Robert Go, Jakarta – Chief security minister Susilo Bambang Yudhoyono yesterday advised foreign businesses to start dealing directly with local administrations, in the clearest admission yet that Jakarta's economic sphere of influence would decline as decentralisation kicks in.
The minister said: "I suggest companies work closely and cooperate with local leaders and government officials, including the police.
Advertisement "They should also develop policies by involving the local society as much as possible." Mr Bambang, who spoke at a seminar attended by hundreds of foreign and domestic businessmen yesterday, added that investors should take advantage of the potential influence local leaders may exert on their communities.
District and provincial officials could serve as a company's "eyes and ears, mediate disputes with the community, and help protect the company's interests".
Indonesia's decentralisation programme took effect this past January. But analysts, even the programme's own designers, have raised concerns over how local governments would execute their new responsibilities.
In addition to greater political and social control over their respective regions, Indonesia's 300-plus bupatis, or district administrators, also gained much expanded economic powers.
There have been numerous reported cases where district governments demanded that existing business contracts be redrawn – problems that analysts ascribed to conflicting or unclear regulations, and lack of monitoring by the central government.
Several foreign executives interviewed by The Straits Times agreed that the best way of dealing with problems related to decentralisation is to cultivate local relationships.
A foreign consultant who has worked in Indonesia for over 15 years said: "A Jakarta-based network is not sufficient anymore, especially for companies whose businesses are tied to the land, such as oil and gas, and minerals. You have to get to the district level."
An oil-sector executive added: "There is so much uncertainty that the best thing to do is to maintain a positive yet neutral relationship with every level of government – bupati, governor or national players." But they also echoed Dr Andi Mallarangeng, a political analyst and decentralisation expert, who said that Jakarta still has to exert some control.
"There has to be a balance between district power and central control. Only this balance can cut down corruption, inefficiency, and other problems inherent in the decentralisation process," said Dr Andi.