rp40,3T

Rice reserves for the poor Rp2,0T;

4

1. Optimization of State revenue2. Increasing Quality spending by increasing

Infrastructure spending

4. Decreasing debt ratio to GDP

Trend of Policy: Optimization of state

revenue that considering entrepreunership climate; Increase efficiency &

effectivity of government expenditure through increase quality spending. Increase infrastructure expenditure which is followed by increase in economic growth, declining unemployment rate, and poverty alleviation; Controlling deficit within

secure level under 3%GDP; Reduce debt gradually

and seek low risk financing source.

47%

39%35%

33%

28%26% 25%

-

1.000

2.000

3.000

4.000

5.000

6.000

7.000

2005 2006 2007 2008 2009 2010* 2011F

Tri

liu

n r

up

iah

0%

10%

20%

30%

40%

50%

PDB Outstanding Utang Rasio Utang thd. PDB [RHS]

To maintain fiscal sustainability

23,7

50,0 54,0

70,0 78,9

93,4

149,3

02468101214161820

-10

10

30

50

70

90

110

130

150

2005 2006 2007 2008 2009 2010 2011

%Rp Triliun

K/L Unemloyment Poverty Growth

3. Controlling deficit within secure level (<3% PDB)

5

Expenditure : Rp1.435,4 T

Tax Revenue Rp1.032,6 T

(78,7%)

Non tax Revenue Rp280,0T (21,2%)

HibahRp0,8T (0,1%)

Income Tax Rp520,0T(50,4%)

VAT Rp352,9T(34,2%)

ExciseRp75,4T(7,3%)

Property Tax

Rp35,6T(3,5%)

International

Rp42,9T(4,2%)

Other tax

Rp5,6T(0,5%)

Natural Resources Rp177,3T(63,8%)

SOE Rp28,0T(10,1%)

Other non tax revenue

Rp50,3T(19,2%)

BLU Rp19,2T(6,9%)

Transfer to Region

Rp470,4T (32,8%)

MaterialRp188,0T(19,5%)

Capital Rp152,0T(15,7%)

Interest Payment Rp122,2T(12,7%) Subsidy

Rp208,9T(21,6%)

Social Assistance

Rp47,8T (4,9%)

OthersRp28,5T(3,0%)

Grant Expenditure

Rp1,8T (0,2%)

Deficit : Rp124,0T (1,5% PDB)

Balance FundRp400,0T(85,0%)

Special Autonomy

and adjustment

FundRp70,4T(15,0%)

Revenue Sharing

Fund Rp100,1T(25,0%)

General Allocation

Fund Rp273,8T(68,5%)

Specific Allocation

Fund Rp26,1T (6,5%)

Central Government Expenditure :

Rp965,0T (67,2%)

Macro Assumptions

Poverty: 10,5-11,5%;

Unemployment: 6,4-6,6%;

Workforce increase

450.000 people per 1%

Economic Growth

Target :

PersonnelRp215,9T(22,4%)

Financing : Rp124,0T

BUDGET

Debt Rp133,6T(107,7%)

Non-DebtMinus Rp9,5T

(-7,7%)

