Adam Schwarz – It's not as if the administration of Indonesia's President Abdurrahman Wahid doesn't have enough on its plate already. Unfortunately for the beleaguered Mr. Wahid, his plate is about to get more crowded. In less than three months the deadline arrives for Jakarta to begin implementing one of the most ambitious political projects ever attempted: the rapid devolution of political and economic power from the capital Jakarta to hundreds of provinces and districts across the vast Indonesian archipelago, home to 220 million people.
The task is certain to be every bit as daunting as recovering from the political upheavals that followed the ouster of former President Suharto in May 1998, or recouping the economic ground lost in the dark days of the financial crisis. The risks involved in the decentralization campaign are huge. The World Bank, not given to hyperbole, calls it a make-or-break issue for Indonesia. Given these stakes, one might think the government in Jakarta would be intently focused on the issue. Worryingly, it isn't.
As it stands, the plan is to extend wide-ranging political powers and revenue-collecting rights to the country's 346 districts and municipalities beginning in January. Although the country's 26 provinces are not the principal targets of the decentralization program, they too stand to be further empowered. (Little wonder, then, that Jakarta has already received 68 applications for new districts and eight applications for new provinces.) In theory, decentralization is a fine idea. Most everyone agrees that the current heavy concentration of power in Jakarta is neither politically viable nor economically efficient. The devil, as always, is in the details. Former President B.J. Habibie passed two laws in mid-1999, which set the decentralization process in motion. Among other provisions, it gave resource-rich provinces the right to keep much higher percentages of revenues generated locally: 30% of after-tax revenues from gas, 15% of after-tax revenues from oil, 80% of after-tax revenues from forestry and general mining, and so on.
Partly because he was trying to curry favor from political elites outside the island of Java, Mr. Habibie insisted on giving the decentralization program an absurdly short implementation schedule of just two years. This was despite an acute shortage of human-resource talent and functioning institutions in the regions to which power is supposed to be devolved.
Mr. Wahid, who inherited these laws, was in a tough spot. He had to choose between the economic risks of implementing the laws on schedule, which raises the possibility of tremendous fiscal strain on Jakarta and the lack of service delivery across the country. Or he could choose the political risk of delaying implementation, and incur the wrath of regional elites already skeptical of Jakarta's intentions. In some areas, it is feared, delay could even result in heightened separatist sentiment.
Much to the chagrin of many mainstream economists and international donor agencies, Mr. Wahid has decided the political risk is the greater of the two and thus is intent on forging ahead with Mr. Habibie's timetable. Mr. Wahid's recently sacked finance minister, Bambang Sudibyo, put the case in particularly stark terms at a conference two weeks ago. "We have to start regional autonomy in January 2001," he said. "We are in the process of rotting and, if we don't do something, we will break up." Oddly, in the same cabinet reshuffle in which Mr. Sudibyo lost his job, the home affairs post was not given to Ryaas Rashid, the cabinet minister most closely associated with the decentralization campaign.
Some concluded that Mr. Rashid's removal from the decentralization brief implied a slowdown in the process. But in an interview in late September, Mr. Wahid firmly denied this was the case.
Yet even at this late date, it remains far from clear how decentralization will work in practice. It is not clear just what powers the districts are supposed to receive, or quite what their responsibilities are, or how the district governments will interact with provincial administrations. There are no procedures for arbitrating disputes between districts.
Although the districts are not allowed to pass laws that violate national laws or Indonesia's international treaty commitments, it is not obvious how Jakarta can stop them, or how it would go about disciplining wayward districts. Foreign investors, especially those active in regions outside Java, are justifiably nervous.
Only a handful of Indonesian provinces, most with abundant natural resources, are economically self-sustaining. Unless Jakarta is able to collect enough tax revenue from the resource-rich provinces and distribute it efficiently to the resource-poor provinces, the result is likely to be a sharply widening wealth gap. And that, in turn, may prove as harmful to Indonesian national unity as an excessive concentration of power in Jakarta.
The bureaucratic and logistical obstacles still to be overcome are mind-boggling. Experts say some 1,200 pieces of legislation need to be changed to conform to the decentralization laws. As many as 100,000 civil servants (and possibly many more) will have to physically move from Jakarta to various provinces and districts.
The central-government bureaucracy in Jakarta will have to be downsized dramatically to avoid a major, and expensive, overlap with provincial and district-level administrations. None of this has yet begun in a serious way. In fact, there are rising concerns that redundant workers in Jakarta-based ministries will simply be reassigned to work in state-owned enterprises. This could further stretch Jakarta's cash-strapped treasury and inevitably slow down the privatization program.
Jakarta is facing the real danger of getting the worst of both worlds: A badly implemented decentralization program will achieve neither economic efficiency nor political harmony. Common sense suggests that what is needed is a prudent scaling back of the over-ambitious implementation schedules laid out in the 1999 laws.
There is still a lot of homework to be done before decentralization can be attempted with a reasonable hope of success. The homework includes both a readying of the political ground as well as putting the adequate bureaucratic structures in place in the provinces and districts.
Indonesia's military continues to be profoundly concerned that a hurried, poorly prepared decentralization program is more likely to rip the country apart than bind it together. Mr. Wahid's vice-president, Megawati Sukarnoputri, is said to share the military's unease on this issue. A lack of support from the military and Ms. Megawati's party, the largest in parliament, will make it that much harder for the decentralization campaign to succeed on its current implementation timetable.
There is still a way for Jakarta to push back the implementation targets without irreparably alienating regional elites. But there will need to be a much more robust series of dialogues between Jakarta and the regional governments on the rights and duties of each. The key will be keeping the districts and provinces convinced that Jakarta remains committed to the decentralization of power, and that a delay in implementation is just a delay, not an indefinite postponement.
This is a task that cannot be left to the bureaucrats in Jakarta working on the decentralization program. This is fundamentally a task of political leadership and it falls to Mr. Wahid to provide it. There is little time to waste.
[Adam Schwarz is the editor-in-chief of AsiaWise.com, a Hong Kong-based finance and investment Web site.]