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Intergovernmental Transfers And Decentralisation In Indonesia

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  • Christopher Silver
  • Iwan Azis
  • Larry Schroeder

Abstract

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.

Suggested Citation

  • 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.
    • Handle: RePEc:taf:bindes:v:37:y:2001:i:3:p:345-362
    DOI: 10.1080/00074910152669172
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    References listed on IDEAS

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    1. Schroeder, Larry, 1988. "Intergovernmental grants in developing countries," Policy Research Working Paper Series 38, The World Bank.
    2. Millidge Walker, 1991. "DECENTRALIZED PLANNING FOR SUSTAINABLE DEVELOPMENT: The Case of Indonesia," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 3(1), pages 94-102, January.
    3. 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.
    4. Blane Lewis, 2001. "The New Indonesian Equalisation Transfer," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 37(3), pages 325-343.
    5. 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.
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    Cited by:

    1. Takahiro Akita & Awaludin Aji Riadi & Ali Rizal, 2019. "Fiscal Disparities in Indonesia under Decentralization: To What Extent Has General Allocation Grant(DAU) Equalized Fiscal Revenues?," Working Papers EMS_2019_05, Research Institute, International University of Japan.
    2. Brehm, Margaret E. & Brehm, Paul A. & Cassidy, Alecia & Cassidy, Traviss, 2024. "Resource Extraction, Revenue Sharing, and Growth," MPRA Paper 121428, University Library of Munich, Germany.
    3. World Bank, 2003. "Decentralizing Indonesia : A Regional Public Expenditure Review Overview Report," World Bank Publications - Reports 14632, The World Bank Group.
    4. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2022. "On the effects of intergovernmental grants: a survey," Working Papers. Collection A: Public economics, governance and decentralization 2204, Universidade de Vigo, GEN - Governance and Economics research Network.
    5. Ludovick Leon Shirima, 2006. "Fiscal Equalization Formula Design for the Republic of Rwanda," EcoMod2006 272100083, EcoMod.
    6. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2024. "On the effects of intergovernmental grants: a survey," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 856-908, June.
    7. Primandita Fitriandi & Makoto Kakinaka & Koji Kotani, 2014. "Foreign direct investment and infrastructure development in Indonesia: Evidence from province level data," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 4(1), pages 79-94, January.
    8. Fadliya & Ross H. McLeod, 2010. "Fiscal Transfers to Regional Governments in Indonesia," Departmental Working Papers 2010-14, The Australian National University, Arndt-Corden Department of Economics.
    9. Blane Lewis, 2001. "The New Indonesian Equalisation Transfer," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 37(3), pages 325-343.
    10. Green, Keith, 2005. "Decentralization and good governance: The case of Indonesia," MPRA Paper 18097, University Library of Munich, Germany.
    11. Takahiro Akita & Sachiko Miyata, 2018. "Spatial Inequalities in Indonesia, 1996–2010: A Hierarchical Decomposition Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 138(3), pages 829-852, August.
    12. Takahiro Akita & Awaludin Aji Riadi & Ali Rizal, 2021. "Fiscal disparities in Indonesia in the decentralization era: Does general allocation fund equalize fiscal revenues?," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(6), pages 1842-1865, December.
    13. Azis Iwan J. & Pratama Alvin, 2020. "Polarization and Local Conflicts in Post Decentralization Indonesia," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 26(2), pages 1-28, May.

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