A Year of Hijacking of Budgets by the Elite, Bypassing Public WelfareEnd of Year Notes and Reflections by Seknas Fitra on Budget Year 2011

Yuna Farhan      

Yenny Sucipto
Ucok Sky Khadafi
Hadi Prayitno
Mohammad Maulana

Ahmad Taufiq

English Translator : Denis Fisher

2011 was a year of budget hijacking by Indonesia’s political and bureaucratic elite to the detriment of public welfare.    An important factor at play in this situation was increasing “budget mafia” activity, evident in corruption cases within the Ministries of Youth & Sport and Labor & Transmigration; and in confirmation of charges against members of the Budget Committee (Banggar) of the House of Representatives (DPR) as  accomplices in those cases.

This turn of events confirms that Banggar has become a springboard for budget mafia activity.  And, this year, hijacking of budgets has taken place in broad daylight with funds from the public purse being openly squandered on activities of benefit to political and bureaucratic leaders. Proposed construction of a new DPR building has a bad smell about it; purchase of a Presidential aircraft makes no sense; burdens of debt weigh more heavily on citizens; and official travel votes have become like feeding troughs for bureaucrats. All of this has amounted to nothing less than a hijacking of the State budget acted out in full public view.

Hijacking of Indonesia’s budgets continues because of Indonesia’s weak law enforcement regime and because budget processes remain closed. Thus, in comparison to the amount spent on corruption eradication, the value of embezzled assets returned to the public purse is modest.  The overall situation was made worse by the predilection of public institutions—especially ministries, agencies and political parties—not to be open about budgetary information.

This derailing of budgetary funds has had implications for expenditure on education and health—both of which continued to be ineffective. Although government has managed to spend 20% of budgetary resources on education, education budgets have, at the same time, become a dumping ground for all sorts of activities. Moreover, at the central level, education funding is dispersed across 19 ministries and agencies and almost half of it is being appropriated for payment of salaries.  Government is also not meeting its legal obligation to spend 5% of budgetary resources on health.  It is no surprise, therefore, that Indonesia’s Human Development Index (HDI)—which encompasses education and health—declined in 2011.

The elite’s hijacking of budgets has also led to neglect of public welfare in regions.  A principal cause of this has been distortions of the system for fiscal transfers from the central government to regions (known as dana perimbangan). Those distortions have impacted badly on regional budgetary processes. Indeed, it is the fiscal transfers system itself that is acting as a catalyst for increased civil service spending in regions and for promotion of even more fiscal imbalance among regions.  Around half of Indonesia’s sub-national (regional) governments are appropriating more than 50% of their budgets to fund civil service costs.  This situation was made worse by increased levels of misappropriation of regional funds—evident from national Audit Board reports.

FITRA’s projections and recommendations for 2012 reflect the assessment that budgets for 2012 are unlikely to be very different to those of 2011.  Budget processes are still on a business-as-usual footing.  Hijacking of budgets by the elite and neglect of public welfare will continue unless government completely revamps current pro-“rent-seeking” budgetary processes.  And, as the next general election approaches, budget mafias will peddle their wares even more actively as they become players in political contests.

According to FITRA’s projections, State budget funding of civil service costs will continue to blow out in 2012 without any improvement of service provided or any diminution in the level of misappropriated funds.  2012 State funding for education will continue to resemble a dumping ground for sundry activities. The legal requirement to spend 5% of budgetary resources on health will, yet again, not be met. And national Audit Board reporting will continue to be little more than an annual ritual that cannot be counted on to improve the quality of budgetary spending.

To put a stop to budget mafia operations, budget processes need to be totally revamped.  Above all else, budgetary processes need to be open.  To achieve that, the Law on State Finances needs to be revised to ensure in particular that it contains specific provisions fleshing out the Constitutional mandate that State budgets “shall be implemented in an open and accountable manner in order to best attain the prosperity of the people”.

In addition, corruption eradication efforts should focus on the return of State assets to the public purse by those found guilty of embezzling them.  Both the President and the DPR should become agents for change—to make budgets more efficient—and should refrain from deriving personal benefit from State-financed facilities.

Revision of the regional fiscal transfers system must also be a priority. That system should squarely focus on realizing fundamental civic rights by reducing per capita fiscal inequalities among regions.  The system’s policy framework should therefore facilitate more efficient spending on regional civil services and promote greater prosperity for the people.


Subject A Year of Hijacking of Budgets by the Elite, Bypassing Public WelfareEnd of Year Notes and Reflections by Seknas Fitra on Budget Year 2011
Author Yuna Farhan, Yenny Sucipto, Ucok Sky Khadafi, Hadi Prayitno , Muhammad Maulana, Ahmad Taufiq,
Publisher SEKNAS FITRA, Jakarta
Publish year 2011
Supported by Ford Foundation

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