Institutions, Outputs and Outcomes: Two Decades of Decentralization and State Capacity in Indonesia

Abstract:Since the 1998 Reformasi process, Indonesia has decentralized and granted wide-ranging autonomy to its subnational governments. Two decades following these reforms, it is crucial to ask the extent to which decentralization has strengthened state capacity—namely, the ability of the administration to deliver development. Of the various dimensions of state capacity, we focus on two: the structure of public administration; and the provision of local public services. To this end, we analyse statistics from the periods prior to and following decentralization. In addition, we draw on key informant interviews and refer to our personal experience in government to provide depth and nuance to our findings. We find that, in some respects, decentralization in Indonesia has managed to achieve what it promised, but failed to deliver in others. Most indicators of state capacity regarding the delivery of public services improved under decentralization. This progress was probably linked to the increase in the quality of public administration at the local level. However, disparities and gaps in local state capacity are also evident. In some aspects of the economy, the disparity in the provision of social and basic services has deepened. Decentralization has also made policy coordination between central and subnational governments in delivering development more complex, due to the high level of political intervention at both levels.