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THREE YEARS OF FISCAL DECENTRALIZATION IN INDONESIA : ITS IMPACTS ON REGIONAL ECONOMIC DEVELOPMENT ... - page 3 / 21

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instead the PP used the residual approach that listed only the detailed functions of central and provincial government, and left the rest to local government. As a result, the local government can define their functions at their will. It could be a broad range of function but at the same time, it could be a small range. There are two predicted outcomes generated from this condition, the conflicts of interests between central and local governments, and lower quality of basic public services delivery for the local residents.

The second issue, the formation and amalgamation of new local governments is mostly treated exclusively as the political concerns. Whenever there is formation of new local government, the political flavor and interests are much more dominant than other consideration. It is no secret that the local elites are jockeying for the local executive position through the proposal of new local government formation. The law 22/1999 interpretation seems to fully support the formation without real and binding consequences.

The government regulation (PP) that is supposed to back up the clauses about the formation already described the process in detail with the criteria. However, lack of political willingness at the central government side to manage and control the formation of new local governments caused the high influx of new districts and municipalities at

more than 10% municipalities, it

annual

growth

rate.

Currently,

is not clear if the number will keep

with more growing at

than 410 districts and the same rate after 2004

and how formation

this number of new local

will contribute governments in

to economic efficiency. Indonesia has nothing to

Many argue that the do with the economic

efficiency and more on entertaining the recovery process and acute corruption,

local it is

political interests. With the slow economic quite ironic that Indonesians still give the

opportunity for the formation.

wasting the economic resources and for creating more corruption through There are two obvious wasted economic resources as results of new local

government formation namely the administration system, and the

relatively huge initial investment to set up the local higher dependency of local governments to the

intergovernmental and Mahi (2003) local own revenue

transfer, especially the general purpose grant noted that many new local governments had (PAD) and relied heavily on DAU.

(DAU). Brodjonegoro relatively insignificant

The third issue, the local executive – legislative relationship, becomes one of major obstacles in promoting good governance and effective local administration. The law 22/1999 somehow implied that the local parliament (DPRD) is the most powerful body at the local level. They basically have the authority to hire, evaluate, and fire the head of local executives. Their authority in determining the local budget also seems to be very

powerful. Therefore, the local executive and legislative relationship is not

and conducive one from local resident point of collaboration between them or fight continuously.

view. Each

They could one of them

a productive either make will not be

beneficial for the local resident and the latter even creates

Karanganyar District, central legislative tends to promote the

Jawa.

The collusion

corrupt

behavior, and the

two bupatis (head of district) in between local executive and local legislative tends to be the

major player. suspect in the

There is relieving trend nowadays when many DPRD members become the local corruption cases, and some of them have even stayed in the prison.

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