House endorses controversial FTZ bill

House endorses controversial FTZ bill

Rendi A. Witular, Jakarta

In a controversial move -- the first of its kind in the
country's modern history -- the House of Representatives has
unilaterally endorsed a bill conferring free trade zone (FTZ)
status on Batam Island into law, despite the opposition of the
government.

The House's decision seems certain to cause further
uncertainty for the business community, especially businesses
operating on the island, as the government refuses to accept the
newly endorsed bill, and has decided to maintain the current
status of the island.

The unexpected decision to endorse the bill was taken during a
plenary session on Tuesday when all nine House factions agreed to
pass the bill, despite disagreement with the government over
several key articles.

"All nine factions of the House have resolved to endorse the
bill. The version of the bill that is being endorsed is that
which has been initiated by the House and discussed together with
the government over the last month," said House deputy speaker
Tosari Widjaja during the plenary session.

The House and the government have been engaged in fierce
debate over three articles in the bill, with both sides refusing
to compromise prior to the deadline set for the bill's
endorsement on Tuesday.

One of the disputed articles in the government-proposed bill
concerned the limiting FTZ status to only specified industrial
areas on the island, to be known as "enclave FTZs", while the
House-proposed bill grants the whole of Batam Island full FTZ
status.

The other article concerned the authority to manage seaports
and the airport in Batam. The government wanted this authority to
continue to be vested in the central government, while the House
insisted that the authority should be delegated to the local
administration.

Authority in the area of spatial planning was another major
cause of disagreement. The government wanted spatial planning in
Batam to come within the purview of the central government, while
the House rejected this, but failed to come up with an
alternative arrangement.

Minister of Justice and Human Rights Yusril Ihza Mahendra said
the government had decided not to implement the bill as it ran
counter to article 20 of the 1945 Constitution, which provides
that the endorsement of a law must be agreed upon by both the
House and the government.

"We will not recognize the law as it is unconstitutional.
President Megawati Soekarnoputri has ordered us not to accept it
until the House agrees to compromise on the three articles," said
Yusril

"We want further deliberations with the House before we will
recognize the law as legally binding," he said.

Under article 20 (3) of the 1945 Constitution, if the
government and the House fail to agree on a bill's contents, the
bill should be dropped and it should not be moved again during
the House session in question.

The House and the government each proposed separate bills, one
of the few times in recent years that this has happened. A bill
is usually proposed by either the government or the House.

The House, which is given the right of legislative initiation
by the Constitution, completed its version of the bill several
years ago. However, the government rejected it and instead
drafted its own version, which was completed earlier this year.

A decision on the status of Batam has been hanging in the
balance since 2001 following lobbying by vested interests, mostly
Singaporean businessmen, who want greater incentives and tax
exemptions for their operations on the island.