LAW & REGIONAL AUTONOMY

1. Definition of Local Government

The 4th (fourth) amendment to the 1945 Constitution clearly states the form and
structure of regional government within the framework of the Republic of Indonesia.
Article 18 paragraph (1) reads: " The Unitary State of the Republic of Indonesia is divided
into provincial areas and the provincial area is divided into regencies and cities, each of
which has a regional government regulated by law ".
Meanwhile, Article 18 paragraph (5) of the 1945 Constitution states that: " Regional
governments are autonomous regions that can carry out government affairs to the widest
extent and have the right to regulate government authorities, except for government
affairs which are determined by law as affairs of the central government ".
The definition of Regional Government in Law no. 32 of 2004 concerning regional
government, article 1 paragraph 2, is as follows: " Regional Government is the
administration of government affairs by the regional government and DPRD according to
the principle of autonomy and co-administration with the principle of autonomy as wide as
possible within the system and principles of the Unitary State of the Republic of Indonesia
as referred to in the 1945 Constitution of the Republic of Indonesia ”.
Seeing the definition of regional government as stated above, what is meant by
regional government here is the implementation of autonomous regions by regional
governments and DPRD according to the principle of decentralization where the elements
of regional government organizers are the Governor, Regent or Mayor and regional
apparatus.

2. Functions of Local Government

The function of local government can be interpreted as a regional apparatus to run,
regulate and organize the course of government. The function of local government
according to Law no. 32 of 2004 are:
a. Local governments regulate and manage their own government affairs according to
the principles of autonomy and co-administration;
b. Carry out the widest possible autonomy, except for government affairs which are
government affairs with the aim of improving public welfare, public services and
regional competitiveness;
c. The regional government in carrying out government affairs has a relationship
between the central government and the regional government. Where the
relationship includes authority, finance, public services, utilization of natural resources,
and other resources.

3. Regional Government Principles

a. Centralization Principle
Etymologically, centralization is all authority centralized in the central government.
The centralized system is that all decisions (decisions/policies) are issued by the
 center, the regions are just waiting for instructions from the center to implement
the policies that have been outlined according to the law. (Khairul Ikhwan Damanik
et al. 2012: 78).

b. Deconcentration Principle
Namely the delegation of power from higher-level state equipment to lower levels
of government in order to facilitate work in carrying out government duties (Yasril
Yunus. 2005: 3). While in Law no. 32 of 2004 concerning Regional Government,
deconcentration is the delegation of government authority by the government to
governors as government representatives and/or to vertical agencies in certain areas.

In addition, Deconcentration is an activity of handing over various affairs from the

central government to other agencies. Then when it has been accepted by other
agencies that have been authorized by the government, when these agencies carry out
their duties, they must comply with all instructions from the central government and
be responsible to them. In Indonesia, the implementation of this Deconcentration is
regulated in Government Regulation of the Republic of Indonesia Number 39 of 2001
which contains the division of territory and authority that must be carried out by the
agencies of the government. In this regulation concerning the territory and authority
of the Governor, it reads: Provinces have a position as an autonomous region as well
as an administrative area, namely the working area of the governor to carry out the
functions of the authority delegated to him. In this regard, the Head of the
Autonomous Region is called the Governor, who also functions as the Head of the
Administrative Region and at the same time as the representative of the Government.
The governor in addition to implementing the principle of decentralization also
implements the principle of deconcentration.

The governor as the head of the province also functions as a representative of the
government in the region, in the sense of bridging and shortening the span of control
for the implementation of the duties and functions of the government, including in the
guidance and supervision of the administration of government affairs in the regency
and city areas. (Regulation of the Government of the Republic of Indonesia No. 7 of
2008) And also Deconcentration is the delegation of administrative authority from the
central government to officials in the regions. It should be underlined, the delegation
of authority here is only limited to administrative authority, for political authority is
still held by the central government. Officials in the area in question are people
appointed by the central government who are then placed in certain areas. In
deconcentration, the authority given is limited to administrative authority, namely the
implementation of public policies, while political policies remain at the center.
Therefore, the official appointed by the central government in carrying out all the tasks
he carries out in an area is not responsible to the community he serves, but is
responsible to the central official who has appointed him or delegated authority to
him.
 Example: from deconcentration is the tax service office. Where the agency remains
in the status of the center but its officials are placed in several regions. ( Fileesa. 2013)
. the administration of the transportation service, the administration of the public
works service.

c. Decentralization Principle
The term deconcentration comes from the Latin "de" meaning loose and
"centrum" meaning center. Decentralization is the opposite of centralization because
the previous word. Based on the origin of the words, decentralization is detachment
from the center. According to Joeniarto, the principle of decentralization is a principle
that intends to give authority from the state government to local governments to
regulate and manage certain affairs as their own household affairs, which is usually
called Autonomy or Autonomy. One example of decentralization is in regional
government agencies, such as the Education Office, which regulates educational
patterns, the Fisheries Service, which regulates the potential for fisheries in an area,
and so on. regional head election, policy making by DPRD.

d. Regional autonomy
In Law no. 32 of 2004, Regional Autonomy is the right, authority and obligation of
autonomous regions to regulate and manage their own government affairs and the
interests of local communities in accordance with statutory regulations.

e. devolution
Namely strengthening or creating levels and units of independent government.
Devolution is a separate concept and design from decentralization. Devolution is a
concept of political democracy that reflects the liberation or relinquishment of
functions by the central government and the creation of new units of government
outside the control of the central authority.

f. Attributes and Delegates

According to Hadjon (1994) states that attribution is the authority attached to
officials or state administrative bodies. Meanwhile, delegation is in terms of the
transfer of an existing authority.

g. Mandate
In terms of mandate, there is no such thing as an acknowledgment of authority.
The basis of authority is only internal, and involves work promises between the
authorities and employees.

h. The principle of co-administration

 It is the duty to participate in carrying out government affairs assigned to the
regional government by the government or regional government above it with the
obligation to be accountable to those who assigned it. (Yasril Yunus 2005: 7-9)

4. Legal Basis for Local Government Administration

In this case, political conditions play a significant role. In addition, all changes to the
constitution of the Republic of Indonesia except the constitution of the United States of
Indonesia (RIS) demand the issuance of laws and regulations governing regional
government. There are at least 10 legal foundations that regulate local government, such
as:
1. UU no. 1 of 1945 concerning Regulations concerning the Position of Regional National
Committees;
2. UU no. 22 of 1948;
3. UU no. 1 of 1957;
4. Presidential Decree No. 6 of 1959;
5. UU no. 18 of 1965;
6. UU no. 5 of 1974;
7. UU no. 22 of 1999;
8. UU no. 32 of 2004;
9. UU no. 8 of 2005 concerning amendments to Law no. 32 of 2004;
10. UU no. 12 of 2008 concerning the second amendment to Law no. 32 of 2004.

5. Regional Government Structure and Authorities

The legal basis above is used as a source of guidance for the formation of local
government in Indonesia. Each Act is declared to have a different government structure.
Similar to the central government, regional governments also have the authority to
manage state power in their regions in order to realize state goals. This is regulated in the
legislation. Here's the explanation.

a. RI Law No. 1 Year 1945

Regional government structure:
1) The Regional People's Representative Body is the embodiment of the Regional
National Committee;
2) Regional executive bodies elected by the Indonesian National Committee together
with and led by regional heads in carrying out day-to-day governance;
3) The regional head is the head of the regional legislative body.

