INdOnesia

Indonesia has been classified as a middle income countryfor more than two decades. Even though Indonesia's economic performance has been improving significantly in period 2001 and 102 which is indicated by almost the doubled GDP's value and significant increasing in the GDP per capita, there is a risk that Indonesia is being trapped in the middle income country. In the same report the World Bank claims that there are three ways to improve economic growth base on productivity. First is to reduce the infrastructure gam, reduce the skills gap, and improving markets' function. Regarding of the inftrastructure gap, the World Bank suggests to phase out the fuel subsidy spending at the central government level. The fuel subsidy spending is one of the dominanat components of subsidies. In June 2014, the 2014 state budget amendement was approved by the parliament with some revisions. One main issue in this revision is the increasing of the energy subsidy appropriation to approximately 453 trillion IDR in which contains 350 trilion IDR for the fuel subsidy or increase by 66 percent. Basically, the subsidy account in the sate budget can be decomposed into two main classified under energy while food, tertiliser, project loan and tax are classified under non enertgy. In general the value of subsidies increased significantly year by year. In 2004, the total value of subsidies approximately at 24.5 billion IDR. However in ten years, the value increased significantly to 333.68 billion IDR in the 2014 State Budget.