May Not Block the Path to Regional Self-Reliance
Artikel Havina Mirsya \'afra, S. Sos.(DINAS KOMUNIKASI, INFORMATIKA DAN STATISTIK) 07 September 2026 18:33:29 WIB
Written by:
Mahyeldi (Governor of West Sumatra)
The Finance Minister's statement encouraging local governments to borrow through PT. Sarana Multi Infrastruktur(PT. SMI) rather than issuing Regional Bonds can be understood from the perspective of national fiscal prudence. However, this directive has the potential to give rise to at least three structural issues.
Don't Measure West Sumatra with a Jakarta Yardstick
The sentiment that even Jakarta doesn't need Bonds, let alone other regions sounds appealing. However, it would be highly dangerous to use this as the basis for national policy.
Let us review the data carefully and honestly:
The Regional Budget of DKI Jakarta Province for the year 2026 amounts to ± Rp. 81 Trilyun. Meanwhile the Regional Budget of West Sumatra Province only ± Rp. 6,3 Trilyun. Furthermore, in terms of the strength of Locally-Generated Revenue, DKI Jakarta’s capacity is very high, standing at approximately ± Rp. 55,0 Trilyun. Whereas West Sumatra’s figure is only ± Rp. 3,2 Trilyun.
The data shows that a single day's revenue in Jakarta is equivalent to the entire monthly regional budget (APBD) of West Sumatra Province. Jakarta has no need for Bonds because it is wealthy. It is akin to a tycoon with Rp. 100 Milyar in savings who still takes out a mortgage to keep their cash flow healthy; it is purely a strategy to preserve their personal fiscal flexibility.
Yet, we in West Sumatra are expected to adopt the strategy of that tycoon, even though our savings are barely sufficient. That is like telling a humble coffee stall to follow the financial strategy of a banking giant like Bank Central Asia (BCA).
West Sumatra Province lacks the oil refineries found in Riau Province, the coal mines of East Kalimantan Province, and export ports as large and busy as those in East Java Province. Its primary revenue sources are property tax (PBB), motor vehicle tax (PKB), hotel tax, and tourism. All indicators suggest that these main revenue streams are highly vulnerable to disasters, pandemics, or declines in purchasing power.
Given this fiscal structure, if the only available avenue is to queue for funding from PT. SMI, development efforts in West Sumatra Province will stagnate and eventually grind to a halt. Constructing just one Type B Regional General Hospital costing approximately Rp. 400 Billion would require a five-year wait. Similarly, building a drinking water supply system (SPAM) for 10.000 households would mean waiting for a deduction from the General Allocation Fund (DAU).
It is understandable, then, that Jakarta does not require such a mechanism, given its extraordinary array of a hundred different revenue streams. Conversely, if the Bond issuance option were closed off to West Sumatra—leaving the province with only a single avenue, namely the queue at PT. SMI—it would hardly seem fair to West Sumatra.
PT SMI’s model may be manageable for the central government, but it stifles regional autonomy.
PT. SMI’s loan mechanism—which utilizes a General Allocation Fund (DAU) deduction scheme—certainly makes it easy for the central government to maintain control. However, this approach gives rise to at least three economic consequences:
First, the centralization of liability.
All credit risks associated with 514 Regencies and Cities would accumulate on the balance sheet of a single state-owned enterprise (SOE). If ten regions were to default, the national budget (APBN) would ultimately have to step in.
Second, regions fail to learn.
Issuing regional Bonds would force us to undergo three simultaneous tests : feasibility studies, credit ratings, and market testing. This process would train regional financial and planning agencies (BPKAD and Bappeda) and other relevant departments to design and execute bankable projects. If everything must go through PT. SMI, we never learn to swim; instead, we are simply handed a life preserver over and over again.
Third, bottlenecks and inefficiencies arise.
PT. SMI’s capacity is clearly limited. If regions spanning from Aceh to Papua all queue at the same door, basic infrastructure projects in West Sumatra—such as irrigation systems, bridges, or public markets—could face delays of three to five years.
Default risks should be addressed through strengthening measures, not prohibitions.
The Central Government's concerns regarding potential defaults are valid and appreciated. However, the solution lies not in shutting down the market, but in reinforcing the safeguards surrounding it.
Government Regulation (PP) No. 1/2022 concerning Financial Relations between the Central Government and Regional Governments (HKPD) already establishes strict regulations: a) a maximum debt ratio of 75% of Locally-Generated Revenue (PAD); b) a mandatory sinking fund; c) a minimum credit rating of 'Triple B'; and d) restriction to productive projects that generate Non-Tax State Revenue.
Given this framework, the Central Government should provide guidance and support rather than imposing a ban. It should assist regions with limited fiscal space in structuring projects that are attractive to investors and help establish regional guarantee institutions. Such an approach is far more productive than channeling everything through PT. SMI.
Aspiration.
West Sumatra does not reject the presence or benefits of PT.SMI as a partner for projects requiring a Public-Private Partnership (PPP) scheme. However, PT. SMI should not be treated as the only available solution. Grant us options such as Bonds and Sukuk ; fiscal independence is not born of fear, but of trust and the opportunity to be tested.
If Jakarta is permitted to exercise using Bonds to maintain its health, then regions like West Sumatra should be afforded the same opportunity. This is not for the sake of extravagance, but to enable us to stand on our own two feet. Ultimately, a strong Central Government is one surrounded by strong, independent regional governments.
Prudence is certainly necessary. Yet, the Central Government’s caution must not become a source of fear that stifles the growth and development of regional governments. Allow us to jog using Bonds and Sukuk so that, one day, we may sprint—without having to constantly turn to the Central Government in distress.
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