Local government and decentralization are the main challenges of the Albanian government reforms. Decentralization and urbanization are a greater pressure on local governments to finance public services and facilitate economic development. During the years, the local government responsibilities have been increased, while fiscal decentralization and transfer of funds have not progressed with the same speed, resulting in significant lack of funding. Local government budgets are generally small and cannot afford financing for major projects and infrastructure improvements. Funds from the state budget for infrastructure investments (mainly competitive grants/Regional Development Fund) have been increasing in recent years, their impact is still small compared to the needs. The main forms of financing of local government are: central government transfers and its own revenues. Vertical and horizontal transfer between different levels of governments (CG and LG) that takes place during the annual budget cycle is not based on clearly defined criteria and in a transparent way, or does not match the needs for expenditures at the local level. This creates a considerable level of instability (illogical movement) of revenues and expenses during the budget cycle units, as a result created a high degree of unpredictability of revenue and expenditure of local units.Currently, local government units funded from central government about 60 percent of local budget, which shows the low level of local autonomy. These and the other problems have made necessary by the territorial reorganization and together with the performance of a deep fiscal decentralization.This article through studding the local decentralization in the last years aims also to make a comparison to previous years and since 20016 is the first year of the complete implementation of the new Administrative and Territorial Reform and the transfer of certain new functions to the local government as well. Keywords : Local government, local finances, transfers conditional, unconditional transfers, their income, responsibility, decentralization, Administrative and Territorial Reform, funding sources etc.
Implementation of regional autonomy as the government's efforts for the welfare society in accordance with the characteristic of each region. Implementation of the fiscal decentralization recurring phenomenon is the phenomenon of flypaper effect. Flypaper effect occurs when the local government responded to the regional expenditure larger than the central government transfer revenue. The purpose of research is to prove the phenomenon of flypaper in East Java Province period 2011-2015. This research uses quantitative analysis with a population of 29 districts and 9 cities in East Java province. Data were analyzed using panel data regression analysis with Eviews statistical test equipment. The result showed that regional revenue positively affects regional expenditure, general allocation fund positively affects regional expenditure, financing budget surplus positively affects regional expenditure, regional revenue positively effect on growth, positive effect on the regional expenditure growth at district/city in East Java Province. The result of the comparison coefficient general allocation of funds and region revenue indicate there has been a flypaper effect on region expenditure districts/cities in East Java Province period [2011][2012][2013][2014][2015]
In the context of financial relations between the central and local governments, the central government has now allocated a Balancing Fund (Dana Perimbangan) to finance local needs in order to support the implementation of decentralization of governance and development as a form of political will to reform and democratize. The aim of this study is to evaluate the effectiveness of DAK allocation for financial year 2003-2013 and to analyze the impact of Dana Alokasi Khusus (DAK) allocation from 2003 to 2013 on various development indicators in the regions (districts / cities). DAK transfer design is the main cause of various issues related to the implementation of DAK. In addition, the problem of DAK allocation mechanisms in the determination of programs and activities, the calculation and use of DAK, budgeting and disbursement of DAK, reporting and monitoring and evaluation of DAK. DAK, as one type of Balancing Fund, has a positive impact on the fiscal capacity of the region, especially the district /city. In addition to regional fiscal capacity, DAK also plays a role in reducing the level of fiscal gap between districts / cities during the period 2003-2007. The result show that DAK allocation (in total) is not significant influence to PDRB per capita of Regency / City. In conclusion, DAK has not had a significant impact on public services and public welfare. This is because the direction of using DAK is not directly used to "build", but only to "maintain". Therefore, DAK is considered not effective enough in an effort to achieve the national priority target.
The chapter examines the critical role of good governanceGovernance and robust financial management in building stable democratic states in the Pacific Islands. It explores the role of ICTs in public financial managementPublic financial management (PFM) as a means to this end and identifies some of the factors that lead to the success or failure of e-government initiatives in this core government activity. The chapter outlines the dominant PFM reform agendas in the Pacific, including those of the World BankWorld Bank and the IMF, which have been endorsed by the Pacific Islands ForumPacific Islands Forum Economic Ministers Meeting, and the role of PFM systems and effective audit systems in combating corruptionCorruption . The need for capacity buildingCapacity building and leadershipLeadership in embedding public financial management reforms are discussed and the chapter concludes with a discussion of some issues emerging from the chapter: the value of centralized versus decentralized systems and the tension between development assistance and sovereignty. The chapter argues that ownership of the public financePublic finance reform agenda by Pacific governments and a commitment to good governance is essential for sustainable PFM reforms in the region and for development.
