[Kabar-indonesia] 3 of 3: Text: President's State of the Nation Address 2006

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-3 of 3-

State of the Nation Address 
continues...

Fourth, in the energy policy sector, it will be
directed to utilize oil substitute energy sources that
are generated from coal, water, gas, as well as
renewable energy, particularly biofuel that is cheaper
so it is more affordable to the public. This policy
will take time, therefore the 2007 Draft State Budget
still makes available Oil-Based Fuel (BBM) and
electricity subsidies. The fuel subsidy is allocated
in the amount of Rp 68.6 trillion and the electricity
subsidy amounts to Rp 25.8 trillion. This subsidy
allocation that is quite substantial is undertaken
because the Government is fully cognizant of the
burden that the people had to endure due to the
reduction of the fuel subsidy last year. The
proportion of fuel utilisation in 2007 as electricity
generating energy shall be decreasing and substituted
by coal and gas. In 2008, it is expected that the
subsidy allocation for fuel and electricity in the
State Budget will decrease drastically owing to the
utilization of gas at gas-powered electric generator
plants (PLTGs). Meanwhile in 2009, all power plants in
the Island of Java would have been populated by
non-fuel electric generators. For the purpose of
developing biofuel energy, the Government will utilize
the asset expenditures allocation from various
ministries and related institutions to support that
program. In addition, it will also be made available
credit interest subsidy for biofuel industry amounting
to Rp1 trillion.

Fifth, as part of the State Budget support to the
bureaucracy reform programme, it will be allocated an
increase of 23.3 percent in personnel expenditure
budget in 2007. In the calculation for the personnel
expenditure, it is incorporated, among others: (i) the
increase in the base salary for state apparatus and
retirees; (ii) the payment for the thirteenth month
salary and pension; (iii) the improvement of
structural allowances and some functional allowances;
(iv) the increase in profession allowance for teachers
and lecturers; (v) the salary budget for new central
public servants numbering around 50,000 persons, the
majority of whom originate from non-permanent
employees; (vi) the increase of official per diem and
extra money for members of the TNI and POLRI amounting
to 20 percent; and (vii) the increase in the
Government contributions to assist in the improvement
of health services for the staff and retirees.

The Government will try to increase the efficiency of
the budget to purchase goods and services through a
tender and procurement system that is more transparent
and competitive. Therefore, the public can participate
in supervising the conduct of the procurement of
Government projects. The increase in goods
expenditures is projected not to surpass 31.3 percent.
This budget for goods and services expenditures shall
be used to: (i) increase the public service function
of each Government institution; (ii) increase the
efficiency and effectiveness of goods and services
procurement, service trips, and state assets
maintenance; and (iii) support the smooth flow of
Government operational activities, be it domestically
as well as in Indonesian diplomatic missions abroad.
The increase of the budget for domestic goods
expenditures is, among others, used to accommodate the
planned increase of the service trip cost index at all
departments or non-departmental government
institutions.

Sixth, in order to mitigate natural disasters,
starting from the Revised 2006 State Budget (APBN-P)
and in the 2007 Draft State Budget, the Government
proposes an increased allocation for expenditures to
build a disaster early warning system, the additions
respectively amount to Rp 60 billion for 2006 and Rp
150 billion for 2007. The post-disaster allocation
fund provided through the general reserves amounts to
Rp 2 trillion in 2007. At the present time, it is
being deliberated an additional expenditure in
disaster mitigation for the rehabilitation and
reconstruction of the Special Region of Yogyakarta and
Central Java as well as regions affected by other
disasters. The post-tsunami rehabilitation and
reconstruction programme in Aceh and Nias will
continue to be monitored according to the schedule.

Aside from the six previous types of expenditures, in
the 2007 Draft State Budget, expenditures are
allocated for the Central Government to pay debt
interests, both domestic and foreign debts, amounting
to Rp 85.1 trillion. Therefore, the total expenditures
of the Central Government for 2007 amount to Rp 496
trillion or experiencing an increase of 16 percent
compared to that of the 2006 State Budget.

Honourable Leadership and Members of the House of
Representatives,

The 2007 Draft State Budget allocates expenditures to
the Regional Administrations for the development and
improvement of services for the regional communities
amounting to Rp 250.5 trillion or experiencing an
increase of 13.8 percent compared to that of 2006. The
General Allocation Fund (DAU), which constitutes an
instrument to overcome the financial imbalance between
the regions, is allocated at 26 percent of the net
domestic revenue. In parallel to the increase of the
domestic revenue, the allocation of the DAU in 2007 is
then projected to reach Rp. 163.7 trillion or
increasing by to 12.4 percent from the DAU allocation
of the previous year.

In consonance with the increase of the DAU allocation,
the allocation of the Special Allocation Fund (DAK) is
also being increased. For that purpose, the DAK
allocation for 2007 is projected to reach Rp. 14.4
trillion. This amount indicates an increase of 24.1
percent from the DAK allocation of the previous year.
Furthermore, the special autonomy and adjustment fund
in 2007 is projected to amount to Rp. 6.7 trillion.
>From the aforementioned special autonomy fund, the
special autonomy fund specific for the Province of
Papua is planned to amount to Rp. 3.3 trillion or
equal to 2 (two) percent of the DAU allocation, which
usage will be directed in particular to finance the
education and health sectors. In addition, in order to
carry out the mandate of Article 34 paragraph (3)
point f of Law Number 21 of 2001, the Province of
Papua is also provided with an additional fund in the
framework of infrastructure development amounting to
Rp. 800 billion, which usage will be allocated for the
development of road infrastructure and transportation.