Revenue : Rp1.311,4 T

Economic Growth 6,7

Inflation 5,3

SPN 3 Month 6,0

Exchange Rate 8.800

Oil Prices/ICP 90,0

Lifting 950,0

I-Account Budget 2012

2011

A. STATE REVENUE AND GRANT 1,169.9 1,292.9 1,311.4 18.5 141.5

I. DOMESTIC REVENUE 1,165.3 1,292.1 1,310.6 18.5 145.3

1. TAX REVENUE 878.7 1,013.9 1,032.6 13.2 153.9

Tax Ratio (% to GDP (CPI)) 12.2 12.6 12.7 0.2 0.6

2. NON-TAX REVENUE 286.6 272.7 278.0 5.3 (8.6)

II. GRANT 4.7 0.8 0.8 0.0 (3.8)

B. EXPENDITURE 1,320.8 1,418.5 1,432.4 16.9 114.7

I. CENTRAL GOVERNMENT EXPENDITURE 908.2 954.1 965.0 10.9 56.8

A. LINE MINISTRIES 461.5 476.6 508.4 31.7 46.9

B. NON-LINE MINISTRIES 446.7 477.5 456.6 (20.9) 9.9

Additional Budget 0.0 0.0 12.5 12.5 12.5

- Non-Education 0.0 0.0 9.1 9.1 9.1

- Education in line ministry 0.0 0.0 3.4 3.4 3.4

II. TRANSFER TO REGION 412.5 464.4 470.4 6.0 57.9

1. Balanced Fund 347.5 394.1 400.0 5.8 52.4

a. Revenue Sharing Fund 96.8 98.5 100.1 1.6 3.3

b. General Allocation Fund 225.5 269.5 273.8 4.3 48.3

2. Special Autonomy and Adjusment Fund 65.0 70.2 70.4 0.2 5.5

C. BUDGET DEFICIT (A-B) (150.8) (125.6) (124.0) 1.6 26.8

% Deficit to GDP-CPI (2.10) (1.55) (1.53) 0.02 0.56

D. FINANCING (I+II) 150.8 125.6 124.0 (1.6) (26.8)

I. DOMESTIC FINANCING 153.6 125.9 125.9 0.0 (27.7)

II. FOREIGN FINANCEING (NETTO) (2.8) (0.3) (1.9) (1.6) 0.9

1. Gross Drawing 56.2 56.0 54.3 (1.7) (1.9)

i.e. Program Loan 19.2 16.9 15.3 (1.6) (3.9)

2. Amortization (47.2) (47.3) (47.3) 0.0 0.0

SURPLUS/(DEFICIT) FINANCING 0.0 0.0 0.0 0.0 0.0

DescriptionAPBN-P

Difference

to RAPBN

Difference to

APBN 2011

2012

APBNRAPBN

Budget Summary 2012

6

Trillion rupiah

Fiscal Policy Direction for Sustainable Development

8

Budget

Sustainable economic growth

Economic Stability

Infrastructure development

Conducive investment climate

Law and Order

Clarity of Rule of The Game

Policy Consistency

Fiscal Sustainability

Sustainable

Development

Welfare

Concept of Budget Policy for Welfare Fiscal Sustainability &

Sustainable development

54,0 59,8 78,7

91,3 99,4

144,7 161,4

-

2,0

4,0

6,0

8,0

10,0

12,0

-20,0 40,0 60,0 80,0

100,0 120,0 140,0 160,0 180,0

2006 2007 2008 2009 2010 2011 2012

Infrastruktur Growth Unemployment9

Capital Expenditure increase to support infrastructure development in order to domestic connectivity

Infrastructure Spending increase to support acceleration and expansion economic growth and unemployment reduction

Government Spending is aimed to achieve people’s welfare

15,0

8,1

9,1

18,1

33,4

6,9

9,4

2005 (%)

Trillion IDR

22.4

19.5 15.7

12.7

21.6 4.9 3.0

2012 (%)

Sustainable Fiscal Management

10

Debt to GDP Ratio has been sharply declining since crisis period

Fiscal Deficit (% of GDP)

8-year fiscal deficit

average= -1.1%

Source: FPO

Average 1,0%

Central Government Expenditure increase more than double (2006 : Rp440,0 T 2012:

Rp965.0T) especially Subsidies and personnel expenditure

11

440,0 504,6

693,4 628,8

697,4

908,2 965,0

-

200,0

400,0

600,0

800,0

1.000,0

2006 2007 2008 2009 2010 2011 2012

Bel lain-lain Bansos Bel Hibah Subsidi Bunga utang Bel Modal Bel Barang Belpeg

16,6

10,7

12,5

18,0

24,4

-

9,3

8,5

2006

Belpeg

Bel Barang

Bel Modal

Bunga utang

Subsidi

Bel Hibah

Bansos

Bel lain-lain

22,4

19,5

15,7

12,7

21,6

0,2 4,9 3,0

2012

Belpeg

Bel Barang

Bel Modal

Bunga utang

Subsidi

Bel Hibah

Bansos

Bel lain-lain

Portion of capital expenditure increase to support infrastructure development Economic Growth

Komposisi (%)

12

• 149.99 km new railway project, 355.9 km double track

• Maintenance of 240.44 km of tracks

• Expansion and rehabilitation of 116 airports

• Construction of 14 new airports

• Housing programs for over 3,000 villages

• Cinstruction of 223 twin block affordable flats

New roads and highway project of 127 km, bridges 7.7km.

