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SBY RIDES STABLE ECONOMY TO NEW HIGH IN POPULARITY NEW YEAR, NEW GOVERNOR INCENTIVES FOR LOCAL GOVERNMENTS * * * SBY RIDES STABLE ECONOMY TO NEW HIGH IN POPULARITY M. Taufiqurrahman, The Jakarta Post, Jakarta President Susilo Bambang Yudhoyono remains popular among the people and if an election were held today he would easily outdo his rivals, a poll said Thursday. The Jakarta-based Indonesian Survey Institute (LSI) found in its latest poll that the approval rating for Yudhoyono had reached a staggering 67 percent, above the 61 percent of the popular vote he and running mate Jusuf Kalla garnered in the 2004 presidential election. The LSI interviewed 1,227 people between Dec. 18 and Dec. 22 in all the country's 33 provinces for the poll, which has a 3 percent margin of error. The survey also discovered that in an election held today, Yudhoyono would win by 41 percent of the vote, easily outdoing Megawati Soekarnoputri of the Indonesian Democratic Party of Struggle, who would take 17 percent, and Kalla, on 4 percent. Yudhoyono's job approval rating is at a comfortably safe level, far above last year's 56 percent. The perception of a stable economy and rosy prospects for next year have contributed greatly to the improvement in Yudhoyono's ratings. "In spite of real economic problems, 33 percent of the respondents had a positive perception of the overall economic condition, up from last year's 22 percent," the LSI said in a statement. The LSI found that 48 percent of respondents were optimistic about improvements in the economic situation next year, an increase on the December 2005 figure of 40 percent. In politics, however, Yudhoyono gets less credit. There is only slight improvement in his job approval rating for politics. Satisfaction over the general political condition increased from 28 percent last year to 33 percent this year. LSI researcher Anis Baswedan said that in spite of the lukewarm performance, Yudhoyono's job approval rating remained high because he had no credible opposition. "The existing opposition consists of figures from the past who have no credibility. This is an important factor that will make SBY gain the upper hand," Anis said, referring to Yudhoyono by his popular nickname. Responding to the findings, political analyst Sukardi Rinakit of the Soegeng Sarjadi Syndicate said it would be strange if Yudhoyono failed to register an improvement in his job approval. "Everything about him has worked in his favor. He is seen as a honest and disinterested figure, and is a former general who holds a Ph.D. What's not to like?" Sukardi said. On a more professional level, Yudhoyono was seen as capable of resolving three serious problems -- the rise of Islamic fundamentalism, terrorism and the separatist conflict in Aceh province, Sukardi said. Economist Umar Juoro of the Center for Information and Development Studies, however, warned of the possibility that Yudhoyono would turn into a risk-averse leader. "Given his popularity, SBY is unlikely to make drastic policies that have the potential to ruin his image in 2007," Umar said. NEW YEAR, NEW GOVERNOR The Jakarta Post Editoial, 29 Dec 2006 The year 2006 has come to an end. For the Jakarta government, it is time to review whether it has provided basic protections and services for its citizens, who, as taxpayers, are deserving of good treatment. Looking back makes city officials proud of their achievements and successes, but, at the same time, it takes courage and honesty to recognize their failures and mistakes. Sincerity and honesty are the key words. In all honesty, many things have been achieved by Governor Sutiyoso's administration. Limited ability in financing, human resources and managerial skills have posed the biggest hurdles to the administration's success. Despite abundant criticism of his overall performance, Sutiyoso gained the admiration of state school teachers by raising their take-home pay by Rp 2 million a month. The money has been allocated from the city's annual budget beginning 2006. Civil servants have also been enjoying an extra Rp 1.7 million a month, thanks to Sutiyoso. The provision of a tuition subsidy for state schools has been heralded as another "success story" in education. Sutiyoso's persistence in improving and restoring to good order National Monument park is deserving of appreciation. His ambitious busway project has been a good thing for the city, despite some shortcomings. There has also been criticism of the operational consequences of the busway system, which is modeled on the successful system in Bogota, Colombia. However, since its establishment in 2004, the busway has gradually won the people's hearts. More and more people are choosing to take TransJakarta buses to work. Unfortunately, the busway alone is not enough to address long-term ground transportation needs. The Mass Rapid Transit (MRT) system, which has been offered as an intelligent solution to the city's transportation problems, remains a fantasy. A number of key problems remain unsolved. The lightweight efforts to fight corruption among City Hall officials could be cited as an example. The laws and regulations on air pollution have yet to be enforced properly. Private and public vehicles continue to spew black smoke into the air, but their drivers are rarely pulled over or ticketed, meaning the high-profile Blue Sky program remains political rhetoric. Flood control and garbage collection and treatment are another cause of headaches. Efforts and campaigns to prohibit residents from dumping garbage into waterways have yet to see results. The rubbish clogging waterways undoubtedly contributes to flooding, but there is a bigger picture. The inconsistent implementation of the spatial and zoning plans, uncontrolled deforestation and the illegal construction of buildings in upland areas have damaged the environment, causing floods. The flood control system, which was first introduced in the 1980s, has yet to be fully materialized. The limitations of the existing economy and financial constraints have been blamed for the floods. City officials say the East Flood Canal system -- the eastern part of the flood control system -- will play a significant part in flood prevention efforts. But the project has been delayed for years due to land acquisition problems. Garbage management has been a pitiful state of affairs. Finding the right location for a dump has been a tough and costly business for the administration. Advanced technology seems to be what is needed to solve the garbage problem, which continues to be shunted from seminar to seminar, remaining nothing more than a subject for discussion. Another unpleasant matter to review is security. Despite the fact that, in general, Jakarta is considered secure, street crimes and armed robberies are constantly reported. Teenagers continue to use drugs, while families -- especially those in the low-income bracket -- are denied access to medical treatment. The administration's efforts to prevent further outbreaks of avian influenza have been inconsistent. While bird flu continues to terrify the people, the administration's success in combating