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2016 | Book

Decentralization and Governance for Sustainable Society in Indonesia Read chapter Read first chapter

Decentralization and Governance in Indonesia

Editors: Ronald L. Holzhacker, Rafael Wittek, Johan Woltjer

Publisher: Springer International Publishing

Book Series : Development and Governance

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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About this book

Indonesia over the past two decades has embarked on a process of decentralization as part of a broader process of democratization, which followed earlier periods of centralized governance and authoritarian rule across the archipelago. The purpose of this book is to begin to explore the connections between governance and sustainable society in a wide variety of policy fields in Indonesia, and how reforming governance structures may contribute to societal benefits and the creation of a long-term sustainable society.

This book bridges important theoretical debates related to governance and sustainable society and provides empirical research from Indonesia in important policy areas related to this debate. By placing research in different policy areas in a single volume, the link to the broader concepts of governance, decentralization, and societal outcomes is strengthened. The book builds on the recent interest that has focused on Indonesia and the continued development of democracy in the country. The chapters in the book show a rich variety of decentralized governance arrangements and capacity building at the local level in particular. Central standards (for example for social sustainability, anti-corruption arrangements, or for dealing with direct foreign investment), combined with local innovation (for example for municipal coordination of primary health care or metropolitan transport), are key to Indonesia as a country in a continuing process of transformation.

We identify three key trends in the on-going process of decentralization and governance in Indonesia. First, we find that formal governance, the relation between the national and local government, is characterized by a system of ‘variable geometry multi-level governance’ depending on the policy area. The challenge ahead is strengthening accountability mechanisms to assure national standards while

preserving and encouraging local innovation. Secondly, informal governance mechanisms are evolving to move from ‘hierarchical to network’ forms of governance. Here the challenge is to insure democratic input by citizens and civil society organizations. Finally, we identify a trend toward ‘shared value creation and sustainable cooperation.’ Indonesia is beginning to move from a rather singular policy focus on economic growth to a more complex and developing notion of policymaking for inclusive growth and the creation of a sustainable society for present and future generations. Here the challenge is sound implementation and to increase the effectiveness of governance mechanisms. There is also a noted diffusion of goals, to focus beyond the Jakarta metropolitan area to smaller regional cities, as urbanization continues and rural areas are changing.

This book will be of interest for use in advanced undergraduate and graduate courses related to Southeast Asia in the fields of international relations, political science, public administration, economics, law, sociology, educa

tion, public health, and the spatial sciences. It will also be of interest to policymakers and government officials at the national and local level in Southeast Asia and middle-income developing countries, officials and policymakers in institutions of regional governance such as the Association of Southeast Asian Nations (ASEAN), and of global governance such as the United Nations and World Bank. It will also be of interest to civil society organizations and other actors focused on policy development and economic development, health, education, the environment, sustainable transport, etc. The book will also be of interest to business people interested in economic and governance issues, such as the management and governance of in-bound foreign investment, inclusive growth, and corporate governance. Finally, the book should be of interest to citizens in advanced, middle-income, and developing countries motivated to learn more about the links between governance and the creation of a sustainable society for current and future generations.

Table of Contents

Frontmatter

Theoretical Reflections on Decentralization and Governance for Sustainable Society

