Indonesia has embarked upon a radicaland rapid decentralization program. Regional autonomy istransforming one of the most centralized countries in theworld into one of the more decentralized ones. If managedwell, a country as large anddiverse as Indonesia willbenefit greatly from decentralization, through moreefficient service delivery, but also national unity anddemocracy. Yet, not all is well. The Consultative Assembly,the country's highest constitutional body, hasrecognized as much by calling for a thorough evaluation ofthe decentralization program, and adjustments of thedecentralization laws, if needed. Indonesia should use theprocess of revision as an opportunity to create a consensuson the type andextent of regional autonomy, and definebetter rules of the game to ensure that the benefits ofdecentralization will prevail. Rapid decentralization andits hasty preparation have left much unfinished business.Some of the issues encountered are merely teething problemsof an ambitious decentralizationprogram, and over timethey can be ironed out. Others could jeopardize the successof the program itself, undermine the potential efficiencygains of decentralization, and even trigger fiscalimbalances and macroeconomic instability over the longerrun. These issues fall into three broad categories: (i) theassignment of functions over levels of government: (ii)local capacity to implement the functions; (iii) theintergovernmental fiscal system; and (iv) accountability atthe local level.
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