Decentralization in Nation State Building of Indonesia

Introduction：Today, many countries, regardless of developed or developing, are trying to promote decentralization. According to Manor, as his quoting of Nickson’s argument, decentralization stems from the necessity to strengthen local governments as proxy of civil society to fill the yawning gap between the state and civil society (Manor [1999]: 30). With the end to the Cold War following the collapse of the Soviet Union rendering the cause of the “leadership of the central government to counter communism” meaningless, Manor points out, it has become increasingly difficult to respond flexibly to changes in society under the centralized system. Then, what benefits can be expected from the effectuation of decentralization? Litvack-Ahmad-Bird cited the four points: attainment of allocative efficiency in the face of different local preferences for local public goods; improvement to government competitiveness; realization of good governance; and enhancement of the legitimacy and sustainability of heterogeneous national states (Litvack, Ahmad & Bird [1998]: 5). They all contribute to reducing the economic and social costs of a central government unable to respond to changes in society and enhancing the efficiency of state administration through the delegation of authority to local governments. Why did Indonesia have a go at decentralization? As Maryanov recognizes, reasons for the implementation of decentralization in Indonesia have never been explicitly presented (Maryanov [1958]: 17). But there was strong momentum toward building a democratic state in Indonesia at the time of independence, and as indicated by provisions of Article 18 of the 1945 Constitution, there was the tendency in Indonesia from the beginning to debate decentralization in association with democratization. That said debate about democratization was fairly abstract and the main points are to ease the tensions, quiet the complaints, satisfy the political forces and thus stabilize the process of government (Maryanov [1958]: 26-27). 　　　What triggered decentralization in Indonesia in earnest, of course, was the collapse of the Soeharto regime in May 1998. The Soeharto regime, regarded as the epitome of the centralization of power, became incapable of effectively dealing with problems in administration of the state and development administration. Besides, the post-Soeharto era of “reform (reformasi)” demanded the complete wipeout of the Soeharto image. In contraposition to the centralization of power was decentralization. The Soeharto regime that ruled Indonesia for 32 years was established in 1966 under the banner of “anti-communism.” The end of the Cold War structure in the late 1980s undermined the legitimate reason the centralization of power to counter communism claimed by the Soeharto regime. The factor for decentralization cited by Manor is applicable here. 　　　Decentralization can be interpreted to mean not only the reversal of the centralized system of government due to its inability to respond to changes in society, as Manor points out, but also the participation of local governments in the process of the nation state building through the more positive transfer of power (democratic decentralization) and in the coordinated pursuit with the central government for a new shape of the state. However, it is also true that a variety of problems are gushing out in the process of implementing decentralization in Indonesia. 　　　This paper discusses the relationship between decentralization and the formation of the nation state with the awareness of the problems and issues described above. Section 1 retraces the history of decentralization by examining laws and regulations for local administration and how they were actually implemented or not. Section 2 focuses on the relationships among the central government, local governments, foreign companies and other actors in the play over the distribution of profits from exploitation of natural resources, and examines the process of the ulterior motives of these actors and the amplification of mistrust spawning intense conflicts that, in extreme cases, grew into separation and independence movements. Section 3 considers the merits and demerits at this stage of decentralization implemented since 2001 and shed light on the significance of decentralization in terms of the nation state building. Finally, Section 4 attempts to review decentralization as the “opportunity to learn by doing” for the central and local governments in the process of the nation state building. 　　　In the context of decentralization in Indonesia, deconcentration (dekonsentrasi), decentralization (desentralisasi) and support assignments (tugas pembantuan; medebewind, a Dutch word, was used previously) are defined as follows. Dekonsentrasi means that when the central government puts a local office of its own, or an outpost agency, in charge of implementing its service without delegating the administrative authority over this particular service. The outpost agency carries out the services as instructed by the central government. A head of a local government, when acting for the central government, gets involved in the process of dekonsentrasi. Desentralisasi, meanwhile, occurs when the central government cedes the administrative authority over a particular service to local governments. Under desentralisasi, local governments can undertake the particular service at their own discretion, and the central government, after the delegation of authority, cannot interfere with how local governments handle that service. Tugas pembantuan occur when the central government makes local governments or villages, or local governments make villages, undertake a particular service. In this case, the central government, or local governments, provides funding, equipment and materials necessary, and officials of local governments and villages undertake the service under the supervision and guidance of the central or local governments. Tugas pembantuan are maintained until local governments and villages become capable of undertaking that particular service on their own.

