Striking the Right Balance

Abstract

Abstract Indonesia has achieved significant political and institutional reforms over the past two decades. Four sets of amendments to the 1945 Constitution allowed for the enactment of Indonesia’s decentralization laws, transferring significant fiscal and political authority to districts and municipalities, bypassing the once powerful provincial administrations unless sectoral imperatives cross-cut district boundaries. This went some way to addressing subnational demands for greater autonomy that had long beleaguered Indonesia’s central administration, which in the extreme resulted in regional rebellions and separatist insurgencies. The new centre-periphery bargain that was struck mitigated some past pressures and presented new opportunities, including more customized local services and subnational policy innovation suited to Indonesia’s varied local contexts. Yet, regional autonomy also created new challenges—the substantial increase in the scale of actors vying for power and influence in subnational regions has generated new tensions, especially over land claims and resource extraction rights, alongside centre-periphery struggles for licensing authority. In response, successive central administrations have sought to strengthen central powers in the mining sector, also winding back district government licensing authority in lucrative resource sectors. The question remains as to whether the slow creep of recentralization strikes the right balance in Indonesia’s centre-periphery and intra-periphery distribution of power and authority. Lessons from history elucidate the risks of extreme re-centralization, particularly if subnational regions receive few benefits. Contemporary lessons from Bangka Belitung and Banyuwangi show there is no easy fix for resource contestation through regulation or force, also illustrating the importance of creating inclusive subnational bargains.