State budget revisions usually happen because of a number of reasons, most often revenue shortfalls. However, this year’s budget revisions, or cuts to be precise, are different as they have now been made twice. After revising the 2016 state budget in June in line with the slump in the global oil price, the government took further austerity measures late last month to cope with the higher-than-predicted revenue shortfall.
President Joko “Jokowi” Widodo issued Presidential Instruction (Inpres) No. 8/2016 on Aug. 26 setting out a second round of budget cuts amounting to Rp 137.6 trillion (about US$ 10.4 billion) following a projected Rp 219 trillion state revenue shortfall, particularly stemming from low tax revenues, this year. Around Rp 64.7 trillion will be slashed from ministries and state institutions.
The across-the-board budget cuts will have an impact on the Defense Ministry’s budget, which includes spending on the Indonesian Military (TNI). All in all, defense spending will be reduced by some Rp 2.8 trillion this year. The savings will result from efficiencies in operational expenditure worth Rp 1.1 trillion and the rest from efficiencies in other expenditures.
Cost structure-wise, 40 percent of the Defense Ministry/TNI budget is spent on routine spending, such as on salaries for ministry employees and TNI personnel, 20 percent on procurement of military equipment and weaponry and the remaining 40 percent on capital expenditure, including on personnel welfare and housing provision.
In view of the above cost structure, it is therefore next to impossible to cut the routine spending of the Defense Ministry/TNI, unless the country’s economy is really in a bad shape. The only possible way is to cut spending on either the procurement of military equipment and weaponry or capital expenditure, or both.
However, upon looking further into the current state of TNI equipment and weaponry, it is also nearly impossible to slash the budget for equipment and weapons procurement, at least until the country can meet its commitment to the Minimum Essential Force (MEF) 2024.
Initiated in 1999 in the reform era, the MEF 2024 serves as a basis of transition until Indonesia is able to initiate a military innovation program that will adopt the most advanced military technology to start a revolution in military affairs and which will hopefully transform the TNI into an agile 21st century force.
Apart from the MEF 2024, President Jokowi’s “global maritime fulcrum” campaign has also added to the complexity of the TNI’s modernization program. The campaign, aimed at strengthening Indonesia’s maritime infrastructure and security apparatus to better propel Indonesia’s economic and political rise, has also led to the commitment to prompt modernization of the military’s equipment and weaponry, particularly that of the Navy.
Also part of the consideration in not reducing the budget for military equipment and weapons procurement is the fact that payment for all these procurements has been made in installments, a commitment to timely payment of which is an essential part of the sustainability of the country’s military modernization program in the future. Otherwise, we may find it difficult to purchase modern military equipment and weapons from top foreign producers as a result of our failure to pay previous installments on time.
Upon observing the above conditions, the last possible resort of the military budget cuts is to slash capital expenditure.
Until now, the Defense Ministry/TNI has been correct in not aggressively pursuing its ambition of providing more housing for its personnel, but using existing housing complexes instead. There have been reports of the eviction of retired officers and their family members from their official residences.
However, this policy must be enforced, especially during an economic crisis like today. Moreover, those official residences have from the beginning been allocated for use by active officers only.
Apart from housing, other programs that have no direct correlation with defense or military affairs should also be cut or postponed. One program in point is the Bela Negara (state defense), which was launched in October last year. The program, which is designed for Indonesian citizens of all backgrounds and income levels, has been initiated and conducted by the Defense Ministry.
Defense Minister Ryamizard Ryacudu has insisted the program is aimed at building national character, instilling discipline and promoting solidarity that could eventually prepare citizens for dealing with threats and playing a role in the event of war. It is also aimed at instilling the country’s Pancasila ideology so that foreign ideas cannot easily corrupt the minds of citizens.
The program has so far used the Defense Ministry’s budget, with some Rp 45 billion having been earmarked for the first year. Sustainable organization of such a program will certainly need state money although the ministry has insisted that in the future local governments will be expected to foot the bill.
Such a program is indeed important for an archipelagic and pluralistic nation like Indonesia but its organization could be postponed to a later time when the country’s economy has improved, or the ministry could cooperate and share the burden with related ministries, such as the Education Ministry and Social Affairs Ministry, in administering the program.