Govt must push regions to drop bad policies

Govt must push regions to drop bad policies

A'an Suryana, The Jakarta Post, Jakarta

The central government is not doing enough to resolve the poor
investment climate in provinces and districts, according to
Regional Autonomy Watch (KPPOD).

KPPOD executive director Agung Pambudi told The Jakarta Post
on Wednesday that local governments had issued many bad policies
which discouraged investors, but the central government had
largely sat by quietly without taking an active role in
pressuring the regions to drop the policies.

He said that such a wishy-washy attitude had only worsened the
country's investment climate.

"In order to lure back investors, the central government has
no choice but to take a tougher stance against the recalcitrant
regional governments," Agung said.

The above problem emerged after the central government
provided in 1999 wide-ranging powers to regional governments,
allowing them to manage their own economic and social affairs
including investment policies under the autonomy law.

But it turned out that the provincial and district
administrations have been too aggressive in exercising their
newly obtained power by, among other means, imposing high taxes
on businesses in a bid to collect higher revenue, disregarding
investors' concerns.

This is seen as among the major factors which have discouraged
investors from pouring in new investments and had even prompted
some investors to leave Indonesia.

Agung pointed out as an example a bylaw issued in 2001 by the
Deli Serdang district administration in North Sumatra which
stipulates that businesses must pay fees to the local government
for its role in supervising the production process.

"It (the ruling) has no precedent in the business world, and
it will only burden investors," he said.

Agung said that the Ministry of Manpower and Transmigration
has filed a letter of complaint to the Deli Serdang regional
government, but the latter has yet to respond.

Worse, the Deli case is not the only case, but such practices
have also occurred in many regions, Agung said.

Agung said the central government should move quickly to
overturn the bad policies if it wanted to lure new investments
into the country.

He added that according to the regional autonomy law, the
central government had the authority to revoke local regulations
that contravened higher rulings.

"If the government fails to do so, the investors could shy
away from investing money in the regions," he said.

Investment has been a primary concern for the Indonesian
government, as it has sharply plunged since the 1997 financial
crisis. Indonesian economic growth has so far been supported by
domestic consumption as investment and exports have continued to
dwindle.

But in the longer run, sustainable growth cannot be expected
without a significant role from the investment and export sector.

The Investment Coordinating Board reported earlier this month
that foreign direct investment approvals dropped by 35 percent to
US$9.7 billion in 2002 from its level in 2001.

A steeper decline was seen in domestic investment approvals,
which last year saw a 57 percent drop from Rp 58.62 trillion to
Rp 25.26 trillion.

The 10 most attractive regions for investment in Indonesia

1. Semarang Mayoralty,
2. Balikpapan Mayoralty,
3. Sawah Lunto Mayoralty,
4. Tegal Mayoralty,
5. Batam Mayoralty,
6. Tangerang Mayoralty,
7. Kediri Mayoralty,
8. Pekan Baru Mayoralty,
9. Palembang Mayoralty,
10. Sibolga Mayoralty

Source: 2002 Survey by KPPOD. The survey was conducted in 134
regencies and mayoralties in 2002, which measured key indicators
like institutions, social, political and culture of the regions,
local economy, manpower and physical infrastructures.