Government budget cuts: Hotels and airlines prepare efficiency strategies
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Anggaran pemerintah dipangkas: Hotel dan maskapai siapkan strategi efisiensi
31 January 2025
By Annasa Rizki Kamalina and Ni Luh Anggela
The hotel and aviation industries are gearing up to enhance efficiency in response to the government's budget reduction policy mandated by President Prabowo Subianto.
The Secretary General of the Indonesian Hotels and Restaurants Association (PHRI), Maulana Yusran, stated that efficiency and business adjustment strategies are essential to maintaining business.
He explained that hotels outside Java, in regions such as Sumatra, Kalimantan, Papua, Sulawesi, and Nusa Tenggara, rely heavily on government activities. This reliance is due to the limited economic activities conducted by private companies in these areas.
He emphasised that if there are reductions in activities in these regions, businesses may potentially halt operations for daily workers or delay recruiting new workers. Meanwhile, the sector currently positively contributes to job creation.
"We are creating jobs that trigger economic growth," he told Bisnis on Thursday (30/1).
He noted that reduced hotel and restaurant activities will also lead to a decrease in regional original revenue (PAD).
He highlighted that, until now, government activities, particularly business trips, have significantly contributed to the revenue of the hotel and restaurant sectors.
"Of course, PAD will decrease in each city as hotel and restaurant taxes are among the top five contributors to PAD," he stated.
The Secretary General of the Indonesia National Air Carriers Association (INACA), Bayu Sutanto, mentioned that reducing the business trip budget may also lower the number of passengers from the central and regional government segments.
"Of course, there is an impact on the number of passengers from the central or regional government segments with the reduction of the business trip budget for government officials," he told Bisnis.
He noted that government business trips contribute approximately 30%-35% to the aviation industry.
He noted that airlines under state-owned enterprises (SOEs) will be the most affected by the business trip budget efficiency policy.
"The ones who will be affected the most are SOE airlines, such as Garuda Indonesia, Citilink, and Pelita Air," Bayu stated.
The directive to cut the budget is outlined in Presidential Instruction No. 1/2025 on the Efficiency of the State Budget (APBN) and Regional State Budget (APBD) for Fiscal Year 2025. President Prabowo Subianto has instructed a budget reduction of Rp306.69 trillion. The cuts include Rp256.1 trillion from ministries and institutions, and Rp50.59 trillion from transfers to regions.
The President also requested that ministries and institutions reduce spending on staff and social aids. Specifically, the types of expenditure to be cut include office operations, maintenance, business trips, government support, infrastructure development, and equipment and machinery procurement. Prabowo further instructed regional heads to limit ceremonial activities and reduce spending on business trips by 50%.
Prabowo also issued seven instructions to governors and regents/mayors to save their APBD. He further tasked Home Affairs Minister Tito Karnavian with overseeing budget reduction efforts at the regional government level.
The instruction to cut the budget is outlined in seven key points directed at regional heads. The first point is to limit ceremonial activities, studies, comparative studies, printing, publications, and seminars/focus group discussions.
Second, reduce spending on business trips by 50%. Third, limit honorarium spending by reducing the number of teams and the amount of honorarium, in accordance with the Presidential Regulation on Regional Standard Unit Prices. Fourth, cut spending on supporting activities that lack measurable output. Fifth, focus budget allocation on public service performance targets, rather than equal distribution among regional apparatus or based on the previous fiscal year's budget allocation.
Sixth, be more selective in providing direct grants in the form of cash, goods, and services to ministries and institutions. Seventh, adjust the APBD for the fiscal year 2025 based on transfers to regions.
The government issued the budget reduction instruction in November 2024. Finance Minister Sri Mulyani Indrawati directed ministries and institutions to be more efficient in conducting business trips for the fiscal year 2024.
The instruction is outlined in Letter Number S-1023/MK.02/2024, following directives from President Prabowo Subianto at the cabinet meetings on 23 October 2024 and 6 November 2024.
Moreover, PHRI has sent a letter to Finance Minister Sri Mulyani Indrawati, stating that the policy could harm the hotel industry by trillions of rupiah.
KPK saving up
Meanwhile, Corruption Eradication Commission (KPK) Spokesperson Tessa Mahardhika stated that the KPK will reduce its business trip and office operation budget following the issuance of Presidential Instruction Number 1/2025.
According to him, KPK will conduct training and disseminations online to optimise the use of rooms and space around the KPK building.
“Meanwhile, for activities outside the city, the priority scale will be adjusted, and the number of personnel will be limited,” he told the media.
To reduce the office operation budget, the KPK will gradually optimise digital archives, reducing the need for printed goods and making the management of work facilities in rooms and buildings more efficient.
“Through these efficiencies, the KPK hopes its activities can still be carried out effectively, in collaboration with stakeholders and the entire population,” he explained.
Regarding honorarium, Tessa mentioned that the KPK does not allocate such funds, as it has implemented a single salary system.
“Following the government’s budget reduction, the KPK hopes the budget will be managed more effectively in the future, in line with good governance principles to prevent corruption,” he stated.
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