Minister considers revising law on local govt companies

Kurniawan Hari, The Jakarta Post, Jakarta

The government is seriously studying the possibility of revising law No. 5/1962 on regional enterprises in an attempt to empower companies owned by regional administrations (BUMD) to meet present challenges and opportunities.

Minister of Home Affairs Hari Sabarno said on Tuesday that a bureaucratic approach to regional companies, as stipulated in law No. 5/1962, was no longer appropriate for current challenges.

"We agree that businesses should be managed with a business approach," Hari said at the opening of an International Workshop on Local Government Enterprises here on Tuesday.

The workshop was organized jointly by the Ministry of Home Affairs and the Institute of Public Administration of Canada (IPAC).

Virtually all of the country's more than 400 regencies and municipalities have BUMDs.

Hari emphasized that the philosophy of business approaches was completely different to that of bureaucracies.

When law No. 5/1962 took effect, BUMD directors and employees were members of the bureaucracy.

"In some cases, the management of BUMDs lacks independence and innovation to pursue corporate goals," he said.

BUMDs often carry two contradictory missions -- to provide public services and earn a profit as a revenue source for regional administrations.

Hari emphasized that BUMDs should be redesigned to improve their public services as well as boost their ability to compete with private companies.

During his speech, Hari emphasized that Indonesia was changing from a centralized to a decentralized system, mainly due to the implementation of regional autonomy.

Under law No.22/1999, economic development is part of the role of regional administrations, private parties and people in regional areas in dealing with the management of natural resources.

The minister said it would be important to strengthen pillars of economic institutions in the regions to speed up national economic recovery.

An article in law No.22/1999 stipulates that each regional administration is allowed to have enterprises while taking into account other laws and bylaws.

The existence of BUMDs, Hari added, was important mainly to help improve productivity, increase employment and distribute income.