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THE SIXTH FIVE-YEAR DEVELOPMENT PLANNING

CHAPTER I

INTRODUCTION

 

 

By the Grace of Almighty God, Indonesia has succeeded in completing the First Twenty-Five-Year Long-Term Development Plan (PJP I, 1969/70-1993/94), which ended with the completion of the Fifth Five-Year Development Plan (Repelita V, 1989/90-1993/94). In the struggle to consolidate our independence through a series of these development plans, Indonesia has achieved progress in several important aspects of life, and now enters its Second Twenty-Five-Year Long-Term Development Plan (PJP II, 1994/95-2018/19), which begins with the Sixth Five-Year Development Plan (Repelita VI, 1994/95-1998/99).

 

PJP II is a continuation, enhancement, and renovation of PJP I and is an important part of the whole national development process. In PJP II, Indonesia will enter the take-off stage in the effort to become a developed, just, prosperous and self-reliant nation. PJP II is also the second era of national awakening, during which growth and development will increasingly rely on Indonesia's own ability and resources. The energy of the entire nation will be directed towards achieving a standard of living which can place Indonesia on an equal footing with other developed nations.

 

PJP II expresses the vision of Indonesia's future which will emerge through the process of development over the next 25 years. This vision is described in both social and economic indicators, and is stated in quantitative and qualitative terms. The indicators

are intended to give ideas regarding the main goals of development which are expected to be achieved. PJP II indicators are also intended to identify the current problems of development, and problems that may arise in the future, in order to be able to recognize and respond to these problems at an early stage.

 

National development is carried out through planning that encompasses the whole nation, in an integrated, well directed manner involving continuous and interrelated stages. As in PJP I, PJP II is divided into five five-year development plans, beginning with the Sixth Five-Year Development Plan (Repelita VI). To give a more comprehensive picture of the continuing development process, Repelita VI includes reports of development achievements during PJP I, and outlines challenges, obstacles, opportunities and goals which are expected to be attained in PJP II.

 

Repelita VI specifies the development goals, priorities and polices which are contained in the 1993 State Policy Guidelines (GBHN 1993). The broad directives of the GBHN 1993 are used to specify measurable targets and detailed policies, which take into account the challenges to be overcome, the constraints to be faced, and the opportunities that can be utilized over the next five years. The specification of the targets and the formulation of the policies for PJP II are also based on a fundamental national asset, namely the determination of the Indonesian people to be self-reliant.

 

As were the previous five-year development plans, Repelita VI is an indicative plan, not a detailed blueprint for implementation. The targets in Repelita VI are not rigidly set, but rather convey a set of broad objectives which can be adjusted to actual needs as circumstances change. This flexibility allows all those involved in carrying out Repelita VI, including the private sector, to have a common perception of the direction of the development plan, thereby facilitating coordination of their respective plans and actions in conformity with the national development targets.

 

Repelita VI is made operational in the form of concrete policy measures in various fields. For the government sector this is reflected in the annual budget, which is divided into sectors, sub-sectors, programs and projects. Estimates of sources of financing for the plan are based on projections concerning the Indonesian economy and the world economy over the five year period. As actual developments may differ from the assumptions underlying the plan, necessary adjustments will be made when implementing the annual government budgets, as well as in the implementation of other specific policy measures.

 

This summary of Repelita VI is divided into five chapters. The first chapter is an introduction which describes the general concept of Repelita VI and its position in national development. The second chapter explains the principal development achievements of PJP I, particularly in the economic field, social welfare, politics and religion. The third chapter presents the major challenges which will be faced and the primary targets to be achieved in PJP II. The fourth chapter specifies the general objectives and priorities of development in Repelita VI. This includes the development objectives and policies for each sector, cross-sectoral objectives and policies, development funding plans encompassing both the demand for and sources of investment funds, macro economic policies, and the system of development implementation and supervision. Chapter five is the concluding chapter.

 

 

 

CHAPTER II

ACHIEVEMENTS OF THE FIRST LONG-TERM DEVELOPMENT PLAN

 

 

Throughout the 25-year implementation of PJP I, development was carried out continuously in line with the Development Trilogy, which requires the maintenance of a harmonious balance between equity, economic growth and national stability.

 

During PJP I Indonesia overcame various fundamental problems, significantly enhanced the standard of living of the people, and established a strong foundation for implementing the subsequent stages of development. Economic development in PJP I has been able to create economic stability and has developed economic institutions that are critical for supporting development.

 

Various basic policies, such as the balanced and dynamic budget principle, the open capital account system, and prudent macroeconomic policies, have made major contributions to the attainment of development objectives. Satisfactory economic growth and equitable development have been attained in conjunction with economic stability. The average economic growth rate in PJP I was 6.8 percent per annum. The inflation rate, which was very high in the 1960s, was reduced to an average of 17.2 percent per year in the 1970s, and further reduced to an average of 8.7 percent per year in the 1980s.

 

All economic sectors, including industry, agriculture, and services, have made significant progress. The industrial sector grew at an average real rate of approximately 12 percent per year between 1969 and 1992. In the same period, agriculture also made significant progress, as reflected in the achievement of rice self sufficiency since 1984. This success has dramatically altered Indonesia's position from the world's largest rice importing country in the 1970s to a country which can supply its own rice consumption needs. The attempt to establish a strong economic base, characterized by a growing industrial sector and supported by a solid agricultural sector, has been realized.

 

High economic growth coincides with a more balanced economic structure. The share of industry in the national product continues to rise. Since 1991, the industrial sector's contribution to the national product has exceeded the share contributed by agriculture. Indonesia's dependence on oil has fallen since the early 1980s. In 1981 the contribution of oil and gas to the national product reached 24 percent, while by 1992 it had dropped to only 13 percent as a result of healthy growth of the non-oil sectors.

 

The structure of Indonesia's foreign exchange earnings has become more sustainable due to decreased reliance on oil and gas. Non-oil and gas exports have increased rapidly, particularly since the initiation of the deregulation and debureaucratization policies in the mid-1980s. In 1968, one year prior to the implementation of PJP I, earnings from non-oil and gas exports were US$ 569 million. Today Indonesia's income from non-oil and gas exports is US$ 2 billion per month. In 1981/82 non-oil and gas exports were still fairly low, accounting for only 18.1 percent of total export earnings, whereas by 1993/94 the share had risen to 75.8 percent. The rise of non-oil and gas exports has been accompanied by diversification into new commodities and the opening up of new markets. Similar structural change has also characterized government revenues. Domestic non-oil and gas revenues have increased rapidly, and now greatly exceed revenues from oil and gas. In 1981/82, government revenue from non-oil and gas accounted for only 29.4 percent of the total. By 1992/93, it had risen to 67.7 percent.

 

The increased share of non-oil and gas exports in total exports and the larger proportion of domestic non-oil and gas revenue in total domestic revenue of the government, has strengthened both the balance of payments and the government budget.

 

The track record of PJP I also witnessed the continued expansion of employment opportunities, which, in conjunction with a falling population growth rate, has resulted in the continued increase in the standard of living of the Indonesian people. Income per capita, which in 1969 was still around US$ 70, had risen to approximately US$ 700 by the end of PJP I. Meanwhile, the number of people living below the official poverty line dropped drastically. While in 1970 there were 70 million people in Indonesia identified as poor, accounting for 60 percent of the total population, by 1993 this number had dropped to 25.9 million people, or approximately 13.7 percent of the entire population.

 

The role of the people and of the private sector in development activities has continued to rise. Since the 1980s, particularly after the launching of a series of deregulation measures, private investment has increased rapidly, from both domestic and foreign sources. In the 1970s most domestic investment activities were undertaken by the public sector. Nowadays the situation is reversed. Most domestic investment comes from the private sector, and private sector investment is growing continuously. By the 1990s, the role of the government had increasingly been confined to the supply of infrastructure and other public facilities that could not be undertaken by the private sector.

 

The increasing strength and sophistication of the economy is also evident in the growing network of basic infrastructure services, such as, electricity, roads, ports, and telecommunication. During the last quarter century, national development has changed the Indonesian economic situation from an economy with a very limited infrastructure to an economy supported by continuously improving infrastructure. The existence of basic infrastructure provides the foundation for a dynamic and modern economy.

 

Development in the economic field has stimulated development and progress in other fields. In the religious field, the faith of members of different religious communities has risen. Religious values that support the development ethos have increased.

 

With regard to education, much progress had been achieved. Since 1984, the universal six-years primary education program has resulted in an increase in the enrollment rates of school aged children in the seven to twelve years age bracket. By the end of PJP I, almost all of the school aged children were enrolled in six year primary schools, compared to only 41.4 percent in 1968/69. In addition, the illiteracy rate of the population aged 10 years and older has continued to fall, from 39.1 percent at the start of PJP I, to only 15.8 percent in 1990.

 

The health and nutrition condition of the population has also continued to improve. Life expectancy in Indonesia has increased from 45.7 years in 1967 to 62.7 years by the end of PJP I. In the same period, the infant mortality rate has decreased from 145 to 58 per 1000 live births. Caloric intake has increased from 2035 calories per capita per day in 1968 to 2701 calories per capita per day in 1990 and this has been accompanied by increased consumption of protein and other nutrients.

 

The improved health and nutrition of the population is a result of expanding access to public health facilities. In the 1971-1990 period, the total number of medical doctors increased from 4.9 to 16 doctors per 1,000,000 citizens. Health facilities are more widely distributed throughout the country. In 1992/93 the total number of public health centers (puskesmas) was 6,277, a significant increase from 1,227 in 1968. There has been an equally big increase in the total number of subsidiary-puskesmas and mobile-puskesmas.

 

Much progress has also been achieved in the effort to enhance the role of women in development. The illiteracy rate for females aged 10 years and above has decreased from 53.1 percent in 1971 to 21.3 percent in 1990. Female school attendance, especially in primary school, is approximately the same as that of males. The number of females completing secondary school and above has increased from 4.2 million in the 1980s to 12.4 millions in 1990, while the percentage of women in the labor force has increased from 32.4 percent in 1980 to 38.8 percent in 1990. The improved role of women has also been reflected in the increased quality of employment available for women.

 

The development of politics in PJP I has succeeded in creating a national political foundation based on Pancasila and the 1945 Constitution. During the period of PJP I the nation has successfully organized political institutions, developed the political culture, and implemented Pancasila Democracy.

 

The dual-functions of the Armed Forces of the Republic of Indonesia (ABRI) have been accepted by all of the people of Indonesia. The role of ABRI as a socio-political force in the Indonesian political system has also given vigor to the development of Pancasila Democracy, together with other socio-political forces.

 

The development and utilization of the government apparatus in PJP I is one of the main elements in the national development strategy. The consistent and continuous improvement in this area has succeeded in enhancing the role of the government apparatus as the instrument of development.

 

From the above description of the achievements of development, it is evident that PJP I has succeeded in realizing the goal of enhancing the people's welfare and laying down a strong foundation for the subsequent stage of development.

 

 

 

CHAPTER III

THE SECOND LONG TERM DEVELOPMENT PLAN

 

 

A. CHALLENGES OF DEVELOPMENT

 

Development in PJP II and Repelita VI faces a variety of challenges that must be identified and overcome. Some of the challenges comprise problems that could not be fully resolved in PJP I, while other challenges are problems that are expected to arise over the course of PJP II. The challenges affect the formulation and implementation of targets and policies over the next twenty-five years.

 

Each of these challenges is interrelated. A problem in one development area could affect progress in other areas. Some of the major challenges are discussed below.

 

Sustaining High Economic Growth

 

Development in PJP I has significantly increased the standard of living of the population. This is reflected in the growth of per capita income from US$ 70 in 1969 to around US$ 700 by the end of PJP I. Although this is major achievement, the Indonesian per capita income is still low compared to other countries. Sustaining high economic growth will therefore be one of the main challenges in PJP II.

 

Closely related to the challenge of increasing income per capita is the challenge of controlling the population growth rate. Indonesia's success in implementing the family planning program in PJP I has significantly reduced the population growth rate. Nevertheless, the already high population base at the start of the program resulted in Indonesia still having a total population of 189 million people at the end of PJP I. This large population is expected to continue to grow during PJP II. Therefore, PJP II still faces the challenge of further reducing the population growth rate.

Increasing Equitable Development

 

Development achievements in the economic field as well as in other fields must be accompanied by enhanced equity. Although much has been achieved in PJP I, there are various inequities that still must be resolved, such as the gap between different regions, between the western part and the eastern part of Indonesia, between Java and outside Java, between urban and rural areas, between agriculture and industry, and between different socio-economic groups. Unless consistent efforts are made to resolve this problem, inequity could lead to greater social envy that would pose a menace to the maintenance of national stability. The existence of such inequities also indicate that much still needs to be done in order to attain the goal of social justice for all of the Indonesian population. Reducing these inequities is another major challenge that must be resolved in PJP II.

 

Related to the equity issue is the problem of people still living below the poverty line. In terms of absolute total number there has been a significant decrease, from 70 million people below the official poverty line in 1970 to 25.9 million in 1993. Nevertheless, the figure in 1993 means that around fourteen percent of the population, or one out of seven Indonesians, lives in absolute poverty. This fact is naturally a great cause for concern not only for humanitarian reasons, but also because poor people tend to have limited opportunities for increasing their productivity. Therefore, another big challenge in PJP II is the eradication of poverty under the current definition so as to allow poor people to become increasingly capable of increasing their participation in development.

 

Resolving the Unemployment and Underemployment Problem

 

The growth of the labor force in PJP II will still be relatively high, as a large number of the people will reach the working age bracket. At the same time the total number of unemployed workers is still large. Thus, a big challenge in PJP II is to create a large number of productive jobs in order to resolve the existing and pending unemployment problem over the next twenty-five years.

 

In addition to the need to create new jobs for the new entrants into the labor force, there is the problem of underemployment that lowers productivity. The current underemployment rate is quite high, around 40.5 percent of the labor force. Thus resolving underemployment is also a challenge faced in PJP II.

 

Another major challenge is the unequal population distribution. In certain areas, especially in Java, the population density is very high. Moreover, in PJP II the process of urbanization will increase, with more than half of the population living in urban areas within 25 years. This could have a negative impact on rural productivity if rural areas lose their skilled and educated workers. In addition, urban areas will face a variety of social, economic and political problems.

