The Regional Representatives Council (DPD) has backed the stance of most factions in the House of Representative in rejecting a government regulation in lieu of law (emergency regulation) on free trade zones (FTZ).
"The DPD agrees that the substance of the government regulation actually needs to be enshrined in statutory form.
"In addition, to prevent inconsistencies with other laws, a process of harmonization will be required," DPD member Nurmawati Bantilan said while reading the official stance of the council at a meeting with House factions and the government Wednesday evening.
At a previous meeting, almost all of the 10 House factions said that the emergency regulation, aimed at replacing the 2000 Free Trade Zone Law (FTZ), was incompatible with preexisting laws and regulations.
The government issued the regulation in June to amend three articles in the 2000 legislation that require the designation of an FTZ to be set out in statutory form.
Under the emergency regulation, an area can be designated a FTZ by way of government regulation.
Armed with this, the government issued three government regulations last month designating all of Batam island, and parts of Bintan and Karimun islands as FTZs, with their new status due to come into effect in January.
Following this, all import duties, value added tax, luxury goods tax and excise duties will be eliminated within the designated zones.
The government hopes that the new FTZs will help double exports from the three islands, add $1 billion-worth of new investment and create 130,000 new jobs by 2009, compared to the figures for 2006.
The DPD said that designating an FTZ by way of government regulation also violated article 9 of the 2004 Local Government Law, which provides that the functions of an FTZ must be stipulated by law.
The DPD also argued that it violates article 31 of the 2007 Investment Law, which states that the rules governing the operation of an FTZ must be set out in statutory form.
Furthermore, the Constitution provided that the boundaries and powers of areas and regions had to be provided for by law. Hence, the DPD argues that the designation of an area as an FTZ must also be enshrined in statutory form.
Representing the government, Trade Minister Mari Elka Pangestu said that the emergency regulation had to be issued as a matter of urgency as the country was facing increased competition from industrial zones in the Philippines and Malaysia's Iskandar Development Region (IDR).
"The IDR aims to achieve exactly what we are hoping for in Batam, Bintan and Karimun, which is to create synergies with Singapore. If we postpone the FTZ development in Batam, we will miss the boat," Mari said.
She added that the IDR is three times larger in size than Singapore, has an airport and seaport, and has received US$1.4 billion in investment from the Middle East.
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