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NEWS UPDATES 6 August 2010

Indonesia to revise rules on procurement bids

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President Susilo Bambang Yudhoyono said Thursday the government would revise a regulation on bidding for public procurement of goods and services, blaming it for sluggish public spending.

“Based on our evaluations, the regulation has slowed down the spending of state and regional budgets.

This has bottlenecked the trickling down of economic benefits,” Yudhoyono said prior to a two-day Cabinet meeting, which was also attended by governors, heads of government agencies, state company executives and noted tycoons, at the Bogor Presidential Palace.

“The impact is clear. The economic development, particularly at the regional level, could not be optimized as local administrations feared speeding up spending.”

Yudhoyono said the revision would be discussed Friday.

Many bureaucrats at central and local levels have criticized the rigidity of the 2003 presidential regulation on procurements, under which failure to strictly comply would lead to prosecution for power abuse or corruption.

Due to the revolving risks, the bureaucrats said they preferred spending more time complying with the regulation, or in some cases, refusing to initiate procurement bids.

“There have been numerous complaints about the regulation. This has led to most state and local budgets laying idle. The regulation should not be too bureaucratic,” Yudhoyono said.

Finance Minister Agus Martowardojo said only 35 percent of state budgets had been spent in the first half of this year, far lower from the expected 50 percent. Average budget spending by local administrations has remained at a similar level.

The country’s state budget this year of more than Rp 1,000 trillion (US$110 billion) is expected to help drive the economy in the form of public spending. However, with less spending, few economic advantages from the budget have ever been enjoyed by businesses.

Indonesia’s economy is set to grow 5.8 percent this year, fueled mainly by public, private and household spending.

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