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Mardiasmo, Diaswati and Barnes, Paul H. and Sakurai, Yuka (2008)
Implementation of Good Governance By Regional Governments in Indonesia: The
Challenges. In Brown, Kerry A. and Mandell, Myrna and Furneaux, Craig W. and
Beach, Sandra, Eds. Proceedings Contemporary Issues in Public Management:
The Twelfth Annual Conference of the International Research Society for Public
Management (IRSPM XII), pages pp. 1-36, Brisbane, Australia.

© Copyright 2008 (please consult author)
Implementation of Good Governance by Regional Governments in
Indonesia: The Challenges

Author:

Diaswati Mardiasmo
School of Management
Faculty of Business
Queensland University of Technology
2 George Street, Brisbane, QLD 4000
Phone: 07 3138 4015
Fax: 07 3138 1313
Email: d.mardiasmo@qut.edu.au

Paul Barnes
School of Management
Faculty of Business
Queensland University of Technology
2 George Street, Brisbane, QLD 4000
Phone: 07 3138 9019
Fax: 07 3138 1313
Email: p.barnes@qut.edu.au

Yuka Sakurai
School of Management
Faculty of Business
Queensland University of Technology
2 George Street, Brisbane, QLD 4000
Phone: 07 3138 2652
Fax: 07 3138 1313
Email: y.sakurai@qut.edu.au

Presentation Track : Local government management and local governance










1
Abstract

Good governance refers to government agencies’ conduct in implementing innovative policies
and programmes to increase the quality of public service with the ultimate aim of increasing
economic growth. This paper investigates good governance in Indonesia, with a focus on its
implementation by regional / local government. Indonesia’s good governance implementation
has attracted further attention with it being the vocal point of its current president’s, Susilo
Bambang Yudhoyono, presidential vision and mission. Although much research has
acknowledged good governance implementation at regional/local government level, the extent
of implementation has varied, suggesting partial or incomplete implementation of good
governance principles. This paper investigates impeding factors that do not support effective
implementation of governance protocols. Analysis of findings found nine impediment
variables to good governance and a large disparity gap in good governance understanding and
implementation. Further investigation of findings allows a conclusion whereby the main
challenge for good governance implementation is the existence of a double edged sword; lack
of good governance legal instruments as well as a lack of bureaucratic reform.

Key Words:

Good Governance, Indonesia regional government, impeding variables, bureaucracy
culture, political history, public policy, implementation guidelines.




















2
Introduction

Interest in the concept of Governance compliance is currently a world-wide phenomenon
resonating in all corners of life; private sector, public sector (government agencies), society,
non-profit sector, and international institutions. Interest in governance within Asia has
increased markedly in recent times due to the financial crisis but also too due to other events
derivative of poor governance practices. A growing literature is available on governance as
well as numerous standards and codes of conduct: many precipitated by institutional crises in
commerce and exposure to inappropriate government practices globally
1
.

A prime factor for this has been an increase in global economic integration leading to an
increase in the demand for capital both in the developed and developing economies; thus a
need for enhanced regulatory compliance (Bhasa 2004). A further driver for this change has
been an increase in economic turbulence around the world. A sentinel event in this regard
was the 1997 Asian financial crises (Barro and Lee 2003; Mitton 2002). Corporate collapses
such as Enron Enron in the USA (Bonn 2004; Grantham 2004; Lansley, Gibson and Fogarty
2002), HIH, One Tel and Ansett Airlines in Australia (Houghton and J ubb 2003; Leung and
Cooper 2003; Milne 2002), and China Aviation oil in Singapore (Clarke, Dean and Houghton
2002; Evans 2005) have also contributed to the increase in governance and corporate controls.

While the implementation of standards in established economies is a regular topic in
professional and academic journals, as well as in commercial settings, the extent to which
good governance is implemented within government agencies remains ambiguous
(Brinkerhoff and Goldsmith 2005; Ciborra 2005; Duvall and Shamir 1980; Knack and Keefer
1995; Wu 2005). Literature sources also have a tendency to generalise country conditions as a
whole, overlooking the status history, legislative context, and other constraints on regional
government within a country. These sources are also generally silent on the question of how
well good governance concepts are understood and implemented across levels of government.
While there is acknowledgment of the attributes of governance failures and non-compliance
available works generally lack deeper analyses of the contributory factors to good governance
nor do they examine details of why good governance is not applied to maximum potential.

1
Armijo (2004), Beck, Clarke, Groff, Keefer and Walsh (2000), Court, Gyden and Mease (2002), Hellman,
J ones, Kaufmann and Schankermann (2000), Huther and Shah (1998), Kaufmann, Kraay and Zoido-Lobaton
(2000), Kaufmann, Kraay and Zoido-Lobaton (2002).
3
This paper, derived from research carried out across four regions in Indonesia, investigates
good governance as implemented by regional/local governments. Indonesia has been chosen
due to the contrasting paradoxical views of it being the “worst hit and slowest recovering”
country following the Asian Financial Crisis (Muljadi 2001; Muljadi 2002) yet the most
active out of the Asian economies in respect to political, economical, and social transition
(Freedman 2005; Iskander, Meyerman, Gray and Hagan 1999; McCawley 2003). Indonesia’s
good governance implementation has also attracted further attention with it being the vocal
point of its current president’s, Susilo Bambang Yudhoyono, presidential vision and mission,
sparking analysis on the extent of good governance implementation since its introduction in
2001.

