JAKARTA - Economic observer from Andalas University, Syafruddin Karimi, assessed that the reduction of Transfer to the Region (TKD) reflects the emergence of a new form of fiscal centralization.
According to him, the initial purpose of the TKD is to provide adequate fiscal space for local governments to exercise autonomy, set development priorities, and drive the local economy.
"When the central government reduces the TKD, collects fiscal space, and then spends it through the ministry's programs in various regions, the region remains a location for development, but loses control over the budget, project design, implementation time, and business actors who receive contracts," he said in his statement. , Friday, July 31.
According to Syafruddin, this condition makes regional autonomy only leave service responsibilities without being followed by adequate fiscal authority.
He also highlighted the reason for the central government which often associates the takeover of shopping spaces with the assumption that local governments are inefficient, wasteful, and prone to corruption.
According to him, although the problem does occur in a number of regions, the government should not make it a stigma for all local governments.
"The government needs to prove through data that central spending is really more efficient after calculating the quality of the project, the appropriateness of local needs, implementation delays, contract concentration, and leakage of income outside the region," he said.
He also reminded that corruption practices not only occur at the regional level, so that the centralization of the budget only moves the location of the risk while increasing the value of the projects being contested.
Furthermore, Syafruddin assessed that central government spending in the region does not automatically have the same economic impact as spending carried out through the APBD.
According to him, projects managed by local governments generally involve local contractors, local suppliers, and local labor, thus generating economic circulation in the region.
He added that on the contrary, if the procurement process is centralized with greater requirements, such as capital, experience, guarantees, and the scale of national projects, regional contractors will find it difficult to compete.
"They often only become subcontractors with a small margin, while profits and business decisions remain at the headquarters of large companies. This condition explains the long-standing complaints of the regional Kadin that projects are present in their region, but business opportunities are actually away from local actors," he said.
Syafruddin also highlighted the impact of the TKD cut, which began to be seen from the estimate of around 490 local governments that needed additional funds to finance employee salaries and minimum operational needs after adjusting transfers.
On the other hand, the central government also still has an obligation to pay the Revenue Sharing Fund (DBH) which has not been disbursed worth around Rp. 70 trillion to hundreds of regions.
According to him, this condition shows that the government has not fully anticipated the impact of transfer reductions on the liquidity of the Regional Budget, development spending, and regional economic circulation.
"The region then protects the salary by cutting projects, maintenance, public services, and payments to contractors. The central government may succeed in increasing control over the budget, but at the same time weaken the fiscal capacity and the business base of the region," he said.
Therefore, Syafruddin encouraged the government to implement fiscal decentralization based on performance, not to return to the pattern of re-centralization on the grounds of efficiency.
He assessed that the central government needed to ensure certainty of the amount and timing of the distribution of TKD, immediately fulfill the obligation to pay DBH, and provide sanctions against inefficient regions based on the evaluation of each region.
In addition, he suggested that central government projects be designed on a scale that would allow local contractors to compete, accompanied by the obligation to involve labor, suppliers, and business partners from the region.
According to him, every policy to shift TKD into central government spending also needs to be preceded by an analysis of the impact on the regional economy.
"If the center controls the money, chooses the project, determines the winner of the tender, and controls the disbursement, the region will only be a location for implementation. This pattern does not improve autonomy, but builds a new centralism on the grounds of efficiency," he concluded.
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