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)