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JAKARTA
POST, 13 Mei 2013
On the commemoration of decentralization day on April 25,
home minister reminded the heads of local governments and public servants to
work hard to improve the people’s welfare.
In Indonesia, a limited number of progressive autonomous cities and regencies have put into practice an array of activities to improve the quality of their governance for economic issues.
Innovative programs, such as one-stop services for business licensing, regular forums with private firms to highlight their obstacles and participatory approach in policy making process are among others of examples of best practices to improve the quality of service to business.
The fact that best practices were never implemented under centralization holds out the possibility that there is room for improvement under decentralization. However, do those best practices contribute to the people’s welfare?
Literature at the national level suggests that countries with better governance enjoy higher economic growth rates, but is that the case at lower levels?
It is fascinating to study whether the change from centralized to decentralized government contributes to the performance of the economy at the local level.
Growth is derived from a number of structural conditions of a country, such as its endowment in natural resources, geography, physical infrastructure and human capital.
What is the role of governance to the growth? One influential study said that countries with better governance have higher growth rates. Hence, governance does contribute to economic performance.
Putting that in the context of decentralization in Indonesia, development stakeholders work on many aspects of governance to improve their quality. Besides government programs, many NGOs dedicate their efforts and funds to implement a wide range of activities dealing with national and local governmental issues.
Various activities on economic-related issues of decentralization, such as regulatory and bureaucratic reforms as highlighted above, that have been conducted by donor agencies, NGOs and think tanks raise a question on their effectiveness in achieving a broad goal: improving the quality of economic performance. In a narrower scope, decentralization triggers a question as to its contribution to the economic growth as addressed above.
Given the fact that decentralization has been implemented for about 12 years in Indonesia, it is an ideal time to evaluate its performance. It is essential to look at the evidence of the contributions of local governance to local economic performance, specifically local growth.
The KPPOD (Regional Autonomy Watch) and The Asia Foundation’s local economic governance index provides valuable information on local economic governance.
It evaluated nine indicators gauging the quality of local economic governance under district governments by focusing on policy related indicators as perceived by around 50 firms each district. In addition, it also analyzed seven local economic regulations promoted by each district based on 14 criteria such as the local tax burden and the implementation of free movement of goods among districts.
The good local economic governance indicates its contribution to increasing local growth. This is good news for decentralization. The efficiency of providing services for business licensing, good public-private interaction and the quick responsiveness of districts’ government to handle problems of infrastructure are among other factors associated with increasing local economic growth. It means that local innovative programs are not useless — they contribute to the people’s well being.
However, the study also indicates that economic governance is less relevant in richer districts endowed with natural resources, suggesting elite capture.
This is in line with the huge problems of natural resource based economic activities, such as licensing, as frequently highlighted by the mass media.
Another finding is that the business development programs for small and medium enterprises initiated by district governments such as business matchmaking and training contribute to the growth negatively because the beneficiaries of the programs were not targeted correctly.
The findings support a number of case studies evaluating the role of governance in various dimensions. They also confirm the concerns of the private sector that address the importance of those issues. The findings are indeed important as they cover a large number of districts.
Based on the above findings, there are a number of interventions that could be done by related stakeholders. The governments at the central and local level need to seriously institutionalize reliable performance measurement of important element of economic governance such as services on business licensing.
The government is also expected to prioritize the consistent monitoring of the implementation of good economic governance in districts endowed with rich natural resources. In order to make the existence of the governments relevant, the governments should sharpen their intervention programs for businesses through affirmative programs in the case of SME development.
Meanwhile, the stakeholders of local development should continue their programs to support local government in introducing good governance into practice in various aspects of governance. The proper implementation of the above mentioned agenda would bring about a better decentralized Indonesia. ●
In Indonesia, a limited number of progressive autonomous cities and regencies have put into practice an array of activities to improve the quality of their governance for economic issues.
Innovative programs, such as one-stop services for business licensing, regular forums with private firms to highlight their obstacles and participatory approach in policy making process are among others of examples of best practices to improve the quality of service to business.
The fact that best practices were never implemented under centralization holds out the possibility that there is room for improvement under decentralization. However, do those best practices contribute to the people’s welfare?
Literature at the national level suggests that countries with better governance enjoy higher economic growth rates, but is that the case at lower levels?
It is fascinating to study whether the change from centralized to decentralized government contributes to the performance of the economy at the local level.
Growth is derived from a number of structural conditions of a country, such as its endowment in natural resources, geography, physical infrastructure and human capital.
What is the role of governance to the growth? One influential study said that countries with better governance have higher growth rates. Hence, governance does contribute to economic performance.
Putting that in the context of decentralization in Indonesia, development stakeholders work on many aspects of governance to improve their quality. Besides government programs, many NGOs dedicate their efforts and funds to implement a wide range of activities dealing with national and local governmental issues.
Various activities on economic-related issues of decentralization, such as regulatory and bureaucratic reforms as highlighted above, that have been conducted by donor agencies, NGOs and think tanks raise a question on their effectiveness in achieving a broad goal: improving the quality of economic performance. In a narrower scope, decentralization triggers a question as to its contribution to the economic growth as addressed above.
Given the fact that decentralization has been implemented for about 12 years in Indonesia, it is an ideal time to evaluate its performance. It is essential to look at the evidence of the contributions of local governance to local economic performance, specifically local growth.
The KPPOD (Regional Autonomy Watch) and The Asia Foundation’s local economic governance index provides valuable information on local economic governance.
It evaluated nine indicators gauging the quality of local economic governance under district governments by focusing on policy related indicators as perceived by around 50 firms each district. In addition, it also analyzed seven local economic regulations promoted by each district based on 14 criteria such as the local tax burden and the implementation of free movement of goods among districts.
The good local economic governance indicates its contribution to increasing local growth. This is good news for decentralization. The efficiency of providing services for business licensing, good public-private interaction and the quick responsiveness of districts’ government to handle problems of infrastructure are among other factors associated with increasing local economic growth. It means that local innovative programs are not useless — they contribute to the people’s well being.
However, the study also indicates that economic governance is less relevant in richer districts endowed with natural resources, suggesting elite capture.
This is in line with the huge problems of natural resource based economic activities, such as licensing, as frequently highlighted by the mass media.
Another finding is that the business development programs for small and medium enterprises initiated by district governments such as business matchmaking and training contribute to the growth negatively because the beneficiaries of the programs were not targeted correctly.
The findings support a number of case studies evaluating the role of governance in various dimensions. They also confirm the concerns of the private sector that address the importance of those issues. The findings are indeed important as they cover a large number of districts.
Based on the above findings, there are a number of interventions that could be done by related stakeholders. The governments at the central and local level need to seriously institutionalize reliable performance measurement of important element of economic governance such as services on business licensing.
The government is also expected to prioritize the consistent monitoring of the implementation of good economic governance in districts endowed with rich natural resources. In order to make the existence of the governments relevant, the governments should sharpen their intervention programs for businesses through affirmative programs in the case of SME development.
Meanwhile, the stakeholders of local development should continue their programs to support local government in introducing good governance into practice in various aspects of governance. The proper implementation of the above mentioned agenda would bring about a better decentralized Indonesia. ●
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