Reforming Intergovernmental Fiscal Relations and the Rebuilding of Indonesia
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Reforming Intergovernmental Fiscal Relations and the Rebuilding of Indonesia

The ‘Big Bang’ Program and its Economic Consequences

Edited by James Alm, Jorge Martinez-Vazquez and Sri Mulyani Indrawati

Indonesia is currently facing some severe challenges, both in political affairs and in economic management. One of these challenges is the recently enacted decentralization program, now well underway, which promises to have some wide-ranging consequences. This edited volume presents original papers, written by a select group of widely recognized and distinguished scholars, that take a hard, objective look at the many effects of decentralization on economic and political issues in Indonesia.
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Chapter 12: The Indonesian Experience with the Implementation of Regional Autonomy

Made Suwandi


Made Suwandi INTRODUCTION Since the economic crisis in mid-1997, Indonesia has experienced several other crises of a political and governmental nature. Since the start of this new period for Indonesia, there have been continued demands for the reform of local governments and for the deepening of decentralization. From this perspective, the demand for local government reform in Indonesia has been driven by political pressures from the bottom up. These pressures have been a manifestation of democratic values and the widespread spirit of reformation of Indonesian society. The government responded to these demands by issuing two important laws – Law No. 22/1999 concerning Local Government and Law No. 25/ 1999 concerning the Financial Balance between the Central and Local Governments. Those two laws marked a radical shift toward decentralization providing discretion to local government in managing their local affairs and away from decades of domination by central government of practically all local government arrangements. This swing of the pendulum from bureaucratic deconcentration in the past to political decentralization in the present is not a strange phenomenon in the Indonesian context if we see it from a historical perspective. Since Indonesia’s Independence in 1945, the issuance of various laws concerning local government, culminating most recently in Law No. 22/1999, has been marked by the political swing either favoring decentralization or centralization. These swings have tended to reflect the political situation in the national arena. The question is whether Indonesia can learn from its relatively long experience with decentralization. In particular, what should...

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