The Allocative Efficiency Analysis of Special Allocation Fund for Road Sector in 2015-2019

Abstract

Indonesia, as an archipelago, requires connectivity infrastructures to ease mobility and equitable development. However, the current condition has not reflected a decent quality of road infrastructure. The road sector's special allocation funds are the main instrument for financing local road infrastructure development following national priorities. Departs from this, the study analyzes the extent to which the allocation for the Road Sector in 2015- 2019 complied with the Allocative Efficiency principles as part of the public expenditure management (PEM) framework. The research uses a postpositivism approach with primary data analysis (in-depth interviews) and secondary data in literature reviews, regulatory reviews, and descriptive statistics. The study concluded that the 2015-2019 allocation was not optimally in line with priority-based allocations, a weak medium-term budgeting perspective, poor consolidation within the local autonomy, and several contradictions among regulations. Even though there are several weaknesses in the practice of implementing allocative efficiency principles, the Government's strong commitment is reflected in the Cabinet Review annually and the planned issuance of the Presidential Instruction of Regional Roads. This study brought practical recommendations highlighting the need to sharpen priority targets and recipients, adopt the medium-term expenditure framework (MTEF), and regulatory harmonization. In addition, it is essential to revamp the structure of regional capital spending and the need to accommodate roads in the Minimum Standards Services.