Local Government System in Indonesia

Introduction to International Cooperation Law Tri Widodo W. Utomo
(DICOS, 300202040)
LOCAL GOVERNMENT SYSTEM IN INDONESIA AFTER
THE IMPLEMENTATION OF LAW NO 22 OF 1999
1
THE IMPLEMENTATION OF LAW NO. 22 OF 1999
(FROM AUTHORITATIVE TO DEMOCRATIC DEVELOPMENTAL REGIME)
By: Tri Widodo W. Utomo
Abstract:
Abstract:
Abstract:
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.
Introduction: 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

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(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.
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 seems
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

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3
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.
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.
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

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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 (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

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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

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6
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. 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 investable 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.

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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 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.
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

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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 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

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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.
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.

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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 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.

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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).
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 1.1.
Table 1.1.
Table 1.1.
Table 1.1.
Basic Principles of Local Government Function in Indonesia (Comparative Perspective)
LGA 1974
LGA 1974
LGA 1974
LGA 1974 LGA 1999
LGA 1999
LGA 1999
LGA 1999
Decentralization
Decentralization
Decentralization
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
D
D
D
Deconcentration
econcentration
econcentration
econcentration of activities to regional offices of central ministries
(at provincial and local level).
Only at provincial level.
C
C
C
Co
o
o
o-
-
-
-administration
administration
administration
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

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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.
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 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

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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.

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Examining those phenomena, Kimura (1999: 36-37) mentions that in case that
administrative infrastructure is not ready or prepared, excessive implementation of
decentralization would 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.

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15
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 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.

(DICOS, 300202040)
16
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 Seddon (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 hypothesis 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 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,

(DICOS, 300202040)
17
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 in 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

(DICOS, 300202040)
18
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 / 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.

(DICOS, 300202040)
19
Concluding Remarks
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.
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