The Asian Century, Sustainable Growth and Climate Change
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The Asian Century, Sustainable Growth and Climate Change

Responsible Futures Matter

Edited by Moazzem Hossain, Tapan Sarker and Malcolm McIntosh

This path-breaking book investigates the challenges of realizing the Asian century. Prosperity in Asia does not only mean economic growth; the issues of public health, sanitation, income equality, the social safety net and efficient use of natural resources are also important. It argues for new policy initiatives in social, environmental and natural resource areas of South, Southeast and East Asia.
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Chapter 8: Decentralization and poverty reduction in Indonesia: the case of East Nusa Tenggara (NTT)

Yenny Tjoe


Decentralization in Indonesia is principally implemented via two laws. Law 32/2004 on Regional Autonomy (original Law 22/1999) restructures the organizational arrangements of the regional government system, with a view to: (1) giving local governments at district and municipal level, greater representation, autonomy and resources; (2) giving emphasis to local knowledge and preferences about development; and (3) providing opportunities for local people to participate in decision making. The companion Law 33/2004 on Fiscal Balance between central and regional governments (original Law 25/1999) focuses on the intergovernmental fiscal system, intending to promote a more equitable distribution of resources, to increase responsiveness and fiscal capacity of local governments at district and municipal level, and to improve social welfare. By their stated objectives, these two laws depict the motives of Indonesia’s ‘Reformasi’ (reform) in 1999, in order to reform a long lasting centralized autocratic regime into a public-participatory democratic system. The outcome of these two key laws on decentralization, and more specifically on the alleviation of poverty, cannot be separated from two features. First, the role of central government transfers to sub-national levels to support the process of decentralization. And second, the commitment of local governments to allocate the resources for developmental purposes and poverty reduction. Although the latter plays a vital role in regards to empowering the poor, the former is equally important as a source of finance to support local governments that are lacking financial competency to perform regional autonomy.

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