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Fiscal Transfers to Regional Governments in Indonesia

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  • Fadliya
  • Ross H. McLeod

Abstract

This paper examines the design of the fiscal 'equalisation', or 'balancing', arrangements introduced in Indonesia in 2001, when many functions were devolved from the central to regional governments. This new and needlessly complex system of fiscal transfers was introduced hurriedly, and lacked clarity as to the objectives it was intended to serve, resulting in a number of seemingly undesirable outcomes. One such is the fragmentation of the Indonesian polity through widespread splitting of provinces and districts. Another is that there are huge differences among jurisdictions in the levels of per capita transfers, implying that recipient governments end up with vastly differing capacities to provide services such as education and health to their citizens. Although the relevant law and regulations have already been modified to some extent, the changes fall well short of the far-reaching adjustments needed if the scheme is to serve Indonesia's needs into the future.

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File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2010/wp_econ_2010_14.pdf
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Bibliographic Info

Paper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2010-14.

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Length: 39 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:pas:papers:2010-14

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Related research

Keywords: decentralisation; fiscal transfers; regional autonomy;

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References

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  1. Christopher Silver & Iwan Azis & Larry Schroeder, 2001. "Intergovernmental Transfers And Decentralisation In Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 37(3), pages 345-362.
  2. Fitria Fitrani & Bert Hofman & Kai Kaiser, 2005. "Unity in diversity? The creation of new local governments in a decentralising Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(1), pages 57-79.
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Cited by:
  1. McCarthy, John F. & Gillespie, Piers & Zen, Zahari, 2012. "Swimming Upstream: Local Indonesian Production Networks in “Globalized” Palm Oil Production," World Development, Elsevier, vol. 40(3), pages 555-569.
  2. Shah, Anwar & Qibthiyyah, Riatu & Dita, Astrid, 2012. "General purpose central-provincial-local transfers (DAU) in Indonesia : from gap filling to ensuring fair access to essential public services for all," Policy Research Working Paper Series 6075, The World Bank.

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