C

ompanies in East Java’s 38 regencies and mayoralties will soon be required to set aside 2.5 percent of their profits for corporate social responsibility (CSR) programs, a regional representative says.

Ahmad Iskandar, chairman of East Java legislative council Commission E overseeing welfare, said the scheme would be regulated by a bylaw.

“The regulation will be approved in the near future before it is implemented in the middle of next year,” he said recently.

Ahmad said that the regulation, would affect more than 500 corporations in East Java and more than RP 10 trillion (US$1.11 billion) in CSR funds that could be used improve the people’s welfare in East Java.

“The CSR funds will not be included in the provincial, regency, city or state budgets. But they will be deposited at the provincial treasury on behalf of the East Java Development Planning Board [Bappeprov],” he said.

Ahmad said that the bylaw would affect limited companies (PTs), state enterprises (BUMNs) and regional enterprises (BUMDs) but not smaller companies, such as small and medium scale enterprises (UKMs) and cottage industries.

The CSR funds would be collected by a business forum set up by companies at the regency or municipal level — and not the provincial administration, he said, adding that the forum might coordinate with Bappeprov to manage the funds.

“Besides being expected to improve people’s well-being, the CSR funds also aim at financing health insurance schemes for company workers, or building and repairing roads around the companies due to limited funds from provincial and state budgets,” he said.

The government would assess which companies would be required to pay the CSR and calculate their annual tax in order to minimize irregularities, he said.

“We are also discussing sanctions to be imposed on companies or government officials who are found embezzling the funds,” he said.

The Prosperity Justice Party’s (PKS) East Java chapter general-secretary Arif Hari Setyawan said the distribution of CSR funds should be regulated by law to emphasize that corporations were required to pay the CSR as well as to forestall embezzlement.

“In East Java, 11 BUMDs have deposited 2.5 percent of their CSR funds. However, we found indications of CSR funds being used by incumbents for their election campaigns in five regencies and cities in East Java, including Surabaya,” Ahmad said.

Separately, Pasuruan Vice Regent Eddy Paripurna said his office had had difficulties in overseeing the distribution of CSR funds since every company contacted alleged that it had already fulfilled their CSR requirements through distribution of food and other items.

“Despite a legal mandate, of around 100 companies, only two companies — PT Sampoerna and
PT Tirta Investama — have routinely paid their CSR,” Ahmad said.

East Java Governor Soekarwo said his administration had encouraged companies to distribute CSR funds through a partnership forum and neighborhood improvement and partnership programs.

“We have initiated contracts with a number of companies regarding the partnership program,” he said.