Institutional Autonomy: Driving the Decentralization Framework through Fiscal Decentralization Standards

The governance of Indonesia’s diverse regions is anchored in a complex legal structure designed to balance central authority with local autonomy. Law Number 23 of 2014 regarding Regional Government serves as the definitive instrument for Indonesia’s Decentralization Framework. This law defines how power, responsibility, and resources are distributed. However, to maintain high-resolution Fiscal Decentralization Standards, several portions of this law have been revoked or amended by newer legislation to better align with contemporary financial and sectoral needs.

Partial Revocations and Regulatory Evolution

The Decentralization Framework is dynamic, and certain provisions of Law 23/2014 have been superseded to ensure administrative efficiency and legal clarity:

1. Law No. 1 of 2022 (Financial Relations between Central and Regional Governments):
   This law revoked significant sections of Law 23/2014 to optimize Fiscal Decentralization Standards. The revocations include provisions regarding Regional Taxes and Retributions (Article 245), financial relations (Articles 279, 285), and several administrative protocols. These changes were aimed at creating a more transparent and equitable fiscal flow between the state and local entities, as previously touched upon by the Job Creation Law (Cipta Kerja).
2. Law No. 17 of 2019 (Water Resources):
   This legislation adjusted the Concurrent Governance matrix within Law 23/2014. Specifically, it modified the division of authority in the sectors of Public Works, Spatial Planning (Sub-sector of Water Resources), and Energy and Mineral Resources (Sub-sector of Geology). This ensures that critical natural resources are managed with a clear jurisdictional line between central, provincial, and regency governments.

Understanding Concurrent Governance Authority

The hallmark of the Decentralization Framework in Law 23/2014 is the concept of Concurrent Governance. This system divides governmental affairs into three categories:

• Absolute Affairs: Authorities retained solely by the Central Government (e.g., Foreign Policy, Defense, Justice).
• Concurrent Affairs: Authorities shared between the Central, Provincial, and Regency/City governments, which form the basis of regional autonomy.
• General Governance Affairs: Authorities belonging to the President as the head of government.

Conclusion: Strengthening Regional Accountability

In conclusion, Law Number 23 of 2014 remains the pillar of the Indonesian Decentralization Framework, even as it evolves through Fiscal Decentralization Standards introduced by subsequent laws. These amendments do not weaken regional autonomy; rather, they refine it by providing clearer legal boundaries and more sustainable financial mechanisms. By understanding these legal shifts, regional governments can better exercise their authority to improve public services and local welfare.

Visit the Village Regulations page for official access.