Authority :
1) Make your own household regulations (regional regulations) as long as they do not
conflict with central government regulations;
 2) Regional heads carry out central government affairs in the regions, except for
those that have been carried out by departmental offices in the regions.

b. RI Law No. 22 Year 1948

Regional government structure:
1) The Regional People's Representative Body is the embodiment of the Regional
National Committee;
2) Regional executive bodies elected by the Indonesian National Committee together
with and led by regional heads in carrying out day-to-day governance;
3) The regional head is the head of the regional legislative body.

Authority:
1) Make your own household regulations (regional regulations) as long as they do not
conflict with central government regulations;
2) Regional heads carry out central government affairs in the regions, except for
those that have been carried out by departmental offices in the regions;

4. RI Law No. 1 Year 1957

Regional government structure:
1) Regional People's Representative Council (DPRD);
2) Regional Representative Council (DPD);
3) Elected by and from DPRD members on the basis of balanced representation from
political parties and chaired by the regional head (ex-officio);
4) Regional heads are directly elected by the people;
5) The DPD and regional heads are collegially responsible to the DPRD.

Authority:
1) Regulate and manage all household affairs in the form of a regional regulation,
except for matters which are delegated by law to other authorities;
2) Regulate all affairs that have not been regulated by the Central Government in the
upper-level regions.

5. Presidential Decree No. 6 of 1959

The composition of the local government consists of 2 institutions, namely:
Regional Head, including:
1) Governors are appointed and dismissed by the President of the regent/mayor by
the Minister of Home Affairs and Regional Autonomy;
2) The appointment of regional heads comes from candidates who are proposed
from the DPRD concerned, and it may be possible from outside the DPRD;
3) The regional head becomes a tool of the Central Government as well as the
Government ;
 4) The Regional Head in carrying out his duties is assisted by a Daily Government
Agency appointed from the candidates proposed from the DPRD (both candidates
from DPRD members and from outside DPRD members);
The Gotong Royong Regional People's Representative Council (DPRD-GR), includes:
1) Consists of representatives of political groups and working groups;
2) DPRD-GR members are proposed by regional heads to their respective
superior agencies (political groups and work groups).
5) The ex-officio regional head is the head of the DPRD-GR (not a member).

Authority:
1) Organizing regional/autonomous household affairs in which the regional head acts
as the executive holder of the implementation of the said affairs;
2) Organizing coordination between Central Government agencies in the regions, and
between these agencies and the government;
3) Carry out other authorities that lie within the affairs of the Central Government;

6. UU no. 18 Year 1965

Regional Government Structure:
1) Regional People's Representative Council (DPRD);
2) DPRD is responsible to the Regional Government;
3) Regional Government is DPRD and regional head;
4) The composition of the membership is 40-75 people for provinces (Level I regions),
25-40 people for districts/municipalities (Level II regions), and 15-25 people for
sub-districts/municipalities (Level III regions);
5) The regional head, as a tool of the Central Government and Regional Government,
which in carrying out the daily administration is assisted by the Daily Government
Agency (BPH).

Authority:
1) Regions have the authority in matters of autonomy and assistance tasks whose
implementation is accounted for by the regional head to the DPRD.

7. RI Law No. 5 of 1974

The regional government structure includes:
1) Regional People's Representative Council (DPRD);
2) Regional Head, including:
1) The Head of the Level I Region because of his position is the head of the
province called the governor;
2) The Head of Level II Region because of his position is the head of the
regency/municipality area called the regent/mayor.

Authority :
 1) Local governments have the right, authority, and obligation to regulate and
manage their own household.

8. UU no. 22 of 1999
Regional government structure:
1) Provincial head (governor), district head (regent), city regional head (mayor), sub-
district head, and lurah/village head;
2) In the regions, DPRDs (as regional legislative bodies) and regional governments (as
regional executive bodies) are formed;
3) The regional government consists of regional heads and regional apparatuses;
4) DPRD has an equal position and is a partner of the government;
5) In carrying out their duties, the governor is responsible to the provincial DPRD,
regents and mayors are responsible to the regency/city DPRD.

Authority:
1) The authority to carry out all government affairs except in the fields of foreign
policy, defense and security, justice, monetary and fiscal, religion;
2) The mandatory regional authorities are in the fields of public works, health,
education and culture, agriculture, transportation, industry and trade, investment,
environment, land, cooperatives, and manpower;
3) Provincial authority is an autonomous authority which includes authority in the
field of government that is cross-district and city, authority in certain other areas
of government, and authority that is not or cannot be carried out by regencies and
cities.

9. UU no. 32 of 2004, Law no. 8 of 2005, and Law no. 12 Year 2008
Regional government structure:
1) The provincial government consists of the provincial government and the
provincial DPRD;
2) Regency/city regional government consists of regency/city regional government
and regency/city DPRD;
3) The regional government as referred to above consists of regional heads and
regional apparatuses;
4) DPRD is a regional people's representative institution and is domiciled as an
element of regional government administration, which has the functions of
legislation, budgeting, and supervision;

Authority:
1) Regional governments exercise the widest possible autonomy to regulate and
manage their own government affairs based on the principle of autonomy and
assistance tasks;
2) Autonomous affairs of regional governments carry out government affairs under
their authority, except for government affairs which are determined to be
 Government affairs, namely foreign policy; defense and security; justice; national
monetary and fiscal l; and religion;
3) Co-administration tasks in carrying out foreign policy affairs, defense and security,
justice, national monetary and fiscal affairs, and religion.

6. Legal Basis of Local Government

Article 18 of the 1945 Constitution regulates the division of the territory of the Unitary
State of the Republic of Indonesia as follows: "The division of the Indonesian region into
large and small regions, with the form and structure of the government stipulated by law,
by taking into account and remembering the basic requirements in the state government
system, and the rights/rights of proposals. proposals in special areas."

a. RIS Konstitusi Constitutional Period

In Article 51 of the RIS Constitution
1) The administration of the government regarding the items listed in the annex to
the constitution is charged solely to the RIS;
2) The list of attachments for the administration of government as referred to in
paragraph (1) is amended, either at the request of the joint regions or at the
initiative of the federal government, after obtaining approval/conformity with the
joint regions, according to the program stipulated by law. federal laws;
3) In the constitution, local government arrangements are not included in the affairs
of the federal government, but are the affairs of the respective states.

Article 47 of the RIS Constitution

"State administrative regulations of states must guarantee the right to the life of the
people themselves to various people's associations within their regional environment
and must also provide the possibility to realize this in a uniform way the rules regarding
the arrangement in a democratic manner in autonomous regions."

Article 65
"Regulating the position of the autonomous regions is included in the tasks and powers
of the respective subregions with the understanding that the regulation is carried out
by a contract concluded between the respective regions and autonomous regions and
that in that contract the special position of the autonomous regions will be taken into
account and that None of the existing autonomous regions can be abolished or reduced
against their will, except for the public interest and after the federal law which states
that the public interest demands the abolition or exclusion, authorizes the relevant
regional government for it.

b. 1950s Constitution Period

Regarding regional government, it is regulated in articles 131, 132, and 133.
 Article 131
1) The division of Indonesia's regions into large and small regions that have the right
to manage their own households, with the form of government structure
stipulated by law, taking into account and remembering the basis of deliberation
and the basis of representation in the state government system;
2) Regional heads are given the widest possible autonomy to manage their own
household;
3) With the law, the implementation of tasks can be delegated to regions that are not
included in their household.

