Tempo No. 48/VIII/28 July - 04 August, 2008 Economy & Business Local Economic Governance Big May Not be Best
A survey of businesses in 243 regencies and cities in Indonesia show that big administrations may not be the best provider of facilities for attracting business and investment. -------------------------------------------------------------------------------- BLITAR Deputy Mayor Hendro Hernowo was all smiles when he mounted the podium to receive the award for the best performing local administration in 2007. The city of 1.3 million people in populous East Java had beaten other, much bigger municipalities to win top recognition for providing the right climate to attract investment and developing businesses. While Blitar was named first among the top 10 best performers, the North Sumatra capital of Medan ended up as one of the survey's 10 worst administrations. The recently launched Local Economic Governance in Indonesia report, last year's poll of more than 12,000 companies and 29 business associations in 243 regencies and cities, produced quite a few surprises. Like Medan, none of the other supposedly 'developed' cities, such as Surabaya, Makassar or Yogyakarta, made the top 10 list either. The economic indicators used in the survey covered a wide range of topics-access to land and security of tenure, ease of business licensing, local government and private sector interaction, business development programs, the capacity and integrity of the mayor or regent, tax structures and other transaction costs, infrastructure, security and conflict resolution, and bylaws and regulations. It was the sixth survey to be carried out since 2001 by the Regional Autonomy Watch (KPPOD), in collaboration with USAID and the Asia Foundation in Jakarta. "The last five surveys covered general conditions for a positive investment climate from the perspective of endowments," said KPPOD Chairman Dr Bambang Brojonegoro and Dean of the University of Indonesia's Economic Faculty. "This is the first time we focused on governance, on how local administrations manage issues." Much of the stress was on how facilities, infrastructure and regulations were successfully capitalized on, maintained and improved so that existing businesses grow and new investors come in. In other words, the study is intended to measure the degree of initiative and innovation that local governments bring into play in promoting their areas. There is no monetary reward for winning the top prize, but over the years the survey has triggered enough neighborhood rivalry to induce ambitious local governments to raise their standards. Bambang hopes that if nothing else, those on the list of the 10 worst administrations will be shamed into more positive action. In fact, a few disgruntled losers actually offered inducements to get their names deleted. There might just be something to the one-upmanship the survey creates. Out of the 10 best performers, six came from regencies and cities in East Java province, while fully seven of the 10 worst performers were in North Sumatra. "If your neighbor is doing well, you tend to do as good if not better than him, and conversely, if you are in an area where nothing much is happening, you lack the motivation to do anything new," Bambang noted. Indeed, geographical proximity could well be a significant factor in determining how hard-working local officials can be. Finance Minister Sri Mulyani Indrawati, who gave the keynote speech at the award-giving event last week, provided an intriguing insight into the issue of fiscal decentralization. She noted that up until mid-July, her ministry had recommended that 28 percent of about 7,200 regional or local regulations (perda) on taxes and retribution (PDRD) be abolished or revised. The same action has been advised for a whopping 66 percent of proposed regulations. Most of the bylaws cited by Sri Mulyani were in the transportation and communication, agriculture, public works, industry and trade, and forestry sectors. Not surprisingly, the worst offender among eight provinces cited was North Sumatra. Conflict areas like Maluku and Papua were not included in this year's study, although a special survey of regencies and municipalities in Aceh is being planned for sometime this year. Sri Mulyani told the winners that she would recommend to the cabinet that they be given special recognition by the central government. But what will be interesting to observe is how the results will be received at the local level and whether they will impact on the next round of provincial and district elections after the KPPOD goes on the road to socialize the study. Yuli Ismartono 10 Best All-Round Performing Regents/Cities 1.Blitar, East Java 2.Magetan, East Java 3.Prabumulih, South Sumatra 4.Musi Banyuasin, South Sumatra 5.Jembrana, Bali 6.Tuban, East Java 7.Lumajang, East Java 8.Madiun, East Java 9.Probolinggo, East Java 10. Gianyar, Bali 10 Worst All-Round Performing Regents/Cities 1.South Nias, North Sumatra 2.Labuhan Batu, North Sumatra 3.Rokan Hilir, Riau 4.Nias, North Sumatra 5.Rokan Hulu, Riau 6.Bima, West Nusa Tenggara 7.Asahan, North Sumatra 8.Karo, North Sumatra 9.Medan, North Sumatra 10.Tanjung Balai, North Sumatra
