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Power to the people?

Source
Straits Times - January 7, 2001

Jakarta – Question: What is the going rate for elected local office in most of Indonesia today? Answer: At least 1 billion rupiah (S$180,000).

But those aspiring to be provincial governors, city mayors or bupatis (district chiefs) are advised to offer their electorates – the local legislative chambers – more since most members collect from all candidates and the highest bidder wins.

Be warned too that there are no refunds for unsuccessful bids, as one mayoral candidate for Surabaya discovered last year when his nomination was rejected on discovery of a previous criminal record.

"It's all about money now. We didn't think of this when we wrote the laws," laments former deputy minister for regional autonomy Afan Gaffar, a member of the Team Seven which wrote Indonesia's political and administrative decentralisation laws back in 1998- 99.

Professor Afan, a political scientist specialising in governance issues, can cite cases of bribery and manipulation of local elections in most of Indonesia's big cities in the months since the country's first free and relatively clean General Election in June 1999.

Even in Jakarta, where a vociferous civil society movement is supposed to make official graft a rarity, members of the district council allegedly demanded 100 million rupiah each from the city governor to approve his annual accountability speech last year, he says. They also claimed extra recompense upfront – all- expenses-paid "study trips" abroad with no real defined objective but plenty of time in shopping malls.

The regional parliament in Prof Afan's hometown, Yogyakarta, also voted themselves extra holiday allowances last month. "And what did they give the local people? Nothing."

Beginning this year, these district and provincial legislators are supposed to be the main bulwark against the establishment of local fiefdoms.

They are to ensure that newly-empowered community administrators – mayors and bupatis – spend state monies and local taxes according to the perceived preferences and needs of their constituents, now that they are not governed by diktat of a bureaucrat sitting in faraway Jakarta with notions of some five- year development goals.

(Aceh and Irian Jaya, with their local separatist movements, will, however, have to wait for May for their Big Bang. The national parliament has till then to pass special autonomy laws for these resource-rich provinces at either end of the archipelago.)

Customer orientation, transparency and accountability are to be the new buzzwords of regional autonomy, not asal bapak senang (keeping the boss happy).

Yet anecdotal evidence suggests that in reality, korupsi pindah ke daerah (corruption moves to the regions), self-aggrandisement and maximising the benefits of officials will intensify instead.

Award-winning environment activist Emmy Halfid, who has much experience battling local officials, is pessimistic life for the little man will improve.

"Any improvement we will likely see for a while will be the dramatic increase of the bupati's income. Bupatis now have incredible power and the local government officials and parliament, instead of working to serve the public, will be too busy amassing wealth.

"Autonomy should give the public more say because the power of the state stops at the district level. Instead what we are seeing now is that autonomy belongs to the local government, giving the public very little power."

As they say, democracy benefits the powerful and the wealthy; the poor and voiceless simply get poorer.

Decentralisation inevitable

In theory, as a system of governance, the all-encompassing decentralisation exercise Indonesia has now embarked on – in political, fiscal and administrative matters – is a quantum leap into grassroots democracy.

In practice, decentralising key authorities and functions of government to the regions is inevitable in a nation as physically far-flung, diverse economically and ethnically, and disparate in terms of local historical experience and preferences as Indonesia is. The alternative to separatism was centralised military rule. And even Mr Suharto's version broke down after 32 years of refinement.

With the pendulum suddenly swinging in the opposite direction, the mandate-starved, populist-minded Habibie government rushed to put in place a legal framework allowing the people to play a bigger role in decision-making as a means to calm unrest, while keeping the nation intact. The problem is that Indonesia is trying to do at one go what most other countries took years to implement, stage by stage.

To be effective, decentralisation choices have to affect political accountability, fiscal soundness and administrative capacity to deliver services without increasing moral hazard or macro-economic instability and ultimately result in increased prosperity and public welfare of the citizens.

If this multi-layered system of arrangements is what one World Bank analyst calls the Souffle Theory, then Indonesia is trying to microwave a souffle before whipping its ingredients into sufficient sturdiness or ascertaining the capacity wattage of its machine.

And perhaps most trying, all this cooking is taking place in a bare kitchen, when the country is still trying to recover from its monetary crisis, the rule of law is almost non-existent and there has been a last-minute change of sous chefs with the removal of chief policy designer Ryaas Rasyid from the Regional Autonomy portfolio last August.

Now Administrative Reform Minister, Prof Ryaas tendered his resignation last week, citing the government's management of the decentralisation process as his main grievance.

No attention to details

The two laws which form the basis of the current autonomy exercise – Law No. 22 of 1999 on regional governance and Law No. 25 of 1999 on the fiscal balance between centre and regions – might have been drafted in haste and without consultations with regions or much policy consensus. "But the devil is in the details now and nobody is paying attention to them," he says.

As the newly-appointed Regional Autonomy Minister in January last year, he had noted that the two framework laws required a multitude of implementing regulations: eight other laws, 50 national government regulations and decrees, 1,600 regulations on the provincial level and the modification of several thousand local regulations.

Doing a count last month, he reckoned that up to 177 presidential decrees had still not been written, with ripple effects for local administrative guidelines.

These include the control and supervisory mechanisms stipulated by the International Monetary Fund at its last review in September: Auditing standards to keep local officials honest and spending guidelines, including how they can draw on central contingency funds for local projects, as well as minimum service delivery standards.

Officials speak vaguely of some 20 to 30 regulations having been issued in the last three weeks. But nobody in Jakarta seems to be very sure, and officials in the regions have certainly not received physical copies of the regulations.

