Concrete formula sought for revenue-sharing

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)