General Purpose Central-Provincial-Local Transfers (DAU) in Indonesia: From Gap Filling to Ensuring Fair Access to Essential Public Services for all

No AccessPolicy Research Working Papers22 Jun 2013General Purpose Central-Provincial-Local Transfers (DAU) in Indonesia: From Gap Filling to Ensuring Fair Access to Essential Public Services for allAuthors/Editors: Anwar Shah, Riatu Qibthiyyah, Astrid DitaAnwar Shah, Riatu Qibthiyyah, Astrid Ditahttps://doi.org/10.1596/1813-9450-6075SectionsAboutPDF (2.2 MB) ToolsAdd to favoritesDownload CitationsTrack Citations ShareFacebookTwitterLinked In Abstract:Indonesia has come a long way from centralized governance to decentralized local governance, and today Indonesia ranks among the most decentralized developing countries. The Government of Indonesia is revisiting all aspects of local governance to make appropriate legal and institutional adjustments based on lessons leaarned during the past decade. An important area of this re-examination and possible reform is the central financing of subnational expenditures. The system of intergovernmental finance represents one of the most complex systems ever implemented by any government in the world. The system is primarily focused on a gap-filling approach to provincial-local finance in an objective manner to ensure revenue adequacy and local autonomy but without accountability to local residents for service delivery performance. This paper takes a closer look at Dana Alokasi Umum—the most dominant program of unconditional central transfers to finance provincial-local government expenditures in Indonesia. The paper also presents illustrative simulations of alternative programs and compares these with the existing Dana Alokasi Umum allocations. The paper concludes that super complexity leads to lack of transparency, inequity, and uncertainty in allocation. Simpler alternatives are available that have the potential to address autonomy and equity objectives while also enhancing efficiency and citizen-based accountability. Such alternatives would represent a move away from the complex gap-filling approach to simple output-based transfers to finance operating expenditures. Capital grants would deal with infrastructure deficiencies. And the alternatives would institute fiscal capacity equalization as a residual program with an explicit standard to ensure that all local jurisdictions have adequate means to deliver reasonably comparable levels of public services at reasonably comparable levels of tax burdens across the country. Previous bookNext book FiguresReferencesRecommendedDetailsCited ByIntergovernmental Fiscal Transfers: Principles6 September 2019Higher-Order Fiscal Transfers to Local Governments: An Overview of Worldwide Practices6 September 2019Local Government Responses to Permanent vs. Transitory Grant Revenue: Evidence from IndonesiaSSRN Electronic Journal View Published: June 2012 Copyright & Permissions Related RegionsEast Asia & PacificRelated CountriesIndonesiaRelated TopicsMacroeconomics and Economic GrowthPoverty Reduction KeywordsGRANTSFISCAL TRANSFERSFAIRNESSEQUALIZATIONPUBLIC SERVICESPROVINCIAL-LOCAL FINANCESDECENTRALIZATIONRESULTS BASED ACCOUNTABILITYINCENTIVESINDONESIA REFORMS PDF DownloadLoading ...