Article 132
1) The position of self-governing blood is regulated by law with the stipulation that in
the form of the structure of government, it must also remember article 131, the
basics of deliberation and representation in the state government system.
2) ...
3) ...

Article 133
"While waiting for the provisions as referred to in article 132, the existing regulations
will remain in effect, with the understanding that the old officials of the sub-regions
mentioned in this regulation are replaced."

c. Law No. 22 of 1948

The territory of the Republic of Indonesia is composed of three levels:
1) Province;
2) Regency/City (Big City);
3) Village (small town).
According to the functional jurisdiction of the NRI government, it consists of:
1) The national territory is the authority of the central government;
2) DT I province area under the authority of the provincial government;
3) DT II in the regency/municipal area under the authority of the regency/city
government;
4) DT III is a village area which is a village government.
The four regions are called autonomous/swatantra which organize their own
government.

d. Meaning And Terminology

Article 18 A of the 1945 Constitution, mandates that the relationship of authority
between the central government and provincial, district and city governments or
between provinces, regencies and cities is regulated by law with due observance of the
specificity and diversity of the regions. Article 18 B of the 1945 Constitution of the
Republic of Indonesia recognizes and respects regional government units that are
special or special in nature regulated by law.
 The aim of regional governments is to accelerate the realization of community
welfare through improving services, empowerment, and community participation, as
well as increasing regional competitiveness by taking into account the principles of
democracy, equity, justice, privilege, and the specificity of a region within the Unitary
State of the Republic of Indonesia.
Improving services in the fields of government, society, and development is
fundamental to encourage/support the dynamics of interaction in community life,
such as in terms of recommendations, permits, dispensations, business rights,
residence certificates and others.

Empowerment and community participation, community participation is more

prominent which is demanded by the creativity of the community, both
entrepreneurs, planners, service entrepreneurs, developers. In drafting the concept of
a regional development strategy where the government only plays a role in facilitating
and mediating.

Increasing regional competitiveness, aims to increase regional competitiveness, in

order to achieve local advantages and if fostered which in turn can become a national
competitive advantage. With this legal politics, the important thing in the
administration of autonomous regional government is the granting of the widest
possible authority to regions accompanied by the granting of certain rights and
obligations. The government system in Indonesia consists of:
1) The central government is the government;
2) Regional governments, such as provincial governments and district/city
governments;
3) Village government.

The Relationship Between Political Policies, Oversight Mechanisms, And

Responsibilities of Local Governments

Monitoring
Law Political Policy Responsibilities
Mechanism

Authorized official
No. 5 of 1974 Bureaucratic uniform To the president
approval

Democracy,
Responsibilities to
No. 22 year 1999 transparency and It's only reporting
DPRD
accountability

Equality checks and

No. 32 year 2004 Evaluation system Just a report
balances
Relationship Between Political Policy, Principles of Autonomy, and Principles of Government
Administration

law Political Policy Autonomy Principle Principles of Governance

Decentralization,
No. 5 of Bureaucratic
Real and responsible deconcentration and
1974 uniform
assistance

Democracy,
No. 22 year Extensive, real and
transparency and The same
1999 responsible
accountability

No. 32 year Equality, checks Broadly, real and

The same
2004 and balances responsible

Regional Government (Regional Government) specifically on the principles of local

government only. According to Law No. 5 of 1974, regional government is a government unit
under the central government which has the right to regulate and manage government affairs
as its own household affairs. The operational definition of autonomy includes two
components, namely:
a. The component determines and implements policies as a component that refers to the
concept of government contained in the sense of autonomy.
b. Independence as a component that refers to the words by, from, and for the people.
1) The first component has the following characteristics: The existence of the authority to
determine and implement certain policies obtained from the central government.
2) The characteristics of the second component are; Areas and people who are the target
of authority ( domain of power ) and areas (gatra) of life that are covered by authority (
scope of power ) are determined by the central government through legislation.
Both the domain of power and the scope of power can be changed so that it affects
the weight of power .

7. Government And Government

In Law No. 32/2004, the word government refers to the central government, namely
the president of the Republic of Indonesia and his ministers. Is the subject of the organizer.
Local government refers to governors, regents/mayors with their regional apparatus.
Regional government is the administration of government affairs by the regional
government and DPRD.

a. In article 18 of the 1945 Constitution

Government is meant as a subject in a broad sense (executive and legislative
government). The government has a wider scope of understanding than the
government, because it includes legislative functions, DPRD also includes elements of
 regional government administrators. Governance includes the understanding of the
process of administering government, as well as being the subject of government
administration.

b. In chapter III of the 1945 Constitution concerning the powers of state government,
only the executive branch includes:
Governance means processes, mechanisms or efforts to administer government. In the
context of local government (local government), according to Article 18 of the 45
Constitution, government means the subject of government which includes the
executive and legislature as bearers of rights and obligations as government
administrators in a broad sense.

c. In Law No. 32 of 2004

Governance, is the administration of government affairs by the regional government
and DPRD according to the principle of autonomy to the greatest extent within the
system and principles of the Unitary State of the Republic of Indonesia as referred to in
the 1945 Constitution.

In the concept of state government, the concept of government and government only
includes two meanings, namely as a subject and as a process:
 Government as a structure;
 Government as the process, activity or substance of the administration of state
government.
In the concept of regional government, the government contains the following meanings:
 As a government administrator;
 The governance process.
Term of Regional Government
1) administrative local government;
2) Autonomous regional government.

The administrative regional government is formed because the central government

cannot carry out all state government affairs from the center. Thus he is the representative
of the center in the area that is subject to the center. (served as administrative organizer
only). Administrative regional government applies the principle of deconcentration, while
in autonomous regions the principle of decentralization applies. An autonomous region is a
legal community unit that has territorial boundaries, which is authorized to regulate and
manage government affairs and the interests of the local community according to its own
initiative based on aspirations in the system of the Unitary State of the Republic of
Indonesia. So on the basis of this definition there are elements of an autonomous region,
namely:
a. Elements of territorial boundaries;
b. Elements of government (consisting of local government and DPRD);
c. Elements of society.
 The principle of regional autonomy by using the principle of autonomy as broadly as
possible means that regions are given the authority to make blood policies to provide
services, increase participation, initiatives and community empowerment aimed at
improving people's welfare. The principle of real and responsible autonomy:
1) In fact, to handle government affairs, it is carried out based on the duties of authority,
and obligations that actually already exist, and have the potential to grow, live and
develop in accordance with the potential and uniqueness of the region;
2) Responsible "autonomy which in its implementation must be in line with the
objectives and purposes of granting autonomy, which is basically to empower the
region, including improving the welfare of the people, which is a national goal.
The powers of the local government are:
1) The field of legislation such as regional regulations and regional head regulations;
2) The issue of financial balance between the government and regional governments
with the principles of fair, proportional, democratic, transparent and responsible.

