Statement of the Government of Indonesia on Decentralization
Surjadi Soedirdja,
The Minister of Home and Regional Autonomy Affairs
Mr. Chairman,
Your Excellencies,
Distinguished Delegates from the CGI countries,
Ladies and Gentlemen.
I am honored to speak to you on this topic. Decentralization is a national effort and I am pleased
that as the Minister responsible for coordinating the implementation of the decentralization
program, I have received tremendous support and understanding from my cabinet colleagues and
staffs. I wish to acknowledge and appreciate their support. I can commit that our team,
comprising colleagues and staff from several ministries and agencies, supported by donors are
working closely to meet the dateline for the implementation of the decentralization program. I wish
to acknowledge everyone's dedication and effort in this difficult and historical exercise.
Ladies and Gentlemen.
We are less than three months away from a momentous change in the administrative system of
Indonesia. The government of Indonesia enacted Law no. 22 of 1999 on Regional Government
Administration and Law no. 25 of 1999 on Financial Balance between Central and Regional
Government. The laws call for devolution of public service responsibilities to districts and cities in
Indonesia. The central government and provinces maintain the role of setting policies and service
delivery standards. On the fiscal side, decentralization should equalize fiscal capacity between
central and regions as well as across country, based on objective indicators of needs. We
consider that the decentralization process is a great opportunity. to involve local communities in
their development and will in turn improve the welfare of the nation.
'Decentralization' is not a slogan for Indonesia. Under Law No. 5 1974 on Basic Principles on
Local Government, we had introduced the concept of 'de-concentration' and decentralization. We
have attempted to devolve responsibilities to the regions such as in education, health and public
works. The results were mixed, with the more capable regional governments implementing the
programs more successfully than others.
Our program for decentralization is now enshrined in the Laws and will be implemented by next
January. Though we expect to face many challenges, we cannot reverse, retract or postpone its
implementation. The laws have provided for improved revenue sharing with the regions and
increased responsibilities to manage their own affairs. This meets a key democratic principle; that
of equipping and empowering regions to manage their own affairs and respond to the needs of
the people who elected them directly through their own democratic local election process.
Several countries have introduced decentralization, some successfully and others continue to
struggle with their implementation. We should not shy away from attempting this bold move just
because other countries have encountered problems. We are grateful that Germany, Canada,
Australia, US and multilateral institutions are assisting us and sharing their experience. We look
to their support during the implementation phase of this program.
Ladies and Gentlemen,
In the design of our fiscal decentralization program, we are guided by the principle of fiscal
prudence. We have earlier heard from the Coordinating Minister for Economic Affairs and Minister
of Finance and several other speakers that we are still recovering from our economic crisis.
Therefore, our program design has taken into consideration measures to ensure disclosures and
accountability in the use of fiscal resources by the regions.
I like to be candid and highlight several concerns regarding decentralization. I believe this is
necessary, as we would like to acknowledge these difficulties upfront so that we can be better
prepared to address them.
A key concern and uppermost in our minds and yours is the issue on potential improper use of
resources transferred to the regions. Under Law No. 25, we will be transferring at least 25 per
cent of central government domestic revenue to the regions. In addition, we have introduced a
revenue sharing formula with the regions for revenue from their natural resources as well as
formula for grant allocation. We have submitted to the Parliament a revision of the law number
18/1997 on Local Tax to provide the opportunity to local government to collect additional
revenues. We will be assisting local parliaments to put in place measures to ensure proper
monitoring and accountability for the use of the revenue. We would also welcome donors support
to enhance the regional governments' capacity in enhancing their disclosure and accountability
practices.
An issue that has been raised often is on the authority of regional governments to borrow directly
from within or from outside the country. We have drafted regional borrowing regulation and the
draft ensures that the central government will continue to be responsible for borrowings from the
external sources.
Another concern is on quality of delivery of social services. On this, we are coordinating with the
sector ministries to introduce minimum service standards. This will enable the regional parliament
and community service organizations to monitor the performance of the delivery of the social
services.
We are aware of the challenges in coordinating the implementation and monitoring of this
complex program. We have established a Regional Autonomy Advisory Council (RAAC/DPOD)
supported by a full time secretariat. This council comprises ministers responsible for regional
autonomy and administrative reforms, BAPPENAS and local government associations (provincial,
districts and municipalities) and regional representatives. In addition, an implementation
coordinating team has been set up to formulate guidelines and had held several consultative
session with regions to seek confirmation on work plan and time frame. This team is also be
responsible for dispute resolution during the implementation.
I would now like to address the issue on the civil servants. It is not an easy task to re-organize a
largely centralized civil service to respond to decentralization. Our bureaucracy, like most other
countries, is rigid and inflexible. However, we are working closely with our Agency for Civil
Service Administration (BKN) to manage the smooth transfer of civil servants to the regions. As a
start, civil servants who are already serving the regional authorities will be integrated into the
regional civil service. For the civil servants at the central level, plans are being finalized for their
eventual transfer to the regions.
Ladies and Gentlemen,
We are embarking on a bold initiative in January. We believe that given the complexities, the
diversity and archipelago nature of our country, it is the best approach for us in responding
effectively to regional and local desires and aspirations. The process of decentralization, by any
standard will always be difficult and probably more so in our nation where centralized
administration has been entrenched since our independence.
The implementation of decentralization in January can be considered as the 'installation' phase.
During this phase, we will focus on governance and capacity building for the regions. As
decentralization takes 'root', we would be consolidating and broaden our decentralization efforts.
The donor community, the IMF, World Bank, the Asian Development Bank, UNDP, Germany, the
Netherlands, Australia, US and several others have been assisting us and passing on their
experience in best practices in decentralization. We will continue to look to you for assistance in
the implementation soon. It is now more crucial that we have the institutional capacity, human
resources and the resolve to take on all the challenges that we expect to face by next year.
We will continue to need your support through this critical phase of our decentralization program.