Mekeng Urges Acceleration of Regional Bond Law, Investors Require Certainty

Amidst the demands for accelerated regional development and limited government budgets, the Golkar Party Faction (FPG) of the MPR RI has emphasised the importance of accelerating the formation of a Regional Bond Law. This is intended to provide legal certainty for local governments, investors, and all parties involved in the issuance of such financing instruments.

The Chairman of the FPG MPR RI, Melchias Markus Mekeng, explained that a Regional Bond Law is desperately needed because, to date, no local government has successfully issued bonds despite derivative regulations being available for a long time. “Regional bonds have actually been discussed since the 1990s. However, until now, no one has issued them because there is no certainty for investors. That certainty must be enshrined in law,” Mekeng stated on Monday (8/6/2026).

These remarks were made during a public discussion titled ‘Regional Bonds as an Alternative for Regional Financing and a Public Investment Instrument’ in South Tangerang, Banten. Mekeng believes the presence of this law will provide security for investors while opening alternative financing options for regional development outside of conventional funding sources. One primary recommendation, he continued, is the need to draft the Regional Bond Law by referencing the success of the State Treasury Bill (SUN) Law. “The simplification is to immediately finalise the law on regional bonds. We can mirror the State Treasury Bill Law, which has successfully built investor confidence since its issuance in 2002,” said Mekeng.

Regarding the aspect of guarantees, Mekeng argued that the state needs to be present to provide guarantees for regional bonds to increase market confidence. “In my view, the best approach is for the state to guarantee regional bonds. This also serves as part of the effort to strengthen the Unitary State of the Republic of Indonesia (NKRI), as the central government remains present in supporting the regions,” Mekeng noted. He expressed hope that local communities could participate as investors in regional bonds so that the benefits of development can be felt directly by local residents.

During the same event, Hasan Fawzi, a member of the Board of Commissioners of the Financial Services Authority (OJK), explained that the need for regional development financing continues to rise alongside the increasing complexity of development challenges and the limited fiscal space faced by local governments. “Regional bonds and sukuk have great potential as strategic instruments to strengthen regional fiscal capacity, open space for more sustainable funding, and encourage community participation in their respective regional developments,” said Hasan.

Hasan noted that regional bonds and sukuk could solve the mismatch between long-term financing needs and the limited short-term fiscal funding sources available to local governments. Besides providing an alternative source of development funding, these instruments also offer opportunities for the public to invest directly in strategic regional projects. “By involving the community as investors, local governments not only obtain additional funding sources but can also foster a sense of ownership and pride among the community towards their regional development,” he added.

Despite regulations for regional bonds and sukuk being available for over 15 years, Hasan acknowledged that no local government in Indonesia has yet realised the issuance of these instruments. He stated that the challenges are not only technical but also involve governance and policy support aspects. “Regulatorily, the legal framework for issuing regional bonds and sukube is available, from the level of laws and government regulations to OJK regulations. What is needed now is a collective commitment to overcome various implementation hurdles on the ground,” said Hasan.

Furthermore, Hendro Utomo, Director of Rating at PT Pemeringkat Efek Indonesia (PEFINDO), stated that the national debt market still has significant room to support regional development funding. Based on presented data, the portion of local government debt currently accounts for only about 0.43% of the total national public sector debt, indicating minimal utilisation of long-term financing instruments by local governments. “We see great potential for local governments to utilise the capital market as a source of development funding. From both the investor and market capacity perspective, the opportunities are still very open,” said Hendro.

Hendro noted that credit rating is a crucial element in regional bond issuance as it provides an objective overview of a local government’s credit risk to investors. “A rating is an independent measurement tool that helps investors assess a local government’s ability to meet its financial obligations punctually. This is an important basis for investment decision-making,” he explained.

Meanwhile, the President Commissioner of PT MNC Vision Networks Tbk (IPTV), Tito Sulistio, emphasised the need for policy breakthroughs so that regional bonds are not merely instruments available regulatorily but can be implemented in reality. According to Tito, Indonesia has had a regulatory foundation for over two decades, yet has not produced a single regional bond issuance. “We must not let regional bonds remain unrealised after more than 20 years of available regulation. It is time for this instrument to be implemented as a new pillar of regional development financing,” Tito asserted.

Tito also encouraged the development of a revenue-based financing model, so that regional bond issuances can be supported by clear and measurable project cash flows. “We need to shift the paradigm from financing based solely on regional budgets (APBD) to financing supported by project revenue…”