President Susilo Bambang Yudhoyono said Thursday that local administrations must share the responsibility of defeating corruption and improving the country's economy by bringing in investors.
The President cited cumbersome local regulations arising from the 1999 autonomy law.
"Devolution of authority does not mean the decentralization of corruption ... each and every province and regency must do all it can to make sure decentralization does not lead to more corruption," he said at the opening of the Indonesian Regional Investment Forum, which ends Friday.
From multiple taxation to complicated bureaucratic procedures, many local regulations have discouraged investors, despite efforts by the central government to lure them in.
Investors have complained that they end up spending significant amounts of money on levies, fees and bribes at the regional level.
The President said the government had scrapped more than 506 local regulations, revised 148 and was scrutinizing 824 more that are believed to be a source of legal uncertainty to investors.
He added that the government had signed Investment Protection Agreements with 60 countries, as well as enacting a free foreign capital policy and guaranteeing there would be no nationalization.
"Local governments must show an open, embracing and assertive attitude toward private capital, including foreign investment. Governments must attract private capital with the aggressiveness of politicians attracting voters," he said.
In his annual address last August in front of the Regional Representatives Council, which hosts the forum, Yudhoyono instructed local leaders to coordinate with the Justice and Human Rights Ministry before issuing any regulations.
The President urged local leaders to quickly determine their areas' strongest selling points, to ensure that no regions lag behind in economic progress.
During the pre-1999 centralized era, development was heavily focused in Java, leading to a massive gap between the densely-populated island and other provinces.
The President called on local administrations to improve their human capital to help propel the economy.
He also warned investors not to overlook their corporate social responsibility to provide jobs, increase local skills, protect the environment and empower the community.
Non-governmental organizations often accuse investors here, particularly in the mining sector, of abandoning their responsibility to local communities in the pursuit of profit.
Protesters in Papua blocked roads and clashed with authorities in February after illegal miners were shot on the property of American mining firm PT Freeport.
The incident led to rallies nationwide, as protesters accused the company of overlooking the poverty of local people around the mine.
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