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Building Democratic Developmental Regime in Indonesia



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Local Government System After the Implementation of Law No.
22 of 1999

Indonesian Scientific Meeting 2003 in Central Japan
December 20, 2003, Faculty of Engineering, Gifu University, Japan

Tri Widodo W. Utomo
Department of International Cooperation, Graduate School of International Development, Nagoya University, 1 Furo-cho, Chikusa-ku, Nagoya, 464-0861, Japan

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Building Democratic Developmental Regime in Indonesia

  1. 1. Building Democratic Developmental Regime in Indonesia (Local Government System After the Implementation of Law No. 22 of 1999) Tri Widodo W. Utomo Nagoya University Abstract Nowadays, political and governmental system in Indonesia is in transition from New Order era (1966-1998) to the era of total reform. The main purpose of the reform, mostly prompted by the implementation of Law No. 22 of 1999, is to make political and governmental system more democratic. However, although democracy and democratic governance have become more observable, the quality of development and the performance of governance (particularly in local level) are likely to worsen during the last 4 years. Simply speaking, this transition condition looks like “trade-off”, where developmental performances are traded by democratic values. This paper tries to evaluate the new decentralization policy in Indonesia and its roles in encouraging “democratic developmental regime” for local administrations. 1. Introduction 1.1 Some Features in Transition Period During Soeharto administration (1966-1998), Law no 5 of 1974 (hereinafter is referred as to LGA 1974) was the main source concerning local government provisions. It was a deconcentrated (centralized) policy rather than devolved (decentralized) one. Therefore, Indonesian government could be stated as an authoritarian regime rather than a democratic regime. In the New Order era, democracy was only a dream and rhetoric rather than as a reality. The incumbent authorities tended to say that high growth of development, in turn, would promote democracy. At the same time, they reject an assumption that democracy is a precondition for development. That is why, political stability through limitation of press freedom, oppression of labor unions, restriction of political parties and social movements etc., constituted the main strategy in development process in Indonesia. However, GDP per capita growth and economic performance was very exceptional, which is more than 4% during 1965-early 1990s. Poverty had reduced to 12% by 1996 (UNDP-a), while in 1984 self-sufficiency of food had been achieved (UNDP-b). It was not so surprising that World Bank (1993) categorized Indonesian economy with other seven countries at that time as a “miracle”. Based on Lefwitch’s (2000: 153-154) conception, this economic / developmental achievements constitute the precondition for developmental state regardless the quality of democracy. ISSN 0918-7685 pg. 43-59 Proceeding Temu Ilmiah XI, 2002
  2. 2. Unfortunately, initiated by economic and currency crisis in 1997, social development in Indonesia has tended to decelerate (Utomo, 2002). As a result, the proportion of people living in poverty climbed to more than 20%. Although the situation has been improving after bottoming in 1998, it is said that people facing the threat of potential poverty account for 30% to 60% of the population (JBIC, 2002). Regarding HDI (human development index), the 2001 UNDP report shows that of 162 countries, Indonesia lies on 102nd position and has only 67.7 point. Although this feature is better than in 1999 (UNDP, 1999) when Indonesia ranked 109 of 174 countries with 64.3 point, but worse than in 1996 (UNDP, 1996) when Indonesia reached the best performance and ranked 99 of 175 countries with 69.0 point. In addition, in the last 4 years from 1998-2001, the real GDP per capita growth was –13.7%, 0.31%, 4.8%, and 3%, respectively (IMF, 2001). In line with the political reform post Soeharto era, the demand for democratization was getting increase. Democratic waves suddenly became the major agenda in building “New Indonesia”. This phenomenon is spurred by the reason that without democracy, Indonesian peoples will never able to deal with their national development goal. It means that there is a paradigm shift from “democracy as outcomes of development’’ to “democracy as prerequisite for development’’. In simple way we can say that political reform in Indonesia concerns with such shift of paradigm. In line with the demanded reforms, legal provisions that were enacted under Soeharto regime must be amended. In other words, all new legislative products should contain democratic values. As a result, local government system was also fundamentally adjusted through the implementation of Law no 22 of 1999 on Local Government (hereinafter is referred as to LGA 1999). Basically, LGA 1999 has three new central paradigms, those are, people empowerment, democratization, and public service improvement. These three paradigms are extremely crucial to be promoted if democracy and good governance are to be realized. Positively, democratization process both in central and local level seem to increase more and more, as we can see from some political indicators. In central level, some policies have been enacted such as amendment of constitution, multi parties system, establishment of National Commission on HR, etc. While in local level, Local Government Unit (hereinafter is referred as to LGU) has broader autonomy and bigger power in arranging household affairs, exploring financial resources, and imposing peoples’ participation. Based on such legal reforms, even US Ambassador in Indonesia, Ralph L. Boyce says that Indonesia is a country that is able to proceed a rapid decentralization and democratization (Media Indonesia, 2002). Simply speaking, this condition looks like “trade-off”, where developmental performances are traded by democratic values. In fact, either non-democratic developmental state or democratic non-developmental state is not an ideal situation for Indonesia and any other countries. Political and governmental reform must able to speed up the occurrence of democratic developmental state. It is worthless if reform movement does not make any difference compared to foregoing conditions. What Indonesians need is democratization followed by economic performance. In this sense, the key factor in the developmental states (either democratic or not) is that they have capacity to accelerate economic / development growth, while in the non-developmental states, they lack of such capacity. Proceeding Temu Ilmiah XI, 2002
