Regions Compete for Good Governance

By Ridwan Max Sijabat

Sumenep, a remote regency on the poorly developed island of Madura, has proved a success in economic governance, with the presence of dozens of domestic and foreign investors helping to boost the regency's economic growth by almost 7 percent in the past two years.

The regency -- home to more than 1,300 poor families and 34,000 unemployed people who for a long time relied on salt farming -- has turned its fate around by giving incentives, including tax breaks, to investors in infrastructure projects, mining, shipping and horticulture.

It achieved this by overhauling its large regional bureaucracy, building pro-investment infrastructure and reviewing its tax and excise, business licensing and bylaws, and development programs.

More investors are eyeing the regency's maritime, shipping and mining potential in line with the near-completion of the Suramadu bridge project and the development of Sumenep and Gresik as alternative ports to Tanjungperak in Surabaya -- not to mention the proposal to develop the island into a special economic zone. The mushrooming of investors in numerous sectors has generated more job opportunities for local workers and eased urbanization and migration to the province's mainland, Malaysia and the Middle East.

The regent of Bangkalan, Fuad Amin, took similar steps to improve locally generated income, saying the island had to be open to modernization to catch up with more developed regencies.

Aware of the importance of public services, many regencies and municipalities in East Java are starting to overhaul their bureaucracy to improve services for investors, SMEs and job seekers. Banyuwangi regency, for example, has revamped security and restored public order to attract investors and shipping companies to use the Tanjung Wangi seaport for exports and imports.

Remoteness (from Jakarta and Java) and large land areas have encouraged local leaders in Sulawesi, Kalimantan and Papua to create new regencies in a bid to improve access to public services and thus develop economic potential and boost local living standards.

So far, more than 480 regencies and municipalities have been formed within the nation's 33 provinces. The smaller administrative blocks deal with provinces' domestic affairs in certain sectors as part of the implementation of regional autonomy.

Although there are some success stories, not all regencies and municipalities have advanced or performed well in terms of economic, political, security, labor and environmental management. Many regions are barely managing to run on the spot when it comes to implementing democracy, finding themselves trapped in political conflicts and power abuses that have hindered attempts for good governance.

In a 2007 survey of the nation's regencies and municipalities conducted by the Regional Autonomy Advisory Committee (KPPOD), six of the 38 regencies and municipalities in East Java -- Blitar, Magetan, Tuban, Lumajang, Madiun and Probolinggo -- were among the nation's top 10 in terms of land access, security, business licensing, government and business transactions, business development programs, mayor and regent capability, taxes, infrastructure, security and conflict resolution.

The best-performing region overall was Blitar, a small municipality with 229,000 people, which scored the highest in infrastructure, access to land use, licensing and security.

The best-performing regencies and municipalities were notable for having limited the time for issuing land use permits and business licenses to three months at the most, for campaigning for certain areas and sectors to become open to investment, and for providing tax breaks for investors during the first year of their business operation.

As well as holding an annual labor market for job seekers, they have also helped people to find work overseas.

The KPPOD survey also named the 10 regions with the worst performances: South Nias, Nias, Labuhan Batu, Karo, Asahan, Tanjung Balai and Medan in North Sumatra; Bima in West Nusa Tenggara; and Rokan Hulu and Rokan Hilir in Riau. In these regions, the investment climate was considered not conducive for investment as investors had to go through long, complicated bureaucratic processes, and pay kickbacks to obtain land permits and business licenses. Investors also lack access to legal certainty and security.

Aware of the problems with the implementation of the decentralization program introduced in 1999, the central government has reviewed more than 7,200 contentious bylaws in regencies and municipalities found to overburden investors; a small number of the bylaws have been revoked or revised.

The Justice and Human Rights Ministry has also revoked 974 bylaws that met strong opposition from investors.

The government revised the 1999 regional autonomy law in 2004 and again in 2008 and issued a series of government regulations to speed up the decentralization program or public services, build true democracy, accelerate economic growth and improve living standards.

Nevertheless, regional autonomy is not being implemented as it should.

To help speed up the implementation of regional autonomy, the government submitted a bill on the minimum service standard to ensure that regencies and municipalities met minimum services for the public, including investors and residents, but the bill has been stalled in the House of Representatives for three years.

And even though the Home Ministry issued Government Regulation No.78/2007 on the Formation and Merger of Regencies and Municipalities, none of the worst-performing regions has been merged with its mother region.

In 2006, the ministry issued a government regulation on evaluating regional financial performance and designing regional budgets, but the judiciary has not followed up findings by the Supreme Audit Agency (BPK) on irregularities in regencies and municipalities.

Recently, the Home Ministry issued Government Regulation No. 41/2008 to overhaul regional bureaucracies to increase efficiency and allocate a larger part of the budget to public spending, but this has met with strong opposition from large and wealthy regencies and municipalities.

Aside from all these factors, advances by regencies and municipalities in implementing regional autonomy have depended greatly on their regents and mayors, who are required to possess an "investment mind-set" to make effective changes.

As well as creating a business climate conducive to investment, regents and mayors require the political will to make a pro-poor budget, the bigger part of which would be allocated for health, transportation and education in compensation for the taxes paid by the public.

It may have been a breakthrough and good initiative when a regent in East Nusa Tenggara -- the nation's least-developed province -- last year leased several uninhabited islets to foreign investors to develop tourism and fishery, thus generating job opportunities for local people and boosting its locally generated income.

The state of regional development points to two other things governments must consider. First, programs for free education and healthcare for the poor and the construction of public infrastructure should be seen as a long-term investment to produce high-skilled workers and improve people's living standards.

Furthermore, all public spending designed to generate job opportunities and for the education and health sectors must be audited to ensure it reaches the people for whom it is intended.

Sumber: The Jakarta Post, Friday, 01/02/2009