New law to spur regional growth
JAKARTA (JP): Analysts praised on Saturday the intergovernmental fiscal balance law as offering a greater chance for new economic growth centers to emerge outside Java, but they warned provinces of daunting tasks ahead.
Analysts HS Dillon and Umar Juoro told The Jakarta Post the law would give provincial and district administrations bigger revenues and wider autonomy to develop themselves.
They cautioned, though, the regions would also face a variety of problems, including a lack of skilled human resources and inadequate administrative capability to capitalize on the advantages.
They said provinces should prioritize attracting qualified human resources that have migrated to Java, especially Jakarta, over the past several decades due to the centralized economic system.
"The main task for the provinces is how to recruit skilled personnel from the capital to help develop local economies," Umar said.
Dillon said provincial administrations had to build social infrastructure, including high-quality education and health facilities, and provide other amenities to woo highly skilled professionals from Jakarta back to the regions.
"Based on my experience as a senior government official, many officials refuse assignment to the regions simply because they are worried that their children will not get a good education there," noted Dillon, a former high official at the Ministry of Agriculture.
"Obviously, good salaries are another factor that can attract talented officials to the region," Dillon added.
The House of Representatives approved the fiscal balance bill on Friday after month-long debates, especially regarding the fixed formula on revenue sharing between the central government and the provinces.
Under the law, the provinces will receive 15 percent of oil receipts, 30 percent of gas receipts and 80 percent of forestry, mining and fishery-derived income.
The law will supplement the law on regional administrations which was approved by the House earlier on Wednesday. The latter transfers more administrative functions from the central government to local administrations.
Dillon said that as the provinces would get bigger revenues, local administrations must abolish various local levies to encourage investment in their respective areas.
"In the past, local administrations created various levies at the expense of a sound business climate to offset the shortfall in revenues. Now that they will be given a bigger share of the revenues derived from their areas, there are no longer reasons to maintain those levies," Dillon said.
Umar also stressed the importance of building clean and competent institutions within local administrations to enable them to use their larger revenues efficiently and effectively.
Local legislative councils and the Development Finance Comptroller (BPKP) should provide effective checks and balances for local administrations, Umar said. (jsk)