Fiscal Decentralization In Indonesia Research Articles

Fiscal Decentralization in Indonesia: Does It Curb the Quality of Environment?

Local authorities have played an enormous role in maintaining the sustainability of the environment through decentralization. While decentralization could improve the quality of the environment as an attribute of public good provision, it could also harm the environment by setting low environmental standards to boost environment-related business. In addition, the Environmental Quality Index (IKLH) from various provinces has shown fluctuations in the past ten years. With this ambiguous effect of decentralization, this study aims to disentangle the effect of decentralization on the quality of the environment in Indonesia. This study utilizes Indonesia’s provincial-level data in 33 provinces from 2010 to 2020. In order to solve the model's suffering endogeneity problem, the two-stage least square panel-instrumental variable method is performed. The main results demonstrate that fiscal decentralization and its square significantly affect environmental quality. Its square indicates a nonlinear U-shaped relationship, that in the low-level stage of decentralization tends to harm the environment until the turning point. In addition, this research also suggests the positive but weak effect of Intergovernmental Fiscal Transfer (IFT) on environmental quality. Considering all the results, this research infers that decentralization curbs the quality of the environment in Indonesia and, to some extent, contributes to maintain environmental quality. Therefore, local authorities have a significant role in promoting green regulation to enhance environmental quality and this also reaffirms the importance of green indicators in local budgeting.

The Challenges of Decentralization Fiscal Regulations: Experience from the Philippines

<div><table cellspacing="0" cellpadding="0" align="left"><tbody><tr><td align="left" valign="top"><p>This research aims to understand, analyze, and detail the experience of fiscal decentralization in Indonesia and the Philippines. It explores the main challenges faced in implementing fiscal decentralization policies and valuable lessons that can guide other third countries planning to expand their local entities' fiscal authority. By comparing the experiences of the two, we can explore the similarities and differences in approaches and analyze their impact on economic development and local empowerment. The results show that decentralization in the Philippines is comprehensive and has one of Southeast Asia's most substantial legal bases. Moreover, each tier or each type of local government has a rather direct relation to the central government, especially in fiscal relationships, and is relatively independent compared to other countries in the region.</p></td></tr></tbody></table></div>

Effect of Fund Transfer, Revenue on Development Index as Moderation Variables

One of the instruments to measure the level of success of a country in carrying out development is the human development index calculation approach. In essence, development is a change towards better conditions so that as a result of development activities it will have implications for the emergence of a budget and ultimately money is needed to realize development activities. During the twenty-four years of implementing fiscal decentralization in Indonesia, the number of transfers to the regions has increased significantly. However, efforts to increase regional revenues are often neglected, so that the goal of fiscal decentralization towards self-sufficient regional government funding has not been achieved to date. This study examines quantitatively how the influence of money arising from development activities, namely Central Government Transfer Funds and Regional Original Revenues, can generate benefits or whether the realization of the budget spent by local governments, namely Capital Expenditures, can generate a certain value or benefit for the community, so that in this study can be described through the human development index instrument. The sampling technique used in this study was purposive sampling. The data used in this study is secondary data obtained from the Central Bureau of Statistics and the Directorate General of State Financial Balance. The research method used is panel data regression with the Fixed Effect Model (FEM), where the data collected is cross-sectional data, namely 414 districts/cities in Indonesia for the period 2012 to 2020 which are time series data. The results obtained show that: (1) DTPP has a positive and significant effect on HDI; (2) PAD has a positive and significant effect on HDI; (3) Through capital expenditure mediation, DTPP has a negative and significant effect on HDI; and (4) Through the mediation of capital expenditure, PAD has a positive and significant effect on HDI..

Analisis Desentralisasi Fiskal Pada Postur APBD Kota Batam, Provinsi Kepulauan Riau Tahun 2018

This study focuses on a simple analysis of the public financial posture in Batam City. Fiscal decentralization in Indonesia is carried out by granting broad regional expenditure discretion supported by transfer funding from the center and strengthening local taxing power. Fiscal decentralization is expected to increase the efficiency and effectiveness of governance and public services in the regions. This is due to the proximity of the levels of government providing services to the communities they serve so that local governments understand their local needs and priorities. Furthermore, improving the quality of governance will encourage better access to public services and ultimately boost the regional economy and improve people's welfare.

