East Kalimantan prepares dozens of regulations to block fund flows to central government

An assistant to the secretary of the East Kalimantan administration, Imdaad Hamid, said that the local administration was currently preparing around 60 to 80 local regulations that would force companies operating in the province to pay income and value added taxes (VAT) to the provincial administration, instead of the central government.

The regulations would affect dozens of companies in the forestry and mining that had contributed a large parts of their income to the central government.

"We have completed the drafting of those regulations, and we will soon bring them to the provincial legislative body for passage into regulations. We hope, we could implement the regulations by early 2001," he said.

The drive to produce such regulations was prompted by the reluctance of the central government to meet the East Kalimantan administration's demand of more income portion from businesses in the province.

Imdaad noted that the central government had allocated Rp 2.4 trillion of funds to East Kalimantan administration, far lower than an earlier prediction of Rp 3.766 trillion, calculated based on Law No. 25/1999 on the finance balance between the central and local administrations.

He noted that even Rp 3.766 trillion was still too small for East Kalimantan province whose gross local production reached Rp 55 trillion in 1999. Imdaad even put the gross East Kalimantan production at Rp 80 trillion.

He suspected that most of income portion form East Kalimantan ran to the central government.

Because of that imbalance, Imdaad said, the East Kalimantan administration demanded an additional Rp 3.02 trillion for 2001 budget year to finance infrastructure development, human resources and agriculture development.

Based on intensive lobbying from officials at the East Kalimantan administration and also local legislative body, the central government is likely to meet the demand for additional budget.

Nevertheless, Imdaad said that his administration would proceed with its move of producing those regulations that would bar more funds from going to the central government, by demanding more payment of income and value added taxes from companies with operations in the territory.

East Kalimantan is home of many large mining and also oil and gas corporations. They include coal miner Kaltim Prima Coal, and gas producer in Badak. State oil and gas firm Pertamina has also large operations in East Kalimantan, including refinery plant in Balikpapan. (*)