Consensus vital to support autonomy law

Consensus vital to support autonomy law

JAKARTA (JP): Natural resource-rich provinces should be
willing to subsidize poor regions if Indonesia wants to
successfully adopt its autonomy law, an expert has said.

The chief economist at the United Nations Support Facility for
Indonesian Recovery, Satish Mishra, said here on Wednesday that
the understanding from the rich provinces would ensure the smooth
implementation of the autonomy law which would take affect in
2001.

"You must have a social consensus on what it means to stay in
Indonesia," Mishra said on the sidelines of the seminar called
"The Indonesian Government & Business Investment Forum" held by
Strategic Intelligence.

He said that cross subsidies were unavoidable in any country
in the world in order to protect the poor segments of a nation.
"But rich provinces often ignore such an obligation," he added.

Mishra said that there should be, for example, a national
agreement on the flow of revenue from natural resource-rich
provinces to poor ones.

In response to demands for decentralization, the government
issued last April Law No.22/1999 on Regional Administration and
Law No. 25/1999 on Intergovernmental Fiscal Balance.

Both pieces of legislation give regions greater autonomy in
managing their own affairs, including a greater share of the
revenues they generate.

Under the intergovernmental fiscal balance law, provinces will
get 15 percent of the government's oil revenue, 30 percent of gas
receipts and 80 percent of mining royalties.

Mishra said the government should not apply the autonomy law,
unless it had consulted thoroughly with representatives of each
of the regions.

"Each side should be involved in detailed bargaining, as in
the end it's all about the distribution of national resources,"
he said.

Failure to involve regions in the decentralization process, he
said, might cause unintended consequences, in which rich regions
would make demands on the central government in return for their
needed commodities.

The government plans to implement the autonomy law next year,
but some natural resource-rich provinces are demanding that the
government speed up the process, saying they are ready for
autonomy now.

According to Mishra, such demands were more due to these
provinces' concern that the government would later backtrack on
its promise of autonomy.

Mishra also said that decentralization created a problem of
balancing resources throughout the country. "On the one hand you
want to recognize local differences but on the other you want to
ensure that nobody goes below a certain minimum," he added.

He said that if regions were too defendant on revenue transfer
from the central government, it would be unrealistic to expect
them to have an independence voice.

"However, if you starve them of revenue then they would apply
all kinds of informal taxations and local customs," he said,
adding that this would prevent such regions from offering
efficient services to investors.

He admitted that decentralization would reduce the
government's revenue, but added that this depended more on how
decentralization allocated the revenue.

Furthermore, he said, by allowing rich provinces to attain
more of their revenue, the government should provide them with
the incentive of raising more revenue.

He said this would enlarge the total pool of revenue for the
central government, which would partly compensate for the loss of
it due to decentralization.(bkm)