Revenue per capita transferred from the central government to the subnational government (Rp. million), 2010
Transfer payments from the central government are by far the most important source of revenue for almost all subnational governments in Indonesia. This indicator, like the total revenue indicator, is presented on a per capita basis. So for every area it looks at the amount of money supplied by the central government relative to the areas’ most basic measure of need, namely population size.
The indicator reveals that the per capita transfer amounts received by some areas are very much higher than others. The map shows that areas that are spatially large (especially those in Papua and the north eastern parts of Kalimantan) tend to have much higher per capita transfers than areas that are spatially small and most clearly those in Java. As is well known the small areas tend to have large populations and vice versa. Thus, it appears that population density is an important factor in determining per capita allocations to each area. For other explanations please refer to Seknas FITRA views further below.
Large inequality in transfer amounst
In 2010, among all Kabupaten and Kota, the revenue obtained from local sources averaged 2.76 million rupiah per person. One might expect that this amount would be similar for all areas with some variation (say plus (+) or minus (–) 20% of the average) to allow for special needs. However, this is not the case. The difference between those receiving large amounts and low amounts from the central government is in fact huge. For example, the average per capita transfer amount among the 10 Kabupaten receiving the largest transfer amounts received close to 50 times more per capita than the average received by the 10 Kabupaten receiving the lowest transfer amounts. Why these massive disparities should exist are not clearly explained by the Ministry of Finance but rather are obscured by a complex set of mechanisms for distributing the funds: see …. for further information.
It is true that some areas are less developed than others and so one might expect that the less developed areas would receive much more. However, related research demonstrates that this is not in fact the case. Indeed the analysis has shown that some areas with relatively high living standards get much more per capita than some of the most disadvantaged areas. See here from more details.
Revenue per capita, 2010, Local Government Area averages
Average Revenue Per Capita (Rp. Million)
|All areas||10 areas with lowest per capita revenue||10 areas with highest per capita revenue|
What about your area of interest?
So, according to the map, how does the subnational government of interest to you stand relative to others? Does it receive a low or high amount? Does the allocation seem fair to you? Is the reason for the disparity well understood by you?
Frequently asked questions
Where do local government revenues come from?
Subnational government revenues come from various sources. By far the largest share comes from the Central Government (it is actually provided as a series of monthly transfer payments by the Ministry of Finance (MoF)). However, local governments also raise some money themselves (this source is called Own Source Revenue – see related indicator map) and they sometimes get money from other sources too (such as, Foreign aid??). More information about these components of revenue is available from the MoF website as shown here.
What is included among the fiscal transfers?
Fiscal transfers from the Central Government (see related indicator map) are provided through a number of separate mechanisms. When grouped together several of these, namely: DAU (Dana Alokasi Umum _General Allocation Fund , DBH (Dana Bagi Hasal – Revenue Sharing Fund) and the DAK (Dana Alokasi Khusus) are collectively known as Dana Primbangan. Dana Primbangan provides the legislated underpinning of the fiscal transfer system. However, there are other types of transfer payments to regions and these have been proliferating in number more recent years. Examples of these other payments include: DPPID (Dana Penguatan Infrastruktur dan Prasarana Daerah) or Funds for accelerating the improvement of regional infrastructure) and the DPID (Dana Percepatan Infrastrucktur Pendidikan – Funds for accelerating the improvement of educational infrastructure) . For more information see about various components see … (give link to an authoritative source which describes these transfer)
There are two major issues here. One concerns the level of transfers made from the Central Government to Subnational governments, and the other concerns the relative amount allocated to each Subnational Government.
We believe that a much greater share of Central Government funds should be distributed to Subnational Governments than is currently the case. Over much of the last decade the share of total revenues allocated to Subnational Governments has been around 34%. This is far too low when we consider the service delivery responsibilities of Subnational Governments and the principal that Money should follow function.
The differently shaded areas that appear on map only reveals some of the high level of inequality in the level of transfer payments made to different subnational areas. Some areas get more than 50 times more than others for every man, woman and child. The reasons for having such high levels of inequality are poorly understood and seem illogical to many observers. One might expect that areas with a high proportion of people living in poverty might get more per capita than those where the poverty rate is low. This is consistent with the idea of the Millennium Development Goals which provides an agreed conceptual basis for governments to focus their efforts in reducing poverty and other inter-related aspects of social and economic disadvantage. However, our research (confirming that of others1) ,), actually shows that some areas with high poverty rates get much less per capita than some areas with relatively low poverty rates.
It is in view of the above that we call on the National Government to provide:
1. Clear and well-founded explanations of the reasons for:
- not providing more of the people’s revenues down to the levels of government by which most public services are provided
- the very high level of inequality in the per capita amounts transferred to the regions, and
- why the transfers are sometimes much higher in well-off areas than in areas with low living standards
2. Complete transparency in the budget allocation process such that independent analysts can replicate the allocations and assess if they actually correspond to the amounts prescribed by administrative laws or not.
Since the formula for allocating funds remains much the same one might expect that much the same pattern of inequality will persist over time.
Data: Sources and notes
The data for each area used for this indicator comes from two sources. The total revenue data for each area is sourced from the Ministry of Finance budget information website (see http://www.djpk.depkeu.go.id/datadjpk/131/). These data can be accessed by reference to the webpage “Data Series”, and to the link “Dana Perimbangan”, Realised Budget 2010, and then Sheet 1 , Permentdagri 13. The population data was sourced from Indonesia’s 2010 population census (see http://sp2010.bps.go.id/.)
Missing data: there is 1 Kabupaten (namely: Kab. Nduga in Papua) for which budget data was not available.
Fadliya and McLoud, 2011 (give full ref).