Does regional autonomy better the people's lot?

Wed, 16 Apr 2003, 00:00 WIB

By P. Agung Pambudhi

Any attempt to evaluate the implementation of regional autonomy
faces extreme difficulties because of two reasons. First, the
implementation of regional autonomy has been going on only for
two years so that empirical evidence is relatively limited.
Secondly, the implementation of regional autonomy must be put to
a test both in conceptual, philosophical, judicial, governmental
institutional aspects and in political, economic, social and
cultural realms in relation to various groups.
In the economic sector, the broad-based authority vested in a
regional administration by virtue of Law No. 22/1999 should be
construed as an opportunity for the local political elite to
improve the access of their people to the economic sector.
But this situation can be attained only if there is a conducive
business climate, and it is only possible if autonomous regions
can compete effectively with both other autonomous regions and
the regions in other countries in an unavoidable global market
system.
Unfortunately, quite a few autonomous regions have yet to put
their house in order. Instead of facilitating business
activities, they seem to be vying to apply regional policies
discouraging progress in the business field.
A study by the Monitoring Committee of Regional Autonomy
Implementation (KPPOD) on regional taxes and levies set forth in
regional regulations shows this reality. In terms of principles
and substance, over 30 percent of a total of 693 regional
regulations under analysis reveal the lack of sensitivity on the
part of the regions with respect to the creation of a conducive
business atmosphere.
Amid the regional cooperation that Indonesia has been actively
forging to create a larger market with reduced trade tariffs,
there are regional regulations that stipulate trade tariff and
non-tariff barriers domestically. This is but one of the examples
of how regional regulations can create distortion in the business
realm in terms of principles as referred to earlier.
In concrete terms, these tariff barriers take the form of the
imposition of certain tariffs on units of goods that leave or
enter a particular region. In the meantime, non-tariff barriers
may be manifested as compulsory inspection of traded commodities
or compulsory certificates of the regions of origin of the
commodities, an obligation that hampers the smooth flow of trade
distribution.
Another example of problem of principle posed by some regional
regulations is the imposition of levies on objects that the
central government has subjected to similar levies.
Matters of substantial importance related to these levies are
concerned with the absence of connection between the goal claimed
in the regional regulations and the content of the articles.
Take a regional regulation on environmental protection, for
example: While the goal is clearly the protection of the
environment, the articles of the regulation only spells out
levies to be imposed on the trading of waste. There is no mention
at all about how the environment must be kept free from hazardous
waste.
Besides, the definition of the object of the levies is usually
unclear, therefore allowing broad interpretation.
There are also problems related to judicial and technical
aspects. Although these problems may not harm business
activities, they may lead to confusion. A regional regulation,
for example, may use a formal judicial consideration that no
longer legally prevails. In other examples, the legal foundation
used is not relevant to what a particular regulation is about or,
in other cases, a regional regulation fails to fulfill the
structural requirement for legal drafting
Meanwhile, in connection with the relationship between the
central government and regional administrations, it is important
to note that clarity is lacking, leading to a tug-of-war of
sorts, in authority over certain business areas. Business circles
are complaining about the locus or the level position of policy
makers regarding processing of permits on land affairs, forestry
and other realms owing to the ever-present lack of clarity.
In the land affairs, for example, despite the stipulation in
Article 7a of Law No. 22/99 that these affairs fall within the
authority delegated to regional administrations or that they are
even matters that are compulsory for regional administration to
take care of (by virtue of Article 11), the central government,
by virtue of Presidential Decree No. 10/2000, had taken it back
and returned it to the National Land Agency (BPN), whose offices
in the regions are apparently vertical government agencies
subordinated to the central government.
In the forestry area, for example, with the issuance of Law No.
41/1999, as well as government regulations Nos. 34 and 35/2002,
the central government again takes over the authority of
processing permits authorizing forest management.
The bill on investment prepared by the Investment Coordinating
Board clearly stipulates that in the case of foreign investment,
autonomous regions at the regency/municipality and provincial
levels do not have any licensing authority.
There is fear, therefore, that this situation will lead to sharp
conflicts between the central government and regional
administration as Law No. 22/999 clearly stipulates that
industrial and trade undertakings as well as investment fall
within the authority of regencies/municipalities.
These uncertainties may unnecessarily increase the cost of
economy and erode the competitiveness of products in the domestic
and international markets.
At the same time, this will lead to greater uncertainties and
eventually the opportunity cost will exceed the levies imposed.
World-class industrial players, as well as, understandably, the
local industrialists, will feel highly uncomfortable with these
"minor" or major disturbances because, once these uncertainties
are tolerated, greater uncertainties will ensue.
However, not all regions apply such distorting policies.
