New Indonesian Province to Create Fresh Problems

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LATE last year, not long after the Indonesian parliament approved the establishment of North Kalimantan as the country’s 34th province, automobile dealers arrived in Tanjung Selor, the proposed capital, looking for land to build their showrooms.

Was their interest evidence of the new prosperity expected to flow to the people from this latest move towards decentralisation? Or should it more realistically be seen as a harbinger of the corruption and injustices to come?

Sadly, the latter seems the more likely outcome. 

The campaign for the new province, started about 12 years ago by idealistic university students, was later taken up by local politicians including several who now see themselves as candidates for North Kalimantan’s first gubernatorial elections due in 2015.

Decentralisation came into effect in Indonesia in 2001 with the passage of the Regional Autonomy Law. Essentially, it aimed to accelerate development by giving locally elected officials more say in how education, health and development funds would be allocated. The hope was that anti-poverty programmes would also be addressed more effectively.

The result was the creation of seven new provinces as well as numerous additional regencies and municipalities. The performance of many of these new local governments, however, was disappointing. Matters came to a head in 2009, when North Sumatra Legislative Council’s speaker Abdul Aziz Angkat suffered a fatal heart attack after he was assaulted by an angry mob demanding the creation of a breakaway province to be called Tapanuli. The government in Jakarta responded by announcing a moratorium on the creation of all new provinces.

The decision of the House of Representatives to approve the formation of North Kalimantan province in October last year therefore came as something of a surprise.

That was an exceptional case, supporters of the proposed new province had argued. In the light of the loss to Malaysia of the disputed islands of Sipadan and Ligitan, they believed, Jakarta should prioritise the formation of new regions in border areas. In this way, insisted Mr Gunandjar Sudarsa of House Commission II on regional autonomy, Indonesia could secure the loyalty of Indonesians living in such locations.

North Kalimantan borders the Malaysian states of Sabah in the east and Sarawak in the west. An area the size of Java, it has a population of around 500,000 and comprises some of the poorest regencies in what was previously part of East Kalimantan.

How the establishment of the province would secure the loyalty of its inhabitants in border areas was not spelled out by parliamentarians. There is no separatist movement in the region. Moreover, the loss of Sipadan and Ligitan in 2002 did not rest on the opinions of the local population. Rather, it was the result of legal arguments presented at the International Court of Justice.

Parliamentarians also rolled out the old argument that creating a new province would improve administration and thus speed up the elimination of poverty.

If previous Indonesian experience is any guide, however, the reality is likely to be very different. Elections are costly affairs, and the local elite often find that they have to fund their activities through various forms of corruption. Last year, the deputy speaker of the People’s Consultative Assembly cited data showing that 32 per cent – 173 out of 525 – of active governors, mayors and district heads were under investigation for graft.

Local leaders also tend to create bloated bureaucracies in order to provide employment for their supporters. According to Regional Autonomy Watch, a Jakarta- based organisation funded in part by the Asia Foundation, 60 per cent of the nation’s 491 local districts spend more on bureaucracy than on public services.

The new North Kalimantan administration may not have much money anyway. The relatively prosperous Berau regency, originally slated to be part of the new province, has been kept within East Kalimantan. North Kalimantan regencies will also lose their share of the dividends from East Kalimantan’s lucrative extractive industries, most of which are located in the south.

By law, the central government receives a 70 per cent share of the income from oil and gas. Much of the remainder is distributed directly to the regencies and municipalities in the producing province.

Expect local officials in North Kalimantan to issue dozens of new mining and logging permits in the coming years to make up the shortfall. The resulting conflicts with landowners and environmentalists are not difficult to imagine.

Such a development could also exacerbate ethnic conflict. Local Dayaks already complain that after their land has been given away for mining or timber concessions, the companies concerned rarely recruit Dayaks for the good jobs.

Those new automobile showrooms in Tanjung Selor will certainly have customers. But it is unlikely that the creation of the new province will benefit the majority of the area’s inhabitants.

(C) Singapore Press Holdings Limited 

Key Political Risks

Asia is the fastest growing region in the world, and is likely to remain so in 2013. However, a number of risks cloud the picture.

The good news is that domestic demand in the region remains strong and should continue to cushion the impact of weaker external demand on overall economic growth. The completion of national elections in Japan and South Korea in December 2012 should also help reduce political uncertainties. 

But Asian governments will need to guard against the adverse impact of prolonged easy financial conditions on inflation.

Rising inequality also continues to threaten social stability. Ethnic and religious rivalries remain just below the surface in many countries. When combined with government corruption and (in some countries) high youth unemployment, this could become a deadly mix. This seems particularly true of China.

Territorial disputes also require close monitoring. Much diplomatic activity in the new year is likely to be centered on finding ways to reduce tensions over resource-rich islands in the South China Sea, where Beijing's claims overlap with those of Japan, Vietnam and other Southeast Asian states. South Korea and Japan also have rival territorial claims.

North Korea remains the wild card. Inclined to believe its own propaganda, Pyongyang's new leadership could miscalculate, making belligerent moves that plunge the region into a military conflict that nobody wants.

About Me

My name is Dr Bruce Gale and I am a senior writer with the Singapore Straits Times. I studied at  LaTrobe University (BA Hons) in Melbourne and later at the Centre for Southeast Asian Studies at Monash University (MA). My PhD thesis, which focussed on Malaysian political economy, was completed at the Malaysian National University (Universiti Kebangsaan Malaysia) in 1987.

From 1988 to 2003 I was Singapore Regional Manager for the Hong Kong based Political and Economic Risk Consultancy (PERC). 

I have written several books and articles on Southeast Asian affairs, including Political Risk and International Business: Case Studies in Southeast Asia (Pelanduk Publications, 2007). Books on language include Mastering Indonesian: a guide to reading Indonesian language newspapers (Pelanduk Publications, 2008)

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