Roads 292 km of remote areas Maintenance Roads 36,319 km and

bridges 217 m

• Continued construction of 9 dams• Completion of 87 lakes• Rehabilitation of 24 dams and 62

lakes

• Construction of 735.6 km of new transmission

• Construction of new main gate totaling 2,330 MVA

Infrastructure Development Target 2012

12

Airports

Affordable HousingRoads and Highways

Double Track Railway Road Electric Infrastructure

Water Infrastructure

13

Trillion IDR

Expenditure

440,0 504,6 693,4 628,8 697,4

908,2 965,0 226,2

253,3

292,4 308,6

344,7

412,5 470,4

667,1 757,6

985,7 937,4 1.042,1

1.320,8 1.435,4

(100,0)

100,0

300,0

500,0

700,0

900,0

1.100,0

1.300,0

1.500,0

2006 2007 2008 2009 2010 2011 2012

Transfer ke Daerah Bel Pemerintah Pusat

• State expenditures has increased more than 2 times from Rp 509.6T (2005) to Rp1.320,8T (2011).

• On 2012 State expenditures is proposed increase by Rp114,6T, with details central government increase by 67.2% and transfer to region increase by 32.8%.

• Expenditure Policy Direction, i.e. (i) Infrastructure Development to support MP3EI program, (ii) increasing country's defense capability to reach Minimum Essential Force (MEF), and (iii) the extension of social protection programs (pro-people).

Spending increase by average of 14,2% annually

General Policy

Increasing in infrastructure expenditure to support the Debottlenecking, Domestic

Connectivity, Food Security, Energy Security, and Welfare Society;

Supporting multiyears activity funding

Moving towards minimum essential forces;

Improving mitigation capability and adaptation of climate change

Strengthening Pro People Program (Cluster 4):

• 6 Main Programs: Affordable Hosing, Affordable Public Transportation, Clean

Water for people, Affordable and Efficient Electricity, Fishermen Life

Improvement, Suburban Communities Life Improvement

• 3 Priority Programs: Rice surplus 10 million ton in 5-10 years, Job creation

for reducing unemployment 1 million people per year, and Jakarta

Transportation Development14

Policy Direction of Central Government Expenditure 2012

15

Top 10 Big Budget Line Ministries

Top 10 Big Capital Expenditure Line MinistriesTop 10 Big budget Line Ministries

17,1

17,8

17,8

28,1

29,9

38,3

39,8

62,6

64,4

72,5

- 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0

Trade

Finance

Agriculture

Transportation

Health

Religion

Police

Public Works

Education

Defense

Trillion Rupiah

2012

2,4

2,5

2,6

3,8

4,1

5,4

11,4

20,6

26,2

48,8

- 10,0 20,0 30,0 40,0 50,0 60,0

Kemenkeu

Kemendiknas

Kemenpera

Kemenag

Polri

Kemenkes

Kemen ESDM

Kemenhub

Kemenhan

Kemen PU

Triliun Rupiah

2012

Public Works

Defense

Transportation

Health

Police

Religion

Education

Finance

Trillion Rupiah

Youth and Sport

Energy & MineralResources

Capital Expenditure

increase to maitain

sustainable agriculture

development

FOOD SECURITY PROGRAM 2011-2012

Food Security Program Target 2011-2012 :

To Cope with food prices rise through price stabilization policy by providing food stocks and market operations (food subsidies);

To increase production, productivity, and the quality of food products, the targets are:

o Rice 74,1 million tono Corn 24,0 million tono Soybean 1,9 million tono Sugar 4,4 million tono Meat 471 million tono Fish 14,86 million ton

To anticipate global food inflation through international cooperation on food security;

To increase production, productivity, and the quality of plantation crops;

To achieve rice surplus minimum 10 million ton per year within 5-10 years.