  3. 3. Therefore, the very basic question is, what conditions enable a democratic state to generate the capabilities that transform it into a successful democratic developmental state, and how to generate them? And, what role can LGA 1999 play in promoting democratic developmental regime in local level? Such questions or problems are the central points of this paper. However, before dealing with the problems, I would like to serve some explanations about the theory of developmental state and the emerging demand for good governance, relationship between democracy and development, basic concept of decentralization and the rationale for decentralized governance, and the probability of failure in implementing decentralization policy. 2. Continuum of Developmental States and the Emergence of Good Governance Concept Principally, developmental states concept, initially offered by Johnson (1982) with specific reference to Japan, can be understood as a Weberian ideal type of an interventionist state that was neither socialist (described as ‘plan irrational’ state in which both ownership and management remained in the hands of state) nor free market (no plan, and where private control coincided with private ownership). Such state conjoining private ownership with state or administrative guidance (gyōsei shidō), so that it can be avowed as “plan-rational capitalist developmental state”. This state form originated as the region’s idiosyncratic response to a world dominated by the West. (Woo-Cumings, 1999: 1). In similar way, Leftwich (1996: 284) defines developmental states as those states whose internal politics and external relations have served to concentrate sufficient power, authority, autonomy, competence and capacity at the center to shape, pursue and encourage the achievement of explicit developmental objectives, whether by establishing and promoting the conditions of economic growth, or by organizing it directly, or a varying combination of both. According to Leftwich (2000: 132, 153-154; 1996: 280), the continuum of developmental states varies from Singapore, Malaysia, Botswana, Mauritius, Thailand, Indonesia, China, Taiwan, and South Korea as developmental states on the one hand; and Venezuela, Costa Rica, Jamaica, India, Gambia, South Africa, Zaire, Bolivia, Argentina, Peru, Haiti, Nigeria, Philippines, Pakistan as non-developmental states on the other hand. Schneider (1999) includes Italy, Germany, French, Mexico, Brazil and Japan as developmental states. East Asian Countries such as Japan, Korea, and Taiwan are the best examples of developmental states. They have been successful because governments there have acquired control over a variety of things presumed critical to economic success: they can extract capital; generate and implement national economic plans; manipulate private access to scarce resources; coordinate the efforts of individual business; target specific industrial projects; resist political pressures from popular forces such as consumer and organized labor; insulate their domestic economies from extensive foreign capital penetration; and, most especially, carry through a sustained project of ever-improving productivity, technological sophistication, and increased world market shares (Pempel, 1999: 139). Pempel (ibid.) and Johnson (1999: 44) provides further explanation that developmental state (hatten-shiko-kata kokka) is seen as one of ideal types of states beside regulatory state Proceeding Temu Ilmiah XI, 2002
  4. 4. (kisei-shiko-kata kokka); all categorized by the state’s relationship to the domestic economy. The US and Britain exemplify the regulatory state. Such states are organized for and define as their principal mission the setting of basic ‘fair’ rules for economic competition and the umpiring of private market disputes. Most economic outcomes are the outgrowth of impersonal and short-term price variations. Developmental states, on the other hand, define their mission primary in terms of long-term national economic enhancement. They actively and regularly intervene in economic activities with the goal of improving the international competitiveness of their domestic economies. From the description above, it can be easily implied that the meaning of development is closely related to economic growths or performances. Nevertheless, most major understandings of development can be located within one or more of the following broader approaches (Leftwich, 2000: 17-59): • Development as historical progress. • Development as the exploitation of natural resources. • Development as the planned promotion of economic and (sometimes) social and political advancement. • Development as a condition. • Development as a process. • Development as economic growth. • Development as structural change. • Development as modernization. • Marxism and development as an increase in the forces of production • Development as the satisfaction of basic human needs (BHN). • Development as freedom and expansion of choice (Amartya Sen). • Development as domination. In order to simplify the understanding of developmental state concept, it is useful to restrict the definition of development merely as economic growth. Without intention to neglect the other ideas of development, economic growth is the most universal indicator for development and it is relatively measurable. Countries that are not met with the definition of developmental state, therefore, will be classified as non-developmental states. In practice, non-developmental states occur in diverse types or styles. The concepts of predatory state (Pareto, 1966; Evans, 1995), weak state (Joe Migdal, 1987, 1988, 1994), and soft state (Gunnar Myrdal, 1970) refer to or can be seen as a reflection of non-developmental states. All of concepts are cited in Leftwich’s book (1999). Myrdal was using the concept of soft state in an attempt to account for the slow pace of Indian development in the twenty years after independence (ibid.: 80). Here, the soft state is characterized by “a general lack of social discipline in underdeveloped countries, signified by deficiencies in legislation and, in particular, in law observance and enforcement, lack of obedience to rules and directives handed down to public officials on various level, often collusion of these officials with powerful persons or groups of persons whose conduct they should regulate, and, at bottom, a general inclination of people in all strata to resist public controls and their implementation. Within the concept of the soft state belongs also corruption. Proceeding Temu Ilmiah XI, 2002
