Acting regional heads: Small mandate, big responsibilities

The government will be appointing acting regional heads to replace the 271 governors, regents and mayors whose terms end this year and next. Challenges await these interim leaders, who will face a different structural landscape. 

Besides uncertainty over when the COVID-19 pandemic will end, the paradigm shift in a number of national policies offers a new and demanding context for these acting leaders. Therefore, the selection of accountable officials and support for the policy governance design and central-regional institutional relations will be crucial. 

During the pandemic, the government enforced two strategic policies: the Job Creation Law and the Central-Regional Fiscal Relations Law (HKPD). 

The jobs law amended a number of provisions in more than 70 laws to clear barriers to investment and hence, job creation. One of the most striking changes the law brought was the paradigm shift of business licensing from a permit-based to a risk-based approach. 

These changes didn’t land smoothly. The national policies are not yet solid, egocentrism typifies ministries and agencies, and digital government services are as yet unintegrated under the Online Single Submission Risk-Based Approach (OSS RBA). In the regions, apart from capacity constraints, confusion over the content of the law has prevented local administrations from formulating good policies. 

Meanwhile, the HKPD Law seeks to increase regional administrations’ fiscal capacity and spending quality. On the income side, besides simplifying local taxes and levies, the policy has introduced an open scheme. On the expenditure side, the law has been deemed progressive for setting a 30 percent budget cap on personnel expenditures and a 40 percent spending floor on infrastructure. This provision is expected to address the classic problem of burdensome bureaucracy spending. 

The 2021Regional Autonomy Watch (KPPOD) review, however, shows that the changes made in the HKPD Law are not yet fundamental because they only simplify tax rates. The central government does not yet dare transfer the authority to collect income tax (PPh) and land and building ownership tax (PBB) to regional administrations. In addition, as regards personnel and infrastructure spending, the thresholds will work only if bureaucratic reform materializes. 

Another strategic policy is the passage of the State Capital City (IKN) Law, which will impact regional governance, especially Jakarta. This issue is crucial, considering that a change of guard will occur in Jakarta as it transitions from a Special Capital Region to another designation that may have other special powers. 

Controversy has marked the legislation and enactment of the three laws. The dynamics indicate that the government and local administrations have hard work ahead in enforcing these policies. 

The most crucial thing at this time is implementing the Job Creation Law, especially the OSS RBA, after the Constitutional Court declared the law conditionally unconstitutional in November last year and ordered its revision within two years. 

The court’s decision has prompted various interpretations among legal experts and practitioners, and among central and regional governments. 

In this state of multiple interpretations, the central government has instructed regional administrations to continue to formulate related policies. But they have been reluctant to follow the order, first and foremost because drafting the implementing policies requires large funding. This attitude is understandable, especially because of the central government’s policy flip-flop.

Meanwhile, the HKPD Law mandates changes to tax governance at the subnational level. First, regional administrations must revise their local regulations on taxes and levies. The main challenge here is not actually revising their number, but striking a balance between taxes and levies as instruments to collect revenue and to promote an inclusive economy. 

Second, on the expenditure side, the most crucial challenge is that regional administrations must begin adjusting their personnel expenditures and infrastructure budget. Although the law provides a five-year transition period, these adjustments are no easy matter, especially for regional administrations whose bureaucratic spending exceeds a third, let alone half, of their budgets. 

The problem is intertwined with the poor structure and culture of regional development governance. The structural problem is evident in the fact that many regions lack focus in development planning and their capacity to absorb the budget. When it comes to culture, the neutrality of the local bureaucracy is questionable: the civil service is prone to politicization, especially during the regional elections. 

The tangle can actually be minimized if the central government provides optimal guidance and supervision. However, the central government is also trapped by the same structural-cultural problem: policy overlap between ministries that work in silos. This acute problem will haunt the implementation of the crucial Job Creation Law and the HKPD Law for the next two years. 

Acting regional heads will be thrust into meeting these challenges. One to two years is not a short term for an interim official, who normally serve no longer than six months. These regional captains, despite the question of the people’s mandate, have to follow up on central policies and programs as well as direct all stakeholders, especially the civil service, to stay focused on regional development programs. 

Selecting the right people to carry out this job will only be possible if the central government meets two conditions. First, the selection process is accountable and transparent. The selected officials must truly be competent and experienced in governance (planning, budgeting, policies, institutions and public services). 

Second, it must "help" ease the burden of the appointed officials by solving its own structural problems, such as overlapping and flip-flopping policies. 

The clearer the rules of the game, the easier the acting regional heads can plan and execute their development programs. Once these two conditions are fulfilled, the acting leaders will be able to bring progress to their regions, instead of a mess. *** The writer is executive director of Regional Autonomy Watch (KPPOD).

Sources: https://www.thejakartapost.com/opinion/2022/04/25/acting-regional-heads-small-mandate-big-responsibilities.html.