(Program Kompensasi Pengurangan Subsidi Bahan Bakar Minyak -- PKPS-BBM Tahun 2005)
Following is a complete summary of the government's plans relating to its subsidy reduction program. Reliability is very high; all data have been gathered from scattered governmental sources and media reports.
Sector of Education
Total amount: 6.27 trillion rupiah.
Programs:
i) Bantuan Operasional Sekolah (BOS ) - Block grants for state and private elementary as well as junior-high schools including: SD/MI/SDLB/SMP; MTs/SMPLB; To support the mandatory 9-year basic education policy
ii) Bantuan Khusus Murid (BKM) - Special Assistance for students of senior high schools, state and private, including SMA/SMK/MA/SMLB. Executing agencies: Minister of education and Minister of Religion.
Beneficiary: 28,65 million of elementary students and 10,85 million of junior high students
Time frame: Starting 1st semester of 2005-2006 education year.
Sector of Health
Total amount: 3.87 trillion rupiah.
Programs:
i) Program Jaminan Pemeliharaan Kesehatan bagi Masyarakat Miskin (PJKMM), or Program to Guarantee Health Maintenance for the Poor, namely free health service provision at Puskesmas and its networks, health referrals, and in-patient treatment in appointed state or private hospitals (Class III in-patients), with funding channeled by PT. ASKES;
ii) Program Penyelenggaraan Pelayanan Kesehatan di Puskesmas Puskesmas service provision and referrals to appointed hospital (Class-III in-patients) with funding channeled by authorized budget users appointed by Minister of Health. Executing agency: Minister of Health
Beneficiary: 36,146,700 poor.
Time frame: Starting 1 July - 31 Dec. 2005
Sector of Infrastructure
Total amount: 3.34 trillion rupiah.
Programs:
Infrastructure development for backward villages. Each village will get Rp250 m per year. Executing agency: Minister of Public Works.
Beneficiary: 12.834 poor villages; selection of poor villages with help from Ministry for Development of Left Behind Regions. Note: According to statistics poor villages amount to
28.000.
Time framce: August 2005 onward.
ADDITIONAL PLUGGED-IN INCENTIVE PROGRAMS AS OF 1 OCTOBER (a.k.a. THE OCTOBER 1st INCENTIVE PACKAGES)
Intended stakeholders: i) Low income households; ii) farmers; iii) laborers; and, iv) businesspeople.
Coverage:
A.Fiscal incentives;
B. Reform in the trade sector;
C. Reform in the transportation sector;
D. Presidential decree on Govt's Purchase Price of rice;
E. Direct cash subsidy.
A. The fiscal incentives. Objective: A number of policies aimed to stengthen industrial competitiveness, improve business climate and compensate to household groups (particularl workers) not targetted at the direct cash programi. Time frame: Effective October 1, 2005 up to January 2006.
Scope:
1. Status change of value added taxation on primary products to non-taxable goods. Purpose: To give incentives to primary agricultural products. Time frame: Effective January 2006.
2. Postponement of State non-tax revenue charges to export and import transactions. Objective: To smoothen and ease transactional costs in exportation/importation. Time frame: Specifics will be stipulated in the amendment of PP No. 44/2003, which will be effective for 3 months starting November 1, 2005.
3. Uplifting ceiling of nontaxable income brackets. Objective: to ease taxpaying burden particularly to low income workers. PTKP subject to tax will increase from Rp 1 million per month to Rp 1,1 million per month. Time frame: January 1, 2006.
4. Exemption of import tariffs for some products. Objective: to improve industrial competitiveness to users particularly SMEs. In regard to sugar, import duties will be reduced by heeding the interests of sugar cane farmers, processing industry and end users. Import duties will be totally uplifted to the following products:
a) Raw materials and heavy-duty industrial components, to 0%;
b) Importation of engine assemblies for public transport, to 0%;
c) Import duties for sugar:
- Raw sugar import duties reduced from Rp 550/kg to Rp 250/kg;
- Rafinated sugar from Rp 790/kg to Rp 550/kg;
- White sugar from Rp 790/kg to Rp 550/kg;
d) Import duties for energy-related converter kits.
5. Expediting cancellation of regional regulations on taxes and retributions. Objective: to improve business climate; on-going program, part of the government's annual workplan for 2005 and 2006, for which purpose the law No. 34/2002 will be amended.