  5. 5. As a result, the soft state is incapable of promoting urgently needed development (ibid.). The same as cited by Chang (1999: 183), Myrdal argued that a major reason for the economic stagnation of many developing countries was the absence of ‘hard state’ that can override conservative interests in favor of social reform and economic transformation. Likewise, Migdal proposes a concept of weak states, those are, states that have a low capability to penetrate society, regulate social relationship, extract resources and appropriate or use resources in determined ways (ibid.: 97-98). Finally, Pareto’s account on predatory states means as appropriation of the goods of others by legal or illegal means. To this extent, the minority preys on the majority using the state as its engine of predation (ibid.: 100). Building on Pareto’s early formulation, Evans defines predatory states as those that extract such large amounts of otherwise invest able surplus while providing so little in the way of ‘collective goods’ in return that they do indeed impede economic transformation. Those who control these states plunder without any more regard for the welfare of the citizenry than a predator has for the welfare of its prey (ibid.). Both weak states and predatory states have been used to explain the failures or relative slowness of development (ibid.: 96). In current situation, the demand of good governance is getting higher to replace non-developmental state idea. Since 1990s, good governance and democracy (taken together as ‘democratic good governance’) dominate and become confident assertion of official western aid policy (Leftwich, 2000:127). According to UN ESCAP (2002: 2), good governance has 8 major characteristics. It is participatory, consensus oriented, accountable, transparent, responsive, effective and efficient, equitable and inclusive, and follows the rule of law. It assures that corruption is minimized, the views of minorities are taken into account, and that the voices of the most vulnerable in society are heard in decision-making. It is also responsive to the present and future needs of society. It is important to note that although Indonesia is categorized as developmental state, some quandaries are still evidently prevailed such as corruption, social gaps, economic inequalities and regional disparities. Whenever such problems exist in a country, I would say, personally, that this country couldn’t be judged to be a developmental state. Therefore, judging Indonesia as a developmental state is quite ambiguous. As Political and Economic Risk Consultancy (PERC, 2001) indicates, China, India, Indonesia, the Philippines, Thailand and Vietnam were perceived to be the most corrupt Asian nations. In line with PERC’s study, Effendi, cited by Utomo (2002-b), reveals that corruption in Indonesia is transforming from oligarchic corruption to democratic corruption. Moreover, after the implementation of LGA 1999, some provinces prefer to detach and build as independent state due to unequal development treatment from the central government. Again, these indicate that there is something wrong in Indonesian development process, so that the status of developmental state for Indonesia is not so truthful. Nevertheless, the impetus of the formulation of LGA 1999 and its implementation is to promote good governance, particularly in local level. There is a hope that when good governance can be realized massively, development performance and democratic regime will automatically occur. Certainly, it cannot be observed clearly now since LGA 1999 just come into effect no more than 2 years. As mentioned above, governmental reform in Indonesia is in Proceeding Temu Ilmiah XI, 2002
  6. 6. a phase of transition; hence it does not produce any real benefits yet. However, new paradigms of governance implemented are in line with the characteristics of developmental democracies, so that it could be envisaged that Indonesia and local government there would represent the democratic developmental states, at least in the long-term. 3. Interrelationship of Democracy and Development Although there is no accordance among experts regarding the exact form of relationship between two variables, democracy and development, it is quite clear that each variable is affected by, and affect the other variable. Leftwich (2000: 130-131) is one writer who has solemn attention on those variables, from which he is able to describe its relationship vividly and obviously. In the 1960s, he argues, democracy was a concomitant of ‘modernity’ and hence an outcome of socio-economic development, not a condition of it. By citing Dahl (1971), he elucidates that democracy require a high level of literacy, communication and education, an establish and secure middle-class, a vibrant civil society, relatively limited forms of material and social inequality, and a broadly secular public ideology. All this was a function of prior economic development, which would yield necessary conditions for sustainable democracy. Lipset (1960) as quoted by Leftwich (ibid.) summarizes that “the more well-to-do a nation, the greater the chances that it will sustain democracy”. But this argument is changed now, actually even from 1960s. The critics argue that democracy and development are both compatible and functional for each other. If there is a trade-off between development and democracy, a slightly lower rate of growth is an acceptable price to pay for a democratic polity, civil liberties, and a good human right record. The point is that there have been many more non-democratic than democratic regimes that a various times have had disastrous developmental records such as Romania, Argentina, Haiti, Ghana, Myanmar, Peru, Ethiopia, and Mozambique. In other words, there is a new proposition that democracy is a necessary prior or parallel condition of development, not an outcome (Leftwich, 2000: 129). It is interesting that after researching some case studies, (Leftwich, 2000: 133) comes to conclusion that there is no necessary relationship between democracy and development nor, more generally, between any regime type and economic performance. Crucially then, it has not been regime type but the kind and character of the state and its associates politics that has been decisive in influencing developmental performance. Based on this framework of thinking, he proposes five conditions for democratic survival. They are legitimacy, adherence to the rules of the game, consensus and constitutionalism, policy restrain by winners, and ability to overcome obstacle / constraint like poverty and ethnic / cultural / religious cleavage (Leftwich, 2000: 136-144; 1998: 58-60). White (1998: 21-26) provides a more comprehensive and more detail explanation. He identifies four variant views of the relationship between democracy and development. From optimistic view, liberal democracy is a powerful stimulus to societal progress, basically because it provides a more conducive institutional environment for market-led economic development and because it carries the potential for more efficient, open, and accountable government. However, while it may be true that there is a long-term statistical correlation Proceeding Temu Ilmiah XI, 2002