Frontmatter
Chapter 1. Decentralization and Governance for Sustainable Society in Indonesia
Abstract
Indonesia, over the past two decades, has embarked on a process of decentralization as part of a broader process of democratization, which followed earlier periods of centralized governance and authoritarian rule across the archipelago. The purpose of this book is to explore the connections between governance and sustainable society in a wide variety of policy fields in Indonesia and how reforming governance structures may contribute to societal benefits and the creation of a long-term sustainable society. The structures created may be characterized as a variable form of multi-governance, with varying types of relationships between the central government and newly empowered local governments.
Ronald L. Holzhacker, Rafael Wittek, Johan Woltjer
Chapter 2. Good Governance Contested: Exploring Human Rights and Sustainability as Normative Goals
Abstract
The governance of a society should ideally lead to its sustainability. This chapter sets out to shed light on the notions of good governance and sustainability that are, though often described as problematically vague, generally accepted goals of development. Good governance, by definition, proposes to be a guide towards the better execution and exercise of authority, power and rule making. Through an analysis of the most prominent uses of good governance in international development, an argument is given for the appreciation of the normative dimension of good governance: of what the good is. An assessment of critique levelled against the concept of good governance establishes that it suffers from vagueness and contestation. It will be argued that these problems are, at least minimally, due to the lack of normative foundation and overly economic outlook. A normative dimension should provide fundamental values that governance should adhere to for it to be called good. Furthermore, the argument is put forward that the concept of good governance is best grounded in the fundamental values underlying international legal human rights and the concept of social sustainability. The convergence of the values of status-egalitarianism, well-being and futurity establish the normative goal of good governance: to respect, protect and further status-egalitarianism and well-being into the indefinite future.
Jilles L. J. Hazenberg

Decentralization and Policy Making

Frontmatter
Chapter 3. Decentralization and Primary Health Care Innovations in Indonesia
Abstract
A well-functioning primary health care system (PHCS) is fundamental for a nation’s overall health performance. PHCSs are designed to improve universal access to health care, which likely leads to healthier communities, higher quality of care, and a more effective and efficient health care system. The present chapter investigates how the two large-scale decentralization waves in Indonesia affected the processes, product and structural innovations in its PHCS. We argue that adequate organizational capacity and local level innovations are a major requirement to improve the performance of a PHCS. The study uses the decision space approach (DSA) to analyse the impact of decentralization on the decision space, accountability mechanisms and organizational capacity to facilitate health improvement. To achieve the aim, first, the study uses institutional analysis to describe the transformation of the decision space and accountability mechanism from the first and second waves of decentralization based on changes to laws and regulations. Second, the study investigates the sequence of innovation of PHCS by analysing studies on cases of innovation in the two waves of decentralization. The study found that the first wave of decentralization in Indonesia resulted in institutional changes that were detrimental to innovation. Whereas discretion for local-level decision makers increased compared to the situation under the former centralized system, requirements for accountability did not. This pattern was reversed during the second wave of decentralization, suggesting that the conditions for innovation have improved. The cases of successful innovation share a specific combination of initiative, commitment and social capital of a key decision maker as a fundamental enabler of innovation.
Suwatin Miharti, Ronald L. Holzhacker, Rafael Wittek
Chapter 4. The Impact of Decentralization on Educational Attainment in Indonesia
Abstract
This study contributes to our knowledge on the impact of decentralization of the education sector in Indonesia. We extend existing research by examining the influence of both municipal factors and other explanatory variables on educational attainment in Indonesia. We focus on mean years of schooling as an indicator of educational attainment. We hypothesize that after decentralization, (1) educational attainment is higher compared to the pre-decentralization era, (2) regional variations in educational attainment will have increased, and (3) the fiscal capacity, degree of urbanization, and development will be higher, the higher the municipality’s mean year of schooling. The latter is also expected for the newly created municipalities of the past years. We test the hypotheses with panel data on 5,541,983 respondents aggregated to 3880 observations nested in 491 districts/cities nested in 32 provinces for the pre- and post-decentralization era. The results reveal the following. First, after decentralization, the length of schooling slightly increased, but progress in the length of schooling has slowed down a bit. Second, educational attainment variation between provinces slightly decreased, but the variation among municipalities increased. Third, the degree of municipalities’ development and urbanization has a significantly positive impact on improving educational attainment, while the fiscal capacity and the status of being a new municipality do not have a significant effect on extending the length of schooling. Our findings suggest that especially rural areas and less developed municipalities have lagged behind in the attempt to improve Indonesia’s educational attainment.
Tatang Muttaqin, Marijtje van Duijn, Liesbet Heyse, Rafael Wittek
Chapter 5. Decentralization, Foreign Direct Investment and Development in Indonesia
Abstract
As the role of Foreign Direct Investment (FDI) in development becomes increasingly significant, the concern of many policy makers is not only to attract FDI but also to ensure that the society and future generations gain broad benefits from the FDI. Hence, the United Nations Conference for Trade and Development (UNCTAD) developed the Investment Policy Framework for Sustainable Development (IPFSD) as guidance for countries to achieve sustainable development from FDI. Using the IPFSD, this paper examines the investment policies of Indonesia under centralized and various decentralization periods and describes the relationships among government levels in implementing the policies which guide FDI. From the examination, we found that the investment policies in Indonesia have been directed to achieve sustainable development gradually. Furthermore, the intergovernmental relationships that have changed due to the decentralization process have become crucial to the effectiveness of investment policies for the society. During the centralized period, the performance of inward FDI was good, but citizen input and participation in the policy process was weak. In the first wave of decentralization, local governments gained significant powers from the central government to guide FDI. However, the great devolution of power to local governments without clear mechanisms of intergovernmental relations and accountability led to a deterioration of the investment climate and made the policies less effective. Finally, during the second wave of decentralization, the central government has taken responsibility in the FDI management process but still provides more room for local governments to participate in the development process. Hence, cooperation between national and local government is more enhanced during this period to guide FDI.
K. Kuswanto, Herman W. Hoen, Ronald L. Holzhacker
Chapter 6. The Inclusive Growth Concept: Strengths, Weaknesses, and a Research Agenda for Indonesia
Abstract
In the last decade, inclusive growth, a broader concept of economic growth came into vogue among international organizations and countries’ policy makers. This paper reviews recent studies on inclusive growth addressing the following issues: which indicators have been considered, how they have been combined, and to which extent can existing research on inclusive growth provide a better understanding of the economic development process in an emerging economy like Indonesia. Many studies use one index and a single-equation approach to measure the determinants of inclusive growth. This paper suggests an alternative approach for future research that can shed more light on (the drivers of) (the different components of) inclusive growth, i.e. using a simultaneous equations model or a structural equation modelling approach. We can, thereby, provide better analyses and policy recommendations to achieve inclusive growth.
Pande Nyoman Laksmi Kusumawati, J. Paul Elhorst, Jakob de Haan

