Linking expenditure assignments and intergovernmental grants in Indonesia

Indonesia is currently in the process of evaluating and revising the decentralization legislation and the progress made during the first stage of its “big bang” decentralization reforms. This first wave of decentralization reform was implemented without major interruptions in service delivery as had been feared by some. However, initial and partial field evidence suggests that the long-term viability of service delivery may now be threatened in some local governments and in some sectors. In particular, there is a danger that the proliferation of obligatory functions and minimum service standards that far outstrip available resources will undermine functioning and credibility of local government units (LGUs). To forestall this possibility, and address other shortcomings in the decentralization framework, the Government of Indonesia (GOI) is in the process of reviewing and refining its system of intergovernmental relations.