Local Government Midterm Paper

Local Expansion in Indonesia Vs Local Amalgamation in Japan

Rudy
051I254I
Graduate School of International Cooperation Policy Studies
Kobe University

I. Introduction

Decentralization has become the trend of millennium. It is considered or attempted in aston-

ishing diversity of developing and transitional countries (Dillinger, 1994). Nearly all countries

worldwide are now experimenting with decentralization. Their motivations are different. Many

countries are decentralizing because they believe this can help stimulate economic growth or reduce

rural poverty. Some countries see it as a way to off load expensive responsibilities onto lower level

governments. Thus, decentralization is seen as a solution to many different kinds of problem

(Manor, 1999).

In much of Western Europe, decentralization has been a response to both political pressure

and changing economic circumstances (Batley and Stoker, 1991). In Latin America, African, and

Asian, decentralization has been a key element of democratization and particularly in the searching

of participatory development (Nickson, 1995). In case of Indonesia, decentralization is generally

seen as the influence of universally democratization in all around the world and the effort to pacify

the regions in the archipelago.

As each country has its own characteristic, the path or direction that is taken is different for

each country. Beside that, the effect and practice of decentralization reform is various influenced by

political, social, history, and cultural factor. This fact is also stressed by Smoke who state that

(Smoke, 2005):

“Although political forces have largely driven decentralization in East Asia and most
countries face similar reform challenges, their decentralization experiences are far from
uniform. Countries have adopted different intergovernmental structures, proceeded at
uneven paces, and adopted a wide range of implementation strategies. This diversity is
not surprising, as East Asian countries vary greatly in geographical size, population, his-
tory, economic structure, and political and institutional dynamics, all of which influence
the form that decentralization can and should take”

After starting dramatic decentralization in 2001, Indonesia has experienced dynamic change

as the effect of decentralization implementation. One of the changes is the emerging of new local

government since 2001 under the local expansion process. Seven provinces, 114 (one hundred

fourteen) districts, and 27 (twenty seven) municipalities are established as new local government as

the result of local expansion since decentralization implementation in 2001 (Yudhoyono, 2006).

Meanwhile, Japan has something different in the direction and effect of decentralization process.

The trend that is happening in Japan is local amalgamation which is opposite from the trend which

is happening in Indonesia.

Even though both nation having the same form of unitary state and having territory that is

consisted of many islands, the direction and practice is very different. This paper mainly focus on

how the direction and practice of decentralization implementation has varied between two country

and specifically analyze and comparatively study why such different trend is happening in each

country.
II. Local Expansion in Indonesia Decentralization

The rational for regional decentralization in Indonesia is to be found far back in history.

There were serious political reasons to carry out as a far-reaching political decentralization that

would involve the devolution to the regional governments of powers to design and implement poli-

cies on matters that were of their own interest. The first was the need to find a solution to an old

problem that Indonesia is not, and never was, a homogeneous country. There are important cultural,

linguistic, and historical differences across regions.

Indonesia has population more than 200 million people and is comprised of 13.667 is-

lands—large and small—6044 of which are populated by numerous ethnic groups. It is a heteroge-

neous society. Each ethnic group, residing in a specific area of the archipelago has its own charac-

teristic, language, tradition, customs, culture and even law. Each province in Indonesia has numer-

ous ethnic groups, for example, the province of South Sulawesi contains a number of distinct ethnic

categories—Buginese, Makassarese, Torajan, and others—and residents of the province are highly

aware of these categories and the cultural differences across them.

Two main laws established decentralization in Indonesia. Law 22 on Regional Government

of 1999 eliminated hierarchical relationships between cities and districts and higher levels of gov-

ernment, granting the former autonomy and broad responsibilities. This legislation has been revised

as Law 32 of 2004, which allows for the direct election of sub-national leaders beginning in 2005.

Law 25 on Fiscal Balance of 1999 modified the intergovernmental transfer system and provided for

limited local revenue authority. This law has been updated as Law 33 of 2004, which further defines

aspects of the intergovernmental fiscal system. Constitutional amendments passed in 2000 consoli-

dated certain decentralization reforms and make it more difficult for the National Assembly and the

president to substantially reverse them.

 As the new path has been taken, many effects have been occurred in this decentralization

process. Beside democratization in the local level, local financial improvement and the strengthen-

ing civil society as the result of decentralization reform, the legislation on which this decentraliza-

tion was based also allowed for the creation of new regions by dividing or merging existing admin-

istrative units. In practice, this process known as local expansion or “pemekaran” has meant not

mergers but administrative fragmentation and the creation of several new local governments. Thus

the rise of new local governments known as local is one phenomenon occurred in the decentraliza-

tion process.

