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Intergovernmental Transfers And Decentralisation In Indonesia

  • Christopher Silver
  • Iwan Azis
  • Larry Schroeder

A fundamental restructuring of intergovernmental relations involving decentralisation and expanded autonomy for provincial and local governments is under way in Indonesia. This paper explores the intergovernmental financial system that preceded the new General Allocation Fund (DAU), with particular attention to the old Inpres development grants. Like Inpres, the DAU attempts to address national development objectives, and can be seen as a logical consequence of reform efforts in intergovernmental finance that began long before the demise of the New Order government in 1998. The use of earmarked Inpres grants enabled the central government to ensure that key sectors such as roads, public health and education received adequate attention throughout Indonesia's diverse regions. Local governments' experience with Inpres should help in implementation of the DAU, yet Law 25/1999—which restructures fiscal relations between the various levels of government—may actually have increased local reliance on the central government.

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Article provided by Taylor & Francis Journals in its journal Bulletin of Indonesian Economic Studies.

Volume (Year): 37 (2001)
Issue (Month): 3 ()
Pages: 345-362

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Handle: RePEc:taf:bindes:v:37:y:2001:i:3:p:345-362
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  1. 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.
  2. Beier, Christoph & Ferrazzi, Gabriele, 1998. "Fiscal decentralization in Indonesia: A comment on smoke and lewis," World Development, Elsevier, vol. 26(12), pages 2201-2211, December.
  3. Schroeder, Larry, 1988. "Intergovernmental grants in developing countries," Policy Research Working Paper Series 38, The World Bank.
  4. Blane Lewis, 2001. "The New Indonesian Equalisation Transfer," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 37(3), pages 325-343.
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