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physical security – which contributes to low morale anda lack of professionalism among security personnel. Thishas hit the poor especially hard since they cannot affordto make private security arrangements.Is it possible to increase public spending on humandevelopment during a period of slow economic recovery?How much more is needed and what would be theimplications for the sustainability of the state budget?Chapter four of this report has shown that the cost ofdelivering basic human development rights is notinordinately high. As a proportion of GDP it would requirean increase in public social sector expenditure from 3%to around 6% – which would bring Indonesia’s publicsocial expenditure into line with that in Malaysia, Thailandand the Philippines.These extra resources could be mobilized in a numberof ways. The first priority should be to increase efficiency– both in revenue collection and in the administration ofpublic expenditure. Then the government should be lookingfor new forms of tax revenue. In the interim, it shouldconsider running a small budget deficit. Such a deficit isunlikely to be destabilising. Quite the contrary, sinceimprovements in human development can underpin bothsocial stability and economic growth. And when thevirtuous circle between human development and economicgrowth sets in, it then becomes possible to increase publicsocial expenditure from the resulting increases in tax revenue.The regional dimensionThe responsibility for basic health and education hasnow passed to district governments. If they are to fulfilthese rights adequately they will need substantial increasesin their budgets. Figure 6.1, for example, shows that fora significant number of districts – those above the diagonalline – the cost of achieving the ‘education for all’ targetsoutlined in chapter four is considerably above not justtheir current education budgets but also their total budget.Clearly they will need to be allocated extra funds from thecentre through a mechanism that takes better account oflocal needs.The current formula for calculating the general grant,the Dana Alokasi Umum (DAU) does not take needstrongly into account. This is illustrated in figure 6.2 whichplots the per capita DAU for each district against the HDIand shows that there is no strong relationship betweenthe two: many districts with high HDIs also received highDAUs, while districts like Jayawijaya and Sampang withvery low HDIs received disproportionately low per capitaDAUs. There are some attempts underway to addressthese mismatches by revising some aspects of thedecentralization laws and the grant formulae – whichhopefully will make the grants more appropriate to needs.This will inevitably involve a degree of crosssubsidization,with the richer regions and sections of thecommunity helping the poorer ones. Cross-subsidizationis nothing new in Indonesia. The Inpres grants from theFigure 6.1 – Comparison of estimated ideal cost of 9 years education with regional budget (Rp. million)National Human Development Report 2004 59