  7. 7. between democracy and prosperity, the statistical evidence in short and medium terms is ambiguous. Meanwhile, pessimistic view regards democracy as a valuable long-term goal but a potential impediment to the earlier stages of socio economic development. In other words, democracy is a luxury which poor societies can ill afford. Lee Kuan Yew has stated that ‘I believe that what a country needs to develop is discipline more than democracy’, so that he is entailed in this pessimistic view. The third view is ‘don’t expect anything’ school of thought to which Huntington is one of its supporters. He argues that the sustainability of a stable democracy depends on disillusionment and lowered expectations on the part of the general population. This kind of view is buttressed by the argument that democratic regimes are not legitimized by their performance, but by their procedures. In authoritarian regimes, legitimacy derives from economic performance, so that they are vulnerable to economic downturns. Finally, the last view is that the nature of the political regime is not the central issue; rather it is good governance and state capacity. In essence, the argument here is for the primacy of constructing an effective developmental state, whether by authoritarian or democratic means White (ibid.). Although there are controversies about the interrelationship of democracy and development, the basic point is that both democracy and prosperity (performance of development) is important for a state / country. Therefore, balancing democratic and developmental aspect constitutes strategic option if peoples’ life and peoples’ choice is to be improved. Development without democracy is meaningless, but democracy without development is ironic. In order to accelerate development process and, at the same time, to promote wider public participation in the development, or democracy, formulation and implementation of decentralization policy is extremely essential. 4. Concept of Decentralization and Rationale for Decentralized Governance The meanings of and interpretations to decentralization vary from country to country and by experts or practitioners. As Devas (1997: 352) mentions, the term decentralization means different things to different people, and the approach to decentralization has varied widely between countries. Turner and Hulme (1997: 152) also insist that various writers have proposed very different meanings for the term decentralization and much ambiguity surrounds the concept. Yet, there is a wide-ranging agreement that decentralization is extremely needed to promote a better, more effective and more democratic governance. Both in developed and developing countries, decentralization forms a key element of the reform agenda. As a concept, Rondinelli (1999: 2) defines decentralization as the transfer of authority and responsibility for public functions from the central government to intermediate and local governments or quasi-independent government organizations and/or the private sector. Similarly, Turner and Hulme (1997: 152) point out that decentralization within the state involves a transfer of authority to perform some service to the public from an individual or an agency in central government to some other individual or agency which is ‘closer’ to the public to be served. Hence, talking about decentralization is talking about relationship Proceeding Temu Ilmiah XI, 2002
  8. 8. between central, regional and local government, both in political and economic dimensions. In other words, much of the decentralization happening in the world today has been aggravated largely by political and economic concerns or rationales. From political perspective, on the one hand, Ford (1999: 6) and Javier (2000: 2) provide some interesting illustrations about the political grounds of decentralization in some countries. They identify that in Latin America, decentralization is part of the democratization process where autocratic regimes are replaced by elected governments operating under a new constitution. In Africa, the spread of multi-party political systems is creating a demand for more local voice in decision-making. In some countries such as Ethiopia, decentralization has come in response to pressures from regional or ethnic groups for more control or participation in the political process. In the extreme, decentralization represents a desperate attempt to keep the country together in the face of these pressures by granting more autonomy. In Mozambique or Uganda, decentralization has been an outcome of long civil wars where opening political opportunities at the local level has allowed for greater participation by all former warring factions in the governance of the country. On the other hand, from economic perspective, decentralization should be seen in the context of the intrinsic need of government. This need derives from market failures and therefore centralization has to take into account (Owens and Panella, ed., 1991: 6). In this case, there are two main economic rationales for decentralization, they are, variations in individual preferences for private versus social goods (and services) and for different types of social goods (and services); and the benefits of social goods (and services) are generally characterized by spatial limitations. Ford (1999: 6) further adds economists justify decentralization on the grounds of allocative efficiency. A second economic rationale for decentralization is to improve the competitiveness of government and enhance innovation – and hence the likelihood that governments will act to satisfy the wishes of citizens. Obviously, there are some other reasons for decentralization such as exposed by Smith and Rondinelli. Smith (1985) offers six benefits of decentralization: political education, training in political leadership, political stability, political equality, accountability, and responsiveness. Meanwhile, Rondinelli (1981) cites 14 specific benefits that may accrue from decentralization. Litvack, Ahmad, and Bird (1998: 5) also provide some political economic rationales for decentralization. In line with such rationales, decentralization may occur in four major typologies, (a) political, (b) administrative, (c) fiscal and (d) market or economic decentralization. Political decentralization aims to give the people access to public decision-making. Administrative decentralization aims to redistribute authority and responsibility for providing public services among different levels of government. Administrative decentralization has three major forms, deconcentration, delegation and devolution. Fiscal decentralization, on the other hand aims to provide the local institutions the authority to carry out the decentralized functions together with making expenditure decisions and power to raise their own revenues. Market or economic decentralization aims to shift responsibilities for functions from public to private sector. It is regarded as the complete form of decentralization. Privatization and deregulation are its two major forms (Rondinelli, 1999: 4). Proceeding Temu Ilmiah XI, 2002
