Robert Go, Jakarta – The new revenue-sharing formula between Jakarta and regional governments presents a medium-term Pandora's box, but its immediate effect is the reduction of the central government's ability to jumpstart the economy at the national level.

The 74.9 trillion rupiah (S$16 billion) plan will take effect next January and is aimed at quelling separatist sentiments in some of the country's resource-rich areas, which have protested against the siphoning off of revenues from local constituents to Jakarta for decades. "The government will focus on fiscal decentralisation as a way to avoid national disintegration," said Coordinating Economics Minister Dr Rizal Ramli.

Finance Minister Prijadi Praptosuhardjo similarly indicated on Sunday night that regional governments would have more authority to determine their fiscal agendas and oversee development at the local level.

The plan, called Balanced Fund in the government's budget proposal to Parliament, features an 18.3-trillion-rupiah Revenue Sharing Plan that will reward resource-rich regions such as Aceh, West Papua and East Kalimantan.

The bulk of the programme, the 56-trillion-rupiah General Allocation Fund, will finance development programmes and routine governmental expenses.

But critics voiced concerns over the programme's practicality and focused their questions on the regional administrations' ability to use their new authority in a transparent and accountable fashion.

"The focus for this Budget is in guarding social stability, but as many of the regulations governing regional autonomy is not yet clear, the potential for corruption and other violations is substantial," said Dr Sri Adiningsih, an economist from Gadjah Mada University.

"For the central government, handing off what amounts to 25 per cent of its yearly budget to regional administrators means less flexibility to spend on economic recovery," she added.

A foreign banker based in Jakarta also warned: "The government can't stop at transferring more money. It has to set clear guidelines as to how the money should be used and monitor the entire process."

Even the International Monetary Fund and the World Bank, two key supporters of Indonesia's struggle to climb out of the crisis, have suggested that implementing fiscal decentralisation presents a major challenge to the government.

Under current and past arrangements, Jakarta oversees all development programmes in the regions and manages revenues from exploitation of natural resources. But since the resignation of former President Suharto in 1998 and the relaxing of control by the central government, regional constituents have openly accused Jakarta of stealing local revenues.

The regional autonomy plan was hatched by President B. J. Habibie's administration and finalised during President Abdurrahman Wahid's term.

The following are the key figures and measures of the budget:

• Total expenditure will be 295 trillion rupiah (S$62 billion) while total revenue is expected to be 243 trillion rupiah.
• The largest single spending item is the 74.9 trillion rupiah funding for provincial and local governments to give them more economic autonomy and responsibility.
• Fuel prices will be raised an extra 20 per cent from April as the government continues to cut a range of costly fuel subsidies.
• Total subsidies in 2001 will be 48.27 trillion rupiah, covering a range of essential commodities, but mostly fuel – including kerosene, which many Indonesians use for cooking and lighting.