Wednesday, 27 February 2013


Max Pohan *)



The financial crisis that hit Indonesia and some other asian countries starting 1997 has brought the country into a devastating socio-economic and socio-political situation. Its economy has suddenly collapsed to a level that never happened before. Number of unemployment increased significantly, bringing the socio-economic welfare of the people down to the worst ever. As a result, the Suharto regime had resigned and this gives hope for economic recovery, improvement of socio-economic condition, political reform, democratization, and even decentralization. The decentralization policy to boost local autonomy has officially implemented on the 1 January 2001. Yet, the big question now is whether the implementation of the policy will enhance social development, democracy, as well as people’s participation at grass root level.

 I.  Background 

Just as a reminder, Indonesia is a vast and archipelagic country of South-east Asia with around 13,700 islands stretches from west to east along the equator, among them: Sumatra, Borneo (Kalimantan), Celebes (Sulawesi), Java, Moluccas, and West Papua. It has population around 210 million where male is less than female. Indonesia is a unitary state (Republic) headed by a President with 2 (two)-level parliamentary system, the House of Representatives (MPR) and House of Parliament (DPR). Before 1988, the government of Indonesia was known as autocratic, undemocratic, centralistic, monologue, and military-backed. This was indicated by tight press-control, politically stable, freedom oppression, but high economic growth, steady social-welfare level increase, high inequalities (between regions and between households), and highly-integrated.
Though, starting mid 1997 a severe financial crisis hit most of the Asian countries, including Indonesia. The crisis has significantly changed almost all aspects of life in the country. The economy that constantly grew in the last few decades, suddenly contracted by 13% in 1998, and  within a short period of time, the shock has caused impacts on the welfare of the population. In the first place, it directly raised unemployment which resulting in the decrease of household’s income and, hence, reducing their purchasing power.
Adding to the macro-economic severe situation, the long draught caused by El-Niño in 1997 had also reduced employment opportunity in agricultural sector. The situation was worsened by high inflation rate (reached 77.6% in 1998) which decreased the purchasing power even further. In the social sectors, a steep price hike had reduced the service quality of important sectors such as health and education. Secondly, at the household sector, the lower level of income forced them to change their consumption pattern, where women and children were usually the most vulnerable family members –particularly in the poor ones– as the households’ consumption pattern changes.
In the beginning of 1998, when the secondary impacts were more evident, some experts warned the possibility of “lost generation” in the future if no interventions were taken to lessen the impact.  Future physically and intellectually weak generation would be resulted from today’s children who are malnourished and whose parents could not afford education and health services for them.  Furthermore, a drastic change in living standards had built up more conflict and social unrest.  It usually started from household level (domestic violence), which accumulated at community level (higher crime rate), and even in the society (higher political tension).  In Indonesia, this tertiary impact of the economic crisis had changed overall political constellation only within 9 months after the depreciation of its currency (Rupiah) to US Dollar in August 1997.
The impact of 1997 economic crisis in Indonesia is much worse than those suffered by other Asian nations. One of the reasons is ‘poor governance’, where corruption, collusion, and nepotism (KKN) as its primary indicators. Access to economic resources had been limited only to some economic and politico-elites, who were the most benefited from the high economic growth. The Soeharto’s regime had become increasingly corrupt and complacent, their family and cronies abused their connections to amass wealth.
Control mechanism and public participation to safeguard the development in increasing people’s welfare were simply did not exist. In the regions, local parliament were subordinate of governors and district-heads or mayors. Civil society, who could have led the people to be more involve in the decision-making processes have been undermined and to some extent was controlled by the government. The centralistic and ‘top-down’ public administration practices has reduced the people’s participation even at the lowest level of community.
As the socio-economic conditions getting worse, demand for political and economic reform (reformasi) was mounting and then culminated in 21 May 1998 when Soeharto’s government collapsed after 32 years in power. Since then, the political environment has changed drastically.