Background

Indonesia is a prime example of an economy where awareness of the benefits of governance
has increased dramatically since the 1997 Asian financial crisis. As part of the recovery
phase, post-crisis, Indonesia has strived to enhance resilience to crises and collapse by
increasing governance implementation through numerous innovative policies in both the
private and public sector.

An analysis of literature related to governance systems found three important gaps as follows;
limited publication on governance policies, exclusion of commentary on economic and policy
changes in Indonesia after the financial crises, and little consideration of factors operating at a
regional/local government level. This paper therefore seeks to address issues firmly within
the context of these issues. A general consensus in this literature, however, is that ‘more
time’ is a needed to achieve effective implementation of governance capacities. One of
Indonesia’s economic and political transition policies in 1999 was the introduction of
decentralisation, allowing regional government autonomy on the development of its region
and allocation of resources. Decentralisation policy in Indonesia, as it has been implemented
in recent years has impacted strongly on regional levels of government. An examination of
how decentralisation policy has affected good governance implementation at regional of
government levels is timely.

An important gap exists with respect to the involvement of regional government officials in
the data collection process, leading to questions of reliability and an accurate rendering of
4
regional government practices. Limited studies have been completed in Indonesian regions:
namely, North Lampung, Flores Island, Bali, Northern Sulawesi, and Irian J aya (Elmhirst
2001; Erb 2005; Hassler 2005; Henley 2002; Newhouse 2005; Williams 2005; WorldBank
2005). These works however, have focused on single governments and are in the main based
on legislative review and documentation of practices without direct official government
endorsement or involvement. The scarcity of literature detailing in-depth, comparative
assessment of regional government practices in relation to governance is an important factor
requiring attention. The importance of this issue seems obvious given that extant commentary
on governance matters is either published by central government bodies (BAPPENAS 2006;
KNKG 2006), international institutions (ADB 2004; BaKTI 2006; ILGR 2004), or based on
data released by either or both (Brinkerhoff and Goldsmith 2005; Ciborra 2005; Elson 2006)

Recent approaches to governance: the regional context

Indonesia’s governance system historically operated under a regime in which state institutions
neglected good governance and the rule of law, where the ‘state’ managed essential parts of
the corporate sector, and corruption was allowed to rule over common interests (Adicondro
2002; Resksodiputro 2002; McLeod 2000). These same institutions were those deemed to
have the role of securing democracy, supporting a market economy, and providing good
governance (Tambunan 2000; Velayutham 2003). The national government recently enacted
amendments to the 1945 constitution to incorporate good governance aspects in its clauses,
introduced Law 22/1999 on Regional Government and Law 25/1999 on Fiscal Balance
between the Regions and the Central Government, and introduced international institutions to
assist in forming good governance codes that are in line with international good governance
standards (WorldBank 2004; Soesastro 2000; MPR-RI 1999; OECD 1995; Nugroho 2003) .

In 2001 the National Committee of Corporate Governance released Good Corporate
Governance Guidelines (CGC), where although the level of implementation in Indonesia is
still very low the effort and enthusiasm for implementation in the private sector is srong
(Capulong, Edwards, Webb and Zhuang 2000; Gingerich and Hadiputranto 2002; Muljadi
2001; Muljadi 2002). The central government has also realised the importance of effective
implementation of governance practices because of the mutually beneficial outcomers
possible for both the public and private sectors (KNKG 2006).

5
Decentralisation and regional autonomy has also brought on a new phenomenon, where many
new regional governments are formed and established (Silver 2003; Devas 1997). Indonesia
now has nearly 400 regional governments (increased from a previously registered total of
300) as a result of decentralisation and enhanced regional autonomy (Dwiyanto 2003). This
phenomenon has both positive and negative consequences. The establishment of new regional
governments has sparked a competition between “old” and “new” regions, especially in the
area of innovation, as “new” regional governments are suspected to be more open to adapting
innovative ways in governance (Malley 2003). Thus there is a positive effect in the sense that
competition will result in overall improvement from regional governments in terms of
governance. The “new” regions however may not have the same expertise as the “old” regions
or the human resource capacity to perform government related tasks and thus will need more
guidance from central government in regards to governance matters; hence the wider
disparity between a mature and immature regional government (Erb 2005; Hellman et al.
2003). The establishment of “new” regions also mean a new funding structures and re-
evaluation of current rules and regulations to ensure flexibility is extended to newly formed
regional governments

The manner in which government officials view their roles, in their daily work, is a key factor
in good governance implementation (Warwick,1978). In particular it is important that a civil
service is allowed to develop its professionalism in order to more effectively serve
democratically-elected governments and its people. It is also important that political
appointees are accountable, where boundaries of authority are clear and there is respect for the
neutrality of civil servants (WorldBank 2001a). Research shows that there is a lack of the
aspects listed above in regional governments in Indonesia, where cultural aspects interfere
with the professional appointment of officials and there are glass ceilings in professional
development in terms of information/training exposure (Beecher 2003). It has also been
identified that there are significant political implications in the appointment of officials and
promotion within its echelon system (Wray 1999). The boundaries of authority however
seems to be a clear one in Indonesia’s regional government as portrayed by a clear structure
and division between echelon (Doornbos 2001; Fukuda-Parr and Ponzio 2002; Liddle and
Mujani 2005; Taylor 2000) levels of government, where there is high power distance between
each level of government (WorldBank 2001a). Government neutrality is questioned in
Indonesia as it interlinks with political relations in official appointments (Manning 2000;
Rijckeghem and Weder 1997).
6

Current decentralisation policy in Indonesia emphasises robust regional independence in
terms of policy making and economic autonomy (Devas 1997; Schroeder 2003; Federspiel
2005). Each region has the independence to enact policies based on the level of benefits
reaped, where central government acts both in an advisory as well as a controlling role
(Tambunan 2000; Silver 2003; Kristiansen and Trijono 2005; Crane 1995). This advisory and
control mechanism relationship suggests that geographical distance between the central and
the regional government affects the level of control the central government would have on
policy adaptation and implementation by regional government.

