Fiscal Transfers to Regional Governments in Indonesia

Fadliya and Ross McLeod ()

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: This paper examines the design of the fiscal 'equalisation', or 'balancing', arrangements introduced in Indonesia in 2001, when many functions were devolved from the central to regional governments. This new and needlessly complex system of fiscal transfers was introduced hurriedly, and lacked clarity as to the objectives it was intended to serve, resulting in a number of seemingly undesirable outcomes. One such is the fragmentation of the Indonesian polity through widespread splitting of provinces and districts. Another is that there are huge differences among jurisdictions in the levels of per capita transfers, implying that recipient governments end up with vastly differing capacities to provide services such as education and health to their citizens. Although the relevant law and regulations have already been modified to some extent, the changes fall well short of the far-reaching adjustments needed if the scheme is to serve Indonesia's needs into the future.

Keywords: decentralisation; fiscal transfers; regional autonomy (search for similar items in EconPapers)
JEL-codes: D78 H71 H77 R58 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:pas:papers:2010-14

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