The condition of the house of Tarmizi, 35, and Nur Ismi, 30, members of a poor family in Gampong Lamcarak, Seulimum district, Aceh Besar regency, Aceh province, Saturday (14/1). Economic difficulties have meant that the family has only been able to build a 3x4 meter house out of leftover wood.
JAKARTA, KOMPAS – Regional autonomy is actually the right policy to improve the welfare of the people. However, the broader authority gained by local governments is used only to facilitate big businesses rather than small entrepreneurs.
The executive director of the Regional Autonomy Implementation Monitoring Committee, Robert Endi Jaweng, said in Jakarta on Thursday the regional autonomy system was the right policy to improve the welfare of local people in many regions across Indonesia.
The worsening of economic inequality since the introduction of regional autonomy was caused by the issuance of regulations to implement autonomy by local governments. Such regulations should therefore be evaluated.
According to Endi, there are two important factors within the context of regional autonomy that have to be evaluated in order to reduce economic inequality significantly, inequality both in one region or between regions.
These two factors are strengthening of local policies on private sector development and revising the methods of transferring funds from the central government to local administrations.
Endi said that local government policies on private sector development gave more attention to medium and large enterprises. As a result, micro and small enterprises (MSEs) were often neglected. One example is unfriendly licensing for MSEs that give limited access to the facilities and programs of local governments.
"Institutional reform related to licensing and local taxation should be able to encourage new businesses or the expansion of existing businesses. On the other hand, it must be ensured that business development programs are relevant and properly targeted," said Endi.
Meanwhile, the method of transferring funds from Jakarta to the regions was too general, said Endi. As a result, border areas, islands, and poor areas with geographical difficulties do not get sufficient attention.
The fiscal design that is implemented at present does not help much. One of the main problems is that the local perspective on the use of the general allocation funds provided by the central government is very weak. In fact, the cost of development in border areas or islands can be 10 times as much as on Java.
"I hope the President not only ensures the increase in the allocation of village funds and transfers funds every year. Without a major budgetary change to reduce economic inequality, increasing the budget will never be a solution," he said.
Separately, the vice chairman of the Indonesian Chamber of Commerce and Industry (Kadin) for the development of economic areas, Sanny Iskandar, said industrial activities in some areas should be developed to reduce inequality.
"Regional economic equality can be created through the development of manufacturing industries, such as in the processing of natural resources and minerals in the area," he said.
Not yet successful
Although the Special Region of Yogyakarta has been granted the privilege to receive a special fund since 2013, economic inequality in the region cannot be reduced.
The Gini ratio in Yogyakarta in March 2017 reached 0.432, a rise from 0.425 in September 2016. The higher the Gini ratio indicates wider inequality in the area.
To reduce inequality, the Yogyakarta administration has implemented community empowerment programs, particularly in areas with a high poverty rate. Improving basic facilities and infrastructure in areas with a high population of poor people is also encouraged. Currently, 15 subdistricts in Yogyakarta have a high poverty rate.
"We created a program to reduce inequality, such as through empowering the community," said the assistant to the Yogyakarta secretary on economic affairs and development, Gatot Saptadi.
In accordance with Law No. 13/2012 on the Special Region of Yogyakarta, Yogyakarta received a special fund of Rp 231 billion in 2013. The funds were increased to Rp 523.8 billion in 2014, Rp 547.5 billion in 2015, Rp 574 billion in 2016 and Rp 853.9 billion in 2017.
Based on a survey by the Yogyakarta Institute for Research and Empowerment (IRE), inequality in Yogyakarta is due to the lack of productive assets owned by citizens of rural communities. A Yogyakarta farmer, Rajif Dri Rangga, said farmers earned a very low income.
The lower middle class in rural areas also meet with difficulties in finding work in the formal sector. They work mostly in the informal sector and earn an inadequate income.
