Regions need guidelines for DAU funds

The Jakarta Post, Jakarta

Administrations in the provinces and regencies need to be equipped with guidelines to follow so they know how to use the central government's General Allocation Funds (DAU) in an effective manner, according to an expert.

Ahmad Syakhroza of the University of Indonesia said on Tuesday that many local governments had used the funds mostly on routine expenditures such as salaries, thus neglecting infrastructure development or other economic and social programs.

"Such a huge amount of money is not effective if it is only used for routine expenditures," said Ahmad, who is also a consultant for a number of regional governments.

He said that the guidelines, preferably designed by the central government, would be useful for new governments and lawmakers in the outer regions.

The local administrations are expected to get more DAU funds starting in 2008, as the recently endorsed Intergovernmental Fiscal Balance Law, calls for the DAU portion to be increased to 26 percent of the annual state budget's domestic revenue, up from 25 percent currently. For 2004, the DAU has been earmarked at Rp 88.1 trillion.

The central government provides the funds to help regional governments finance a greater portion of their own fiscal needs following the implementation for the Autonomy Law in 1999. The central government also provides Special Allocation Funds (DAK) to help finance social and economic development programs in the regions.

Ahmad said despite the availability of the DAK funds, the regional government must also commit part of the DAU funds for development programs to help accelerate economic growth in their respective areas.

Many provinces and regencies in the country, particularly outside of Java, have lagged behind in terms of overall development.

"After all, the essence of a government is to ensure welfare for its people," Ahmad said.