<![CDATA[The implementation of regional autonomy necessitates local governments to foster fiscal independence through investment. However, Musi Rawas Regency faces acute structural investment imbalances characterised by an overconcentration of capital in the primary sector and minimal integration of local Micro Small and Medium Enterprises (MSMEs). This empirical condition is severely exacerbated by an underlying legal problem, namely a regulatory deficiency and administrative ambiguity regarding local investment incentives. Existing legal scholarship largely overlooks the absence of a comprehensive regulatory mechanism governing local administrative discretion, which leaves regions vulnerable to a race to the bottom. This study aims to fill this research gap by addressing the regulatory vacuum and developing a normative legal model for local investment incentives. Employing an empirical legal approach with an explanatory case study design, primary data were gathered through purposive comprehensive interviews with key stakeholders. The data were triangulated with statutory analysis and synthesised using an ex-ante evaluation framework. The results indicate that unconditional tax incentives are legally and fiscally detrimental. As a normative contribution, this article constructs a Conditional Incentives legal framework. This prescriptive legislative blueprint mandates corporations to establish MSME supply chain integration, conduct downstream industrialisation, and prioritise local workforce absorption as binding legal prerequisites to acquire licensing privileges and local retribution reductions. In conclusion, translating these socioeconomic obligations into a binding regional regulation is crucial to shift the investment paradigm from a race to the bottom to a race to the top, thereby ensuring legal certainty and inclusive economic transformation.]]>
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