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Can the Jokowi Effect Trickle Down?

Popular Jakarta governor Joko Widodo is often upheld as an example of a new breed of clean, non-nonsense  politician. After he announced he would be running as the presidential candidate for Indonesia’s main opposition party, PDI-P, the stock, bond and currency markets reacted with glee.

If he does become president, however, the former furniture salesman widely perceived as “Mr. Fix It” will likely have a hard time convincing thousands of regional leaders and civil servants to be better managers.

Local leaders in Indonesia control nearly a third of the country’s $161 billion budget. But a non-governmental policy watchdog says rather than spend it to make life better for constituents, they’re footing the bill for administrative inefficiencies.

More than half of Indonesia’s nearly 500 cities and regencies invested less than 50% of their budgets on infrastructure, economic stimulus and improvements to public utilities in 2012, Robert Endi Jaweng, executive director of Regional Autonomy Watch, said during a recent interview.

The lion’s share of their spending went to pay civil servants’ wages and to settle other costs related to bureaucracy, he added.

The central government has allocated 593 trillion rupiah ($52.5 billion) this year to regional governments’ budgets. That’s more than four times what it was a decade ago, when local leaders started to take control of their own spending.

But no matter how much the central government allocates to regional ones, the room for public investment remains small because of the need to pay for day to day operations, said Mr. Jaweng.

Regional Autonomy Watch has been working to support better policymaking and efficient use of funds by regional governments, but Mr. Jaweng said what’s really needed is for the bureaucracy “to be slimmer.”

If it were, more funds could be freed up to build infrastructure needed to attract investment and raise the quality of living for citizens.

Poor planning and policy coordination has also led to problems with budgetary spending, he said. Nearly 100 trillion rupiah remained unspent at the end of last year due to underspending, according to Regional Autonomy Watch. That was up 60% over the leftover funds in 2010.

The move to parse out power to the local level came about following the ouster of former president Suharto, who consolidated power in the capital and managed it tightly during his 32 years of strong-arm rule.

Reforms launched since his downfall in 1998 have brought about greater political and economic liberalization that have generally helped bring wealth to far-flung areas. They’ve also worked to defuse tensions built up during the Suharto years, when many Indonesians expressed resentment toward Jakarta’s tight grip on the country’s purse strings.

But Rodrigo Chaves, the World Bank’s Indonesia country director, says stronger leadership is needed to eradicate corruption, create accountable officials and improve policy-making coordination.


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