7. Regional Household System

The regional household system is an order concerned with ways of dividing the
authority, duties, and responsibilities of regulating and managing government affairs
between the center and the regions. or recognition or left as regional household affairs.
Based on the above understanding, several regional household systems are obtained,
namely the formal household system, the material household system, and the real or real
household system.

a. Formal Household System

In the formal household system, the division of authority, duties, and responsibilities
between the center and the regions to regulate and administer certain government
affairs is not specified in detail. The formal household system starts from the principle
that there is no difference in the nature of affairs held by the central government and
those held by the regions. The division of authority, duties, and responsibilities to
regulate and administer a government affair is solely based on the belief that a
government affair will be better and more successful if it is managed and regulated by
a particular government unit, and vice versa. Consideration of usability (and usability)
is a point of concern to determine the division of authority, duties, and responsibilities.
Theoretically, the formal household system gives the regions the widest possible
flexibility to regulate and manage government affairs and make these matters a
regional government affair.
In reality, the formal household system is not always an incentive for regions to
manage and regulate government affairs. There are several difficulties in enhancing
the usability of the formal household system:
1) The level of efficiency and effectiveness of the formal household system is highly
dependent on the creativity and activities of the region;
2) Another obstacle is the regional financial aspect;
 3) No less important is the technical problem.

From the above study, there are several considerations for using the formal household
system:
1) There is an assumption that there is no difference in the nature of government
affairs;
2) The formal household system is a means that provides wider opportunities for
regions to expand their authority, duties, and responsibilities in government
affairs;
3) The formal household system is one way to maintain the historical and cultural
heritage of the original state administration and government by continuing to
allow the regions to regulate and manage traditional government affairs, including
their household affairs.

b. Material Household System

Doubts and uncertainties in the formal household system can be overcome by
(with) the material household system. In the material household system there is a
detailed division of authority, duties and responsibilities between the center and the
regions. The material household system starts with the idea that there are
fundamental differences between central and local government affairs. Regions are
considered to have their own scope of government affairs which is materially different
from government affairs which are regulated and managed by the center.
Furthermore, this system is based on the idea that government affairs can be sorted
out in various spheres of government units.

The material household system actually stems from the wrong premise, namely
the assumption that government affairs may be detailed and segregated. Indeed, in
certain cases it appears the nature or character of a government affair, for example,
which concerns the interests and order of the whole country, such as matters of
defense and security, foreign affairs, certain monetary affairs. But quite a lot of
government affairs that show dual nature or character , for example government
affairs in the agricultural sector. It is not easy to determine that nursery affairs are
included in regional households, while post-harvest affairs are included in central
affairs.

Furthermore, the regional household system does not provide an opportunity to

quickly adapt a government affair to the changes that occur. A government affair that
was originally considered to be something local or local in nature, because
developments can turn into a national affair, so it needs to be regulated and managed
nationally. For example, the issue of waste. At this time in terms of waste includes
industrial waste, nuclear waste, and so on. In addition, due to its nature, the new
waste requires handling by using various technologies and personnel that may not be
 available or cannot be provided by the region, so it must be changed no longer as part
of regional household affairs but into household affairs. national ladder (country)

c. Real Household System (Real)

This household system is also known as real autonomy (system) or real autonomy.
It is called "real", because the content of regional households is based on real
conditions and factors. Tresna said this system took a middle ground between the
formal household system and the material household system. Looking at what Tresna
said, it is impressed that the methods contained in the formal household system are
principles that take precedence over the methods according to the material household
system.

As stated earlier, the authority that is formulated in general in the formal

household system provides the basis for realizing the principles of freedom and
independence in the household. On the other hand, objections to the material
household system have also been described. The material household system will
stimulate regional dissatisfaction and spanning relations between the center and the
regions.

Thus, the formal household system contains more solid foundations for realizing
household principles and goals than the material household system. Only with a
formal household system accompanied by elements of a material household system
can household goals, especially autonomy, be realized naturally.

Aspects of the material household in the real household system turned out to
cause various criticisms. The existence of affairs that were handed over at the time of
the formation of the region, caused the household system to be inconsistent.
According to Boedisoesetyo, the aforementioned methods of determining household
affairs have resulted in a real household system without a system.
d. Elements of D in Assistance Tasks
The elements contained in the co-administration task can be broken down into
criteria for the field of co-administration from the Central Government to the Regions
and Villages, the legal basis for the assignment and the cost of co-administration from
the central government to the regions and villages, reports on accountability for the
implementation of co-administration tasks to those assigned and the consequences.

The purpose of holding the principle of co-administration in development in the

regions is that the limited reach of the central government apparatus can be overcome
through the authority of the regional apparatus. Regions have the right to determine
Regional policies in carrying out Co-administration Tasks. Regional policies are only
related to regulations regarding the implementation of Co-Administration Tasks in
their respective regions.
 The budget for carrying out the Co-Administration is provided by the person in
charge. The budget document for carrying out the Co-Administration is submitted by
the regional head receiving the Co-Administration to the Regional People's
Representative Council (DPRD) together with the submission of the draft Regional
Budget of Revenue and Expenditure of the Regional Budget in a separate document.
The Co-Administration Budget implementation report is submitted by the regional
head receiving the Co-Administration to the DPRD together with the submission of the
Regional Government financial report in a separate document.

8. History of Regional Autonomy in Indonesia

a. Colonial Legacy
In 1903, the colonial government issued staatsblaad No. 329 which provides an
opportunity for the formation of a government unit that has its own finances. Then
this staatblaad is strengthened with Staatblaad No. 137/1905 and S. 181/1905. In
1922, the colonial government issued a law S. 216/1922. In this provision a number of
provinces, regentschap, stadsgemeente, and groepmeneenschap were formed which
all replaced the locale ressort. In addition, there is a government which is the original
alliance of the local community.

One by one the royal government was bound by the colonial government with a
number of political contracts (long contracts and short contracts). Thus, during the
colonial period, citizens were faced with two government administrations.

b. Japanese Occupation
When the Cold War II spread, Japan invaded all of East Asia from North Korea to
Mainland China, to the islands of Java and Sumatra. This country succeeded in
conquering British colonial rule in Burma and Malaya, the US in the Philippines, and
the Netherlands in the Dutch East Indies Region. The short Japanese rule of about
three and a half years succeeded in making quite fundamental changes in the
administration of regional government in the former Dutch East Indies. The military
authorities in Java issued Law (Osamu Seire) No. 27/1942 which regulates the
administration of regional government. During the Japanese era, local governments
had almost no authority. The mention of autonomous regions for regional
governments at that time was misleading.

c. Independence Day
1) Period of Law Number 1 Year 1945
Law Number 1 of 1945 focuses on the principle of deconcentration, regulating the
formation of KND (Regional National Committee) in residencies, regencies,
autonomous cities, and areas deemed necessary by the Minister of Home Affairs.
The division of the region consists of two kinds, each of which is divided into three
levels, namely:
 Province;
  Regency/Big City;
 Village/Small Town.
Law No. 1 of 1945 only regulates matters that are emergency and immediate. The
body also only consists of 6 articles and does not have an explanation.

d. Period of Law No. 22 of 1948

The second regulation that regulates regional autonomy in Indonesia is Law No. 22 of
1948 which was enacted and entered into force on July 10, 1948. The law states that
the regions of the Republic of Indonesia are composed of three levels, namely:
 Province;
 Big regencies/cities;
 Small village/town;
 Who has the right to take care of and manage their own household.

