Government to draft law on fiscal balance

JAKARTA (JP): The government will soon form a team to draft legislation to create fiscal balance between the central and provincial governments, an official at the National Development Planning Board (Bappenas) said on Sunday.

A deputy head of the budget and implementation control department at Bappenas, Muhammad Abduh, said the team would be coordinated by the Ministry of Finance.

Abduh said the quick drafting of legislation on fiscal balance was necessary to implement the People's Consultative Assembly's decree No. XV/MPR/1998 on the administration of regional autonomy, management, distribution and harnessing of natural resources in a just manner to strike a fiscal balance between central and provincial governments.

Abduh, however, warned that the percentage of local resources income going to provincial administrations would differ among provinces, considering their potential, size and populations.

"Not every province will not get the same percentage of income dividend because the MPR decree stipulates that the amount of money entrusted to local administrations should be adjusted to their potential, size, population," he said.

Therefore, he said, demands by Riau people to get 10 percent of oil revenue from the province would not be realized, considering the fiscal need of that province.

Currently, he said, Riau's budget amounted to Rp 600 billion (US$80 million), while Riau's income from the oil and gas sector exceeded Rp 38 trillion. Ten percent of that would equal Rp 3.8 trillion. "That's too much," he said.

Abduh said legislation on fiscal balance between central and provincial governments would possibly come into affect next fiscal year, starting April 1999. Therefore, it would significantly affect the 1999/2000 state budget. (29)