Finance minister defends bill on fiscal balance

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)