Wednesday, January 19, 2005

Government pledges annulment of bothersome local regulations

Source: The Jakarta Post

The central government pledged on Tuesday to immediately revoke inappropriate regulations issued by local administrations that have increased the cost of doing business in the country and created a lack of legal certainty for investors.

The pledge was conveyed following criticism from a number of business lobby groups and investors that the central government has been largely powerless in preventing regional governments from issuing inappropriate regulations.

"My ministry is currently working together with the Ministry of Home Affairs to review a number of regional regulations that have undermined our business climate," said Minister for Justice and Human Rights, Hamid Awaluddin, in front of foreign and local investors during the Infrastructure Summit, held to lure billions of dollars in new investment to finance badly needed economic infrastructure.

Hamid said that the ministry would review local regional rulings that went against the interests of the public by creating a high-cost economy.

In addition, regulations that contradicted higher rulings or laws would also be revoked.

Hamid refused to disclose the number of these inappropriate regional regulations, but according to the Ministry of Home Affairs there are at least 100 such regulations.

Under existing laws, the Ministry of Home Affairs is the only institution authorized to revoke local rulings, after a joint review with the Ministry of Justice and Human Rights.

However, critics have said that these regulations have been untouched due mainly to bureaucratic constraints and alleged corrupt practices, particularly on the part of bureaucrats within the Ministry of Home Affairs.

The regional autonomy drive launched a few years ago provided greater power for local administrations in managing their economic and social affairs, prompting many of them to issue rulings to generate more income for their administrations, but often at the expense of the business sector.

According to the autonomy law, local regulations are automatically put into effect if there is no rejection from the Ministry of Home Affairs within three months of the regulation being issued.

Recently issued local regulations deemed inappropriate by the business community include those affecting the management of seaports and airports, and the acquisition of land for infrastructure projects.

One such example is the lingering dispute between the Cilegon municipality and state-owned port operator PT Pelindo that has the authority over local seaports.

The East Java provincial government is also currently in dispute with the Madura and Lamongan regents over the construction of seaports in East Java.

Local administrations have been blamed for the sharp increase in the price of land dedicated for infrastructure projects, by issuing rulings that have led to price rises.

Hamid said that Minister for Home Affairs Muhammad Ma'ruf had pledged to jointly review all inappropriate policies.

"I can assure you that the government is serious in resolving legal problems experienced by investors," Hamid said.

During the investment forum, most investors also raised concerns over the country's poor court system due to rampant corruption, as well as the lack of legal and economic knowledge of judges dealing with investment and business disputes.

Investors have proposed the possibility of obtaining legal protection and guarantees directly from the government in developing infrastructure projects.

Hamid said the government could not interfere in court processes as courts are independent institutions.

"There is currently ongoing reform of the legal system by the Supreme Court. We are optimistic that the court will be more professional in coming years," said Hamid.