Decentralization in urgent need of major overhaul

Decentralization in urgent need of major overhaul

Bahtiar Arif, Center for Indonesian Reform, Lecturer, University of
Pancasila, Jakarta

Decentralization is now four-years old as a result of "reform"
in 1999. Under laws No 22 and 25/1999 and their respective
government regulations, regional administrations have been more
flexible to run programs according to their needs.

Yet it has not been easy for Indonesia to manage more than 300
regional administrations. Therefore, decentralization has
produced at least two negative consequences. The most dangerous
effect is corruption as President Megawati Soekarnoputri and
Minister of Home Affairs Hari Sabarno had warned earlier.

Another unintended consequence has been the widely cited
potential of separatism. A number of regional governments have
raised a campaign to be independent and it is not impossible that
the campaign has been supported by funds from the central
government.

The funds have been poorly monitored. In Sumatra a regent
bought a luxurious car financed by the regional budget. In
Kalimantan, the take-home pay for the top executive and regional
legislative members has reached Rp 10 million per month, higher
than that for the central government officials.

It has been difficult to study or investigate allegations of
corruption, given the lack of transparency and high degree of
collusion in the public administration.

Even without corruption, ineffectiveness and inefficiency in
the use of public money would follow decentralization, as a
result of a lack of skills and knowledge in handling a sudden
large amount of money from Jakarta.

Related studies have indeed focused on such "inefficiency".
Public investment in the budget or "development expenditures"
tends to be corrupted. This is commonly done by enlarging and
ballooning expenditures.

Further, the government system requires that projects are
contracted out by private enterprises by a bidding process.
Collusion between a government official and a manager of a
private enterprise is not uncommon, reducing the productivity of
public investment. This becomes worse when expenditures are
financed by foreign loans.

A study by Tanzi and Davoodi (1998) uses corruption data from
Business International, Political Risk Services Inc. and
International Country Risk Guide, and public investment data from
Government Finance Statistics from the International Monetary
Fund. They concluded that high corruption is associated with high
public investment.

Decentralization of investment by the central government to
the regional government has, as business people have said, led to
decentralization of corruption. Bribery and collusion are
transferred to regional government officials, supported by local
politicians seeking to gain as much as possible as they aren't
sure they will keep their seats in the next election.

To cope with those problems, these following proposals may be
considered.

First, the decentralization laws and regulations may need to
be revised. It can be done by analyzing the negative effects and
by using the new approved law on state finance. The most
important to be revised is the system and policy of fund
allocation to the regions.

There has been a potentially dangerous shift of internal
political affairs since the implementation of the allocated
funds. Local governments have approached the Ministry of Finance
to negotiate and obtain the funds, instead of the Ministry of
Home Affairs, who used to control and supervise the local
governments -- leading to fears of funds being used to campaign
for independence.

The fund allocation policy should be determined by the
Ministry of Home Affairs, who should be responsible over such
internal politics.

But this is provided that the central government establishes a
blue print of the decentralization process. It may consist of
short, medium or long-term planning, which prepares the
structure, and determines clear steps and targets.

Skills and knowledge of local manpower must be improved by
training and development skill programs. This should be a part of
the blue print; skilled human resources at the central government
may be also transferred to the local government.

Government Regulation no.110/1975, which determines the money
used by the regional legislature, should be restored and the
Supreme Court decision to annul the regulation should be revised.

Finally, the use of public money should be regulated based on
social justice. As decentralization should be designed to improve
public services, this needs government officials and politicians
who place national and public interests over their own.

The writer is an alumnus of the University of Manchester, UK