Decentralization flawed, says World Bank<\/p>\n
Evi Mariani and Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The World Bank said the government's two-year-old
\ndecentralization program has opened immense opportunities to
\nimprove the lives of many people, but warned that there were
\nstill a number of flaws that must be fixed to ensure long-term
\nbenefits.<\/p>\n
The Bank said that one such flaw was the issuance of a host of
\n\"nuisance taxes\" by regional governments that had negatively
\naffected the business climate. Examples of such taxes are tax on
\nimporting goats issued by the Bogor regency administration in
\nWest Java, and the advertisement tax on Coca-Cola bottles in
\nLampung province.<\/p>\n
World Bank's lead economist on Indonesia Bert Hofman said that
\none of the ways to help resolve the problem was to give more
\npower to regions over land and building taxes as compensation for
\neliminating the bizarre taxes.<\/p>\n
\"All around the world, land and building tax is a local tax.
\nWe feel that having regions decide on the rate for this tax would
\nbe key to better governance,\" Hofman said in a press statement
\nissued at the launch of the World Bank assessment report on the
\ndecentralization reforms.<\/p>\n
Entitled Decentralizing Indonesia -- A Regional Public
\nExpenditure Review, the report offers a broad analysis of central
\ngovernment policy and regional finances in the run-up to and the
\nfirst two years of decentralization.<\/p>\n
Many investors, both local and foreign alike, have complained
\nabout the poor implementation of the decentralization program,
\nparticularly on the aggressive move by regional governments to
\ncollect taxes from businesses.<\/p>\n
The government is currently in the process of revising the
\nlaws and regulations of the program.<\/p>\n
The World Bank insisted that Law No. 34\/2000 must be revised
\nto help prevent nuisance taxes from increasing.<\/p>\n
The decentralization program was launched in 2001 and has
\ncreated dramatic changes nationwide, opening up immense
\nopportunities to enhance service delivery and accountability.<\/p>\n
As part of that program, more than two million civil servants
\nhave been transferred to regions to around 16,000 service
\ncenters, such as schools and hospitals.<\/p>\n
\"Much has been achieved in the first couple of years, but
\nthere are still a lot of outstanding issues,\" Hofman said.<\/p>\n
Aside from the dubious local tax rulings, there is also a huge
\ngap in fiscal capacity among regions, causing difficulties for
\npoorer regions to meet minimum service standards.<\/p>\n
The richest region has 50 times more revenue per capita than
\nthe poorest, showing that the general allocation grant (DAU) is
\nas not as equalizing as it should be. To help overcome this gap,
\nthe government should make its transfers through DAU more
\nequalizing, the World Bank report said.<\/p>\n
Another flaw was the absence of laws and rulings that clearly
\ndefined the assignment of functions at all levels of regional
\ngovernments.<\/p>\n
The report also cited the increased emergence of new regions
\nas alarming, as they were not only often unnecessary, but were
\nalso sometimes inspired purely by vested interests.<\/p>\n
Over the past two years, more than 100 new local governments
\nhave been created to bring the current total to more than 400.<\/p>\n
The Bank welcomed the government's moves to amend the existing
\nLaw No. 22\/1999 on regional autonomy: \"Indonesia should use the
\nprocess of revision as an opportunity to create a broad consensus
\non the type and extent of the regional autonomy, and define
\nbetter rules of the game to ensure that the benefit of
\ndecentralization will prevail.\"<\/p>\n
The report also singled out financial accountability at the
\nlocal level as a major concern. \"While evidence from BPK
\n(Supreme Audit Agency) audits suggests that abuse is not larger
\nat the local than at the central level, financial management
\nshould be tightened,\" Hofman said.<\/p>\n
\"Better regulations on financial management, better rules on
\nprocurement, and more systematic audit of local governments are
\nkey.\"<\/p>\n
The report, noted, however, that follow up on audits was
\nneeded as well, and that a weak justice sector was not helping in
\nthat respect.<\/p>\n
The World Bank said in a statement that it was ready to help
\nprovide financing to help improve the implementation of the
\ndecentralization program.<\/p>",
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