Govt reviews 60 investment-retarding bylaws

Zakki P. Hakim, The Jakarta Post, Jakarta

The government is reviewing some 60 bylaws issued in recent years by local administrations nationwide, which have retarded trade and discouraged investment.

The review process will determine over the course of the next few weeks, which bylaws will remain and which will be scrapped. The government also will likely take away some regional authority to issue certain kinds of bylaws and put such authority back in the hands of the central government.

Minister of Trade Mari E. Pangestu said last week that part of the review would be to identify all the bylaws that need to be synchronized among various regions to improve foreign investor confidence in the country.

"Most importantly is how to improve the business climate and reduce the unnecessary costs associated with doing business here," she stated.

Among the bylaws that would be reviewed, she added, were the various rulings on business permits, which varied from province to city to regency.

Some local administrations require companies to renew their permits every three years, while others say two years and some each year, she explained.

She added that the ministry would suggest that the offending administrations set the same standard for business permit renewals and make it at least five years before they need to be renewed.

"We understand that business permits are a source of revenue for local administrations, but in the long run, the high cost of doing business will stifle the economy."

The review plan is the latest follow-up to a meeting in late December between the trade minister and the heads of regional industry and trade agencies from across the country.

During that meeting they discussed a report by a group called Regional Autonomy Watch (KPPOD), which concluded that at least a third of the bylaws issued by local administrations in recent years, since greater regional autonomy was granted, were discouraging trade and investment.

KPPOD, a committee under the Indonesian Chamber of Commerce and Industry (Kadin), conducted the survey on a total of 881 bylaws issued by 225 cities and regencies across the country. It concluded that 297 of the 881 bylaws, nearly 34 percent, could be classified as disruptive or detrimental to a healthy business climate.

According to Mari, the ministry had finished compiling a list of all the problematic bylaws and had moved to the next step of reviewing them.

In its report, the KPPOD said some of the bylaws had created tariff-like barriers between different areas of the country for certain goods and were essentially "protectionist" measures.

Citing an example, the report said in Bima regency, West Nusa Tenggara, a special tax has been imposed for businesspeople who transfer natural resource-based products into or out of the regency.

Another bylaw issued by Tolitoli regency in Central Sulawesi ruled that "outsiders" must pay additional fees of 5 percent when purchasing seafood products originating from the area, according to the report.

Mari said that President Susilo Bambang Yudhoyono administration would make the annulment of such regulations a priority in order to improve the business climate and attract fresh investment.

The regional autonomy drive, launched in the wake the 1998 reformasi movement, has granted greater powers for local administrations to manage many of their own economic and social affairs. However, it has prompted many of them to issue bizarre rulings to generate revenue, often at the expense of the business climate.

In January, the government pledged to immediately annul such inappropriate bylaws, as stated by Minister for Justice and Human Rights Hamid Awaluddin, in front of foreign and local investors during the Infrastructure Summit, held to lure billions of dollars in new investment to finance badly needed economic infrastructure.

Another example of the regions shooting the national economy in the foot is when the local administrations sharply increase the price of land meant for infrastructure projects, by hurriedly pushing through rulings on the land's value.