e. Period of Law Number 1 Year 1957

According to Law no. 1 of 1957, the autonomous region was replaced with the term
autonomous region. The territory of the Republic of Indonesia is divided into large and
small regions that have the right to take care of their own household, in three levels,
namely:
 Level I autonomous regions, including the municipality of Greater Jakarta;
 Level II autonomous regions;
 Level III autonomous regions;
UU no. 1 of 1957 emphasizes the implementation of regional autonomy as widely
as possible in accordance with Article 31 paragraph (1) of the 1950 Constitution.

f. Period of Law Number 18 of 1965

According to this law, the territory of the state is divided into three levels, namely:
 Province (level I);
 Regency (level II);
 District (level III).
As an instrument of the central government, the regional head is tasked with
holding the leadership of the police political policy in his area, coordinating the inter-
departmental coordination of the central government in the region, supervising, and
carrying out other tasks assigned to him by the central government. As a regional
government tool, the regional head has the task of leading the implementation of the
executive power of the regional government, signing the regulations and decisions set
by the DPRD, and representing the region inside and outside the court.

g. Period of Law Number 5 of 1974

This law states that the regions have the right to regulate, and regulate their
households based on the principle of decentralization. This law recognizes two
regional levels, namely the level I region and the level II region. The regions of the
country are divided according to their level into:
  Province/capital of the country;
 Regency/municipality;
 Subdistrict.
The emphasis of regional autonomy lies in level II regions because level II regions
are directly related to the community so that they better understand and fulfill
people's aspirations. The principle of autonomy in this law is real and responsible
autonomy.

h. Period of Law Numbers 22 and 25 of 1999

In principle, this law regulates the administration of regional government which
prioritizes decentralization. Main thoughts in the preparation of Law no. 22 of 1999
are as follows:
1) The Indonesian state administration system is obliged to implement the principle
of division of authority based on the principle of decentralization within the
framework of the Unitary State of the Republic of Indonesia;
2) Regions formed based on the principles of decentralization and deconcentration
are provincial regions, while regions formed on the basis of decentralization are
regencies and municipalities;
3) Regions outside the province are divided into autonomous regions;
4) The sub-district is a district apparatus.
In general, Law no. 22 of 1999 brought much progress to the region and increased
community welfare. However, according to the development of the wishes of the local
community, it is also felt that this Law has not fulfilled the sense of justice and welfare
for the community.

i. Period of Law Number 32 Year 2004

On October 15, Law no. 32 of 2004 concerning Regional Government which in
Article 239 expressly states that with the enactment of this Law, Law no. 22 of 1999
concerning Regional Government is declared no longer valid. This new law clarifies and
reinforces the hierarchical relationship between districts and provinces, between
provinces and the central government based on the principles of administrative unity
and territorial integrity. The central government has the right to coordinate, supervise,
and evaluate the government under it, as well as the provinces to districts/cities. In
addition, the partnership and parallel relations between regional heads and DPRD are
increasingly being emphasized and clarified.

10. Development of the Regulation of the Principles of Assistance in the Implementation of

Local Government
1. Arrangement of Co-administration Tasks Based on Law no. 1 of 1945;
2. Arrangement of Co-administration Tasks Based on Law no. 22 of 1948;
3. Arrangement of Co-administration Tasks Based on the NIT Law No. 44 of 1950;
4. Co-administration Task Arrangement Based on Presidential Decree Law no. 6 of 1959;
5. Arrangement of Co-administration Tasks Based on Law no. 18 of 1965;
 6. Arrangement of Co-administration Tasks Based on Law no. 5 of 1974;
7. Arrangement of Co-administration Tasks Based on Law no. 22 of 1999;
8. Arrangement of Co-administration Tasks Based on Law no. 32 of 2004.

10. Regional Apparatus Organization

For the implementation of government administration as well as government
programs and activities, the Governor and the Regent/Mayor are assisted by regional
officials. Regional Apparatus or Regional Apparatus Organization (OPD) is an organization
or institution in the Regional Government that is responsible to the Regional Head in the
context of administering regional government. Regional Apparatuses are formed by each
Region based on consideration of the characteristics, potential and needs of the Region.

The main basis for the preparation of regional apparatus organizations in the form of
an organization is the existence of government affairs which are the authority of the
regions, which consist of mandatory affairs and optional affairs , but this does not mean
that every handling of government affairs must be formed into a separate organization.
The formation of regional apparatuses is solely based on racial considerations to carry out
government affairs that are under regional authority effectively and efficiently. Mandatory
and optional tasks can be seen here.

Regional Apparatus Organization Arrangement as well as the preparation of the

organizational structure of the Regional Apparatus Work Unit ( SKPD ) is currently carried
out based on the regulatory framework as well as the objective integrity and strategic
environmental conditions of the region. The regulatory framework in question is
Government Regulation Number 41 of 2007 as an amendment to the previous Government
Regulation. In addition to PP No. 41/2007, the institutional arrangement of regional
apparatus also pays attention to the laws and regulations that have relevance to the
organizational restructuring program . Based on Law 23 of 2014 concerning Regional
Government Provincial and regency/municipal regional apparatuses are stipulated through
Regional Regulations in the following form:
a. Provincial Apparatus : Regional Secretariat, DPRD Secretariat, Inspectorate, Service
and Agency;
b. Regency /City Regional Apparatus: Regional Secretariat, DPRD Secretariat,
Inspectorate, Service and Agency.

The formation of regional apparatus organizations in the form of Dinas or Agency is

classified based on Type A (large workload), Type B (moderate workload) and Type C (small
workload). Determination of the workload for the Service is based on the population, area,
size of each Government Affairs under the authority of the Region, and the financial
capacity of the Region for Mandatory Government Affairs and based on potential,
projected employment absorption, and land use for Preferred Government Affairs.
Meanwhile, the amount of workload on the Agency is based on the total population, area,
regional financial capacity, and scope of work. The name/nomenclature of the Office and
the Agency is adjusted to the pre-determined groupings and classifications. The collection
of affairs that are accommodated in the form of a Service consists of:
1) education, youth and sports;
2) health;
 3) social, labor and transmigration fields;
4) the field of transportation, communication and informatics;
5) etc.
The collection of affairs that are accommodated in the form of bodies, offices,
inspectorates, and hospitals, consists of:
1) field of development planning and statistics;
2) research and development field;
3) the field of national unity, politics and community protection;
4) environmental sector;
5) food security sector;
6) etc.

With the new President and Vice President and with the stipulation of the new
Ministry's Numenclature , the Ministry of Home Affairs will conduct discussions to make
changes to PP No. 41 of 2007 concerning the Organization of Regional Apparatus so that it is
possible to change the guidelines and the organization of affairs. In addition to the above
regional apparatus, the Governor/Regent/Mayor may form an integrated service unit to
improve and integrate public services in the field of cross-sectoral licensing. The integrated
service unit is a combination of elements of the regional apparatus that carries out the
licensing function. The integrated service unit will be discussed in the next post.

