Regional financial potential after the enactment of the law on the financial relations between central government and regional governments in Indonesia

Faisal Akbar Nasution

Article ID: 8196
Vol 8, Issue 12, 2024

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Abstract


The implementation of government decentralization in Indonesia is facing regulatory problems for autonomous regions’ financing sources. Therefore, attention to regional finance is increasingly needed given that autonomous regions are required to carry out various central government interests in addition to their affairs. This leads to a split of power over financing development policy by the regional government. However, this does not mean that the local government’s financial needs must be free from the central government’s intervention. This study briefly compares financing regional autonomy in Indonesia, France, Germany and Thailand. The results show that the distribution of financial resources between the central government and regional governments is inconsistent with Article 18A section 2 of Law No.1/2022. The results also show that the provisions of various sources of taxation and levy have not met the financial needs of regions in Indonesia. Financial balance in the form of Natural Resources Production Sharing Fund from various natural resources owned by regions that only share unrenewable resources such as mining excavated materials remains unequally distributed between regions that have natural resources.


Keywords


regional finance; government decentralization; financial balance; natural resources

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DOI: https://doi.org/10.24294/jipd.v8i12.8196

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