Ina Parlina and Haeril Halim, Jakarta – The House of Representatives on Wednesday passed the Village Law, a new regulation that, the government claims, will improve the welfare of people living in the country's 73,000 villages.

Under the new law, which was unanimously approved by all political factions in the House during a plenary session Wednesday, 72,999 villages in the country will share funds equal to 10 percent of the state budget earmarked for regional administration.

"The 10 percent budget allocation for villages will be withdrawn from state expenditures, not from the budget's regional allocation. All programs related to villages in relevant ministries will now be cut," chairman of village bill special committee Budiman Sudjatmiko of the Indonesian Democratic Party of Struggle (PDI-P) said on Wednesday.

He said of the total Rp 1,800 trillion (US$150 billion) earmarked for the 2014 state budget, Rp 592 trillion would be allocated to regional administrations. "Ten percent would be Rp 5.92 trillion. This means each of village will receive around Rp 850 million per year," Budiman said.

Other than the cash transfer, villages are also allowed to get funds from other sources," he added, adding that the amount of budget received by each village would vary depending on population, size, poverty rate and geographic location.

Other sources of funding could include village income; revenue from levies contributed by regencies and municipalities; financial aid from provinces, regencies and municipalities; as well as aid from legal sources.

The law also stipulates that village heads will stay in office for six years and can be reelected for no more than three consecutive terms.

Commenting on the new law, Golkar lawmaker Nudirman Munir said it should firmly define "village", given the variety of definitions that constitute a village.

"Please note that in Indonesia we have the term nagari [an administrative system in West Sumatra equal to village in Java], which consists of a number of smaller villages. How will the law treat nagari? It should be clearly stated in the law," he said.

Earlier on Wednesday and shortly before the bill's endorsement, President Susilo Bambang Yudhoyono said that the new regulation could empower the country's villages as well as people living in them.

"The bill was the government's initiative as we understand the important role they play in this, our, country. If, in the near future, the House, as well as the government, agree and endorse the bill, I will also sign it as soon as possible so that it can take immediate effect," Yudhoyono said at the Presidential Office.

Yudhoyono also called on village heads to spend the money wisely and ordered governors, mayors and regents, as well as ministries, to monitor its use. Data from the Home Ministry shows that only 22 percent of regional governments are performing well while the remaining 78 percent are failing.

A similar cash handout program was also proposed by chief patron of the Great Indonesia Movement (Gerindra) Party, Lt. Gen. (ret.) Prabowo Subianto in October.

Prabowo promised that if he was elected president he would hand out cash to all the villages in the country, in a move believed to be aimed at winning back lower- and middle-class voters who had recently swung in the direction of popular Jakarta Govenor Joko "Jokowi" Widodo.

Prabowo, who said such a program would not breed corruption as "villagers don't practice corruption, city folks do", won support from a number of mass organizations that had complained about the government's failure to introduce progress in the country's villages.