Newer regional governments tend to embrace innovative ways of implementing government
procedures as the reason for their establishment is dissatisfaction from the old ways of
previous regional governments that they were part of, thus they innovate by establishing a
new regional government (Indrawati 2005; Kivimaki and Thorning 2002; Mishra 2005). As
good governance is considered an innovation by literature due to its contrasting characteristics
to Soeharto’s 32 years of governance (Mishra 2001), a relationship is concluded wherein
newer regional governments would be more open to implementing good governance aspects
(Mishra 2002). Therefore another consideration variable in selecting a regional case study is
age of the region, in order to provide a contrast between regional governments that existed
pre-decentralisation and regional governments that were created due to decentralisation.

Analytical Framework & Methodology

This work derives from detailed fieldwork within Indonesia and seeks to enhance levels of
understanding of impediments to the implementation of good governance at a regional
government level. The analytical bases of this research (depicted in Figure 2 below) is
derivative of aspects of the de-centralisation policies referred to above and relates to two
hypothetical considerations. Namely:

• that differences might exist between established and more recent regional
administrations
• that proximity to the capital, J akarta may influence the nature and flexibility of
implementation of governance.

7
Figure 2 represents these considerations, contextually, in a four cell matrix allowing a contrast
between recent and well established locations, both near and distant to the national capital.


Old

New
Far from Capital Near to Capital
Solok,
(West Sumatra: est. 2001)
Padang
(West Sumatra: est. 1975)
Gorontalo
(Sulawesi: est. 2000)
Denpasar
(Central Bali: est. 1956)
Figure 1 Analytical Framework (Regional Governments)








A depicted in Figure 3 below, investigative activities in each of the four regional government
locations involved series of on-site observation, document analysis and in-depth interviews.















Five days were spent in each regional government office as part of the on-site observation
stage. Access during each visit to regional government offices included briefings on the
organisational structure, introductions to key regional government informants, including open
Solok, Padang Gorontalo
Emergent Outcomes
Denpasar
In-depth
Interview
Document
Analysis
On-site
Observation
Figure 2 Methodological Framework

8
access to required documents,
2
and participation in a number meetings, as well as
opportunities to interview employees within the regional office.

A key purpose of this triangulation method was to make-sense
3
of economic, political, and
approaches taken with respect to the decentralisation of governance within Indonesia.
Document analysis in combination from findings derived from on-site observation formed a
basis for initial content used in in-depth interviewing in the third stage of the data gathering
process. In-depth interviewing involved three different strata of employee within each
regional office setting. Namely: Staff Level Official (SLO), Middle Level Official (MLO),
and High Level Official (HLO). The interview protocol also involved provision for key
government officials from the central government (J akarta) to provide a comparative view on
emergent issues detailed in the regional locations. The total number of government officials
interviewed within regional locations and for each staff level is shown in Table 1.




Region Government Official
Interviewees
Total
SLO MLO HLO
Denpasar 1 3 2 6
Padang 2 2 2 6
Solok 0 2 1 3
Gorontalo 2 4 4 10
J akarta 2 2 2 6
Total 7 13 11 31










Table 1 Number of Government Officials Interviewed

Data derived empirical data collection were analysed using NVIVO and the excel
matriculation system to ensure a systematic treatment of data and test consistency. It is
recognised that there is an uneven number of government officials per informant strata level
and per region. This is related to a balance of contextual issues such as access to regional
government authorities, introduction from a senior official, the culture of reluctance and high
uncertainty, government official schedule and availability, and the sensitivity of ‘governance’
as an interview topic: all of impacted on access to government officials.

2
Regional government publications on governance and public policies, reports, public records, and regional
government laws and codes as well as Central government document and a selection of international documents.
3
Sense-making activity is defined as the process where reading of documents provide a clearer picture of current
conditions in Indonesia, the reason behind activities or policies, and good governance role in the current
economic and political conditions.
9


Results and Findings

Level of Good Governance Understanding
4
and Implementation
5


Good governance is understood at different levels by (strata) employees within regional
government and between each regional government as a whole. Table 2 displays a
comparative table on the level of good governance understanding.

Table 2 Level of Good Governance Understanding - Regional Comparison
Region Understanding Strata Disparity
Low Medium High
Denpasar
Padang
Solok
Gorontalo

From Table 2 it is evident that Denpasar respondents reported low levels of understanding
about good governance. Padang however listed medium levels of awareness with both Solok
and Gorontalo expressing high levels of understanding. The last column (strata disparity)
indicates whether disparity in understanding of good governance between employee levels
exists, in which all government officials interviewed agreed to. This result suggests that there
is an overall disparity in the level of good governance understanding between regions and
between strata levels within each regional government.