  9. 9. In Indonesia, the legal basis for the previous system of regional / local government is set out in LGA 1974, while the current system is set out in LGA 1999. These laws embody three different principles for distributing governmental functions: Table 1. Basic Principles of Local Government Function in Indonesia (Comparative Perspective) LGA 1974 LGA 1999 Decentralization of responsibilities to `autonomous' provincial and local governments (District / Kabupaten and Municipality / Kota). Province is superior of District / Municipality government. No more tier / hierarchy of local government Deconcentration of activities to regional offices of central ministries (at provincial and local level). Only at provincial level. Co-administration (tugas pembantuan in Indonesia but also often known by the Dutch term medebewind), in which provincial and local governments carry out activities on behalf of central government. Desa (village government) may involve in co-administration In addition, LGA 1974 defines local autonomy as being `clear and responsible’ (nyata dan bertanggungjawab), while LGA 1999 replaces that definition by `broad / wide (luas) clear and responsible’ autonomy. The above policy changes have political, administrative, and judicial implications. From political facet, roles of central government have tended to be lower while responsibilities of local government are becoming higher. Besides, local representatives body (DPRD) purely functions as legislative body (regulatory / reglementaire pouvoir), so that policy and decision-making might be formulated based on people-centered orientation. The most important of administrative implication is that regional authorities shall cover the authorities in all fields of governance, except authorities in the fields of international policies, defense and security, judicature, monetary and fiscal, religion and authorities in other fields. Moreover, the design of the organization structure is formed based on the scale of their authorities, and the shape of human resource balance alters from reversed pyramid to normal pyramid. Finally, from judicial perspective, Regional Regulation (Perda) functions not only to interpret / spell out higher-level regulation, but also to make a new law (law making). There is widespread faith that those three implications are in conjunction with democratic demand and movement. 5. The Shadow of Decentralization (Regional Autonomy) Failure It is unquestionable that decentralization is an outstanding concept. However, the good implementation of decentralization represents more essential factor in achieving effective and democratic governance. As World Bank (2001: 1) alerts, decentralization holds great promise for improving the delivery of public services, but outcome depends on its design and on the Proceeding Temu Ilmiah XI, 2002
  10. 10. institution arrangements governing its implementation. Turner and Hulme (1997: 151-174) also indicate that decentralization within the state is a good theory but poor practice. By quoting Smith (1995), they express that experience of decentralization in less-developed countries (LDCs) has almost everywhere fallen short of expectations and the declared objectives of policy makers. Correspondingly, Litvack, Ahmad, and Bird (1998: 7) confess that designing decentralization policy is difficult in any country because decentralization can affect many aspects of public sector performance and generate a wide range of outcomes. But it is particularly difficult in developing countries because institutions, information, and capacity are all very weak. Therefore, successful decentralization depends highly on institution-specific design. In Indonesia and even in other countries, decentralization policy is not a final purpose of governmental process. It is only a tool or method in creating an interaction among people, between people and the government, and between local and central government. For this reason, it needs concrete efforts, which assures the effectiveness of the tool. Otherwise, decentralization is potentially going to be failed in the implementation step. In this case, decentralization will only work in an ideal concept, but never come as a political and administrative ideality. In other words, decentralization not always offers good stories, but sometimes also includes weaknesses. In this sense, Javier (2000: 3) describes that decentralization is not a cure all for bureaucratic illnesses; it has its own share of disadvantages and misgivings. A power shift away from central government to local institutions can result in losing control over scarce financial resources. A negative re-distributive effect of the transfer of administrative responsibilities can create friction in central-local relations. Anticipating this, Kimura (1999: 35) sharply warns about the possibility of regional autonomy failure, particularly in Indonesia. For instance, one of central paradigm included in LGA 1999 is promoting democratization process in local level. If democracy is defined as government of the people, by the people, for the people (Abraham Lincoln), the main actors of government should be the people itself. Nevertheless, government is never governed by the people, but by the political party instead. In fact, people just like a football game observer; while the real political player are the football teams. Moreover, the optimism for the encouragement of check and balance function between executive and legislative body is likely postponed due to the domination of political party in determining some key positions. The other paradigm included in LGA 1999 is improving the quality of public service. Theoretically, it will cause local administration to be more responsive to both people’s need and local issues raised. However, local administration’s responsiveness can only realized when local politicians are more democratic than those in central level. It is ironic that most of local politicians relatively have traditional attitude, authoritarian, and tends to be dominated by local middle-classes that have narrow vision, and that are not familiar with democratization process and information disclosure. Examining those phenomena, Kimura (1999: 36-37) mentions that in case that administrative infrastructure is not ready or prepared, excessive implementation of decentralization would Proceeding Temu Ilmiah XI, 2002