dengue is also in question, given that the number of dengue victims remains high from year to year. Appreciation of the current administration must be accompanied by a detailed critical review. Leadership seems to be the most crucial issue. It is a matter of the man behind the gun. During the New Order era, all Jakarta governors were appointed by the President. The citizens had no right to resist or say no. What has been incorrectly established in the city administration system will finally change next year, when the residents have the legal right to directly elect their own governor. It is a big step forward, in spite of the fact that many other provinces in the country have already elected their governors, mayors and regents in direct elections. The direct gubernatorial election will enable residents to vote for the best candidate. And, if their choice is later found to be wrong, it is the residents who will suffer the consequences. With the direct gubernatorial election just around the corner, Jakartans can afford to greet 2007 in higher spirits and with great hopes for the future. INCENTIVES FOR LOCAL GOVERNMENTS Edy Priyono, Jakarta It is now about five years since the decentralization policy took effect in 2001, and it is quite an old story that a number of analysts expressed concerns regarding the radical policy. They were particularly concerned by the "big bang" approach chosen by the government in carrying out the decentralization, when almost all the authorities for delivering almost all public services were transferred to local (district) administrations. Now some of the concerns have become a reality. Many businesspeople have been complaining about the worsening business environment, unclear licensing procedures, the mushrooming of fees and about being treated as ATM (automatic teller machines). The questions then are: In the context of the business environment, are we headed in the right direction in terms of decentralization? And, what can we do to improve the situation? The problem of local governments increasing fees themselves is closely related to "problematic" regional regulations or bylaws, which have unnecessarily imposed additional burdens on the community, particularly the private sector. These bylaws seem to have been designed only to raise local revenues in the short term through higher local tax and user charges. Problematic local regulations can also be associated with a non-tariff barrier. In this case, some local governments tend to be more protective against other districts by limiting access for people from other districts to the local market (both input and output markets). Almost every province or district in Indonesia currently has that kind of problematic local regulation. The most crucial source of problematic local regulations is the absence of a regulatory framework. The other serious problem is the acute lack of public participation in policy-making, due to the lack of commitment among government institutions to develop participatory governance, combined with the low capacity of civil society organizations and the inadequate institutional capacity of local administrations. The government has tried to solve the capacity problem by revoking many problematic regional regulations and by giving provinces the authority to review controversial regulations issued by regional administrations. Unfortunately, without adequate institutional capacity at the provincial level, that has tended to create new bottlenecks for development. As a result, many local governments continue to make problematic regulations. Fortunately, not all regional administrations have issued a myriad of bylaws inimical to businesses. Some regions have been taking tremendous steps to be more business friendly by developing a one stop service for business licensing. They are examples of good governance at the regional level. Of course, such initiatives should be appreciated. However, that is not enough because the majority of regional administrations still prefer short-cut policies to raise revenues. They are narrow-minded in dealing with the private sector. Most regional administrations appear unmotivated to woo investors because all receipts of value added tax and most of the income tax goes to the central government. The only direct effect enjoyed by local people from new investment in their areas is job opportunities. But even this impact is not secure, because if the required skill is not available locally, it is workers from other regions who will benefit from the job opening. It is no wonder that some districts look at investors as a "threat" to local interests, instead of an opportunity. One should not forget about the authority to set a minimum wage, which could potentially be used as part of efforts to attract investors. Although the term is district minimum wage, formally the wage is determined by the province (governor), based on proposals from districts. Hence districts cannot use the minimum wage as a policy instrument effectively. It is clear that, while not all of them have commitment, in fact districts do not have sufficient policy instruments to create an enabling business environment. Up to now, practically the only feasible instrument is streamlining business licensing and/or developing a one stop service -- as is being done by some local governments -- but that will not be enough. To encourage districts to be more business friendly, some other incentives are needed. That can be done by giving districts more policy instruments, and at the same time creating a direct connection between the ability to create an enabling environment with the local government's performance. More specifically, the economic motivation should be linked to the direct election of district chiefs. The government should change the status of the property tax (PBB) into local tax, as suggested by text books as well as international practices. That will give districts a chance to use it as a policy instrument. Actually, that is very different to the property tax revenue sharing as implemented currently by the government. Under this tax sharing system, the role of districts is only as tax collector. By making the property tax a local tax, the behavior of district administrations in administering the property tax would change, and tax collection would be more efficient. Besides which, as a local tax, the rate of property tax would vary across districts as local administrations have broad leeway to use the tax as a policy instrument to influence new investment. The District Minimum Wage (UMK) should be fully determined by districts. Analog to the PBB case, which will give local governments the opportunity to use it as a policy instrument. The government should share income and value added tax with regional administrations. The idea is quite simple: giving greater benefits to local administrations that are successful in attracting investors. The more business friendly they are, the more local revenue the districts can collect, and the more opportunity they have to boost local development. The writer is a Professor at the School of Economics, University of Indonesia and Director of the Akademika Center.