11. Central and Regional Financial Balance

The financial balance between the central and local governments according to the
General Provisions of Law no. 33 Th. 2004 concerning Financial Balance between the
Central and Regional Governments is a financial distribution system that is fair,
proportional, democratic, transparent, and accountable in the framework of funding the
implementation of decentralization, taking into account the potential, conditions, and
needs of the regions. , general allocation funds, and special allocation funds. The amount
of balancing funds is determined every fiscal year in the APBN (Law No. 33 of 2004
concerning Financial Balance between the Central and Regional Governments Article 10
concerning Balancing Funds: 273) .

a. Profit Sharing Fund

Revenue Sharing Funds are funds sourced from APBN revenues which are
distributed to regions based on certain percentage figures. Revenue-sharing funds are
sourced from taxes and natural resources. Revenue-sharing funds from taxes include
land and building taxes, receipts from fees for the acquisition of land and building
rights, and income taxes. And profit sharing funds from natural resources come from
forestry, general mining, fisheries, petroleum mining, natural gas mining and
geothermal mining (UU No. 33 Th. 53 2004 concerning Financial Balance between
Central and Regional Government Article 11 concerning Funds for Sharing Result: 273).
b. General Allocation Fund (DAU)
The DAU aims at equitable distribution of financial capacity between regions,
which is intended to reduce the gap in capacity between regions through the
application of a formula that takes into account the needs and potential of the region.
The DAU of a region is determined by the size of the fiscal gap of a region, which is the
difference between regional needs and regional potential. DAU allocations for regions
with large fiscal potential but small fiscal needs will receive relatively small DAU
allocations. On the other hand, regions with small fiscal potential but large fiscal needs
will receive relatively large DAU allocations. Implicitly, this principle emphasizes the
function of the DAU as a factor in equitable distribution of fiscal capacity (Explanation
of Law No. 33 of 2004 concerning Financial Balance between Central and Regional
Governments: 324).

The DAU for the province and the district is set at 10% and 90%, respectively, of
the DAU. The DAU for each province and district is calculated based on the
multiplication of the total DAU for all regions, with the weight of the area concerned
divided by the total weight of each region throughout Indonesia (Bratakusumah and
Solihin, 2001: 183).

c. Special Allocation Fund (DAK)

DAK is intended to help finance special activities in certain regions which are
regional affairs and in accordance with national priorities, in particular to finance the
needs for basic public service facilities and infrastructure that have not yet reached
certain standards or to encourage the acceleration of regional development
(Explanation of Law No. 33 Th. 2004 concerning Financial Balance between Central and
Regional Governments: 324).
Funds originating from the APBN, which are allocated to regions to help finance certain
needs:
Revenue Sharing Fund, namely the distribution of revenue from,
1. natural resources from, oil, natural gas, general mining, forestry, and fisheries;
2. Tax revenue ( tax sharing ) from individual tax (PPh), Land and Building Tax (PBB),
and land and building rights acquisition fees (BPHTB).

The regulation of financial relations between the central and regional

governments, which are implemented through the central and regional government
financial balance funds (PKPD), are:
1. In the context of empowering the community and local government so that they
are not left behind in the field of development;
2. To intensify the activities and creativity of the local community's economy based
on the potential of each region. The local government and DPRD act as facilitators
in economic development carried out by their people. This means that in the era
of regional autonomy, people must play an active role in planning and
implementing regional development;
 3. Support the realization of good governance by local governments through
transparent financial balances;
4. To organize regional autonomy in a democratic, effective, and efficient manner, it
is necessary to have professional human resources with good morality. Therefore,
fiscal decentralization carried out through financial balance will increase the ability
of regions to develop and provide services to local communities, not just the
distribution of funds, then "decentralization of KKN" occurs from the center to the
regions.

Sectors or activities that cannot be financed from DAK are administrative funds,
costs for preparing physical projects, research costs, training costs, travel costs for
regional employees and other similar general costs (Bratakusumah and Solihin, 2001:
188). The amount of DAK is determined every year in the APBN. While for the
Emergency Fund, the Government allocates it sourced from the APBN for urgent needs
caused by national disasters and/or extraordinary events that cannot be handled by
the Regions using APBD sources. All regional revenues and expenditures in the
relevant fiscal year must be included in the APBD.

12. Techniques and Procedures for Preparation of Performance-based Regency City Budget
The process of planning and preparing the APBD (Regional Revenue and Expenditure
Budget) refers to PP Number 58 of 2005 concerning Regional Financial Management, in
outline as follows:
a. Preparation of local government work plans;
b. Preparation of draft general policies of the APBD as well as priorities and temporary
budget ceilings;
c. Preparation of SKPD work plans and budgets;
d. Preparation of the draft regional budget (APBD);
e. Determination of the budget.

1) Local Government Work Plan

The preparation of the APBD is based on a predetermined plan regarding the
programs and activities to be implemented. When viewed from a time perspective,
planning at the local government level is divided into three categories, namely: (1)
Regional Long Term Plans (RPJPD) are regional government plans for a period of 20
years; (2) Regional Medium Term Plan (RPJMD) is a regional government plan for a
period of 5 years; (3) The Regional Government Work Plan (RKPD) is a regional annual
plan. Meanwhile, the planning at the SKPD level consists of the SKPD Strategic Plan
(Renstra) which is a plan for a 5-year period, and the SKPD Work Plan (Renja) is the
SKPD's annual work plan. The planning process at the satker and local government
levels can be described as follows:
 SKPD prepares strategic plans (Renstra-SKPD) which contain vision, mission,
objectives, strategies, policies, programs and development activities that are
indicative in accordance with their respective duties and functions;
  The preparation of the Renstra-SKPD is guided by the regional medium-term
development plan (RPJMD). The RPJMD contains the direction of regional financial
policies, regional development strategies, general policies, and SKPD programs,
cross SKPD, and regional programs;
 The local government prepares a local government work plan (RKPD) which is an
elaboration of the RPJMD using materials from the SKPD Renja for a period of one
year referring to the Government Renja;
 The SKPD Renja is an elaboration of the SKPD Renstra which is prepared based on
the evaluation of the achievement of the implementation of programs and
activities in previous years;
 The RKPD contains the draft regional economic framework, priorities,
development and regional obligations, measurable work plans and their funding,
whether implemented directly by the regional government or pursued by
encouraging community participation;
 The regional obligation as referred to above is to consider the achievement of
minimum service standards in accordance with the laws and regulations;
 The RKPD is structured to ensure linkages and consistency between planning,
budgeting , implementation, and supervision;
 The preparation of the RKPD is completed no later than the end of May of the
previous fiscal year;
 The RKPD is determined by a regional head regulation.

