Indonesian Decentralization: Case Study

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Indonesian DecentralizationCase Study 2

• Roy Bahl and Kai Kaiser
• The World Bank
• May 8-10, 2006

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A Good Candidate for Decentralization

• Large and Heterogeneous
• Previous Expenditure Decentralization
• Actual 13 percent
• Expected18 percent
• Political Upheaval / Economic Crisis
• Disaffected Minorities

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A Very Big Bang

• Expenditure Decentralization to One-Third
• Expenditure Assignment by the Residual Method
• Two Million Civil Servants Downloaded
• A New System of Intergovernmental Transfers

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Not So Big A Bang

• Limited Revenue Raising Powers
• No Direct Local Elections

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What Happened?

• No Major Disruptions in Services
• Unclear Expenditure Assignment
• Accountability?

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Your Questions As Outside Evaluators

• Is Big Bang A Good Idea?
• The Residual Approach to Expenditure Assignment?
• Other Issues