Regions ‘Misspent’ Trillions

Jakarta Globe, Nivell Rayda, July 19, 2010

The Supreme Audit Agency may have the answer as to why regional areas — particularly new provinces, districts and municipalities — continue to lag behind in terms of development.

Less than 6 percent of the state budget channeled to provincial and district or municipal governments is actually spent on development projects and public services, the agency, known as the BPK, has revealed.

“Most of the funding is spent on government facilities, such as offices and cars,” BPK official Rizal Djalil said in a statement on Sunday. “Little is allocated to the direct needs of the people.”

Since President Suharto resigned in 1998, seven new provinces and 205 new districts and municipalities have been established. Rizal said these new regional governments still relied heavily on central government funding.

“Every aspect [of the new regions] relies on the central government. Regional income is still not sufficient, not even enough to fund the regional governments’ operational budgets,” he said.

The findings follow a scathing assessment by President Susilo Bambang Yudhoyono, who has said that some 80 percent of the newly created administrations are not performing well.

According to Rizal, regional governments should focus on creating jobs and economic independence from Jakarta.

The central government has allocated Rp 344.6 trillion ($38.2 billion) this year to expedite the development of newly established regions. That excludes additional aid for social affairs, education and health, which also reaches hundreds of trillions of rupiah.

To make matters worse, the BPK also indicated that some of the funds earmarked for economic empowerment had been redirected to populist programs aimed at strengthening officials’ grip on political power.

Rizal said some funds had been used to finance short-term programs such as providing free basic commodities instead of more strategic programs such as job creation.

A study released by the Partnership for Governance Reform in January reported that provincial governments also seemed to be largely ignorant about the need to fund public health and education.

“Provinces on average allocate only Rp 14,004 per person each year [for public health],” the report said. “Some are as low as under Rp 4,000 per year.”

Provinces also failed to meet the 20 percent budget allocation for education mandated by the central government, the study found. Even the biggest spender on education, Riau Islands, which spends Rp 831,860 per student annually, only allocated 17.6 percent of its total budget to education.

Maryati Abdullah, a researcher from the Regional Study and Information Center (Pattiro), said greater regional autonomy had created more opportunities for officials to steal funds due to a lack of financial guidelines and oversight by the state.

“They don’t have a standardized supervisory system and, more often than not, there is political interest in overlooking the rampant corruption by local officials because the Regional Legislative Councils are just as corrupt,” she said.

Since it was set up in 2003, the Corruption Eradication Commission (KPK) has received more than 30,000 complaints from the public about corruption involving local administrations, and hundreds of regional officials have been jailed for graft.

Anies Baswedan, the rector of Paramadina University in Jakarta, said tighter controls were needed to rein in the regions. “The central government has been too lenient,” he said. “There is no transparency or accountability for local governments, so they get away easily with graft and neglect.”

The Ministry of Home Affairs said in May last year that it was examining the effectiveness of decentralization and preparing new rules on how regions should manage their finances.