THR – Religious Holiday Allowance and year-end-bonus: Popularity boost nearing 2019 Presidential Elections

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(illustration: IO/Rudraksha)

IO, Jakarta – A week after Muslims commence the annual ritual of holy fasting, the Government announced good news: President Joko Widodo has declared the provision of Religious Holiday Allowance and year-end-bonus for current and retired Civil Servants (pegawai negeri sipil – “PNS”). This is the first time the Government has provided Religious Holiday Allowance for PNS retirees, while the provision for Religious Holiday Allowance has been given to PNS since 2016.

This Government’s policy causes pros and cons. On one hand, Indonesia is in a difficult economic condition. Rupiah continues to weaken. Economic growth in the first quarter reached only 5.1%. Indonesia’s debts have reached a fantastic figure of Rp 5,000 trillion. On the other hand, the Government decision is viewed as too political in nature made to attract the people’s sympathy, as this year is a political year due to the upcoming 2019 Presidential Elections.

Government Regulations Number 18 and 19 Year 2018 stipulate that the recipients of Religious Holiday Allowance and year-end-bonus (13 month salary) are PNS including temporary employees; members of the Armed Forces and the Police; officials, including President and Vice President; members of MPR, DPR, and DPD; ministers and officials equal to ministers; and Governors, Mayors, Regents, and their assistants. New Religious Holiday Allowance recipients include PNS, TNI, Polri, and State official retirees. Veterans and their widows, orphaned children of TNI/Polri also receive Religious Holiday Allowance.

According to Badan Statistics Indonesia, the total number of PNS in the capital and regions per December 2016 is 4.4 million people. The amount spent by the Government for the payment of both year-end-bonus (13th Salary) and Religious Holiday Allowance this year is Rp 35.76 trillion, or 69% higher than the amount spent in the previous year. This payment is divided into Salary Religious Holiday Allowance at Rp 5.24 trillion, Performance Bonus Religious Holiday Allowance at Rp 5.79 trillion, and Retirement Religious Holiday Allowance at Rp 6.85 trillion. The total of Salary, Performance Bonus, and Retirement Religious Holiday Allowances is Rp 17.88 trillion, and the same amount paid out for the 13th Salary. Religious Holiday Allowances are to be paid out in late May and early June, while the 13th Salary is to be paid out in July.

The Government’s policy of continuing to pay out Religious Holiday Allowance despite the difficulties faced by the country is similar to the action taken by the Prime Minister (PM) of Malaysia, Mahathir Mohamad. In the early days of his rule, he took a controversial step of deducting no less than 10% of the salary of all the ministers in his cabinet. He did this in order to reduce the State’s debt that reached MYR 1 trillion, as well as to reduce Government expenditure.

Image Building for 2019
Both current and retired PNS are naturally happy with the Government’s policy. However, they still want a change of leadership in 2019. Many groups consider that the provision of Religious Holiday Allowance and 13th Salary to current and retired PNS, TNI, and Polri to be merely an image building act of President Jokowi. Eko Listiyanto, the Vice Director of the Institute for Development of Economics and Finance (INDEF), agrees. The timing is just too precise. The Government seems eager to obtain positive response from the people in this political year. The Government’s policy of granting Religious Holiday Allowance for retirees did not exist last year. Eko concludes that the Government is using this policy to gain political momentum. This is a natural and legitimate part of political dynamics.

Yenny Sucipto, Secretary General of the Indonesian Forum for Budgeting Transparency (Forum Indonesia untuk Transparansi Anggaran – “FITRA”), believes that this policy of granting Religious Holiday Allowance and 13th Salary should be supported, as long as it is effective and efficient. It should also be monitored and evaluated properly in order to view PNS performance. If the Government does not use specific parameters, it would be nothing but a mere popularity-grabbing program. “In the end, many groups claim that it is just image building for 2019. It is a legitimate right for the public to say so. We, however, do not care as much to the political slant than towards whether comprehensive studies have been made or not, before this policy is issued,” she said.

Siti Zuhro, Senior Researcher from Indonesian Institute of Sciences, concludes that the President announced the Religious Holiday Allowance policy himself because it is a “sexy” policy, which concerns human necessity and nature of wanting bonuses. “So there’s no need to blame anyone for relating this policy with politics, as this is a political year. Suddenly providing Religious Holiday Allowance to retirees out of the blue, won’t a lot of people wonder what’s behind it?” she said.

Agus Pambagio, Public Policy Observer, agrees that since this is a political year, it is only natural that the policies made by the Government would have political content. He said that having the President make the announcement concerning Religious Holiday Allowance by himself is something people generally do in a political year. “Take a look at all presidents – the old presidents and the current president are the same, whether they are providing new subsidies or a Religious Holiday Allowance. They all have the same purpose of increasing the people’s buying power,” he said.

