Jakarta – Leaders of oil-producing districts predicted potential trouble over a new oil and gas law as President Megawati Sukarnoputri courted oil barons in the United States, reports said Tuesday.
Megawati, who is visiting the United States, told a lunch of oil industry chiefs in Houston, Texas, on Sunday that she promised a "more stable and conducive climate," and would protect foreign investors, the Jakarta Post reported. Oil companies in turn told Megawati it was vital to clarify apparently contradictory or overlapping tax regulations, resulting from vague regional autonomy laws introduced on January 1. "Indonesia will be one of the best places to put money if you have a stable and predictable tax environment," Conoco senior vice president, J. Michael Stinson, was quoted as saying. Texaco chairman Glenn Tilton said uniformity in investment laws was crucial.
One of Megawati's key economic advisers, Frans Seda, was quoted as saying the firms pledged two billion dollars in new investment in Indonesia.
In wooing the oil companies, many of which already have projects in Indonesia, Megawati cited a bill liberalising the oil and gas sector which is expected to be ratified next month.
However its passage could bring fresh problems, with district chiefs of oil-producing areas, grouped under the Consultative Forum of Oil Producing Regencies, accusing MPs of ignoring their input for the bill. "If the oil and gas producing regions are denied a participation [in forming oil gas policies], this will create a fatal consequence," Forum chairman Irianto Syaifuddin told the Post.
Syaifuddin warned that security problems could result if local people feel they have been ignored. The regent [chief] of East Lampung district, Irfan Djafar, reminded parliament that security for oil and gas companies depended on local authorities. "Thus far we have taken pains to persuade local people not to take anarchic action against oil and gas companies in their areas. But it seems that the central government and the House are not sensitive to the problems."
The regional autonomy laws have been widely criticized as vague and creating an overlapping of authority between the central government and regional authorities. Investors and businessmen have repeatedly complained of overlapping levies set by district, provincial and central government authorities as well as overtaxation of their operations.
Parliament will debate a revision of the regional autonomy law by the end of the year, Home Affairs Minister Hari Sabarno said Tuesday. It will examine the relationship between administrations at all levels. The regional autonomy bill aimed to appease mounting local demands for a greater share of profits made in their regions.