Govt moves to undo local
regulations detrimental
to investment

More than one-third of regulations issued by local governments are detrimental to Indonesia's investment climate, shun investors and have contributed to slower overall economic activity, the Finance Ministry says.

As of Aug. 14, of 9,715 taxes and levies issued by regional adminis-trations, the ministry has recommended 36 percent or 3,455 of them be cancelled or revised, Finance Minister Sri Mulyani Indrawati said at a forum at the Regional Representatives Council (DPD) on Wednesday.

Under existing laws, only the Home Ministry can annul local government regulations.

Most of the levies issued were for the transportation, industry and trade, agriculture, culture and tourism, and forestry sectors, Mulyani said.

Regions that had issued the most detrimental levies were East Java, West Java, Central Java, North Sulawesi and East Kalimantan.

Similarly, based on the ministry's evaluations, of 2,566 draft laws for regional taxes and levies proposed by regions, 67 percent or 1,727 were recommended to be annulled or revised.

Such levies often hurt businesses aiming to expand, and thus caused the economy to grow slower than it could have done, Mulyani said.

Earlier in the day, President Susilo Bambang Yudhoyono also told a DPD forum that regions should remove obstacles to deve-lopment.

"I realized one of the complaints I have often heard is that there are delays and obstacles to development in regions," Yudhoyono said.

"The main concern here is how to overcome problems and stagnation, de-bottleneck regulations, bureaucracy and government management," he said.

The government expects the economy to expand 5 percent in 2010, up from an expected 4.3 percent this year, as the world economy gears toward a recovery.

Home Minister Mardiyanto said his office would revoke regional taxes and levies damaging the investment climate in regions should administration be unwilling to revise them independently.

In its effort to protect Indo-nesia from the effects of the global economic downturn, the central government introduced several measures to improve foreign investment, including by regulating and synchronizing local taxes and levies.

On Tuesday, the House of Representatives passed a law on regional taxes and levies, which includes closed-list provisions specifying and limiting levies that can be issued and charged by regions.

Under the law, regions can only impose levies (at specified rates) on a specified list of sectors.

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