Quick Fund Disbursement Getting More Crucial

Indonesia\'s economy is projected to experience negative growth in the second quarter 2020. The bureaucratic procedure, distribution and data collection should be immediately improved to help boost government pending.

KOMPAS/PRIYOMBODO

Activities are carried out in the construction of an LRT station to link Jakarta, Bogor, Depok and Bekasi (Jabodebek) at the Dukuh Atas-Cawang route, which is next to the inner-city toll road, South Jakarta, Sunday (2/8/2020). The LRT project is among infrastructure projects allowed to continue in the midst of the Covid-19 epidemic. Jabodebek LRT is targeted to be ready for commercial operation in June 2022.

JAKARTA, KOMPAS - Bureaucratic and administrative problems that have so far impeded the disbursement of the national economic recovery funds must be immediately resolved. If government spending is not increased, Indonesia\'s chances of falling into a recession are even greater.

Teuku Riefky, an economist at the University of Indonesia\'s Institute for Economic and Social Research (LPEM UI), said the low disbursement of the government’s funds for economic recovery programs did not only occur in Indonesia, but also in many other countries.

The disbursement of the economic recovery funds is trapped in a dilemma (trade-off) between accuracy and speed.

"If we want it fast, the accuracy of the targeted recipients is not maximal. If we want to be on target, the disbursement of the fund will be slower. The government must assess which programs need speed and which need accuracy," said Riefky when contacted from Jakarta on Tuesday (4/8/2020).

Also read : 2021 State Budget Should Accelerate Economic Recovery: Jokowi

One of the budget programs that requires speed is social assistance. Its disbursement must be fast to maintain people\'s purchasing power while reducing the risk of the spike in poverty and unemployment.

While the type of expenditure that needs to prioritize accuracy is the stimulus program for companies in which the selection process and policy formulation should be carried out carefully. The funds should not be given to companies that are not eligible or to those that cannot stimulate economic recovery.

The disbursement of the economic recovery funds can be accelerated by improving the bureaucratic procedure, distribution and data collection. At present, the slow process in the formulation of the budget execution list (DIPA) is one of the obstacles. According to Riefky, the quick disbursement of the recovery fund is crucial to prevent Indonesia from falling into recession.

Also read : Budget Reallocation to Focus on Covid-19

KOMPAS/ANGGER PUTRANTO

Workers put the finishing touches on a railroad factory to be operated by PT Stadler INKA Indonesia in Kalipuro, Banyuwangi, East Java, Tuesday (4/8/2020). The factory, which is targeted to start production in late 2021 or early 2022, has a production capacity of 500 cars (wagons) per year.

Avoid recession

The government has allocated Rp 695.2 trillion to finance mitigation efforts and economic recovery programs to cope with the impact of the Covid-19 pandemic. However, as of this week, only Rp 141 trillion or 20 percent of the funds have been disbursed. The amount is only 1 percent higher than those disbursed as July 27, 2020.

In a limited Cabinet meeting on the handling of Covid-19 and economic recovery at the Merdeka Palace on Monday, President Joko “Jokowi” Widodo said the disbursement was slow because 40 percent of the allocated funds had not been included in the DIPA lists. Ministries and other government agencies have not included them in the DIPA lists, which are used as the basis of the program implementation and fund disbursement which have to be approved by the Finance Ministry. The ministries and other government institutions seem to be trapped in business routines and are not aware about the need to establish priority programs.

Also read : Deficit Widens, Debt Increases

Separately, Deputy Finance Minister Suahasil Nazara said the economy was projected to shrink 4.3 percent in the second quarter of this year. The government is trying hard to prevent the economy from further falling into negative territory in the third quarter of 2020 by increasing the disbursement of economic stimulus and opening up the economy gradually.

According to Suahasil, the main obstacle in the policy execution in the middle of the pandemic is historical data. For example, the government’s existing data cover only 40 percent of the poor, while the distribution of social assistance has to cover 60 percent. Due to the data gap, the distribution of social assistance does not entirely reach the targeted recipients.

Meanwhile, senior economist and rector of Atma Jaya Catholic University, A. Prasetyantoko said the recession would severely affect households and the real sector. If a recession occurs, unemployment and poverty will increase, while the people\'s income decreases.

Also read : Jakarta Seeks ‘Cure’ for Economy

An economic recession can also reduce the quality of people\'s lives. Indonesia may fall into recession in the second quarter of this year. As anticipation, the government will encourage the disbursement of spending in order to increase the resilience of the community and the real sector.

According to the director of research at the Center for Reform on Economics, Piter Abdullah, even though the Indonesian economy has the potential to enter into a recession, people do not need to panic. In the midst of the pandemic, a recession is becoming a new norm that may hit many other countries.

Commodities

Amid the threat of recession, prices and demand for a number of Indonesia\'s export commodities have showed an improvement after China and India, and several countries in Europe begun to resume their exports.

The price of oil palm fresh fruit bunches in South Sumatra, for example, rose from Rp 1,400 per kilogram in May 2020 to Rp 1,600 per kg per on Tuesday (4/8). Crude palm oil (CPO) rose from Rp 7,200 per kg to Rp 8,100 per kg.

According to Rudi Arpian, the head of the plantation product processing and marketing at the South Sumatra Plantation Office, the price increases were partly due to the surge in demand from a number of countries.

Also read : Stimulus and Coordination

Exports of crumb rubber also began to increase. Rubber exports from North Sumatra rose from 14,975 tons in May 2020 to 28,012 tons in June 2020. "The increase in export volumes was driven by the rise in rubber demand from China," said the executive secretary of the North Sumatra branch of the Association of Indonesian Rubber Producers, Edy Irwansyah.

Rubber exports from North Sumatra are expected soon reach the monthly export volume of 34,000 tons recorded before the pandemic. The six main export destinations of rubber in June 2020 were China, the United States, Japan, India, Brazil and South Korea. ( KRN/AGE/ RAM / NSA / RTG/ NIK ).