Likewise there is variance in good governance implementation between regional governments.
Based on table 3 on characteristics of good governance implementation and interview results,
Table 3 is compiled to illustrate the disparity in good governance implementation. It is clear
that both Denpasar and Padang show medium levels of governance implementation, whereas
Solok and Gorontalo on the other hand shows a higher degree of implementation.

4
(Level of Understanding) Low: Acknowledge the term “good governance” and able to name good governance
concepts; Medium: Acknowledge and able to name good governance concepts, able to explain the meaning of
each concept; High: Acknowledge, able to name and explain the meaning of each concept, and able to provide
examples of how concepts are applied in everyday work.
5
(Level of Implementation) Low: Introduction stage, vague plans of good governance implementation;
Medium: Concrete plans of good governance implementation (through decrees and published policies/plans);
High: Concrete plans and evidence of good governance implementation.

10

Table 3 Level of Good Governance Implementation - Regional Comparison
Region Implementation Strata Disparity
Low Medium High
Denpasar
Padang
Solok
Gorontalo

Interviews with government officials showed a disparity in opinion on the extent of
governance implementation. A common belief by high level officials was that a high level of
implementation was in place whereas both medium and staff level officials supported the
notion that lower levels of implementation were the norm.. Thus it may be concluded that
there is a disparity in the level of implementation between regions, however its extent is at a
lower level than good governance understanding disparity.

A view from the central government (J akarta) contrasted with the views of regional
government officials in that officials believed that there was, in general, low levels of
understanding of the principles of good governance. J akarta-based informants were split
evenly on the issue of implementation of governance practices regionally. The difference in
opinion exist as central government interviewees believe there are regions that are considered
“mature” in their public services provision, as well as regions that are still “young” and
“immature” in their public service provision. Interviewees believe that there is a positive
correlation between the level of public service provision (or the “stage” that regional
government is in) and the level of good governance implementation. Although the disparity in
views can be perceived as a negative there is also a positive impact, where such views
advocates the central governance to increase aid and attention in “maturing” those “young and
immature” regional governments.

Impeding Variables to the Implementation of Good Governance

Open access reports on good governance implementation in Indonesia exhibit a common
thread of recognition of the issue of inconsistent approaches (and success) in implementation.
In many instances it is noted that the intention of good governance implementation exists
(through regulations, government decrees, codes, etc) however there is disparity between
what is on paper and in reality (ADB 2004; WorldBank 1992; WorldBank 2004; WorldBank
11
2001b). In short the tools and intentions of implementing good governance principles exist,
however a realistic implementation in everyday public service provision is still lacking. This
raises an interesting question of why good governance is not implemented at optimum levels.
Regional government have also examined impediments to implementation through in-depth
interviews with its employees/officials. These issues are displayed in Table 4.

Table 4 Impeding Variables to Good Governance Implementation - Regional Comparison

Impeding Variables Regional Government
Denpasar Padang Solok Gorontalo J akarta
Communication Disabilities
Lack of Good Governance
Implementation Guidelines

Influences of Leadership
Human Resource Capability and
Capacity

Political History
Local Government Bureaucracy
Culture

Remuneration System and
Employee Welfare

Minimum Public Service
Standard

Society Involvement
Commitment
Lack of Good Governance
System


Analysis of work reported here identified twelve variables that could impede the even
implementation of governance. Further analysis of the interview responses identified nine of
these variables as critical to the understanding of the contexts from which impediments
emerged. These variables were: communication disabilities, lack of good governance
implementation guidelines, influences of leadership, human resource capability and capacity
within local government, political history, local government customs and culture,
remuneration system and employee welfare, minimum public service standards, and societal
involvement. The degree of common support for these emergent variables is illustrated (0 as
a percentage of respondent support) in Figure 3, below.



12























Discussion

Level of Good Governance Understanding and Implementation

The result of this investigation emphasises a range of factors. Good Governance exists in
regional government Indonesia at different levels depending on many factors. The level of
implementation in Indonesia is varied among different regions, however a common thread is
found in that there is a mismatch between the notion of good governance - on paper and in
reality.

Impeding
Variables to
Good Governance
Bureaucratic
Culture
(13%)
Law
Enforcement
(6%)
Reward and
Punishment
(5%)
Political
History
(11%)
Goodwill
(2%)
Level of
Government
Official Welfare
Leadership
(11%)
(12%)
Level of
Socialisation
(6%)
Human
Resource level
(13%)
Commitment
(5%)
Minimum
Public Service
Standard
High Frequency in
changing rules and
regulations
(5%)
Figure 3 Impeding Variables to Good Governance
(11%)
13
Each region has its own official publications concerning good governance (Gorontalo 2004).
These contain information on good governance definition, how the region’s vision and
mission align with the central government’s notion of good governance, and action plans
within the regional government to implement good governance. However when these
publications are compared to on-site observations and interview responses it is noticeable that
there are many mismatches. High-level government officials interviewed acknowledged that
the publications and good governance innovations within them, are in the planning documents
of regional governments’ working agenda. However all interview participants agreed that
only a small number of the written innovations are implemented.

Analysis of regional government publications on good governance and interviewee’s
responses reveal mixed understanding of what is meant by good governance and the
supporting detail of the term. Differences in understanding can occur in two ways. The first is
that there are differences in understanding between different levels of government officials
within single regional governments: in relation to different ideas on how to implement aspects
of good governance. The second is that understanding between equal levels of government
officials from different regions vary, depending on each region’s current position or level of
good governance implementation. Interestingly, although there is a different understanding of
each aspect, there is a mutual acknowledgement between all government officials that good
governance equates to a clean government, which is identical to transparency and
accountability.