"Trash, Cities, and Politics" describes Indonesia's ADIPURA, an environmental program begun in the mid 1980s to focus on waste management, cleanliness and sanitation, and green spaces. The paper discusses the program within the larger context of Indonesia's urbanization and its environmental consequences, from the time of the New Order up to today's decentralization era. The essay describes ADIPURA's continuity and evolution, with respect to central and local governments, law enforcement, financing, and community and private sector participation. It also provides specific data from more than 300 cities, and presents statistics to reveal trends and disconnects and to examine the program's successes and failures. For example, the study found that the program's incentives are inadequate, given Indonesia's regional autonomy and decentralization; that government ministers' credibility may be too weak to encourage municipalities' participation and compliance; and that the program comprises an unmanageable number of targets and is excessively expensive to administer, especially the inspections. The study concludes that ADIPURA is potentially useful to clean up cities, but needs to be overhauled, modernized, and coordinated with other government policies, and further transformed to eliminate actual and potential corruption and manipulation.
Radical decentralization reform works or does not work for reducing communal conflict is still debatable. This study examines the linkage between decentralization policy and communal conflict in Indonesia. Two measurement of decentralization: administrative decentralization, and fiscal decentralization is examined. Data come from the Village National Census (Podes) 2003-2014 (N=301.974). Results of twolevel logit regression show that fiscal decentralization not significantly associated with reducing communal conflict. The findings suggest that decentralization work for reducing communal conflict through better capacity of local bureaucrats rather than through financing capacity in delivering public services and district proliferation policy
Julius Tamawiwy, Jullie J. Sondakh, Jessy D.L Warongan
The main objective of regional autonomy is to improve public services and promote the local economy in Indonesia. Capital expenditures for public services is used to finance expenditure in investing activities (add assets) aimed at improving public infrastructure that results can be used directly by the public. Developed regions tend to maintain the structure of expenditure into maintenance expenditure. The shift in spending patterns in the local government often triggered concerns about the extent to which the amount of local revenue affects the pattern of local government spending, especially capital expenditure for public services. This study purposes to analyze growth of revenue (PAD), the fiscal decentralization, financial effectiveness and efficiency of the Local Government Financial Management to the capital expenditure for public services. The method used is quantitative method with a sampling technique using judgment sampling which took samples with consideration of the availability of data in the Local Government Financial Statements Reports in the Province of North Sulawesi by 10 districts/cities of Local Government in North Sulawesi since 2010 to 2015. The analytical method used is a multiple regression using SPSS 20 application assistance. The results show that PAD growth is effect as positive and significant capital expenditures for public services, fiscal decentralization is negative effect and not significant toward capital expenditures for public services, effectiveness and efficiency of local financial is effect as positive but not significant toward capital expenditures for public services..
In the terms of decentralization and local autonomy, increase of financial capacity, is the result of more use of fiscal and financial instruments, as well as increasing the effectiveness work of the local government. They are facing a series of complex issues related to the functions they have to carry and their financial capacities against these needs. Local Government Units in Albania have few funds to fill the needs for financing great projects mainly infrastructure, so in this paper we aim to analyze the financing instruments of local government. Borrowing from financial institutions and second level banks is the main financial instrument for Local Government to financing their great investment for the community. This is a new financing instrument for LGUs in Albania that is considered as a strong financial lever to enable the financing of their budgets and great projects capital investment. Another instrument are guidelines constructed in similar models and experiences of countries in political and economic tradition with that of Albania, the issue of bonds of LG / municipal bonds which are regulated by laws. Programs of international agencies to support lending to the local government is also another a significant financing instrument for LGUs in Albania to fulfilled their needs. DOI: 10.5901/ajis.2016.v5n3s1p387
