Down to Earth No. 48, February 2001

Confusion and delay

President Wahid's fractured government has been unable to prevent confusion and disarray at the launch of regional autonomy - the transfer of authority from central government to the regions. While centre and regional governments wrestle for control over forests, mineral wealth and taxes, civil society organisations are concerned that social and environmental issues - the need to promote open, democratic governance, to foster human rights and to manage natural resources sustainably - are being sidelined.

The deadline to start implementation of regional autonomy passed on January 1 2001, less than two years after the autonomy Laws 22 and 25 were passed by the Habibie government in 1999. The process has been a rushed one and the uncertain prospects offered by the new year were met with caution and concern.

The main criticism levelled at the central government has been its lack of commitment to genuine decentralisation and its failure to prepare the country for regional autonomy. There is even uncertainty over the actual start date: according to one government advisor, the whole process has been postponed until May, although this has not yet been admitted publicly.

The growing rift between district governments - to whom most authority will be transferred - and the central government has widened, with ministers claiming that the districts are not prepared to take on their new roles. The district heads (bupatis), represented by their association Apkasi, have countered that all 365 districts are ready and that delay in implementing regional autonomy will be due to the centre's reluctance to relinquish control. Apkasi chair Syaukani, also bupati of Kutai, East Kalimantan, said district governments would take a "learning by doing" approach to autonomy.

The International Monetary Fund, as leader of Indonesia's economic "rescue" programme, is extremely uneasy about the process and is reported to have blocked the transfer of $400 million in loans due in part to concerns over possible financial chaos (see also DTE IFI Update 11). The Fund has pressed the Wahid government to issue a regulation preventing regional governments borrowing from foreign sources, fearing they may otherwise embark on a borrowing binge. This stance has provoked resentful reactions from some ministers, including economics minister Rizal Ramli who accused the IMF of "making a fuss" when it had been silent on the issue before. Home affairs minister Surjadi Soedirdja has confirmed that local governments will not be permitted to make co-operation agreements with foreign governments and will not be able to receive loans without central approval. In turn, the central government will guarantee regional government's debts.

Regional autonomy and NKRI

The autonomy issue has also widened cracks within the central government. There is now open conflict within the government as to how fast the transfer of authority to district and provincial control should proceed. Although President Wahid himself is believed to view regional autonomy as a political necessity - to allay separatist inclinations in resource-rich areas - his commitment to the project appears to be on the wane. He has turned down a proposal by Ryaas Rasyid, former regional autonomy minister and now state minister of administrative reforms, to establish an independent regional autonomy board - to oversee and evaluate the implementation of regional autonomy. Wahid has instead opted for a directorate under the ministry of home affairs, which will have far less authority- a move which has prompted Ryaas Rasyid to try and resign.

The decision to place autonomy with the home affairs ministry is tied to the current emphasis on the Negara Kesatuan Republik Indonesia (NKRI) - Indonesia as a 'unitary state'. The majority of Wahid's government and especially the military, have used this term repeatedly to make it clear that the government will not tolerate separatism or independence movements.

The home affairs ministry is the most heavily militarised ministry after the defence ministry, and minister Surjadi has already made it clear that NKRI will play an important role in the autonomy process. In January this year, he attempted to dampen down expectations of autonomy by reminding provincial governors that no region would be fully autonomous. He said that all districts and municipalities would remain interrelated with the central government, "both administratively and politically under the unitary state." Surjadi added that a region's success in implementing autonomy would be measured by whether its public service and social welfare had improved and "if the unitary state has been strengthened." The main 1999 autonomy law (No. 22) says that foreign policy, defence, religion, law and fiscal and monetary affairs are to remain under central control. The oil and gas industry also stays under central government, but most other areas, including mining, forestry, health, and education are supposed to be transferred to local control. Since the laws were introduced anti-autonomy ministers in Jakarta have been trying to claw back authority for the centre.

It is far from clear, for example, who will be responsible for approving foreign investment projects. According to Ryaas Rasyid, decision-making on investment projects can be done at local government level without approval by central government. But this is contradicted by economist Soeharsono Sagir, who advises the home affairs minister on regional autonomy. In a December interview Sagir told the Jakarta Post that district governments did not yet possess adequate resources to be able to negotiate investment contracts. (Jakarta Post 21/Dec/00)

Now sidelined from the process, minister Ryaas Rasyid has also criticised the government over its failure to issue the necessary regulations needed to implement autonomy on time. By the end of the year, only 15 government regulations had been issued. A further 41 new decrees were issued by the Finance Ministry in January (38 covering tax and excise): some aimed at boosting investment; some concerning revenue sharing between centre and regions. In addition to the dozens of new regulations and decrees required, up to 1,200 existing decrees and regulations need to be amended because they conflict with regional autonomy legislation.

