Thu, 14 Jun 2007
Published: June 12 2007 15:54 | Last updated: June 12 2007 15:54

Indonesia is planning to roll back some of the powers granted to local authorities under a seven-year-old regional autonomy scheme because they are negatively affecting investment and infrastructure development, the country’s chief economic minister said on Tuesday.

The government is preparing a draft law on taxation that will limit how much local governments can tax business, said Boediono, co-ordinating minister for economic affairs.

It also plans to revise regulations to outline the division of authority between central and regional governments on issues such as land titling, and to establish a team to review and quash local bylaws that hinder investment.

“It’s going to give a much better, clearer division of labour,” Mr Boediono said.

His comments followed the release of a presidential order outlining policies to accelerate economic development and investment, and alleviate unemployment and poverty. It covers numerous sectors of government and economy, from improving air transport safety to supporting sharia banking. It is meant in part to address criticism that the government of President Susilo Bambang Yudhoyono has been slow to implement reforms.

One priority is strengthening economic investment by reining in what some analysts say is out-of-control decentralisation.

Jakarta embraced autonomy after the 1998 end of the 32-year rule of strongman Suharto. It implemented changes in January 2001 that give local government and far-flung provinces more control over economic resources and affairs.

However, autonomy has been implemented haphazardly, with local governments enforcing excessive taxes and rules on businesses, and religiously-inspired morality bylaws, and clashing with Jakarta on who has authority to make decisions.

Copyright The Financial Times Limited 2007



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