Decentralisation and Poverty Reduction: Great Authority, Wealth and Poverty in East Kalimantan, Indonesia

East Kalimantan is a province with full of paradox. This region has considerable economic potential measured in terms of its endowments of natural resources, including oil, natural gas, gold and coal. Yet, East Kalimantan still lacks infrastructure, has poor human resources and high levels of unemployment, factors which condemn much of the population to a life of paucity and hardship. The new system of decentralisation which has been implemented since 2001 has been expected to give more benefit to the region, as regional governments have held relatively more power and fiscal capacity. Law 22 1999, which has been revised twice, has provided more authority to regional governments to take care of such important areas as education, health, the environment, labor, public works and natural resources management, where previously control in these areas was strictly limited (Aspinal and Fealy 2003). The introduction of fiscal decentralisation through Law 25 1999, further revised in Law 33 2004, has favored regions rich in natural resources such as East Kalimantan. The increase of political power and fiscal capacity was supposed to provide regional governments with the opportunity to develop their own regions and bring their communities greater prosperity. However, East Kalimantan, the richest province in Indonesia, still harbours high levels of poverty. This essay will discuss the extent to which decentralisation has facilitated poverty reduction in a resource rich province like East Kalimantan.

East Kalimantan was one of the regions that “celebrated” of the implementation of decentralisation. As it has abundant natural resources, this province has received greatly increased funding from the central government generated from the natural resources sharing revenue formula. During the implementation of regional autonomy, there have been significant increases in the APBD (Local Budget). In 2001 the APBD of East Kalimantan Province increased by 300 per cent from IDR 605.5 billion in 2000. This extraordinary increase has continued, so that in 2008 the APBD of East Kalimantan Province reached 6.1 trillion – an increase of 900 per cent compared to the APBD in 2000, one year prior to the implementation of the law (Anggaran Pendapatan dan Belanja Daerah Provinsi Kalimantan Timur Tahun 1999 - 2008/Local Budget of East Kalimantan Province Year 1999 – 2008). The experience of East Kalimantan supports Seymour and Turner’s (2002) assertion that the regional autonomy gives more benefit to regions rich in natural resources.

Although some claim that the revision of Law 22 1999 has reduced the authority devolved to the regions, I believe that there remain great opportunities for the regional authorities to develop their regions, particularly in addressing the issue of poverty in local communities. Regional government are more likely to understand the characteristics and needs of their own communities, Regional autonomy has provided provincial and district governments with the opportunity to reform their own organizations, determine their priorities and design programs that fit with the local needs. Regional governments have the authority to recruit and deploy their own capable and competent officials, which previously been the preserve of the central government. The significantly increased local budget was supposed to provide more opportunity to regional government to develop more pro people programs that would accelerate the development in their regions (Sarosa, 2006). In the case of East Kalimantan, I believe that the increasing budget together with a relatively small population should have provided the regional governments with the means to develop and implement appropriate poverty reduction programs. Ishak (2006) argues that the significant increases of authority and local budget should have provided the resources for the regional governments to lead their community to greater prosperity (see also Agustianto, 2008).

However, great authority and huge revenues received by East Kalimantan has not been used effectively to improve community welfare. The BPS (2007) reported that 2.9 million people, approximately 20 percent of the population, are categorized as “poor” or somewhat higher compared to the national poverty level of 16.58 percent. By national standards, the educational attainment is relatively low, where more than half of the population has only gained a primary and junior high school education. The data suggests that poverty has become worse following the implementation of regional autonomy.

There is a debate in the literature about how and whether decentralisation functions to reduce poverty. Some experts contend that decentralisation may have a positive impact on poverty because it would make the voice of the poor better heard, improve their access to good quality public services and reduce vulnerability (e.g. UNDP, 2003; Jutting, 2004; Blunt and Turner, 2007; Von Braun and Grote, 2002; Romeo, 2002; Rondinelli and Cheema, 1983; Wekwete, 2007; and Rasyid, 2003). Others claim that decentralisation has failed to help to reduce poverty (See for example Bossuyt and Gould, 2000). The proponents argue that decentralisation may promote a more supportive decision-making process by providing greater opportunities for marginalized sections of the community to participate in development activities. The greater community participation in decision making and the closer the government to the community may enhance the effort toward poverty reduction. Another proposition is that local authority tends to act based on the preferences and characteristics of local people and this can give policy a stronger local orientation.

Furthermore, Rondinelli and Cheema (1983) argue that decentralisation provides greater opportunities for the involvement of different political, religious, ethnic, and tribal groups in the decision-making processes. This representation, may then promote equality in the allocation of government resources and funding. They also argued that transferring more authority to the local level will create more space for the government to create policies and programs appropriate to the local situations and the preferences of the local community. In addition, they believe that decentralisation will enable the provision of public services in a more economical way, as the public service providers are closer to community. All of these are major components of anti poverty programs.