II. The Reformasi: On Democratization and Decentralization  

Another demand echoed through the reformasi is decentralization, which is rather an expression of dissatisfaction vis-a-vis the Central Government after more than three decades seen as injustice by provincial/local governments those with abundant natural resources. Indonesia has been administered by Jakarta since its proclamation in 1945 and since 1950, traumatic of  regional resentment which threatened the unity of the country, the successive governments continuously believe that a unitary state is more secure in maintaining unity than a federal system.[2] Based on Law No.5/1974 on Principles of Regional and Local Governments, the government is divided into provinces, currently 30 provinces (2002), and provinces are subdivided into districts (kabupaten) and municipalities (kotamadya). Districts, in the rural areas are also subdivided into sub-districts (kecamatan) and kecamatan into desa (villages), while municipalities, as urban areas, the villages are called kelurahan.
This system, despite some advantages such as the effectiveness of handling and delivery system from the central government down to village level, has major disadvantages of extended and often inefficient, bureaucratic chain of command, very “top-down” approach which tends to discourage local initiatives.  The Law No.5/1974 has also stipulated the regional autonomy to some extent. However, the subsequent government regulation (Peraturan Pemerintah) was only issued in 1992 (PP No.45/1992 on Decentralization at Daerah Tingkat II), after almost 20 years later. The central government has been charged by the local governments as not serious in this matter, although almost none of the governments voiced this charged openly.
Decentralization as a strategy for economic and social development and for nation building has become accepted around the world. Most developing and transition nations have by now adopted a decentralization program in one form or another.[3] Decentralization could well be the right policy for Indonesia because it moves government decisions closer to the people, a crucial ingredient of governance in a country that is so large and so diverse. And, with local elections, it will lead to better public services and better public servants, and more participation. In the long run, decentralization could make Indonesia a stronger, more stable, and more democratic nation.[4]
The House of Representatives (MPR) has obviously managed to capture this view and the demand of regional and local governments and the people in general, to have a more extensive autonomy by decentralization of responsibilities from central government to them. In May 1999, in line with the democratization process, devolution of power from central government to the regions was initiated when the Indonesian parliament passed two important laws on the relationship between central government and regional/local governments.
The two laws, Law No. 22/1999 on Regional Government and Law No. 25/1999 on “Fiscal Balance Between the Central Government and the Regional Governments” constitute a breakthrough from a centralistic government administration to a more balanced distribution of power and functions between central and local government, as well as development funds.  The two new laws have officially been implemented starting January 1, 2001, and give wide-ranging autonomy to the district/municipal government full-authority in planning-cycle process and control over their finances (revenue and spending), civil services, and organizational setup.
Related to the democratization process, the Law No. 22/1999 clearly divides the executive and legislative body at the local level. As a consequence, head of district/municipality is elected by the local parliament (although the winner still need approval by the President) and accountable to the legislative body only. However, in the Law there is no clear connection between the government and civil society in general.
Through the Law No. 25/1999, in addition to the regional government’s own revenue, the regions will receive “the equalization funds” that consist revenue sharing from taxes and natural resources exploitation, a general allocation grant (DAU), and specific grants (DAK). The regional governments may also receive funds from external loan or grant, although this entitlement has been suspended in both fiscal year 2001 and 2002 for the state’s balance of payment reason. This cancellation by a letter from Minister of Finance early in the year 2001 has to some extent has triggered dissatisfaction from some local governments accusing the central government as reluctant to help the regional and local governments in their economic recovery.
To implement the decentralization policy the government has divided the implementation stages into 4 (four), namely: initiation period (2001), installation (2002-2003), consolidation (2004-2006), and stabilization period (2007 - onwards). Initiation period covers the development of the new regulations, guidances, etc including their dissemination. This stage also includes the efforts to deal with risks in the context of initial implementation of regional autonomy and response to be given – by the central government – to deal with several problems that are arising in implementing the regional autonomy. Installation period includes the continuation of all not-yet-finished activities in the first period and the development of activities for strengthening, elaborating work, and adjusting to the existing and the newly developed system.

