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Govt hands tied as regional laws discourage business
Many local business regulations contradict national laws and create legal uncertainty, but there is still no clear way to resolve the problem, partly due to a Constitutional Court ruling from two years ago
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span>Many local business regulations contradict national laws and create legal uncertainty, but there is still no clear way to resolve the problem, partly due to a Constitutional Court ruling from two years ago.
Jakarta-based think tank Regional Autonomy Watch (KPPOD) recently completed a study of 1,109 regional business regulations issued by six administrations and found that one-third of them (347 regulations) contradicted equivalent central government rulings.
"Such contradictions confuse business players. Which regulations should they follow? The ones they encounter every day on the field or those on the national level? By hierarchical right, they should follow those on the national level,” said KPPOD executive director Robert Na Endi Jaweng at a briefing in Jakarta on Wednesday.
The regulations studied were those issued by the Bekasi, Bogor, Depok, Jakarta, Sidoarjo and Kulonprogo administrations between 2010 and 2015. KPPOD chose the former four areas, which collectively form Greater Jakarta, because they were easily accessible and the latter two areas because they were rising industrial areas.
Robert said KPPOD, an affiliate of the Indonesian Employers Association (Apindo), used to bring problematic regional regulations to Home Affairs Ministry director-general for regional autonomy Akmal Malik, who would review them and revoke those he deemed contradictory.
However, the central government no longer has the authority to revoke contradictory regulations since the Constitutional Court decided in 2017 to transfer the authority to the Supreme Court. Thus, only privately-funded civil lawsuits can change such laws.
"If we were to send problematic laws to the director-general now, he would just keep it for further study and monitoring," said Robert.
Akmal, who attended Wednesday’s briefing, acknowledged that Indonesia “has a glut of regulations” but also reiterated that his office did not have the authority to revoke regional regulations.
“We are given the room to facilitate, verify and clarify rulings [...] The issue is that other regulatory bodies produce rulings so fast that they are not well-communicated to us facilitators,” he said.
The study found contradictions on regulations related to taxation, employment, permit issuances and non-smoking areas, all of which were used as indicators of business conduciveness.
KPPOD researcher Naomi Simanjuntak said that Jakarta had the highest number of contradictory taxation regulations, Bogor the highest regarding non-smoking areas, Bekasi the highest regarding employment and Kulonprogo the highest regarding license issuance.
“The substance of regional employment regulations [in Bekasi] contradicts the laws above it. Tax laws [in Jakarta] have the same problem and do not refer to national regulations,” she said.
KPPOD found that Jakarta Gubernatorial Regulation No. 117/2019 on depositing land acquisition taxes contradicted the 2009 Law on Regional Taxation. The former required sellers — instead of buyers — to pay the taxes.
“In Kulonprogo, we see the permit issuance laws are not updated with the OSS [Online Single Submission] System. Non-smoking areas [in Bogor] very clearly contradict national laws.”
Nevertheless, the KPPOD is optimistic that President Joko “Jokowi” Widodo’s promise to align regulations by issuing two Omnibus Laws and establishing a National Legislation Center will provide a solution to the conundrum.
Akmal said his office was “still waiting for the formulation of the omnibus law. When it comes to those parts related to regional administrations, we will discuss them with other [central government bodies].”
