Regional Governments in Indonesia Benefit from $350 Million ADB Loan

MANILA, PHILIPPINES - Improved financial and economic management at all levels of government will be the outcome of a $350 million program loan granted by the Asian Development Bank (ADB) for Indonesian regional and local government reform.

In 1999, the Government of Indonesia began major decentralization reform which has created significant responsibilities for provincial, district, and city governments.

Following further major reforms in 2001, Indonesia became one of the most decentralized countries in the world, with its regional governments managing around 40% of total government expenditure. One of the benefits of decentralization is that residents in the regions gain more representation and have access to their local representatives. Regional governments then become more accountable and efficient in their operations.

Regional governments now deliver services in public works, health, education, culture, communications, industry and trade, capital investment, environment, land, cooperatives, labor, and many other sectors.

The reforms have been radical and have occurred rapidly.

The Second Local Government and Finance and Governance Reform Program will continue ADB’s long-term support for effective decentralization and will assist to broaden the processes of regional autonomy and financing, which in turn will achieve better social and physical services and opportunities arising from a more robust economy.

"This program will generate significant benefits for the financing and delivery of local services, and in the development of badly-needed capacity. ADB believes that in pursuing these reforms, Indonesia is creating a solid base for growth," said Arjun Thapan, Director General of ADB’s Southeast Asia Department.