 

Improving the Quality of Human Resources

 

National development is essentially development of the Indonesian people. It encompasses efforts aimed at attaining the national goal contained in the Preamble to the 1945 Constitution, which seeks to enhance the well being and educational level of the whole people.

 

In addition to meeting the provisions of the 1945 Constitution, the requirement to increase the quality of human resources is critical for enabling the country to increase productivity and thus to become capable of competing in domestic as well as in world markets. In PJP II, Indonesia must no longer depend mainly on its abundant natural resources, but instead must depend on the development of human resources. Therefore, the challenge in PJP II is to improve the quality of the Indonesian people both as human beings and as development resources.

 

Developing Science and Technology

 

The transformation of Indonesia into a developed and self-reliant nation will very much be determined by its ability to utilize, to develop and to master science and technology. Development of science and technology must enable us to deal with the challenges of development in the coming years. Therefore, the challenge of science and technology development in PJP II is to ensure that the utilization, development and mastering of science and technology will increase the quality of human resources, raise productivity and efficiency, expand employment opportunities, and increase the people's welfare.

 

Conservation of Natural Resources and the Environment

 

During PJP II, industry is to provide the main engine of growth. Industrial growth will naturally affect the availability and utilization of natural resources. Also in PJP II, economic activities will increasingly be concentrated in urban areas, which will increase the risk of pollution. High rates of economic growth combined with rising population will put further pressure on limited quantities of land, water, and other natural resources.

 

Thus one of the challenges in PJP II is to ensure the preservation of a balance between economic growth and the conservation of natural resources and the environment, by maintaining a sustainable development process.

 

Development of Law, Social Institutions and National Culture

 

Globalization and the rapid progress of science and technology will influence the development of law in Indonesia. Increasing awareness of law, attributable to rising educational levels, will increase the demand of the people for a justice system which is broader and more sophisticated. Therefore, development of a healthy national legal system that is responsive to the increased need for justice in society and able to safeguard the achievements of development, is a challenge for PJP II.

 

The increasing role of the industrial sector in development will bring changes in values that will cause social problems. As industrialization and modernization proceed, efforts to maintain and develop appropriate social institutions and preserve culture must be intensified to ensure that rapid industrialization and greater openness to the global economy will not adversely affect national identity and unity, and will not endanger national stability.

 

 

B. THE GENERAL AIM OF PJP II

As stipulated in the 1993 State Policy Guidelines, the general aim of PJP II is the creation of quality human beings and a quality Indonesian society that are advanced and self reliant. The priority of PJP II is placed on the economic field as the main engine of development, commensurate with the quality of human resources, and interlinked with development in non-economic fields.

 

On the basis of the above general aim, the following are specific targets of PJP II as further elaborated in the text of Repelita VI, the first phase of PJP II.

 

To achieve the progress, self-reliance and prosperity called for in the 1993 State Policy Guidelines, economic activities must be developed quickly. To this end, a high rate of economic growth is projected in PJP II, averaging 7 percent per year. This growth rate is even higher than the average economic growth rate achieved during PJP I of 6.8 percent per year, which was considered high by international standards.

 

This economic growth will be accompanied by an effort to lower population growth. Population growth rate is targeted to be reduced to 0.9 percent per annum by end of PJP II. If this economic and population growth target is achieved, at the end of PJP II real Indonesian income per capita will increase almost four fold, to around US $ 2600 in 1989/90 constant prices. To achieve those targets, the industrial sector is expected to become the engine of growth. During PJP II industry should grow by 9 percent per year on average. The link between industry and agriculture will be strengthened by developing agroindustry and agribusiness, while the links between the industrial sector and natural resource sectors such as mining will also be improved, thereby enhancing the strength of the industrial sector.

 

Rapid industrialization will lead to a continuous decline in the share of GDP coming from agriculture. Nevertheless, the agricultural sector will continue to play a strategic role in PJP II. In addition to supplying food for the population, the agricultural sector will be the main source of living for a large part of the Indonesian work force. A relatively high agricultural growth rate of 3.5 percent per annum is therefore targeted during PJP II.

 

The development of industry and agriculture requires support from other sectors, such as transport, trade, and financial services. These other sectors are expected to grow by 7 percent per year on average. Stronger links between industry, agriculture and services is very important to encourage economic efficiency and productivity.

 

Along with economic development, the emphasis of development in PJP II will be on the improvement of human resource quality. The policies in education, science and technology, health, religion, population, workforce and social welfare are the main elements of human resource development. All are closely interrelated and require major efforts over the next 25 years.

 

In the field of education, the main program is universal nine- year basic education. Efforts to attain this goal will start in the first year of Repelita VI, and this program is expected to be completed by the end of Repelita VIII at the latest. By the end of PJP II, it is expected that the gross participation rate in education at the junior secondary level (SLTP) will be 118 percent, up from 52.7 percent in 1993/94; at the senior secondary level (SLTA) 80 percent, up from 33.2 percent; and at the university level 25 percent, up from 10.5 percent. In addition to broadening educational participation, educational quality in general must be improved and education must be more directed towards, and more responsive to, the requirements of the work place.

 

In the field of health, the efforts to improve health services and community nutrition are expected to increase life expectancy to 70.6 years at the end of PJP II, from 62.7 year at the end of PJP I. The infant mortality rate per 1000 live births will be lowered from 58 at the end of PJP I to 26 at the end of PJP II.

 

The development of science and technology relates closely to the development of education and human resources. In the 1993 State Policy Guidelines, science and technology is identified as one of the principle development components. Improving the ability to utilize, to master and to develop science and technology will be reflected in increased technological content of products, thereby raising the competitiveness of Indonesian goods, and improving national defence and national self-reliance.

 

One of the important aspects of science and technology development in PJP II is research and development. Changes in the methods of financing research and development activities will be needed if they are to expand at a sufficiently rapid pace. At present 80 percent of total research and development is funded by the government. By the end of PJP II it is expected that 70-80 percent of total research and development will be funded by the private sector. At present about 70 percent of science and technology program expenditure is provided for programs in government institutions. By the end of PJP II it is expected that about 60-70 percent of science and technology program expenditure will come from the private sector, and will be used to improve product quality and production process quality to increase competitiveness in the international market. Increased participation by the community and the private sector in research and development programs is expected to increase the share of science and technology development programs in GDP from 0.3 percent currently to around 2 percent by the end of PJP II.

 

With high economic growth and an increase in the quality of human resources, it is expected that absorption of the labor force, which is projected to grow by 69.1 percent during PJP II, can be achieved. Creating work opportunities for 68.6 million people is a critical task, which depends very much on developing human resources. If these objectives can be achieved, the Indonesian people will become developed, self-reliant and prosperous. At the end of PJP II it is expected that Indonesia will be an industrialized country strong in trade and commerce.

 

 

 

CHAPTER IV

THE SIXTH FIVE-YEAR DEVELOPMENT PLAN

 

 

A. THE GENERAL OBJECTIVE AND PRIORITY OF REPELITA VI

 

The 1993 State Policy Guidelines (GBHN 1993) stipulate that, in accordance with the general aim of PJP II, the general objective of Repelita VI is the growth of self-reliance, through increased participation, efficiency, and productivity of the people, in the context of increasing their standard of living, intelligence and overall well being. This implies that enhanced productivity, efficiency and people's participation are main elements of the development strategy that will determine the success of Repelita VI.

 

The GBHN 1993 also stipulates that in line with the emphasis of development in PJP I, the priority for Repelita VI is the development of economic sectors, comprising industry, agriculture and services, in parallel with the enhancement of human resource quality.

 

To achieve the general objectives and targets of the 1993 State Policy Guidelines as described above, the development targets and policies of Repelita VI are further specified.

 

Enhancing Human Resource Quality

 

By increasing human resource quality, the Indonesian people will be able to improve their dignity, their participation in development, and their ability to make informed choices so as to make optimum use of scarce development resources.

 

The quality of human resources will influence the solutions to various problems of development; not only those of productivity and economic growth, but also inequity, poverty, and national stability.

 

The quality of human resources is reflected in living standards, levels of education, health status, character and morals, ability to develop and to master science and technology, and self-reliance. Thus, important steps to improve human resource quality are included in the main development targets and policies in education, health, science and technology, religion, population, social welfare, labor force, and other development sectors, and are implemented in a integrated fashion.

 

In accordance with the effort to improve human resource quality, labor productivity, as measured by value added per worker, is expected to increase at an average annual rate of 3.3 percent. Labor productivity in agriculture is expected to grow by an average of 2.4 percent per year, industrial labor productivity by 3.7 percent per year, and labor productivity in other sectors, including the service sector, by 1.7 percent per year.

Economic Growth and Structural Change of the Indonesian Economy

 

Economic growth in Repelita VI, will reach an average of 6.2 percent per year, accelerating from 6 percent in the first year to 6.6 percent in the fifth year. With this overall growth rate, per capita income will increase by 4.7 percent per year and will exceed US$ 1000 by the end of the five year period.

 

The supply of capital and labor will continue to grow to catch up with the rapid increase in demand. Therefore, the major sources of growth will come not only from increased investment and labor but also from increased total factor productivity. In Repelita VI, around 22 percent of economic growth is expected to come from increased total factor productivity, 26 percent from increased numbers of workers and 52 percent from increased levels of capital stock.

Sectoral economic growth will rely on the industrialization process, supported by agriculture. The economic structure will undergo a basic transformation. The role of industry and services, both in production and in employment generation, will continuously increase, and the role of agriculture will decline.

 

To achieve a 6.2 percent average annual growth rate during Repelita VI, the contribution of non-oil/gas sectors must rise. National product coming from non-oil/gas is estimated to grow on average by 6.9 percent per year. Non-oil/gas manufacturing will grow at about 10 percent per year, and agriculture will grow on average by 3.4 percent per year. Other sectors, including transport services, telecommunications, trade, finance and mining, will grow at an average rate of 6.0 percent per year. As a consequence of these sectoral developments, the share of manufacturing in GDP will rise to 24.1 percent in constant 1989/90 prices, and the share of agriculture will decline to about 17.6 percent. The share of other sectors will decline to 58.3 percent.

 

One of main factors which will contribute to achieving the development target of 6.2 percent average annual growth is the enhancement of non-oil/gas exports. During Repelita VI, the annual growth rate of non-oil/gas exports is expected to increase by an average of 16.8 percent per year. Exports of manufactured products will need to grow by 17.8 percent per year on average. Foreign tourists are expected to reach 6.5 million people at the end of Repelita VI, and foreign exchange earnings from tourism is expected reach about US$ 9 billion, which represents an average annual increase of 18.6 percent over the five year period. Foreign exchange remittances from workers employed abroad are estimated to total US $3 billion in Repelita VI.

 

Enhancement of Equity and Poverty Alleviation

 

The 1993 State Policy Guidelines place great emphasis on the need for more just and equitable development in PJP II. The Guidelines direct economic development to the realization of a national economy which is self-reliant and based on economic democracy for the improvement of the entire people's prosperity and harmony, with justice and equality. Thus, economic growth must be a result of the rise of people's economic activities in an equitable way, and result in reduced economic imbalances and social disparities. Growth must demonstrate a solid tendency to enhance the welfare of lower income groups, and a strong will must be exercised to develop an economy that realizes more concretely the goal of Economic Democracy. The aim of enhancing equity and reducing poverty in Repelita VI encompass objectives for improving the people's business capability and role, especially through cooperatives, small-scale businesses, traditional and informal businesses, and medium-scale businesses that grow from small businesses. Regional capabilities will be improved through the efforts of regional governments, private businesses, social institutions, and actions of the entire society. The development of regional autonomy which is genuine, dynamic, harmonious and responsible will be emphasized. Efforts will be made to reduce the discrepancy between urban and rural areas. The development of Eastern Indonesia and other less-developed regions will be accelerated. Links between economic sectors, especially between agricultural, industry and services, will be strengthened. The growth and development of medium-scale businesses, small-scale businesses, and informal or traditional businesses, will become the lifeblood of the national economy. Improved equity in access to employment, education, and business opportunities will contribute to enhancing the standard of living of the whole population.

 

Poverty alleviation is one of the most important aims of promoting equitable development. The target in Repelita VI is to reduce the total number of people living in absolute poverty to around 12 million, or 6 percent of the population. At the end of Repelita VII the problem of absolute poverty, as currently defined, will be largely resolved. Likewise, the problem of poor villages will also generally be overcome by the end of Repelita VII.

 

One important target of policies to promote equity is the creation of a productive labor force. Economic growth must be directed to activities which support the absorption of highly productive workers. Through integrated efforts across different sectors, it is expected that employment opportunities will be created that gradually will reduce open unemployment and underemployment. In Repelita VI, of the total increase in the labor force of 12.6 million workers, agriculture will absorb 1.9 million, manufacturing will absorb 3 million, and 7 million will be absorbed by other sectors.

 

Another way to promote equity is to improve the quality and capabilities of small-scale, informal and traditional businesses. Such enterprises are to be organized more firmly into formal business units, especially cooperatives. The goal is to raise the quality and the ability to create employment in small and medium businesses.

 

In the context of increasing equity, efforts will be continued to promote regional development through policies directed at the reduction of inter-regional and rural-urban disparities. Regional development will be designed to improve the efficiency of the regions and maximize their potential. More balanced growth between regions will allow the share of various regions in total Gross Regional Domestic Product (GRDP) to become more balanced. The share of the eastern part of Indonesia in total GRDP is expected to rise from about 9 percent at the end of Repelita V to 11 percent at the end of PJP II. The development of urban and rural areas will be better balanced in order to reduce migration to urban areas.

 

Efforts to increase equitable development and reduce poverty will be carried out in all fields of development, and implemented harmoniously and in an integrated fashion through various macro-economic policies, sectoral policies and regional policies.

Economic Stability

 

To support growth and equity, it is necessary to maintain economic stability. In Repelita VI, prudent macroeconomic policies will be continued, and inflation rate will be kept at an average annual rate of under five percent. The external current account is expected to further improve and the deficit will be maintained below 2 percent of GDP. Foreign exchange reserves, which are necessary for maintaining stability under the free foreign exchange system, will be maintained at a level that is sufficient for financing a minimum of five months of imports.