Fiscal Decentralization in Indonesia: Does Discretionary Policy on Tax Facilities Remain Urgent?

The Regional Governments in Indonesia provide tax facilities as regulated in each region’s Head of the Region Regulations as a form of implementing fiscal decentralization. This study examined 56 Head of the Region Regulations in Indonesia on land and building tax facilities. This legal research examined the concept of tax facilities as a reflection of fiscal decentralization. In addition, it reviewed the application of discretionary power and assessed differences in Head of the Region Regulations on regional tax facilities. The result of the research demonstrated differences in the material substances of the Head of the Region Regulations on tax facilities. Those differences reflected the discretionary power that came from the Regional Tax Law. This discretion must be maintained because Heads of the Region need flexibility in managing the potential of their regions as the embodiment of regional autonomy.
 Keywords: Discretionary Power, Fiscal Decentralization, Regional Government, Tax Facility

DETERMINAN PEMEKARAN WILAYAH DAN FRAGMENTASI PEMERINTAHAN DI INDONESIA

The phenomenon of making new autonomous local government is increasingly widespread in line with the policies of regional autonomy and fiscal decentralization in Indonesia. Many literatures show the local government proliferation in Indonesia is one of the fastest and largest in the world. This study aims to examine the determinants of local government proliferation and government fragmentation in Indonesia. Using panel data from 32 provinces in Indonesia for the period 2001-2013 with fixed effect model (FEM) analysis techniques. The study found that population density, per capita income level, and political aspects are factors that significantly affect territorial splits and government fragmentation in Indonesia. Meanwhile, fiscal capacity, ethnic diversity and income inequality have not been shown to significantly affect the level of fragmentation. The impetus for territorial splits is seen to increase in areas with low population density, high per capita GRDP levels, and high percentage of votes for political parties winning legislative elections. The level of Government Fragmentation in Indonesia is also higher after the implementation of the direct election system for local government head.

The Relationship of Village Funds With Village Economic Development: A Village Level Study in Indonesia

The Village Fund Program is a manifestation of fiscal decentralization in Indonesia, which is intended to support equitable development and increase community welfare. The village government has the authority to plan the use of the Village Fund and to spend it concerning regulations from the central government. The use of the Village Fund needs to be evaluated to determine whether the funds have been spent properly and to support the village's economic development. This study aims to identify Village Fund program activities that can affect village economic development and determine regional priorities in utilizing Village Funds for village development in the economic field. The analysis was conducted using a qualitative approach by mapping and tagging Village Fund expenditures. The mapping and tagging aim to ensure that Village Fund spending follows the mandate and to know the composition of the share of economic spending in each region. The results showed that: (1) the utilization of the Village Fund was following the applicable priority guidelines for the use of the Village Fund; (2) the share of economic spending in the eastern part of Indonesia is lower than in other regions, but the trend is constantly rising, while the share of economic spending in the islands of Java and Bali shows a higher number. Based on the research results, this study suggests that villages in disadvantaged areas prioritize Village Fund spending for infrastructure improvement and regional openness to increase village progress or independence.

The General Allocation Fund (DAU) Formulation Policy: Incentives or Disincentives to the Fiscal Independence of Local Governments

