Government to draft law on fiscal balance

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)