Decentralization of Forest Administration in Indonesia, Implications ...

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Fiscal Balancing and the Redistribution of Forest Revenues
Box 4.1: Special Autonomy for Nanggroe Aceh Darussalam and Papua
Demands from regional stakeholders for a more equitable share of natural resource
revenues have been a significant driving factor behind Indonesia’s decentralization
process. In the years leading up to the 1999 regional autonomy law, some of the
most vociferous demands came from stakeholders in the resource-rich provinces
of Nanggroe Aceh Darussalam and Papua (which has now been divided into three
provinces) – located, respectively, in the furthest western and eastern reaches of
the archipelago. Indeed, when the regional autonomy laws were adopted, each of
these provinces had a long-standing separatist insurgency: namely, the Free Aceh
Movement (Gerakan Aceh Merdeka, GAM) and the Free Papua Organization
(Organisasi Papua Merdeka, OPM).
In a bid to prevent the secession of these two important provinces from
the unitary republic, the central government negotiated with each province an
arrangement for ‘special autonomy’. Law 18/2001 delineates special autonomy
for Nanggroe Aceh Darussalam, while Law 21/2001 does so for Papua. Both laws
focus largely on the relationship between the provincial and central governments,
and they say little about how authority should be shared between the provincial and
district governments. In each case, the province is given wide-ranging authority
to manage its own affairs. In recognition of local cultural institutions, the special
autonomy laws give political legitimacy to both traditional councils and regional
parliaments. In the case of Aceh, the special autonomy law allows the province to
organize both the legal and educational systems around Islamic principles.
Significantly, the special autonomy laws give Nanggroe Aceh Darussalam and
Papua a much larger share of oil and gas revenues than other provinces. Under the
special autonomy arrangement, Aceh receives 55% of oil taxes and 40% of LNG
taxes for a period of eight years after the agreement was signed. Thereafter, the
region’s share of oil and gas revenues will be reduced to 35% and 20%, respectively.
For Papua, the special autonomy agreement stipulates that the region shall receive
70% of the oil and gas revenues generated within the region for a period of 25 years,
after which the portion shall decline to 50%. The special autonomy agreements for
both provinces stipulate that at least 30% of the region’s natural resource revenues,
including the special-autonomy related oil and gas revenues, should be allocated for
education, and 15% should be allocated for health and nutritional development.
The authority of provincial and district governments to impose their own
taxes and levies was further strengthened by Law 34/2000, which amended the
highly restrictive 1997 regional tax law. Law 34/2000 defined a set of procedures
for provincial and district governments to issue their own Regional Regulations
(Peraturan Daerah, commonly referred to as perda) related to taxes. In brief,
provincial and district governments are permitted to issue new tax regulations as long
as these fully adhere to existing laws; do not duplicate existing taxes administered by
the central government; do not affect the economy and the environment negatively;
are ‘socialized’ prior to their issuance; and are ratified by the DPRD at the appropriate
level. Under Law 34/2000, the Ministry of Home Affairs has the authority to review