Concrete formula sought for revenue-sharing

JAKARTA (JP): A noted economist on Wednesday urged the government to formulate a clear-cut formula for the sharing of revenue with the provinces to quell the growing restlessness in several areas over what locals consider economic injustice.

The University of Indonesia's Feisal Basri, who is also secretary-general of the People's Mandate Party (PAN), said several natural resource-rich provinces were determined in their demands for bigger shares of revenue from the development of their assets.

The country could be torn apart if the central government fails to take concrete measures to address the issue, he warned.

"The government should have a sense of urgency. Otherwise, we could disintegrate," Faisal said in a seminar discussing the bills on regional administration and on intergovernmental fiscal balance between the central government and local administrations.

The one-day seminar was organized by the Coordinating Body of Graduates of Indonesian Universities.

Several natural resource-rich provinces, including Aceh and Riau, have increased pressure on the government to fulfill their demands for greater revenue from the exploitation of their natural resources.

Thousands of university students attacked the housing complex of the country's largest private oil and gas company, PT Caltex Pacific Indonesia, in Rumbai, Riau, on Tuesday. They demanded temporary shutdown of its oil production until the central government was willing to meet their demand for a 10 percent share of the province's oil production.

Caltex produces more than 50 percent of the country's oil output of about 1.2 million barrels per day.

Unrest also is growing in Aceh, home to giant liquefied natural gas producer PT Arun NGL Co.

The government collects most revenue from the provinces and distributes it unilaterally among local administrations, with no consideration of their respective contributions.

A clear-cut revenue sharing formula is only available in the mining sector, where the government takes 20 percent of the royalties paid by mining contractors and provides the rest to local administrations.

Taxes

Faisal contended that the amount of royalties transferred by the central government to local administrations was too small, saying total royalties for all the provinces with major mineral resources were a mere Rp 800 billion (US$93 million) for the fiscal year 1999/2000.

He believed the central government should give all the royalties to the local administrations as compensation for their loss of natural resources.

Local administrations also should have a share of the revenues from value-added tax collected in their areas, he added, with the central government only receiving income tax.

"I suggest that local administrations gradually take all the receipts from value added tax within 10 years. The central government should retain only income tax revenue," Feisal said.

Faisal said provision of greater income would boost growth in the provinces, which in turn would increase the central government's revenues from income tax.

Speaking at the same seminar, South Sumatra Governor Rosihan Arsyad called on the central government to discuss the revenue- sharing issue with all the provinces to curb separatist sentiments.

He said the central government and mineral-rich provinces could not settle the issue only among themselves because it could foment envy among poorer provinces.

"South Sumatra is a a natural resource-rich province, but we have never asked the central government for a percentage of the revenues from our natural resources because we are aware the country's unity could be in danger if all rich provinces try to solve the problems bilaterally with the central government."

Rosihan said that although the provinces would welcome greater autonomy and larger income to be provided by the central government, most faced a shortage of skilled human resources to benefit from the policies. (jsk)