 

 

B. NATIONAL DEVELOPMENT OBJECTIVES AND POLICIES

 

1. ECONOMIC SECTORS

 

Industry

The objectives of industrial development are to strengthen the national economy by creating forward and backward linkages between sectors, improving the resilience of the national economy, expanding employment and business opportunities, and promoting the growth of all sectors of the economy. Industrial development in Repelita VI will be geared towards self-reliance and improved competitiveness, both in domestic markets and in foreign markets, while preserving the environment.

 

The objectives of industrial development in Repelita VI are to achieve a sufficiently high growth rate so that industry can become the main vehicle for stimulating economic development, and so that a stronger and more diversified industrial structure can emerge supported by increased technological capabilities and optimum utilization of economic resources. Additional objectives are to improve industrial competitiveness and the ability to produce high quality products capable of penetrating international markets; to promote the growth of small and medium size industries, including rural industries; and to broaden the regional distribution of industry, particularly in the eastern part of Indonesia. By dispersing industry to the regions, centres of economic growth and potential can be developed in the outer islands.

In Repelita VI, manufacturing, which includes oil and non-oil/gas manufacturing, is expected to grow at an average annual rate of 9.4 percent. Non-oil/gas manufacturing will grow at an average rate of 10.3 percent per year. At this rate of growth, the contribution from manufacturing as a whole to GDP will increase from 20.8 percent at the end of Repelita V to 24.1 percent at the end of Repelita VI, and the contribution from non-oil manufacturing will increase from 17.6 percent to 21.3 percent.

 

Along with increased industrial production, exports of manufactured products are expected to increase by an average of 17.8 percent per year, and to reach US$ 54.8 billion by the end of Repelita VI.

 

Non-oil/gas manufacturing consists of agroindustry, basic metals, capital goods, chemicals, and other important industries. Agroindustry, including processed food, processed timber, leather goods, goods made of rubber, and paper, is expected to grow on average by 8.2 percent per year. Basic metals and capital goods, including industrial machinery and equipment, transportation equipment, electronics and telecommunications, is estimated to grow on average by 12.6 percent per year.

In addition, the chemical industry, including chemicals, plastics, and non-metallic minerals, is expected to grow by 9.7 percent per year. Other manufacturing industries, such as textiles and garments, are estimated to grow on average by 13.0 percent per year.

 

Manufacturing as a whole is expected to create additional employment for about 3 million people. At this level of absorption, industry should account for 25.3 percent of the additional employment created during Repelita VI.

 

To accomplish these objectives, a range of policies are required for developing industry, using the following strategy: (1) developing broad-spectrum industries orientated towards the international market, natural resource-intensive industries with a rising technological level, labor-intensive industries which become more skilled-intensive over time, and technology-intensive industries; (2) developing industries by accelerating technological mastery in order to solidify the base for producing superior industrial products; (3) developing industries which rely on the market mechanism, with the private sector in the lead; and (4) developing industries which emphasize growth and income distribution by giving priority to those industries capable of fast growth and improving the participation of the broader community.

 

Priorities for industrial development during Repelita VI will include: (1) agroindustry, which is developed through the network of agroindustrial activities and agrobusiness; (2) mineral processing industries; (3) the machinery, capital goods and electronics industries, including industries which produce components and engage in sub-assembly; and (4) export-oriented industries which become increasingly skill-intensive and diversified over time, including textiles and textile products.

 

The development of agroindustry and agrobusiness is carried out to increase value added, intensify and strengthen the industrial structure, increase exports of industrial products, extend business opportunities and employment, and alleviate poverty. To accomplish this, policies will be undertaken to develop agro-processing industries that utilize comparative advantage, create competitiveness, and stimulate demand for agricultural commodities which will improve farmers' purchasing power and create domestic markets. Policies will also be developed and implemented which improve the mastery and application of technology for processing agricultural products.

 

Policy measures undertaken for the development of the machinery, capital goods and electronics industries include improving the types, quality, and performance of products, the development of technological infrastructure, standardization of products, the development of small- and medium-sized suppliers and support industries through business partnership with large-scale industries, the improvement of linkages between industry and other sectors, and further development of strategic industries.

 

Export-oriented industries will be further promoted as a source of industrial growth and labor absorption, and to strengthen the balance of payments. Policy measures to accelerate export growth include the development of labour-intensive industries which will become more skill-intensive over time, product diversification, and the development of export-oriented industrial zones.

Design and engineering industries will be improved for purposes of domestic industrial development, particularly for the development of small and medium size industries, as well as for supporting service exports. Steps in this direction will involve utilization of technological licensing, innovative engineering, and the optimum use of domestic expertise and service industries.

 

Industrial development during Repelita VI aims to stimulate the growth of competitive small and medium size industries which serve as the industrial backbone of the economy. Linkages between large, medium and small size industries will be developed through a mutually profitable business partnership, including the development of regulatory support institutions and business partnership institutions. The development of craft and home industries will be encouraged through the establishment of various industrial centres. Developmental measures for these craft and home industries need to take into account local human resource potential, natural resources, and cultural values.

 

Agriculture

 

During Repelita VI agricultural development will be directed towards raising the quantity, quality and diversity of agricultural products and improving efficiency. Agricultural development will also be directed towards the fulfilment of food and nutritional needs, and the need for basic materials for industry. Linkages between agriculture and other industries are to be encouraged and developed, so that agriculture can benefit from domestic and foreign market opportunities, and contribute to the expansion of business and employment. These objectives are directed towards improving the standard of living of farmers and the rural community.

In addition to improving the income and living standards of rural people, the objectives of agricultural development during Repelita VI are to improve the diversification of agricultural businesses and products and to intensify and extend agriculture with the support of agro-industry. Additional objectives are to improve labor productivity and employment opportunities in the agricultural sector, supply a diverse range of food products, and raise product quality through better processing. Agriculture should also contribute to regional development. Maintaining food self-sufficiency, improving the farmers' capability to master and apply agricultural technology, improving the productivity of farm enterprises, and improving competitiveness both at home and overseas, are additional important objectives.

 

The average growth rate of the agricultural sector is estimated to be 3.4 percent per year during Repelita VI. The food crops and horticulture sub-sector is expected to reach an average growth rate of 2.5 percent, animal husbandry 6.4 percent, plantations 4.2 percent and fisheries 5.2 percent per year. The share of agriculture in GDP is expected to decrease from 20.2 percent at the end of Repelita V to 17.6 percent at the end of Repelita VI.

 

Employment opportunities in agriculture are expected to grow by 1 percent per year on average during Repelita VI so that the agricultural sector should be capable of absorbing up to 1.9 million additional workers. By the end of Repelita VI, employment in agriculture is expected to reach 38.4 million people.

 

To realize these objectives, a range of agricultural development policies will be undertaken. These will cover efforts to improve productive efficiency and the quality of agricultural products, to maintain food self-sufficiency, to improve market-share, post-harvest processing efficiency, and the distribution of agricultural products, and to increase the supply of basic materials for industry. Policies will also be initiated to reduce income gaps, preserve the environment, and improve the role of peoples' integrated farm enterprises. Improving the quality and productivity of the work force and creating employment opportunities in rural areas will contribute to the strengthening of agricultural institutions and will help overcome poverty.

 

Water Resources

 

Development of water resources is closely related to the development of agriculture, housing and human settlements, industry, energy, and hydropower.

 

The targets for water resource development in Repelita VI include: providing water at a rate of 210 cubic meters per second to meet the needs of 72 percent of the population; supplying 3,700 cubic meters per second to irrigate 6.2 million hectares of rice land; supplying 380 cubic meters of fresh water per second for 370 thousand hectares of fish ponds; supplying 20 cubic meters per second to irrigate 50 thousand hectares of grazing land; and supplying 110 cubic meters per second to fulfil the needs of industry and tourism. In addition to meeting these physical targets, the ability to master and apply water resource technology will be improved.

 

Policies for achieving these targets include: improving efficiency and productivity in water utilization; increasing the supply of water for human settlements, agriculture, industry, tourism, and electricity generation; extending irrigation networks; improving water utilization through development of fair and efficient allocation systems; controlling damage to the environment; strengthening water resource institutions; and supporting regional water resource development.

 

Food and Nutrition

 

Food and nutrition is closely interrelated with efforts to improve the quality of human resources. The capability to nurture qualified and self-reliant human beings depends on the quality and balance of available food. Food and nutrition levels will be further developed during Repelita VI.

 

The objectives of food development during Repelita VI include maintaining dynamic food self-sufficiency and increasing energy supply from both carbohydrates and proteins. The community should be free from foods that endanger peoples' health. Nutrition targets during Repelita VI stipulate average energy intake of 2,150 calories and protein intake of 46.2 grams per person per day, improvement in the community's knowledge and awareness of nutrition, and reduced malnutrition.

 

Policy measures for food development will include efforts to increase production, improve purchasing power, raise trade efficiency, improve distribution and supply, and improve the coordination of pricing policy. Additional measures will aim to increase the diversification of food consumption, maintain food security, and develop effective and efficient food institutions. Specific policies will focus on overcoming malnutrition and improving the management of nutrition programs.

 

Manpower

 

The development of manpower during Repelita VI seeks to expand employment, reduce unemployment, and develop human resources, so as to establish independent and productive workers with a high work ethos.

 

The main manpower objective during Repelita VI is to create new employment opportunities of sufficient quality and number to absorb the additional workers entering the labor market. During Repelita VI, the manpower target will be to create new employment opportunities for 11.9 million people. In this way, the open unemployment rate, which was 3.2 percent in 1990, will be reduced to 0.8 percent by 1998. This percentage will consist of new entrants to the labor market from the educational and training system, and workers who change jobs. In addition, expansion of employment opportunities will also be geared towards the absorption of additional workers in the regions. Of the 11.9 million new jobs which are expected to be created, it is estimated that 3.0 million will be in Sumatera, 6.4 million in Java, 0.8 million in Kalimantan, 0.6 million in Sulawesi, and the rest spread over the other islands.

 

As part of the objective of extending employment opportunities, approximately 1.25 million professional workers are expected to find jobs overseas, which should generate around US$ 3.0 billion in foreign exchange earnings.

 

Additional objectives include shifting employment opportunities from the informal sector to the formal sector and from low productivity occupations to high productivity occupations. Efforts will also be made to improve industrial relations by supporting the development and improvement of working conditions and providing labour protection, including protection for female employees and for children.

 

To reach these targets, policy measures will be pursued that promote the development of a climate conducive to the expansion of employment opportunities, the improvement of efficiency in all sectors, the improvement of manpower quality, effective utilization of manpower, and the improvement of labour welfare. Efforts to improve the climate for employment expansion will be carried out by creating a sound and dynamic business climate, and by improving linkages and the flow of information between sectors in a mutually supportive fashion, such as between educational and vocational institutions and the needs of the labor market.

 

Trade

 

The development of domestic trade during Repelita VI will be geared towards improving the role of the domestic market by developing a distribution system which is stronger and more extensive. Foreign trade objectives include the expansion of overseas markets, as reflected in growing non-oil/gas exports, and strengthening the structure of non-oil/gas exports with industrial exports in the lead.

 

In quantitative terms, the domestic trade target is to achieve an average growth rate of 6.6 percent per year, so that by the end of Repelita VI the contribution from the trade sector to GDP will reach 17.5 percent. The average labor force growth rate in the trade sector is expected to reach 3.5 percent per year, so that by the end of Repelita VI trade will be capable of absorbing 14.0 million workers, accounting for 18.5 percent of all new employment opportunities. Non-oil/gas exports are expected to increase on average by 16.8 percent per year so that by the end of Repelita VI non-oil/gas export revenue should reach US$ 61.2 billion. The export values of farm products, industrial products, and mining products are estimated to grow by 6.8 percent, 17.8 percent and 15.0 percent per year, respectively, to reach US$ 3.6 billion, US$ 54.8 billion and US$ 2.8 billion. By the end of Repelita VI, industry will account for 89.4% of total non-oil/gas merchandise exports, agriculture for 5.9 percent, and mining for 4.6 percent.

 

Domestic trade policy in Repelita VI will be directed towards strengthening and expanding the market, improving consumer protection, enhancing business competitiveness which protects small and medium size businesses, and improving the role of cooperatives in trade. Foreign trade policy will be geared towards improving the competitiveness of export commodities, improving the structure of non-oil/gas exports, increasing the number of countries to which we export, and improving the role of Indonesia in trade cooperation, both bilaterally, regionally, and multilaterally, including cooperation among the developing countries.

 

Trade activities must also be geared towards stimulating the people's economic potential by supporting small size businesses, economically deprived groups, household enterprises, and informal and traditional businesses. This is carried out through the creation of a supportive climate, provision of trading places, credit facilities and other financial resources, the improvement of trade extension and information, and the development of business capacity and business protection.

 

Transportation

 

Transportation plays a key role in the development of the country, affecting the economy, culture, politics, defense and security. The development of transportation during Repelita VI will be geared towards enhancing the mobility of people, goods, and services, supporting the national distribution system, territorial development, and improving international relations. The improvement of the national transportation system will be achieved through improved coordination, integration and synchronization in planning, development, and operation of the different modes of transportation, and by developing transportation infrastructure and facilities which can reach remote and isolated areas.

 

The targets of road development during Repelita VI include construction of 16 thousand kilometres of arterial roads, 50 thousand kilometers of collector roads, 201,370 kilometres of local roads, and 660 kilometres of tollroads, as well as achievement of 100 percent satisfactory condition for arterial and collector roads and 60 percent for local roads. The targets in the development of railway transportation during Repelita VI include construction of 350 kilometres of track, improvement and rehabilitation of 840 kilometers of track, and improvement and rehabilitation of 130 railway bridges in Java and Sumatera.

