A recent tweet made by Indonesia's President, Joko Widodo, startled the entire nation as he was asking his citizen to have a say in picking the new location to replace Jakarta as a capital city. Many scratched their heads and wondered if he had got his priorities right. Political junkies started playing their guessing game on either this decision is made under a political prominence. Otherwise, economists also began questioning where the cash come from for this tremendous project.
One of the many threats and excuses of the transference is that Jakarta will be an underwater city in 2050. Laughter would have been the response had someone told you this in a couple of years ago. But up until the BBC has dubbed Jakarta as the world's fastest-sinking city, you cannot deny the fact of what is known to be a rumor. The city, parts of which are already below sea level, has sunk 13 feet in the past 30 years, according to Reuters. Vast growth in urban development along with groundwater that is being pulled for human use has reduced the region's elevation as the ground can shrink. Apparently, the bill for this forestall is $33 billion or equal to 400 trillion in rupiah which is totally not a humor.
Certainly, $33 billion is a considerable amount to spend and people will rapidly refer to our state budget, or APBN in Indonesian, for fault-finding. Yet, money sure is a burden in every plan, that's why there is a term "budget constraint" which represents a combination of goods and services consumer may purchase within given income, but discretion can still be done without overlooking other concerns.
Presidential special staff in economics, Ahmad Erani Yustika, said in Kompas that presently the government is compiling financial scheme for the capital city shift. Although the capital city relocation sounds colossal, he assured that the government will utilize our state budget wisely with only a few used.
Moreover, the transfer process is not limited only to one or two years, yet it is going to be a long journey for Indonesia. The government even has yet still a zero in on any specific location.
Erani said the financial scheme will be broken down into multi-years scheme and the withdrawal of funds will not exceed 20 percent from the total state budget. It might seem like a big deal to use 20 percent of our state budget for the capital city relocation rather than our other concern like, health which is 5 percent and education with the same 20 percent. Still, it is realistic to exert 20 percent of our state budget.
Building a new capital may take between five to ten years and cost as much as $33 billion or 400 trillion in rupiah, according to Planning Minister Bambang Brodjonegoro. Indonesia's state budget for 2019 is 2,461 trillion according to the Ministry of Finance of the Republic of Indonesia. Thus, 20 percent of it amounted to 492.2 trillion which already overqualified the estimated price. If multiyears scheme applied, every year we will acquire 4.2 percent from our state budget with five years of development. Thus, annually we will earn an average of 103 trillion then it will overachieve 400 trillion rupiahs estimated cost for five years.
Despite the adequate funding solely from 20 percent of the state budget, there must be another allocation sacrificed in order to accomplish five years target. Either decreasing some fund allotment or diverting infrastructure fund. Yet, we cannot neglect our country's mandatory spending which includes 20 percent for education and 5 percent for health. Otherwise, amassing 100 trillion per annum from the state budget is seen ginormous, thus the venture will also be joined by state-owned enterprises and private sectors.
In like manner, an increase in expenditure from the state budget for development will also possibly hike budget deficit. An upsurge in budget deficit cannot outstrip 3 percent from GDP. Along with this year's GDP amounted to 14,000 trillion and a deficit of 296 trillion, the deficit is still below 3 percent which is 2.1 percent. Therefore, the emergency alarm remains silent.
On the whole, the state budget is a compulsory item to be provided by a country as it plays a role as a basic fundamental of a nation's funding. Thus, a contribution, even if just a penny, from the state budget for the country's advancement, is a must.
In fact, the usage of the state budget is for the benefit of ourselves too. Jokowi has been arguing since 2008 that Indonesia needs to hurry up and move its capital. Urban development is already growing rapidly and it can't handle much more if it's to run efficiently. Removing all the government activity related to capital can help relieve some of that.
