The Impact of Indonesia’s Decentralization Reforms Two Decades On: Introduction

Abstract

Following the end of the New Order in 1998, Indonesia embarked on a far-reaching decentralization drive. Envisioned as a means of restoring political rights to citizens, disrupting the country’s pervasive patronage networks, and quelling calls for regional autonomy, Jakarta devolved extensive governmental responsibilities to the subnational level. To this end, sweeping changes were passed which curbed the power of the executive, revitalized the role of the legislature, and rolled back controls on political life. In addition, financial resources and administrative authority in a wide range of areas were devolved to local governments, namely municipalities and regencies. These measures were drawn up in 1998, legislated in 1999, and implemented in 2001. The key provisions were the following: Law 1999/22 on regional government, which transferred a significant proportion of government responsibilities in areas such as education, health and infrastructure to the local level, and introduced elections for the local and provincial levels; and Law 1999/25 on the fiscal balance between the centre and the regions, which established the financial infrastructure to enable these changes (Ostwald, Tajima and Samphantarak 2016). With these measures, Indonesia went from having one of the world’s most centralized government structures to one of the most decentralized, with only a core set of responsibilities such as foreign affairs, defence, and monetary policy remaining at the centre. Early reviews carried out by organizations like the World Bank (2005) labelled Indonesia as a leader in Southeast Asia for the breadth and depth of its decentralization drive. Two decades after the reforms were enacted, it is timely to review the effects of these changes. On the one hand, surveys have indicated broad-based support for the decentralization reforms (KPPOD 2017, 2021). However, much of this backing may have been derived from the decentralization’s political rather than economic or service delivery implications. For example, the decentralization drive has: revitalized