"The weakest link is the propaganda machinery," notes an international consultant helping with the implementation process. "Interior and Regional Autonomy Minister Surjadi Soerdirdja has to get out there and start explaining what's going on instead of complaining about over-politicisation of the process. This is about politics too, not just budgets."

Chief economic czar Rizal Ramli did try to calm investor fears by issuing a press statement on January 4 asserting that preparatory steps already taken included training for regional officials as well as reviews of each region's readiness.

All pre-existing international agreements with foreign investors will continue to be honoured and regulations are in place to ensure regions cannot borrow internationally without the approval of Jakarta. "This will ensure the central government's ability to continue to safeguard Indonesia's overall fiscal management," he said.

But without citing chapter and verse to show proof of work done, it was ignored by most newspapers. Besides, what worry observers most is the checks and balances he cannot promise.

The autonomy experiment, when fully implemented, will see more than 40 per cent of total government expenditures or 81 trillion rupiah in the hands of regional managers. Because resource-rich districts will get to share oil, gas, mining, fishery and forestry royalties with Jakarta, some in Riau and East Kalimantan may end up with more money than they can reasonably spend in a year.

Prestige projects

The temptation will be to spend the windfall on prestige projects, as has been the trend in the past. The Kutai Induk district in East Kalimantan, for example, spent most of its discretionary income on government offices and convention halls instead of improving services to the poor.

But perhaps the most flawed element of the new fiscal arrangements, from the perspective of local accountability, is that regional governments will not be able to raise new taxes, retaining only the right to collect small taxes on water use and street lighting.

Experience elsewhere shows that local residents are more likely to hold their leaders accountable for their spending decisions when their tax revenues are spent locally.

The law notwithstanding, local parliaments are, however, less likely to have qualms imposing new taxes on "outside" companies operating in their districts. The Bima district in West Nusa Tenggara plans, for instance, to levy nine new taxes and user charges.

Decentralisation exercises are always fraught with risks. But more than fuzzy process design and confused concepts, the overarching problem is an inherent one in newly democratic Indonesia.

The paradox of decentralisation is that a strong central government is even more vital now to check abuses and generally provide a supportive environment where the rule of law becomes the norm.

The evidence so far of savvy district chiefs seizing the initiative is not salutary. The US Embassy gave these examples in a report last May: "The impression in mid-2000 was that regions had taken hold of Law 22 and were essentially implementing it in advance of the official schedule.

"Local authorities were dividing up forests for logging ... counting local mining revenues as already theirs, causing concern among US and other foreign investors whose regional operations some local governments regarded as additional revenue sources." It concluded: "Regions seemed eager to take on the 'profit centres' such as mines and forests, but reluctant to handle 'cost centres' such as hospitals and schools."

In response to such concerns, Jakarta is hanging on to its control of mining concessions for another five years. But can it stop local parliaments from unilaterally seizing the mines? Send in the troops? Can Jakarta even do anything if district chiefs decide to enrich themselves by setting up toll booths on national highways? Can a weak national government exercise moral suasion over local bosses, never mind taking them to court?

Already there are examples to show that local judges will tend to side with local district managers, as one in North Sulawesi did when the Newmont gold mine refused to pay the district chief extra taxes. He shut the mine down.

Foreign-aid agencies have poured more than US$3 billion into programmes to help Indonesia's local authorities build capacity and competency. But what of the more intractable issue of changing Indonesian political culture? The major political parties are personality-centred and a strong patronage system still exists.

Local elections still revolve around the people selected by party leaders in Jakarta. Whereas, in the past, Jakarta could override results of local decisions, now the only counteracting force to party leaders is money politics.

Where is the linkage that will bind local politicians to deliver on their promises and bear the costs of their decisions if their main constituent is some man or woman in Jakarta?

Will the autonomy experiment create sufficient incentives for people to rebel against this national political mindset? Will a cultural revolution take place, towed by the autonomy impetus? Or will change have to come first to make genuine decentralisation possible? Stay tuned.

New power structures: What they mean

  • Two regional autonomy laws passed in 1999 open up windows to opportunistic politicians and conscientious officials alike to forge new power structures.
Key features

  • The local-level district and city governments have broad autonomy, with responsibility for all government matters, except for foreign affairs, defence and security, justice, monetary and fiscal affairs and religion.
  • Local governments are to be responsible for public works, health, education and culture, agriculture, transport, industry and trade, investment, environment, land matters, co-operatives and manpower.
  • Responsibility for such matters include planning, financing, implementation, monitoring, evaluation and maintenance.
  • Regions can re-transfer their functions to the provinces if they are not capable of handling them.
  • Regions are to be given control over their finances, civil servants and organisational set-ups.
  • At the village level, the communities elect a village council and a village head; such local institutions can be fashioned in accordance with local traditions and needs. These village councils will be part of district governments.
  • All revenues and expenditures of local governments must be reflected in the local budget. Local governments can borrow from capital markets. Foreign borrowing requires prior approval by the central government.
  • The central government can nullify regional decisions and regulations deemed unconstitutional, against national law or against public interest.
  • It is expected that after full implementation of both laws, the regional share of general government spending will more than double to over 40 per cent, and that some 60 per cent of the development budget will be managed at sub-national levels.
[Source: Adapted from a German Technical Co-operation and USAid discussion paper, Decentralisation In Indonesia – The Framework For Local Governance.]
 
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