A further differentiating issue with regions is evidence of clear differences between levels of
officer within the governments. Results suggest that: (1) Higher level officials are able to
explain the theory of good governance and current rules and regulations in relation to it; (2)
Middle level officials have an idea of what good governance is and can provide examples of
its implementation within the regional government; and (3) Lower level officials have only
heard and acknowledged its existence.

It seems apparent that the Indonesian government faces an issue common to most of the
global pubic sector, where innovations exist on paper, policies and in publications but lack
degrees of the on-the-ground reality. It is important to acknowledge that realistic timeframes
and implementation plans may not have been available to regional governments. Recognition
14
of this with suitable advocacy and support would provide a framework for enhancing the
balance and understanding of how to realise good governance in their everyday work life.

Impeding Variables to Good Governance Implementation

As detailed in Figure 3 nine main impediment variables to good governance implementation
were identified. Each is discussed below:

o Communication Disabilities: In terms of good governance understanding and
implementation, it is found that communication disability occurs in two different aspects;
unequal opportunity to information exposure and a lack in communication documentation.
Unequal opportunity is evident in each regional government, where although there is an
abundance of good governance seminars or workshops there unequal opportunity for all
government officials to attend. Most of good governance related workshop and seminars
are either held by other regions, academic institutions, non-government organisations, or
international institutions. Unequal opportunity occur in that the higher level government
official will always be the one attending such events, or in the event that this is not
possible the higher level official will appoint other officials to represent the region. It is
this appointment system that is considered of unequal opportunity, as there is heavy
politics and certain favouritism involved in the appointment as opposed to objectivity
based on regional government needs and regional government officials’ capability.

This has led to discrepancy in information received by government officials, which has
caused a very large gap in human resource level within a regional government. Not only
does this hinder equal good governance understanding within the region, it also causes
resentment within lower level government officials which will have an effect on the
execution of tasks and performing working agendas, and ultimately rejecting good
governance implementation not because they do not favour the concept but because they
simply do not know how to implement it, have no motivation in learning a new system,
and are comfortable with the old way of governance. This tension can lead to resentment
and a lack of motivation, thus ultimately impeding the implementation of good
governance.

15
o Lack of Good Governance Implementation Guidelines: Indonesia has its own governance
codes and laws however this is restricted to corporate governance through the creation of
National Code of Corporate Governance in 1999 and Good Corporate Governance
Guidelines in 2001. Good governance is mentioned within these two codes, in particular
in the Good Corporate Governance Guidelines, as well as numerous presidential,
ministerial, and governor decrees (Agung 2005; Kristiansen and Trijono 2005; Mishra
2002; Tambunan 2000). Yet the presence of an exclusive good governance code is yet to
be written. Regional government officials interviewed claim that an official good
governance code does not exist, and governmental (presidential, ministerial, and
governor) decrees are considered to be the base or code for good governance
implementation.

It is recognised that although some countries may have a good governance code that
contains rules, regulations, and clauses; however these codes do not guide governments on
how to implement good governance aspects (Verschoor 2002). Interviews with
government officials on the subject of good governance code have revealed the need for
an implementation guideline for each aspect, based on echelon levels and job description.
Currently there is confusion among all government levels, especially those in the middle
and staff level. Confusion exists in how to implement good governance in their daily work,
how to create a work environment that is in accordance to good governance code; yet is
suitable, comfortable, and will ensure high performance rate.

Therefore it is concluded that there is a need for good governance implementation
guidelines, one that is a step above good governance code. This implementation guideline
should contain ways and examples that each good governance concept can be
implemented on a day to day basis, is adapted to country conditions and needs, and
contains indicators for each aspect as control mechanisms.

o Influence of Leadership: Leadership, or the importance of leadership, was named as one
of the factors that influenced the degree of good governance implementation. This
conclusion was reached based on primary data from interviews as well as the undeniable
link between regional governments in Indonesia identified as an organization and how
organizational behaviour and work performance is strongly affected by leadership factor
(Armstrong and Baron, 1998; Gilley et all, 2000; Politis, 2000; Kotter, 1996; Manz &
16
Sims, 2001; Umemoto et all, 2002). This can also be seen in figure 7, where 11% of
interviewees identified leadership as a strong impeding variable to good governance
implementation.

Analyses of interviews show that traits of a transformational leader (Bycio et all 1995;
Bowel & Avolio 1993; Rahmany 2006) are evident in Gorontalo province and Solok
regency leaders; of which both places have been named as best practice examples of good
governance implementation. Informants from both Gorontalo and Solok claim that it is
their supervisor’s and leader’s trust that has encouraged innovative and honest behaviour
from government official staff members, especially as the opportunity for direct
contribution of opinion and expertise on certain regulation and implementation areas exist.
It is also acknowledged that leaders in both places communicate and makes democratic
work related decisions which resulted in quicker transition in staff adopting
own/individual leadership mentality.