Post-Crisis Economic Reform in Indonesia:Policy for Intervening in Ownership in Historical Perspective

Introduction : Economic reform in Indonesia after the Asian currency crisis is often discussed in parallel with Thailand and South Korea, which were alike hit by the crisis. It should however be noted that what happened in Indonesia was a change of political regime from authoritarianism to democracy, not just a change of government as seen in Thailand and South Korea. Indonesia’s post-crisis reform should be understood in the context of dismantling of the Soeharto regime to seek a new democratic state system. 　　　In the political sphere, dramatic institutional changes have occurred since the downfall of the Soeharto government in May 1998. In comparison, changes in the economic sphere are more complex than the political changes, as the former involve at least three aspects. The first is the continuity in the basic framework of capitalist system with policy orientation toward economic liberalization. In this framework, the policies to overcome the crisis are continued from the last period of the Soeharto rule, under the support system of IMF and CGI (Consultative Group on Indonesia). The second aspect is the impact of the political regime change on the economic structure. It is considered that the structure of economic vested interests of the Soeharto regime is being disintegrated as the regime breaks down. The third aspect is the impact of the political regime change on economic policy-making process. The process of formulating and implementing policies has changed drastically from the Soeharto time. With these three aspects simultaneously at work, it is not so easy to identify which of them is the main cause for a given specific economic phenomenon emerging in Indonesia today. 　　　Keeping this difficulty in mind, this paper attempts to situate the post-crisis economic reform in the broader context of the historical development of Indonesian economic policies and their achievements. We focus in particular on the reform policies for banking and corporate sectors and resulting structural changes in these sectors. This paper aims at understanding the significance of the changes in the economic ownership structure that are occurring in the post-Soeharto Indonesia. Economic policies here do not mean macro economic policies, such as fiscal, financial and trade policies, but refer to micro economic policies whereby the government intervenes in the economic ownership structure. In Section 1, we clarify why economic policies for intervening in the ownership structure are important in understanding Indonesia. Section 2 follows the historical development of Indonesia’s economic policies as specified above, throughout the four successive periods since Indonesia’s independence, namely, the parliamentary democracy period, the Guided Democracy period under Soekarno, the Soeharto-regime consolidation period, and the Soeharto-regime transfiguration period2. Then we observe what economic ownership structure was at work in the pre-crisis last days of the Soeharto rule as an outcome of the economic policies. In Section 3, we examine what structural changes have taken place in the banking and corporate sectors due to the reform policies in the post-crisis and post-Soeharto Indonesia. Lastly in Section 4, we interpret the current reorganization of the economic ownership in the context of the historical transition of the ownership structure, taking account of the changes in the policy-making processes under democratization.

Vietnamese Local State-owned Enterprises (SOEs) at the Crossroads: Implications of SOE Restructuring at the Local Level

This paper aims to capture the changing features of local SOEs under the national SOE restructuring program in the 2000s. The national policy on SOE reform in this phase had an effect of considerably clarifying and narrowing down the raison d'être of SOEs, which has been put into practice at the local level through provincial master plans. Consequently, some signs of an important change are observed: the structure of the local SOE sector is being standardized to a certain extent, and the remaining local SOEs are becoming more geared to the needs of a market economy. This trend would have far-reaching implications for the policy implementation and public service delivery by localities, which in turn would affect the long-term development of non-state sectors.