6. Reduction of tax basis for public-transport vehicles.
Objective: to ease the burden of public transportation, subject to MOHA regulation No 16/2005.
B. Reform in the Trade Sector. Objective: Efforts to smoothen flows of goods so as to increase industrial competitiveness and product domestic products from unfair competition.
Scope:
(a) Termination of technical verification processes in importation of salt and sugar for pharmacheutical purposes; tire cord; filter cloth; gunny cloth (goni); and gunny- sacks.
(b) Addition of priority and green lanes to importing producers;
(c) Combating smuggling by applying the so called red line to general importers of lubricant, cigarrettes, garments, shoes, cosmetics, and electronic goods, and tightening the checking of Letters of Origin (SKA).
C. Reform in the Transportation Sector. Objective: Endeavor to curb high cost economy. Attainment of lower cost is expected to improve competitiveness of Indonesia's products in domestic and international markets and strengthen domestic economic integration. Main target in the reform is more competitive agricultural products.
Scope:
a) Reduction of truck-weighing stations (jembatan timbang) from 127 to 64;
b) Reduction of container handling charge (CHC) and set surcharges to not exceed 50%, which is expected to lower terminal handling charge (THC) from US$ 150/container to US$ 93;
c) Cancellation of 36 local govt-imposed regulations in the sector exempting charges on overloaded containers; time frame: effective October 2005.
D. Presidential decree on Govt's Purchase Price of rice. Objective: Through amendment of Presidential decree no 2/2005, it aims to maintain stability of farmers' income vis a vis the fuel price hikes.
Scope: The GOI will increase by 36.2% its purchase price of unhusked rice from farmers; the GOI is indicating to increase the rice price by 34.4%. Time frame: The decree on rice takes effect on 1 January 2006
E. Direct cash subsidy. In place of commodity-subsidy, the GOI is now implementing direct cash subsidy 15.5 low-income households (approx. 30% of national households). Time frame: 1 October 2005 until end of the year (3 months of October through December 2005. Possible continuation until end of 2006. Amount: Rp 100.000 per month.
Vouchers for direct cash subsidies for poor families, Rp300,000 for 3 months: October, November and December 2005, to cover 15.5 million families, or 62 million people
Mechanism:
1. BPS to census the poor;
2. Data to be sent to and validated by Ministry of Social Welfare;
3. The Ministry to instruct PT Pos Indonesia to print the fuel compensation vouchers;
4. Vouchers to be distributed to regional postal offices;
5. Regional postal offices to cooperate with local governments;
6. Vouchers to be distributed to Kecamatan (sub-districts) all over Indonesia;
7. Kecamatan to distribute vouches to Kelurahan (Village offices);
8. Village officials to hand in vouchers to beneficiaries.
Variables to Identify the poor:
1. Size of home less than 10m2;
2. Floor made of soil, bamboo, wood;
3. Walls of low quality
4. Dependence on public toilets/latrines;
5. Unprotected source of water;
6. Nonelectrification;
7.Use of wood or carcoal for cooking;
8. Consume no meat in last 1 weekl;
9. Meal frequency only once a day;
10. No new clothing in last 1 year;
11. No financial capacity to go to puskesmas or hospital when ill;
12.Breadwinner has a job;
13.Breadwinner eduicated as low as elementary school level or less;
14. Owning assets of Rp 500, 000 or less;
15. Recipient of no business credits in last 1 year.
Classification
Very poor: 16 million
Poor : 24 million
Near poor : 22 million
Total: 62 million
MAIN ISSUES
EDUCATION PROGRAMS
Issues: Widespread perception of totally free education, while actually it is very highly limited. Each schools is allowed to charge students if the amount of BOS subsidy is smaller than its actual need.
HEALTH PROGRAMS
Issues: Actual numbers being bigger than that targeted by the center, local governments are expected to mobilize additional funds; but this assumption is too optimistic. There have been reports on rejection of some appointed hospitals in providing services to the poor.
RURAL INFRASTUCTURE PROGRAMS
Issues: This program cannot cater to all needy villages. By design it only cover about 50% of the nation's poor. Even some regions that have been selected as beneficiaries still have not enjoyed it.
DIRECT SUBSIDIES
Issues: Inaccuracy and discrepancy of data on the poor. Susceptibility to corruption.>
