Home Affairs Minister Tito Reminds Local Governments to Be Creative in Boosting Regional Own-Source Revenue

Home Affairs Minister Muhammad Tito Karnavian has reminded local governments to be more creative in boosting regional own-source revenue (PAD). He made this statement while delivering guidance at the Deliberation on Development Planning for the North Sulawesi Provincial Government’s Work Plan (RKPD) for 2027, held at the Mapalus Building in the North Sulawesi Governor’s Office on Thursday (9/4/2026). On that occasion, Tito highlighted the high fiscal dependence of local governments on the central government. He explained that most areas in North Sulawesi have a relatively small share of PAD compared to central transfer funds. “If you only rely on this budget (central transfer funds), it will be tough,” he said in a written statement received by Kompas.com. In several regions, personnel spending even reaches more than 50 percent of the total budget, thus severely limiting fiscal space for development. He emphasised that the mindset of local government apparatus needs to change. So far, the bureaucracy has tended to focus only on spending without considering efforts to increase revenue. Therefore, Tito encouraged regional heads to have an entrepreneurial mindset in managing local finances. He stated that the basic principle of financial management must ensure that revenue is greater than expenditure. Furthermore, Tito outlined several steps that regions can take in managing budgets, including increasing PAD. First, carrying out spending efficiency, particularly operational spending such as official travel, meetings, and non-priority activities. Second, tapping new revenue sources without burdening small communities. Tito also encouraged local governments to revitalise the private sector through ease of investment and permitting. One effort that can be done is building a Public Service Mall (MPP) to accelerate business licensing processes. “There is the Indonesian Chamber of Commerce and Industry (Kadin), there is the Indonesian Employers Association (Apindo), invite them to discuss to revitalise the private sector. Investment doesn’t have to be from abroad, it can be domestic too, even local,” he explained.