Local expansion is stipulated in Law No. 32/2004 on Decentralization together with local

amalgamation within the provision of the establishment of new local government. The establish-

ment of regions as referred must meet the regional administrative, technical and physical prerequi-

sites.

The administrative prerequisite as referred for the province covers the approval from

district/city DPRD and District Head/Mayor that serves as the basis of the provincial regional

scope, approval of main provincial DPRD and the Governor, as well as the recommendation from

the Minister of Home Affairs. The administrative prerequisite as referred for district/city shall com-

prise the approval of district/city DPRD and the District Head/Mayor, approval from provincial

DPRD and Governor as well as the recommendation from the Minister of Home Affairs (Law No.

32/2004, article 5).

The DPRD approval in this provision occurs in the form of DPRD resolutions that will be

taken in observation of the aspirations from the majority of the local people. The Governor’s ap-

proval in this provision occurs in the form of Governor’s decrees made based on the result of the

team studies that are specially formed by the said provincial administration in reference to the laws

and regulations. The said team will involve expert staff in correspond to the needs (Law No. 32/

2004, elucidation).
 The technical prerequisite as referred to in paragraph shall include the economic capability

factor, regional potential, socio-culture, socio-political, demography, size of the region, defense,

security, and other factors that enable the regional autonomy to run. Other factors in this provision

refer to among others considerations pertaining to financial ability, level of public welfare, span of

control of regional government administration. The physical prerequisite as referred to in shall

comprise at least 5 (five) districts/cities to form a province, and at least 5 (five) sub-districts to form

a district, and 4 (four) sub-districts to establish a city, prospective capital city location, administra-

tion means and facilities (Law No. 32/2004, article 5).

III. Local Amalgamation in Japan

Amalgamations are not solely a phenomenon of the west, nor of contemporary Japan. Even

though the decentralization reform officially started in the nineties, local amalgamation has been

occurred in Japan before that. As Mabuchi points out (2001; see also Nakanishi 2002), there have

been two significant periods of amalgamation in Japan’s modern history. From 1883 to 1898, the

number of municipalities decreased from 71,497 to 14,289 as a direct result of municipal amalga-

mation, justified under the reasoning of increasing the scale and relevance of the resulting respec-

tive autonomous governing bodies. The first is called Meiji Amalgamation. The second drastic

change took place from 1950 to 1960. During this period, the total number of municipalities de-

creased from 10,443 to 3,526. The second major amalgamation is called Showa Amalgamation.

The motivation behind each amalgamation is different. The great Meiji Amalgamation have

been motivated principally by the desire to use municipalities more effectively as an instrument of

state power and policy and to modernize Japanese State. The Showa Amalgamation was motivated

largely by the need to ensure sufficient capacity to deliver newly devolved and important local serv-

ices, more importantly to strengthen local autonomy (Iqbal, 2001; Mabuchi, 2001).

After 1961, further amalgamations had a more pronounced bias in favor of economic devel-
opment; infrastructure programs and subsidies targeted at larger units were used to coax small mu-

nicipalities to amalgamate. In many cases, however, post 1960 amalgamations were voluntary.

Residents voted with their feet by leaving small villages to go and live in adjoining large cities; in

cases where the outflow to neighboring cities was large, villages voluntarily apply to be annexed to

these cities. In this sense many of the more recent amalgamations have been amalgamations from

below, advocated by mayors and village assemblies rather than forced by prefecture or national

authorities (Iqbal, 2001). Mabuchi also notes this reason (Mabuchi, 2001) that, “In short, we can

conclude that the amalgamations after 1961 were oriented toward economic development rather

than administrative efficiency”

The process of municipal amalgamation, as outlined by Nakanishi (2002; see also Ikegami

2003) consists of two major stages, each of which include multiple internal steps. The first stage

consists of interested cities, towns and villages forming voluntary assemblies, which initiate inves-

tigations and study of amalgamation. Closing out this first stage the assemblies undertake decisions

based in legal statutes, the final of which is the decision to merge. The second stage, consisting of

the application and official formation stage, includes the presentation of an official application, the

decision of the prefecture governor accepting the application and the emergence of the amalga-

mated municipality.

IV. Local Expansion in Indonesia Vs Local Amalgamation in Japan

One of the specific reasons behind the policy of decentralization and regional autonomy is

that a centralized government system cannot possibly administer Indonesia’s large population of

over 203 million (BPS, 2001) and its diverse socio cultural and religious background. Strong, com-

petent regional governments and greater autonomy are fundamental requirement for a country as

diverse as Indonesia.
 The main aim of decentralization and regional autonomy is to bring the governments closer

to their constituents so that government services can be delivered more effectively and efficiently.

