Review of the New Local Government Law


What are the new distribution of functions and authority between national and local governments for natural resource management?

In September 2014, the Indonesian government enacted the new Local Government Law, Law No. 23/2014 that replaced the old Local Government Law, Law No. 32/2004. The lessons learned from the implementation of old law was the main reason why the government needed to write the new law. Conceptually, the Local Government Law is the main legal regime regulating the distribution of functions and authority among the central, provincial, and district governments.

In the old law, most governmental functions were distributed between the central and district/municipal governments while the authority of provincial governments was not regulated in great detail. In the new law, most governmental functions are distributed between the central and provincial governments. District/ municipal governments retain the authority for several functions, but to a much lesser degree than that given by the old law. The old law, for instance, gave certain authority to district/municipal governments in the forestry sector, however, the new law decentralized authority in the forestry sector only to the provincial level.

This article summarizes the legal analysis of the old and new Local Government Laws. Specifically, this article will analyze the shift of authority and distribution of governmental functions among the central, provincial, and district governments, especially with regards to land-based sectors, including forestry, land, agriculture, and spatial planning. The analysis finds that there are a number of significant changes to the distribution of governmental functions and authority with regards to the aforementioned sectors. In the forestry sector, the central government retains the authority over state forest areas, which includes the planning and licensing process, the implementation of forest management and monitoring. The central government holds the authority to control the planning process and monitoring of forest resources, including gazettement of forest areas. Although the authority to conduct planning for forest area gazettement rests in the hands of the central government, implementing this activity will be the task and responsibility of the provincial government. In this regard, there are many issues relating to the implementation of forest area gazettement, which are closely related to the responsibilities of provincial governments, such as the settlement of third party rights claims and monitoring the use of forest areas.

With regards to licensing in the forestry sector, provincial governments have two categories of licensing authority. The first is forest utilization licenses/permits that are non-exploitative in nature, which do not create significant impacts on forest cover or cause changes in the landscape inside the forest area. Permits that fall into this category are Business Permits for Forest Area Utilization (IUPK), Business Permits for Environmental Services Utilization (IUPJL) – except for the utilization of forest areas for carbon storage and/ or sequestration, which is still under the authority of the central government – and Non-Timber Forest Product Extraction Permits (IPHHBK). The second category is permits for activities that will have an impact on forest cover, including: Permits for Timber Forest Product Extraction (IPHHK) and Timber Utilization Permit (IPK) in Convertible Production Forest (HPK) and forest area with lease permits.

Specifically at the implementation level, the authority for the forestry sector is closely related to the authority for Forest Management Units (FMU). The authority, which was previously distributed among district/municipal or provincial governments, has now been allocated solely to provincial governments. This implies that it is provincial governments who will implement FMU related functions including designating forest functions and conducting forest management, forest utilization, forest use, forest area use, forest rehabilitation and reclamation, and forest protection and nature conservation in accordance with the jurisdiction of the provincial government. Since FMUs will be the main locus for forest management at the site level, then various technical proposals, regarding forest use and forest area allocation, must first be addressed to provincial governments. The role of the central government is to monitor forest plans proposed by the province and their implementation. Thus, the system for planning and monitoring forest utilization at the macro level is still under the authority of the Ministry of Environment and Forestry (MoEF). Meanwhile, the authority to propose forest area utilization and management at the site level will be the provincial government’s authority.

In the land sector, the new law devolves most of the authority for land functions to the provincial or district/ municipal governments. Governments at the district/municipal level are given more licensing authority in the land sector than the central and provincial level. Government functions related to communal (ulayat) and abandoned lands are fully devolved to the provincial or district/municipal level. In the old law, the two functions were placed under the authority of the central government, including the authority to set norms, standards, procedures, and criteria. With regards to land acquisition for public interests, the authority is distributed between the central and provincial governments. This is in accordance with the provisions of Law No. 2/2012 on Land Acquisition for Development for Public Interests, which distributes the authority for land acquisition between the central government and provincial governments. In the Land Acquisition Law, district heads are only involved as a member of the assessment team in case of objections that may arise regarding the location of a development plan (article 21 para 3). In the old law, a district or municipality has the authority for land acquisition for public interests, including designating the location, establishing land acquisition committees, establishing a team to assess land prices, and settling disputes regarding compensation. The distribution of authority under the new law should be further regulated in derivative regulations to make it operational such as through government regulations, presidential regulations, and/or ministerial regulations.

