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SUB‐NATIONAL GOVERNMENT CAPITAL SPENDING IN INDONESIA: LEVEL, STRUCTURE, AND FINANCING
Author(s) -
Lewis Blane D.,
Oosterman André
Publication year - 2011
Publication title -
public administration and development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.574
H-Index - 44
eISSN - 1099-162X
pISSN - 0271-2075
DOI - 10.1002/pad.582
Subject(s) - capital expenditure , finance , depreciation (economics) , investment (military) , operating budget , gross fixed capital formation , economics , public finance , debt service coverage ratio , capital (architecture) , business , government (linguistics) , capital formation , government spending , fixed capital , financial capital , economic policy , economic growth , gross domestic product , debt , macroeconomics , external debt , market economy , human capital , politics , philosophy , history , linguistics , archaeology , welfare , law , political science
Sub‐national government capital spending is important for both public service delivery and economic development. Currently, Indonesian sub‐national public capital spending appears barely sufficient to cover the annual depreciation of its fixed assets. A substantial proportion of local government investment spending goes to create relatively unproductive assets, such as administrative office buildings. Sub‐national governments finance their capital acquisitions out of gross operating budgets and have thus far not used, to any great extent, either borrowed funds or their significant cash reserves for such purposes. Indonesian sub‐nationals need to spend more on capital than they do now and also need to focus that spending on more useful types of infrastructure. The major constraints to increasing capital spending at the sub‐national level are not related to a dearth of finance, but regulatory rigidities in budget preparation and implementation and, most importantly, a lack of capacity to plan, design and implement investment projects. Copyright © 2010 John Wiley & Sons, Ltd.