Does regional autonomy better the people's lot?

Does regional autonomy better the people's lot?

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.