Intergovernmental Relations and Decentralization in Indonesia: New Arrangements and Their Impacts on Local Welfare

The paper elaborates major issues related to the implementation of the decentralization policy in Indonesia.The analysis of the paper suggests that an increased responsibility of public services to local governments has not given a significant contribution to the improvement of local welfare. This could be a result of local government behavior which among others have not prioritized their budget according to public priorities. Further results also suggest a possibility of a lack of working synergy between the central and local governments in the era of decentralization. Problems related to the implementation of decentralization could result from the adoption of concurrent responsibilities,which not only have a long delay on the availability of supporting regulations, but also require a vast amount of techinical regulatiosn clarifying responsibilities among the levels of the government. The lack of these technical regulations, such as the availabiltiy of minimum standard of service for each responsibility, could restraint the efficiency and effectiveness of fiscal decentralization policy. Some improvements are proposed in this paper on the area of regulations, institutions and planning mechanism.