Other research on decentralisation found that as it tends to improve transparency and responsibilities, the possibility for misspending money would be reduced. The Human Development Report (UNDP

However, another study conducted by Blair (2000) in six countries (Bolivia, Honduras, India, Mali, the Philippines, and Ukraine) shows that although decentralisation has promoted greater participation in governance, as more authority was devolved to the local level, it failed to help reduce poverty or create pro poor policies. This was because “local elites have dominated the decision making process and adopted the policy that could bring benefits to themselves”.

The case of East Kalimantan seems to support those who argue that devolved powers and increased budget revenues has not reduced the level of poverty. Some observers pointed out that this paradoxical phenomenon indicates that the regional governments have failed to utilize the opportunity given by the central government through regional autonomy. For example, Sulekale (2003) claims that inappropriate government policy settings or inadequate pro poor development programs, and the common practices of corruption may lead to the inefficiency in spending the budget and that these contribute to poverty. Aswin, 2008 and Rifai, 2008 claim that the ongoing poverty problem in this area has been a result of fiscal mismanagement and the wide spread corruption practices among local elites. Indeed, some officials, even the heads of districts and the governor, have been sent to jail because they have been involved in corruption.

Spicker (2007) argues that one way that may cause people to become poor is structural and suggests agency explanations like: “the poverty is caused by the fault of someone or something-government, private firms, or agencies- who ought to have dealt with poverty and have not done so”. In relation to this, I argue that the policies of the regional governments in East Kalimantan have often exasperated poverty rather than aided in its alleviation. It may be because they have implemented inappropriate policies or they have not done anything to reduce poverty (government inaction). So it is apparent that public policy may have either positive or negative impacts on poverty reduction and even the government itself can foster poverty if the implemented policy is not pro poor oriented (Lokollo, 2005).

From the discussion above, I argue that the persistent high poverty rate in East Kalimantan is one of the indications that the implementation of regional autonomy has not effectively addressed poverty reduction. In the case of East Kalimantan, there are some important points that may result in the high poverty rate in this rich region:

The policy development under the New Order Government tended to be very “Java centrist”. Kombong, (2005), a member of the Senate (DPD) from East Kalimantan regards poverty problems as a legacy of the former central government policy which was too “Java centrist” and neglected other regions outside of Java. A similar statement by Chauvel (1998) regards the situation as an inheritance of the highly centralized financial system developed by Soeharto’s Regime, where almost all revenue generated from the provinces with the most abundant natural resources flowed to Jakarta to fuel the development process in Java, Jakarta and the rest of the country. In terms of infrastructure for example East Kalimantan is far behind compared to other regions, and regional autonomy should have been stimulus for improvement.

A senior official of the East Kalimantan Provincial Government, Ismail (2005), argues that the persistent increase of the poverty level is due to the increase of unskilled and unemployed migration from other regions which contributes more than 67 percent of the total population growth.

The processes of regional policy making have been very elitist in nature, so that more policy developments accommodate the interests of elites rather than the interests of the broader community. Indeed, decentralisation reforms implemented in order to promote “grass-roots democracy” have often been disappointing because local parliaments and assemblies have simply been captured by local political elites, who then run the local authority largely in their own interests. Epstein (2007) claims that policies intended to reduce poverty often fail because they do not reflect the realities of the poor but the perspectives of policy makers;

The current poverty reduction programs are lacking in coordination among agencies, poor targeting and are short-term oriented (unsustainable). Andrianto (2006) even claims that “these efforts directly benefit government officials, while their benefits to the poor are not guaranteed”;

The incapacity of regional governments to develop policies and programs has contributed to this problem. In the New Order Government regional governments were the object rather than subject of policy making and were required to implement what the central government had decided to do. Booth (2003) states that “functions in sectors such as health, education, and public works were decentralized to levels which had had no experience of implementing programs in these sectors and lacked necessary administrative and technical expertise”;

Misusing the local budget has also worsened the situation, as has been illustrated by the corruption cases involving senior officials of the provincial and some district governments in East Kalimantan. This has resulted in inefficiency in spending the local budget. Local parliaments that have a supervisory function are either unable to control corrupt officials or are complicit with the practice.

To conclude, the implementation of regional autonomy in Indonesia, particularly in the East Kalimantan Province has not met one of the essential aims of the law that is to increase the local communities’ prosperity. The expanded authority and increased fiscal capacity have not been utilized by the regional governments to bring local people to greater prosperity. There has been a tendency that even during the implementation of regional autonomy, the poverty level in East Kalimantan has increased. Lack of regional government capacity and transparency in executing and managing the authority and the huge local budget have contributed to the persistent high levels of poverty in this region. I suggest that both central and regional governments need to incorporate the principles of “good governance” - transparency, accountability, participation and law enforcement – into their processes of policy making and program development.

References can be provided if it is required.

NB:Essay ini menjadi juara Runner Up dalam lomba penulisan essay yang diselenggarakan oleh Australian Indonesia Governance Research Partnerships. Full paper juga dapat di unduh di website AIGRP dihttp://www.aigrp.anu.edu.au/scholars/winners.php