In some regions, the policies are relatively conducive to
business activities. These regions have taken matters in hand
with a view to "selling" their economic potential to domestic and
foreign investors. Information about the potential is presented
in regional digests in great detail or through dedicated Internet
websites. Some other regions have set up an integrated service
unit authorized to issue investment permits.
These favorable steps should encourage investors to invest in
these regions but, unfortunately, there are investors that still
have an unfavorable perception of autonomous regions with the
result that the overall Indonesia's investment atmosphere will
also be unfavorably perceived.
Thus, some examples of excellent practices by autonomous regions
to facilitate business activities have been summarily ignored. In
short, to date investors are still reluctant to invest in regions
because, even in this era of regional autonomy, the perception
that the regions are uncooperative still persists.
The aforementioned problems have come about essentially because
of a number of factors, including the lack of preparedness on the
part of human resources and the weak commitment of the powers
that be. The government's erroneous understanding of a legal
product, the lack of a comprehensive understanding of the
business and investment sectors and similar disregard for
creativeness in bringing about a conducive business atmosphere
advantageous to the locals show the lack of preparedness of human
resources in implementing regional autonomy.
At present, there are quite a lot of elements in the business
sector, particularly large corporations, that do not understand
public policies. This fact should encourage the executives and
the legislators in the region to continue to keep abreast with
the latest developments in their areas because they have to be
leaders of the community, including business people.
In terms of governmental management, the lax enforcement of
regional regulations that, in principle, were required shows a
weak spot in the mechanism of policy drafting. This weakness will
reveal itself later when the policy is enforced and in its
relationship with the central government. Both government and
social institutions have yet to be able to create a mechanism to
prevent the occurrence of these weaknesses.
On the other hand, the central government must show its firmness
in relation to poorly drafted regional policies and in building
up the region's institutional capacity. Meanwhile, in terms of
legislation, there are some conflicts of principles among legal
products at the central government level, for example between the
regional autonomy law and laws in certain sectors or between laws
and government regulations.
Another factor usually voiced in the regions is the small portion
of funds that a region gets from the central government. This may
be considered as the main reason why regional administrations
issue policies that distort business activities. A closer look at
these policies show that they are more in favor of boosting
regionally generated revenues than improving the quality of
services. In fact, regionally generated revenues can be boosted
through the strategy of luring investors to the regions.
What a region will have from investment will be much bigger than
the portion of funds from taxes that the central government
distributes. The trouble is that a systematic effort takes a long
time before the result is visible while a five-year cycle of
leadership often requires a more instant result although this has
to be paid dearly at the expense of long-term interests.
Identification of a number of the causes of these problems has
prompted us to focus efforts on several things. First, in the
short term it is necessary to develop something like a center of
resources in each region as the partner of a regional
administration in determining the strategic direction of regional
development. This is important given that the capacity of human
resources in regional administrations, particularly in the
legislative sector, will, for some time to come, remain as it is
now.
What must be observed in this optimizing of resources is the
likelihood of cooptation of these resources by the power that be.
Second, the central government must play its repressive and firm
role in regard to distortion-generating regional policies to
ensure legal certainties within the Unitary State of the Republic
of Indonesia, and, also, improve the welfare of the locals.
If these two things can be well implemented, the potential of
economic access development in favor of local residents may be
tapped. The third thing to do is intensive popularization of good
practices in governance as an incentive for the regions
concerned. In this way, other regions will also be encouraged to
do likewise. The fourth thing is that our legislation direction
must be geared towards the synchronization between Law No. 22/99
and various relevant laws in certain sectors and other
regulations/decisions spelling out this matter
In the meantime, in the mid term, it is necessary to resort to
alternative ways to improve regional revenue resources so that
the fiscal capacity of the regions may be reinforced. In the mid
and long terms, inter-regional cooperation may be expected to
take place. This cooperation in the economic sector will be
mutually beneficial in regard to proper economy of scales and
cross-border movement of economic potential.
Along with the items in this agenda for the regions, every region
must strengthen its civil society to create a good mechanism of
checks and balances to minimize all forms of irregular exercise
of authority in terms of both regional policies and
administrative practices. Full responsibility, adequate
knowledge, organized solidarity among all social forces and mass
media support will be essential to ensure that this mechanism
runs effectively.

The writer is the executive director of KPPOD.

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