Indonesia: what do we mean by decentralization?

Decentralization has been a major theme in many countries in recent years. In Indonesia it has been part of the rhetoric of the Government for some time, but recent initiatives have suggested some more substance. This article reviews two main concepts: inter‐governmental decentralization and management decentralization. It examines the Indonesian approach to decentralization in law and in practice, focusing on some recent initiatives in reforming the grant system and the declaration of a ‘pilot areas’ decentralization project. The aim of such initiatives appears to be to reap the efficiency gains of management decentralization without transferring power. However, the Indonesian system lacks some of the institutional requirements for effective management decentralization, notably the absence of performance measures and an effective framework of constraints, as reflected in the shortcomings of the systems of central controls over local government. The article concludes with an analysis of the reasons why the Indonesian Government appears to be so wary of western notions of decentralization. © 1997 by John Wiley & Sons, Ltd. Public Admin. Dev. Vol. 17, 351–367 (1997). No. of Figures: 0. No. of Tables: 2. No. of Refs: 49.