Breakthrough in regional autonomy?

Breakthrough in regional autonomy?

Bambang Brodjonegoro

It has been almost three years since the first day of
implementation of Law No. 22/1999 on local government and Law No.
25/1999 on intergovernmental fiscal relations, which also marked
the beginning of a drastic and massive decentralization process
in Indonesia.

It was drastic because Indonesia has been strongly centralized
for more than 30 years and suddenly, beginning Jan. 1, 2001,
Indonesia became a very decentralized country with power being
shifted from the central to regency (kabupaten) administrations.

It was massive because most government powers were shifted to
regency governments, leaving only five major responsibilities in
the hands of the center, namely diplomatic relations, national
defense, fiscal and monetary authority, the judicial system, and
religious affairs.

Consequently, the central government had to reduce its size
and, on the other hand, the regency governments had to expand. As
a result, the central government closed down its "branch offices"
at the local level, which used to be called kantor wilayah
(kanwil), and their powers were taken over by local government
agencies (kantor dinas).

With this massive shift, there has been a transfer of around
two million civil servants, at least administratively, from the
central government to both provincial and regency governments.

During the three-year period, the focus and discussion on
regional autonomy has ebbed and flowed in line with the central
government's commitment.

The first two years, 2001-2002, were marked by zeal on the
part of both central and local governments in making regional
autonomy work. The central government's commitment was quite firm
as indicated by the existence of the Office of the State Minister
for Regional Autonomy.

The central government was also busy producing legal products
to support the implementation of regional autonomy in the form of
government regulations, presidential decrees, etc.

However, this commitment seemed to weaken with the abolishment
of the Office of the State Ministry for Regional Autonomy.
Although, the government stated that the Ministry of Home Affairs
would take care of regional autonomy matters, the tone has never
been the same since then. Instead, the decentralization process
has become a routine activity without any real breakthroughs in
making regional autonomy benefit local people.

What makes ordinary Indonesians aware of regional autonomy are
the reports, often bizarre, that emerge around the time of
gubernatorial or regental elections. Of course, the process of
electing local officials is now totally different compared to the
centralized era and we have to admit that it is more democratic.

However, old (and disturbing) practices are still there,
especially bribery and the shortsightedness of political parties.
It is still questionable that candidates for local offices have
any desire to improve the well-being of local people or their
welfare.

The creation of new provinces, regencies, and municipalities
is another trend that has made Indonesians aware that regional
autonomy is still going on. Currently, there are 32 provinces
with a total of 416 regencies and municipalities. The annual
growth rate of new regencies and municipalities is a staggering
10 percent. If there was no general election in 2004, the number
would still be increasing, but due to the administrative
requirements for the election, the establishment of new local
government units has been halted temporarily. However, after
2004, there will be many more new provinces, regencies and
municipalities as the applications are still piling up in the
Ministry of Home Affairs. It is debatable whether having more
local governments will help the regional autonomy process, and
eventually local people's welfare. One side of the argument is
that a government that is closer to the people will be better
able to identify the local people's public service needs.
However, the other side says that having local government units
that are too small cannot be justified economically, especially
from the local capacity point of view. While the debate may be
endless, the creation of new local governments has been a common
phenomena following a decentralization process, as was the case
in the Philippines during the 10 years of their decentralization
process.

Although the current process of regional autonomy and
decentralization emphasizes the empowerment of local government,
many are still worried that local officials misinterpret the
process as giving them the right to set up small fiefdoms. The
small size of current local government units should make local
officials think more about cooperation between local governments.
Such cooperation should extend from the administrative arena into
economic affairs. It would save a lot of money as regards the
provision of local public services, and at the same time optimize
economic capacity. One basic requirement for such cooperation is
to allow the free movement of goods, services, capital and people
between local government jurisdictions. There are still some
regions where the local governments are imposing "export taxes"
on the export of their local commodities to other parts of
Indonesia. Another example is the "informal tolls" charged at
the borders of regencies and municipalities, especially on
trucks. While these two forms of charges will contribute
relatively insignificant amounts to local (provincial/regency)
own-source revenue, there is no doubt that the side effects will
be devastating -- a high cost local economy, reduced local
competitiveness and eventually a bad local investment climate.

Since revenue generation at the local level is still the focus
of most local governments in Indonesia, it may be too early to
evaluate the performance of local governments in planning their
strategies to improve local people's welfare. Logically, the
regencies and municipalities with significant amounts of revenue,
especially under natural resources revenue sharing, do not have
to rely too much on own-source revenue and, consequently, are not
really interested in "illegal charges" such as local export taxes
and unauthorized levies.

Some of them, however, are still interested in creating
additional (but unnecessary and illegal) fees such as "third
party contributions" (sumbangan pihak ketiga).

Some others, even though do not seek additional local revenue
sources, do not spend their money wisely and optimally. There is
still a tendency to focus on "white elephant" projects without
any clear multiplier or spill-over effects that will benefit the
local people.

People will question decisions to focus on big budget projects
without any benefits for the local community.

However, there are some regions that have shown the ability to
come up with innovative ideas to promote local development
through local government cooperation and the enhancement of local
public participation.

Some poor regencies (in terms of own-source revenue) have come
up with breakthrough policies to accelerate their local economic
development without relying on their own budgets.

The case of Jembrana regency in Bali could be cited as an
interesting example. In this regency, the effectiveness of the
local leader has been crucial factor in turning around the local
economy. In doing this, he has been fully supported by the
locals.

Making decentralization and regional autonomy work should be
an attractive issue for political parties during the 2004
election as long as they can demonstrate their commitment to
making the process beneficial to local people.

There are two big issues in the process that need to be taken
into account, the amendment of Law No. 22/1999 and Law No.
25/1999, and horizontal and vertical intergovernmental
coordination.

The amendment process in respect of Law 22/1999 is still going
on with the minimum objective being to incorporate the direct
election of local officials and the maximum objective being to
optimize the monitoring and evaluation role of both the central
government and the country's neglected provincial governments.

An increase in local taxing powers should be the main focus of
the amendment of Law No. 5/1999. However, the effectiveness of
these amendments will be lessened if there is no horizontal
intergovernmental coordination in the form of sectoral law
adjustments to both Laws No. 22 and 25.

There should be firm leadership on the central government side
to enforce the decentralization spirit in every sector and
ministry so that local governments do not complain that the
central government is not fully committed to decentralizing
powers. The imbalance between the number of deconcentrated
projects (also known as DIP or Daftar Isian Proyek) and specific
purpose grants (DAK) is one indicator on how some parts of the
central government still want to retain their powers.

Leadership and good coordination are also needed in the cases
of Papua and Aceh, which are now experiencing asymmetric
decentralization.

The discrepancies between the special autonomy law on Papua
and the formation of two new provinces in Papua has created
nothing but local conflict and uncertainty. It is also clear that
not much has been done to implement the special autonomy law in
Papua except on the fiscal side through the payment of general
allocation funds.

In the Aceh case, the question of the effectiveness of the
special autonomy law, apart from the fiscal side, is still up in
the air due to the current implementation of martial law.

On one hand, the special autonomy law could be a good solution
for dealing with troubled regions, but on the other hand the
inability to fully implement the law could lead to further
problems, such as the potential disintegration of the country.
The cases of special autonomy in Aceh and Papua also show that
giving more money will not necessarily solve all the problems.
Giving proper recognition might be the answer to the problems in
Aceh and Papua without sacrificing the unity of Indonesia.