 

The main targets for the development of sea transportation include developing and improving 7 container ports; developing local and pioneer wharfs in 158 locations; creating a domestic shipping fleet capable of transporting 167 million tons; creating a national shipping fleet capable of transporting approximately 10 percent of the total overseas-bound cargo; and operating 34 pioneer ships per year. Targets for the development of air transportation by the end of Repelita VI include providing air fleet capacities which can transport 12.2 million passengers on domestic flights and 9.6 million passengers on international flights; providing 12 hub airports and 13 local airports; and the operation of pioneer flights in Sumatera, Kalimantan, Sulawesi, Maluku, Nusa Tenggara Timur, and Irian Jaya.

 

During Repelita VI, it is anticipated that the transportation sector will grow at an average rate of 7.0 percent per year, and create new employment opportunities for 750 thousand people.

 

The targets for transportation development during Repeli- ta VI will be achieved through policy measures geared towards developing a national system of transportation that is reliable, integrated and efficient; developing regional transportation, with special attention given to the least developed areas, particularly eastern Indonesia; developing urban transportation; supporting the development of industry, agriculture, trade, and tourism; and improving the quality of services.

 

In the development of transportation, participation from the community and the private sector will be encouraged, especially in areas of high growth, where private investment is economically feasible. In this way, government efforts to develop facilities and infrastructure can be directed to the least developed and most backward areas, and to activities which are absolutely needed by society at large but are less attractive to private business.

Mining

 

In Repelita VI, mining development will be continued and be geared towards optimal utilization of mineral resources while continuing to preserve the environment. The development of mining will be directed towards providing basic materials for the domestic industries, generating energy, increasing exports, improving state and regional revenues as well as expanding employment and business opportunities.

 

The objectives for the development of mining during Repelita VI are to increase production and diversify mining products in order to fulfil industrial demand for basic materials and energy as well as to increase exports. Other objectives are to create an efficient and productive system for the management of mining activities supported by a highly qualified labor force and the ability to master technology; to broaden people's participation in the mining sector by expanding the role of cooperatives; to expand the development of mining, especially in the eastern part of Indonesia, in support of regional development; and to provide information services on geology and mineral resources for the purposes of further exploration and for the mitigation of geological natural disaster.

 

It is estimated that during Repelita VI the mining sector will grow by an average of 2.6 percent annually. This will provide an estimated 147,000 new jobs. Labor absorption will be primarily in small scale and cooperative mining operations.

 

The mining sector produces coal and minerals as well as oil and natural gas. Production targets for coal and minerals during Repelita VI are 71 million tons of coal, 40,000 tons of tin, 2.75 million tons of nickel ore, 11,000 tons of ferrous nickels, 50,000 tons of matte nickel, 1 million tons of bauxite, 1.8 million tons of copper concentrate, 70,600 kilograms of gold, 143,000 kilograms of silver, and 340,000 tons of laterite. The oil production target is to maintain the production of oil and condensate at 547.5 million barrels per year. Natural gas production is expected to be 2,960 billion cubic feet annually. LNG and LPG production are expected to reach 28 million and 3.5 million tons per year, respectively.

 

In order to reach these targets, mining development policies are geared towards developing information systems on geology and mineral resources; improving production and processing capabilities; increasing diversification of mining products; and developing support systems for improving the efficiency of mining operations -- including the development of human resources and expanding the ability to utilize new technology; as well as creating a favorable investment climate.

 

Forestry

 

Forestry development during Repelita VI will be geared towards improving people's welfare and conserving forests.

 

The primary objective of forestry development during Repelita VI is to preserve the 92.4 million hectares of protected natural forests. Through preservation and conservation of forests, optimum and long-lasting production can be achieved. In conjunction with forestry development, efforts will be made to improve the welfare of the poor people living in and around forests.

The production target for logs during Repelita VI is 188.3 million cubic meters. Production at this level ensures continuity and provision of basic materials for the industry and for local consumption in sufficient quantities. The targets for the non-timber products are about 1.4 million tons of rattan, 364,000 tons of sap, 29,800 tons of tengkawang tree, 30,000 tons of sago flour, and 788.6 million cubic meters of firewood.

 

In order to achieve the above targets the policies for forestry development are aimed at stabilizing protected forest regions; improving the quality and productivity of forests; improving the management of forests and forest development programs; improving the processing of forest products; and diversifying the production of forest products. Other policies are directed towards lessening poverty and raising income levels of people living in forest areas; expanding the role of the cooperatives, small- and medium-size businesses in forestry development; and preserving the forests.

National Enterprises

 

The development of national enterprises, comprising cooperatives, state enterprises and private enterprises, will be geared towards becoming the main engine for strengthening the national economy, furthering economic growth, and to more evenly distribute the activities and benefits of development. In addition development of domestic enterprises will encourage cooperation among businesses of all sizes and creation of business linkages among sectors and sub-sectors.

 

The objectives for the development of national enterprises during Repelita VI are to strengthen informal, traditional and small-size businesses; to expand employment in small- and medium-size businesses, and in so doing to increase value-added and economic growth. Development is also aimed at improving mutually supportive and beneficial business relationship and partnership among businesses of all sizes.

 

The development of state-owned enterprises will be geared towards improving their efficiency, effectiveness, and productivity so that they can assume an increasingly important role as business pioneers and provide stability for the national economy.

 

In order to achieve these objectives, certain policy measures will be adopted, which include improving the organizational structure of the private sector, improving the capability of small- and medium- scale businesses, improving the competitiveness of domestic businesses, improving the distribution of investment, as well as improving the efficiency, effectiveness, and productivity of state enterprises.

 

Tourism

 

The development of tourism will be geared towards strengthening the sector in order to enhance its ability to generate employment opportunities, increase incomes, expand regional and national government revenue, and improve foreign exhange earnings.

 

The target for tourism development during Repelita VI is to increase the number of foreign tourists by an average of 12.9 percent per year. In the final year of Repelita VI it is expected that 6.5 million foreign tourists will visit Indonesia. This is expected to generate foreign exchange earnings of approximately US$8.9 billion. Domestic tourism is expected to increase by 1.6 percent per year, and reach in the final year of Repelita VI 84.2 million visitors. Revenues from domestic tourists are expected to generate about 9 trillion rupiah in 1988/89.

 

In order to reach these targets tourism development policy measures include efforts to strengthen the tourism sector and improve its competitiveness, to develop tourism areas nationwide, and to broaden the participation of the community in tourism development activities.

Post and Telecommunications

 

The development of the post and telecommunications sector will be directed towards improving its capability, efficiency, and reliability as well as its ability to utilize technology.

 

The objectives for the development of the postal system during Repelita VI are to improve its quality and efficiency, to diversify services, to mechanize and automate postal services. By the end of Repelita VI, all sub-district capitals and 40 percent of all villages are expected to have postal service facilities.

 

In order to achieve these objectives, policies will be pursued that will be geared towards improving efficiency and quality of service. This will be done by improving the quality of human resources and the provision of technology, as well as through expansion of the role of cooperatives and the private sector in the provision of postal services.

 

Objectives for telecommunications during Repelita VI are to improve the quality of service and to provide an additional 5 million telephone connections. Telephone density will increase to just under 4 telephones per 100 people. It is estimated that by the end of Repelita VI telecommunication service will be available in all district and sub-district capitals as well as in half of all villages

 

In order to achieve these objectives policy measures will be geared towards improving the distribution and coverage of service, improving the efficiency and quality of service, increasing the participation of cooperatives and the private sector, expanding telecommunications industries, expanding utilization of the radio frequency spectrum and satellite orbits, improving the quality of human resources in telecommunications, and improving special telecommunications and telecommunications for defense and security.

 

Cooperatives

 

The development of cooperatives will be geared towards improving the capability of cooperatives so that they can become efficient business enterprises and the mainstay of a strong people's economy.

 

Objectives for the development of cooperatives during Repelita VI are to further improve the quality of human resources for cooperatives, especially in the areas of management and organization of cooperatives; to encourage and expand active participation among members; to improve the utilization, development, and mastery of appropriate technology; to strengthen the system of capital provision for cooperatives; and to strengthen ties to the business network. In order to achieve these objectives, certain policy measures will be adopted which will improve access to markets, expand linkages to other businesses, improve access to information, simplify licensing procedures, improve access to and utilization of capital, improve the organizational and management capabilities, and expand access to technology and improve the ability to utilize it.

 

Regional Development

 

Regional development as an integral part of national development will be geared towards more balanced inter-regional growth and more equal distribution of growth between urban and rural areas, expanded access to isolated areas and accelerated development in the eastern part of Indonesia. Implementation of development activities and programs will be suited to regional priorities. Attempts will be made to optimally develop regional potentials.

 

The objectives for regional development during Repelita VI are to further regional autonomy, with an emphasis on increasing responsibility and authority at the district level; to distribute growth among regions and between urban and rural areas in such way that the achievement of national development objectives is balanced among areas; and to further the coordination of development among sectors and regions as well as between them.

 

Efforts to increase economic growth in provinces with relatively low per capita income, namely East Timor, Maluku, Irian Jaya, Jambi, Bengkulu, West Kalimantan and Southeast Sulawesi, will be accelerated. In order to become comparable to other regions, growth rates for these provinces need to be higher than for the country as a whole. To achieve the above objectives, the government's regional development policies are to increase the level of decentralization and local autonomy; to increase the harmony of inter-regional growth; to increase the integration of regional and sectoral development programs; to increase government services to the community; to develop active participation of the community in development; to establish the role of spatial planning in regional development; to develop local culture; and to develop the use of applied technology.

 

Other integrated policies are to improve the service to the community through deregulation measures at the provincial and local levels in order to create an attractive business climate and to enhance regional economic activities.

 

During Repelita VI, support for development projects through the Inpres Program, will be improved through decentralization of authority and responsibility and by carefully considering and addressing the needs of isolated areas and other regions with special characteristics.

 

Marine

 

The ocean provides Indonesia with food, energy, transportation connections, a medium for industrial activities, and a field for defense and security. Marine development will be geared towards effective utilization of marine resources and seabeds as well as of national marine territories, such as the Exclusive Economic Zone, in a harmonious and balanced manner.

The objectives of marine development during Repelita VI are to strengthen, expand and broaden the distribution of marine industries and business. The development of shipping industries will be geared towards building and repairing ships of up to 100,000 dead weight tons (DWT). Off-shore building industries are expected to be capable of constructing off-shore buildings at depths of up to 300 meters. An additional goal is to provide mapping and information services.

 

In order to achieve the above objectives, main policies will be adopted to facilitate upholding of sovereignty and national jurisdiction, effective utilization of marine resources and seabeds; improvement in the standard of living for fishermen; development and distribution of marine industries; collection and provision of marine data and information and development of a marine geographic information system; and to protect marine life.

 

Aerospace

 

Aerospace development will be geared towards the upholding of sovereignty and effective utilization of territorial airspace. It will be aimed at attainment of international recognition of airspace rights as well as the mastery of science and technology by aerospace industries.

 

The objectives for aerospace development during Repelita VI are to establish a national aerospace institution, to resolve issues concerning national airspace, to resolve issues in an international forum concerning geo-stationary orbits (GSO), and to ratify various international conventions.

 

The objectives for the development of aerospace technology during Repelita VI are to improve the mastery of aerospace technology, to engineer and to produce an airplane with a carrying capacity of 50-80 passengers, to create a national remote sensing information service, to provide a geographic base map of Indonesia for use in development activities, and to enhance the capability to support a navigational system. Other objectives are to develop a national remote sensing information service, to develop the capability to design a data processing system, to complete wind and solar energy maps, to design and produce hardware and software for development of wind and solar energy, and to improve meteorological forecasting capabilities.

In order to achieve these objectives, policy measures are to be geared towards upholding sovereignty over the national airspace; expanding aerospace capabilities; meeting the demand for air transportation services; and improving flight safety, and ensuring the conservation of airspace environmental function.

Finance

 

Financial development during Repelita VI will be geared towards improving the capability, utilization and facilities of financial institutions as well as formulating financial policies to support development programs. This can be achieved through strengthening of financial institutions and mobilizing national savings as a main source of development funding.

 

The objectives of financial development during Repelita VI are to obtain funding for development activities and for broader distribution of those activities, to further economic growth and economic stability. In order to achieve these objectives, private savings, government savings and foreign net funds are expected to reach 454.1 trillion rupiah, 169.4 trillion rupiah and 36.6 trillion rupiah, respectively by the end of the five-year period. To these objectives fiscal, monetary and balance of payment policy measures will be adopted. Fiscal policy measures include further development of a taxation system, optimization of routine expenditures, utilization of foreign loans, enhancement of the effectiveness of development expenditures, and improving the distribution of development benefits.

 

Monetary policy measures will be geared towards expanding private savings, creating price stability, improving the efficiency of financial institutions, improving the effectiveness of financial distribution, and improving the quality of human resources in the area of financial management.

 

Balance of payment policy measures include increasing exports, improving the efficiency of the stock exchange, increasing the productive utilization of domestic capital and foreign loans, creating a climate to attract capital investment, and maintaining the stability of the rupiah.

 

Transmigration

 

Transmigration development will be directed towards improving the standard of living for people relocating to transmigration areas. It will be directed towards supporting efforts to balance regional development, expanding employment and business opportunities, strengthening national integration efforts by adhering to regional development and spatial plans, and protecting and conserving the environment.

 

The main objectives of transmigration development during Repelita VI are to give stronger motivation for spontaneous transmigration; to give easier access from transigration areas to market locations; to increase the transmigrant's income in an effort to generate savings for business diversification; to develop various business activities in order to achieve people's welfare; and to improve the transmigrants' welfare as well as the people living in the surrounding areas.

The development target for Repelita VI is to relocate 600,000 families. Of these, 250,000 are expected to be spontaneous transmigrants and 350,000 fully or partially subsidized transmigrants. One thousand two hundred new settlements are to be opened on an area which covers around 500 thousand hectares of land. Roads, housing, water supply and sanitation facilities will be provided at each site.

 

Transmigration policy will be directed towards encouraging transmigration to the eastern part of Indonesia; supporting regional development; alleviating poverty, stimulating spontaneous migration; developing agro-business, agro-industrial and other enterprises in transmigration areas; and strengthening the institutional framework of the transmigration program in order to improve its efficiency and effectiveness.

 

Energy

 

Energy development during Repelita VI will be directed toward encouraging economic activities and promoting national welfare by meeting the demand for energy with high quality service. Electric power development will support economic activities and welfare both in urban areas and in rural areas.