Restructuring the state budget system for disinflation and exchange rate unification in Myanmar

The installment of a new government has augmented the prospect for implementing disinflation and exchange rate unification in Myanmar. A close look at the state budget shows that the reform of the budget system for state economic enterprises (SEEs) is essential. Reforms need to hold the replacement of controlled prices including the official exchange rate with market prices in SEE operations, and the separation of the SEEs from the state budget. But separating the SEEs from the state budget will necessitate careful planning to cope with SEE bankruptcies which would imposes another fiscal burden on the government. Therefore, economic viability must be a criterion for the continuation of their operations.

Gacaca and DDR : the disputable record of state-building in Rwanda

State-building is currently considered to be an indispensable process in overcoming state fragility: a condition characterized by frequent armed conflicts as well as chronic poverty. In this process, both the capacity and the legitimacy of the state are supposed to be enhanced; such balanced development of capacity and legitimacy has also been demanded in security sector reform (SSR), which is regarded as being a crucial part of post-conflict state-building. To enhance legitimacy, the importance of democratic governance is stressed in both state-building and SSR in post-conflict countries. In reality, however, the balanced enhancement of capacity and legitimacy has rarely been realized. In particular, legitimacy enhancement tends to stagnate in countries in which one of multiple warring parties takes a strong grip on state power. This paper tries to understand why such unbalanced development of state-building and SSR has been observed in post-conflict countries, through a case study of Rwanda. Analyses of two policy initiatives in the security sector - Gacaca transitional justice and disarmament, demobilization, and reintegration (DDR) - indicate that although these programs achieved goals set by the government, their contribution to the normative objectives promoted by the international community was quite debatable. It can be understood that this is because the country has subordinated SSR to its state-building process. After the military victory of the former rebels, the Rwandan Patriotic Front (RPF), the ruling elite prioritized the establishment of political stability over the introduction of international norms such as democratic governance and the rule of law. SSR was implemented only to the extent that it contributed to, and did not threaten, Rwanda's RPF-led state-building.

The Battle of the Bulge: The Surprising Last Stand Against State Marijuana Legalization

Although marijuana possession remains a federal crime, twenty-three states now allow use of marijuana for medical purposes and four states have adopted tax-and-regulate policies permitting use and possession by those twenty-one and over. In this article, I examine recent developments regarding marijuana regulation. I show that the Obama administration, after initially sending mixed signals, has taken several steps indicating an increasingly accepting position toward marijuana law reform in states; however the current situation regarding the dual legal status of marijuana is at best an unstable equilibrium. I also focus on what might be deemed the last stand of marijuana-legalization opponents, in the form of lawsuits filed by several states, sheriffs, and private plaintiffs challenging marijuana reform in Colorado (and by extension elsewhere). This analysis offers insights for federalism scholars regarding the speed with which marijuana law reform has occurred, the positions taken by various state and federal actors, and possible collaborative federalism solutions to the current state-federal standoff.

The 2011 Constitutional reform in Morocco: more flaws than merits. Jean Monnet Occasional Paper No. 07/2014

