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.