Jakarta – Regional Autonomy Minister Ryaas Rasyid has warned that some local bureaucrats and politicians were using the Indonesian government's new decentralisation policy to blackmail businesses.

"They think that with this new policy they have greater opportunity to generate money from the business community," he told participants of a mining and energy investment seminar on Tuesday.

He said officials had introduced new charges, and in some cases, even threatened to take over companies. "This new phenomena indicates that local government and politicians tend to blackmail the business community," he said.

Mr Ryaas, whose speech was read out by an official, said private and state-owned companies had complained that local politicians had ordered them to have direct dealings with them rather than the central government. Among the companies meeting those demands was the state oil company, Pertamina, he said.

The minister warned local authorities to be aware that all contracts and business commitments approved by the central government must be respected by both local officials and their respective political communities.

"The new regional autonomy policy gives a number of opportunities for local governments to promote economic development in their respective areas. Certainly both local government officials and business communities must make adjustments," he said.

He added that the local authorities must realise that greater autonomy does not mean more opportunities to generate more taxes and charges to increase their own revenue. "The key word for implementing the regional autonomy policy is the creativity of local government to attract the business community to invest their money in the area," Mr Rasyid said.

The Australian mining company Newmont had a tussle with local authorities in South Sulawesi province earlier this year, when they wanted to tax soil and rock removed at the mine there. It was finally settled with the central government's assistance.