Advancing the Local Bond and Sukuk Law, FPG MPR: So Regions Do Not Solely Rely on the Centre

One concrete step advocated is the expedited drafting of the Undang-Undang (UU) Obligasi dan Sukuk Daerah (Local Bond and Sukuk Law) so that regional governments (Pemda) can finance their development independently. Chairman of FPG MPR RI, Melchias Markus Mekeng, criticised the implementation of regional autonomy that has been ongoing since 1998. He noted that after nearly three decades, the majority of Pemda remain unable to be self-reliant due to limited Pendapatan Asli Daerah (PAD), thus continuing to depend on Dana Alokasi Umum (DAU) and Dana Alokasi Khusus (DAK).

“The facts on the ground show that these regions are still too dependent on the centre. Their PAD is small, they rely on DAU and DAK. If there is no breakthrough or bold move, they will stay like this, and their development will be delayed,” Markus said in a statement on Wednesday (20 May 2026).

Markus emphasised that the essence of regional autonomy should be the ability of regions to build their territories with financial strength.

Therefore, FPG is in the process of drafting a comprehensive regulation so that the local debt market has a strong legal umbrella. The aim is for an academic manuscript on this regulation to be completed by August to be submitted to the DPR RI for processing into a law (UU).

“We, from the Golkar faction, see this as a very timely momentum. Our hope is that this issue can be supported by all factions in the DPR RI and be brought to fruition as a Local Bond Law or Local Sukuk Law,” Markus said.

Furthermore, Markus explained that local bond instruments are not new globally. Around 20 countries have successfully utilised these instruments, ranging from the United States (Las Vegas and San Diego), the United Kingdom, Switzerland, Japan, to developing nations in Africa such as Nigeria and Senegal.

In Japan, for example, local financing relies on bonds purchased by the local population themselves, thereby minimising currency risk.

Reflecting on domestic success, Markus is optimistic thatthe local bonds market will rise sharply once the law is enacted, similar to the positive effects following the enactment of the Government Bond Law (SUN) in 2002.

“Before the SUN Act, our government bonds were not very liquid because investors felt uncomfortable without a law providing legal certainty. After that law was enacted, the absorption of our government bonds has become very large,” Markus said.

“I am sure, with full confidence, the local bonds market will grow even more once the law is in place,” he concluded.