The central government believes excesses in the implementation of regional autonomy are scaring away foreign investment.
President Susilo Bambang Yudhoyono said Wednesday that local governments had imposed a slew of local taxes burdensome to investors since the onset of decentralization.
"All this has given rise to a high-cost economy that will sap the competitiveness of the region in both the national and global context," Yudhoyono said before the annual plenary session of the Regional Representatives Council (DPD).
Also present in the plenary session were governors and regents from throughout the country.
Yudhoyono said the central government was now reviewing the bulk of bylaws on taxation which contradicted the 2000 Law on tax and local levies and would revoke them if necessary.
He also called on local governments to desist from imposing such bylaws.
Yudhoyono also focused on the unchecked division of provinces and regencies as another negative effect of regional autonomy.
An evaluation by the central government, he added, showed that new administrations failed to improve their services to the public, and Jakarta often had to intervene to cover outstanding expenses.
"This will only add more burden to the state budget," he said.
The central government is currently drawing up a regulation that would freeze regional divisions.
This is not the first time the President has expressed his misgivings about the implementation of autonomy.
Last May, he debated with the nation's governors about the amount of power that should be ceded to local administrations.
The governors, who were members of the Association of Indonesian Provincial Administrations, said they were disappointed by the central's government's reluctance to give more authority to them.
Responding to the criticism, Yudhoyono said that more power meant more responsibility for local administrations.
Critics contend the central government's reluctance to devolve its powers extends to the distribution of increasing funding to local administrations.
In the budget proposal for 2007, the central government earmarked Rp 250 trillion for local administrations, up 14 percent from Rp 220 trillion this year.
DPD Speaker Ginandjar Kartasasmita countered that it was the bulk of regulations produced by the central government that hampered local administrations from exercising their powers.
Ginandjar said currently there were 25 regulations covering numerous sectors that contradicted the regional autonomy law.
"We expect the central government to give an example of how to draw up regulations that are consistent with the regional autonomy principles," he said.
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