Introduction. In the speech given to both Houses of Parliament on 11 October 2013 during the first parliamentary session, King Mohammed VI said that the “Moroccan democratic model” was “a precursor in the region as well as on the continental level.”1 Similarly, with the purpose of stressing the “democratic exceptionalism”2 of the country, the new government, led by Abdeilah Benkirane, emphasised that Morocco represents a “third way” compared to countries such as Tunisia, Libya or Egypt since it “…has not embarked on a limited process of reform from the top, driven and controlled by the King. Nor has it experienced a revolution brought a angry citizens rising up against the regime. Rather, it has chosen an alternate path based on a genuine partnership between the King and the PJD (Parti de la justice et du développement) that promises to bring about more far-reaching reform than palace alone would grant, without the disruption caused by uncontrolled popular upheaval.”4 It should not be at all surprising that the regime and the new Government consider Morocco a “democratic model” or a “third way.” After all, they are refe country. What is harder to understand is that when discussing the Arab uprisings, even prominent Western political leaders, representatives of the European Union institutions and the mainstream media (when they do not forget about Morocc to praise the process of democratic reform carried out by Mohammed VI. For example, on 12 September 2012, Hillary Clinton, former US Secretary of State, said, “in many ways, the United States looks to Morocco to be a leader and a model […] On political reform, we have all seen remarkable changes taking place across North Africa and the Middle East. I commend Morocco and your government for your efforts to stay ahead of these changes by holding free and fair elections, empowering the elected parliament, taking other steps to ensure that the government reflects the will of the people.”5 Similarly, former French President Nicolas Sarkozy sang the praises of the process that led to the adoption of the new 2011 Constitution: “King Mohammed VI has shown the path towards a profound, peaceful and modern transformation of Moroccan institutions and society […] France fully supports this exemplary process.” Interestingly enough, even at the European Union level the constitutional reform that took more far-reaching reform than palace alone would grant, without the disruption caused by uncontrolled popular upheaval.”4 It should not be at all surprising that the regime and the new Government consider Morocco a “democratic model” or a “third way.” After all, they are refe country. What is harder to understand is that when discussing the Arab uprisings, even prominent Western political leaders, representatives of the European Union institutions and the mainstream media (when they do not forget about Morocc to praise the process of democratic reform carried out by Mohammed VI. For example, on 12 September 2012, Hillary Clinton, former US Secretary of State, said, “in many ways, the United States looks to Morocco to be a leader and a model […] On political reform, we have all seen remarkable changes taking place across North Africa and the Middle East. I commend Morocco and your government for your efforts to stay ahead of these changes by holding free and fair elections, empowering the elected parliament, taking other steps to ensure that the government reflects the will of the people.”5 Similarly, former French President Nicolas Sarkozy sang the praises of the process that led to the adoption of the new 2011 Constitution: “King Mohammed VI has shown the path towards a profound, peaceful and modern transformation of Moroccan institutions and society […] France fully supports this exemplary process.” Interestingly enough, even at the European Union level the constitutional reform that took place in Morocco was considered an extremely positive step taken by the country, as well as a means to strengthen the cooperation between the EU and Morocco. Indeed, according to the High Representative Catherine Ashton, this reform “constitute[s] a significant response to the legitimate aspirations of the Moroccan people and [is] consistent with Morocco’s Advanced Status with the EU.”7 When it comes to the media, it is worth noting that following the ratification of the 2011 Constitution, The New York Times headlined: “All Hail the (Democratic) King.” Even sections of the academic literature have commended the constitutional reform carried out by the Moroccan Sovereign.9 In this paper I argue against the aforementioned idea, according to which Morocco should be considered a model in the region, and in particular I show that the constitution-making process, the 2011 Constitution and its subsequent implementation have more flaws than merits. Accordingly, this paper proceeds in five steps. First of all, I examine the reaction of the regime to the upheavals that broke out in the country after 20 February 2011. Secondly, I analyse the process of constitution showing its main strengths and weaknesses, and comparing it with other constituent processes that took place in the region following the Arab uprisings. In the third section, I highlight the most significant elements of continuity and discontinuity with the previous 1996 Constitution. The fourth section deals with the process of implementation: specifically process is proceeding quite slowly and that in some cases ordinary legislation is in contrast with the new Constitution and international human rights treaties. Moreover, I discuss the role that the judiciary and the Constitutional Court can play in the implementation and interpretation of the Constitution. Finally, I draw some concluding remarks.

Under the veneer of decentralisation. Ukraine's modernisation efforts stall due to lack of local government reform. OSW Commentary No. 102, 2013-02-12

