March 6, 2019 / 9:22 AM / 13 days ago

Handout plans for Indonesia's unemployed could spark backlash for president

JAKARTA (Reuters) - Indonesian economists and opposition officials have questioned the feasibility of President Joko Widodo’s plan for cash handouts to the unemployed, citing an already strained national budget and ballooning debt at state enterprises.

FILE PHOTO: Indonesian President Joko Widodo leaves after visiting former first lady Ani Yudhoyono at a hospital in Singapore February 21, 2019. REUTERS/Edgar Su

Widodo, who is seeking re-election in April, promised cash benefits last week to graduates from poor families and the unemployed if he won a second term, but did not sketch in the details.

Some opposition figures see the plan, widely known as the “pre-work card”, as a populist exercise to garner votes ahead of the April 17 presidential election, expected to be a re-run of his 2014 race with a retired general, Prabowo Subianto.

“The programme will increase the state’s burden and will be funded by new debt,” said economist Bhima Yudhistira Adhinegara of the Institute for Development of Economics and Finance, pointing to a deficit in the budget and a low tax ratio.

Indonesia aims to hold its fiscal deficit at about 1.84 percent of gross domestic product (GDP) this year, or roughly 296 trillion rupiah (£16 billion), up from 1.76 percent of GDP, or about 260 trillion rupiah, in 2018.

Unemployment, standing at 7 million by August 2018, ranks among southeast Asia’s highest, and makes up about 5 percent of the population, government data shows. Most of these individuals are graduates of vocational schools.

Indonesia would need to find 84 trillion rupiah each year if the government decided to pay out 1 million rupiah a month to so many, Adhinegara said.

Widodo has also promised subsidised food for poor families and a programme to ensure higher education for high school graduates.

The plans will be an extension of existing schemes set to cost the government about 72 trillion rupiah this year.

Indonesia introduced universal health coverage in 2014 and guarantees free education for children up to 12 but provides no welfare for the unemployed.

Opposition politicians also ask how funds will be raised.

“It’s not a solution,” Fadli Zon, of the main opposition Gerindra Party, told the Detik news website. “The solution is to create easy employment.”

He gave no details, however.Widodo’s campaign team director, Usman Kansong, said the scheme provide funds for a fixed time to enable training for “underprivileged” high school and university graduates.

Funds would come from the national budget, but the amount and duration have yet to be decided, he added, with an official of Widodo’s campaign team leading a group to hammer out the details.

Kansong said a system would be set up to rein in the budget and focus only on poor families.

Editing by Kanupriya Kapoor and Clarence Fernandez

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