Challenges of Decentralization for Cities to Create Sustainable Futures

Frontmatter
Chapter 7. Metropolitan Governance and Institutional Design: Transportation in the Jakarta Metropolitan Region
Abstract
In the Jakarta Metropolitan Region (JMR), the lack of coordination and appropriate governance has resulted in paralyzing traffic jams at the metropolitan scale that cannot be resolved by a single government entity. The issue of metropolitan governance is especially crucial here as the JMR lacks an established and formally predesigned system of governance (e.g., in a constitution or other legal regulations). Instead, it relies on the interaction, coordination, and cooperation of a multitude of different stakeholders, ranging from local and regional authorities to private entities and citizens. This chapter offers a discussion on the various governance approaches relating to an appropriate institutional design required for transportation issues at the metropolitan scale. The case used is a regional Bus Rapid Transit (BRT) system as an extension to the metropolitan transport system. Institutional design analysis is applied to the case and three possible improvements, (i) a “Megapolitan” concept, (ii) a regional spatial plan, and (iii) inter-local government cooperation, were identified that correspond to current debates on metropolitan governance approaches of regionalism, localism, and new regionalism. The findings, which are relevant to similar metropolitan regions, suggest that (i) improvements at the meso-level of institutional design are more readily accepted and effective than improvements at the macro-level and (ii) the appropriate institutional design for governing metropolitan transportation in the JMR requires enhanced coordination and cooperation amongst four important actors: local governments, the regional agency, the central government, and private companies.
Taufiq Hidayat Putra, Johan Woltjer, Wendy Guan Zhen Tan
Chapter 8. Environmental Governance by Transnational Municipal Networks: The Case of Indonesian Cities
Abstract
Global environmental governance has developed a multi-layer of government from the global to the local. Transnational Municipal Networks (TMNs) are a newly emerging form of organization within global environmental governance. The TMNs are an institutional mechanism to enhance how local governments address environmental problems. Previous empirical research on these networks focused on the European context. There is little research about TMNs conducted in a country undergoing government reform and decentralization. Decentralization seeks to create an effective system of governance in which local governments attain greater authority. Here, we examine the impact of TMNs in Southeast Asia, particularly in the cities of Yogyakarta and Wakatobi in Indonesia. Referring to the TMNs and decentralization arrangements, we analyze the role of TMNs in enabling cities to play a significant role in establishing environmental policy in their region. We conclude that if local governments maximize the role of the TMNs in environmental policy, the local government will contribute to the development of a sustainable society agenda and contribute more to the state fulfilling its national environmental goals and international commitments.
Annisa Paramita Wiharani, Ronald Holzhacker