President Viktor Yanukovych and his Party of Regions have been repeating the pledge to decentralise power in Ukraine and to give local government a greater decision-making role ever since the party appeared on the Ukrainian political scene. The implementation of this reform is crucial both for the economic recovery of Ukraine’s regions and the overall modernisation efforts of the Ukrainian state. At present relations between central government and the regions are regulated by Soviet-era legislation that fails to address the modern-day challenges facing Ukraine. The political elite in the country, including the opposition, appear to have reached consensus on the importance of the decentralisation reform. The first attempts to implement changes in this area were made in the late 1990s, followed by a comprehensive reform programme developed between 2007 and 2009 by Yulia Tymoshenko’s government. In 2012, the Constitutional Assembly under the President of Ukraine appointed a team of experts who drafted a document detailing the reform of local government and the territorial organisation of power1. The document envisages the implementation of what effectively are two major reforms: (1) an administrative-territorial reform, which would help consolidate the fragmented administrative structure, creating larger and more economically self-sufficient administrative units, and (2) local government reform, focusing on creating clearly defined powers for local authorities with a view to securing government funding for specific tasks delegated from central government. Nonetheless, despite these measures, and in spite of the rhetoric coming from President Yanukovych and other members of the Party of Regions, it seems unlikely that the reform will be implemented in the foreseeable future. A series of concrete political decisions taken by the president over the past three years indicate that Yanukovych has not abandoned his plan to build a highly centralised political system. This in turn limits the capacity to govern of local authorities and further restricts the sources of funding for Ukraine’s regions. This apparent resistance to change stems from the fact that by implementing the proposed reforms, the president and his political allies would be forced to relinquish much of their control over the political processes taking place in the country and would have to free up the distribution of budgetary resources between Kyiv and the regions. The implementation of the reform within the specified timeframe (i.e. by 2015) is also unlikely due to the upcoming presidential election and the deteriorating economic situation in Ukraine. Without a comprehensive reform of local government, however, Ukraine will be unable to undertake effective modernisation measures, which are key for the socio-economic development of the country’s regions.

Ending the State-Building Impasse: What Can Be Learned from Previous EU Enlargements that Might Offer Solutions for Bosnia and Herzegovina. ACES Working Paper No. 10, 2007

On the basis of the success of the two previous waves of European Union enlargement to post-communist states, EU accession is the international community's solution for ending the state-building impasse in Bosnia and Herzegovina. Through a literature review of analysis of the recent EU enlargements, this paper compares those countries' experiences with the current situation in Bosnia, and raises questions about the ability of the EU to address state-building issues through the accession process. The paper concludes that the previous enlargements do not provide a model for state-building in Bosnia. Because the EU's attempts to help along the process of state building in Bosnia is a new type of policy project, the paper proposes how the enlargement process might be adapted to address the specific problems in Bosnia, particularly in terms using human rights norms to compel Bosnian leaders to adopt necessary reforms.

The Malleable Politics of Welfare-to-Work Reform: Germany's "Hartz" activation compared with Dutch, British and Irish cases. ACES Cases No. 2009.1

We compare the Hartz reforms in Germany with three other major labor market activation reforms carried out by center-left governments. Britain and Germany developed radically neoliberal “mandatory” activation policies, whereas in the Netherlands and Ireland radical activation change took a very different “enabling” form. The Irish and German cases were path deviant, the British and Dutch path dependent. We explain why Germany underwent “mandatory” and path deviant activation by focusing on two features of the policy discourse. First, the elite level discourse was “ensilaged” sealing policy formation off from dissenting actors. This is what the British and German cases had in common and the result was reform that identified long term unemployment as social delinquency rather than market failure. Second, although the German policy-making system lacked the “authoritative” features that facilitated reform in the British case, and the Irish policy-making system lacked the “reflexive” mechanisms that facilitated reform in the Dutch case, in both Germany and Ireland the wider legitimating discourses were reshaped by novel institutional vehicles (the Hartz Commission and FÁS) that served to fundamentally alter system-constitutive perceptions about policy. The findings suggest that major reform of welfare-to-work policy may be much more malleable than previously thought.

Will this time be different for Greece? How to assess its ability to deliver on the reform agenda. CEPS Commentary, 13 March 2015

Taking its inspiration from the ongoing debate on whether this time will be different for Greece and whether Syriza will deliver on its reform promises to the European partners, this Commentary expresses bemusement that the public debate on such an important issue as well as internal discussions among senior policy-makers frequently resort to ‘gut feelings’ or simple stereotypes. To counteract this tendency, the author presents a simple analytical framework that can be used to assess the likelihood that a government will deliver on its reform agenda. Its purpose is not to allow for a precise probabilistic calculation, but to enable better structuring of the knowledge we have. It emphasises that the change depends NOT only on the capacity of the state to design and deliver policies, but even more crucially on state autonomy from both illegitimate and legitimate interests and cognitive models used by policy-makers to make sense of the world.