2) General Regional Budget Policies and Temporary Budget Priorities and Ceilings
(PPAS)
A bridge between the process of policy formulation and budgeting is essential and
fundamental so that policy becomes a reality and not just a wish. For this purpose at
least two clear rules must be established:
 The implications of a policy change (proposed policy) on resources must be
identified, even in a rough estimate, before a policy is established. An entity that
proposes a new policy must be able to calculate its effect on public spending, both
on its own spending and on other government departments;
 All proposals must be discussed/consulted and coordinated with the relevant
parties: Head of TAPD, Head of Bappeda and Head of SKPD;
 In the budget preparation process, the local government budget team (TAPD) must
cooperate well with the regional work units (SKPD) to ensure that the budget is
prepared within the established policy corridors (KUA and PPAS); and ensure that
all stakeholders are involved in the budgeting process in accordance with
applicable regulations;
 Consultation can strengthen the legislature to review government strategy and
budgets. Opinion between the legislature and government, as well as pressure
from the public, can provide an effective mechanism for broadly consulting the
best policy. The government should try to get feedback on its policies and budget
implementation from the public, for example through surveys, evaluations,
 seminars and so on. However, the budgeting process must avoid excessive
pressure from interested parties and lobbyists, so that budgeting can be
completed on time.

a. General Budget Policy (KUA)

The process of preparing KUA is as follows:
1) The regional head based on the RKPD prepares the draft general policy of the
APBD (RKUA);
2) The preparation of the RKUA is guided by the guidelines for the preparation of the
APBD which are determined by the Minister of Home Affairs every year. For
example, for the preparation of the 2007 APBD, the Minister of Home Affairs has
issued Permendagri Number 26 of 2006 dated September 1, 2006 concerning
Guidelines for the Preparation of Regional Revenue and Expenditure Budgets for
the 2007 Fiscal Year;
3) The regional head submits the RKUA for the next fiscal year, as the basis for the
preparation of the RAPBD, to the DPRD no later than mid- June for the current
budget year;
4) The RKUA which has been discussed by the regional head with the DPRD in the
preliminary discussion of the RAPBD is then agreed to become the APBD General
Policy (KUA);
5) The Guidelines for Budgeting as stated in Permendagri Number 26 of 2006 above
contain, among others:
 Policy points that include synchronization of government policies with local
governments;
 Principles and policies for the preparation of APBD for the relevant fiscal year;
 Technical preparation of APBD; and
 Other special things.

b. Priority and Temporary Budget Ceiling (PPAS)

For the preparation of the draft APBD, it is necessary to have an order of Priority
and Temporary Budget Ceiling (PPAS). PPAS is a priority program and a benchmark for
the maximum budget limit given to SKPD for each program as a reference in the
preparation of RKA-SKPD. The process of preparing and discussing PPAS into PPA is as
follows:
1) Based on the agreed KUA, the regional government and DPRD discuss the draft
priorities and provisional budget ceiling (PPAS) submitted by the regional head;
2) PPAS discussion;
3) PPAS discussion is carried out with the following steps:
 Determine the priority scale in mandatory and optional matters;
 Determine the sequence of programs in each affair;
 Prepare temporary budget ceilings for each program.
 4) KUA and PPAS which have been discussed and agreed upon with the regional head
and DPRD are set forth in a memorandum of agreement signed jointly by the
regional head and DPRD leadership;
5) The regional head based on the memorandum of agreement publishes guidelines
for the preparation of SKPD work plans and budgets (RKA-SKPD) as guidelines for
SKPD heads in preparing RKA-SKPD.

Based on the provisions contained in Article 87 paragraph (2) of Permendagri

Number 13 of 2006, the regional head submits the PPAS draft to the DPRD for joint
discussion between the TAPD and the DPRD budget committee no later than the
second week of July of the current budget year. After being mutually agreed upon, the
PPAS is determined as a Priority and Budget Ceiling (PPA) no later than the end of July
of the current budget year.

c. Preparation of SKPD Work Plans and Budgets (RKA-SKPD)

According to Article 89 paragraph (3) of the Minister of Home Affairs Regulation
No. 13 of 2006, after the Memorandum of Understanding stated above, the Budget
Team (TAPD) prepared a circular letter for regional heads regarding Guidelines for the
Preparation of RKA-SKPD which must be issued no later than the beginning of August
of the current budget year.

Arrangements on the planning aspect are directed so that the entire APBD
preparation process as much as possible can show the background of decision making
in determining general policy directions, priority scales and determining allocation and
distribution of resources by involving community participation. Meanwhile, budgeting
is carried out using three approaches, namely the medium-term expenditure
framework approach (KPJM), the integrated budget approach, and the performance
budget approach.

The MTEF approach is a policy-based budgeting approach, with the decision

making on the policy carried out in the perspective of more than one fiscal year, taking
into account the cost implications of the decision in question in the following year as
outlined in the forward forecast. The medium-term spending framework is used to
achieve fiscal discipline in a sustainable manner. A medium-term view is needed
because the budget period of one year is too short for the purpose of adjusting
expenditure priorities, and the uncertainty is too great if the budget perspective is
made in the long term (above 5 years). Medium-term expenditure projections are also
needed to indicate the desired direction of change. By illustrating the implications of
the current year's policy on the budget of subsequent years, multi-year expenditure
projections will allow the government to evaluate the cost-effectiveness
(performance) of the implemented program. Meanwhile, in a pure annual budget
approach, the relationship between sectoral policies and budget allocations is usually
weak, in the sense that the required resources are not sufficient to support the
 policies/programs that have been determined. However, the pitfall must be avoided
where this multi-year programming approach by itself opens up opportunities for
unnecessary or irrelevant increases in spending.

Unified budgeting is the preparation of an annual financial plan that is carried out
in an integrated manner for all types of expenditures to carry out government
activities based on the principle of achieving efficient allocation of funds and to avoid
duplication of spending. Meanwhile, the preparation of a performance-based budget is
carried out by taking into account the relationship between funding and expected
outputs and results, including efficiency in achieving these results and outputs. In the
preparation of performance-based budgets, performance indicators, cost standards,
and performance evaluations are needed for each program and type of activity.
The work performance-based budgeting approach is carried out by taking into
account the relationship between funding and expected outputs from activities with
work results and expected benefits, including efficiency in achieving these results and
outputs. This Performance-Based Budget is prepared based on:
1) Performance indicators;
2) Achievements or performance targets;
3) Expenditure standard analysis (ASB);
4) Work unit standards, and
5) Minimum service standards;

The budget preparation document submitted by each regional work unit (SKPD)
which is compiled in the SKPD Work and Budget Plan (RKA) format must really be able
to present clear information about the goals, targets, and the correlation between the
amount of the budget (workload) and unit price) with the benefits and results to be
achieved or obtained by the community from a budgeted activity. Therefore, the
implementation of a performance-based budget implies that every budget user
(government organizer) is obliged to be responsible for the results of the process and
the use of its resources.
Furthermore, several principles in budgetary discipline that need to be considered
in the preparation of regional budgets include (1) the planned revenue is a rationally
measured estimate that can be achieved for each source of income, while the
budgeted expenditure is the highest limit of expenditure expenditure; (2) Expenditure
budgeting must be supported by the certainty of the availability of sufficient revenue
and it is not justified to carry out activities that are not yet available or whose budget
credits are not sufficient in the APBD/Amendment to the APBD; and (3) All regional
revenues and expenditures in the relevant fiscal year must be included in the APBD
and made through the Regional General Treasury account.

d. Preparation of the Regional Budget Draft

The RKA-SKPD that have been prepared, discussed, and mutually agreed upon
between the Heads of SKPD and the Regional Government Budget Team (TAPD) are
 used as the basis for the preparation of the Regional Budget Raperda. This Raperda is
prepared by regional financial management officials which will then be submitted to
regional heads. The Raperda on APBD must be accompanied by the following
attachments:
1) Summary of APBD according to mandatory and optional affairs;
2) Summary of APBD by regional government affairs and organization;
3) Details of APBD according to regional government affairs, organization, income,
expenditure, and financing;
4) Recapitulation of spending by regional government affairs, organizations,
programs and activities;
5) Recapitulation of regional expenditures for the alignment and integration of
regional government affairs and functions within the framework of state financial
management ;
6) List of the number of employees per group and per-position;
7) List of regional receivables;
8) List of regional capital participation (investment);
9) List of estimated additions and subtractions of regional fixed assets;
10) List of estimated additions and deletions of other assets;
11) List of activities for the previous fiscal year that have not been completed and re-
budgeted in this fiscal year;
12) List of regional reserve funds; and
13) Regional loan list.

