Prof. Benedictus Raksaka Mahi, S.E., M.Sc., Ph.D. inaugurated as Professor in the Field of Economics and Public Policy, Faculty of Economics and Business (FEB) Universitas Indonesia (UI). The inauguration procession was led by the Rector of UI, Prof. Ari Kuncoro, S.E., M.A., Ph.D., and was held at the Convention Hall, UI Depok Campus, on Wednesday (22/11). Prof. Mahi was inaugurated as a professor after delivering a scientific oration entitled “Reflections on the Role of Fiscal Decentralization for Regional Development: Its Relevance in the Present and Future”.
In his speech, Prof. Mahi said that Indonesia will become a developed country and reach its golden age in 2045. To make this happen, a solid economic foundation is needed for it to consistently achieve economic growth of between 5.4 – 6.7 percent per year in that golden year. On various occasions, the National Development Planning Agency (BAPPENAS) has presented various development strategies to realize Indonesia’s per capita income reaching USD 30,300 in 2045. Meanwhile, based on World Bank data, Indonesia’s per capita income in 2022 will be USD 4,580.
Previously, the central government was the main actor in planning development in the regions. However, with the advent of the decentralization era which began in early 2001, regional governments, be it provincial, district, city, and village, played an active role in their regional development strategies to contribute to national development. Regional development in the era of autonomy provides opportunities for regional governments to innovate by building local growth centers to encourage regional economic growth.
The decentralization or regional autonomy scheme in Indonesia has delegated many governmental and administrative matters to regional governments, which is strengthened by fiscal (financial) decentralization, in the form of transfers of General Transfer Funds (DTU) and Special Transfer Funds (DTK). To attract investment to the regions, investment incentive scheme regulations have also been issued which can be provided by regional governments, as stated in Government Regulation (PP) Number 24 Year 2019 concerning Providing Incentives and Facilitation of Investment in the Regions.
However, Prof. Mahi assesses that there are various regional government regulatory problems which result in inefficiency in regional spending. Some of this is due to the effect of incumbent expenditure allocation in regional head elections, known as the political budget cycle (PBC) effect; weak regional government governance which creates inefficiency in regional financial management; and support for central and regional budgeting which has not been optimal in implementing the division of government affairs in the regions.
“Making regional development a driver of economic growth in the era of decentralization is the right choice. Through decentralization, many affairs and resources have been regionalized. However, improvements to the management of regionalized affairs and regional financial management need attention. Fiscal decentralization policies have adaptability and can be designed to overcome various existing problems in order to support optimal regional development,” said Prof. Mahi.
Several points of recommendation conveyed by Prof. The way to fix this problem is to increase sustainable public transparency in the budgeting and audit process, consider results-based accountability, and use information technology in public services. Furthermore, a reward and penalty mechanism is needed in the regions. The government can provide Regional Incentive Funds (DID) only to regional governments that demonstrate good governance performance. Meanwhile, regions that have poor performance will receive General Allocation Funds (DAU) in the form of performance-based grants to encourage improvements in services that are still poor.
Increasing synergy between central and regional development also needs to be a special agenda by optimizing the role of fiscal decentralization policies. This could involve the development of transfer funds in the form of Special Allocation Funds (DAK), which are focused on building infrastructure (roads) to connect growth centers such as Special Economic Zones (KEK) with regional centers of economic activity. DAK can also support human resource development by involving regional workers in the development of national strategic projects.
Before conducting a study on fiscal decentralization for regional development, Prof. Mahi has done a lot of similar research. Some of them are Village Development: Effect of Village Fund and Village Head Education (2023); The Effect of Financial and Non-financial Supports on the Productivity of MSEs in Indonesia (2022); and Analysis of the correlation between ICT and Tax Revenue in Indonesia (2022).
Prof. Benedictus Raksaka Mahi, S.E., M.Sc., Ph.D, completed a Bachelor of Economics and Development Studies at Universitas Indonesia in 1989; completed the Master of Science in Policy Economics Program at the University of Illinois Urbana-Champaign, United States in 1992; and obtained a Ph.D Department of Economics at the University of Illinois Urbana-Champaign, United States in 1996. Prof. Mahi received the 30 Year Satya Badge award from the President of the Republic of Indonesia in 2022. In 2019-2022, he served as Chair of the FEB UI Faculty Academic Senate (SAF).
The inauguration procession of professor Prof. Mahi was also attended by Deputy VII (International Economic Cooperation) of the Indonesian Coordinating Ministry for Economic Affairs, Dr. Edi Prio Pambudi, S.E., M.A; Managing Director at Inke Maris & Associates, Strategic Communications Consultant, Isma Natanegara, MBA; Former Director General of Financial Balance 2013-2018, Dr. Boediarso Teguh Widodo; Professor at the Faculty of Science & Technology, Pelita Harapan University, Prof. Dr. Ir. Wiryanto Dewobroto, MT.; Professor at the Faculty of Geography, Gajah Mada University, Prof. Drs. Projo Danoedoro, M.Sc., Ph.D.; and Professor at the Faculty of Economics and Business, Bogor Agricultural Institute, Prof. Dr. Ir. Bambang Juanda, M.S.