The implementation of fiscal decentralization in Indonesia is expected to improve economic welfare for the people in the regions because it can bring the government closer to the community in providing public services according to people's preferences. As a consequence of decentralization, the central government provides transfer funds to local governments. The amount of transfer funds to local governments is around thirty percent of total National Budget (APBN), excluding central expenditure funds allocated to regions. Central government expect the fiscal dependence of local governments to be reduced. In fact, since regional autonomy was implemented in 2001 until 20 years later, regional independence has never been achieved. Ratio of local revenues (Pendapatan Asli Daerah,PAD) to total revenues in Regional Budget (APBD) ranged from 36.8 percent in Java to only 6.1 percent in Maluku and Papua., the rest still expects transfer funds from the central government. It is suspected that regional independence is closely related to the formulation of the General Allocation Fund (Dana Alokasi Umum, DAU) where PAD is a component of reducing DAU in the formulation. It can be seen from this formulation that the central government has ambiguous policies. On the one hand, it punishes local governments whose PAD efforts are high by providing a smaller DAU, but on the other hand they hope that the regional fiscal dependence will be decrease through an increase in PAD. When there is a view that the effort to collect local taxes is not an important factor for the regions, the regions will prefer to receive a higher DAU rather than increasing their tax collection effort but reducing the DAU. This study will try to analyze the efforts of local governments and will examine the data on variables related to the DAU whether it is consistent with its formulation. Through Weight Least Square (WLS) analysis which is more suitable for heteroscedasticity data that may arise from the diversity of data between regions, this study will see whether the DAU formulation becomes an incentive or disincentive for regional fiscal independence through increasing PAD. The results showed that the PAD variable had a negative relationship with DAU. This means that the DAU formula actually becomes a disincentive for regions to increase their PAD. The greater the PAD, the smaller the DAU received by the local government. Review this policies or reformulate the DAU formulation in accordance with the principles of local government fiscal independence need to be implemented immediately.

Does Fiscal Decentralization Increase the Economic Growth in Sulawesi Island?

Fiscal decentralization in Indonesia has been carried out since the issuance of Law No. 22/1999 which requires the central government to hand over financial management authority to local governments. Fiscal decentralization can create efficiency and effectiveness to encourage economic growth. However, there are still problems, namely whether the delegation of authority can contribute to regional economic growth. This study was conducted to determine the effect or impact of fiscal decentralization on the economic growth of six provinces on the island of Sulawesi. The central government assists the regions through fund transfer schemes such as GAF, SAF, and RSF. This study uses data from six provinces on Sulawesi Island between 2005-2019 and looks at the amount of fiscal decentralization used, namely the ability of regional transfers to create economic growth (AII) and the ability of local revenues to contribute to economic growth (AIII). The results of the analysis show that the indicator of the ability of transfer funds to the formation of regional original income has a positive and significant relationship. This means that, judging from the ability of the regions to contribute to economic growth, they are still unable to increase economic growth without the help of the central government.

The Analysis of Regional Expenditure Responses to Block Grants Transfer from Central Government

The implementation of fiscal decentralization in Indonesia is exactly two decades in year 2021, during this time the policies in the field of transfers to regions have developed with a significant increase in the budget. The budget increasing of transfer to regions is expected to increase the region in providing services to the community and increase development. Furthermore, the objectives of fiscal decentralization are to reduce fiscal gaps and encourage regional governments to be more independent. This study aims to determine the response or behavior of regional spending to transfer funds (block grants) from the central government. The research locus are all districts/cities in West Java, Central Java, and East Java Provinces and used a panel data equation, with variables are regional expenditure, general allocation fund (DAU), sharing allocation fund (DBH), and local revenues (PAD). The results showed that the block grant in the form of DAU encouraged an increase in regional spending. Meanwhile, DBH does not cause a flypaper effect. In the future, in order to achieve the region’s independence, the influence of the flypaper effect from the DAU should be minimized, and the exploration of potential regional revenues needs to be optimized.

Pengaruh Belanja Ekonomi di Era Desentralisasi Fiskal terhadap Kemiskinan di Indonesia

The purpose of this study was to determine the effect of provincial government sectoral spending on poverty in the era of fiscal decentralization in Indonesia. Meanwhile, the sectoral expenditure variables that are considered closely related to poverty are economic spending, housing and public facilities spending, health spending, education spending, and social protection spending according to provinces in Indonesia. The data in this study is panel data, namely cross-section of 33 provinces, and time series of 4 years, namely the period 2012 - 2015. After the Chow test and Hausman test, as well as the lagrange multiplier test, the analysis model in this study was determined to be the random effect model, which is a common analysis model in panel data analysis. This study concludes that partially negative economic spending on poverty, meaning that sector spending can reduce poverty in the era of fiscal decentralization in Indonesia. In this analysis, it was found that the ability of the independent variable in explaining the dependent variable was 0.190165 units or 19.02%, and the remaining 80.98% was explained by other variables not included in this study.