  11. 11. produce serious problems, such as: • Widening gap between rich and poor local government. • Decreasing government services due to budget constraints or lack of capacity. • Increasing “local kingdom” and the hardship to create a check and balance system. • Sharpening antagonism among racial groups. Similarly, Prud’homme (1995: 202-207) states that there are three dangers of decentralization, those are: 1) decentralization can increase disparities; 2) decentralization can jeopardize stability; and 3) decentralization can undermine efficiency. In Indonesian context, the possibility of wide-autonomous region policy failures can be detected from the phenomena that balance-fund legislation often produces disagreement between local and central government. Demand for independency from some provinces such as Aceh, Papua, and Riau, are also good examples for terrible reality. Besides, raising trend of the Municipalities and Districts superiority over the Provinces as mentioned by Utomo (2000) is indicating such likely failures. Awareness of those will lead us to another understanding, that is, the need for strategic policy and concrete effort as an integral part of decentralization implementation. In this case, all local governments need to employ capacity building programs. According to Kimura (1999: 37), capacity building is the subsequent step to be considered after implementing the decentralization. From this perspective, capacity building constitutes prerequisite, by which local government would able to strengthen their administrative infrastructure in order to realize an effective governance system. Strong and productive administrative infrastructure is very important to achieve what so called good governance. In turn, good governance hopefully will become a trigger of the public service quality improvement. To conclude, local government capacity building program aims not only to reinforce the implementation of decentralization policy, but also to refurbish the public service performance. Besides, specific policies as will be explored below are extremely required in order to anticipate the failure of decentralization programs. 6. Decentralization and Its Impacts on Democratic Developmental Regime Promotion (Cross-Country Cases and the Role of LGA 1999 in Indonesia) As it is mentioned above, LGA 1999 conveys some new paradigms of governance such as democratization, peoples’ participation empowerment, and public service enhancement. In other words, LGA take an important role in promoting democracy and development in local level (taken together as developmental democracies or democratic developmental regime). Although the implementation of LGA 1999 has been effective just no more than 2 years (it is effectively implemented since January 1st , 2001), and though it does not bring glaring impacts yet, some improvements in managing local can government be easily observed. The main point is that decentralization should lead to a better government; and better government should lead to a better community. From cross country data and experiences, decentralization may produce higher performance of certain field of development. Keith McLean and Elizabeth King (1999: 55) conduct research on decentralization and its impacts on the education sector. The initial evidence suggests that decentralization to sub-national Proceeding Temu Ilmiah XI, 2002
  12. 12. governments may increase autonomy for communities and school actors to improve school and learning. By increasing the participation of the parents, community-managed school in El Savador show significantly low rates of student and teacher absenteeism. In Nicaragua, controlling for similar household background and school inputs, students in school that make more of their own decisions about school functions perform better in tests. Similarly, as declared by Anne Mills (Kolehmainen-Aitken, 1999: 57), decentralization in health sector offers some advantages, those are: • More rational and unified health service that caters to local preferences. • Improvement of health programs implementation. • Lessened duplication of services as the target of populations are defined more specifically. • Reduction of inequalities between rural and urban areas. • Cost containment from moving to streamlined, targeted programs. • Greater community financing and involvement of local communities. • Greater integration of activities of different public and private agencies. • Improvement of intersectoral coordination, particularly in local government and rural development activities. However, without careful planning of appropriate organizational roles, relationship and structures, decentralization in health service may produce unproductive results, as occur in some countries like the Philipines, Zambia, and Papua New Guinea (Kolehmainen-Aitken, 1999: 59). In the infrastructure sector, Jessica Seddon (1999: 70) serves studies that indicate that decentralization can have varied effects on the infrastructure sector. For example, both aggregate and sub-national infrastructure expenditure increases as decentralization proceeds, particularly in developing countries. This could be an indicator that local government prefer more infrastructure than would have been provided by the central government. In addition, performance indicators generally improve slightly or stay the same when infrastructure sectors are decentralized, although they do observe a few negative effects. Finally, to some degree decentralization also gives a better performance on economic growth, as researched by Seldon (1999: 93). Quoting some experts, she points out that decentralization has a positive and sometimes significant effect on regional economic growth in India, while work on the US find fiscal decentralization to be associated with lower growth. However, several methodological problems in these studies discount even these mixed results and much more needs to be done to ensure that the measured decentralization-growth relationship is robust. That’s why, in the absence of strong, unambiguous empirical evidences; researchers have put forward three hypotheses about the relationship between decentralization and growth. In each hypothesis, growth has only a secondary relationship to decentralization, and the nature of the connection, whether growth enhancing, growth impeding, or growth requiring, depends on what are considered to be the primary effects of decentralization. Those three hypothesis are: 1) Decentralization increases economic efficiency in public spending, therefore its dynamic effects should be growth-enhancing; 2) Decentralization can lead to macroeconomic instability, which can inhibit growth; and 3) Developing countries Proceeding Temu Ilmiah XI, 2002