An important thing that must be considered is that before being submitted and
discussed with the DPRD, the Raperda must first be socialized to the public that provides
information about the rights and obligations of the regional government and the
community in implementing the APBD in the planned fiscal year. The dissemination and/or
socialization of the Raperda APBD is carried out by the Regional Secretary as the
coordinator of regional financial management.

e. Budget Determination
The process of determining the APBD goes through the following stages:
1) Submission and Discussion of Raperda on APBD
According to the provisions of Article 104 of Permendagri No. 13 of 2006, the
Raperda and its attachments that have been prepared and disseminated to the
public to be further submitted by the regional head to the DPRD no later than the
first week of October of the previous budget year from the planned budget year
for mutual approval. This joint decision-making must have been carried out no
later than 1 (one) month before the start of the relevant fiscal year.

On the basis of this mutual agreement, the regional head prepares a draft
regional head regulation on the APBD which must be accompanied by a financial
memorandum. The APBD Raperda includes, among other things, a mutually agreed
 expenditure plan. This Raperda APBD can only be implemented by the
regency/city government after obtaining approval from the relevant Governor.
Furthermore, according to Article 108 paragraph (2) of Permendagri Number 13 of
2006, if within 30 (thirty days) after the submission of the Raperda on APBD the
Governor does not ratify the Raperda, then the regional head (Regent/Mayor) has
the right to stipulate the Raperda as a Regulation of the Regional Head.

2) Evaluation of the Raperda on the APBD and the Draft Regional Head Regulation
on the Elaboration of the APBD
The approved Regency/Municipal Government APBD Raperda and the draft
Regional Head Regulation concerning the Elaboration of the APBD before being
stipulated by the Regent. The Mayor must be submitted to the Governor for
evaluation within a maximum of 3 (three) working days.

This evaluation aims to achieve harmony between regional policies and

national policies, harmony between public interests and the interests of the
apparatus, as well as to examine the extent to which district/city APBD do not
conflict with public interests, higher regulations and/or other regional regulations.
The results of this evaluation must be stated in the governor's decision and
submitted to the regent/mayor no later than 15 (fifteen) working days from the
receipt of the Raperda APBD.

3) Stipulation of Regional Regulation on APBD and Regional Head Regulation on

Elaboration of APBD
The final stage is to stipulate a regional regulation draft on the APBD and the
draft regional head regulation on the elaboration of the APBD which has been
evaluated to become a Regional Regulation on the APBD and a Regional Head
Regulation concerning the Elaboration of the APBD no later than December 31 of
the previous fiscal year. After that, the Regional Regulation and Regional Head
Regulation concerning the elaboration of the APBD shall be submitted by the
Regent/Mayor to the relevant Governor no later than 7 (seven) working days after
the date of stipulation.

13. Relations between Central and Regional Governments in Indonesia

a. Authority Relations
Where this is a relationship about government affairs to be carried out by the
government or the central government, government affairs to be carried out by the
provincial government and those carried out by the city government or district
government.
 b. Financial Relations
Local governments that have larger natural resources will certainly welcome them
with pleasure and full participation, but the existence of gaps such as regions that do
not have good natural resources and poor will get worried and this will affect the
amount of regional income they receive. And autonomous regions will be given
demands to be able to find alternative sources to obtain sources of financing and
assistance from the central government

c. Public service
The central and regional governments cannot be separated as a broad means of
providing comprehensive services to the people of a nation. And if interpreted in
general terms, these two types of government hold similar responsibilities .

d. Utilization of Natural Resources and Other Resources

Where a relationship will be formed that will regulate the use of all sources of
wealth for the benefit of all the people .

e. Functional Relationship
This is a relationship that is based on the context of implementing government
programs. Which if interpreted in general is a reciprocal process in the form of a
relationship or part that occurs due to process factors, common interests and causal
relationships. All of these relationships must be carried out fairly and in harmony
between the central and local governments.

14. Relationship between APBN and Economic Growth

APBN and economic growth are two things that cannot be separated. The allocation of
funds contained in the APBN is used for development. With economic development,
economic growth will be created. APBN and economic growth are two important
indicators in determining the level of people's prosperity. The indicators that become
assumptions in the preparation of the APBN are macroeconomic indicators that serve as
indicators in the process of economic growth. Several policies in the management of the
APBN are always directed at the creation of economic growth, although economic growth
itself cannot be forced. There are several reasons that cause economic growth to move
slowly even though macroeconomic stability has been achieved:

a. High unemployment and vulnerability in the labor market. High unemployment is

related to population growth and the quality of education and skills of most of our
human resources. On the other hand, the labor market is also less flexible, meaning
that it is very expensive for companies to reduce their workforce if the market shrinks.
Severance costs for termination of employment are very high. Because industrial
relations in Indonesia are not profitable for companies, many would-be international
investors choose China and Vietnam over Indonesia;
b. Weak investment activity and related fundamental problems. Weak new investment
activity is also due to reduced legal certainty for entrepreneurs since the reformation.
The implementation of regional autonomy adds to the uncertainty. Indonesia is now
known as a high-cost economy. One source of the high cost economy is inadequate
infrastructure, because since 1998 there has been practically no government
investment in this infrastructure. In fact, there is still a fundamental obstacle, namely
that the intermediation of the banking system has not been able to work normally,
due to the tightness of the new prudential rules and the trauma of bad credit;
c. The government itself must maximize investment through its budget, for example to
build infrastructure that is not profitable for private investors. However, the
management of this APBN still contains its own problems, which are also related to the
principle of prudence;
d. The high potential for structural inflationary pressures;
e. At the technical level, there is an agreement between the Government and Bank
Indonesia to bring the long-term inflation rate to around 3% a year. For 2005, BI's
target is 6% plus-minus 1%, for 2006 5.5% plus-minus 1% and for 2007 5% plus-minus
1%. Likewise for the years 2008 and 2009. Inflation control still faces considerable
internal and external risks.

The sources of financing for the implementation of decentralization consist of: (1)
Regional Original Income (PAD), namely regional taxes, regional levies and BUMD results,
(2) Balancing Funds, (3) Regional Loans and (4) other revenues that legitimate.
Autonomous regions must have the ability to explore their own financial resources,
manage and use them to finance the administration of their regional government.
Dependence on Central assistance is still very strong, should be kept to a minimum.
Optimization of PAD sources needs to be done. For this reason, it is necessary to intensify
and expand local revenue subjects, among others by: expanding the revenue base,
strengthening the collection process, increasing supervision, increasing administrative
efficiency and reducing collection costs, and increasing revenue capacity through more
targeted planning. One of the main pillars in implementing regional autonomy is increasing
regional financial capacity. One aspect of optimizing local revenue revenue is increasing
sources of financing for the implementation of decentralization.