The People’s Buying Power
The Minister of Finance, Sri Mulyani Indrawati, believes that the provision of Religious Holiday Allowance can increase the people’s buying power in Quarter II of 2018. As buying power has been decreasing, the President would naturally provide Religious Holiday Allowance to encourage the people to shop more for Eid-el-Fitr. Yet the facts are more complex than mere perception of the Government’s desires. Eko believes that the provision of Religious Holiday Allowance to current and retired PNS would normally do little to increase buying power. However, the Eid-el-Fitr momentum means that most people would shop and consume more, no matter what their occupation or social level.

“Eid-el-Fitr has always been a good momentum, as people generally do consume more at this time. People in general would spend more, including PNS. But at the same time, the impetus for increased buying power mostly come from non-governmental household. They comprise 56% of total economic growth, and they move together as a unit. That means that economic growth would occur due to higher consumption, because both PNS and non-governmental households simultaneously allocate a bigger budget to celebrate Eid-el-Fitr, in this case bigger budget than during non-religious holiday periods. It is only natural that the economy will be improved due to this extra shopping, but you can’t really claim that that the economy improves due to Religious Holiday Allowance. That’s not how it works at all,” Eko said.

Mohammad Faisal, Ph.D., Director of Center of Reform on Economics (CORE Indonesia), said that Religious Holiday Allowance will cause increased household consumption, but the effect would be temporary. It will only last throughout Quarter II, or when the Religious Holiday Allowance is distributed. It is not sustainable. Furthermore, the scope of the people who receive its benefit is limited. After all, the recipients are current and retired PNS, TNI, and Polri, which is a percentage of less than 50% of the total number of households in Indonesia.

Religious Holiday Allowance is Paid from Debts
The distribution of Religious Holiday Allowance is paid out of the State Budget (Anggaran Pendapatan dan Belanja Negara – “APBN”) and Regional Budget (Anggaran Pendapatan and Belanja Daerah – “APBD”). Government Regulation Number 19 Year 2018 concerning Religious Holiday Allowance, Article 9, states that the Religious Holiday Allowance of officials and PNS working for the Central Government is taken out from APBN, while the Allowance for Regional Government PNS is taken out from APBD. Furthermore, the income tax for the Religious Holiday Allowance is also borne by the Government.

Religious Holiday Allowance is provided just at the time when Rupiah is weakened and APBN is on a deficit. Bank Indonesia, Monday (28/5/2018), set the US Dollar price at Rp 13,995, while APBN is on a deficit of up to Rp 55.1 trillion in April. Employee expenditure in APBN 2018 is allocated at Rp 365.7 trillion, which is 26% of the total Government budget. In the past year, employee expenditure is recorded at Rp 313 trillion. That means that employee expenditure increased 16.8% within a year. Even worse, employee expenditure increased 28% in the 2014-2017 period.

President Jokowi, the incumbent, is elected by 5 political party as candidate president for 2019-2024. The policies of an incumbent candidate will be intensely scrutinized, and all connection to political interest would naturally be highlighted.

Retirees may be delighted because of the Religious Holiday Allowance announcement for them, but they must remember that they will have the allowance paid to them out of national debt. This is something the Government should have admitted to the people. It begs the question whether the Government really does feel sorry for Civil Servant retirees throughout Indonesia, or is this a not-so-subtle persuasion to elect Jokowi in the upcoming 2019 Presidential Elections?

“It’s only natural that PNS should get a 13th salary in a year, but this year is retirees are provided with Religious Holiday Allowance for the first time. There should be information given that the Allowance comes from the State budget, and let retirees elect whomever they want intelligently. The Religious Holiday Allowance increases national debt. All policies should have their impact considered, not just the positive impact but the negative ones as well – and which one of them is bigger,” Siti said.

Eko believes that Religious Holiday Allowance and 13th Salary-year-end-bonus will increase burdens to the APBN. Yet he also believes that the Government would also liquidate the Religious Holiday Allowance and 13th Salary expenditure as quickly as possible, because it will affect President Joko Widodo’s electability in the upcoming Presidential Elections next year. Furthermore, the Religious Holiday Allowance budget item will negatively impact development. As we all know, the Government is pushing the completion of infrastructures. With the need for Religious Holiday Allowance expenses, the Government will have cut development budget. “This is a short-term policy that makes use of Eid-el-Fitr momentum. But in consequence, it reduces capital expenditure for development,” Eko said.

However, Eko refutes the claim that Religious Holiday Allowance is financed by debts, as it is of one piece with other items of Governmental budget. “So you can’t tell whether it is financed by debts or by State income, such as taxes.” Amidst worrisome economic condition, he suggests that the Government be more efficient. However, efficiency is closely related to various PNS activities. “The salary is actually pretty small. Therefore, “efficiency” is more towards what their activities are. For example, many PNS-related events are held in hotels. This affects the Budget more than any single reduction to Budget items,” he said.

Similar with Eko, Mohammad Faisal believes that Religious Holiday Allowance will be a burden to the APBN. It must be noted that APBN 2018 originally has very high targets, plus rapidly increasing debt repayments and social security expenditures. Yet capital expenditures are decreased, with extremely low realization in Quarter I. Religious Holiday Allowance would naturally increase non-capital expenditure (employee expenditures).

