Draft Law On HKPD Enacted As Law, Sri Mulyani: Improving The Quality Of Fiscal Decentralization

Minister of Finance Sri Mulyani when giving a press statement at the Senayan Parliament Complex, Jakarta (Photo: Screenshot of the Ministry of Finance Youtube)

JAKARTA - Minister of Finance, Sri Mulyani, said that the Draft Law on Financial Relations between the Central Government and Regional Governments (RUU HKPD) which was approved by the House of Representatives to become law was aimed at strengthening fiscal decentralization.

According to the Minister of Finance, this step will encourage effective and efficient allocation of national resources through transparent, accountable, and just financial relations between the central and regional governments, to achieve equitable distribution of community welfare.

"We believe that this excellent discussion process will make the HKPD Bill an important component in fiscal reform, especially towards a system of financial relations between the center and the regions that are fair, aligned, effective, efficient, and accountable", she said at the Senayan Parliament Complex, Jakarta after attending the House of Representatives Plenary Session, Tuesday, December 7.

The Minister of Finance added that various improvements were made, including an evaluation of the implementation of fiscal decentralization that was not yet optimal, such as increasing the allocation of Transfers to Regions and Village Funds (TKDD) which had not been fully utilized optimally.

"This can be seen from the use of the DAU (General Allocation Fund) which is still dominated by personnel expenditures and DAK (Special Allocation Fund) which is one of the main sources of capital expenditure in the regions, and the lack of regional capacity in optimizing Regional Original Income (PAD) which has been In the last three years, the portion of Regional Original Revenue (PAD) to Regional Revenue and Expenditure Budget (APBD) is still in the range of 24.7 percent", she said.

It is stated that other evaluations highlight the issue of regional spending that has not been focused and efficient, which is reflected in 29,623 types of programs and 263,135 types of activities as well as the pattern of APBD execution which is still business as usual.

Furthermore, the state treasurer also revealed that the synergy and movement of the State Budget and APBD policy steps are still not running optimally, so they need to be strengthened to be able to maintain fiscal sustainability.

"These things have an impact on the achievement of outputs and development outcomes that are not optimal and unequal in the regions. Therefore, new policies are needed that are oriented towards performance and capacity in improving public services and public welfare through synergy and collaboration to support national development targets", she explained.

Then, this regulation is also designed with comprehensive reform efforts, not only from a fiscal perspective such as granting the authority to collect regional taxes and regional levies, transfers to regions, and financing, but also strengthen regional spending to be more efficient, focused, and synergistic with the central government.

"It must be understood together that the policies carried out in the HKPD Law are a joint effort to improve the quality of the implementation of fiscal decentralization in Indonesia", concluded Minister of Finance, Sri Mulyani.