Post-decentralization regional economies and actors -- putting the capacity of Local governments to the test

Matsui Kazuhisa

The Developing Economies, 2005, vol. 43, issue 1, 171-189

Abstract: Decentralization in Indonesia was introduced institutionally in 2001, with a democratization drive promoted by international donors and by the intention of the new government to clear away the centralistic image of Soeharto. Decentralization has had some effects on regional economies and on local government administration. Compared to the period before decentralization, the share of gross regional domestic product and local government finance has increased in Java, though investment and bank borrowing have expanded to the outer islands. In qualitative aspects, decentralization has transferred not only administrative authority but also many new vested interests from the center to regions. Local governments have become more extensive economic actors in regional economies. Regional economic actors now compete actively for such vested interests and have missed the opportunity to create market-friendly regional economies. The government sector should not be a mere rent-seeking economic actor, but should play a role as a facilitator promoting private sector activities in regional economies.

Keywords: Decentralization; Local economy; Community development; Regional administration; Local government; Indonesia; 地方分権; 地域経済; 地域開発; 地方行政; 地方自治; インドネシア (search for similar items in EconPapers)
JEL-codes: R1 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (4)

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