Robert Go, Jakarta – Local governments have been warned not to abuse new regional autonomy laws or they risk losing both domestic and foreign investment, high-level central government officials have warned.

On Monday, State Minister of Regional Autonomy Ryaas Rasyid met a parliamentary commission overseeing domestic and legal affairs to express concern regarding how provincial and municipal authorities would react to regulations granting them new economic powers scheduled to take effect in January 2001.

Topping his list was the fear that regional officials would illegally impose extra taxes illegally and drive away both domestic and foreign investors.

"If regions burden foreign investors with extra levies, they simply would not come to Indonesia," he told The Straits Times yesterday.

Mr Cahyana Achmadjayadi, Deputy Minister for Investment at the Regional Autonomy Ministry, similarly cautioned that Jakarta would need to strictly monitor implementation of regional autonomy regulations to ensure compliance with consistency and transparency standards.

"There should be a coordinated system to make sure local governments can't abuse their powers," he explained. "Clearly limiting how much tax and other business costs local authorities could legitimately impose is part of our effort to make sure foreigners feel secure about investing in Indonesia," he added.

Responding to complaints that Jakarta has dominated much of the country's economic revenues at the expense of development in resource-rich outer provinces during former president Suharto's rule, the central government agreed to redraw the fiscal balance lines last year.

Beginning next January, each province would theoretically exercise more control over economic development and share a greater portion of revenues.

Head of the Indonesian Chamber of Commerce's Investment Office, Mr Bambang Sujagad Susanto, stressed, however, that success of the regional autonomy programme depends on how well Jakarta formulates its national policies now.

"The central government needs to establish clear and cohesive guidelines and to verify local governments' readiness to take over administration of trade," he advised.

In addition to excessive taxing, the authorities would also need to look at security and labour issues, making sure that local officials do not make unreasonable demands on companies interested in doing business within their jurisdiction, he added.

He also warned against inconsistencies between provinces, saying it would reflect badly on Indonesia as a whole, and not just on badly administered regions themselves.

A report in yesterday's Jakarta Post said that Mr Ryaas's warning to parliament mentioned Singapore as one of the countries put off by irregular practices in some of Indonesia's provinces.

But Industry Counsellor Dr Lim Chuan Poh of the Singaporean Embassy in Jakarta denied the existence of an official provincial blacklist. "There is no formal government policy on the issue and investment from Singapore is still up to the private sector," the Industry Counsellor added.