Govt needs to keep decentralization on track

Govt needs to keep decentralization on track

Indonesia has pursued decentralization since 2001, however,
until now no authoritative measurement has been adopted to
actually assess its progress. The Jakarta Post's Riyadi Suparno
interviewed Roy Bahl, an expert in fiscal decentralization from
Georgia State University, United States, on the issue of
performance measurement of local government. Bahl, who has been
engaged in Indonesia's decentralization process for some years,
participated in a seminar organized by the World Bank and the
Ministry of Home Affairs on performance measurement in Bali on
Monday. The following is an excerpt from the interview.

Question: Why do we need performance measurement of local
government?

Answer: Decentralization means letting local units do what
they want, but at the same time, having a monitoring system
allows you to check the excesses. Decentralization is about
getting government closer to people. So, if it works, local
officials become accountable down to the voters. Performance
measurement sort of feels like local officials being accountable
up to who's doing the monitoring.

Some local officials argue that they are accountable to local
voters more than to the central government, because ultimately it
is the voters who determine their fate? Your opinion?

All over the world, there are monitoring systems. There are
good and legitimate reasons why central government opts to
measure the performance of local governments. For example,
conditional grants, or what you call here DAK (Special Allocation
Fund): If you give a grant with a condition, then, you have to
monitor whether local governments meet the condition. Another
example, in order to have good financial practice, all local
governments have to have financial accounts in the same format.
The central government has to set that and monitor it. Also,
every local government has to have their books audited, and the
central government has to do that.

Every country has a limit on what local governments can do.
Like in my country, the United States, local governments have a
great deal of freedom, but they may be limited in terms of tax
rates or in terms of their borrowing rate. Somebody has to
monitor that. So, really, it's about striking the balance.

As the central government has to do the assessment, as you
suggest, what areas need to be assessed by the central
government?

If I were the central government, the Ministry of Home Affairs
or the Ministry of Finance, I would be worried about how well
decentralization is doing. I would want to monitor the
performance of decentralization so that I can change policy to
make it better.

If we put all these local governments on the learning curve of
finance, for example, I might want to monitor how quickly they
are learning financial management practices. Are their financial
management practices proper? If not, what short of capacity
building, training, procedural changes do we need?

So, I think, it's pretty broad. There are a lot of things to
do. It would be a mistake to say that we would just watch after
the local governments if they are doing the good job. That's part
of it. To me, in Indonesia right now, what the central government
most needs to know is whether they are succeeding in
decentralization.

But measuring the success of decentralization is more than
judging the performance of local governments, isn't it?

The point is it isn't just you judging each local government
on how well they succeed in decentralization. What you are
judging is also whether the central policy is any good.

One thing that should happen with this decentralization is
that local governments should generate more revenues from their
own sources, i.e. user charges and local taxes. You may find out
that across the country that's not happening. Maybe it's because
there are deficiencies in local administrations that need to be
corrected. Maybe the central government does not give enough
taxing power to the local governments.

So, the central government is doing the monitoring, but, in
essence, they are monitoring themselves.

When the central government has conducted the monitoring, what
needs to be done with the results, and what should be the
priority?

Different things. In Indonesia, you are very concerned about
disparity between rich and poor regions. If it is found that the
next year, the disparity has widened in this country, this might
lead you back to DAU (General Allocation Fund) to solve the
problem. The question is whether the DAU is narrowing this
disparity or widening it.