Do the donors have it right? Decentralization and changing local governance in Indonesia

Abstract

Indonesia has initiated an ambitious decentralization program since 1999 spurred on by the international donor community (earlier decentralization measures were more like “deconcentration” under strong central control). This paper examines the degree to which Laws 22/1999 and 25/1999 are working. Local government employment has been expanded (not fully offset by a decline in central government employment) and training has been provided. Many functions have been transferred to the local level, but this was not matched by adequate funding transfers. Those localities that fare best have revenues available from their own natural resources. The results, therefore, are very mixed, and it is much too early to determine whether decentralization is a success.