The Politics of Budgeting in Indonesia A thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy Yuna Farhan Faculty of Arts and Social Sciences University of Sydney 2018 This thesis is my own original work. It contains no material previously published or written by another person except where due reference is made in text. Clearance was obtained from the University of Sydney Human Research Ethics Committee for the project. Yuna Farhan ii Table of Contents Figures .......................................................................................................................... iii Tables ............................................................................................................................ iv Abbreviations ................................................................................................................. v Abstract ......................................................................................................................... ix Acknowledgments .......................................................................................................... x Chapter 1: Introduction .................................................................................................. 1 Research Question ...................................................................................................... 2 Theoretical Framework .............................................................................................. 4 Approach and Methodology ....................................................................................... 5 Thesis Outline ............................................................................................................ 8 Chapter 2: Theoretical Framework .............................................................................. 11 The Politics of Budgeting ........................................................................................ 11 Situating Budget-making within Approaches to Indonesian Politics ...................... 18 Synthesising the Framework .................................................................................... 27 Chapter 3: Politics and Budgeting from the New Order .............................................. 29 Politics of Budgeting during the New Order Period ................................................ 29 The Politics of Budgeting in Post-New Order Indonesia ......................................... 35 Conclusion ............................................................................................................... 52 Chapter 4: Politics and Budgeting after the 2014 Elections ........................................ 54 Indonesian Politics in the Post-Election Period ....................................................... 54 The Politics of Budgeting in the 2014 Post-Election Period ................................... 61 Conclusion ............................................................................................................... 76 Chapter 5: Capital Injections into State-owned Enterprises ........................................ 78 The Development of Indonesia’s State-owned Enterprises ..................................... 79 State-owned Enterprises in the 2015 Revised Budget ............................................. 83 State-owned Enterprises in the 2016 Budget ........................................................... 90 Conclusion ............................................................................................................... 97 Chapter 6: The Optimisation Fund ............................................................................... 99 The Development of the Optimisation Fund .......................................................... 100 The Implementation of the Optimisation Fund after the 2014 Elections ............... 108 Conclusion ............................................................................................................. 119 i Chapter 7: The Aspiration Fund ................................................................................. 121 The Emergence of the Aspiration Fund ................................................................. 121 The Implementation of the Aspiration Fund .......................................................... 129 Conclusion ............................................................................................................. 136 Chapter 8: Conclusion ................................................................................................ 138 Main Findings ........................................................................................................ 139 Implications of the Study ....................................................................................... 144 Significance for Future Work ................................................................................ 146 References .................................................................................................................. 147 ii Figures Figure 1.1. Formal and Informal Institutions in the Budget-making Process ................ 4 Figure 4.1. Coalitions in the 2014 Presidential Election .............................................. 58 Figure 4.2. The Budget Cycle and Political Events, 2014–16 ..................................... 63 Figure 4.3. Fuel Subsidies as a Share of Government Expenditure, 2005–15 ............. 65 Figure 4.4. Expenditure under Yudhoyono (2005–14) and Jokowi (2015) ................. 68 Figure 5.1. The Development of SoEs, 2012–16 ......................................................... 80 Figure 5.2. Capital Investment in SOEs and Dividends, 2005–14 .............................. 82 Figure 6.1. Budget Deficit Changes (%), 2006–16 .................................................... 102 Figure 6.2. Operation of the Optimisation Fund ........................................................ 109 Figure 6.3. Dialogue between the Budget Committee and the ICT Ministry ............ 116 Figure 7.1. Mechanism for Constituency Fund Proposals ......................................... 130 iii Tables Table 2.1. Approaches to the Study of Budget-making ............................................... 16 Table 3.1. The Relationship between the President and the Legislature ..................... 38 Table 3.2. Main Duties of the Budget Committee and the Sectoral Commissions ...... 50 Table 4.1. Results of the 2009 and 2014 Legislative Elections ................................... 56 Table 4.2. Background of Budget Committee Members, 2014–19 ............................. 62 Table 4.3. Draft Bills Decided by the Outgoing Legislature in 2014 .......................... 66 Table 4.4. State Ministries with the Largest Budget Allocation .................................. 70 Table 4.5. Macroeconomic Assumptions in the 2015 Revised Budget ....................... 71 Table 4.6. Macroeconomic Assumptions, 2015–16 ..................................................... 74 Table 4.7. Additional and Suspended Funds in the 2016 Budget ................................ 75 Table 5.1. Adjustment of Capital Injections in the 2015 Revised Budget ................... 87 Table 5.2. Fractions’ Positions on Capital Injections in the 2016 Budget Proposal .... 91 Table 5.3. Adjustment of Capital Injections Approved in 2016 .................................. 93 Table 5.4. Fractions’ Positions on the 2016 State Budget and Capital Injections ....... 95 Table 6.1. Time between Plenary Session and the Final Budget ............................... 104 Table 6.2. Corruption Scandals, 2011–13 .................................................................. 106 Table 6.3. Macroeconomic Indicators and the Revised 2015 Budget ....................... 110 Table 6.4. Optimisation Fund Allocations in the Revised 2015 Budget .................... 113 Table 6.5. Macroeconomic Indicators and the Budget Position, 2016 Budget .......... 115 Table 6.6. Allocations from the Optimisation Fund in the 2016 Budget ................... 118 Table 7.1. Party Positions on the Aspiration Fund, 2010 and 2015 ........................... 134 iv Abbreviations APBD Anggaran Pendapatan dan Belanja Daerah (Local Government Budget) APBN Anggaran Pendapatan dan Belanja Negara (National Budget) APBNP Anggaran Pendapatan dan Belanja Negara Perubahan (Revised National Budget) BAKN Badan Akuntabilitas Keuangan Negara (Public Finance Accountability Committee) Baleg Badan Legislasi (Legislation Body) Bamus Badan Musyawarah (Steering Committee) Banpres Bantuan Presiden (President’s Special Fund) Bappenas Badan Perencanaan Pembangunan Nasional (National Planning Agency) BK Badan Kehormatan (Ethics Committee) BKASP Badan Kerjasama Antar Parlemen (Inter-parliamentary Cooperation Body) BPK Badan Pemeriksa Keuangan (Supreme Audit Body) BPKP Badan Pengawas Keuangan dan Pembangunan (Control Agency for Budget and Development) BURT Badan Urusan Rumah Tangga (Household Affairs Committee) CDFs Constituency Development Funds CSOs Civil Society Organisations CSR Corporate Social Responsibility DAK Dana Alokasi Khusus (Special Allocation Fund) DPD Dewan Perwakilan Daerah (Regional Representative Council) DPID Dana Penyesuaian Infrastruktur Daerah (Infrastructure Development Adjustment Fund) DPP Dewan Pengurus Pusat (Central Party Board) DPR Dewan Perwakilan Rakyat (People’s Representative Council) DPRD Dewan Perwakilan Rakyat Daerah (Regional People’s Representative Council) FITRA Forum Indonesia untuk Transparansi Anggaran (Indonesian