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THREE YEARS OF FISCAL DECENTRALIZATION IN INDONESIA : ITS IMPACTS ON REGIONAL ECONOMIC DEVELOPMENT ... - page 12 / 21

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equal DAU but it is improving albeit gradually. Some efforts to separate the political influence from DAU allocation should give a hope of more equal allocation based on independent judgement. The central government also improves the natural resources revenue sharing disbursement that could neutralize the restless local governments. On the fiscal sustainability perspective, the central government has relatively managed the debt well so that the proportion for the intergovernmental transfer is higher in APBN. A prudent and cautious national budget management is the key to success but the latest request to increase the DAU portion might have to be observed carefully.

Aside from relatively success stories, the decentralization process could still lead to a

failure if behavior

the local governments and central government are not

in

new

paradigm

of

decentralization.

At

the

local

practicing their proper government side, the

tendency to prioritize local budget potential investors that want to stay

rather than local GRDP will still discourage the away from illegal and excessive charges or levies.

Local

budget

(APBD)

should

be

treated

as

a

local

economic

stimulator

than

the

final

purpose support

itself. Local parliament (DPRD) that, accountability of both local

should share the same spirit and in order to legislative and executive to the local voters

should be promoted, and everyone has to support the first legislative. It it fails, then the accountability mechanism

direct might

election in 2004 for local have to wait another five

years. Accountability of local governments to voters should ensure a service delivery and local government should begin to formulate effective local government that will not spend too much on routine

better basic public how to build an activities. On the

borrowing issue, potential lenders

the that

local they

governments have to convince the central government and are capable in managing the borrowing without jeopardizing

the current fiscal revenue collection and lender.

sustainability. As instrument since it

many agree, will create a

the local borrowing is a best local win-win condition for both borrower

At the end, the success of decentralization process will lie on the central government that designs the process and commits to the implementation. Although it is not visible, there is a tendency that decentralization is not one of priorities of central government. The decentralization activities are already considered as routine activities. It might be a good one if all the process is perfect and smooth, but it is dangerous if everything is not in place yet. That could lead to the impression that the central government is not so serious anymore in promoting decentralization and prefers to go back to old paradigm. Lack of coordination and intense rivalry among central ministries do not help the situation with the impression that the decentralization process is no longer a national interest but a ministry interest. The strong national leadership should handle this matter, and it could start from the amendment process of law 22/1999 and law 25/1999 that seems to go separate ways and it ends up in “tug of war” rather than a vision for decentralization process itself. At the fiscal side, the central government still has to manage the fiscal sustainability that has effects on decentralization process and most importantly, Indonesians should avoid a large scale of economic crisis due to local government behavior in borrowing and managing their budgets as in the case of Brazil.

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