  13. 13. have significantly different institutional and economic environments than do industrial countries and will not reap the benefits or suffer the consequences of decentralization in the same ways (Seldon, 1999: 93-95). In the case of Indonesian decentralization, the Asia Foundation (2002) finds out that decentralization is able to endorse the following three current directions. First of all, there is an increasing awareness and appreciation of peoples’ participation in LGU. In the sites covered, there are strong indications of increasing peoples’ participation, transparency and accountability. People are demanding better performance and in response, some LGUs have become more ‘customer oriented’ and open to public discussion and dialogue about their performance and how they can improve. In Bandung, for example, the Bupati (Head of District) and technical staff have held weekly public dialogues with constituents at the sub district level for the past year. The dialogues give the public an opportunity to provide feedback on LGU performance related to service delivery and social, political, economic and environmental problems. These forums have favorably impacted peoples’ image of LGU and their perceptions of government accountability and transparency. Another finding is that LGU agencies are committed to improving service delivery and are feeling the pressure to do so from citizens. Since public service delivery in the hands of closer and more accessible LGUs, citizens have found it easier too express concerns about the quality of service and demand more. The quantity and quality of services has improved in some areas, but it has deteriorated in others. Generally speaking, however, LGUs have managed to maintain the level of service that the central government used to provide. For instance, a perda (regional regulation) was passed in Pontianak in April 2001 to improve the quality of public services. Considering local potentials, community needs, and work efficiency, the Pontianak City Government established a benchmark of 5.6 (out of 8) working hours as minimum amount of time that should be devoted to service delivery. The remaining time is for administrative matters. Units that fail to meet this standard will be evaluated and face the possibility of being merged with other units. Finally, the last finding concerns with the fact that regional governments are cooperating and sharing information with one another and with provincial government to solve a variety of shared problems. A common interest in improving public service delivery, increasing revenue and resolving problems and conflicts arising from decentralization have motivated LGUs to help each other. Though the roles and responsibilities between different levels of government remain unclear, and the central government has provided insufficient support for local problem solving and conflict management, LGU are being proactive in forming association to share information and approaches to common problems and to advocate policy reforms. The Bupati of Indramayu, for example, established an association of local government officials from kabupaten (districts) that are rich in oil and gas resources. This association provides a forum for these kabupaten to negotiate with the central government over the amount of resources from oil and gas that is returned to LGU. The association has lobbied the central government to be more transparent in how it allocates the DAU (dana alokasi umum, general allocation unit) to the district level. Nevertheless, some negative impacts seem unable to be avoided. In their research report, SMERU (2002) depicts that Cirebon District Government is preparing to launch 18 new tax / Proceeding Temu Ilmiah XI, 2002
  14. 14. levies (pajak / retribusi) regulation; while Garut District Government has issued 24 new tax / levies (pajak / retribusi) regulation, 17 of them concerns with financial charges. The similar can be found in Ciamis, where LGU has 35 types of revenues: taxes (6), levies (27), and third party grants (2). These phenomena have propensities impeding economic investments and domestic businesses in the future if the government does not anticipate through proper policies. Due to the decentralization policy in Indonesia creates not only positive outcomes, but also negative consequences, it is important to consider the preconditions that could strengthen the role of LGA 1999 in upholding the democratic developmental regime. In general, the following requirements should be met to construct a developmental state / regime: a dedicated developmental elite; relative autonomy for the state apparatus; a competent and insulated economic bureaucracy; an empowered civil society; a capacity to manage effectively local and foreign economic interest; and a varying balance of repression, legitimacy and performance (Leftwich, 2000: 160-167). Unfortunately, it is extremely difficult to create such requirements for developmental state. In this case, we need accurate strategies of development. For that purposes, Kimura (1999: 37-50) offers six central points in promoting (LGU) capacity building. Those six points are: establishing nation-wide minimum standard of services, improving policy formulation capacity, modernizing bureaucracy, reorganizing boundary between LGUs, promoting check and balance system in local level, and strengthening financial basis. To some extent, both central government and LGUs in Indonesia have realized such points or policies, but to some other extent they have not. Here, there are hypothesis that the more effective the implementation of those policies, the stronger LGUs capacity in promoting development. Then, the stronger LGUs capacity to promote development, the higher their possibility to become developmental democracies or democratic developmental regimes. 7. Conclusions The above sketch implies that the political reform is not complete yet. Instead, it should be pursued by a series of governmental and developmental agendas. Otherwise, the “New Indonesia” is likely to be unrealized. The implementation of LGA 1999 functions merely as a bridge from authoritarian regimes to democratic regimes. However, it is not enough. The other bridge should be created in order to bring LGUS from democratic regimes to developmental democracies, that is, democratic developmental regimes. And the second bridge should be LGUs capacity building. Proceeding Temu Ilmiah XI, 2002
