How tech will help Indonesia manage public spending
By Yun Xuan Poon
Interview with Sudarto, Senior Advisor to the Finance Minister on Organisation, Bureaucracy, and IT Affairs, Indonesia.
The Ministry of Finance’s vision is to make it easier to monitor and manage spending across national and local governments. It began work on an integrated public financial management system in 2009, known as Sistem Perbendaharaan dan Anggaran Negara (SPAN).
Sudarto, Senior Advisor to Indonesia’s Finance Minister on Organisation, Bureaucracy, and IT Affairs, shares how tech will help the country keep a tighter eye on public spending, and distribute financial support for citizens.
A nationwide tool to monitor public spending
There are three things SPAN will help with. First, it will centralise financial information from all of Indonesia’s federal and subnational governments.
Before this, financial records from different agencies were stored on separate systems. SPAN allows officials to access important information through a website or mobile app, according to a report by the World Bank. This could save the country tens of millions of dollars a year in internal communication, printing, and transportation costs, Sudarto said.
Second, SPAN will make government spending more transparent. Authorised officials can look up transactions almost in real time, according to the World Bank Group report.
It also encourages accountability. Each subnational government receives funding to improve public services and facilities. They rarely submitted reports on time, however, so it was difficult for the central government to understand how this money was being used in districts and villages. SPAN requires local governments to submit reports online before they can receive the next sum.
Third, SPAN can help the government plan its spending better. It used to give out funds mostly towards the end of the financial year, the World Bank Group report pointed out. With a clearer picture of real time spending on SPAN, the President’s Office could “potentially identify any lagging areas early, and push ministers to accelerate the budget execution.”
The Ministry of Finance aims to make SPAN available to all central ministries and local governments by 2022, Sudarto tells GovInsider. This will cover about 22,000 spending units across Indonesia.
Digital wallet
Besides managing public spending, tech is key in distributing funds to those hardest-hit by the Covid-19 pandemic.
The government distributed funds to help retrenched workers tide through one to two months, Sudarto shares. Citizens received the cash in their digital wallets, held in a magnetic card that has been given to 22 million families across the nation, he notes. They can use this card to collect food staples, such as rice and eggs, and withdraw money from their linked bank account.
Micro, small and medium enterprises also received relief packages. These businesses employ 97 per cent of the country’s entire workforce, and had been struggling to make ends meet in the pandemic, reported The Straits Times.
Sudarto sees the digital wallet as a crucial step towards financial inclusion. “If you need support, the government just transfers. It’s simple as well to verify their need, and to register them, because their data is already in our register,” he explains.
More than 90 per cent of the Covid-19 support funds were distributed digitally through the card, he says. About 8 million unbanked families received cash support manually from the post office, he adds.
The magnetic card is linked to each citizen’s single identity number, so those who qualify for funding are already registered digitally. The government can easily keep track of who has received the funds so there are no duplications.
Outside of the digital wallet, the single identity number is used to transact on local e-commerce platforms such as Tokopedia. The government finds this helpful against tax fraud, Sudarto says. Each transaction generates an e-receipt that keeps track of the number of goods sold by each company.
Data analytics
Data analytics is another important tool for managing the government’s finances. The Ministry of Finance uses analytics to forecast the amount of tax the government will receive in the next year.
Governments need to take into account many factors, including investments and changes in the number of businesses. “You cannot just add 5 per cent [to last year’s taxes], it’s impossible like that,” Sudarto explains.
“And you have to analyse how many of those transactions will be captured so they will comply with the tax regulation,” he adds. With more than 20 million taxpayers in the country, analytics certainly comes in handy. The Ministry also analyses data on income and the number of people in a family to determine who is eligible for support funds.
Digitalising Indonesia’s finances will be a big priority for the Ministry of Finance in the coming year, starting with the integration of its public sector finances system, SPAN. The next step is to link up the country’s financial community, including banks and fintech, to increase the pace of digital transformation. “Transformation for us means cooperation,” says Sudarto.
Tech has helped Indonesia forecast government tax amounts and lend financial support to vulnerable groups in the pandemic. The country will continue its tech efforts to improve transparency and accountability in public spending.