Finance minister defends bill on fiscal balance

JAKARTA (JP): Finance minister Bambang Subianto turned down on Monday legislators' demands to include a clear-cut revenue sharing formula in the proposed law on striking fiscal balance between the central government and local administrations.

He said the government would use a separate regulation to determine local administrations' share of income from natural wealth in their areas.

Bambang explained that determining a revenue-sharing formula needed further comprehensive discussion with various government institutions, with allocation of the nation's natural resources contained in various laws or draft bills currently before the House.

"With such considerations, the ruling (on a revenue-sharing formula) which still needs intense discussions will be stipulated in the government regulation," he told House members during a general debate on the bill.

Legislators have panned the draft, submitted to the House on Feb. 12, as unclear in defining how local administrations would benefit from natural wealth in their areas. They have taken issue with the fact that essential elements of the fiscal relationship were still under central government control.

Legislators complained that stipulating the revenue-sharing formula in a separate regulation would be prone to manipulation by the central government, thereby keeping provincial administrations heavily dependent on funding from Jakarta.

Submission of the bill, together with an earlier draft on greater autonomy for provincial governments, was designed to create more equitable distribution of income between the central government and provincial administrations.

During the 32-year rule of Soeharto, resource-rich provinces failed to enjoy the benefits because a large part was funneled to Jakarta. Since Soeharto's ouster in May 1998, several provinces have demanded greater autonomy and a higher revenue share.

Bambang said the bill was not only designed to obtain a balanced distribution of income between the central government and the provincial administrations, but also as a means to reach balance among local administrations.

"There has to be a balance between areas with vast natural resources and areas with lack of potential natural resources."

He explained the bill would provide the central government with "general funding" as a mechanism for Jakarta to improve the balance of income among the provinces. (rei)