Objectives: This study is aimed at analyzing various facets of Fiscal Federalism and its impact on the growth of states in India. Methods/Analysis: The Study proposes a model to test the impact of autonomy and hard budget constraints, two important features of decentralization, on the economies of the states. The model has been analyzed using the Fixed Effects Least Squares method for panel data using EViews. Findings: The results point out quite a few aspects of the impact of fiscal federalism on Indian states. The paper concludes by giving possible reasons for the negative relation between autonomy with growth and the positive relation between central grants with growth. The fact that the OwnTax ratio is negatively related to the GSDP growth rate shows that the level of autonomy of a state is negatively related to the growth of the state. The study also revealed a high dependence of the states on the grants and tax sharing mechanisms for growth. It was found that the central intervention in the states’ economy was positively related to their growth, which points to soft budget constraints on the states which depend highly on the central government to finance their spending. The overall level of decentralization was also found to be quite poor, though the relationship is not very economically significant. Applications/Improvement: The Study highlights that trade-off between the autonomy and budget constraint aspects of fiscal federalism needs to be a major concern and work area for policy makers in India.Keywords: Economic Growth, Fiscal Federalism, Tax
(ProQuest: ... denotes formulae omitted.)IntroductionThe existing literature have concluded that foreign resources have played significant role in raising the pace of economic development in developing countries. Most of the developing countries have been facing shortage of resources failing to meet the rising demand of capital over time. In order to overcome this problem these countries have been receiving heavy doses of external resources in the form of loans and grants from developed countries and international financial institutions World Bank, IMF and Asian Development Bank. The developing countries depend on foreign aid due to the desire of achieving rapid pace of economic development in the shortest period of time. Furthermore, for bridging their saving investment gap and export import gap these countries are forced to receive foreign aid from foreign sources. On the other side, developed countries provide loans and foreign assistance to developing countries keeping in view that developing countries cannot borrow from commercial sources due to their limited debt servicing capacity.Oates (1972) stressed that decentralization is one of the important factors which helps the donor countries in transferring resources because the government officials of recipient countries can make correct and appropriate decisions regarding the development projects as decentralization helps in bringing government and people closer. There are two serious problems which may come up in this regard. Firstly, it is very difficult to know about the real needs of the society. Secondly, allocation of the resources under political pressure to meet these requirements is not an easy task.The resource allocation in developing countries remained controversial due to the political pressure and conditions attached to foreign aid. The need for decentralization, comes up because of the existence of gap between spending needs and availability of revenue. There are three levels of government working in Pakistan and the allocation and distribution between them remained under debate. There exists a well-defined process through which resources are redistributed to provincial government by the federal government through National Finance Commission (NFC).The introduction of new formula in 2009 for the share of all provinces in the dividable pool has altered significantly. In the 1990 the Punjab's share was 57.87 according to NFC award based on the population, while there was an insignificant decline observed in 2006. There is decline in the share of Punjab recorded from 57.37 percent in 2006 to 51.74 percent in 2009. The share of Sindh has gone up from 23.71 percent in 2006 to 24.55 percent in 2009. The share of KPK has gone up from 13.82 percent in 2006 to 14.62 percent in 2009. The Baluchistan's share has increased to 9.09 percent on the basis of the revised formula.Several studies have analyzed the effect of foreign aid, fiscal decentralization on economic growth but there is no consensus among the researchers regarding the role of decentralization in economic growth.Easterly (2003) concluded that corrupt institutions having weak policies had adverse impact on foreign aid in achieving its desired objectives. Morrissey (2006) stressed that private investment has appeared to be inversely related to imports and directly related to foreign aid. Aurangzeb (2010) failed to find the evidence related to the impact of foreign aid on economic growth in Pakistan. Javid (2011) concluded that foreign aid may have positive effect on economic growth in Pakistan only in the presence of sound economic policies. The present study is highly important as the results of this study would help the policy makers to formulate and implement better policies consistent with the economic and political conditions prevailing in Pakistan.The rest of the study is organized as follows. Section-II presents theoretical framework. Model specification and interpretation of results are presented in Section-III. …
The political and economic benefits of decentralization have been cogently represented, to the extent that decentralization and devolution comprise identifiable programs of reform across a range of polities. However, the public policy question of finance following function – and the oversight of this process – is less resolved. Further, concerns over the financial sustainability of sub-national governments continue across a range of polities. Against the backdrop of reforms to municipal finance in both Australia and China, this chapter provides an account of the formation and functioning of two successful sub-national financial institutions, the Local Government Finance Authority of South Australia (LGFA) and the Municipal Finance Authority of British Colombia. The case studies suggest that sub-national finance may not be the thorn in the side of decentralization it sometimes appears to be. The broader introduction of such financial instruments is considered.