In order to meet the expenditure needs, both at the
central as well as at the regional levels, sources of
revenue are needed that originate from tax and non-tax
revenues and grants. State revenue and grants in the
2007 Draft State Budget is projected to reach the
amount of Rp. 713.4 trillion or increasing by 14.1
percent from the 2006 State Budget. The sources for
the state revenue in 2007 is planned to consist of tax
revenue amounting to Rp. 505.9 trillion, non-tax
revenue amounting to Rp. 204.9 trillion, and grants
amounting to Rp. 2.7 trillion. The estimation of the
state revenue and grants indicate that around 71.2
percent are supported by the tax revenue, and around
28.8 percent originate from non-tax revenue. The tax
ratio is increasing from 13.7 percent in 2006 to 14.3
percent in 2007. The contribution of the tax revenue
that is increasingly growing demonstrates that the
Government remains consistent in continuing to explore
domestic funding sources, in order to realise the
level and quality of State Budget independence.

Honourable Leadership and Members of the House of
Representatives,
Ladies and Gentlemen,

In accordance with the direction of the fiscal policy,
and the planned state revenue and grants, and the
state budget as I have previously elaborated, the 2007
Draft State Budget will then experience a budget
deficit of around Rp. 33.1 trillion or 0.9 percent of
the GDP. In order to finance the budget deficit, the
government plans to use funding sources, from both
domestic and foreign, while still being oriented
towards financing efforts that are stable and
sustainable, with as minimal a burden and risk as
possible. In addition to close the budget deficit, the
budget funding is also needed to meet the payment
obligations for the main instalments of domestic and
foreign debts that will reach their maturity dates in
2007, and the government capital participation for the
revitalization of several State-Owned Enterprises that
are still in trouble.

In the 2007 Draft State Budget, the budget financing
that originates domestically is planned to reach a net
amount of Rp. 51.3 trillion. This financing from
domestic sources is planned to originate from: (i) The
issuance of Government Bonds or SUN by taking into
account the fiscal and monetary policies in an
integrated manner; (ii) ex-moratorium funds to finance
the reconstruction and rehabilitation programmes in
NAD-Nias; (iii) the sale of assets from the banking
restructuring programmes in an optimal manner; (iv)
utilizing the reserve fund of the government in the
Bank of Indonesia; and (v) privatization. I would like
to convey that the source of privatization financing
is designed to be at quite a low level, since the
government realizes that the privatization programme
should not be aimed at merely meeting the financing of
the State Budget deficit, however, what is more
important is that the effort to revitalize and the
improvement of the performance of State-Owned
Enterprises as mandated by Law Number 19 of 2003 on
State-Owned Enterprises.

In the meantime, budget financing that originates from
foreign loan sources amounts to a net figure of Rp.
18.2 trillion. That amount consists of program loans
and project loans amounting to Rp. 35.9 trillion, and
subtracted by payments for the main instalments of
foreign debts amounting to Rp. 54.1 trillion.

With the structure of the draft State Budget that I am
presenting, and with a targeted economic growth of 6.3
percent, the debt ratio of the government at the end
of 2007 is estimated to decrease from around 41.3
percent in 2006 to around 36.9 percent in 2007. The
decrease of the debt ratio of the government will
increasingly strengthen the structure of the fiscal
resilience, in parallel with the objective of
achieving sustained fiscal self-reliance.

In the end, implementing the State Budget and the
development objectives in general would unlikely reach
the target without the participation of all the people
and the businesspeople. The programmes of the State
Budget are carried out by increasing the improvement
of the public accountability, which is reflected in
the improvement of the quality and orderliness of the
state finances report. The policy orientation of the
State Budget and the focus of the Indonesian
development will also be more directed at the
betterment of the quality of the Indonesian being,
which is covered in the improvement of the quality of
life, and the achievement of the Millennium
Development Index. The importance of the development
of the Indonesian being is also translated in the
enlargement of the budget portion destined for the
development of the Indonesian being in the State
Budget and the Regional Budget all over Indonesia.
Henceforth, we long for inexpensive education and
health costs and basic infrastructure that is
appropriately available, so that all of the Indonesias
people will be able to gain access to health and
education, two matters that constitute crucial
elements in the development of the Indonesian people.

Honourable Speaker, Deputy Speakers, and Members of
the House of Representatives,
My fellow countrymen,

In concluding my State Address, and the Government
Statement on the Bill on the State Budget for the 2007
Fiscal Year and Its Financial Note, I would like to
invite the entire components of the nation to look
forward, together in concert build a brighter future.
Long was the road that we thread, much that we have
achieved, yet, there remains much more endeavours that
we must undertake, towards the ideals and purpose of
our independence. The years that we are navigating
these days are by no means easy, and replete with
challenges. Be that as it may, with the assent of
Allah SWT, I am confident, all of us, the Indonesian
nation that is grand, shall be able to transform our
fate and future towards a better direction.

Let us remain resolved, confident, and evermore
hardworking in reaching our ideals. The time has come,
for us to be more united, rise up, and step forward.
Ahead of us, there lie a wealth of opportunities and
chances that we must approach and seize. To all of the
leaders in our homeland, I invite you, let us dedicate
our thoughts, time, and energy to improve the welfare
and progress of the entire Indonesian people, the
people we hold dear in our hearts.

May the Almighty God bestow His blessing upon all of
us.
Long live the Republic of Indonesia!
Thank you.

Wassalamu’alaikum warahmatullahi wabarakatuh.

Jakarta, 16 August 2006
PRESIDENT OF THE REPUBLIC OF INDONESIA,

Sgd.

DR. H. SUSILO BAMBANG YUDHOYONO

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