Jakarta – An unclear division of responsibilities between local and central government is hampering both from reaping more benefits from fiscal decentralization, international experts said Thursday.
"On the expenditure side, fiscal decentralization here is radical and spontaneous, as it was the result of a regime fall, but local government responsibilities have been only rather vaguely defined," Motohiro Sato of Hitotsubashi University, Japan, said in his presentation to an international seminar in Jakarta.
Besides the question of responsibility, Sato also highlighted the fact that many local governments remained almost totally dependent on central government transfers.
He added that the revenue-sharing arrangements, which exacerbated fiscal imbalances in many regions, needed immediate attention.
He said that the two laws that shaped decentralization were drafted in a relatively short time back in 1999, in the absence of proper coordination between the Home Affairs Ministry and Finance Ministry.
Sato argued that the lack of clarity led to constant haggling and disputes over who was entitled to what as between the central and local governments, which, in turn, led to inconsistency and conflict.
In addition, he said, the process of defining and establishing minimum service standards had long been delayed.
"In short, it is not yet clear or agreed which level of government should be in charge of which services or functions, and what minimums should be guaranteed," Sato said.
Speaking earlier at the seminar, another expert had claimed that six years of decentralization in Indonesia had been a total failure.
"If a percentage can truly signify success, having only two out of 33 provinces in the country managing positive GDP growth after decentralization would indeed constitute a total failure.
"The Indonesian growth experience after decentralization has been disappointing," said Iwan Jaya Azis, a professor at Cornell University, while presenting figures based on Central Statistics Agency (BPS) data.
The BPS statistics for regional growth in each year between 2001 and 2006 show that only two out of 33 provinces in the archipelago experienced increases in their regional GDP growth.
Some of the reasons for the disappointing trend, Iwan explained, were the rapacious collection of unnecessary fees and levies, and the misuse and siphoning off of funds.
As for the central government, Iwan said, it seldom realized the major repercussions its national policies could have on local growth, or on the capacity of local governments to foster growth.
"A case in point is tight monetary policy, which acted as an incentive for local governments to invest some of their development funds in interest-bearing assets, such as Bank Indonesia Certificates (SBI)," he said.