Fiscal Decentralization Dilemma in Indonesia: Between Corruption Accountability and Probability at Local Levels

Decentralization in Indonesia is an unfinished reform and to date, its implementation has not been maximized especially fiscal decentralization. This study aims to investigate the dilemma of fiscal decentralization in Indonesia, between accountability and the probability of corruption at the local level. Data collection in this research is in the form of documentation study to collect secondary data. Secondary data, this study will rely on documentary analysis of official documents from government, NGOs and news items from the media. For data analysis, the study will run analysis processes such as coding, combining emerging codes into themes, verifying themes through theory and follow-up interviews, and drawing conclusions. Whereas the validity mechanism applies member checks, triangulation, multiple sources of data, and looking for counterexamples. This research empirically found that the implementation of fiscal decentralization in Indonesia not only had a positive impact on the financial accountability of local governments but also had a positive impact on the occurrence of corruption in local governments. This means, fiscal decentralization is like two sides of a coin, on the one hand, it is able to increase the financial accountability of local governments, but on the other hand the greater the balance of funds provided by the central government to the regions, the higher the probability of corruption in local governments. Therefore, the supervision of the implementation of fiscal decentralization in order to create good financial governance and minimize corruption in the local government body in Indonesia.

The Evaluation of Fiscal Decentralization in Indonesia Based on the Degree of Regional Autonomy

The implementation of regional autonomy in Indonesia has lasted almost 18 years. However, the success of regional autonomy has not been optimal. Some researchers discovered the existence of limitation of Regional Government Budget. This study investigates the presence of the degree of regional autonomy and its impact on social welfare using data covering all districts in Indonesia from 2013 to 2016. To test hypotheses, we first group districts based on the degree of regional autonomy and than test the existence of the degree of regional autonmy and its impact on social welfare simultaneously on each of regional autonomy degree. Partial Least Square release 6 is used to test hypotheses. The results show that the fiscal decentralization has a significant effect on capital expenditure in districts’ APBD in Indonesia but has no significant effect on economic growth and social welfare of districts in Indonesia; capital expenditure in districts’ APBD in Indonesia has a significant effect on the economic growth and social welfare of the districts in Indonesia; and economic growth has no significant effect on the social welfare of the districts in Indonesia. The significance of the influence between variables depends on the degree of regional autonomy.

Measuring the Impact of Fiscal Decentralization on Economic Growth and Income Inequality using the Heuristic Network

To achieve regional economic growth, the role of regional budgets is very important. In this regard, the utilization of regional economic and financial resources is an important factor in supporting the implementation of the fiscal decentralization system in the area. The implementation of fiscal decentralization in Indonesia is marked by the process of transferring financial resources to regions in significant amounts. In the last five years (2011-2015), the proportion of balancing funds to total regional income nationally reached an average of 73%. Despite the huge spike in decentralization policies, the implementation of fiscal decentralization in East Kalimantan Province, one of Indonesia's provinces, till now has not been able to bring about improving the welfare of local communities. In reality, there is still income inequality, although still relatively low in East Kalimantan Province. This study performs to measure the impact of fiscal decentralization on economic growth and income inequality in East Kalimantan – Indonesia. The hypothesis in this study is that fiscal decentralization negatively affects income inequality directly or indirectly through economic growth in East Kalimantan – Indonesia. The aim of this study is how to use the heuristic network to prove this hypothesis.

Kurang/Lebih Bayar Transfer Antar Pemerintah Pada Sektor Mineral Dan Batubara

In implementing fiscal decentralization in Indonesia there is a phenomenon of under/overpayment of revenue sharing of natural resources from the Central Government to Regional and Local Governments that lead to debt and receivables among government agencies. This study aims to answer why and how this phenomenon occurs and its effects. The strategy of this research is a case study with a qualitative approach to financial data, regulation, and interviews with related sources. The results of the study show that less/overpayment of revenue sharing of mineral and coal is caused by poor planning, policy changes, invalid information, commodity prices, exchange rates and receivables of related non-tax revenues. This research is expected to provide an overview of the causes, conditions and impacts of under/overpayment of revenue sharing of mineral and coal phenomena so that it can reduce the potential for under/overpayment of related revenue sharing and increase transparency among governments.

