WEEKLY ASSIGNMENT 2

“GOVERNMENTAL SYSTEM IN INDONESIA”

STATE AND REGIONAL FINANCE

ARRANGE BY :

1. SHABINA HUMAIRA MUHARDI (2210532039)

2. MAHRAINI SALSABILLA ASRI S. (2210533047)
3. TESSA PUTRI FAHIRA (2210533061)
4. ADEK SRI WAHYUNI (2210533068)
5. INDAH SALSABILA OKSALIMA (2210533070)
6. KHAIRUNISSA YUMNA HANAN (2210533078)

ACCOUNTING DEPARTMENT
ECONOMICS AND BUSINESS FACULTY
UNIVERSITAS ANDALAS
2023/2024

"Characteristics of the First & Second Waves of Decentralization in Indonesia"

 Since Indonesia gained independence in 1945, the government structure has
undergone numerous changes from what was once anticipated to be a more
decentralized one. The growth of regional autonomy is a key component of this
transition. Following its 1945 liberation from Dutch colonialism, Indonesia opted for
a structure of administration that tended to be centralized. While regional
administrations have little autonomy, the central government has extensive authority
over decision-making. This centralization persisted for many years after that.
With the reform movement's overthrow of the New Order administration in 1998,
significant changes in Indonesian government history began (Baidhowah, 2022). The
development of regional autonomy was one of this reform's most significant
outcomes. The central government understood that city governments needed more
authority to handle regional concerns.
The Regional Autonomy Law was adopted by Indonesia in 1999. Indonesia saw
its first wave of regional autonomy with the adoption of Regional Government Law
No. 22 of 1999. A big step toward decentralization has been made with this
constitution. This law establishes the legal foundation for the formation of
independent regional administrations and grants regions the power to manage the
majority of their own affairs, including planning for development, health care, and
education (Baidhowah, 2022). Although the initial wave of regional autonomy
resulted in positive achievements, a number of problems eventually surfaced that
required resolution. Law No. 32 of 2004 is the laws that's referenced within the
second wave of alterations. This law's reason is to reinforce the decentralization
handle by giving nearby governments more independence (Kai, Yuhki and Krislert,
2016).

1. Characteristics of the first wave of decentralization in Indonesia and the

negative implications of the first wave.
The first wave of decentralization in Indonesia began in the late 1990s and
was a significant shift in the country's governance structure. This period brought
about several key characteristics, along with both positive and negative implications.
Below, I'll outline the characteristics and discuss some of the negative implications of
this decentralization wave, along with journal sources for reference.
[Link] of the First Wave of Decentralization in Indonesia:
a. Transfer of Authority: The central government transferred substantial political,
administrative, and fiscal authority to regional and local governments. This transfer
aimed to give regions more control over their own affairs.
b. Regional Autonomy: The new decentralization laws aimed to provide a high degree
of regional autonomy. Provincial and district governments gained more control over
decision-making in areas such as education, healthcare, and infrastructure
development.
c. Fiscal Decentralization: Local governments were granted greater control over their
finances, including the ability to collect and manage local taxes and allocate budgets
for development projects.
d. Election of Local Leaders: Direct elections for provincial governors, mayors, and
district heads were introduced. This allowed local populations to choose their leaders,
increasing accountability at the local level.
e. Legal Framework: A new legal framework was established to regulate the
relationship between central and local governments, outlining the division of powers
and responsibilities.

[Link] Implications of the First Wave of Decentralization in Indonesia:

a. Inequality: While decentralization aimed to reduce regional disparities, it had the
unintended consequence of exacerbating economic and social inequalities between
regions. Wealthier regions could generate more revenue, leading to greater disparities
in public service provision and infrastructure development.
b. Corruption: Decentralization opened up new opportunities for corruption at the
local level, as local officials gained control over budgets and contracts. Some local
governments were plagued by corruption scandals.
c. Capacity Issues: Many local governments lacked the capacity to effectively manage
their new responsibilities, including budgeting, planning, and service delivery. This
resulted in inefficiencies and poor public service delivery in some areas.
d. Coordination Challenges: The decentralized system often led to coordination
challenges between different levels of government. Disputes over authority and
resource allocation sometimes hindered effective governance.
e. Service Quality Variations: The quality of public services varied widely across
regions. Some areas improved their services, while others struggled to provide basic
services like education and healthcare.
After a period of government transition, several provincial independence movements,
and demands for greater local government powers, the Indonesian government passed
the Regional Autonomy Policy Law no. 22 of 1999. The regional autonomy policy
was actually only effectively implemented in 2001, which essentially gave a broader
role to local governments in the administration and delivery of public services, in
addition to the fields of defense, security, foreign policy, fiscal and monetary, justice
and religion (Law No. 22/1999). The main objective of regional autonomy policy is to
encourage community empowerment, shape community potential and creativity, and
increase community participation in regional development (Law No. 22/1999). In
addition, regional autonomy aims to bring governance closer to citizens, make public
services more effective and efficient, and restore the character of regions that were
previously too dominated by the central government. (SMERU Research Institute,
2002).

Based on Law No. 23/2014, The following are the 26 obligatory functions and 8
optional functions that have been delegated to local governments :
A. Obligatory Functions
1. Education
2. Health
3. Environment
4. Public works
5. Spatial planning
6. Development planning
7. Housing
8. Youth and sports
9. Capital investment
10. Cooperatives and small and medium enterprises
11. Population and civil registration
12. Employment
13. Food security
14. Women's empowerment and child protection
15. Family planning and family welfare
16. Transportation
 17. Communication and informatics
18. Land
19. National unity and domestic politics
20. Regional autonomy, general government, regional financial
administration, regional apparatus, staffing and coding
21. Community and village empowerment
22. Social
23. Culture
24. Statistics
25. Archives
26. Library.

