To learn from past
experiences and in view of various rules and future prospect, it was stipulated
that broad regional autonomy in regencies and cities was only based on the
principle of decentralization. In the province, there would be limited autonomy
based on decentralization and deconcentration.
Besides this policy
might open broad opportunities for establishing a democratic Government, so
the people could play their roles in executing development based on the
potentials in the region, and the Government would be enabled to render better
services for the people.
In principle all the
Government's task to develop could be delegated to the autonomous Provincial
Governments except in defense and security, justice, external affairs,
monetary, religion etc which nationally were better to be managed by the
central Government. Basically there was distribution of power between the
Central Government and local governments.
The Central
Government's power was to enhance execution of policy for national development
at macro level, to manage financial balancing, state's administration system
and state's economic institutions, human resources development and natural resource
development, strategic high technology, natural conservation and national
quality standardization.
The Provincial
Government's power as autonomous region included power in administration which
was trans residential and power in other domains and provincial authority as
administrative zone including governmental authority delegated to Governors as
Government's representatives in the regions.
The autonomous
provinces had the authority to execute decentralization plan aimed at enhancing
provincial administration functions, provincial development execution,
enhancement of service efficiency to the people, development of regional
financing and people's empowerment.
By the
above-mentioned authority, implementation of the regional autonomous system
must ensure readiness of institutional function, and competent personnel,
material equipments, and economic potential of the regions to serve as income
resources for the region, giving of fiscal and non fiscal incentives and
financial relationship between the Central and local Government.
Serious attention on
economic capacity of all autonomous provinces was of utmost importance. Financial
matters should be managed based on APBD Regional Budget, general assistance,
special assistance from the Central Government and income fund according to
provincial economic contribution without disregarding Government's role.
Regional Government
was expected to empower all Indonesian regions in terms of politics, economy,
or social culture. Independent legislation function and control by the Local
Parliament [DPRD] would lead to effective local administration and democratic
life of the people.
People's
participation in development process would be enhanced to enable all the
regions in Indonesia to grow integratedly. Hence the autonomous Government
system was a starting point of Indonesia's fundamental change process.
Autonomy as written
in Law No. 22 year 1 999 which was revised into Law No.32 /2004 was generally
understood as transfer of authority from the Central Government to the
Provincial Government. It was more than just transfer of authority but also
transfer of financial management known as Money Follow Function as regulated in
Law no 25 Year 1999 which was revised into Law No 33/2004 on Financial
Balancing between the Central Government and local Governments.
Further consequences
of the implementation of the two laws was that authority of the local
Government would be greater so the responsibilities would be just as high.
Regional governments must be able to manage authority in the broadest sense of
the word to empower the people, economic and political institutions, legal
institutions, religious institutions and non-Governmental organizations and all
public potentials in the region within the United Republic of Indonesia.
Besides, the
regional Government must also have the capability to manage their own fund.
Every region was demanded to be able to finance developments in their
respective areas by their own financial resources which they commanded. The
role of provincial Governments in exploring and developing local potentials as
source income would determine attainment level of the Government in that
region.
Unfortunately as the
decentralization of Government [Otoda] was applied, many local Governments
were still unprepared in finance management. Financial performance was the
benchmark of readiness of local Governments, but in reality financial
management capability of some provinces were still dependent on cash supply
from the Central Government. Supposedly they were self-reliant.
In regard to the
local financial authority of the local Government, Law no. 32 /2004 regulated
transfer of balancing fund consisting of General Allocation Fund [DAU],
Special Allocation Fund [DAK], and fund from shared income consisting of tax
income and natural Resources.
Spending of the
balanced fund was fully entrusted to the local Government. However the local
Government must use the transferred fund effectively and efficiently in
promoting minimum standard of public service presented transparently and
accountably.
However in reality,
transfer from the Central Government were frequently used by the local governments
to finance daily operations and in the Financial Report was included in the
Regional Budget [APBD1. The objective of this transfer was to reduce inter
Governmental gap and to ensure minimum public service standard all over the
country, and only a small portion allocated for public welfare.
And yet the Regional
Budget [APBD] was the main instrument for policy implementation for the local
Government who was in the central position in the process of capability
development by the Provincial Government. For that matter regional fund must be
public orientated, be transparent about budgeting to the public as stated in
the regional financial report.
Considering the wide
disparity of development between the Central Government and the local
Governments and bias in budget alocation, it was important to speed up
development process and maximize PAD management by all stakeholders. Unfortunately
the application of OTODA seemed a far cry from its true objective. This was
evident in absorption of local Government's fund for development.
Excessive fund of
the Local Government were mostly deposited as fix deposit in banks which was
ineffective because they became idle fund. So it was right for the Ministry of
Finance to issue regulation on the maximum amount of fund to be placed in fixed
deposits to enhance development in the regions .
The Central
Government' fund was very often placed by the local Government at Regional
Development Bank [BPDJ further re-deposited in the form of Bank Indonesia
certificate [SBII and the fund flowed back to Central. Last year local
Government's fund which was idle in banks came to Rp109 trillion further the
fund became over spill of Budget Expenditure [silpa] which was further used as
initial fund 2014.
The Ministry of
Internal Affairs approved prohibition to keep fund in fix deposits. Remaining
[unspent] fund from December to March was normally unused. In that case it was
permissible to keep money in fixed deposit. The reason was: if fund were kept
as giro the interest was only 3%, while in deposit it was 6%, so the depositor
had 3% of difference to play with. But money keeping in deposits was done only
for a limited period.
If fund of the
regions could be fully used, inter-regional disparity could be minimized. In
the past, a centralistic Government had caused disparity to widen, which was
why people's welfare was not evenly spread. Besides regions were losing their
creativity in seeing the potentials in their region.
In a decentralized
system as today, provincial Governments were demanded of their high capability
and competence. They were demanded to be creative and innovative in developing
their regions based on the budget in hand. In general regions which grew was
because of creative quality of their leaders. They would make policies which
were investor friendly so investors were enthusiastic about investing their
capital. (SS)
Business New - April 30, 2014
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