Challenges of Decentralization

The Jakarta Post, October 7, 2019.

This year marks the twenty years of formal introduction of decentralization program. Despite its real implementation started in early 2001, but legally the idea of having a much more decentralized authority began two years earlier with the passing of Law No. 22/1999 on Local Government and Law No. 25/1999 on Fiscal Balance between Central and Local Government.

Just like in many other countries, decentralization was initially designed to bring government closer to the people, given Indonesia has been ruled by autocracy with strong centralization stance for over three decades. It was also introduced because of the sizable and diverse nature of the country, with its sprawling archipelago and the presence of more than 500 districts and municipalities – many of which are distinct in terms of language, ethnicity, and customs.

For that reasons, the urge of having more de-concentrated power seems inevitable once Indonesia set to democratize itself in 1998. The so-called ‘Big Bang’ decentralization, the term coined by the World Bank economists, essentially denotes to a radical shift that Indonesia experienced from one of the most centralized states to a very much-dispersed regional autonomy.

To be sure, the implementation of this system has been incremental. At the onset of its execution, the focus seems to be less on politics than economic concerns. The Law No. 22/1999 lays out, for instance, the need to have a greater fiscal transfer from central to regional government. This led to the higher share of central government spending to regional government to nearly double in 2000 – 2001.

Relatedly, the Law No. 25/1999 explains the entitlement of local government to earn the so-called balancing fund (dana perimbangan) to boost local development. In 2002, around 90 percent of regional revenues came from this balancing fund, which included the general allocation grant (DAU), special allocation grant (DAK), and shared taxes. This reflects a great reliance in term of financing from regional government to central government.

However, it was not until recently this fiscal transfer has become one impediment in our political system. Indonesia’s fiscal system is quite unique in a sense that it bypasses the role of provincial government in financing its district-level governments. In many occasions, this makes district heads do not feel oblige to work together with governor in a respected province.

This has been worsened with the fact that there is no hierarchical relation between provincial and district or municipality-level governments. The provincial government only plays a “coordinating role,” meaning that it cannot impose any measures for non-compliance. Thus one can imagine when governor and district heads in one province came from competing political parties; making a good cooperation can be a daunting task.

Despite the Law on Local Government clearly states that every district is an independent entity with its own regional autonomy, recent moves from central government has made decentralization to gain a new relevance.

The idea to amend the 1945 Constitution is a case in point. Despite many public contentions, PDIP, the ruling party of President Joko Widodo, strongly supports this amendment. The idea basically aims to attain two things: To revive the New Order-concept of the Broad Guidelines of State Policy (GBHN) and to reinforce the power of People’s Consultative Assembly (MPR).

While we are yet to understand exactly the reasons of this move, but it is safe to say that the plan is a regression for Indonesia’s democracy. We knew from the history how GBHN was being devised; it had never been designed nor discussed in consultancy with regional government, let alone people on the ground. GBHN had always been the top-down product of MPR; it is exclusively devised and imposed by elites.

GBHN could only work in the context of authoritarian in which the same regime endures for a long time, while with democracy, the new elected government can easily annul any programs from its predecessors.

Thanks to decentralization, Indonesia’s now has the Musrenbang, an annual process of planning and budgeting of policies at local level. The Musrenbang began down from village level, and then advances to a higher level such as districts and provinces. In this process, people meet together to discuss issues facing their own communities. They can participate in formulating policies which then will be formally approved by the Bappeda (the local government planning agency).

With all its deficiencies, the Musrenbang is much more representative and nicely fits with decentralization than GBHN, at least in theory.

The idea to strengthen the MPR is also problematic. In the past, the MPR was the supreme body above all institutions, including the president, whereas our system now only acknowledges the check and balances among equally strong institutions.

To some extent, we can understand the dilemma faced by central government in dealing with independent regional governments. The central government wants its development programs to be effectively executed, but the setting of political institutions at times thwarts this purpose.

The contention seems to be always about how to strike a balance between our unitary state and regional autonomy, or about the degree of effectiveness and representativeness. However, it seems that in recent years Jokowi’s administration has accentuated more the unitary elements, instead of embracing more pluralistic tone.

Noory Okthariza is a researcher at the Department of Politics and Social Change, CSIS

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