The ‘Big Bang’ Program and its Economic Consequences
- Studies in Fiscal Federalism and State–local Finance series
Edited by James Alm, Jorge Martinez-Vazquez and Sri Mulyani Indrawati
Chapter 3: Political Reforms, Decentralization and Democratic Consolidation in Indonesia
3. Political reforms, decentralization and democratic consolidation in Indonesia1 Dwight Y. King INTRODUCTION Decentralization of power was one of the main demands of the reform movement that took shape in 1998. After Suharto resigned many regions began voicing their discontent. The interim Habibie administration responded to these developments with a policy of wide-ranging regional autonomy with special additional arrangements for the provinces of Aceh, Irian Jaya, the capital region of Jakarta and East Timor. Accompanying and reinforcing these decentralizing efforts were others intended to democratize the political system. In this chapter I begin by brieﬂy summarizing the effects on decentralization of new political laws passed by the House of Representatives (Dewan Perwakilan Rakyat or DPR) and promulgated in 1999. I then examine aspects of the second wave of reform consisting of constitutional amendments passed by the People’s Consultative Assembly (Majelis Perwakilan Rakyat or MPR) in 2000–02 and of proposals for amendment of the Law on Regional Government (Undang-Undang Pemerintahan Daerah or UU 22/1999). Next I identify factors that help explain interdistrict variation, or why political reform, decentralization and good governance have progressed further in some districts than in others. I conclude with speculations on the likely future evolution of decentralization reforms in Indonesia. HABIBIE’S INITIATIVES Several aspects of the new political laws proposed by interim President Habibie had implications for decentralization.2 The Law on Political Parties (Undang-Undang Partai Politik or UU 2/1999) stipulated that, in order to contest the election, a party had to have an organization (executive...
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