 

The goals of national energy development in Repelita VI are to increase the share of non-oil energy, particularly natural gas, coal, and renewable energy. Targets to be met by the end of Repelita VI include: total oil fuel consumption of 360.0 million Barrel Oil Equivalent (BOE); average oil production of 1.515 million barrels per day; oil refining capacity of 1.042 million barrels per day; total natural gas consumption of 162.6 million BOE; LNG and LPG production of 28.0 million and 3.4 million tons respectively; construction of 2,060 kilometers of natural gas pipelines; an increase in coal production of 71 million tons; utilization of 4.8 million tons of coal brickettes for household consumption; substitution of coal brickettes for 30 percent of the kerosene used by households; utilization of geothermal energy of 12.0 million BOE; preparation of an electric power system connecting Java and Sumatera; achieving a national electrification ratio of 60%; achieving a village electrification ratio of 79 percent; and an energy conservation rate of 15 percent.

 

In order to reach these goals, policies will be initiated to improve energy supplies, to improve energy efficiency and conservation, to develop energy facilities and infrastructure, to improve institutional functions relating to energy, to enhance the quality of human resources and technology transfer in the field of energy, to enhance participation, and to raise environmental awareness.

 

With these policy measures, national energy consumption per US$ 1 million of GDP will decrease from 3,115 BOE in 1994/95 to 2,812 BOE in 1998/99.

 

One widely used source of energy is electric power. There are two main programs for electric power development: the electric power expansion program and the rural electrification program.

The electric power expansion program is designed to meet the increasing demand for electricity nationwide. During Repelita VI, hydro-power and thermal-power electricity generating facilities with a total capacity of 9,522 megawatts will be completed. Construction of 10,548 kmc transmission lines and 30,406 megavoltamperes substations will also be completed.

 

The rural electrification program is aimed at improving equity in the distribution of electricity in order to improve the intelligence and welfare of rural inhabitants. Electrification is planned for 18,619 villages during Repelita VI. The demand for electricity in remote villages will be met by the existing distribution lines, construction of new mini-hydro power plants with a total capacity of 10.5 MW, and the construction of diesel power plants with a total capacity of 40.0 MW. To support the rural electrification program, 61,776 kmc medium voltage distribution lines and 104,847 kmc low voltage distribution lines will be built. With these facilities an additional 6.5 million rural consumers can be supplied with electricity by the end of Repelita VI.

 

Environment

 

The development of the environment will be directed towards balancing natural resource use and population growth to ensure sustainable national development. The development of the environment will be aimed at developing measures for conservation and sustainable use of natural resources, at rehabilitating areas that have been damaged, and at controlling pollution and protecting the environment.

 

 

The objectives for the development of environment during Repelita VI are to inventory and identify natural resources; to determine damage levels in environmentally sensitive areas, to maintain conservation areas, protected forests, river basin areas, biodiversity, coral reefs, and mangrove swamps; to establish a more efficient and effective institutional framework for environmental management; to control air and water pollution; to implement a pollution control and clean up program for the 101 most heavily polluted rivers in Indonesia; to mitigate damage to coastlines; and to rehabilitate soil in critical areas.

 

In order to reach these objectives, policy measures will be adopted which are geared towards developing a system for selecting development sites in areas that are not environmentally sensitive; reducing industrial and hazardous waste; controlling pollution; conserving and rehabilitating natural resources and the environment; strengthening the institutional framework for environmental management; expanding public awareness and participation; and improving the quality of human resources in the area of environmental management.

 

2. GENERAL PUBLIC WELFARE, EDUCATION AND CULTURE

 

Social Welfare

 

The development of social welfare will be carried out by the government and the community in an effort to increase equity and improve the capacity of and the opportunity for all citizens to participate in development and to lead a dignified life.

 

The physical targets for social welfare development during Repelita VI are to provide services and care for 225,000 senior citizens; to provide assistance to 230,000 disabled people, 48,300 households in isolated areas, 202,300 households below the poverty line, and 450,000 neglected children; and to provide training for 23,000 'karang taruna' youth organizations, 4,100 social organizations and 62,000 social welfare personnel. In addition, social welfare development is expected to rehabilitate 15,000 juvenile delinquents and drug abusers as well as 31,000 people who are socially deprived.

 

In addition to the above targets, efforts will be made to improve the ability of communities to function in the event of a national disaster through the provision of equipment and training to operate the equipment; and to map disaster-prone areas and utilize the information in land use and spatial planning activities.

 

To reach the above targets, certain policy measures will be adopted which are directed at caring for people living in poverty, neglected children, and isolated groups; providing treatment and rehabilitation for the disabled, juvenile delinquents and narcotic abusers; and expanding community participation in social welfare activities. Policies for disaster mitigation include improving the vigilance and readiness of communities and local government agencies in disaster-prone areas, continuing the mapping of disaster-prone areas, improvement of capability to master and utilize technology for disaster detection, and improvement of search and rescue capabilities.

 

Education

 

Education is a vehicle for the development of people, both as human and as manpower resources for development. Through education, it is expected that Indonesians will develop the capability for utilizing, developing, and mastering the science and technology required to support economic and socio-cultural development. During Repelita VI, national education will be geared towards improving the quality and equity of education -- both basic and vocational education -- to meet national development goals.

 

The objectives of education development during Repelita VI are to strengthen national education in order to develop people who have faith in Almighty God, have knowledge and skills, are physically and mentally healthy, are self-reliant, and understand their social and national responsibilities. These objectives will be achieved by improving the quality of education and by extending vocational and skills training. An additional objective is to improve the link between education and employment opportunities.

In the context of equitable distribution of educational opportunities, the targets in Repelita VI are to increase the gross participation rates at all levels. In primary education it is estimated that the gross participation rate will rise from 109.9 percent to 114.9 percent; in junior secondary education from 52.7 percent to 66.2 percent; in senior secondary education from 33.2 percent to 40.5 percent; and in higher education from 10.5 percent to 12.8 percent.

 

The above figures on primary and junior secondary school enrollment are based on the estimation that the number of students entering the primary education system will reach 29.4 million, consisting of 25.9 million primary school students and 3.5 million Islamic primary school students. Children aged 7-12 who do not enter the education system will decrease from around 1 million in 1993/94 to about 666,000 in 1998/99, and the number of people with an elementary level education will rise considerably. For this reason, the absorption capacity of the middle school system must be increased by 1.8 million students during Repelita VI.

 

Targets for non-formal education during Repelita VI are to reduce the illiteracy rate among the population aged 10-years and over by 10 percent and to increase the number of qualified teachers at all levels.

 

In order to reach the above targets, certain policies will be adopted, which include implementation of a Nine-Year Universal Basic Education Program, development of general and vocational schools training of teachers and other personnel, curriculum and textbook development, provision of facilities and infrastructures, promotion of community participation, and improvement in the efficiency and effectiveness of education programs.

 

The key component of the educational program during Repelita VI is the Nine-Year Universal Basic Education Program. Basic education is to be made available to everyone, including children living in remote areas. The pace of program implementation will be in accordance with the government's and the people's capabilities. In addition, gradual abolition of school fees, abolition of requirements for entering middle school, and introduction of a program to subsidize the education of outstanding students from economically deprived families will take place. The program will be supported by the construction of new buildings, especially in remote and backward areas and transmigration areas, and rehabilitation of old buildings.

 

To support the implementation of the Nine-Year Basic Education program, facilities and infrastructures for middle schools will gradually be expanded through addition of new building units and classrooms as well as rehabilitation of existing buildings. For schools in remote areas, housing will be provided for headmasters and teachers.

 

A skills enhancement and training program will be developed for middle school students through the introduction of local content to the curriculum and/or extra-curricular activities in ways suited to the local needs and conditions. The skills enhancement program will be directed towards developing job skills and preparing students to enter the labor force.

 

To widen the opportunity for disabled and handicapped children to obtain education, the following activities will be carried out in Repelita VI: construction of new classrooms, rehabilitation of existing schools, provision of additional teaching facilities, development of curriculum, and provision of more teachers, particularly specially trained teachers for the handicapped.

 

To cope with the increasing demand for national development activities and for advancing science and technology, the quality and accessibility of education opportunities at the senior secondary level and higher levels will be improved. This effort will involve: retraining and upgrading teachers, lecturers and faculty members, improving the teaching and learning process, and providing additional educational infrastructure and teaching facilities. In addition, research activities and community extension services will be promoted as part of the university's curriculum.

 

Culture

 

The development of national culture is intended to provide meaning to all dimensions of national development. National culture improves the standard and quality of the people, the identity and personality of the nation, strengthens national dignity and pride, and solidifies national unity. In developing national culture, there is a need to nurture local cultural values which are noble and civilized, as well as to absorb positive values from foreign culture which can enrich domestic culture.

 

The objective of national cultural development during Repelita VI is to create a strong national identity, a national personality, a sense of integrity and unity, and national pride. Cultural enrichment must include creation of modern and independent attitudes through the absorption of science and technology, while simultaneously filtering out negative influences from other cultures resulting from global communication. Increasing the rate of flow and dissemination of information through cultural exchange -- nationally, regionally, and internationally -- will also contribute to national cultural enrichment.

 

In this respect, policies are adopted which nurture and develop cultural values through development of language and literature, including proper usage of Bahasa Indonesia; improve the quality of libraries; develop regional arts; and maintain traditions, historical sites, and museums to improve the security and protection of the cultural heritage and the role of museums as an arena of research and cultural education.

 

 

Health

 

Health development during Repelita VI is geared towards improving the quality and accessibility of health services for improving the health and nutritional status of the community. Health development is also directed towards improving the quality of human resources and the quality of life, as reflected in life expectancy, improving the welfare of families and the community, and enhancing people's awareness concerning the importance of good health. Special attention will be paid to low income groups in urban slums and in rural areas, people in remote and isolated areas, and people in transmigration areas.

 

Health development during Repelita VI is also directed towards: the improvement of individual and family behavior which contributes to good health; adopting the norm of small, happy and prosperous families; improving the quality of the environment and human settlements so as to nurture good health; the improvement of nutritional status to increase physical capability, intelligence and working productivity; reduction of morbidity, disability and mortality; and improved access to quality, affordable health services which serve the entire community.

 

Some important objectives of health development during Repelita VI are:

 

a. The infant mortality rate is expected to decrease from 58 to 50 per 1,000 live births.

b. Life expectancy at birth is expected to increase from 62.7 to 64.6 years.

c. The mortality rate is expected to decrease from 7.9 to 7.5 per 1,000 people.

d. The maternal mortality rate is expected to decrease from 425 to 225 per 100,000 live births.

e. The percentage of children under five suffering from malnutrition is expected to decrease from 40 to 30 percent.

f. The percentage of infants with low birth weight is expected to decrease from 15 to 10 percent.

g. Nutritional anemia due to iron deficiency is expected to decrease to 40 percent for pregnant mothers, 30 percent for low-income laborers, and 40 percent for children under five.

h. The prevalence of iodine deficiency disorder is expected to decrease to 18 percent, followed by eradication of new cretinism, and the reduction of the prevalence of vitamin A deficiency in the children under five to 0.1 percent.

 

To achieve the above objectives, the following policies are adopted : improvement of quality and even distribution of health services; improvement of people's nutritional status; accelerating community participation, including the private sector and professional organizations; and the improvement of health management.

 

The improvement of quality and distribution of health services will emphasize primary health services, implemented through community health centers and sub-centers, village midwives, and other medical centers, as well as referral health services through the regency hospitals. The main priority is given to eradication of communicable diseases and to preventing the increasing trend of degenerative diseases.

 

To support the poverty alleviation program, health development will focus on improving access to quality health service for poor families, especially young children, pregnant mothers, and old people. Health services for this purpose will concentrate on primary health care in community health centers and integrated health posts, provision of clean water, nutritional improvement, supplementary feeding to under-served primary school children, and environmental sanitation.

 

Population

 

Population development consists of efforts to reduce population growth, improve the quality of the population and families, and direct population distribution to achieve a higher standard of living.

 

The main objective of population development during Repelita VI is the reduction of the population growth rate from 1.66 percent in 1993 into 1.51 percent in 1998. This target will be achieved through reduction of the crude birth rate from 24.5 per 1000 population to 22.6 per 1000 population. At this rate, the total population is estimated to increase from 189.1 million people in 1993, consisting of 94.3 million males and 94.8 million females, to 204.4 million people in 1998, consisting of 101.9 million males and 102.5 million females.

 

Population targets will be achieved through : improving population quality by developing potential; controlling population quantity and growth through family planning; directing the distribution of population in harmony with the capacity of the environment and the demand for manpower; perfecting the population information system to improve the quality and coverage of population data; and improving the welfare of the aged by emphasizing the role of the family in society.

 

Family Welfare

 

The development of family welfare is basically a part of the development of human resources which emphasizes the importance of the family's role in the improvement of human quality.

 

The family welfare targets are to reduce the total fertility rate (TFR) from 2.87 in 1993 into 2.60 per woman in 1998; improve awareness and participation of society in creating self-reliant attitudes and behavior; and establish a comprehensive family planning movement as a basis for further development.

 

To achieve the above targets, efforts shall be carried out to develop the resilience of families and improve family quality, to improve the institutionalization of the family planning movement, and to develop international cooperation in family planning.

Children and Adolescents

The development of children and adolescents is a part of the effort to improve the quality of human resources and human beings, from fetus to adulthood.

 

The targets for children and adolescents during Repelita VI include: increasing the number of children with good nutritional status and health; increasing the number of children and adolescents entering the nine-year universal basic education program; increasing interest in reading and learning among children and adolescents; caring for deprived and neglected children; reducing the juvenile delinquency level and preventing drug abuse, addictive substance use, and narcotics use; and improving parents' awareness and role in educating and nurturing children and adolescents. Policies for children and adolescents during Repelita VI include efforts to improve nutritional and health status; to improve education; to develop concern for science and technology; to develop and improve idealism and patriotism; to improve the capability of self-adaptation with the community and the environment; to increase the role of family and community in the nurturing of children and adolescents; and to improve legal protection of children and adolescents.

