GROWING IMPORTANCE OF REGIONAL AND LOCAL GOVERNMENT

C O N F I D E N T I A L JAKARTA 001871

SIPDIS

SIPDIS

DEPARTMENT FOR EAP, EAP/MTS

E.O. 12958: DECL: 07/06/2017
TAGS: PGOV ECON EFIN ID
SUBJECT: GROWING IMPORTANCE OF REGIONAL AND LOCAL GOVERNMENT

REF: 05 JAKARTA 13215

Classified By: Ambassador Cameron R. Hume, for reasons 1.4 (b,d).


1. (C) Summary: Indonesia's future increasingly depends on
the provinces and regencies, whose recent constitutional
changes are taking hold. Over the medium-to-long term, how
will provincial and local governments handle their enhanced
revenue flows? How much political power will direct
elections shift to governors and regency heads (bupatis)?
Governors, who previously were responsible to the Ministry of
Home Affairs and appointed by the President, now have to pay
attention to their constituencies if they wish to remain in
office. In turn, national parties have to listen more
carefully to local leaders, who can garner regional or local
support. This message examines political implications of
decentralization as it has evolved since the 2004 legislation
(reftel focused primarily on the fiscal implications). End
Summary

Choosing Decentralization
--------------


2. (C) Besides the advent of national democratic structures,
just as important has been the increasing shift of power away
from the center to the provincial and regency levels. The
course of democracy that we have traversed in over two
centuries in AMERICA is less than ten years old in Indonesia.
While the U.S. emerged from a union of sovereign states,
modern Indonesia was one of the most heavily centralized
countries in the world, which emphasized national unity and
oneness. Regional variations have always been viewed with
suspicion by the center because of the possible strengthening
of the many separatist movements that this country has had to
contend with. Local authority or initiative tended to be
discouraged.


3. (C) Despite the inherent prejudice towards centralization,
Indonesian leaders adopted decentralization and election laws
that have moved major resources and responsibilities away
from the center to the regency level. In effect, the
equivalent of county-sized units of government have benefited
from block grants, but also have been told that they must
take care of many basic human needs, such as education. Not
surprisingly, we are already seeing real differences between
the managerial qualities from one region to another. More
importantly, we are seeing a plethora of new local laws in a
variety of areas, differing from regency to regency, some of
which have raised important constitutional questions, notably
with respect to freedom of religion. Some communities have
used their new freedom to introduce Islamic sharia law, in
contravention of constitutional principles of freedom of
religion. Formal and informal authority for commercial
decisions, such as the granting of business licenses and
investment approvals, also remains unclear, increasing
confusion and creating new opportunities for graft.

Delineating Powers
--------------


4. (C) Many of the issues that are leading to confusion and
gridlock surround the unclear division of powers that
currently exist between the central and local governments. A
number of regencies have adopted laws on religious practice
and morality that contradict the constitution. Others are
imposing business and tax regulations that are taking
investors by surprise. Others have simply added new layers
of corruption. The confusion is regularly acknowledged by
the press, and the Ministry of Home Affairs has repeatedly
stated its intention of reviewing local legislation to judge
its legality, but we have heard that in practice nothing is
being challenged by the ministry. Religious minorities have
filed various cases in the courts to seek redress.
Complicating matters is that the law that established the
Constitutional Court, which has already made courageous
decisions in support of constitutional values, does not
include local laws within its jurisdiction. Most legal
scholars interpret the law to mean that the Supreme Court,
which is the highest court with respect to criminal matters,
would have to decide any challenge to a local law on
constitutional grounds.


5. (C) At a political level, the diffusion of power to the
regions and counties by definition dilutes the power of what
are very centralized political parties. For the national
legislature, the parties choose the candidates from the
center and they are able to impose party discipline because
the law allows them to remove dissidents from their
parliamentary seats by informing the legislature they are no
longer party members. Although only time will tell, we can
expect that the ongoing rounds of local elections to
strengthen local officials within their respective party
structures as well as instill the almost currently
non-existent concept of servicing local constituencies.


6. (C) On the potential negative side, we cannot forget that
the Indonesian military still very much sees itself as the
guarantor of national unity. If any given area or region is
perceived as using its new powers and finances in a manner
that smacks of separatism, we can expect a strong reaction at
the national level. Similarly, the police is being
maintained as a national organization responsible to the
center. In order to see positive progress no region should
interpret new economic or other successes as a ticket to
breaking away. Given the success of the Aceh Memorandum of
Understanding to date, at this time separatist movements seem
to be at a low, with the strongest sentiments probably in
Papua. Maluku has been much quieter in recent years with the
violence in Sulawesi not of a separatist ilk, but more the
attempts of extremists to reignite communal conflict.


7. (C) While it would be foolhardy to assume rapid change as
this process moves forward, Indonesia has created for itself
a new structure that if fully implemented, will restructure
the relationship of its citizens to their government, and
possibly create unforeseen results. Given the size of the
country, serious management by all levels of government of
the effect of those changes will remain an important
challenge for many years to come, and our following them
systematically will give us indications of the true path we
can expect for Indonesia's future in a broad range of domains.
HUME