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