The importance of a strong leader is undisputed in good governance implementation, both
through all echelon levels and different regions. The reason that a strong leader is needed
is due to the strong leadership of Soeharto for 32 years which has shaped the bureaucracy
culture in a unique way (Bubandt 2006; Warren 2005). Indonesian hierarchy and
bureaucracy culture shows that what the leaders decide, the lower levels will execute;
which is also attested by interviewees. Therefore to change this old way into the new way
of good governance there needs to be a strong leader that has a high commitment level,
one that can not be persuaded by the old ways of corruption collusion and nepotism, and
one that has the charisma to be looked upon and followed.

o Human Resource Capability and Capacity within Regional Government: Human resource
capacity and capability has been identified as one of the stronger impediment variable to
good governance. It is identified as a factor that impedes the ability of government
officials to fully understand the concepts of good governance and work out how to
implement it in their daily work. This is shown in figure 7 where 13% of interviewees
believe human resource is an impeding variable.

Middle and high level government officials across regional governments interviewed
claimed they have had experiences in being sent to a technical information session or
17
training in regards to particular policies or general government administration. However
they claimed that although good governance related training or workshops exist the
frequency of it is not as often as needed and topics discussed tend to be repetitive,
concentrating on concepts and theory as opposed to practical application of good
governance aspects. It is also claimed by higher level officials that many delegates from
both their own regional office and other regions do not maximise the learning opportunity
at seminars, in the sense that officials are present to fulfil government duties only and not
to learn new concepts.

Human resource is an impeding variable in another form, relating more to the human
resource management aspects such as size, recruitment, positioning, and career planning.
Currently human resource management policies and practices do not supply regional
government with the human resources they need for improved performance. The first
aspect is size, where it is found from interviews that the regional bureaucracy is
ineffective in performing tasks due to its sheer size. The second aspect is recruitment and
positioning as incorrect recruitment and positioning has caused inefficiency, resentment,
and is hindering understanding of possible good governance implementations.
Interviewees across staff and middle level officials agreed that civil servants are not
allocated according to institutional needs, educational background, or professional
classifications, but more towards political history and the concept of “its not what you
know but who you know”, claiming that this is a long run phenomenon based on both
political history mindset and bureaucracy culture. Thus it is concluded from the interviews
that there is currently mis-positioning within regional government bureaucracy, where
there is a mismatch between need and capability.

Career planning, or meritocracy, is identified as the third aspect that impedes good
governance implementation; as government officials are uncertain of whether they can
climb the bureaucracy and how to climb the bureaucracy ladder. Once again this is caused
by the absence of job descriptions, resulting in the absence of a career planning reference.
This has caused uneasiness in performing tasks as a government official will not know
whether his/her career in the bureaucracy is secure or not.

18
Therefore there needs to be a reform in the human resource management system; one that
will address the need of a bureaucracy size slimming, recruitment and positioning, and
career planning.

o Political History: The fall of Soeharto in May 1998, triggered by the Asian financial crisis,
led the country into a new phase known as the reformation era or era reformasi (McLeod
2000; Curtiss 1999). This era witnessed Indonesia targeting specific areas for governance
reform such as the Constitution, public expenditure, and decentralisation (Soesastro 2000).
The Indonesian transition toward democracy and market economy affects the political
system, the business community, civil society, and in particular governance system
(Takahashi 2006).

Research has shown that embedded norms and practices within an organisational structure
can cause reluctance to change, especially if the change required is of bi-polar opposite to
the embedded norm (Adicondro 2002; Smith 1971; Reynolds 1994). The Soeharto era of
32 years is closely linked with corruption, collusion, and nepotism in terms of governance,
whereas his successors have pushed for governance that is transparent, accountable,
professional, and participative; thus a bi-polar change (Tambunan 2000; WorldBank
2004). This suggests possible reluctance within government bodies to change its normal
procedure.

Analysis of interviews reveals that there is a general agreement between regions on the
effect of political history on good governance implementation as an impeding variable.
Soeharto’s successors have initiated for bureaucratic reform without significant success
due to the possibility of creating further unemployment and political fears (King 2003;
Schwarz 1997). Therefore there has not been a bureaucratic reform in Indonesia,
indicating officials in authority during Soeharto’s New Order are still in its position in the
current era. This further strengthens reluctance in governance changes. Government
officials relate this resistance to insecurity, where familiarity with the old system is now
replaced with uncertainty of a new system.

Furthermore due to decentralisation there is a lack of capacity building in such functions
as well as overlapping and unclear mandates at both central and regional government
level; causing general confusion in authority structure, law reference, and roles of
19
responsibilities of each government official. Further confusion is caused by the fact that
central government is still in a transition stage, attempting to establish a set of good
governance rules and regulations that can be used as a point of reference by regional
government. As a result there is confusion at regional government level as to which
regulation is the point of reference, where regional governments feel that there is not
enough time to understand and implement a set of regulations before a new revised
version of the regulation is released.

A concern also lies in the tense relationship between central and regional governments in
terms of regulation changes frequency and the level of central government control and
guidance. Decentralisation and autonomy dictates that regional governments have full
authority to innovate and develop its own region based on regional conditions and
resource availability, providing they are still within the corridor of central government
regulations. However it is felt by regional governments that due to the political history of
centralisation, central government is still reluctant to delegate regional government full
authority to innovate. Regional government feel there is a regulation constraint from the
central government to innovate, where there have been cases of regional governments
innovating and receiving sanction.

Central government expressed a different opinion on this matter, claiming that due to
Indonesia’s political history it is feared that regional governments are not prepared for
decentralisation responsibilities and there is a need to provide them with strict corridors of
rules and regulations and guidance. It is also feared that if one region is given too much
freedom to innovate the possibilities of development discrepancy between regions will be
too high and will cause tension and unrest instead of further development. Central
government officials’ claim that many regional governments interpret regional autonomy
incorrectly, causing tension between central-regional governments.