Reform #1. Why Ukraine has to reform its gas sector. OSW COMMENTARY NUMBER 181/01.09.2015

In April 2015, the Ukrainian parliament passed a long-awaited law on the gas sector which paves the way for the extremely difficult process of reforming and de-monopolising the Ukrainian gas sector. The law will come into force on 1 October 2015 and involves the break-up of the state-owned company Naftogaz, the current monopolist, and the gradual creation of a competitive gas market in line with the so-called Third Energy Package. At the same time, a threefold increase in the price of gas paid by individual customers and the public sector was introduced. The price had been subsidised for years and no previous government had ever decided to raise it.

What do Eurozone academics think about EMU reform? On broad support and German exceptionalism. Bruges Political Research Papers 41/2015.

This paper is an empirical contribution to the literature on the formation of policy preferences on Economic and Monetary Union (EMU) reform within its Member States. In the aftermath of the euro crisis, many proposals to ‘complete’ EMU have been tabled. However, discord among Member States has led to a piecemeal restructuring of EMU. For this paper, a survey has been conducted among euro area academic experts, gauging preferences on EMU reform. We find that general consensus masks significant discord among academics from different Member States. Our data indicates the existence of conflicting national epistemic communities, bound by shared causal beliefs on macro-economic policy. Academics within the key creditor Member State, Germany, assume an outlier position. Within the sample of German academics, economists are particularly strongly opposed to all moves in the direction of fiscal or social union. As economists are those academic experts most likely to influence the economic policy beliefs dominant among the German policy elite, these results are highly politically salient. We confront these findings with the literature on the exceptionalism of German economics. We contend that our results substantiate the claim that inadequate EMU reform and, more generally, the EU approach to the Eurozone crisis, can be partially explained by the firm grip these economic doctrines hold over the economics profession and policy-making circles in Germany.

Will Cameron get what he wants? Anticipating reactions to Britain’s EU reform proposals. CEPS Commentary, 29 October 2015

After months of speculation about the British Prime Minister’s specific demands in terms of the “renegotiation” of the UK’s relationship with the EU, David Cameron has bowed to pressure from the heads of state or government of the other EU member states and committed himself to setting out the UK’s specific “concerns” in writing by early November. While we cannot be certain of the contents of David Cameron’s missive to the EU, his recent pronouncements before Parliament set out an agenda whose contours have become quite clear. In this Commentary the authors consider how far the other EU member states might be willing to accommodate Cameron’s demands and provide him with the political capital he seeks to lead the ‘in’ campaign. They distinguish four different attitudes among EU countries, and advocate a constructive approach that sets the scene for a Convention after 2017 – one that opens the treaty for a revision that could accommodate both the British demands for an ‘opt-out’ from ever closer union and gives leeway to those who wish to integrate further. Putting emphasis on strengthening the single market in the more immediate term would allow the Prime Minister to show his home audience that he is a leading reformer and that the EU gives oxygen to the British economy.This is an obvious area where he might be able to seal deals during the UK’s Presidency of the Council of the EU in the second half of 2017. The authors also consider what the European Council Conclusions on the UK’s wish list for EU reform might look like, given that any treaty revision before the time set for the UK referendum is unattainable. They present the results of a two-day simulation exercise involving a cross-section of national experts and present mock European Council Conclusions on the areas of ever closer union; the role of national parliaments; competitiveness; economic and monetary integration; and the free movement of labour.

China's new Government: Priorities, Programs, Reform Signals. Asia Policy Brief 2013/02, May 2013

Never before has any change of leadership in China drawn this much international attention. The composition of the new party and state leadership in China is the result of many years of probing and negotiating within the top levels of the Communist Party. New priorities and leadership styles may cause fundamental shifts in the mechanisms of governance during the decade that China’s new leadership will be in control. Thus, the installation of a new government in China has potentially stronger long-term effects than most government turnovers in Western Democracies.