Provinces asked to honor contracts signed by Jakarta

JAKARTA (JP): President Abdurrahman Wahid urged provincial and district administrations on Monday to honor business contracts concluded by the central government and to act as good hosts to businesses.

Abdurrahman told a meeting with provincial governors, who are holding a two-day conference, that efforts to promote foreign investment by the central government would be futile if local administrations did not help maintain a conducive business climate.

"We have to abide by our international commitments and local administrations cannot change business contracts without approval from the central government," the President said.

He cited a recent decision by the central government which ruled that autonomy rests with provincial administrations, not district administrations.

"Provincial administrations will act as the extended executive arm of the central government in the region," he said.

It was initially expected that the new law on regional administration, which will become effective in January, will vest district administrations with autonomy.

But given the lack of bureaucratic capability at most district administrations, the Cabinet recently decided to vest provincial administrations with autonomy for the next two years at least.

District administrations, he said, had no right at all to change business contracts sanctioned by the central government, and any changes intended for existing business contracts should be proposed to the central government.

He said the numerous claims, either reasonable or insensible, were made to provincial administrations either by district administrations or locals.

The President said provincial administrations should be able to act as an effective bridge or conduit of the interests of district administrations to the central government.

Abdurrahman reiterated the crucial importance of foreign investment for helping accelerate Indonesia's economic recovery.

"Therefore, promotion of foreign investment was made one of the top priority programs of my administration," he said.

The problem, though, is that investors will not come to Indonesia if security and political stability, most notably in provinces, is not maintained.

In fact, he added, most foreign investors have decided to wait for the outcome of the upcoming annual session of the People's Consultative Assembly (MPR) before making decisions to do business in the country.

"They want to see whether I'll be toppled or not from government," he said, referring to the MPR session in August when the President will account for his administration's performance since October.

He added, however, that the government and people should not wait for foreign investors to come to the country.

"We should do something to maintain our economic recovery. Hence, an export drive should be made to fuel economic activities, creating jobs," the President said.

But he again warned that export promotion would become a futile exercise if "we don't honor our international commitments".(prb/vin)