III.     Prospect of Social Development Within Democratization and Decentralization  

Democratization. The democratization process in the reformasi agenda has begun earlier than decentralization, in May 1998, when Soeharto’s regime collapse. Thus, since two and half years ago. However, after those years, this democratization process is still on the way. In general, political parties do not have clear political platforms and policy objectives. At the local level, mostly new parliamentarians would still have to learn about public administration and local decision-making process. At the same time, the people in general has yet lack of trust in the parliamentarian. As the UN Report says:

”....the problem for most of these parties is that they have been assembled around sectional interests and personalities rather than ideologies and manifestoes. Moreover, they usually lack any local organization or any formal mechanism through which ordinary member can influence policy. ........The electoral system is based on close candidate list proportional representation in which members are nominated from party lists so they do not represent a specific district, nor do the people actually vote for them. This and the absence of local political organization means that most people lack formal channels through which they can express their grievances. As a result they are likely to vent their frustrations in other ways, including violently, -in some cases attaching blame to people from other ethnic or religious groups.”.[5]  
The people’s participation is still hampered by the absence of mechanism to channel their aspirations. While the law-makers are mostly busy in dealing with his or her own private interests or his or her party’s interests rather than strive for the people’s common interests. On the other hand, the press which enjoy their freedom since reformasi begun, often disseminates unreliable information and facts, has low qualification, skills, and infrastructures for investigative journalism. Their presence have rather been observed as adding more uncomfortable and chaotic political situation to the poor people who are already suffered  from the economic and political crisis.
Decentralization. On the other hand, decentralization process is still one year of age. In government term, it is just passing through the initiation period and now entering the installment period. In the initation process the government, led by Ministry of Home Affairs, has concentrated in the work of: (a)devolving government functions and responsibilities; (b) restructuring provincial and local government organtizations; (c)reallocation of personnel, assets, and documents; (d) fiscal decentralizations; (e)capacity building to support decentralization; and (f)monitoring and evaluation. Despite more than 20 Government Regulations and a series of Presidential and Ministerial Decrees issued during the year 2000 and 2001, it seems however, the decentralization process is far from completion. This clearly is not a simple task to carry but it needs “a mammoth logistical undertaking” using the Indonesia Human Development Report 2001 words. It says further: It will probably take some years before the administrative and fiscal relationships between the central government and the regions are clearly established.[6]
The local governments motivation in decentralization thus far is mostly political and with the final objective to gain more revenues from the central government rather than seeking better welfare of the people.  Therefore it is somewhat worrying as to whether the local governments are really realizing their basic task and function to serve the people to have better access to health, education, capital and all other public services.
Social development  and the supply of basic needs of the people are clearly now the task of local governments as stipulated in the Law 22/1999. However, experience during the fiscal year 2001 showed that local governments are less responsible in this matter for the reason of lack of funds. In addition to that, it seems that sectoral ministries do not want to lose their grip on the sector they are dealing with after more than three decades.
Good Governance. The two processes –democratization and decentralization– raise the issue of good governance practices. That includes transparency, accountability, and people’s participation.
It is necessary to open wide-range opportunity for public participation from the village level to vanguard the local autonomy not being a transfer of centralistic and authoritarian approach from central to local government. Both laws has fostered the authority of local parliament, wider scope of participation in decision-making process is however not clearly defined in the new legislation, except an “urban forum” which consists all stakeholders of development at the local level.
An attempt to form a multi-stakeholders forum at district level all over Indonesia however had been exercised by the Government since 1999 through Social Safety Nets program. Despite success achieved in some regions, the exercise was hampered by lack of consciousness at the community level and civil society as a whole, and that the forum is mainly financed by local governments. Once the budget is not allocated then the forum is diminished.
The problem –related to the previous political practices– is how to encourage the civil society to be more involve in the development process.  In general, non-governmental organization (NGOs) or community based organizations (CBOs) has very important role in enhancing participation at the local level. At the grass-root level, they can be a facilitator and mediator of the empowerment of local community; facilitating the community to be organized, increasing their capacity in decision-making process, and improving their access to information and resources. At the municipal/district level (or even at the provincial or central level), involvement of civil society in decision-making process may give a wider perspective of development needs. On the other hand, wider participation requires (and implies) a more transparent and accountable public administration.`
ll these issues, democratization, decentralization, good governance are issues relatively new to most Indonesian and surely it needs some more  years to see the good result of those exercises, if it continuously implemented.  