B. Optional Functions
1. Marine and fisheries
2. Agriculture
3. Forestry
4. Energy and mineral resources
5. Tourism
6. Industry
7. Trade
8. Transmigration

2. Characteristic of the second wave decentralization in Indonesia

Regional development is meant to be accelerated by decentralization and
regional autonomy policies, which are implemented as part of changes in governance
relations between the center and regions. This occurs because decision-making in
administration and public services is made easier and more quickly. This strategy is
carried out in accordance with Law Number 32 of 2004 Concerning Regional
Government; in this case, the regional government has independently handled a
number of tasks and authorities that were previously handled by the central
government (centralization). Other improvements in regional government
administration have been made, such as the harmonization of city and regency
connections with the provinces and the centralization of regional and local affairs.
Features of the second wave of decentralization :

1. Decentralization (autonomous regions)

There are several reasons why Indonesia needs this system, including:

- The life of the nation and state has been very centralized (Jakarta), while
development in several other regions tends to even become the object of
"milk" of the central government.
- Unfair and equitable distribution of wealth.
- The social disparity between one region and another is striking.

With autonomy, a mechanism will be created, where regions can realize a number of
political functions towards the national government, power relations become more
fair so that thus regions will have trust and will eventually be integrated into the
national government.

2. Expansion, deletion, and merger of regions

Based on Law No. 32 of 2004 article 4, regional formation can be in the form of
merging several regions or parts of adjacent regions or dividing from one region into
two or more regions. This expansion can be done after reaching the minimum age of
government administration.

3. Reactivation of the Governor's function as a representative of the government

If in the first wave of decentralization there were no duties and authorities from the
Governor, then in Law No. 32 of 2004 the function of the Governor was re-enacted.
As stipulated in Article 37, the Governor is directly responsible to the president. The
duties and authorities of the Governor based on Article 38, among others:

- Development and supervision of the implementation of district/city local

government;
- Coordination of the implementation of government affairs in provincial and
district / city areas;
- Coordination of guidance and supervision of the implementation of assistance
tasks in provincial and district / city areas.
The efficiency and effectiveness of regional government administration needs to be
improved by paying more attention to aspects of the relationship between government
structure and regional government, regional potential and diversity, and also the rights
and obligations for implementing regional autonomy within the unified state
government administration. Based on article 14 paragraphs 1 and 2 of Law No. 32 of
2004 concerning mandatory and optional affairs district/city governments are divided
into:

1) Mandatory matters that fall under the authority of regional government for districts
or cities are:

1. Development planning and control;

2. Spatial planning, utilization and supervision;
3. Maintaining public order and peace public;
4. Provision of public facilities and infrastructure;
5. Handling the health sector;
6. Implementation of education;
7. Overcoming social problems;
8. Employment services;
9. Facilitating the development of cooperatives, small and medium enterprises;
10. Environmental control;
11. Land services;
12. Population services and civil registration;
13. General government administration services;
14. Investment administration services;
15. Provision of other basic services; and
16. Other mandatory matters mandated by regulations legislation.

(2) Regency or city government affairs which are optional cover government affairs
that actually exist and have the potential to improve community welfare according to
the conditions, characteristics, and superior potential of the region concerned.

In conclusion, in the first wave of decentralization, the legal formation was not very
clear and there were no boundaries, which gave rise to many negative impacts, such
as the emergence of small kings (mayors/regents) who had just experienced power.
However, it is precisely because of this that the division of central and regional
authority becomes clear. After being examined, there are six areas that still have
central authority, namely foreign policy, defense, security, justice, national monetary
and fiscal policy and religion. The remaining thirty-four fields fall under the authority
of regional governments. Then in the second wave of decentralization, the central
government reviewed and supervised the running of regional autonomous
governments by reactivating the function of the governor.

References
Baidhowah, A. R. (2022). "Explaining Decentralization Performance in Indonesia:
Member of Parliament Decision, Political Networks, and Constitution
Amendment." Jurnal Bina Praja, 14(1), pp, 97–109.

Kai, 0., Yuhki, T. and Krislert S. (2016). "Indonesia's Decentralization Experiment:

Motivations, Successes, and Unintended Consequences." ISEAS - Yusof Ishak
Institute, 33(1), pp, 139-156.

Budi, S. (2010). "PELAKSANAAN DESENTRALISASI DAN OTONOMI

DAERAH BERDASARKAN U.U. NO. 32 TAHUN 2004" Media Neliti, 9(1),
pp, 98-99.

Suharno. (2004) "Telaah kritis terhadap Undang-Undang No. 32 Tahun 2004 tentang
Pemerintahan Daerah" Jurnal Civics, 1(2), pp, 170-173.

Constitution 2004, local government, no. 32.4. UU, Indonesia

Constitution 2004, local government, no. 32.37. UU, Indonesia

Constitution 2004, local government, no. 32.38. UU, Indonesia

Muqoyyidin, A. W. (2013). “ Post-reform Regional Expansion and Regional

Autonomy in Indonesia: Concepts, Facts, Empirical and Future
Recommendations.” Darul Ulum Islamic Boarding School University
Jombang, pp, 289-290