Local Economic Governance in Indonesia: a Survey of Business Operators in 245 Districts/Municipalities in Indonesia, 2011


Decentralization has been underway in Indonesia for more than ten years, but recently many have challenged the how effectively decentralization – and even democratization – is being implemented. Deterioration in the quality of public services, the many corruption cases involving local governments, and low economic growth rates in some regions have prompted discourse about whether the country is making a reversal away from decentralization and democratization. We recognize that the move toward regional autonomy has not been without its faults. Nevertheless, a choice was made to strengthen democracy and move towards local autonomy based on the problems created by the centralistic, authoritarian system of the previous regime. Yet it is unfair to judge regional autonomy a failure after it has been implemented for such a short time, and under a somewhat inconsistent policy framework. Since 2001, the Regional Autonomy Watch (KPPOD) and The Asia Foundation have aimed to present a clear picture of the quality of regional economic governance from the perspective of business owners. Our studies provide input to government at the central, provincial and regional/municipal levels, as well as information to other stakeholders regarding efforts that can be undertaken to promote improve economic growth under regional autonomy. This year's study finds significant variation among regions in the quality of economic governance. This indicates that despite many limitations, some regions have used the opportunities provided by autonomy to foster good governance while others have not. It is hoped that this present study, and the awards presented to regencies and municipalities with the best performance, will promote a healthy competition among regional leaders. It is also envisioned that local governments whose performance is still low can learn from their neighbors who are doing better, and be inspired to improve. We recognize that improving economic governance requires a strong commitment and hard work, not only from the heads of regions but from all ranks of government officials, politicians, business owners and other stakeholders. This study can help set priorities for reform of local economic governance, identifying areas for immediate improvement that are relatively easy to achieve but have the potential of significant impact. Other aspects may need more time for improvement.


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