Central-Regional Synchronization Becomes a Big PR for Indonesia's Golden Achievement

The misalignment of central and regional development programs means that development does not contribute to people's welfare.

DOKUMENTASI BAPPENAS

President Joko Widodo, Minister of National Development Planning/Head of the National Development Planning Agency (PPN/Bappenas) Suharso Monoarfa (fifth from the right) along with representatives of regions who received awards for best development planning in the opening of the 2024 National Development Planning Conference held in Jakarta on Monday (6/5/2024).

JAKARTA, KOMPAS - The suboptimal alignment or synchronization of work programs between the central and regional government can hinder the achievement of targets in medium and long-term development plans. Development programs from ministry/institutional level to regional level must be in line in order to achieve economic growth acceleration.

The issue of synchronizing development programs between the central and regional levels is a concern among participants at the National Development Planning Meeting (Musrenbangnas) in 2024, which was held in Jakarta on Monday, May 6, 2024.

The implementation of Musrenbangnas 2024 was opened through direction from President Joko Widodo. Also present as speakers were the Minister of National Development Planning/Head of the National Development Planning Agency (PPN/Bappenas) Suharso Monoarfa, Minister of Home Affairs Tito Karnavian, and Deputy Minister of Finance Suahasil Nazara.

A number of governors, mayors, and regents also participated in the National Development Planning Meeting 2024 (Musrenbangnas 2024) to prepare the Government Work Plan (RKP) 2025 with the theme "Accelerating Inclusive and Sustainable Economic Growth".

The 2025 National Development Planning is aimed to be a guide in the planning, budgeting, and implementation of development throughout Indonesia. This document serves as the foundation for Indonesia's transformation towards a higher level.

Minister of National Development Planning/Head of Bappenas Suharso Monoarfa said that the draft RKP 2025 was a window into the government's program to determine the success of the National Long Term Development Plan (RPJPN) 2025-2045. Efforts to achieve targets depend heavily on synchronization or alignment of central and regional government development programs.

"To maintain coherence of development, there is a need for alignment between the central and regional governments, especially in macro development indicators, as well as plans, programs, and activities," said Suharso.

Earlier, when giving directions, President Joko Widodo regretted that there are often inconsistencies found between the central government's development programs and those of the regions. He illustrated that in one region, the central government had built a dam. However, when the dam was completed, the regional government did not prepare secondary to tertiary irrigation development programs so that the flow from the dam could reach the rice fields.

Taking lessons from those cases, Suharso added that RKP 2025 is aimed to become a guide in planning, budgeting, and implementing development throughout Indonesia. This document serves as the basis for Indonesia's transformation towards a higher level.

According to him, for regional governments, the 2025 National Medium-Term Development Plan will be used as a reference for preparing the Regional Development Plan (RKPD). The development direction outlined in the 2025 National Medium-Term Development Plan can serve as a reference for state-owned enterprises and private parties to participate and collaborate in supporting national development goals.

"Therefore, the National Mid-term Development Plan (RKP) must adhere to basic principles, which are the harmonization of central and regional programs, productive outcome orientation, as well as accurate targets and budget allocation strategies," he stated.

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In the 2025 National Development Plan, the government sets a target of economic growth at around 5.3 to 5.6 percent. The target is supported by government spending, which will increase from 14.56 percent of gross domestic product (GDP) in the 2024 state budget to 16.15-17.80 percent of GDP. This includes central government spending of 11.96-13.35 percent of GDP and transfers to regions of 4.19-4.45 percent of GDP.

Fiscal inequality

Amid the government's increasingly extravagant spending targets, Suharso revealed the issue of high dependence on the transfer of funds to regions for the implementation of regional government programs, which has reached an average of 83 percent over the past six years nationally.

On the other hand, at the national level, the ratio of local taxes is still very low, with the average ratio of local taxes in districts/cities in Indonesia in 2021 only at 0.51 percent. This condition makes local taxes and regional levies as a source of local original revenue unable to fund infrastructure and other basic services.

"There are many things that must be done, planned well for. For example, for the provision of drinking water and the improvement of roads, at least Rp 600 trillion will be needed in the next five years," he said.

Suharso added that the imbalance between regional fiscal capacity and funding needs has resulted in the inability of regional governments to carry out development. Moreover, the structure of the regional budget is mostly allocated for routine expenditures, including personnel expenditures, which on average reach 67.26 percent.

"It means that there is diversity in the fiscal capabilities of regions and also differences in authority, resources, and characteristics. All of these require the involvement of development stakeholders who need synchronization and alignment between central and regional planning and development," said Suharso.

In the same occasion, Deputy Finance Minister Suahasil Nazara requested regional governments to pay attention to synchronization when preparing Regional Revenue and Expenditure Budgets (APBD), particularly in the context of education, health programs, infrastructure development, as well as the empowerment of micro, small, and medium enterprises (MSMEs).

"Please ensure that domestic expenditure synchronization is taken into account when planning the regional budget, particularly in spending for small and medium enterprises, infrastructure, education, and health that prioritize domestic products," said Suahasil.

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He ensures that the Ministry of Finance will continue to design general allocation funds (DAU) and special allocation funds (DAK), regional incentives, and other transfer funds aimed at encouraging sustainable development performance improvements. The central government will look at the overall situation and determine how regional incentive funds will actually provide incentives for sustainable regional development.

For the year 2024, the Ministry of Finance has set a regional transfer allocation limit (TKD) worth 857.6 trillion rupiahs in the State Revenue and Expenditure Budget (APBN), of which 184.3 trillion rupiahs has been realized as of March 31, 2024.

KOMPAS/PRIYOMBODO (PRI)

The density of vehicles on the Jenderal Sudirman protocol road in Jakarta on Monday (6/5/2024). Despite various global and domestic uncertainties, the Indonesian economy was able to grow by 5.11 percent. Domestic activities such as the election event and the Ramadan momentum have become supporters of economic growth, which is the highest in the last five years.

In addition, every year, the Ministry of Finance also provides fiscal incentives for inflation control. In the third period of the 2023 fiscal year, the Ministry of Finance disbursed funds worth Rp 340 billion to appreciate 34 high-performing local governments, consisting of 3 provinces, 6 cities, and 25 districts.

Meanwhile, Minister of Home Affairs Tito Karnavian has once again reminded regional heads to manage and allocate finances effectively. He pointed out that many regional governments still have the mindset of spending the budget, and worse, at the end of the year. Regional governments should also focus on increasing local revenue (PAD).

The APBD will not be enough to improve the welfare of the people, especially if it only relies on transfers from the center.

To reduce the regional government's dependence on TKD funds, he hopes that the APBD can be used to stimulate the private sector, including through land permits, spatial planning, and simplifying bureaucracy in the region.

"The regional budget will not be sufficient to improve the welfare of the people, especially if it only relies on transfers from the central government. This is what needs to be changed by formulating plans to encourage the private sector to thrive. If local revenue increases, the regional treasury will have a lot of money," he said.