16

11,3 16,8

23,2

36,2

44,2

48,5

57,6

69,6

-

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

2005 2006 2007 2008 2009 2010 2011 2012RAPBN

Kementerian Negara/Lembaga Subsidi Belanja Lain-LainLine Ministries Subsidies Other Expenditure

Proposed

Budget

95,664,2 83,8

139,1

45,082,4

129,7 123,6

8,930,4

33,1

83,9

49,5

57,6

65,645,0

16,212,9

33,3

52,2

43,5

52,8

41,940,3

120,8107,4

150,2

275,3

138,1

192,7

237,2208,9

23,7

16,1

19,8

27,9

14,7

18,5 18,0

14,5

0

5

10

15

20

25

30

0

50

100

150

200

250

300

350

400

450

500

2005 2006 2007 2008 2009 2010 2011 APBN-P 2012APBN

Non-Energy Electricity Fuel

%

% to State Expenditure

17

Subsidy 2005-2012

Trillion Rp

2005 2006 2007 2008 2009 20102011

APBN-P2012

APBN

Energy 104,5 94,6 116,9 223,0 94,5 140,0 195,3 168,6- Fuel 95,6 64,2 83,8 139,1 45,0 82,4 129,7 123,6- Electricity 8,9 30,4 33,1 83,9 49,5 57,6 65,6 45,0

Non Energy 16,2 12,9 33,3 52,2 43,5 52,8 41,9 40,3- Food 6,4 5,3 6,6 12,1 13,0 15,2 15,3 15,6- Fertilizer 2,5 3,2 6,3 15,2 18,3 18,4 18,8 16,9- Seed 0,1 0,1 0,5 1,0 1,6 2,2 0,1 0,3- PSO 0,9 1,8 1,0 1,7 1,3 1,4 1,8 2,0- Credit Program 0,1 0,3 0,3 0,9 1,1 0,8 1,9 1,2- Tax Subsidy 6,2 1,9 17,1 21,0 8,2 14,8 4,0 4,2- Others Subsidy 0,0 0,3 1,5 0,3 0,0 0,0 0,0 0,0

192,7 237,2 208,9

Description

Subsidy Spending 120,8 107,4 150,2 275,3 138,1

Subsidy Policy 2012

Fuel

Subsidy

• Fuel subsidy targeted by prohibited premium gasoline distribution for private cars inJava and Bali from April 2012;

• Hold subsidized volume of fuel consumption by 40 million kilo liters→ 2.5million kilo liters of subsidized premium will be saved (will be evaluated inBudget Revised 2012);

• Fuel Conversion program from gasoline to gas.

Electricity

Subsidy

• Lowering power losses and increasing supply of gas and coal use as input generator;

• Plan to increase electricity tariff of 10% (awaiting approval from legislative).

Non

Energy

Subsidy

• Food Subsidies: Provides cheap rice for 17.5 million poor house hold during

12 months at 15 kg / RTS / month;

• Fertilizer subsidies: fulfill farmers needs of fertilizers at affordable prices, increasing

agricultural productivity and revitalization, and also to support food

security programs;

• Seed Subsidies : Helps farmer by providing and distributing high quality seeds at

affordable prices through state owned Enterprises;

• PSO: Improve public service of railway transportation and shipping transportation as

well as public information (LKBN Antara and Postal) in order to be utilized by

society;

• Tax Subsidies: Price stabilization of basic needs as well as development of

strategic national industry. 18

19

54,0 59,8 78,7

91,3 99,4

144,7 161,4

-

2,0

4,0

6,0

8,0

10,0

12,0

-

20,0

40,0

60,0

80,0

100,0

120,0

140,0

160,0

180,0

2006 2007 2008 2009 2010 2011 2012

Infrastruktur Growth Unemployment

46,6 53,1

60,6

80,1 81,4

93,8 99,2

-

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

18,0

20,0

-

20,0

40,0

60,0

80,0

100,0

120,0

2006 2007 2008 2009 2010 2011 2012

Budget poor

18,1 22,4

41,1 43,3

46,5

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

90,0

-

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

50,0

2006 2007 2008 2009 2010

Pertanian Produksi

22,5 24,5

24,4 27,8

31,6

68

70

72

74

76

78

80

82

-

5,0

10,0

15,0

20,0

25,0

30,0

35,0

2006 2007 2008 2009 2010

Kesehatan Persalinan ditolong tenaga kesehatan

Capital Exependiture increase inline with improvement of macro economic indicators (Growth &