This is based on the assumption that district and municipal governments have a better understand-

ing of the needs and aspirations of their communities than the central government. Although there is

considerable potential for district and municipal governments to be more responsive to community

aspirations, before that can occur political parties and civil society groups in the regions need to be

strengthened to ensure that the processes of good government can be properly established.

The purpose of local expansion itself institutionally to achieve the main aim of decentraliza-

tion above, bringing the local government to the community so that the services can be delivered

properly. Beside the purpose to achieve democratic decentralization, there is another reason behind

the trend. Politically, local elites in each new local entity have intention to be local leader such as

governor, mayor, or regent in new local government. In this case, ethnicity is become important

issue behind the justification of local expansion.

This process of creating new districts and provinces has for the most part been peaceful, and

for the most part, healthy. If it hasn’t necessarily improved the delivery of government services, it

hasn’t disrupted them either, and in some cases, it’s produced interesting local leaders and a sense

of empowerment to communities and groups that were excluded from local government before.

In Luwu, at least, local expansion has had a mostly positive impact, in large part because it

allowed an effective district head to emerge. Luwu also benefited from the fact that ethnic identity

there was too fragmented to be a significant basis for political mobilization by unscrupulous local

politicians. What also helped prevent conflict emerging was the common resentment, among mem-

bers of the Luwu elite, of the South Sulawesi provincial elite, and a common desire to break away

from South Sulawesi to form the new province of Luwu (ICG, 2003)

Despite the story of successful local expansion, based on the research conducted by Institute

for Economic and Social Research, it has been proved that every establishment new local govern-
ment in the form of local expansion, National Budget has been burdened heavily. The condition is

worse if the new establishment is new province as the result of local expansion since it will be fol-

lowed by municipal/district expansion in that new province (Syahrial, 2004). President Susilo

Bambang Yudhoyono also noted this result in his speech regarding the direction of local develop-

ment (Yudhoyono, 2006). Beside that, local expansion that initially should have been improved lo-

cal community welfare—in reality has an effect on the degradation of community welfare in some

of new established local government (KDP News, 9 October 2006).

In Japan, the decentralization reform initiated by Central Government has resulted on three

prominent results. Beside the increase of local power as the result devolution of central power to

local government and enlargement of local discretion, there is also local amalgamation trend (Ni-

kawa, 2006). Nikawa points out further that (Nikawa, 2006: 6):

“The third result (of decentralization reform) is to strengthen local government man-
agement and capacity through the amalgamation of municipality and local administrative
reform schemes, etc. The amalgamation of municipalities has been experienced in the
two-third of municipalities, and the number of municipalities is drastically reduced from
3200 in the year 1999 to 1800 in the year 2006. This amalgamation reinforces the or-
ganization and finance capability of local government, although it caused conflict among
the central government, the local government, the local politician, and the local people
who were in opposition”.

Local government amalgamation in itself has purpose on promotion decentralization. As

mentioned by Hirashima (2003), the purposes of the present municipal amalgamation in Japan are:

1. Promotion of Decentralization

2. Policy for aging

3. Policy for diversifying needs of citizens

4. Policy for expansion of residential area

5. Streamlining of municipal administration

It can be argued that amalgamations have contributed to broad based economic develop-
ment. By banding together, several villages were able to obtain various services that they probably

could not have obtained independently. Thus, smaller, more remote villages were provided access to

services such as secondary schools through amalgamation; it is unlikely that similar access could

have been achieved had they remained completely autonomous (Iqbal, 2001). Beside the contrib-

uted to economic development, amalgamation is proved to have positive impact on local govern-

ment efficiency in delivering public services or in other word administrative efficiency (Mabuchi,

2001). It certainly true if Joumard (2004) said that local amalgamation in Japan is the strategy to

reach an optimum functional size of local government.

As we have seen, Indonesia and Japan have different trend as the result of decentralization

reform. Indonesia has local expansion as the main issue; oppositely Japan has experienced local

amalgamation and benefited from it. There are three reasons that can be thought behind this trend.

One reason is that Indonesia has variety ethnic and each ethnic community is very aware

regarding their ethnicity and cultural differences among them. Many case of local expansion are

motivated by dissatisfaction from ethnic community which is excluded from political participation

or public services delivering. This condition is not occurred in Japan.

Second is control from central government. Even tough central government in Indonesia

has power over decentralization policy, as the wheel of decentralization move very fast, central

government seem lose control over regions and can not refuse local elites (acting as local people

voice) demand of local expansion. Reformation and democratization unconsciously reduce Jakarta

ability to monitor and supervise local decentralization. We have different condition in Japan as

pointed by Akizuki (2001) that central government in Japan has very strong control over the decen-

tralization policy including the policy regarding local amalgamation.

