Flawed regional rulings, harm investor confidence

The Jakarta Post, Jakarta

Regencies are calling on the government to scrutinize more closely all regional rulings, saying the absence of any coordination between the regions is resulting in overlapping and flawed regulations that harm investors.

"It is not our job to coordinate with regulations that have been issued by other regions," said H.R. Syaukani, who is the regent of Kutai Kartanegara regency in East Kalimantan, and also the chairman of the Association of Regional Administrations (Apkasi).

A year and five months into regional autonomy, investors are criticizing regions for issuing rulings they say are damaging.

Regional autonomy empowers provinces and regencies to manage their own affairs, including imposing their own regulations.

But since regional autonomy came into effect, the government has identified 1,003 regional regulations it deemed as damaging.

And the International Monetary Fund has tied the revocation of such regulations to its lending agreement with the government.

So far the government has revoked 68 rulings, and the Ministry of Finance recommended in March the revocation of 16 others.

Syaukani said Apkasi supported these efforts, as they would improve the business climate in the regions. But he added that such measures would not have been necessary if the government had been doing its job all along.

He cited Law 34/2000 on regional taxes and regulations, which requires the government to assess regional rulings within a month after receiving notification from the regions.

Article 5A of the law stipulates that regions must report any new regulations to the central government. And if no response is received within one month's time, the ruling is deemed acceptable.

"So don't wait a year (to revoke the regulations) and then blame us," Syaukani said.

He also claimed that investor interest in the regions has remained high since regional autonomy went into effect.

According to him, 25 mining investors, including foreign ones, were vying for five coal mining contracts in his regency.

But he added that regional autonomy did not make regions poor in natural resources any more attractive to investors.

Foreign investment expert Harvey Goldstein of PT Harvest International Indonesia said foreign investors had grown more confident about investing in the regions.

For their part, regents and governors have become more understanding about business needs, he said.

"Because it is the regents who realize the benefits (of investment) in the regencies," he said.

Mining, oil and gas companies, he said, were among the first to invest in the regions, despite the perceived higher level of uncertainty.

"Investors look for stability, predictability and continuation," Goldstein said.

Over time, he said, investors would rate the regions by the different investment incentives and regulations they offered.