Indonesia to streamline state budget through digital government

According to Indonesia’s National Economic Council’s Vice Chairman, Muhamad Chatib Basri, one of the biggest challenges in managing the economy is the lack of accuracy in allocating government budgets, especially when it comes to delivering subsidies. 

"Many of our findings show that our subsidies are not well targeted, for example fuel subsidies where almost 30 per cent are misdirected," said Basri while giving his keynote speech at the AWS Public Sector Leadership Innovation Exchange event in Jakarta, recently.  

The lack of data and evaluation processes has led to subsidies not being channeled to the right beneficiaries, namely the lower socioeconomic classes. 

As there is currently a huge need within the government to manage the state budget for better quality, this problem must be addressed immediately, he added.  

Basri emphasised the importance for Indonesia to implement a digital government system that streamlines state spending and prevents the state from spending money on people who do not need it.

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Streamlining the state budget  

Basri said that the government is currently designing digitalisation programmes for subsidy and social protection programmes with the aim of creating potential state budget savings. This aligns with the government's ongoing initiatives to promote modern and integrated digital public services.

According to DEN data, the state spends IDR504 trillion (US$29.9 billion) on subsidies, which include energy subsidies (fuel, LPG and electricity) and social protection programmes (food assistance for families, cash transfers and education funds).

Of that budget, around 20 per cent or IDR101-127 trillion (US$5.9-7.5 billion) is not targeted.   

"Imagine how much additional funds can be allocated to increase the ministry's budget if we can solve this problem," Basri added. 

Government digitalisation efforts, according to him, will be directed at how the state ensures one's eligibility before they can receive assistance from the state.  

Leveraging digital public infrastructure 

As for social protection programmes, DEN encourages the government to develop a digital public infrastructure (DPI) model to ensure that assistance from the state is given to the right person.   

"Digital identity (digital ID) verification and digital payment will open a pathway for the government to deliver its services more efficiently and on target," said Basri, adding that this will also enable people to access government digital services more easily.

Bank Indonesia is also designing a Payment ID system that allows the government to authenticate cash transfer beneficiaries based on a unique code contained in their bank accounts, such as ID card number. 

In addition to encouraging people to activate Identitas Kependudukan Digital (IKD) app through their smartphone, the government also encourages all families in Indonesia to create a bank account to facilitate the disbursement process. 

"DEN also encourages the government to integrate beneficiary data, which is still scattered across various ministries and agencies, to facilitate its management. Without cooperation between agencies, this will be difficult to do," he said. 

Fixing energy subsidies  

In the area of energy subsidies, the government has adopted capping to prevent leakages at the distribution level.

Capping refers to setting a limit on the amount of financial assistance provided by the government. 

Currently, the government has put in place restrictions on fuel subsidies, which requires vehicle owners who are eligible for subsidised fuel to register through the MyPertamina app.

This excludes owners of luxury vehicles or those who are not eligible to purchase subsidised fuel. 

On electricity subsidies, DEN implements a price discrimination formula where customers pay electricity bills according to their economic capabilities. 

"Because electricity is a non-transferable good, we can process the data in such a way that those who are classified as capable pay the costs they should pay," he noted.

Overcoming bureaucratic challenges 

Basri highlighted the need to overcome various bureaucratic challenges to support the government's digitalisation programme. The main challenge is the reluctance of ministries and agencies to hand over their authority and cooperate, despite regulations requiring them to do so. 

Due to data security and trust, many of them want their data to remain in their respective ministries. This situation is exacerbated by the aftermath of the National Data Centre (PDN)’s ransomware attack last year.

"I can't blame [them] because it's a chicken-and-egg situation. If the [data management] authority is given, then the agency holding the authority must be very capable," he said, adding that the government is establishing a GovTech Committee to ensure the government's digital initiatives go according to plan.

Next, the bureaucracy must be agile in this era of disruption. There are times when government employees can no longer stick to rigid regulations due to new innovations.   

"Decision makers must start changing their way of thinking from agreeing on rules to agreeing on principle," said Basri.