2017-09-07

Peat agency gets 'bonus' from budget cut



JAKARTA
(foresthints.news) - Owing to an extremely low absorption of its budget, which by mid-year stood at a mere 1.2%, the Indonesian Peat Restoration Agency (BRG) has suffered a budget cut of more than 50%. This comes on the back of the Finance Ministry classifying the peat agency’s performance as very poor.

The peat agency’s budget for this fiscal year was IDR865.45 billion, or around USD64.85 million. The reduction of its budget by over half from the original 2017 figure leaves the agency with a budget of IDR428.15 billion (USD32.08 million).

In the wake of the 50.52% budget cut, foresthints.news has compiled a critical review of the situation based upon the best available data obtained from various verified sources. This review also looks at the implications of the budget cut on peat restoration efforts under the peat agency.

Free bonus

The peat agency’s budget is still incorporated into the budget of the Environment and Forestry Ministry. As of early September 2017 (Sep 4), state budget funds spent by the peat agency amounted to just IDR25.37 billion (USD1.9 million).

Basically, the peat agency actually benefits from the budget cut from the perspective of its budget absorption level.

The argument is that without the budget cut, the peat agency would only have spent 2.93% of its budget by early September this year. Whatever the reason, this represents an extremely low budget absorption level.

In contrast, taking the budget cut into account, the peat agency’s budget absorption level automatically leaps to 5.93%, giving the impression of an improved performance. In other words, this 3% increase in its budget absorption level favours the peat agency.

Referring to the fact that the peat agency's budget absorption from January to June this year was a paltry 1.2%, the 3% ‘free bonus’ to its performance is of great significance.

An example of what some of the 2016 peat agency budget was used for is seen in the photos below of boreholes constructed in Central Kalimantan’s Pulang Pisau regency, one of the peat restoration priority regencies designated by President Joko Widodo in January last year.



50% budget cut, too big?

Considering the peat agency’s budget absorption performance by early September this year of just 2.93% (without the budget cut) and 5.93% (with the budget cut), it is far from certain that the peat agency would have been able to use 50% of its uncut budget for this year.

As such, the budget cut of more than of 50% from the original 2017 figure is still within a reasonable range given the very low level of opportunities for the peat agency to spend its budget by the end of the current fiscal year.

This assertion also takes into consideration an evaluation of budget items which can no longer be absorbed this year due to delays in tender processes and other constraints.   

These photos illustrate part of the swathes of protection forests significantly burned by 2015's huge peat fires in Central Kalimantan's Pulang Pisau regency. These forests are included in the indicative targeted areas for peat restoration by the peat agency.



Naturally, the peat agency will need to make certain adjustments as a result of the budget cut. However, bearing in mind its extremely low budget absorption until early this month, these adjustments need not be overly significant.

The extremely unsatisfactory performance of the peat agency’s budget absorption from June to early September this year underlines that the agency will find it very difficult to spend its budget to an optimal level despite the more than 50% reduction.

Two things should be highlighted here. Firstly, the more than 50% cut in the peat agency’s budget is really nothing serious in light of the agency’s extremely poor performance in spending its budget.

Second is the question as to why the peat agency’s performance has been so poor in terms of its budget absorption.

While the substance of these two matters is very different, observers are left wondering just how the peat agency’s budget absorption can remain so extraordinarily low even after a more than 50% slash.

This apparent incapability on the part of the peat agency - and how it will affect the agency’s 2018 budget and, in turn, its peat restoration efforts - is really the most worrying aspect of the entire situation.