TEMPO.CO, Jakarta - President Joko Widodo's objective to attract Rp3.5 quadrillion in foreign investment throughout his five-year term could turn out to be an unfulfilled dream if thousands of thorny regional regulations remain in force. It is a fact that the absurd regulations cooked up by little 'emperors' in the regions, in the forms of unfair levies and complex permit procedures, are gnawing at the country's economy like a chronic disease.
In the second year of his administration, Jokowi asked regional chief executives to repeal 3,143 such regulations, a measure critical to make Indonesia more competitive in attracting foreign investors. Amid a myriad of investment options available in other countries, our regulations must be attractive to investors. According to the World Bank's June 2015 index on the ease of doing business, Indonesia ranked a low 109th out of 189 countries. This leaves the government no choice but to fix the consequences of having delegated too much authority to regional chiefs.
The National Development Planning Agency's (Bappenas) assessment shows there are currently around 42,000 regulations, including 3,000 of which are problematic regional regulations. They prove not only to obstruct Indonesia's competitiveness, they are also a waste of money, given that trillions of rupiah are needed to document them. From 2001 to 2010, for example, a staggering budget of Rp14 trillion was spent to formulate various regulations.
These regulations are the results of arbitrary processes, and regional chiefs only use them to generate sharp increase in real regional incomes (PAD) for short periods of time, ignoring larger long-term objectives that can help boost economy and growth.
To tackle this issue, the home affairs ministry has instructed regional chief executives to work with their respective provincial and local councils to scrap those regulations. But the problem does not seem to go away so easily. Regional chiefs can still turn down this instruction and the central government does not have the authority to arbitrarily annul the regulations.
Law No. 32/2004 on Regional Governments regulates that the government can revoke regional regulations within 60 days after they are put into effect. Most of the regulations in question are more than one year old.
One alternative is to propose a judicial review to the Supreme Court. Article 24 of the 1945 Constitution states that the Supreme Court has the authority to review the legality of the laws and regulations. Nonetheless, not all problematic regional regulations violate the law. Regional chief executives can sue the government at administrative courts if the latter revokes regulations without legal grounds.
Consequently, with few options available, the central government must take the persuasive approach. Governors, regents and mayors must be convinced that their regions stand to gain more from scraping these regulations. The taxation system should be overhauled to ensure added PAD.
Apart from the above issues, the home affairs ministry should learn lesson from the consequences of its negligence in its oversight of regulations. In the future, it should exercise its right to revoke absurd regulations right from the start. (*)
Read the full story in this week's edition of Tempo English Magazine
