'Regional autonomy worsens investment climate'

A'an Suryana, The Jakarta Post, Jakarta

The regional autonomy drive, launched more than two years ago, has failed to improve the investment climate in the country's provinces and regencies, according to a survey.

In some cases, the autonomy policy had even worsened the investment climate, the survey said.

The survey, carried out jointly by the Regional Economic Development Institute, the United States Agency for International Development (USAID) and the Asia Foundation, interviewed some 1,014 business executives in 23 regencies and municipalities.

Many have criticized the poor implementation of the regional autonomy policy, which gives regions greater power in managing their economic affairs, because, in many cases, regional governments have been too aggressive in squeezing investors for local taxes and also have often issued policies that are unfriendly to investors.

Last year's sharp decline in both foreign direct and domestic investment was partly attributed to poor implementation of regional autonomy.

The survey said that some 42 percent of respondents claimed to have paid a larger amount in taxes and levies after the implementation.

In terms of public service, the business players said they had not enjoyed improved service quality since the autonomy drive. Some respondents said the service had even worsened.

Some 25.5 percent of respondents also said that they had to pay a greater amount in illegal fees to do business in the regions.

The respondents largely came from small-scale enterprises (57.4 percent), medium-sized businesses (35.6 percent) and large companies (7 percent).

The respondents run businesses mainly within the fields of trading, agribusiness, services, manufacturing and transportation.

The government is planning to revise the regional autonomy policy, following criticism from various quarters, and to help push investment higher, which is crucial to ensure sustainable economic growth and create employment for the millions of jobless people.

David Ray of USAID said that a strong political will from regional governments to get the regional autonomy drive back on the right track was very important to improve the investment climate in the regions.

"If there were the political will, it would be very easy to eliminate the bureaucratic constraints that have discouraged business players," he said.