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The New Indonesian Equalisation Transfer

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  • Blane Lewis

Abstract

This paper examines the intergovernmental general purpose equalisation transfer (DAU) that began operating in 2001. First, a description of the mechanism highlights the significant distributional role played by the 'balancing factor' relative to the 'formula', and the key differences in distribution procedures for districts/municipalities and provinces. Second, the approach and methods are empirically analysed and evaluated. The sums available to the DAU appear more than sufficient to meet regional governments' net expenditure requirements, at least in aggregate, and given some caveats. The allocation mechanism has some design flaws in both its structure and the methods it uses to operationalise expenditure needs and fiscal capacity. Third, an examination of the 'equalising' effects of the transfer scheme shows that conclusions about equalisation depend very much on how one defines and operationalises the concept; policy makers need to be clear about what they want the DAU to accomplish in respect of equalisation.

Suggested Citation

  • Blane Lewis, 2001. "The New Indonesian Equalisation Transfer," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 37(3), pages 325-343.
  • Handle: RePEc:taf:bindes:v:37:y:2001:i:3:p:325-343
    DOI: 10.1080/00074910152669163
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    References listed on IDEAS

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    1. Anne Booth, 1999. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 35(3), pages 3-38.
    2. Anwar Shah & Zia Qureshi & Amaresh Bagchi & Brian Binder & Heng-fu Zou, 1994. "Intergovernmental fiscal relations in Indonesia: issues and reform options," CEMA Working Papers 474, China Economics and Management Academy, Central University of Finance and Economics.
    3. 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.
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    Citations

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    Cited by:

    1. 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.
    2. World Bank, 2003. "Decentralizing Indonesia : A Regional Public Expenditure Review Overview Report," World Bank Other Operational Studies 14632, The World Bank.
    3. 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.
    4. Lewis, Blane D., 2003. "Local Government Borrowing and Repayment in Indonesia: Does Fiscal Capacity Matter?," World Development, Elsevier, vol. 31(6), pages 1047-1063, June.
    5. Hofman, Bert & Kadjatmiko & Kaiser, Kai & Suharnoko Sjahrir, Bambang, 2006. "Evaluating fiscal equalization in Indonesia," Policy Research Working Paper Series 3911, The World Bank.
    6. Earth Innovation Institute, 2015. "Central Kalimantan Land Governance Assessment," World Bank Other Operational Studies 28514, The World Bank.
    7. Bambang Brodjonegoro & Jorge Martinez-Vazquez, 2004. "An Analysis of Indonesia's Transfer System: Recent Performance and Future Prospects," Chapters,in: Reforming Intergovernmental Fiscal Relations and the Rebuilding of Indonesia, chapter 8 Edward Elgar Publishing.
    8. Roger Montgomery & Sudarno Sumarto & Sulton Mawardi & Syaikhu Usman & Nina Toyamah & Vita Febriany & John Strain, 2002. "Deregulation Of Indonesia'S Interregional Agricultural Trade," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 38(1), pages 93-117.
    9. Paul Deuster, 2002. "Survey Of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 38(1), pages 5-37.
    10. M A B Siddique & Heru Wibowo & Yanrui Wu, 2014. "Fiscal Decentralisation and Inequality in Indonesia: 1999-2008," Economics Discussion / Working Papers 14-22, The University of Western Australia, Department of Economics.
    11. Mari Pangestu & Miranda Swaray Goeltom, 2001. "Survey Of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 37(2), pages 141-171.
    12. Reza Siregar, 2001. "Survey Of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 37(3), pages 277-303.

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