Special autonomy for Aceh and West Papua

The "special autonomy" measures designed to address the cases of Aceh and West Papua have still not been finalised. West Papua governor, JP Solossa said late last year that he defined the 'specialness' of special autonomy as greater autonomy to manage provincial finances, traditions, customary rights and religion. He also wants an additional percentage of resource revenues on top of those set out in Law 25/1999. Aceh's governor, Abdullah Puteh, has said that Aceh wants 80% of all resource revenues, and wants this to be set out clearly in the special autonomy legislation. Aceh's resources include the lucrative PT Arun liquefied natural gas complex in Lhokseumawe, operated by US-based corporation Mobil (see also box, oil and gas article, below and DTE 47 for more on Aceh). In both Aceh and West Papua the levels of military and police violence and political oppression have increased as the military and police continue the hardline approach adopted last year towards the popular independence movements. Continuing atrocities in both territories make the notion of regional autonomy almost meaningless, since it is the military who are in charge of government policy in these territories. This leaves the local civilian authorities - who are supposed to take charge under regional autonomy - in an extremely weak position.
(Jakarta Post 15/Dec/00; Detikworld 9/Jan/01)

Centre clings on

Two of the most lucrative sectors of the economy, mining and forestry, are now the subject of an intense tug of war between centre and regions. Under Laws 22 and 25, these sectors are supposed to be managed at district level and 80% of the revenues they earn is to be retained in the regions. Revenues from the oil and gas sector (which remains in the control of the central government) are much lower - at 85% for the centre and 15% for the regions. (See DTE Special issue on regional autonomy, August 2000 for more details of the laws.)

Mining companies in charge

The mining ministry's main attempt to hold onto power is in the form of a proposed decree which will delay regional autonomy for up to five years for those regions not considered ready to manage mining affairs themselves. The proposal stems from Jakarta's concerns about the lack of investor confidence in regional autonomy, as well as direct pressure from the mining industry. Foreign companies are known to be concerned about the capacity of local administrations to process applications; the bankability of contracts signed by regional governments; and extra taxes that may be imposed on companies. Investment in mining projects has been almost at a standstill for the past year and some existing projects - affected by community protests and strikes - have been forced to suspend operations (see eg. Rio Tinto and Newmont cases described in DTE 47).

In his draft decree, mining minister Purnomo Yusgiantoro is also proposing that a team of government officials and foreign investors is established to decide whether local governments are ready or not to take over mining affairs in their areas. Regional governments will have to pass a "test" to see whether they are ready. This represents a continuation of the government's practice of favouring corporate interests over the rights of local communities.

A decision-making process that allows direct involvement of mining companies, without any counter-balancing view, would be open to all kinds of abuse. It could perpetuate the current practices of socially and environmentally unacceptable mining and delay the transfer of authority to those local governments who may have a less than enthusiastic attitude towards the impact of mining on people's health and livelihoods. All the indications are that the bupatis (district heads), bent on raising local revenues, will welcome mining companies with open arms but, in areas where democratic control by local populations is strong, local assemblies and governments may be convinced to oppose new projects or exercise greater control over existing ones.

The mining industry itself appears to be hedging its bets. Companies are eager to convince local governments that they are contributing to local coffers and are trying to speed up the process of getting royalty revenues into local governments' hands. The Indonesian Mining Association recently criticised a government regulation (No 104/2000) which makes this process slow - as well firmly under central control. The regulation says that royalties must first be calculated by the department of finance, then submitted to the energy and mineral resources ministry and can only then be channelled back to the regional governments.

The IMA is also arguing for the retention of the lex specialis, or special legal status of the current 'Contract of Work' system, in order to guarantee legal certainty. They want this included in the new Mining Law which was submitted to the Indonesian parliament last year. The IMA also wants officials from the central government to referee disputes between companies and regional administrations.