Fiscal Decentralization and Regional Economic Growth

Fiscal decentralization in Indonesia initiated in 2001 has proven to be effective and efficient; although, its implementation still need to be evaluated. The aim of the study was to analyze the implementation of fiscal decentralization on economic growth in Central Java. Tools multiple regression analysis using the method Fixed Effect Model (FEM).The period of the research was 9 years (2009-2017), and the subject of the was 35 districts/cities in Central Java Province. The dependent variable was economic growth, the independent variable was fiscal decentralization, and the control variables were investment and labor. The results showed that fiscal decentralization has a positive effect on economic growth in the district/city in Central Java. Other findings, private investment and the amount of labor encourage economic growth in Central Java. Based on findings, to reduce the fiscal gap, local governments should be able to increase their fiscal capacity through the development of commodity-based economic activity in their regions
 Keywords: Fiscal decentralization, Economic growth, Investment, Labor

Does Fiscal Decentralization in Indonesia have Asymmetrical Information?: Principal-Agent Model, Primal-Dual, and a Neural Network Analysis

In reality, subnational governments suffer from moral hazard, creating uncertainty which, in turn, causes economic inefficiency. The behavior of subnational governments cannot be observed by the central government. An analysis which takes into account this phenomenon is therefore needed. Decentralization implies delegating authority from central government to subnational governments. In this study, the subnational government is represented by the local government. This study utilizes a model of principal-agent. The central government acts as a principal who delegates fiscal authority to subnational governments who act as agents. By applying principal-agent model, we can use the primal-dual approach to analyze both revenue and expenditure assignment associated with the tax effort of the subnational governments. The result from artificial neural network approach shows that asymmetric information between central and subnational governments exists in Indonesia.Keywords: Artificial Neural Network, Fiscal Decentralization, Local Tax Effort, Primal-Dual, Principal-Agent.

Poverty alleviation in the contex of fiscal decentralization in Indonesia

Poverty alleviation in the contex of fiscal decentralization in Indonesia

PENGARUH KEBIJAKAN DANA BAGI HASIL TERHADAP PENERIMAAN DAERAH DI PROVINSI KALIMANTAN TIMUR

The implementation of regional autonomy along with fiscal decentralization in Indonesia is significantly expected to increase the amount of funds transferred to the regions. The policy aims to reduce inter-regional fiscal inequality in order to improve the quality of public services in the region. This research was conducted to find out whether central government transfers in the form of Revenue Sharing Funds (DBH) would be able to increase the regional revenues of East Kalimantan Province to fund regional needs in the context of implementing decentralization. East Kalimantan Province was selected as the case study, considering that this province has many natural resources which expectedly will receive a quite large DBH. This study uses qualitative methods to explain problems related to the implementation of fiscal decentralization policies. The focus of the study is the proportion percentage of DBH that has been regulated. Important information gathered through in-depth interviews and focus group discussions to find the core of the problem to facilitate analysis. The results of the study showed that the DBH obtained by East Kalimantan Province in recent years had decreased, so that it had an effect on overall revenue which in turn had a significant effect on the implementation of regional programs. On the other hand, a very large increase was received from the transfer of special allocation funds, but this also did not affect the revenues of East Kalimantan Province. Whereas Local Revenues did not experience a significant increase.

Critically Examining The Arrangements of Fiscal Decentralization in Indonesia

As an implication of the implementation of decentralization in Indonesia, the authority to manage income and spending autonomously by local governments in Indonesia is undeniable. However, the power should be managed and used proportionally. The central government should not lose its control of the local governments, while the local governments maintain the authority to manage its area. This paper examines the proportions of the fiscal authority given by the central government to the local governments in Indonesia. In short, this research finds that in general, the framework of fiscal decentralization in Indonesia is going well. Some research also offers positive findings of fiscal decentralization in Indonesia. However, there are also some serious problems resulting from the implementation of fiscal decentralization in Indonesia, such as vertical fiscal imbalance and corruption. These problems need to be reduced by issuing technical and specific regulations and by ensuring that those regulations are both monitored and implemented.