Intergovernmental Transfers and Decentralisation in Indonesia

Abstract

A fundamental restructuring of intergovernmental relations involving decentralisation and expanded autonomy for provincial and local governments is under way in Indonesia. This paper explores the intergovernmental financial system that preceded the new General Allocation Fund (DAU), with particular attention to the old Inpres development grants. Like Inpres, the DAU attempts to address national development objectives, and can be seen as a logical consequence of reform efforts in intergovernmental finance that began long before the demise of the New Order government in 1998. The use of earmarked Inpres grants enabled the central government to ensure that key sectors such as roads, public health and education received adequate attention throughout Indonesia's diverse regions. Local governments' experience with Inpres should help in implementation of the DAU, yet Law 25/1999—which restructures fiscal relations between the various levels of government—may actually have increased local reliance on the central government.

Who should decide for local health services? A mixed methods study of preferences for decision-making in the decentralized Philippine health system

“…Dependence on central level support in decentralization has similarly been reported in Indonesia, an archipelago like the Philippines, where many functions have been transferred to local levels, but only those localities with revenues available from their own sources fared well in performing the functions [35]. Thus, like in the Philippines, the central government in Indonesia supports many local governments with grants, which increased their reliance on central support [36].…”

The New Indonesian Equalisation Transfer

“…For a standard reference and partial review of other analyses see Shah, Qureshi and Binder (1994). On Inpres grants see also Silver et al (2001), in this issue. 6 See Republik Indonesia (2000b), article 15, for the precise language.…”

Autonomous but constrained: CBOs and urban upgrading in Indonesia

“…Implementing decentralization too rapidly and without a clearly articulated plan (Smoke, 2010) was fraught with problems and exposed: mismatches between local governments' responsibilities, and capacities (Silver, 2003) and priorities (Miller, 2013, p. 843); the need to be less fiscally dependent on the center (Silver, Azis, & Schroeder, 2001) and improve local fiscal accountability and capacity (especially for managing property tax) (Lewis, 2003a,b); the state's history of suppression and distrust of NGOs and its failure to guide and regulate a burgeoning NGO sector (Antlöv, Brinkerhoff, & Rapp, 2010;Hadiwinata, 2003). Moreover, the over 200 new local administrative jurisdictions have hampered development coordination (Miller, 2013) and fragmented regional planning, even as fiscal decentralization reforms create new spatial inequalities across regions and cities (Firman, 2003).…”