Prabowo Subianto takes a chainsaw to Indonesia’s budget
On the campaign trail last year Prabowo Subianto, a former general with a sketchy human-rights record, pledged to give every Indonesian child a free lunch. Experts predicted this would cost $28bn a year by 2029, or the equivalent of 2% of the country’s GDP. Mr Prabowo refused to say how it would be paid for. Four months after he was sworn in as president, the answer, and much of his broader agenda, are becoming clear.
In January Mr Prabowo launched a cost-cutting drive unlike any the country has seen. He is seeking approximately $19bn in savings from this year’s budget, which comes to about 8.5% of Indonesia’s public-sector spending. A proposed second series of cuts, about which he has offered no other details, could lift the savings to $37bn.
Roughly $6bn of the savings will fund the school-lunch programme, which is being implemented in phases. The remaining two-thirds, the president announced on February 24th, will finance a new sovereign-wealth fund. This will back 20 “strategic projects”, such as mineral-processing plants to help Indonesia secure a more prominent place in the world’s electric-vehicle (EV) supply chain.
Mr Prabowo’s aims have something going for them. Cutting red tape is a good idea for Indonesia, just as it is for Elon Musk’s Department of Government Efficiency, or DOGE, to make America more efficient. Free school meals are supposed to reduce childhood stunting. And although Indonesia’s bid to muscle its way up the EV value chain via industrial policy is a long shot, he does at least have a mandate for it from voters.
Unfortunately, as with DOGE, the closer you look, the worse his plans seem. Although civil servants cannot be fired to meet the new targets, contract employees can. The budget at the ministry of public works has been cut by 70%, forcing it to put on hold dozens of toll roads, ports and other investment projects. It has sacked over 18,000 contractors.
Other ministries are taking cuts of 30-50%. Departments are turning off the lights and air-conditioning at 4pm and sending staff home early, which may not help productivity. The meteorological and geophysical agency, handy in a country with at least 127 active volcanoes, had its budget slashed by half. It warns that delayed updates to tsunami sensors could extend the time needed to issue a warning from three minutes to five. That may not sound a lot, but every minute counts. A tsunami in 2004 killed more than 100,000 Indonesians.
The way to reduce stunting is to target children below the age of two, long before they arrive at school. Mr Prabowo’s school programme seeks to increase eating. Yet Indonesian children are twice as likely to be overweight as underweight and stunting is often caused by a lack of micronutrients, not calories. More lives would be improved with better health care and education, including teaching parents about nutrition.
The new sovereign-wealth fund risks being badly run. Its board, unlike that of Indonesia’s first such fund, will report directly to the president. Its CEO is Rosan Roeslani, who chaired Mr Prabowo’s election campaign. Worse, a law passed in February setting up the fund removed it from the jurisdiction of the government’s auditors and anti-corruption cops, and immunised managers against legal liability for any losses. Mr Prabowo is cancelling a lot of growth-enhancing infrastructure projects to create a piggy bank he can use as he pleases.
What could possibly go wrong?
Instead he should use the legislative process to enact smaller, more considered cuts to the state budget. That would be a more democratic way to fund his priorities, and more accountable than his sovereign-wealth fund. But for a president who loves flashy boondoggles, where would the fun be in that? ■
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