Implications of the Decentralization Policy on Poverty Reduction in Indonesia

This paper aims to analyze the implications of decentralization policies that are linked to poverty reduction in Indonesia. The focus of the study is the decentralization policy as regulated in Law No. 22/1999, which was amended twice through Law No. 32/2004 and Law No. 23/ 2014 concerning local government. In addition, it also discussed Law No. 25/ 1999 concerning financial relations in the central-regional government. Using qualitative methods with a policy/program analysis approach and secondary data, this study found that decentralization policies do not link directly to poverty reduction. Out of 34 provincial regions, only 8 provincial regions have achieved a human development index (HDI) above the national average, while having a poverty rate below the national average. In contrast, there are 13 provincial regions that reached HDI below the national average and at the same time have poverty levels above the national average. Based on these findings, this study recommends, first, that local governments evaluate and direct various programs that lead to HDI improvement and poverty reduction. Second, that they synchronize poverty reduction programs in the regions with the same programs from the central government and international programs in the regions.

decentralized policy is that through this policy, it is hoped that regional development will proceed quickly, which is marked by regional economic growth and poverty reduction. The arguments built are (1) a decentralized policy that does not link significantly to poverty reduction in regency/ municipality areas; (2) there is an assumption that poverty reduction is the duty and responsibility of the central government, so that the regions do not explicitly make programs that link directly to poverty reduction; (3) if economic growth occurs in regency/municipality areas, it does not automatically reduce poverty. Furthermore, to prove the successful implementation of decentralization policy, it will be explained by looking at the link between decentralization policy and the achievement of the human development index (HDI) with poverty levels.
Decentralized systems are those in which central entities play a lesser role in any or all of these dimensions (Schneider, 2003) . Decentralization (local autonomy) has emerged as a new paradigm in development policy and administration since the 1970s. Growing attention to decentralization is not only related to the failure of centralized planning and the popularity of growth with equity strategies, but also to the realization that development is a complex and uncertain process that cannot be easily controlled and planned from the center. For this reason, the pioneers of decentralization put forward a long line of reasons and arguments about the importance of decentralization in planning and administrating in third-world countries, especially in accelerating regional economic development and growth. The World Bank also encourages donor recipient countries to implement decentralization (Amal & Pratikno, 1996). Experiments benefit not just the innovating government but also potential imitators, and so local governments have an incentive to freeride off their neighbors. Alternatively, a central government should take this learning externality into account when deciding whether to consider a policy experiment (Stumpf, 2002).
In Indonesia, the decentralization policy is stipulated through Law No. 22 of 1999 concerning regional government, which was implemented in January 1, 2001. This law regulates the clear division of authority between the central and regional governments. There are at least 6 (six) which then turned into regional transfers, such as the General Allocation Fund (DAU). We just look at the sources of regional finance; it is not experiencing a significant change from before.
PAD or local revenue contribution to the total APBD or expenditure is still very small.
The research results of the Faculty of Social and Political Sciences, Gadjah Mada University in collaboration with the Ministry of Home Affairs in 1992 showed the small contribution of PAD to the regional budget. Of the 292 (two hundred ninety two) districts/municipalities that existed at the time, there were 122 city districts whose PAD contribution was between the district budget and 0.00-10.00%. Furthermore, as many as 86 districts/municipalities contributed between 10.10 and 20.00%; 43 regencies/cities contributed between 20.10 and 30.00%; 22 regencies/cities contributed between 30.10 and 40.00%; 17 regencies/cities contributed between 40.10 and 50.00%; and only 2 districts/municipalities have a PAD contribution to the regional budget that is above 50%.
The decentralization has been running for about 18 (eighteen) years, and still the district/ municipality budget is highly dependent on the central government. The difference is that in addition to regional transfers, such as the General Allocation Fund, the central government has issued a new policy in the form of village funds.
The existence of village funds will certainly reduce the burden on the regency budget in financing village development. The average contribution of the central government to the regional budget is in the range of 70%. In 2011, for example, the average PAD contribution was only 17.8%, while fiscal transfers were 72.9%, with an average DAU of 50.4% (Lisna, Sinaga, Firdaus, & Sutomo, 2013). Furthermore, Ahmad (1998), as quoted by (Jia, Guo, & Zhang, 2014), states that district governments are less fiscally independent.
Therefore, over the past decade, most developing and transitional countries have either embarked upon or stated their intention to embark upon some type of fiscal decentralization initiative (Vazquez & Mcnab, 2003) .
Considering that financially only a few regions are able to carry out delegated administrative functions, due to the wealth of natural resources, such as Aceh, East Kalimantan, Riau, Papua and West Papua, as well as for income tax revenue sharing, such as Surabaya and Jakarta, the majority of regions must be able to increase PAD. This is in line with one of the principles of fiscal decentralization, "Local governmental units should have revenues available to meet adequately their obligations" (UNDP, 1999).
In terms of poverty levels, even though during the Five Years Term for Development (Pelita) VI during the New Order and until the current Reform Order, Indonesia was able to reduce the number of people living on the poverty line, the results achieved were not yet satisfactory.
Indeed, as a percentage, the number has decreased and is at a lift of 9.2% of the total population.
However, when compared to other developing countries in Asia, Indonesia is one of the countries with the poorest population, both in absolute and relative terms. This means that it requires more serious and conceptual handling. Not only that, success in poverty reduction also depends on the ability to manage various resources and environmental conditions. This is in line with what (Jones, 2002) said, "In many developing countries, social and economic development, including alleviation of poverty, depend heavily on the proper use and effective management of environmental resources and related ecosystems." (Kuncoro, 2004) identified the causes of poverty in economic terms, namely: 1. At a micro level, poverty arises because of inequality in resource ownership, which results in an unequal distribution of income.
The poor only have limited resources and the quality is low.
2. Poverty arises due to differences in the quality of human resources. Low-quality human resources equals low productivity, which in turn equals low wages. The low quality of human resources is due to lack of education, disadvantaged fortune, discrimination or because of heredity.
3. Poverty arises due to differences in access to capital. Ragnar Nurkse, a well-known development economist in 1953, further said that a poor country is poor because it is poor. This view came to be known as the vicious circle of poverty theory. Low income will result in low saving ability. Furthermore, low saving ability will result in low capital ownership, which will ultimately result in low productivity. This will continue as a cycle [Moeljarto in (Hutahaean, 2006)] Bhagwati (1988)  (1) The decline of public advocates and the demise of epistemic community; (2) The perception of poverty as an avoidable externality of modernity for which economic solution should be paramount; (3) The failure of government; (4) The data maze; (5) The loss of visibility and class basis of poverty; and (6) The emergence of new and better ideas.
On the other hand, although regional government expenditure does not automatically reduce poverty, it is usually expected that the budget for the education and health sector can reduce poverty (Bird & Rodriguez, 1999) The  (Heltberg, 2009). The aim is the use of PPP so that levels of poverty can be compared fairly between countries. The benefit is to determine the direction of using financial resources owned and to assess the progress of the distribution of financial resources, including assessing the progress of poverty reduction.
Conversion using the PPP figure will obtain information about the amount of rupiah that is consumed to buy goods or services; the same amount can be purchased in America for US $1.
The calculation of this conversion number is based on price and quantity in each country whose data is obtained through a survey, which is usually done