In conclusion political history is a strong impediment to good governance as it has
multiple effects on regional government. This is evident through the lack of bureaucratic
reform which induces reluctance in embracing an unknown concept (good governance)
which is of such contrast to the old familiar concept (Soeharto’s ways for the past 32
years). This reluctance is further enhanced by a general confusion in terms of authority
structure, law reference, and roles of each government official as a result of the newly
20
introduced concept of decentralisation - which is a contrast to the old ways of
centralisation.

o Regional Government Customs and Culture: Regional government customs and culture
proved to have a large impact on the lack of good governance implementation, as shown
in figure 7. Evidence exists in both positive and negative effects of culture on the
performance of government in relation to its working agenda. Positive effects include a
family-oriented atmosphere within the regional government and a feeling of responsibility
towards both religious beliefs and the society. Many regional government official claims
that the strong belief in religion has helped officials to defend themselves from well
known bureaucracy culture of corruption, as the act is condemned in the religion and there
is fear of higher consequences than regulated sanctions.

There are also some negative effects of culture on performance and the working agenda
however, relating to the level of disruption religious ceremonies have on performance and
the degree of openness towards change and innovation. Higher level officials in Denpasar
recognised that the amount of religious ceremonies can cause a slight disruption in the
working agenda as there are many religious ceremonies, both regionally recognised and
private occasions. This is not evident in other regions however, which brings to
conclusion that religious culture has a very minimum impact on good governance
implementation, where the level of impact depends on the majority religion of the region.

o Remuneration System and Employee Welfare: Research shows that government
remuneration system is increasingly becoming a concern, especially those in South East
Asian countries as it is considered inefficiently managed and the amount remunerated are
at a lower level than the world government official standards (Rijckeghem and Weder
1997; Woolsey 2002). This is evident within Indonesian government employees and other
public service officials, (Cole 2001; Manning 2000), where low salary levels have caused
a problem in two main areas; dissatisfaction of welfare level among government officials
and reluctance from quality graduates to join the bureaucracy. These two main areas have
impeded good governance implementation in the sense that high levels of dissatisfaction
and low levels of recruitment quality caused an increase in resistance and reluctance in
adapting new systems.

21
Dissatisfaction among government officials in terms of welfare is evident in interviews,
causing government officials to perform without peace of mind and security as they are
constantly trying to think of ways to increase their monthly income. This causes two
problems; the first is that government officials lose partial concentration affecting the
quality of performance, and secondly it creates creative options in manipulating systems
to which they are very familiar with. In terms of good governance impediment, the first
problem impede understanding of good governance aspects as officials are only partially
concentrated on performance and thus ignore innovation; whereas the second problem
impede the implementation stage of good governance as government officials are
reluctant to change to systems which might prevent them from creative options of
manipulation. Government officials feel that there is a strong need to reform the
remuneration system where welfare levels are increased, as this will give peace of mind in
performing government agendas and decrease the need to find creative options. Many
strong opinions expressed that the current salary level shows a lack in gratitude towards
government officials who provides public service, causing further reluctance towards
good governance implementation.

There is a slight difference in regards to government official welfare between regions and
echelon, where although the impact of welfare is recognised it is recognised at different
levels. The difference in official welfare levels between regions can be attributed to
regional autonomy, where each region has different policies in regards to its remuneration
system. In Gorontalo and Solok for example, who have introduced a regional subsidy
there is a lower recognition of welfare problems. Regional subsidy is the result of pooling
of honorariums from projects, which is then dispersed within the regional government
based on echelon level. Therefore there is an increase in government officials’ income.
This initiative was introduced as part of the strategy in introducing good governance, and
as Gorontalo and Solok have been recognised as two best cases in good governance
implementation since the introduction of regional subsidy (Transparency International,
2006), there is a direct correlation between the effectiveness of regional subsidy in
increasing government officials’ welfare and good governance implementation.

The lack of a rewards and punishment system is also a concern within regional
government officials, as it is felt that the absence of such system de-motivates government
officials from discipline, innovation, and compliance to current rules and regulation.
22
Although only a small percentage of interviewees (5%, based on figure 7 on Impeding
Variables to Good Governance Implementation in Percentage Figures) identified lack of
rewards and punishment system as an impediment variable, those who did have claimed
that the absence of such system has a very high impact on good governance
implementation. This is mainly due to the fact that sanction regulations do not exist, and
even if they do exist there is very little chance that it would be enacted and the
government official or regional government will be sanctioned.

Officials expressed that currently there are no incentives to innovate, where there is no
recognition should one suggest a new way of performing tasks or initiated a programme.
It is also expressed that there isn’t a system that will reward officials for overtime work or
a sanction for those who are undisciplined in regards to work such as coming in late,
prolonging days off, and not meeting deadlines. Therefore there is a lack of motivation in
innovating, increasing the discipline level, and complying with rules and regulations. As
famously known in Indonesia; no matter what you do - whether you are smart or not,
disciplined or not, you will still get paid the same salary. Thus interviewees across
regional governments agreed that there is a need for a rewards and punishment system.

o Minimum Public Service Standard: Government is identic to public service, where its
main objective is to provide service to its society in a manner that will improve society
welfare and economic growth (Wray 1999; Rotger 1997; Mariner 1994; Hyde, Boyd and
Daniels 1987). An aspect that has continuously been scrutinised in the government is red
tape, as it impedes efficiency of public administration service (Pandey and Kingsley 2000;
Scott and Pandey 2000; Griffin, Pandey and Bozeman 1995), where in Indonesia itself red
tape is well known within government (Ferrazzi 2005).