IV.  Concluding Remarks

Democracy is key to successful human development, and decentralization is an instrument to have democratization in place. As in many developing countries, decentralization policy in Indonesia constitutes a transfer of governing powers accompanied by authority to make decision on policies, managing public funds, regulating activities in the context of reorganizing government and delivering public services in province, regencies/cities, and villages, including social development. The implementation of the policy is just recently: one year old.

 Until now, achieving regional autonomy was confronted with several political, economic, socio‑cultural and  technical constraints. Among others, the constraints are: (a) the limited availability of qualified human resources and government officials in the regions, relative to the demand for public services reflecting public needs and aspirations; (b) weaknesses in the revenue base of the regions relative to needs; and (c) weaknesses in local legislatures, affecting their ability to perceive the needs of constituents and their capacity to exercise oversight over the operation of regional administrations and evaluate the effective of regional programs.
 An important challenge in the implementation of regional autonomy is the strengthening of professional human capacities in public sector management (policy planning,  organizational development, financial management, the delivery of services, supervision, as well as encouraging public participation).  Another is to improve regional revenues either through the mobilization of own revenues, the transfer of resources from the center and the strengthening the revenue base through the development of regional economic activity. Furthermore, efforts need to be made to improve the accountability of the financial management.
Considering that not all of the regions are endowed with natural resources or  have adequate financial capacity to support the delivery of autonomous services, a policy to equalize the allocation for resources among regions that is fair to all needs to be initiated. 
 The strengthening of regional legislatures is also a major challenge, with expertise needed to help them develop representative institutions, communication and consultation capacity with the public and regional governments, to improve the quality of legislation decision making process, and to effectively supervise regional governments. The current main problem of legislatures (national and local) is that most of the member of  parliaments has short-term political motivation, which brings personal and party’s interest in the first place and rather than public interests.
 Social development is a cross-sectoral and multi-stake holders issue. It is not a sole government responsibulity, but also the civil society as well as the private sector. However, in this transitional period, people’s participation is yet a new thing as well as democracy. The civil society as well as governments has still to learn on what democracy is, and what type of democracy best for Indonesia.
 Decentralization has just begun, the local governments have still a bunch of agenda to set up organization, personnel, and finance.  Lack of financial capacity has been the main excuse for local governments to implement social development, therefore central government and international society are still expected to handle this issue at least for 4-5 years to comen

*)    Ir. Max H. Pohan, CES, MA is Director for Local Government Capacity Empowerment State Ministry of National Development Planning/National Development Planning Agency (BAPPENAS).  Paper prepared for the ASEAN-World Bank High Level Conference on Social Development Agenda, Jakarta, 2002-red.
[1]     United Nations, Indonesia, Common CountryAssessment for Indonesia, December 2001, p.3.
[2]     United Nations, idem,p.8.
[3]     Alm, James and Roy Bahl, Fiscal Decentralisation in Indonesia: Prospects, Problems, and the Way Forward, paper, USAID, Sept.2000, p.1.
[4]     Alm (et al.), idem, p.2.
[5]     United Nations, op cit.,p..9
[6]     BPS Statistics Indonesia, Bappenas, UNDP, Indonesia Human DevelopmentReport 2001: Towards a New Concensus: Democracy and human development in Indonesia, 2001.

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