The economic empowerment of urban local bodies is essential for the effective delivery of urban development programmes. These institutions are to be provided adequate financial resources to carry out various development activities in the cities. They are to be empowered to raise tax and collect fees from their municipal areas and also get due share of the grant-in-aid from the central and provincial governments in time. The financial aspects of intergovernmental relations veritably influence the nature, scope, and depth of democratic decentralization. Urban finances are critical elements in sustainable urban development. Moreover, effective and efficient urban financial management system will go a long way to improve the financial health of the local bodies. It would enhance their economic competitiveness; make the delivery of urban services effective; expand and diversify their revenue; and generate fund through capital investments. Thus, municipal finance is one of the most important areas of the urban development system. Smart urban finance is the key requirement without which the quality of life of people in urban areas cannot be effectively improved.
Recently, fiscal decentralization, which involves the devolution of government fiscal responsibilities to lower levels of government, has been discussed in many developed and developing countries. In particular, the effect of fiscal decentralization on economic growth is a key issue in recent theoretical and empirical studies in public finance. The empirical evidences produce mixed results. In this study, the effect of fiscal decentralization on economic growth in a sample of several provinces will be explored. A province study offers several advantages: a bigger sample of data is available for province than for Indonesia; and panel data estimation is able to adjust the cultural, historical, and institutional differences and also to capture the local heterogeneities. By adopting a production-function-based estimation framework, the empirical estimation is done on a sample of cross section data that comprises of 26 province governments and the time series yearly data from 1992 to 2002. The Generalized Least Square method is used to test these data. The results indicate that: first, the fiscal decentralization variables (expenditure indicator) show the positive and significant coefficients, while, the revenue indicator shows the negative relationship with economic growth. Hence, several policy implications can be derived; i.e, the local government should be able: to increase their non taxes revenues; to create conducive conditions for capital inflows; and to develop a clear framework for fiscal decentralization assignment such as income redistribution and borrowingJEL classification: E60; E62; H62; H63; 04Keywords: province government financing; fiscal decentralization;localautonomy;fiscal policy; economic growth; cross-province data;
The dichotomy between pay-as-you-go (taxation financing) and pay-as-you-use (debt financing) methods of financing municipal projects, etc, is the area of concern in this paper. While there arc advantaees and disadvantages to both forms, debt financing carries a considerable amount of baggage known as interest. Interest or usury has been a concern of economic and religious thinkers through the ages. Given the potentially negative effect this has on the debtor, Indonesia is forewarned as it decentralizes fiscal administration to local governments. Besides reliance on taxation financing, an alternative public debt option is highlighted.
Spatial interaction among local governments in fiscal setting decisions is receiving increasingly attention in the applied public economics literature. Spatial interaction models rely on the presence of an externality from local budget making, that is external effects originate from inter-jurisdictional resource flows due to tax competition for a mobile base, or from local public expenditure spillovers into neighboring jurisdictions. Similarly, the intergovernmental grants competition exists when there is a rivalry among local governments to get them from central government. This paper attempted to identify how great the fiscal competition among local governments in Indonesia. Using spatial statistics, we concluded that the fiscal competition among municipalities was greater compared to the pre fiscal decentralization period. It seems that the local tax setting and expenditures decisions in particular municipality can be attributed to the mimicking behavior to neighbor regions. Also, we found that the fiscal competition among municipalities could be attributed negatively to the fiscal disparity. Those imply that in the regional autonomy era the local governments tend to increase their local own revenue intensively and demand for intergovernmental grants in order to finance their expenditures. In the long run, they could lead to the high cost economy, worsening fiscal dependency, and inefficiency of local government expenditures. Those findings above suggest that the distribution of intergovernmental transfers among regions should consider the local tax effort and the services minimum standard plays an important role to achieve the efficiency of local government expenditures.
This study aims to analyze the relationship between fiscal decentralization, fiscal capacity, financial independence and financial expenditure areas in achieving social justice. In this case, the East Java Province Indonesia is supported by the existence of local government district / municipality became the main object of study during 2010 -2014. The needed data are such as; financial balance data, regional revenue, the amount of local spending and social justice data on people's lives. Data analysis method used is Partial Least Square (PLS). The results provide the conclusion that the implementation of the fiscal decentralization policy gives positive and significant impact on local fiscal capacity. Fiscal capacity gives positive and significant impact on the local financial independence. Local financial independence gives positive and significant impact on the structure of the shopping area. The structure of local government spending has a significant effect on the achievement of social justice areas. In this case, the fiscal capacity and financial independence have no direct impact significantly on the achievement of social justice in the various districts / cities in East Java. In addition, this study also provides important conclusion that there is a significant indirect effect of fiscal decentralization on social justice through local fiscal capacity, local financial independence and the structure of local government spending.
