Killing the Goose<\/p>\n
Regencies and cities, which lack resources -- or the capacity
\nto capitalize on them -- should not despair when it comes to
\nattracting private investment, because investors consider policy
\nvariables to be very important factors that influence their
\ndecisions to set up business in a regency or town.<\/p>\n
Policy variables, which include institutional capacity (legal
\ncertainty, policy consistency and predictability, government
\nservices and local regulations) and socio-political factors,
\ncarry more weight than physical infrastructure, labor supply,
\nworker productivity and the structure and potential of the local
\neconomy, as factors considered by investors in choosing the
\nlocation for their businesses.<\/p>\n
That is one of the main findings of a comprehensive survey of
\nmore than 5,000 businesspeople in 214 regencies and towns across
\n29 provinces conducted by the Regional Autonomy Watch (PPOD) last
\nyear as a means to determining attractiveness of regions to
\ninvestors.<\/p>\n
The survey, funded and inspired by the Asia Foundation and
\nUnited States Agency for International Development, confirmed the
\nconclusions of similar business-perception studies conducted by
\nforeign chambers of commerce and several business consulting
\nagencies in Indonesia.<\/p>\n
The survey, the fourth annual by the PPOD, could eventually be
\ndeveloped into a rating of investment risks in the regencies and
\nmunicipalities to pressure local administrations to improve the
\ngeneral business climate in their areas.<\/p>\n
Such a rating is quite important for local administrations
\nintending to raise funds by floating municipal bonds. In fact,
\nafter the implementation of local autonomy in 2001, it is no
\nlonger sufficient for investors, notably foreign ones, to assess
\nthe country (Indonesia) risks, but also province and regency
\nrisks when deciding on a site for their businesses.<\/p>\n
Indeed, strong law enforcement to minimize government policy-
\nrelated costs and risks like those regarding regulations on
\ntaxation, customs and autonomy have always been high on the list
\nof grievances that both domestic and foreign investors have had
\nabout the investment climate in the country.<\/p>\n
The survey, for example, rated Indramayu regency in West Java
\nthe best in terms of institutional capacity, because the local
\nadministration has expedited investment\/business licensing under
\na one-stop service center at the sub-district level.<\/p>\n
The central government has tried to establish a one-stop
\nservice center for investment licensing, since the 1980s, at the
\nInvestment Coordinating Board, but it has failed -- apparently
\ndue to bureaucratic jealousy.<\/p>\n
Interministerial coordination has long been the weakest point
\nof the government, not only because bureaucrats from different
\nagencies refuse to give up control. Within the perspective of the
\npublic administration, which has been perceived to be one of the
\nmost corrupt in the world, licensing authority means \"lots of
\ncash\" for officials.<\/p>\n
Businesspeople have praised the pro-business attitude of the
\nIndramayu administration and its consistent policy of encouraging
\nthe public's participation in the formulation of local
\nregulations (bylaws).<\/p>\n
Pro-business policies should indeed top the economic programs
\nof local administration because it is investors (businesspeople)
\nwho create jobs, which in turn generate purchasing power to spur
\nconsumer demand for various goods and services.<\/p>\n
Vice President Jusuf Kalla, who is an experienced businessman
\nin his own right, commented on the survey's conclusions. He said
\nthat local administrations should be long-term oriented in their
\neconomic policies must quit such short-term endeavors, like
\nmanufactured taxes and fees for businesspeople, to raise as much
\ncash as possible.<\/p>\n
Many businesspeople have complained about absurd and
\ndisturbing regulations issued by local administrations in an
\noverly zealous bid to raise as much local revenues as possible
\nwithout realizing that this rent-seeking attitude will sooner or
\nlater kill the goose that lays the golden eggs. The central
\ngovernment has revoked many regional bylaws, which contravened
\nnational laws but narrow-minded administrations in several
\nregencies or municipalities still prefer to squeeze
\nbusinesspeople to fulfill their fiscal needs and wants.<\/p>\n
The business survey also reiterated the need for the central
\ngovernment to further expedite investment licensing by
\ndecentralizing the licensing authority from the Investment
\nCoordinating Board in Jakarta to provincial and regency
\nadministrations.<\/p>\n
The central government only needs to set national standards
\nsuch as those on environmental requirements and national
\ndirectives on the business areas closed to private investors,
\nwhether domestic or foreign.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/killing-the-goose-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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