Regional administrations want to issue bonds for development financing<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Citing lack of funding sources, provincial and district
\nadministrations lobbied the People's Consultative Assembly (MPR)
\nto push the central government to allow them to issue bonds as an
\nalternative funding source for financing development programs.<\/p>\n
Deputy chairman of the MPR's regional representatives faction
\nOesman Sapta Odang supported the regions' appeal.<\/p>\n
\"Despite its huge potential, economic development in the
\nregions has been moving at a slow pace due to the lack of
\nfunding. So, this bonds issuance policy should be a breakthrough
\nto bridge that gap,\" Oesman said over the weekend.<\/p>\n
He was speaking at the official conclusion of a two-day
\nseminar on the issue, which had been initiated by his faction
\nlate last week.<\/p>\n
The seminar, officially opened by MPR Speaker Amien Rais, is
\nthe latest move by regions to pressure central government to ease
\nthe existing policy that bans regional governments from issuing
\nbonds.<\/p>\n
Local administrations have long demanded greater freedom to
\nseek their own funding sources since they obtained autonomy power
\nin 1999, to offset what they claim as \"lack of financial
\ncommitment\" on the part of the central government.<\/p>\n
Only by being allowed to issue the regional bonds, they said,
\nwould regions be able to compete fairly with the central
\ngovernment in terms of economic development.<\/p>\n
Consequently, Oesman said, the faction urged the government to
\naccommodate this demand and give it its full support. The support
\ncould come in the form of a package of legislation, including a
\nlaw on regional bonds.<\/p>\n
\"Such a law is necessary to ensure legal certainty for both
\ninvestors and regions,\" he added.<\/p>\n
The Ministry of Finance has long opposed the plan, citing the
\nregions' unreadiness for such a policy as it requires a sound
\ndebt management scheme. Failure to control regions' debts could
\nwell bring about another round of financial crisis for the whole
\ncountry.<\/p>\n
Ministry director general for fiscal decentralization
\nMakhmud Siddik earlier hinted that passage of the law could only
\noccur in 2004 at the earliest.<\/p>\n
Bank Indonesia Governor Sjahril Sabirin shared the same view,
\nsaying that the issuance of regional bonds was not an ideal
\npolicy at the moment, given that the country was already hugely
\nburdened by debt.<\/p>\n
\"What this hugely indebted country needs is a good debt
\nmanagement program, because the huge debts have made investors
\nperceive Indonesia to be a high-risk country in terms of
\ninvestment,\" said Sjahril, also a speaker at the seminar.<\/p>\n
He cited Brazil and Argentina as examples of how a bad debt
\nmanagement concept could result in financial disaster.<\/p>\n
\"Through decentralization, the local governments in these two
\ncountries also sought ways to accelerate their economies. It
\nturned out that this was one of the main contributors to their
\neconomic crisis.\"<\/p>\n
Under the current fiscal decentralization scheme, regional
\nadministrations, apart from obtaining a revenue share from their
\nrespective natural resources, also get a funding allocation from
\nthe central government's state budget, as a funding source.<\/p>\n
Revenue obtained from natural resources like oil, gas,
\nforestry and others are split between the central government and
\nthe producing regions under a revenue-sharing formula.<\/p>\n
Oil and gas producing-regions get a 30 percent revenue split
\nfrom gas, and 15 percent from oil. As for revenue from non-mining
\nresources like forests and fisheries, producing regions retain 80
\npercent of the incomes.<\/p>\n
Regional governments also receive funding allocations from the
\nstate budget: the general allocation fund, popularly known as DAU
\nand the specific allocation fund or DAK. According to the law,
\nthe state budget must allocate 25 percent of revenue to DAU.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/regional-administrations-want-to-issue-bonds-for-development-financing-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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