New Regulation on Local Government Investment

Mahinda Arkyasa

The Ministry of Interior Affairs has decided to apply more stringent provisions on regulating investment by regional governments via the issuance of Minister of Interior Affairs Regulation No. 52 of 2012 on Guidelines for Managing Local Government Investment (“Regulation”). The Regulation stipulates the provisions on investment by regional governments and provides a guideline on investment mechanism.

 “Regional governments may conduct investment if there is a surplus in the Regional Budget (APBD),” said Arsan Latif, Head of the Sub-Directorate on Regional Taxes and Retribution of the Directorate General of Regional Finance of the Ministry of Interior Affairs in Jakarta, Wednesday (12/9).

"Regional governments should prioritize their Regional Budget for developing their regions and their citizens welfare.“Any investment made by the regional governments should aim to provide public services, not commercial purposes,” Arsan said.

Under the Regulation, regional governments are allowed to make direct investment, or indirect investment through the purchase of shares, bonds, or capital participation. Before an investment is made, it must first be analyzed by a investment advisor.

The mechanism under the Regulation can be applied for the 2013 Regional Budget. Meanwhile, investment that have been made prior to the Regulation, are still valid as long as it is in accordance with the Regulation.

Before the Regulation was issued, there are several regulations that stipulates regional government investment, which includes Government Regulation No. 1 of 2008 on Government Investment, Law No. 32 of 2004 on Regional Government, and Law No. 17 of 2003 on State Financial.

Meanwhile, Hani Rustam, Head of the Sub-Directorate on Regional Treasury Management of the Ministry of Domestic Affairs stated that the Regulation provides a detailed stipulation on Local Government investment starting from the planning phase up to supervising phase. He hoped that the Regulation can assure  Regional Budget usage objective, which is public service.

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