Fiscal Decentralization After Implementation of Local Autonomy in Indonesia

Abstract

This research aims to explain the relationship between local fiscal capacities, intergovernmental transfers with the realization of the budget. Using the sample budget of 190 districts in Indonesia, three hypotheses have been tested. The results of this study indicate a high dependence of local governments, to grants from the national government. Although there are close links between local fiscal capacities with performance budgeting, intergovernmental transfers are not fully mediating the relationship.

published in World Review of Business Research, Vol. 1. No. 2. May 2011 Pp.51-70  

FISCAL DECENTRALIZATION AND LOCAL GOVERNMENT AUTONOMY IN INDONESIA

It has been a decade since Indonesia started to reform the budget system in line with the implementation of local autonomy, but it still failed to satisfy the financial information needed by the majority voters. Legislation related to the government financial systems are vulnerable, always changes before the systems are well established. This financial information is worst because the characteristic of local government, which is varied in terms of fiscal need and capacity, and the need for fulfill their obligation to provide public services.