Therefore there is a need for a minimum public service standard; one that outlines the
services a government offer, processes within that service, a standard time frame and
documentation necessary for a particular service, and the authorities (or level of
government official) that is responsible for services available (Huddleston 1991; Mitchell
1990; Reynolds 1994; Stanbury and Thompson 1995). As illustrated in figure 7 regional
government authorities found there is an absence of a minimum public service standard,
where 11% of interviewees claimed its absence is an impediment to good governance
implementation.
23

It is found that after 32 years of red tape in public administration services, the demand to
perform good governance and the absence of a national public service standard has caused
confusion and uncertainty within regional governments on how to perform public services
in the “correct” way. Thus this uncertainty has left government officials guessing and still
attempting to find the “right” public administration procedure standard, causing confusion
within the regional government itself. This has a multiple effect within society, where
confusion impedes good governance implementation.

o Society Involvement: Society is identified as an important aspect of good governance, as
the society can play an important role in demanding good governance from its
government and aiding government in good governance implementation through
providing cooperation when new rules and regulations are introduced (Berman 2006;
Edgington 2000; PricewaterhouseCoopers 2001; Cook 1994; Carroll 2001). This is
especially true in Indonesia, where the Indonesian people’s aspiration for reform is strong
and there is a clear support to eradicate authoritarianism that has characterized the country
for decades (Habir 1999; Hamayotsu 2002). The widespread perception of systemic
corruption afflicting public services is another reason for Indonesian people’s continuing
and accelerating reforms, where the society has screamed for a government that is
transparent and accountable – in short good governance (Soesastro 2000; Velayutham
2003).

Interviews with government officials has also confirmed that this change in the society
has caused for a greater push in good governance implementation, as shown in Figure 3
where 17% of interviewees believe that society change has an important role in good
governance implementation. This has caused a change in government of Indonesia, where
the aspects of good governance such as transparency and accountability are taken more
seriously. As a result there have been some changes in the processes of public
administration and other public service which was introduced and socialised through new
decrees and regulations. However society itself has proven to be an impediment factor in
the implementation of these new decrees and regulations because of two factors. The first
is that there is a disparity between government officials and the society in terms of good
governance understanding. Secondly although society asked for changes they are also
24
used to the 32 years of procedures. Therefore old habits of attempting previous procedures
exist, causing an impediment to good governance implementation.

In conclusion societal change has pushed for good governance idea however society
change has impeded the implementation of that new good governance idea. Thus there is a
need for further socialisation of good governance aspects and the form of these aspects in
real life, where implementation of these aspects within procedures needs to be clearly
shown to society. Hence society will no longer be an impediment to good governance
implementation but will stand side by side with regional government as an educated
auditor of good governance practices.

Conclusion

The importance of good governance has become a rising phenomenon in Indonesia after the
1998 Asian Financial Crisis, where the central government issued a commitment to be free of
corruption, collusion, and nepotism. This was followed by a commitment for democracy and a
less centralised government, as subsequently embodied in a decentralisation and regional
autonomy policy introduced in 1999 and fully implemented in 2001. There are two purposes
within this study; to explore the extent of good governance understanding and implementation
at regional government, and identify the impeding variables to good governance
implementation.

Indonesia is made up of 33 provinces with approximately 400 regional/local provinces. A two
by two matrix is utilised to deduce sample regional governments, where the two variables
determinants are distance from J akarta (central government) and the age of regional
government. It is found that the age of regional governments had a more significant impact on
the level of good governance implementation than the distance between regional government
and central government. The age variable of “old” and “new” differentiated the level of
innovative response towards good governance, resulting in “newer” regional governments (i.e
Solok and Gorontalo) to have a higher level of good governance understanding and
implementation than the “older” regional governments (i.e Denpasar and Padang).

There is a disparity in good governance understanding between echelon strata levels within
each regional government, which inturn suggests disparity in perception of good governance
25
implementation level within that region: this seems common to all regional governments
studied. However there is a difference between each regional government in terms of the
level of implementation of good governance. It is found that the “newer” regional
governments such as Solok and Gorontalo are more compliant in implementing good
governance aspects than the “older” regional governments such as Denpasar and Padang. The
difference in good governance implementation is due to decentralisation and regional
autonomy policy. The policy induced a disparity in regional government capacity and
capability, as well as different levels of regional government responses to good governance
concepts. This disparity has an implication towards standardising good governance
understanding and implementation across regional governments, which creates a challenge in
establishing good governance policy and guidelines that is viable for each regional
government.

Further analysis drew the conclusion that political history and bureaucracy culture (or
regional government customs and culture) are the main impediment variables to good
governance implementation. Indonesia’s political history has been very volatile after the 1998
financial crisis, where Indonesia is in its transition period to finding a form of governance that
suits Indonesia’s current condition. Thirty two years of the Soeharto regime have created an
imbedded culture of collusion, corruption, nepotism, and weak rule of law within regional
governments, which has shaped the bureaucratic culture. The introduction of good
governance is a contrasting change to the current bureaucracy culture thus there is resistance
from government officials which makes the transition a challenge.
26
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