A Decade After Indonesia’s Big Bang, The Jury’s Still Out on Decentralization
James Van Zorge & John Carlile
Little more than 12 years ago, B.J. Habibie — an eccentric aeronautics engineer with a checkered political career as one of Suharto’s unabashed cronies — was suddenly catapulted into the palace as Indonesia’s president. He was under extraordinary fire. Facing separatist wars, ugly outbreaks of ethnic and sectarian violence, massive street protests and calls for him to step down, Habibie had to grapple with the thorny issues of how to survive in office and an emerging crisis of great and far-reaching consequence: Indonesia was, very quickly, falling apart.
Those were desperate times. As the New Order’s last serving vice president, Habibie had experienced firsthand the chaos leading to the fall of Suharto in May 1998.
If Suharto — Indonesia’s longest-serving president and considered one of the most successful strongmen in the developing world — could not overcome the maelstrom of protest against his regime that erupted in the wake of the Asian financial crisis, how could Habibie hope to hold on to power?
He surely must have realized that while the use of military force to restore civil order was an option, it certainly was not the most attractive one.
Indonesia’s new president was viewed largely as an illegitimate heir to the throne, and any move to repress dissent would likely backfire causing widespread unrest.
Wisely preferring the carrot to the stick, Habibie believed the best way to boost his popularity and avoid the Balkanization of the archipelago was to initiate a groundbreaking piece of legislation that granted unprecedented powers to local government.
He wanted to be viewed not simply as a holdover from the Suharto regime, but he needed to provide proof to demonstrate he was both a democrat and a leader in his own right.
Caught between the twin forces of protest and disintegration, regional autonomy seemed to be the best way forward.
This was an extraordinary display of political daring for a man who had once thrived in the shadow of Suharto.
Nonetheless, reformists’ suspicions that Habibie was nothing more than a puppet caretaker of the old regime persisted.
After less than two years in office, Habibie had exited the scene.
And Indonesia, once considered Southeast Asia’s pillar of stability, was still on the brink of collapse.
Three presidents later, those turbulent times seem distant.
Yet, it is important to remember that one of the more important legacies of the early reform era is — and remains — the drastic shift in the balance of power from Jakarta to the regions.
Habibie’s regional autonomy policy set the stage for what became a daring and ambitious experiment in decentralization.
Under regional autonomy, a timetable was established for handing over administrative responsibilities from the national level to more than 400 district governments in one fell swoop by the year 2001.
It became known as the “Big Bang.”
While most local politicians and civil servants found the sudden change exhilarating, they were overwhelmed at the same time. The big question was, would it work?
Today, if you ask the Indonesian public whether or not regional autonomy has been a success or failure, it is apparent that the jury is still undecided.
Some local governments have risen to the challenge and used their new powers and fiscal resources wisely to improve the quality of life for their citizens.
In other parts of Indonesia — perhaps too many — poorly qualified leaders have so far fallen short of the mark.
But having too few good leaders is not the only issue.
Another major problem with regional autonomy — perhaps even more urgent to solve if local governance is to improve — is its policy architecture.
Undoubtedly, the biggest mistake in the regional autonomy legislation was the decision to bypass the provincial governments in favor of smaller and less capable district governments.
Issues such as policy efficiency and economies of scale should have been given more weight, meaning that provincial governments would have become the natural favorites when deciding which local governments would be granted the lion’s share of power.
District governments were given disproportionate powers to counter independence movements in far-flung provinces such as East Timor, Papua and Aceh.
Habibie — and his immediate successors — did not want to face the prospect of the separatist virus spreading.
Clearly, it would have been more difficult for hundreds of district governments to rally against Jakarta than a few dozen provincial ones. From a realpolitik point-of-view, this “divide-and-rule” strategy made perfect sense.
A second mistake in the Regional Autonomy Law was the failure to define clearly the sharing of power between local and national government.
For example, political autonomy laws defined the authority of the national government as covering foreign policy, religion, defense and security, justice, monetary and fiscal policy as well as “other areas.”
While districts were allowed to pass their own regulations, it was under the proviso that those regulations did not contradict existing laws and were not deemed to be against the “public interest.”
But what exactly constituted “other areas” and the “public interest” remained a mystery.
This huge gray area provided fodder for local governments to apply their own definitions.
Some local governments took it upon themselves to regulate international trade.
Scores of entrepreneurial-minded politicians decided that unofficial levies and taxes on business were the best way to raise revenues.
As a consequence, it quickly became apparent business and investment could be hurt not only by poorly conceived policies in Jakarta, but also by the lack of oversight and control over inexperienced local politicians.
A glaring example of how business has been hampered lies in the ambiguity over the management of natural resources between different levels of government.
Under existing laws and regulations, decentralization proceeds the furthest in the mining sector, less so in forestry, and even less so in oil and natural gas.
But the exact amount and type of authority transferred to local governments remains unclear.
Contradictions within the legislation itself abound: While the law grants regions the authority to manage natural resources within their own jurisdictions, it reserves authority over the utilization of natural resources and conservation for the national government.
Fiscal autonomy is another area of huge concern, and for good reason.
How funds are allocated by the national government has sometimes created perverse behavior by local officials, often at the expense of developing better infrastructure and public services.
In fact, local governments spend more money on administrative overhead than on public infrastructure.
In Papua, for example, more than 70 percent of local government budgets are spent on keeping civil servants employed.
Less than a decade has passed since the Big Bang and it is not possible to say whether Habibie made the right decision in letting the decentralization genie out of the bottle.
Pulling back and recentralizing, such as what occurred in Russia under Vladimir Putin, could result in a political backlash and would also be grossly premature.
Change is never smooth, and it always takes time for kinks and imperfections to be ironed out. Indonesia’s democracy, by any standard, is still a young one — and compared with other democracies in the West or relatively new ones elsewhere, it has come a very long way in an amazingly short period.
James Van Zorge is a political and business consultant and John Carlile is a geologist and gold explorer. Both have lived in Indonesia for more than 20 years.