Friday, 24 June 2011

The Decentralisation of Indonesia – What happened after the Big Bang?

By Neil McCulloch

I’m just back from a fascinating conference on Democratisation and Decentralisation in South East Asia, with a focus on evaluating ten years of Indonesian decentralisation.

Indonesia undertook a “big bang” decentralisation in 2001, shortly after the overthrow of long-time dictator Suharto in 1998.  Suharto had, for more than 30 years, run one of the world’s most centralised states, with everything that matters decided in Jakarta.  The fledgling democratic Indonesia took a huge gamble in decentralising most functions of government to the district governments.  Each district now has its own directly elected mayor or district head, as well as an elected parliament.

It’s hard to overestimate what a gamble decentralisation was.  After the horrendous ethnic conflict and bloodshed, collapsing economy and political chaos of 1998, many commentators suggested that Indonesia might break up, or descend into civil war.  Not only has this not happened, but Indonesia is now widely regarded as an example of how to make the transition from autocracy to a functioning unitary democracy with a free press.  As Marcus Mietzner’s argued in his keynote address at the conference, given Indonesia’s history and conditions in which decentralisation occurred, the outcome has been remarkably good.

At the same time decentralisation has not been a roaring success either.  For all the hype about bringing decision making closer to the people, public services have not improved, poverty remains high, and corruption is pervasive.  My own talk showed that a new measure of the quality of economic governance at the district level is uncorrelated with local economic performance.  In other words, sadly, good governance doesn’t help you grow. 

The reason for this is probably the same as the reason why services haven’t improved.  Although millions of Indonesians are now participating in elections, the same “money politics” determines who the candidates are.  As a result it is broadly the same local elites that are in charge, and, in some cases, have used decentralisation as a tool for self-enrichment and political patronage. The pattern is often the same – a candidate buys a candidacy from a political party, using funds from private sector backers to pay.  Then, when in office, procurement rules are rigged to ensure that the same private backers get paid back handsomely for their investment.

But none of this is unique to Indonesia.  Such “elite capture” happens the world over.  As Andrew MacIntyre and Douglas Ramage have nicely put it, “Indonesia is a Normal Country”.  And, little by little, improvements are coming.  The anti-corruption commission is investigating a large number of cases and has already put offenders in jail; local electorates routinely kick out officials that they know to be corrupt.  The key challenge going forward will be to strengthen accountability for delivering genuine improvements – better services, jobs and poverty reduction.  Only when local leaders start to lose their jobs because they failed to deliver, will we be able to declare Indonesia’s decentralisation a success.