 

Youth

 

Youth development is directed towards preparing youth to be a cadre of future national leaders who are disciplined, responsive, self-reliant, have a high work ethos, and are strong and capable of facing the challenges of development. The nurturing and development of youth is directed towards the development of a sense of responsibility among youth so they can be pioneers in developing the future of the state and nation.

 

The objectives of fostering and developing youth in Repelita VI are: to improve their knowledge and skills, as well as their capability for utilizing, developing, and mastering science and technology; to increase youth participation in the life of society, the state and the nation on the basis of Pancasila; to enhance the sense of social togetherness and care for the social and living environment; to improve the quality of youth as the inheritor of noble national cultural values, with piety and faith in Almighty God; and to improve the quality of youth leadership as a cadre for continuing the national struggle.

 

In this respect, the policy for the development of youth is directed towards the expansion of opportunities to obtain education and skills; the improvement of youth participation in all development sectors in the fields of politics, economics, culture, and defense and security; the improvement of youth pioneering and leadership; and the improvement of youth institutionalization and organization.

 

The Role of Women

 

The development of women's role as equal partners with men will be directed towards improving the active participation of women in development. This includes efforts to foster a healthy, prosperous and happy family, as well as the development of children, adolescents and youth, in the framework of Indonesian society. Women, both as citizens and as human resources for development, have equal rights and obligations with men in all sectors of development.

 

The targets with respect to developing the role of women in Repelita VI are: improving the educational level of women, as shown by decreasing the number of illiterate women, particularly the "three illiteracies" of the Latin alphabet, Bahasa Indonesia, and basic knowledge; improving the quality of women by enhancing their economic participation, development, and mastery of science and technology; improving women's health, including the health of their family, thus enabling women to play a more active role in development; improving the quality and productivity of the female labor force by providing strong and stable legal protection for female labor, including protection of their rights and social welfare; improving the dual role of women in the development of the family and their active participation in society in a harmonious and balanced manner; developing a more supportive social and cultural climate which upholds women's dignity and status; and stronger women's organizations and a more active role for women in national development.

 

Housing and Human Settlements

 

Housing and human settlements development is aimed at meeting the needs of the people for shelter, both in terms of quantity and quality, within a healthy environment. The construction of housing and human settlements must take into account spatial planning and interrelationships, as well as the integrity of the surrounding social environment.

 

The objectives of housing and settlement development in Repelita VI include: better planning and distribution of housing and human settlement infrastructure, with affordable quality and basic services, particularly for low income people; more efficient and effective management of housing and human settlement development, which is sustainable and supportive of the environment; improved community participation, including cooperatives, and the private sector, in implementing and funding the development of housing and human settlement; improved business and employment opportunities in industries which support housing and human settlement development; and the creation of a proper housing and human settlement environment, which is clean, healthy, secure, and provided with all necessary facilities.

In physical terms, the target of housing and human settlement development during Repelita VI includes the supply of approximately 500 thousand houses, which consist of very simple core settlements and houses; improvement of 21,250 hectares of slum areas in 125 cities and renovation of an additional 750 hectares; and renovation of housing and settlements in approximately 20 thousand backward villages. Another aim is the development of clean water infrastructure with an improved clean water production capacity of approximately 30 thousand litres per second in urban areas, to service more than 22 million people, and the expansion of clean water services in the rural areas for more than 16.5 million people in 22 thousand villages.

 

The policy adopted for achieving these objectives includes the development of affordable housing and human settlement for the community at large; the development of housing and settlements which are responsive to the environment and are sustainable; efforts for improving the participation of the community and the private sector in the supply of housing and settlements; the development of an improved system of funding for housing and settlements, particularly to assist low-income people; and efforts for strengthening the management of housing and human settlement development in an integrated way.

 

In implementing the development of affordable housing and human settlements, special attention should be paid to the medium and low income group by encouraging the development of simple house together with environmental facilities. Furthermore, improvement in programs for, renovations, relocations and resettlement of slum dwellers will include measures to ensure continuity of employment for the original settlers.

 

Sports

 

The promotion of sports, an integral part of the effort to improve human resource quality, will be directed towards improving the physical and mental health of the people, and will be aimed at creating good character and personality, discipline, and sportiveness, and achieving national pride. The objectives of sports development during Repelita VI are to improve sports in the community at large and throughout the country; to improve the ranking in Asian Games and to maintain Indonesia's position as the General Champion in SEA GAMES; to improve gold medal acquisitions at the Olympics; and to create a sports training system.

 

To achieve these objectives, a range of policies are adopted for, among others, improving sports, i.e. by improving the community's awareness concerning the importance of sports; improving sports achievements through talent scouting and nurturing from early childhood, monitoring talent and selection of potential athletes; and improving the participation of the people and of the sports organizations.

 

3. RELIGION AND FAITH IN ALMIGHTY GOD

 

The development of religious life and faith in Almighty God will be geared towards improving the quality of faith and piety and the maintenance of harmony among the people of the same religion, and between members of different religions. Religious development will serve to improve the awareness of the people of their responsibility for strengthening the spiritual, moral and ethical foundations of national development.

 

4. SCIENCE AND TECHNOLOGY

 

Science and technology (S&T) development is directed toward the improvement of the intellectual level and capability of the nation. S&T development also aims to accelerate the process of change, improve productivity and industrial efficiency, expand employment opportunities, raise the dignity of the nation, and improve the people's welfare. Utilization, development and understanding of science and technology are the main instruments of this effort. In addition, raising the level of S&T understanding must be in accordance with religious values, national values, sociocultural conditions and the environment.

 

The objectives of S&T development in Repelita VI are to improve the ability to utilize, to develop and to master S&T. Emphasis will be placed on the ability of people to carry out technology transfer, adaptation and change. These efforts will be supported by adequate human resources and infrastructure, and an improvement in educational standards. Additional targets of S&T development are to create a more conducive business climate, to increase creativity, and to enhance production standards. S&T institutions are expected to be better organized and capable of carrying out a more effective program of S&T development, and to make more efficient use of available resources.

 

S&T development policy will take into account various aspects of the development of S&T values and the establishment of S&T culture within the community; enhancement of research partnerships; acceleration of progressive manufacturing; improvement of production standards, processes, productivity, efficiency, and innovation; improvement of the quality, quantity and composition of human resources; and development of a more effective S&T organization and management.

 

5. LAW

 

The development of law will be directed towards the realization of a national legal system based on Pancasila and the 1945 Constitution. Objectives for the development of law during Repelita VI are to organize and improve the national legal system. Policies to achieve this include improving implementation of laws and regulations, improving law enforcement, improving the capabilities of legal professionals, and improving legal facilities and infrastructure.

 

6. POLITICS, GOVERNMENT APPARATUS, INFORMATION, COMMUNICATIONS AND THE MASS MEDIA

 

Domestic Affairs

 

The development of politics will be aimed at organizing political life in accordance with Pancasila and the 1945 Constitution.

 

The objective of political development during Repelita VI is to create an atmosphere which fosters the development of a political culture incorporating openness and responsibility in communicating between the government, political institutions and society at large.

 

The mainstay of political development policy is the development of ethics, morality and political culture. This involves improving the role and function of government and political parties, improving the operation of general elections, and advancing genuine regional autonomy.

 

Foreign Relations

 

Relations between Indonesia and other nations are based on the principles of a free and active foreign policy in support of national interests. Foreign policy will be directed towards bringing about a new international order based on freedom, peace and social justice.

 

Objectives in the field of foreign relations during Repelita VI include the expansion of mutually supportive international cooperation in the national interest.

 

To this end, policies will be developed aimed at strengthening a free and active foreign policy, bringing about a new international order, improving multilateral and bilateral cooperation both regionallRepelita VI will be geared towards improving the role of the domestic market by developing a distribution system which is stronger and more extensive. Foreign trade objectives include the expansion of overseas markets, as reflected in growing non-oil/gas exports, and strengthening the structure of non-oil/gas exports with industrial exports in the lead.

 

In quantitative terms, the domestic trade target is to achieve an average growth rate of 6.6 percent per year, so that by the end of Repelita VI the contribution from the trade sector to GDP will reach 17.5 percent. The average labor force growth rate in the trade sector is expected to reach 3.5 percent per year, so that by the end of Repelita VI trade will be capable of absorbing 14.0 million workers, accounting for 18.5 percent of all new employment opportunities. Non-oil/gas exports are expected to increase on average by 16.8 percent per year so that by the end of Repelita VI non-oil/gas export revenue should reach US$ 61.2 billion. The export values of farm products, industrial products, and mining products are estimated to grow by 6.8 percent, 17.8 percent and 15.0 percent per year, respectively, to reach US$ 3.6 billion, US$ 54.8 billion and US$ 2.8 billion. By the end of Repelita VI, industry will account for 89.4% of total non-oil/gas merchandise exports, agriculture for 5.9 percent, and mining for 4.6 percent.

 

Domestic trade policy in Repelita VI will be directed towards strengthening and expanding the market, improving consumer protection, enhancing business competitiveness which protects small and medium size businesses, and improving the role of cooperatives in trade. Foreign trade policy will be geared towards improving the competitiveness of export commodities, improving the structure of non-oil/gas exports, increasing the number of countries to which we export, and improving the role of Indonesia in trade cooperation, both bilaterally, regionally, and multilaterally, including cooperation among the developing countries.

 

Trade activities must also be geared towards stimulating the people's economic potential by supporting small size businesses, economically deprived groups, household enterprises, and informal and traditionalhe development of information and communications systems and the mass media during Repelita VI are to promote active community participation in the development process and to improve the distribution of information to reach a larger segment of society.

 

Some of the policies adopted in pursuit of the objectives are aimed at disseminating the values of Pancasila; directing the character of development efforts in keeping with the Pancasila values; and improving people's awareness of their rights and duties as members of society. Other policies aim at expanding television and radio broadcasts as well as film production; intensifying press activity in a more healthy, free and responsible direction; developing a regional press; developing human resources; and utilizing advances in information and communications technology.

 

Information Systems and Statistics

 

In keeping with the rapid pace of development, an accurate and reliable information system is necessary to administer and monitor development.

 

The objectives for the development of information systems during Repelita VI are to improve efficiency and productivity in all sectors and to develop a multi-sector information system network which is linked both to regional centers and to the rest of the world. This will contribute to the long term goal of national self-reliance in the field of information.

 

In order to reach these objectives, policy measures include: developing a system for the administration of information systems, improving capabilities of information technology industries to provide necessary information, improving the distribution and utilization of information, developing human resources in the field of information; and developing information institutions.

 

The development of statistics during Repelita VI will be directed towards developing a more integrated and reliable set of national statistics which could be used to improve efficiency and productivity at national, regional and sectoral levels. Policies adopted in pursuit of these goals are perfecting statistical operations, developing human resources and developing statistical institutions.

 

7. DEFENSE AND SECURITY

The development of state defense and security will be directed to improving all aspects of national defense. An integrated Total People Defense and Security System with the armed forces as the core element, will be capable of maintaining a high level of readiness to support national stability and control the strategic environment.

 

The objectives of defense and security development include: 1) managing all components of state defense and security within the Total People Defense and Security System, utilizing science and technology, organizing and training people for civil defense and the protection of the community, and 2) developing a professional armed forces which is effective, efficient and modern to serve both as a defense force and as a socio-political force.

 

Policies will be adopted to strengthen the concept of civil defense and community protection, and to administer preliminary education in state defense. Attention will be given to perfecting methods for training people, improving the welfare of the soldiers, and raising their professionalism and quality of fighting spirit. The socio-political capability of the armed forces as an initiator and pioneer in development will be strengthened, along with the unity between the armed forces and the people. The development of natural and man-made resources, facilities and infrastructure for state defense and arrangement of defense zones must be enhanced. Finally, international cooperation in the field of defense and security will be improved.

 

 

C. CROSS SECTORAL DEVELOPMENT

 

In addition to development activities which are specific to fields and sectors, there are cross sectoral activities which are to be implemented in a harmonious, integrated and mutually supportive manner. Many sectors face challenges and problems in common in the areas of: human resource development, equitable development and poverty alleviation, urban and rural development and spatial and land use planning.

 

Human Resource Development

 

During Repelita VI, human resource development is to support national and sectoral development activities. The primary goal of human resource development is to increase the capabilities of each individual and thus of the whole of Indonesian society. This will be reflected in religious beliefs; improvements in physical and mental health; development of knowledge and skills; increased adherence to a productive work ethic; a sense of national responsibility; and increased awareness and understanding of the importance of preserving natural resources and the ecosystem. Other goals include development of a sense of self-reliance, development of leadership and entrepreneurial skills, and increasing the number of national development cadres who have patriotism, perseverance, initiative, discipline, social awareness and awareness of their rights and duties.

 

To effectively and efficiently manage human resources, the effort to develop human resources will be more organized and integrated by the end of Repelita VI. There will be an intensification of efforts to increase understanding and participation of all members of society, including the private sector, in the process of human resource development. In addition, legal measures required vis a vis human resource development will be determined.

 

Efforts to develop human resources during Repelita VI will be carried out through four policies: namely, improvement in the quality of life; improvement in the capabilities of human resources and their distribution throughout the provinces; improvement in the quality of human resources in such a way that environmentally friendly science and technology can be developed and utilized; and development of institutions to support human resource development. Human resource development policies will be cross sectoral and fundamental for the consolidation of sectoral policies and programs.

 

Equitable Development and Poverty Alleviation

 

In accordance with guiding principles from Pancasila and the 1945 Constitution, the 1993 Broad Guidelines of State Policy stipulate that national development programs are to be implemented country-wide and not just among certain groups or sections of the community. Development is to benefit all people.

 

Equitable development, as an outgrowth of economic democracy, is a development effort based on unity and solidarity. As part of equitable development cooperatives are to be developed as a strong, sound, self-reliant people's economy which can become an integral part of the national economy. Equitable development provides people with equal opportunities to contribute their labor and talent while simultaneously meeting their basic needs. Equitable development accelerates the growth of less developed sectors, communities and regions. Regional economies are to be developed in a balanced and harmonious manner, within the framework of national unity. This will be done by fully utilizing regional potential and furthering community participation in development programs in order to foster a spirit of nationalism and to strengthen national resilience. Equitable development furthers the development process because it is supported by broad-based community participation and fully utilizes people's potential.