This condition is worsened with the weakening of Rupiah, because weakening Rupiah would automatically increase all import-related expenditures such as infrastructures. Not only that, but repayment of debt principals and interest in foreign currency will increase due to the weakened exchange rate. It is obvious that added expenditures without increased income will only increase the deficit rate.

Yenny said that it is unfortunate that Religious Holiday Allowance will be included in APBD, because most regions have low financial capacity. “When we look at our fiscal capacity in 2017, 17 out of 34 provinces have “low” and “very low” fiscal capacity,” Yenny said. She further said that 207 out of 415 regencies, and 47 out of 93 municipalities, have “low” and “very low” fiscal capacity. “This means that most regions with little fiscal space will have trouble in implementing this policy. Even if they insist on implementing it, regional innovation and public expenditure will have to go down,” she said.

According to FITRA, the performance of budgets in ministry and institutional levels at the end of 2017 is bad, reaching an average of 40%. According to data from Public Expenditure and Financial Accountability 2017, realized Government expenditure in 2016 is mediocre at “C” category.

“The provision of performance bonus should be reviewed, because the Government’s budget performance is disappointing,” Yenny said. Therefore, she asked that President Jokowi implement the principles of effectiveness, efficiency, and fairness according to Law Number 17 Year 2003. Further, she suggests that comprehensive analysis be made over the fiscal discretion of both APBN and APBD, as FITRA studies in 70 regions in 2016, APBD’s fiscal strictness delays budget allocation for many public-sector programs, as the budget is allocated more towards employee expenditure. “Jokowi’s government must have a comprehensive view by including regions with low fiscal leeway,” she said.

Yenny considers the Government policy to be issued by force, just like the issuance of Government Regulation Number 18 Year 2017. “The last one was DPRD’s portion, and now it’s PNS’ portion of the pie. This is a distribution of funds made without comprehensive analysis. I suggest that when one is drawing a policy, one should not rush it. Make it as comprehensive as possible, and don’t issue it until it is matured,” she said.

DPR Approval
The people’s representatives are expected to take a stand amidst the polemic caused by the Religious Holiday Allowance and 13th Salary (year-end-bonus) policy. However, Agus believes that this Government policy does not require DPR approval, because it is part of the APBN. This is no sudden decision, and it would have been included in APBN proposal.

Yenny believes otherwise. She thinks that the Government should draft and propose the regulation, then DPR should discuss and approve it. APBN should be regulated by law, instead of using APBN carelessly just because they have the authority. Therefore, DPR must exercise its control and budgeting functions by testing all policies generated by the president properly. “DPR can actually question how far comprehensive analysis was made by the Executive when generating the policy. It is DPR’s control function that we expect in relation with these Government Regulation. We expect DPR to optimize its function,” she said.

Siti believes that DPR has three primary duties and functions, among others constructive monitoring of the performance of Governmental programs and policies. The Legislative must perform check and balances upon the Executive by reviewing all Government policies carefully and giving constructive inputs. “DPR certainly has the right to question the Government. We certainly do not want to hurt the retirees by taking this issue to task, but other parties also have their interest in the State budget. There is a very large number of retirees, which makes them a sexy and significant target for political support niche,” Siti said.

Mohammad Faisal said that part of the Religious Holiday Allowance requires DPR approval, others don’t. It all depends on the amount: strategic policies require DPR approval.

Suggestions to the Government
Siti suggests that the Government, in this case the President, should consider all sides thoroughly and formulate his policies carefully, so that he can know and predict all the impacts they cause. Any policy would cause both positive and negative impact, whether to the budget or to the people’s aspiration. This policy may please current and retired PNS, but what about other groups? Such perceived financial favoritism may cause envy among the people. This will ultimately prove fatal, as everyone is more sensitive lately, and we must do our utmost to maintain harmony and cohesion among the people.

Siti further questions whether the Religious Holiday Allowance policy can benefit the dynamics of our economy. Politically, it may represent the needs of current and retired PNS, but we should not close our eyes against other needs and prevent jealousy. It is never easy to manage a highly diverse nation such as Indonesia, with its myriad interest and aspiration, and how to make sure that everyone is treated fairly and equally. The leader, with his facilities, power, networking, etc. should invite all parties to provide him with objective input, especially from the ministries. This would ensure that the president can take the best step possible and reduce the load he carries.

Yenny, on the other hand simply requests that the State’s Executives, especially the President, would at least adhere to the principle of prudence and keep compliance to the laws.

Mohammad Faisal states that the Government must really calculate expenditures and loads balanced against income, because the Religious Holiday Allowance adds to the portion received by part of the community at the expense of other APBN items. Therefore, the Government now has the extra responsibility of further increasing the State’s income until the end of the year.

Eko thinks that it is not enough that the Government only provides Religious Holiday Allowance and 13th Salary (year-end-bonus). It is more important that the Government supports domestic industry, because if imports are higher than the sale of local products, economic growth will not be optimized. (dessy/ekawati)