Unemployment) and micro indicators (Agriculture production, health services), reduction for

poverty level

Infrastructure Spending Agriculture Spending

Poverty Spending Health Spending

20

88,1

77,8 81,0

68,5 72,6

82,3 80,7

11,9

22,2 19,0

31,5 27,4

17,7 19,3

-

20,0

40,0

60,0

80,0

100,0

120,0

2006 2007 2008 2009 2010 2011 2012

non Energi Energi

0

5

10

15

20

25

30

35

0

20

40

60

80

100

120

2006 2007 2008 2009 2010 2011

APBN-P

2012

APBN

Subs

idi P

erta

nian

(Tr

iliun

Rp)

Prod

uksi

(ju

ta t

on)

Agriculture production

Agriculture subsidies

Produksi Subsidi

Kedelai Pupuk

Jagung Benih

Padi

Non Energy Subsidies (Food & seed subsidies) increase, energy subsidies decreasing

meanwhile agriculture production increasing average 7,7%

Fiscal Incentives of Agriculture Sector

BerasMinyak

GorengKedelai

Terigu/

Gandum

1. Dukungan Produksi

# Peningkatan HPP √ ─ ─ ─

# Iklim Investasi Pangan √ √ √ ─

2. Bantuan Fiskal

# Subsidi Benih √ ─ ─ ─

# Subsidi Pupuk √ ─ ─ ─

# Subsidi Kredit √ ─ ─ ─

# PPN DTP ─ √ ─ √

# PPh Import ─ √ ─ √

3. Perdagangan/Tata Niaga

# Non Tarif Barrier √ ─ ─ ─

# Tarif Barrier √ √ √ √

# Kelancaran Arus Barang/Jalur Hijau √ √ √ √

4. Lembaga Penyeimbang

# Peran Bulog √ ─ ─ ─

# Kemitraan Pemerintah - Swasta (DMO) ─ √ ─ ─

5. Intervensi Pasar

# Pengadaan Cadangan √ ─ ─ ─

# Pelepasan Stok √ ─ ─ ─

6. Bantuan Konsumen/UKM

# Bantuan Natura; Penjualan Bersubsidi √ √ √ √

7. Diversifikasi Pangan

# Pencampuran Gandum dgn Bahan

Baku Umbi-umbian/Sukun─ ─ ─ √

Kebijakan

Strategic Food Commodities Policy

Budget support for Food Security

No Items2010Real

2011APBN-P

2012APBN

1 Food Price Stabilization Fund 0,2 2,6 2,0

2 Government Rice Reserve Fund 2,5 1,0 2,0

3 National Seed Reserve Fund 0,2 0,6 0,4

4 Agriculture Subsidy 35,7 34,2 32,8

- Food 15,2 15,3 15,6

- Fertilizer 18,4 18,8 16,9

- Seed 2,2 0,1 0,3

1. Food Price Stabilization Fund: food stuff import, keeping domestic food price, giving compensation to farmer in case ofcorp failure and additional fund for Raskin program.

2. Governments Rice Reserve Fund: stabilizing rice price by market operation, food scarcity anticipation, and food distributionin emergency situation

3. National Seed Reserve Fund : Providing quality seed (rice, soybean, corn) to farmer in order to enhance productivity andproduction of food plantation.

4. Others Expenditure relate to Agriculture Subsidies on Budget 2012 :

a. Bantuan Langsung Benih Unggul (BLBU) Rp1,318M Social Assistance (Kementan)

b. Bantuan Langsung Pupuk (BLP) Rp1,921M Social Assistance (Kementan)

Triliun Rupiah

23

24