Governance to Limit Opportunities for Corruption in a Decentralized Environment

Frontmatter
Chapter 9. Institutional Change and Corruption of Public Leaders: A Social Capital Perspective on Indonesia
Abstract
Incidents of corruption by local public leaders have increased in Indonesia in the era of a decentralized democratic regime, in which regional governments enjoy greater power and autonomy to manage regional resources. Previous research suggests that the shift of formal power from the central government to regional governments resulted in new actors at the local level becoming involved in corruption. Building on ideas from social capital theory, the current study attempts to complement previous work by analyzing the shifts of public leaders’ corruption behavior under the decentralized democratic government. We suggest that besides formal power relations, informal relations are important for initiating and sustaining corruptive transactions, and corruption requires a different social capital base in different institutional settings. The objectives of this paper are (1) to organize current knowledge on institutional change and corruption, (2) to extend current thinking on public leaders’ corruption in Indonesia and beyond, and (3) to suggest a framework for future empirical study. We present an empirical study on the link between institutional change and corruption, based on a unique data set of real corruption cases as they were reported in Indonesian public newspapers. Based on this first exploration—which indicates that indeed the nature of corruption networks in Indonesia has altered since decentralization—the proposed theoretical framework is deemed of value for further empirical investigation.
Mala Sondang Silitonga, Gabriel Anthonio, Liesbet Heyse, Rafael Wittek
Chapter 10. Corporate Governance and Corruption: A Comparative Study of Southeast Asia
Abstract
The weak corporate governance framework in Indonesia, as in other countries in Southeast Asia, was deemed a crucial factor in deepening the financial and economic crisis in the late 1990s. Over a decade after the 1997 Asian financial crisis, Indonesia and other Southeast Asian countries have made substantial governance reforms. The reform measures of the institutional framework, both in the public and corporate sectors, were intended to transform Indonesia into a clean, transparent, and accountable country. While the reforms have resulted in increased political stability, improved government effectiveness, and a more conducive investment climate, corruption remains a major concern in Indonesia. This study aims to evaluate how corporate governance mechanisms can reduce the opportunities for corruption. By utilizing agency theory, we argue that a strong corporate governance institutional framework helps to reduce a country’s level of corruption. We focus attention on three components of corporate governance mechanisms, i.e., shareholder rights, the quality of the board of directors (BoD), and appropriate accounting and auditing standards, including transparency standards. In an attempt to strengthen corporate governance standards and practices in Indonesia, we conducted a comparative study among Southeast Asian middle-income countries, i.e., Indonesia, Malaysia, and Thailand. We rely on accessible secondary data such as corporate governance codes, laws, and regulations. Our study concludes that the Indonesian corporate governance institutional framework is less stringent compared to Malaysia and Thailand. This condition provides a favorable environment for corruption to persist because the standards and practices are less demanding and the companies do not necessarily have to comply with the existing regulatory framework.
Nureni Wijayati, Niels Hermes, Ronald Holzhacker
Backmatter
Metadata
Title
Decentralization and Governance in Indonesia
Editors
Ronald L. Holzhacker
Rafael Wittek
Johan Woltjer
Copyright Year
2016
Electronic ISBN
978-3-319-22434-3
Print ISBN
978-3-319-22433-6
DOI
https://doi.org/10.1007/978-3-319-22434-3