  15. 15. References Asia Foundation, 2002, Decentralization and Local Governance in Indonesia: 1st Indonesian Rapid Decentralization Appraisal (IRDA), Jakarta, February 28. Can be seen online at www.asiafoundation.org/pdf/Indo_IRDA_Summary.pdf Chang, Ha-Joon, “The Economic Theory of the Developmental State”, in Meredith Woo Cumings (ed.), The Developmental State, Cornell University Press. Devas, Nick, 1997, “Indonesia: what do we mean by decentralization?”, in Public Administration and Development Journal, Vol. 17, p. 351-367. Ford, James, 1999, “Rationale for Decentralization”, in Jennie Litvack and Jessica Seddon (ed.), Decentralization Briefing Notes. World Bank Institute. Available online at http://www.worldbank.org/wbi/publications/wbi37142.pdf IMF, The World Economic Outlook Database, September 2001. Javier, Aser B., 2000, New Politics and Governance in an Era of Decentralized Polity: the Local Government of The Philippines, paper presented at the Decentralization Training Program for Trainers of the Indonesian Public Administration Agency held at GSID Nagoya University, 20 September-12 October. JBIC (Japan Bank for International Cooperation), 2002, ODA Loan Report 2001, Tokyo. Johnson, Chalmers, 1982, MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975, Stanford: Stanford University Press. _______________, 1999, “The Developmental State: Odyssey of a Concept”, in Meredith Woo Cumings (ed.), The Developmental State, Cornell University Press. Kimura, Hirotsune, December 1999, “Decentralization: New Form of National Integration?” (Indonesian version), in Ketahanan Nasional Journal, No. IV (3), Yogyakarta. Kolehmainen-Aitken, Riitta-Liissa, 1999, “Decenttralization of the Health Sector”, in Jennie Litvack and Jessica Seddon (ed.), Decentralization Briefing Notes. World Bank Institute. Leftwich, Adrian, 1996, “Two Cheers for Democracy? Democracy and the Developmental State”, in Adrian Leftwich (ed.), Democracy and Development: Theory and Practice, Polity Press. _______________, 1998, “Forms of the Democratic Development State: Democratic Practises and Development Capacity”, in Mark Robinson and Gordon White (ed.), The Democratic Developmental State: Politics and Institutional Design, Oxford: Oxford University Press. _______________, 2000, States of Development: On The Primacy of Polictics in Development, Polity Press, Cambridge. Litvack, Jennie, Junaid Ahmad, Richard Bird, 1998, Rethinking Decentralization in Developing Countries, The World Bank, Washington DC McLean, Keith and Elizabeth King, 1999, “Decentralization of the Education Sector”, in Jennie Litvack and Jessica Seddon (ed.), Decentralization Briefing Notes. World Bank Institute. Media Indonesia, August 14th , 2002, Indonesia is able to conduct rapid democratization process, (Indonesian version), Jakarta. Owens, Jeffrey and Giorgio Panella (ed.), 1991, Local Government: An International Perpsective, North-Holland. Pempel, T.J., 1999, “The Developmental Regime in a Changing World Economy”, in Meredith Woo Cumings (ed.), The Developmental State, Cornell University Press. PERC, 2001, Corruption In Asia In 2001, Excerpt from Asian Intelligence Issue #579 March Proceeding Temu Ilmiah XI, 2002
  16. 16. 7, 2001. Available online at http://www.asiarisk.com/lib10.html. Also see http://www.globalpolicy.org/nations/corrupt/2001/0319asia.htm. Prud’homme, Rémy, August 1995, “The Dangers of Decentralization”, in The World Bank Research Observer, vol. 10, no. 2. Republik of Indonesia, 1974, Law No. 5 of 1974 on Principles of Government in Local Level. _______________, 1999, Law No. 22 of 1999 on Local (Regional) Government. _______________, 2001, Government Regulation No. 52 of 2001 on Co-administration. Rondinelli, Dennis, 1981, “Government Decentralization in Comparative Perspective”, International Review of Administrative Sciences, vol. 47 (2). _______________, 1999, “What is Decentralization?”, in Jennie Litvack and Jessica Seddon (ed.), Decentralization Briefing Notes. World Bank Institute. Available online at http://www.worldbank.org/wbi/publications/wbi37142.pdf Schneider, Ben Ross, 1999, “The Desarrollista State in Brazil and Mexico”, in Meredith Woo Cumings, The Developmental State, Cornell University Press. Seddon, Jessica, 1999, “Decentralization of Infrastructure”, in Jennie Litvack and Jessica Seddon (ed.), Decentralization Briefing Notes. World Bank Institute. _______________, 1999, “Decentralization and Economic Growth”, in Jennie Litvack and Jessica Seddon (ed.), Decentralization Briefing Notes. World Bank Institute. SMERU, 2002, Regional Autonomy and Investment Opportunity: the Case in Three Districts in West Java Province, (Indonesian version), Jakarta, research report. Can be seen online at www.smeru.or.id/report/field/otdaiklusahajabar/iklimusahajabar.pdf and www.smeru.or.id/report/workpaper/regautofieldexpchall/regautofieldexpchall.pdf Smith, B.C., 1985, Decentralization: The Territorial Dimension of The State, London: George Allen & Unwim. Turner, Mark and David Hulme, 1997, Governance, Administration and Development: Making the State Work, London: Macmillan Press Ltd. UNDP (a), Partnership to Fight Poverty: UNDP In Indonesia, can be seen at http://www.undp.or.id/publications/undpprofile/undp_profile.pdf. _______________ (b), Achievement in Rice Self-Sufficiency in Indonesia, can be seen at http://www.undp.org/tcdc/bestprac/agri/cases/indo2.htm. _______________, 1996, Human Development Report: Economic Growth and Human Development, available online at http://hdr.undp.org/reports/global/1996/en/default.cfm. _______________, 1999, Human Development Report: Globalization with a Human Face, available online at http://hdr.undp.org/reports/global/1999/en/default.cfm. _______________, 2001, Human Development Report: Making New Technologies Work for Human (available online at http://www.undp.org/hdr2001/back.pdf, http://hdr.undp.org/reports/global/2001/en/pdf/completenew.pdf, http://www.undp.org/hdr2001/indicator/pdf/hdr_2001_table_1.pdf). Also see: BPS, BAPPENAS, and UNDP, 2001, Indonesian Human Development Report 2001: Towards A New Consensus, Democracy and Human Development in Indonesia, Jakarta. UN ESCAP (United Nations Economic and Social Commission for Asia and the Pacific), 2002, What Is Good Governance?, available online at http://www.unescap.org/huset/gg/governance.htm Utomo, Tri Widodo W., 2002 (a), “ODA Loans to Indonesia Should Shift to Social Welfare”, in The Jakarta Post, August 13th . _______________, 2002, (b), Analyzing the Phenomenon of Corruptive Democracy, Indonesian version, unpublished paper. Proceeding Temu Ilmiah XI, 2002
  17. 17. _______________, 2000, “Provincial Government and Inferiority Syndrome” (Indonesian version), in Republika, September 26th . White, Gordon, 1998, “Constructing a Democratic Developmental State“, in Mark Robinson and Gordon White (ed.), The Democratic Developmental State: Politics and Institutional Design, Oxford: Oxford University Press. Woo-Cumings, Meredith, 1999, “Introduction: Chalmers Johnson and the Politics of Nationalism and Development”, in Meredith Woo Cumings (ed.), The Developmental State, Cornell University Press. World Bank, 1993, The East Asian Miracle: Economic Growth and Public Policy, Oxford University Press. _______________, June 2001, “Decentralization and Governance: Does Decentralization Improve Public Service Delivery?”, PremNotes No. 55. Available online at http://www1.worldbank.org/prem/PREMNotes/premnote55.pdf Proceeding Temu Ilmiah XI, 2002