Minister considers revising law on local govt companies

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.