 

The objectives of equity programs in Repelita VI are to increase the capabilities, self-reliance and strength of the private sector, including cooperatives, small- and medium-scale enterprises; to improve the capabilities of local government officials; to further expand regional autonomy; to reduce the development gap between urban and rural areas; to accelerate development activities in the eastern part of Indonesia and other less developed regions; to improve terms of trade for agricultural commodities vis a vis service and industrial commodities; and to increase equity in business and employment opportunities, income and welfare.

 

The poverty alleviation objective is to reduce the number of people living in absolute poverty to 12 million, or 6% of the total population, by 1998/99. The longer term goal is to eliminate poverty, i.e., to reduce the number of people below the official poverty line to zero by the end of Repelita VII. To achieve this objective a series of policies have been formulated. They consist of developing the people's economy, reducing the gap between economic groups, and balancing inter-sectoral and inter-regional economic growth.

 

In order to improve the people's economy steps will be taken to reformulate regulatory measures which affect economic life, including but not limited to land ownership and the rights and duties of employees, including wages and legal assistance. In addition, supporting actions will be taken to simplify procedures to obtain credit, make investments, pay and collect taxes, gain access to markets and information, obtain education and skills training, improve management capabilities, and facilitate technology transfer. Efforts to prevent the concentration economic power will be stepped up. Efforts will also be expanded to establish partnerships between cooperatives, state owned enterprises and the private sector in order to maximize people's participation and productivity.

 

To balance inter-sectoral growth, linkages will be created between agricultural, industrial and service sectors for the purpose of providing further support for the agricultural sector. These efforts will consist of devising measures to strengthen farmers' bargaining power and increase terms of trade for agricultural products; providing necessary facilities and infrastructure; developing support for businesses; and intensifying the transfer of technology for agricultural enterprises.

 

In order to balance regional growth, measures will be adopted to advance combined sectoral and regional development programs. Efforts will be made to improve community services and to enhance regional economic activities by implementing deregulation measures at kabupaten and provincial levels. In addition, efforts to accelerate development in the eastern part of Indonesia and other less developed regions will be intensified by providing infrastructure for regional economies in accordance with their potential and needs. In order for rural rates of development to become comparable with those in urban areas, infrastructure in rural areas will be expanded, and efforts to in increase community participation in the development process will be intensified. During Repelita VI, efforts to alleviate poverty will be strengthened through a special program, Inpres Desa Tertinggal (IDT). The purpose of this program is to lessen or eradicate poverty in villages. Through this Inpres Program, sectoral and regional programs operating at the village level will be combined to maximize their impact on poverty alleviation.

 

Rural and Urban Development

 

In the implementation of national and regional development programs, urban and rural areas are linked to form an interrelated system. The connection between rural and urban areas can be seen in the flow of raw materials, semi-finished products and labor from rural to urban areas and the provision of basic services, products and markets for rural areas. The mutually beneficial relationship becomes the basis for harmonious growth in both urban and rural areas.

 

Urban development activities will be improved through coordinated planning efforts which take into consideration spatial arrangement, population growth, human settlement environments and the natural environment. Rural development will be encouraged through improved coordination of sectoral, human resource, and natural resource development activities, as well as by creating an atmosphere conducive to growth by encouraging the development of initiatives and community participation. In rural and urban development, efforts will be made to further sectoral growth by taking into account rural-urban linkages.

 

By observing the characteristics of urban and rural areas, implementation of development programs will differ in accordance with local conditions and problems. Attention to local diversity necessitates more coordinated and integrated management of development. Both the need to address local conditions and for better coordinated management of development activities will become important in the implementation of development programs in rural and urban areas. Harmony and cohesiveness in development of sectors in urban and rural areas are needed to ensure achievement objectives.

 

The goal of urban development activities for Repelita VI is to more effectively and efficiently manage urban development. In pursuit of this, urban spatial planning and land administration management should take place in a more orderly and fair manner. This is to be supported by increasingly autonomous local government institutions. Stronger partnerships will be forged between local governments and communities as well as with the private sector in order to manage urban development. This will be done through community organization and self-supporting institutions. Additional aims are to improve social welfare -- measured in increases in per capita income -- and quality of life; to alleviate urban poverty; and to improve environmental quality.

 

To achieve these aims, various policy measures have been adopted including efforts to develop and stabilize urban systems; to increase urban capability and productivity; to improve human resource development; to strengthen urban institutions and financial capability; to institutionalize the integrated urban development planning; to improve urban development regulations; and to improve environmental quality.

 

During Repelita VI the aims of rural development are to improve the quality of human resources, reflected in rising prosperity, rising education levels and increased skills; to strengthen the rural economy through diversified production; to strengthen and expand the provision of facilities and infrastructure; to expand awareness of the environment among rural people; to improve the functioning of rural governments and institutions; to guarantee legal land ownership or secure use rights in accordance with local laws and traditions; and to alleviate rural poverty.

Rural development laws will be directed towards improving labor force quality; improving production capability; improving and expanding rural facilities and infrastructures; instituting an integrated regional development approach; and strengthening local government and local community institutions.

 

Spatial Planning and Land Management

 

With the increases in population and development activities, natural resources especially land and water are becoming increasingly scarce. Spatial planning and land management are tools to ensure sustainable development and, to as great a degree as possible, even distribution of wealth. Through spatial planning and land management, use of natural resources can be optimized. Spatial planning also prevents clashes of interest in the use of space.

 

The objectives of spatial planning and land management for Repelita VI are to provide an information system to support land use planning and spatial planning activities; to increase awareness and participation of communities and businesses in spatial planning and land management activities; to create a high quality institutions to support spatial planning and land management; and to integrate the planning and utilization of areas for social, economic and security purposes. In order to achieve these objectives, basic policy measures which are to be undertaken include furthering institutionalization by establishing strong management organizations with clearly specified duties, authority and responsibilities; improving the capabilities of officials involved in spatial planning and land management activities at both the national and regional levels; introducing spatial planning and collaborative land management to community and business groups; strengthening the use of spatial planning as a guide for national and regional development with special attention to fast developing and strategic areas; strengthening control over the exploitation of areas, including safeguarding important government owned assets; and improving information systems.

 

 

D. DEVELOPMENT FINANCING

 

National development is implemented over a twenty-five year time horizon, and in stages embodying five year time horizons. Over these time periods, the resources of the entire nation must be mobilized to realize the objective of national development based on the principles of self-reliance, unity, justice, and equity. With respect to development financing, particular emphasis will be placed on the principle of self-reliance, reflecting confidence in our ability and strength to develop the nation and forge a modern national identity.

 

In order to achieve the development objectives in Repelita VI and PJP II, a great deal of investment will be required. Financing must therefore be mobilized from all possible sources so that development can proceed smoothly. On the basis of the principle of self-reliance, efforts will be made to ensure that the share of total investment financed domestically rises over time. Consequently, the level of domestic savings, both from the government and the private sector, must be increased. Efforts to enhance tax compliance must also be improved. Nevertheless, in view of the limited capability for mobilizing domestic savings, it is necessary to obtain foreign funds as a supplement to domestic funds, even though the share of foreign funding will continue to fall.

 

Domestic private investment levels must be increased, along with foreign direct investment. Investment efficiency and productivity must also be raised. Accelerated investment in infrastructure must be achieved as part of this.

 

1. Investment Requirements

 

Over the five year period of Repelita VI, it has been estimated that Rp 660.1 trillion worth of investment funds will be required to meet the development targets, particularly the 6.2 percent average annual economic growth target. This is roughly 80 percent higher than the total realized investment during Repelita V, and implies that investment funds must grow at an average annual rate of 12.5 percent per annum, and that the ratio of investment to national product will reach 30.7 percent by the end of Repelita VI.

 

Development funds are expected to come from various sources, both foreign and domestic. In accordance with the 1993 GBHN, the primary source of funds must be domestic. This will require a concerted effort to mobilize both government and private sector savings. Efforts to increase the efficiency of investment and to encourage an active role for the people must be also be intensified. These efforts are essential for accelerating the rate of development, particularly given the climate of uncertainty and the scarcity of funds in the coming years.

To increase investment efficiency, it will be necessary to reduce the amount of investment needed for each additional unit of output. This will make it possible to reach the economic growth target despite limited resources. With greater efficiency, a higher rate of growth can be attained from a given level of investment.

 

In the context of enhancing people's participation in economic development, it is necessary to give further attention to the development of small and medium scale enterprises, including cooperatives. This is important in order to maintain a healthy competitive climate and competitive markets. Efforts to encourage investment must be continuously matched by efforts to attain equity and balance between different sized economic units.

 

2. Sources of Investment Funds

 

The sources of investment funds are domestic savings and foreign funding. In Repelita VI, domestic savings are expected to reach Rp 623.5 trillion, while foreign funding should reach Rp 36.6 trillion. Foreign funding comprises both private as well as foreign government funding, and is a net concept calculated after taking into account repayment of foreign debt. Based on these estimates, the share of domestic savings in total investment is expected to rise from 92 percent to around 94.5 percent. Accordingly, the share of foreign funding will decline from 8 percent to 5.5 percent. As a ratio of national product, domestic savings will reach 28.9 percent and foreign funding will reach 1.8 percent by the end of Repelita VI.

 

Efforts to raise investment efficiency will include steps to continue the process of deregulation and debureaucratization, as well as efforts to fully utilize existing capacity. Investment efficiency can also be raised by improving and consolidating government and private sector institutions.

 

Enhancing the active participation of the people is essential in order to accelerate the rate of development. To this end, investment activities that are carried out by the people through private businesses will be encouraged. Measures for creating a conducive climate for investment will be developed through the construction of economic infrastructure, and by enhancing the quality of Indonesia's human resources. Efforts to accelerate popular participation will be encouraged through improvements in the laws regulating capital investment, both domestic and foreign. Furthermore, simplification in the procedures for new investment, expansion of existing capacity, and access to economic resources and factors of production, will also be encouraged.

 

Domestic savings consist of government savings and private sector savings. In Repelita VI, government savings are projected to increase by an average rate of 10.3 percent per annum, and to reach a level of Rp 169.4 trillion. This amounts to 25.7 percent of total required investment. In terms of the national product, the share of government savings will be 7.9 percent. The increase in government savings will come primarily from domestic revenues, which will increase at an average annual rate of 13 percent. Government savings here is a gross concept, representing the difference between total domestic revenues and routine expenditures after taking into account interest payments on foreign debt, but excluding amortization payments.

 

Private savings include savings from private businesses and individuals, and savings of state enterprises and the regional governments. These savings will be used to finance investment carried out by the savers themselves, or will be channelled through financial institutions to investors. In Repelita VI, private savings are expected to reach Rp 453.4 trillion, which amounts to 68.8 percent of total required investment and 21 percent of national product.

 

In Repelita VI, various efforts will be made to improve the foreign trade balance in order to reduce dependence on foreign borrowing. Exports of goods are expected to increase at an average rate of 13.7 percent per annum, mostly as a result of growing non-oil/gas exports, which are expected to reach an average annual growth rate of 16.8 percent. The growth rate of oil and gas exports is expected to average 0.8 percent per year. Imports of goods are expected to grow at an average rate of 14.3 percent per annum, with non-oil/gas imports growing at 15.0 percent per annum and oil and gas imports growing at 7.9 percent per annum. The increase in non-oil/gas imports is mainly to meet the demand for capital goods, intermediate goods, and raw materials induced by the continuous expansion of investment activity.

 

Meanwhile, net foreign exchange expenditures for services are estimated to increase by an average of 8.7 percent per year, with non-oil/gas service expenditures rising by 10.5 percent and oil/gas service expenditures rising by 3.2 percent per year.

 

Base on the estimates above, it is expected that the average current account deficit will be around US$ 3.1 billion per year, or around 1.3 percent of national product. In Repelita VI the current account deficit is expected to total US$ 15.6 billion, and must be covered by capital inflows.

3. Macroeconomic Policies

 

Macroeconomic policies relating to government finance, monetary affairs and the balance of payment are important for ensuring the realization of national development objectives. In Repelita VI macroeconomic policies are directed at attaining a sufficiently high rate of economic growth, while at the same time enhancing equity and maintaining economic stability.

 

Public Finance

 

Fiscal policies in Repelita VI will still be based on the balanced and dynamic budget principle which allow for the creation of a development reserve fund. The balanced budget requirement implies that the National State Budget must reflect a balance between revenues and expenditures, while the dynamic budget concept implies that the total size of the State Budget must continuously increase in order to maintain the momentum of development. Formation of a development reserve fund can proceed during periods when government revenues exceed planned expenditures, and it can be used in periods when state revenues fall short of the planned amount or are insufficient to support the implementation of the planned programs. The development reserve fund can also be used for supporting programs that are of an urgent nature. The availability of a development reserve fund will ensure the continuity of development funding and help maintain economic stability.

 

The policy target of government finance in Repelita VI is to increase the capability of government funding, mainly by enhancing domestic revenue capabilities, particularly taxes. Increased domestic revenues will both improve the state financing structure, and reduce reliance on financing from abroad. In addition, increased tax revenues will further reduce dependence on oil and gas revenue. Increasing the efficiency and effectiveness of routine and development expenditures is also an important policy target.

 

In Repelita VI, the National State Budget is expected to reach Rp 443.5 trillion. Revenue from domestic sources is expected to reach Rp 382.0 trillion, with the remaining Rp 61.5 trillion coming from foreign aid. Routine expenditures are expected to reach 267.6 trillion and development expenditures are expected to reach Rp 175.9 trillion.

 

The budget estimates in Repelita VI are based on assumptions about the economic growth rate, the inflation rate, the exchange rate, and other factors that may affect the budget. On the revenue side, the assumptions used concern the growth of production in the oil/gas sector, the non-oil/gas sector, and the growth of exports and imports. Assumptions are also used that reflect efforts to increase tax collection efficiency, taking into account actual tax potential. On the expenditure side, assumptions are used pertaining to the expansion of civil servants, policies and various types of subsidies, and factors that affect the growth of government expenditures. In addition, development targets in the economic, socio-cultural, defense and security sectors are also taken into account.

