The Jakarta Post | Wed, 09/14/2011 6:00 AM

Jakarta, September 14 2011 – We found it quite interesting to see how four Indonesian provincial administrations, with a high sense of confidence, made presentations at the business gathering in Moscow earlier this week, competing with each other to attract investment to their respective regions.

Judging from the briefing sheets and the way the delegates made their presentations, their mission was more business than pleasure.

Certainly, the mission would not immediately bring in investment from Russia to their regions. But their willingness to go into such elaborate preparations for a business forum so far away from home is good evidence of their awareness of the vital importance of investment, whether it is domestic or foreign, for their economic development.

Obviously, credit should go partly to the Investment Coordinating Board (BKPM) in Jakarta, which has made concerted efforts to develop the institutional capacity of regional administrations to promote businesses.

Yet more encouraging is that more provincial and regency administrations have increasingly realized the importance of investment to expand their local economies, generate jobs and create new, bigger sources of local fiscal revenue.

BKPM chairman Gita Wirjawan aptly described the effort as empowering and involving regional administrations in promoting private investment so that they feel like they own the process.

The preliminary results, as the BKPM report shows, are promising. Realized private investment in regions outside Java has increased steadily from 18 percent of the total amount nationwide in 2009 to 34 percent in 2010, and almost 50 percent in the first half of this year.

This high rate of investment realization would not have been possible without the support of local administrations. This means many regional administrations have been directly involved (and many more should be) in securing smooth implementation of investment projects.

Hopefully, as their awareness of the vital role of private investment increases, regional administrations will be encouraged to launch more business-friendly policies and refrain from issuing distortive bylaws designed only to collect rent from businesses.

Look at how during the first few years after the launching of the regional autonomy policy, the Finance and Home Ministries in Jakarta had to revoke thousands of regional bylaws issued by narrow-minded administrations only to instantly increase their revenues, but at the expense of the goose that lays the golden egg.

Local administrations should be long-term-oriented in their economic policies and work to maintain a conducive business climate because almost 90 percent of the US$465 billion in funds needed to implement our 15-year economic acceleration Master Plan, with growth of between 8 and 9 percent a year, as against 6.5 percent at present, is expected to come from domestic and foreign private investors. But this ambitious goal will remain a dream without the full cooperation and support of regional administrations.

A conducive investment climate in regions outside Java certainly would contribute greatly to national economic growth because most of the country’s abundant natural resources — such as forests, agriculture, fisheries, mining and tourist attractions — are located in those provinces and regencies.