Forestry revenues

The centre - regional struggle for control over forest resources has focused on the division of revenues from the timber and wood processing industries and on the control of timber concessions. Last year, forestry minister Nur Mahmudi attempted to put all logging concessions in the hands of state forestry companies and suggested a division of resource revenue which differed from the ratios set out in the 1999 law (No. 25) on fiscal balance between centre and regions. This provoked anger among local authorities and pro-autonomy central government officials who saw the proposals as evidence of the forestry ministry's reluctance to relinquish control (see also DTE 46). Mahumudi later proposed a new state forestry agency to oversee the allocation of logging concessions and reforestation. In November, just two months before the start of regional autonomy, the forestry department dropped another bombshell: it announced it would issue 70 logging concessions. Most of these were extensions of expired concessions, but twenty one were new. This was regarded as another slap in the face for the regions.

A decree issued the same month then set out the new rules for timber concession management, still retaining a high level of central government control. The decree says provincial administrations may issue concessions of up to 100,000 hectares, and district administrations up to 50,000 hectares. Where the smaller concessions cross district boundaries, the provincial authorities will assume control of the operation, and where a concession straddles more than one province, central government will take control. It is not clear whether central government or local governments will be able to decide the location of concessions. Either way, it is not impossible to imagine "engineering" of logging concession boundaries to serve political interests. The payment of royalties will continue to be regulated by central government - a move that is bound to further displease local officials.

Challenge for democracy and civil society

It may be that the arguments over cross-boundary timber concessions will become irrelevant as autonomy progresses and as local governments equip themselves with the wherewithal for governing their areas: the legal tools in the form of local government regulations (Perda) and the staff with the required financial and managerial skills. The Perda are now supposed to be higher in the legal hierarchy than are government ministerial decrees, so, in theory, local governments could pass local regulations on concession management, for example, that overrule central government decisions. Local governments with a long-standing interest in decentralisation like those of Kalimantan are already preparing to implement regional autonomy according to their own agendas, no matter whether this leads to confrontation with central government.

One of the main risks of this approach is that the newly empowered bupatis (district heads) will orchestrate the plunder of natural resources in their areas, repeating at local level the get-rich-quick approach of the central government during the Suharto years.

The challenge now for local communities and the civil society organisations that support them is to ensure that these regional authorities are held accountable to their populations and that their decisions are informed by the need to use natural resources sustainably and to protect human rights.

Checks on regional government decision-making have been going on for many years by local civil society groups. The campaigning work by NGOs and community organisations on the Rio Tinto Kelian mine is one illustration of how strong local groups can work effectively to put pressure on powerful, international companies. The Moronene eviction case in Southeast Sulawesi is a further example of strong local level campaigning, supported by Jakarta-based NGOs. But in this case, there is a new element. NGOs have been backed by central government figures - environment minister Sonny Keraf and forestry minister Mahmudi, who have both criticised the governor's decision to evict the Moronene. Governor Laode Kaimuddin's decision to ignore their advice can be seen as regional authority asserting itself. This is likely to become much more prevalent as decision-making at the regional level becomes less dependent on approval from central government. Regional and local level NGOs are already aware that they need to strengthen advocacy capacity to cope with this.

The challenge is huge: endemic corruption throughout the government bureaucracy, over-reliance by local authorities on the military and police to enforce decisions and the entrenched practices of taking instructions from above are not the least of the problems. There is some debate about whether corruption is likely to increase with decentralisation. Some, like minister Ryaas Rasyid claim that accountability is already strong and that local populations will not accept it. Others see the potential for corrupt practices - conducted far from the eye of powerful NGOs and national media - as greater than ever.

Land classification

Many Indonesian NGOs agree that there is a need to address more fundamental issues related to natural resource management under regional autonomy - and to move the debate forward from the question of how to divide revenues.

The issues in urgent need of attention include control over land use planning and the land classification system itself. The current division between state-owned forest land (more than 70% of Indonesia's total land area) and non-forest land automatically denies many indigenous peoples and other forest-dwellers secure rights over their land and forest resources. The problem lies at the heart of Indonesia's natural resources crisis. State control of forests, with its focus on timber extraction for the plywood and pulp industries, has been proven disastrous, as deforestation rates soar and illegal logging reaches ever-higher levels.

(Sources: Jakarta Post 21&30/Dec/00, 9&10 /Jan/00; Reuter 9&11/Jan/01; Asia Wise 9/Jan/01; Suara Pembaruan 15/Jan/01; Indonesian Observer 17/Nov/00; Sydney Morning Herald 2/Jan/01, Mining Journal 24/Nov/00 and others.)

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