With regards to spatial planning, there is no significant change in the distribution of governmental functions between the old and new Local Government Laws. However, in terms of licensing, according to the new law, a district/municipal government has the authority to issue more permits than the central government, namely: Building Construction Permits, National Construction Service Business Permits, and Settlement Area Construction and Development Permits. A provincial government does not even have any licensing authority regarding spatial planning. It is only authorized to coordinate spatial planning proposals from district/ municipal governments. The authority to issue the aforementioned three licenses by district/municipal governments pertains more to urban areas. Meanwhile, spatial planning in rural areas is closely related to the distribution of governmental functions in the forestry sector because so many villages are located inside or overlapping with forest areas. Spatial planning provisions may have to be adjusted, especially regarding the authority to propose forest area changes, which has been redistributed to provincial governments from district governments.

In the agricultural sector, the new law redistributes authority over several governmental functions back to the central government, such as agricultural quarantine and protection of plant varieties. It is in contrast with the old law, which gave some authority to the regional governments, including in the protection of plant varieties such as observation, identification, mapping, control, analysis, and regulation of impact/loss, and pest and disease epidemic control. In terms of licensing, there is no difference between the old and new Local Government Laws. Both laws give the authority to governments at the provincial, district, and municipal levels to issue agricultural business permits, whether for plantations, crop cultivation, or horticulture.

Although it recentralizes some authority back to the central level, the new law provides clearer guidance related to the distribution of governmental functions between the central and local governments. Most functions related to formulation of operational regulations for the implementation of governmental functions amongst government levels, which were in the old law, are no longer included in in the new law. For instance, the establishment of norms, standards, procedures, and criteria (NSPC) to implement a governmental function is no longer listed in detail in the new Law, unlike in the old law and Government Regulation No. 38/2007. The new law also grants authority to the central government to formulate NSPC for all functions relegated to the local level. This is different from provisions in the old law, which distributed the authority to set NSPC both to governments at the central and local levels. As a consequence of this distribution, many functions could not be implemented because the NSPC at the local level had not been established, even up to the issuance of the new law. By taking back the authority to establish NSPC to the central level, it is hoped that the formulation of NSPC will be quicker. However, it also raises an issue regarding implementation at the local level as the standards, criteria, and procedures formulated by central government often fail to address various local needs.

The new law stipulates that the operational regulations for the implementation of authority for each governmental function should be formulated by the beginning of 2017. The Law does not stipulate the exact legal form for the NSPC that will be formulated. NSPC is needed by the central government to guide the interpretation of policy implementation. For governments at the provincial, district, and municipal levels, NSPC provides direction so that their interpretation of policy implementation is similar with the central level. This creates consistency between implementation at the local level with planning at the central level. To achieve this, the new law will be equipped with operational regulations, including for the formulation of NSPC for a number of governmental functions up to the beginning of 2017.

The implementation of the new law will depend on a number of operational regulations, one of which is the revision of Government Regulation No. 41/2007 on Local Organizational Apparatus, which is under the auspices of the Ministry of Home Affairs. This government regulation is very strategic because it will determine organizational structures at the local level along with their core tasks and functions. The Ministry of Home Affairs plans to streamline the organizational structures at the provincial and district/ municipal level to increase efficiency in terms of coordination and budget. One scenario that can be opted for by the Ministry is merging the authority over several issues that are currently scattered in a number of organizations under a single organizational unit. Of course, the option has both positive and negative consequences for the performance of local governments. Therefore, both empirical and legal analyses must first be conducted so that the new Local Government Law can strengthen the spirit of decentralization as well as improve the performance of provincial, district, and municipal governments in the future.