Seeking Legitimacy

(6/1/2012)

Bisnis Bali reports that a number of tourist accommodation entrepreneurs have expressed their confusion and dismay at the amount demanded for securing the legal licenses for commercial villas  by using a fee structure based on the number of rooms.

Some business owners claim the going rate is Rp. 25 million (US$2,690), while others claim a much higher fee of Rp. 85 million (US$9,140) per room or villa unit.

“We are indeed operating in a gray area. If it was all in black and white it might be less enjoyable,” explained the chairman of the Bali Villa Association (BVA), Jero Mangku Wayan Suteja, speaking at the anniversary celebration of the BVA in late May 2012.

He freely admitted that he is uncertain of the actual cost of obtaining licenses and permits for villas, insisting the role of the BVA is to not to organize licenses and permits, but primarily to safeguard its members’ interests. Adding: “We are not a licensing bureau. We do not want to venture into that realm. We are here to take care of our members, not to assist those villas who are unlicensed.”

Suteja explained that the BVA now has more than 75 members. This is an increase from 2011 when the total numbers stood at 69 villas.

Suteja said: “We are targeting that by the end of the year we will have 100 members. We continue to seek contact (with the villa industry). We endeavor to become an association that provides a genuine benefit to its members.”

Many BVA members have complained to the association about the high cost of licensing. Moreover, there appears to be no official “set” price for obtaining the needed permits.

Responding to criticism that informality of the cost of licensing is bad for the investment climate, the government insists the “official” cost of licensing is much lower than the figures being discussed.

Some observers speculate the high cost arises when villas seeking licenses are unable to meet the entire official prerequisites, creating opportunities for “special facilitation at a cost” by bureaucrats.

The BVA estimates that there are thousands of commercial villas in Bali operating illegally. Some villas stand in areas where such construction is barred.

Mangku called on the government to act more sternly in enforcing laws against illegal villas, thereby curbing the uncontrolled growth now taking place in that sector.

Arguing that unbridled growth in unlicensed villas will only lead to unhealthy price competition in the future, the Regent of Badung has warned villa investors to stop playing games. Anak Agung Gde Agung said: “If you wish to build accommodation, such as villas in Badung, then complete the permit process beforehand, then build. We need a better understanding of the law.”

The Regent of Badung welcomed the efforts of the BVA as a partner of the government in bringing order to Bali’s villa sector.

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