 

In Repelita VI, efforts will be made to continuously increase the amount of domestic revenue. Domestic revenue is expected to increase from Rp 59.7 trillion in the first year of Repelita VI to Rp 97.3 trillion in the last year of Repelita VI. Domestic revenue from oil and gas is expected to increase from Rp 12.9 trillion in 1994/95 to Rp 15.2 trillion in 1998/99, and non-oil/gas revenue is expected to increase from Rp 46.9 trillion in 1994/95 to Rp 82.1 trillion in 1998/99.

 

By these estimates, the role of oil and gas in domestic revenue will decline from 21.5 percent in 1994/95 to 15.6 percent in 1998/99. Conversely, the role of non oil and gas revenues is expected to rise from 78.5 percent to 84.4 percent. In Repelita VI, non oil and gas revenue is estimated to total Rp 310.9 trillion, comprising 81.4 percent of total domestic revenue.

 

Taxes are the most important source of revenue after oil and gas. Tax revenues comprise revenues from income tax, value added tax, luxury sales tax, import duties, export tax, land and building tax, and other taxes. Tax revenues are estimated to increase from Rp 40.1 trillion in 1994/95 to Rp 75.2 trillion in 1998/89. The ratio of tax revenue to non oil and gas GDP is estimated to rise from 13.1 percent in 1994/95 to 15.6 percent in 1998/99. In Repelita VI, tax revenues are expected to total Rp 278.7 trillion, comprising 72.9 percent of total domestic revenues.

 

Routine expenditures consist of wages and salaries of civil servants, procurement of goods, subsidies to autonomous regions, and repayment of government debt. The amount of routine expenditures is estimated to increase from Rp 42.4 trillion in 1994/95 to Rp 67.1 trillion by 1998/99. In Repelita VI, the total of routine expenditures is expected to reach Rp 267.6 trillion.

 

Government saving is the difference between domestic revenues and routine expenditures. On the basis of estimates of domestic revenues and routine expenditures, government saving will increase from Rp 17.4 trillion in 1994/95 to Rp 30.1 trillion in 1998/99. Over Repelita VI, government saving is expected to total Rp 114.5 trillion.

 

Government saving, together with development revenues procured from abroad, comprise sources of the development funds needed to finance development activities undertaken by the state. These development funds are expected to increase from Rp 27.4 trillion in 1994/95 to Rp 44.5 trillion in 1988/89. Development funds in Repelita VI are expected to total Rp 175.9 trillion. With this amount, it is expected that the role of government saving in development expenditures will increase from 62.1 percent at the end of Repelita V to 67.7 percent by 1998/99.

 

Efforts to increase tax revenue will concentrate on improving the performance and coverage of existing taxes such as the income tax (PPh), the value added tax (PPN), and the land building tax (PBB). Intensification measures will be aimed at the efficient management of the existing tax potential while steps to broaden coverage will aim for new breakthroughs so that taxes which have not yet met their potential can make greater contributions to development. Through these efforts, the burden of development can be shared more equitably. A tax system widely perceived as being fair will lead to greater compliance from the public and the business community.

 

In Repelita VI, non tax revenues, such as the government's share in the profits of state enterprises and deposits from ministries and non ministerial agencies, will be increased by increasing the efficiency of state enterprises as well as by more effective revenue collection from the ministries and non-ministerial agencies. In the context of enhancing the efficiency of state enterprises, steps will be continued to restructure state enterprises through cooperation schemes and management contract arrangements with third parties, through consolidations or mergers, splitting of enterprises, sale of shares and bonds, and through the formation of joint ventures.

 

In Repelita VI, routine expenditures policy is aimed at increasing government savings and at the maintenance of state assets and previous development achievements. Routine expenditure policy is also aimed at stimulating domestic production and expanding employment opportunities. These steps are pursued by enhancing the effectiveness of routine expenditure allocations, optimizing government personnel, controlling expenditures on goods, restricting subsidies, and increasing progress and equity in regional development. These policies will be implemented through more effective and integrated management and supervision.

 

Development expenditures will increasingly be directed at activities that cannot be undertaken by the private sector. Such activities cover the supply of basic facilities and infrastructure that are of strategic significance in the development process and increase the quality of human resources, as well as poverty alleviation efforts. Intergovernmental transfers will be used also to provide an incentive for improved revenue generation and financial management at the regional level.

Monetary Policy

 

Monetary policy in Repelita VI is directed at promoting equity, economic growth and economic stability. Monetary policy encompasses policies for managing the money supply, credit policies and exchange rate policy.

 

To attain equity goals, monetary policy in Repelita VI is aimed at enhancing the capability of small and medium scale

enterprises and cooperatives. The policy of requiring that banks provide at least 20 percent of their credits to small scale enterprises will be continued. Furthermore, monetary policy is also directed towards enhancing the rate of regional development in an equitable manner, and for supporting businesses and activities which absorb labor, including enterprises in rural areas.

 

The policy of funds allocation is directed towards supporting export-oriented activities and activities which diversify business, as well as for supporting the development of industries, including agroindustry, transportation services, tourism, and other sectors which have dual impacts on the economy. Equitable development and productivity growth, which strengthens the growth process, must also be supported by monetary policy.

 

Financial institutions play an important role in mobilizing and allocating funds from the general public for the financing of development activities. In Repelita VI, efforts to promote financial institutions, both banks and non-bank financial institutions such as the capital market, insurance, pension funds, leasing, venture capital and money market institutions, will be increased. It is expected that such efforts will increase the efficiency of financial institutions and increase their capability for mobilizing and channeling the funds of the general public.

 

Balance of Payments

 

As part of the macroeconomic policy system, balance of payments policy in Repelita VI will be carried out in line with fiscal and monetary policies, in order to realize the objectives of equity, economic growth and national stability.

The main aim of balance of payment policy in Repelita VI is to increase the ability to earn foreign exchange. This will help realize the goal of implementing development through increased self-reliance.

 

Total exports, encompassing oil and gas as well as non oil and gas exports, are expected to increase from US$ 37.2 billion in 1993/94 to US$ 70.6 billion in 1998/99, representing an average growth rate of 13.7 percent per year. This increase is expected to come from increased non-oil/gas exports, which are expected to grow at a rate of 16.8 percent per annum, and to rise from US$ 28.2 billion in 1993/94 to US$ 61.2 billion in 1998/99. Within non-oil/gas exports, the fastest growing group is expected to be manufacturing exports, increasing at an average rate of 17.8 percent per annum. Exports of oil and gas are expected to increase from US$ 9.0 billion in 1993/94 to US$ 9.4 billion in 1998/99, an increase of only 0.8 percent per year. With this rate of growth, it is expected that the share of non-oil/gas in total exports will rise from 75.8 percent in 1993/94 to 86.7 percent in 1998/99.

 

Import policy in Repelita VI is aimed at meeting the needs for capital goods and intermediate goods required for the production of goods destined for export, while also encouraging the efficient utilization of foreign exchange in the effort to maintain stability in the balance of payments. The value of non-oil/gas imports is expected to rise by 15.0 per annum. The share of raw materials and capital goods in total imports is expected to continue to grow, while the share of consumer goods declines. Oil and gas imports are expected to rise by 7.9 percent per annum.

 

Policies related to exports of services will be aimed at increasing foreign exchange earnings from services, mainly from tourism, transfer of remittances from workers abroad, and from constructions services. Foreign exchange earnings from tourism is expected to increase from US$ 3.8 billion at the end of Repelita V to US$ 8.9 billion at the end of Repelita VI. Other service earnings are expected to reach US$ 3 billion in Repelita VI. Foreign exchange expenditures on services are expected to rise by 8.7 percent per year on a net basis consisting of a 3.2 percent growth of oil and gas services and a 10.5 percent growth in non oil and gas services. In Repelita VI it is expected that non oil and gas imports will grow at a rate of 15.1 percent per annum. The share of imports of basic/intermediate goods and capital goods is expected to increase continuously. Conversely, the share of consumption goods will continue to fall. At the same time, imports of oil and gas are expected to increase by 7.9 percent per annum.

 

With the above growth of exports and imports of goods and services, it is expected that the current account deficit in Repelita VI will remain within a safe level. The ratio of the deficit to GDP is expected to fall from 2.0 percent in 1993/1994 to 1.3 percent in 1998/99.

 

Foreign investment policy in Repelita VI is aimed at stimulating economic growth and equity, expanding employment opportunities, expanding and increasing exports and encouraging the transfer and development of technology. In Repelita VI, foreign investment in Indonesia is expected to increase at least by an average of 7.4 percent per annum.

 

In Repelita VI, foreign funding will remain as a supplement to the needs for development financing and its share in total development funding will continue to fall. Foreign funding will be accepted only in so far as it has no political strings attached, does not impose burdensome terms, and is within our capacity to repay. Foreign funding will be used for activities that have high priority and benefit the people at large. Repayment of foreign funding must not disturb the stability of the balance of payments and the government budget.

 

In Repelita VI, the ratio of total government and private foreign debt to GDP is expected to decline from around 57 percent in 1993/94 to 46 percent in 1998/99. The ratio of foreign debt repayment (government and private) to total exports (DSR) is expected to fall from 30.5 percent at the end of Repelita V to 20.6 percent at the end of Repelita VI.

 

Foreign exchange policy in Repelita VI is aimed at consolidating the balance of payments, supported by a foreign exchange rate policy that promotes exports, manages imports, and supports stability of the foreign exchange market. In order to support this policy, efforts are made to maintain foreign exchange reserves at a safe level, sufficient for financing around 5 months of imports per annum.

 

4. Allocation of Development Funds

 

On the basis of the priority and policy direction of Repelita VI, the development fund, encompassing the rupiah as well as project aid components, will be allocated according to the following guidelines.

 

First, development funds from the budget will be used for the development of human resources, with high priority placed on the development of education and health.

Second, development funds from the budget will be allocated to the construction of infrastructure, such as transportation, post and telecommunications, irrigation, electricity and facilities for the development of science and technology. This infrastructure will facilitate development objectives both in the economic and social sectors, and will also promote greater equity among income groups as well as between regions.

 

Third, development budget allocations in Repelita VI will be directed at ensuring harmony between sectoral development and regional development, leading to more equitable economic growth among regions, encouraging initiative and participation of the people and the private sector in the regions, and alleviating poverty in particular. In this respect, regional development is a high priority for the development budget.

 

Fourth, development allocations are aimed at increasing the active participation of the people. To this end, a high priority in the development budget will be promotion of business enterprises, in particular the small and medium scale enterprises and cooperatives.

 

Fifth, development budget expenditures will be aimed at supporting efforts to alleviate poverty. Beginning in Repelita VI, a special program will be initiated to assist villages categorized as being poor. This program, called the IDT (Less Developed Villages Program) provides working capital to villages identified as poor so that the population can have the opportunity to develop economic activities that are suitable to their local situation. In addition, the development budget also allocates funds through a separate program to construct necessary infrastructure in the less developed villages with the aim of enhancing their access to markets and to government-built social facilities, such as schools and health centers.

 

 

E. THE SYSTEM OF DEVELOPMENT IMPLEMENTATION AND SUPERVISION

 

To secure the implementation of development and to ensure that the development aims and objectives are efficiently and effectively attained, a system of development implementation and supervision will be formulated. The system of development implementation is concerned with the development program which is funded through the government budget, including policies and procedures that increase participation in the development process. The purpose of the system is to improve institutions, procedures, and infrastructure, and the professionalism of government functionaries involved in the task of implementing and controlling development. This is meant to increase the clarity and precision of government policies, simplify implementation procedures and speed up service.

 

In putting into effect a development implementation and supervision system, Repelita VI aims for the achievement of the following four objectives:

 

1. The adoption and simplification of various development implementation procedures, especially those related to the supply of goods and services; budget revision proposal and approval; the use of domestic products; contract form and approval; participation of small and medium scale businesses; and the improvement of the monitoring and accountability system. A more decentralized decision making process can reduce the time needed for decision making in the implementation of development.

 

2. Better coordination in drafting development implementation plans, both across sectors and regions, and a better system of supervision, report and control. Also a better communication system, which can be realized by improving the existing information network. Another objective is to balance and integrate policies, programs, and projects both across sectors, regions and departments.

 

3. Increased efficiency and effectiveness in the implementation and control of the government development budget. This involves strengthening the internal and external control systems through the implementation of built-in and functional control, and improving the supervisory awareness of the people. Other objectives include the strengthening of the control mechanism, and initiating a system which can stimulate checking and cross-checking in the above three control systems. In this way, built-in control will be part of the governmental management system, and can play a critical role in internal governmental control, preventing malfeasance.

 

4. Strengthening the technical and managerial skill of government authorities in the implementation of development and the duties of government, and also in services for the people and business enterprises. With such improved capabilities, the quality, efficiency, policy formulation, control and supervision of development implementation and service to society and the business world can be increased.

 

To reach these objectives, the policies adopted in Repelita VI consist of the intensification of the entire development implementation and control system which is carried out in the earliest possible time, i.e. at the stage of planning. This covers strengthening of coordination and inter-departmental relations, strengthening the formulation of programs and budgets, the improvement of human resource quality, the improvement of control, supervision and accountability systems, and the consistent implementation of development supervision.

 

To increase the efficiency of national development implementation, the role of functional supervisory agencies such as the Finance and Development Auditing Agency (BPKP), the Inspectorate General of Development, the Inspectorate General of Ministries, and Regional Inspectorates, and the role of government agencies that function as auditors, supervisors, and controllers, must be further developed. The role of functional supervisory agencies, in particular the Supreme Auditing Agency (BPK), is expected to increase in accordance with their authority and function as stipulated in the 1945 Constitution.

 

 

 

 

CHAPTER V

C O N C L U S I O N

 

 

To conclude, it would be appropriate to emphasize a message from the 1993 Guidelines of State Policy, which states that the success of national development, as an application of Pancasila, depends on the active role of the society and on the mentality, will, spirit, cooperation and discipline of the government and the entire population of Indonesia. Therefore, all social and political forces, civic organizations, and other social institutions need to organize programs in accordance with their own function and capability in implementing the State Policy Guidelines.