Govt reviews 60 investment-retarding bylaws

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.