Study: Decentralization Effort in Indonesia Shows Need for Performance Incentives from Central Government

RESEARCH TRIANGLE PARK, N.C. – To provide needed services to citizens, Indonesia and other developing democracies that decentralize their governments, must still use their central government to monitor and incentivize local governments for service performance, according to a new journal article from researchers at RTI International.

Published in September issue of the International Review of Administrative Sciences, the case study, “Performance-based Public Management Reforms: Experience and Emerging Lessons From Service Delivery Improvement in Indonesia,” examines service delivery pathways in Indonesia 15 years after President Suharto was swept from power amid calls for a more democratized government.

In 1999, subnational governments in Indonesia assumed responsibility for 40 percent of public spending in sectors such as health and education, after decades of a centralized and military-dominated government.

RTI researchers analyzed dozens of reports on the decentralization efforts and cited multiple areas where other developing democracies can learn from Indonesia’s improvements.

"While the central government retains the potential to use budget transfers as performance incentives, these channels for influencing quality and orientation of local service delivery have not been used effectively," wrote the study's authors, Derick W. Brinkerhoff, Ed.D, and Anna Wetterberg, Ph.D. Brinkerhoff is a distinguished fellow at RTI International and Wetterberg is a social science research analyst in RTI’s International Development Group.

The article looks at several key tools for performance-based reform in public sector management, such as standard-setting, results-based management and performance-based payment. The study found that despite considerable variation by region,   Indonesia has applied many of these tools with some degree of success in improving front-line service delivery.

“Our findings, though preliminary, hold potential lessons for improving service delivery in other countries,” the authors wrote. “With a new president coming into office in 2014, the subsequent strength of Indonesia’s reformers at the center will influence Indonesia’s progress toward more accountable local leaders and stronger incentives for providing services.”