<em>Since 2001</em><em> the</em><em> r</em><em>egional autonomy policies have </em><em>br</em><em>ou</em><em>g</em><em>ht</em><em> out</em><em> seven new provinces in Indonesia. Consequently, </em><em>they</em><em> require the central transfer budget to finance the delegated duties and authorities and the development programs in each province</em><em>.</em><em> Since its establishment until today, the fiscal capacity in seven provinces except Banten has not fulfilled the increase in local expenditure needs every year. It still much depends on the central transfer because the local revenue source like PAD is</em><em> very low</em><em>. This research uses a descriptive method-analysis by analyzing the secondary data relevant to the discussed topic and using the concept of fiscal capacity in the framework of the fiscal decentralization theory. The results of this qualitative research explain that the high fiscal capacity index (IKF) is obtained by </em><em>four </em><em>provinces those are Bangka Belitung, West Papua, Riau, and North Maluku, while the intermediate index is obtained by Banten, and the low fiscal capacity index is obtained by Gorontalo and West Sulawesi. Good fiscal capacity with high index does not guarantee that the poor population in the area will be reduced as West Papua and Riau which populations are still relatively large. Besides, Bantam with the very high PAD compared with six other provinces still has a large number of poor population of poor among seven provinces. But, overall the central transfer is recognized to be very helpful for the fiscal capacity of the seven new provinces above.</em><em></em>
Jonas Ingemann Parby, Jean-Noel Amantchi Gogoua, Gyongshim An
Focuses on current trends in municipal finance and the concerted efforts needed with accelerating urbanization in Côte d’Ivoire, where infrastructure requires expansion and upgrading, as well as improved financing and stable mechanisms for revenue generation. Systemic obstacles affect municipal budgets and impede public services under a decentralized model, and the devolution of responsibilities has produced contradictions, overlaps, and confusion. Municipalities have little capacity to finance infrastructure investments because of the limited level of internal resources, fiscal revenue, and government assistance, along with problems in the legal, institutional, and intergovernmental fiscal framework. Policy options must address the inconsistencies between devolution and decentralization alignment; strengthen municipal finance and revise the fiscal transfer systems in key areas; and leverage collaboration between regions, municipalities, and utilities to generate economies of scale in infrastructure services delivery. One promising area, intermunicipal collaboration, has produced groups that have launched development projects, provided towns with computerized systems, and established associations with regional and thematic groups.
The institutional collapse of a once unique state SFR Yugoslavia at the beginning of the 1990s, devastated economy, hyperinflation, corruption and general tendencies contrary to the processes in developed countries, in a nutshell - the entire macroeconomic environment being unstable, - brought about the need for political, economic, social and institutional reforms in the Republic of Serbia. The reform, among other things, and for the study of the factual issues it is exceptionally significant, covered the system of resource distribution and jurisdiction between the central and subcentral levels of government. Numerous changes which then occurred in the last twenty years or so, and which are still going on, have influenced political and territorial polity of our country to become decentralized, as well as the financial and fiscal relations between the levels of the Establishment. In the spirit of reform commitments, Republic of Serbia brought in a new Constitution and adopted copious amounts of laws, whose ultimate intention was promoting the fiscal system that would be in accordance with the latest theoretical findings and examples of good practice. In the structure of territorial organization of Republic of Serbia, autonomous provinces as entities of territorial autonomy, and municipalities, towns and the city of Belgrade have been established, as entities of local self-governance. Otherwise, subcentral authority levels in our country are facing many and various challenges when it comes to creating government revenue which, in its original or transferred form, remains available, used to finance their government expenditure, a constant need for their abundance and suitability, and all in order to constitute financial autonomy, followed by methods of governing the economic development, as well as the volume and content of jurisdiction. \nConsidering the fact that the distribution of resources amongst sub-central levels of government is preceded by the distribution of responsibilities, associated is the dilemma of which functions are realized more efficiently on a central and which on a subcentral level of government, and further, to what extent these lower levels are to be subservient to the central state, that is, in what sense independent. In that matter, it is essential to establish the extent of the realized fiscal decentralization, since depending on that degree, fiscal power is delegated to subcentral levels, the performance of public services is more efficient and is in accordance with priorities and preferences of citizens, which is also a precondition of successful functioning of all the segments of the public sector and widespread democratization of a society.