Methods
The method is a method used by researchers to collect and analyze data to test or answer research questions that have been formulated previously. The choice of method is closely related to the type of data and objectives desired by the researcher and the scope of the study.
This research wants to see the link between decentralization policy and poverty reduction, which uses secondary data obtained through various documents such as books, journals, previous research results, websites, and regional success stories that have succeeded in reducing poverty. Related above, this study uses a qualitative method. (Cresswell, 2009), states that qualitative research methods are "methods to explore and understand the meaning-by individuals or groups of people-ascribed to social problems or humanity." Furthermore, (Denzin & Lincoln, 2005) define qualitative research method as a way to "study things in their natural settings, attempting to make sense of, or interpret, phenomena in terms of the meanings people bring to them." The data collected in this study was analyzed with descriptive analysis. By this technique, it will be illustrated throughout the data or facts will be obtained from the field by applying the following procedure: a. Using descriptive analysis to develop categories that are relevant to the purpose of research.
b. Interpreting the results of descriptive analysis according to the data and theories accordingly.
Specifically, the data analysis is done by the It is often mentioned that the objectives of the decentralization policy concern two main things: the redistribution of authority in the field of government and the economic sector (fiscal decentralization). The principle of its implementation is directed to accelerate the realization of community welfare through service improvement and empowerment, and to be able to increase competitiveness by paying attention to the principles of democracy, equity, justice, specificity, regional potential and diversity (Rudzali & Sudarlan, 2016 Referring to point 4 (four) above, the actual success or performance of the implementation of the decentralization policy is very dependent on whether PAD is increasing and regional economic growth is accelerating. Economic growth in the region is expected to reduce poverty. This is also one of the goals to be achieved from the decentralization policy as mentioned earlier. Meanwhile, Bantaeng regency, in the 5 (five) years of Nurdin Abdullah's leadership, was able to reduce poverty from the previous 12.12% to 7.5% (Haboddin, 2017). However, this poverty rate   This happens because there is an assumption that poverty reduction is the responsibility of the central government. In addition, there is also an assumption that in addition to the affairs of the central government, poverty is a matter for international institutions. Thus, it often happens that between regional programs, the central government, and/or international institutions in the regions are not interlocked. Thus, it is not surprising that the Millennium Development Goals (MDGs) program, even though it has been running for 15 years in Indonesia, has not been successful. This is indicated by the continued program, namely Sustainable Development Goals (SDGs).
Global changes can also be a cause of poverty reduction in one region. At the farmer level, for example, due to the emergence of farmer-hub start-ups, relations between farmers and buyers can occur immediately without going through third parties, such as collectors, small traders to large traders (toke). The direct relationship between farmers and buyers, even in other parts of the world, can increase farmers' incomes, due to farmers' higher agricultural prices compared to before. Thus, regional programs must also be synergized with the central government program and with the global change in question.