Third reason is incentives for the establishment new local government. Indonesia Govern-

ment has promised to give more local allocation fund to the newly established regions to the host

regions. It means that host regions can benefited from the local expansion process. For the new es-
tablished regions, central government has promised to help the local financial during the early es-

tablishment of local government as the result of local expansion. In Japan, central government en-

courages local amalgamation and promise to give some fund incentives for the local amalgamation.

Among financial incentives for amalgamation, one might note certain adjustments in the application

of the Local Allocation Tax to amalgamated municipalities and financial incentives related to local

bonds (Mabuchi, 2001)

Conclusion

As we have see, the direction and experiences with decentralization between Indonesia and

Japan is different even tough both nation pursue the same goal of decentralization. There is some

reason behind this trend; basically not only because the policy ran by each government is different

in achieving the decentralization goal but also the factor of political, social, and cultural different

between Indonesia and Japan.

As the progress of decentralization will continue in both countries, we will see more local

government expansion in Indonesia and local government amalgamation in Japan in the future.

Reference:

Akizuki, Kengo. 2001. Controlled Decentralization: Local Governments and the Ministry of Home
Affairs in Japan. World Bank Institute Working Paper. Washington. DC.

Batley, R.A. and Stoker, G. 1991. Local Government in Europe: Trends and Developments, Mac-
millan, Basingstoke, 1991

BPS (Badan Pusat Statistik). June 2001. Statistical Year Book of Indonesia 2000. Jakarta.

International Crisis Group (ICG). 2003. Indonesia: Managing Decentralization and Conflict in
South Sulawesi. Asia Report No. 60. ICG: Brussels.

Kecamatan Development Program (KDP) News, 9 October 2006. “Pemekaran Wilayah Turunkan
Kesejahteraan” (Local Expansion Decrease Community Welfare. Available at:
http://www.kdp.or.id/ppk/index.php?option=com_content&task=view&id=398&Itemid=107
Syahrial, Syarif. 2004. Pemekaran Pemerintah Daerah dan Beban APBN (Local Expansion and Na-
tional Budget Burden. Institute for Economic and Social Research. Available at:
http://www.lpem.org/item.php?id=81&type=2

Dillinger, William. 1994. Decentralization and its Implications for Urban Service Delivery. Urban
Management Program Discussion Paper 16, World Bank. Washington. DC.

Hirashima, Akihide. 2004. Decentralization in Japan. Paper presented in KEIO-UNU-JFIR Panel

Meeting Economic Development and Human Security on February13th, 2004

Ikegami, Hiromichi. 2003. Shichoson gappei: kore dake no gimon (Municipal Mergers: Only These
Questions). Tokyo: Jichitai Kenkyusha.

Iqbal, Farrukh. 2001. Evolution and Salient Characteristics of the Japanese Local Government Sys-
tem. World Bank Institute Working Paper. Washington. DC.

Joumard, Isabelle. 2004. Getting the Most Out of Decentralization. Available at

www.esri.go.jp/jp/prj-rc/macro/macro15/08-1-P.pdf

Mabuchi, Masaru. 2001. Municipal Amalgamation in Japan. World Bank Institute Working Paper.
Washington. DC.

Manor, James. 1999. The Political Economy of Democratic Decentralization. Washington. DC: The
World Bank.

Nakanishi, Hiroyuki. 2002. Shichoson gappei: machi no shorai wa jumin ga kimeru (Municipal
Mergers: Residents to Decide the Future of our Cities). Tokyo: Jichitai Kenkyusha.

Nickson, R. Andrew. 1995. Local Government in Latin America. Boulder and London: Lynne Rien-
ner.

Nikawa, Tatsuro. 2006. “Decentralization And Local Governance: Reinforcing Democracy And
Effectiveness Of Local Government”. Paper presented in Regional Forum on Reinventing
Government in Asia Building Trust in Government: Innovations to Improve Governance 6-8
September 2006, Seoul, Republic of Korea.

Smoke, Paul. 2005. “The Rules Of The Intergovernmental Game In East Asia:
Decentralization Frameworks And Processes” in East Asia Decentralized. Washington. DC:
The World Bank.

Yudhoyono, Susilo Bambang. 23 Agustus 2006. Pemekaran Wilayah Perlu Ditata Kembali (Local
Expansion Need to be r e f o r m u l a t i o n ) . Av a i l a b l e at:
http://menkokesra.go.id/content/view/1264/39/