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BY
Diaswati Mardiasmo Diploma of Commerce
Bachelor of Business (Economics & International Business)
School of Management Faculty of Business
Queensland University of Technology Brisbane - Australia
Thesis submitted for Master of Business (Research)
2007
i
Abstract
The purpose of this study is to analyse the level of good governance understanding implementation in Indonesia regional governments, identify impeding variables to good governance implementation, and evaluate the extent of international good governance standards alignment. The influence of economic and political transition, decentralisation and regional autonomy regime, bureaucracy culture, and political history is analysed to reflect the degree of good governance implementation and level of convergence to international good governance standards. The methodological approach involves a triangulation of in-depth interview, document analysis, and International Good Governance Standard comparison. Findings from the study reflect disparities in good governance understanding and implementation between Indonesia regional governments, nine main impeding variables to good governance implementation including bureaucratic culture and political history, and a positive response to convergence towards international good governance standard alignment. Findings also act as an in depth study and analysis of current Indonesia regional government situation, resulting in inputs and recommendations geared towards public policy development and good governance implementation guidelines. Key Words: Good Governance, Indonesia, Indonesia regional government, impeding variables,
International Good Governance Standards, triangulation methodology, in-depth interviews, document analysis, international standard comparison, decentralisation,
regional autonomy, bureaucracy culture, political history, disparity, convergence, divergence, public policy, implementation guidelines.
ii
Statement of Original Authorship
I hereby declare the work contained in this thesis has not been previously submitted
to meet requirements for an award at this or any other higher education institution. To the best of my knowledge and belief, the thesis contains no material previously
published or written by another person except where due reference is made.
Diaswati Mardiasmo
22/02/2007
iii
Acknowledgement
There are many people whom without them I doubt this thesis would be written…the first and foremost are my parents – mum and dad – thank you for your support and
blessing…and my two sisters, Dira and Devi, for the steady supply of jokes when I’m down. To the Rosidi and Yatmosoemarto family thank you for endless support
and prayers. My supervisors, Dr Paul Barnes and Dr Yuka Sakurai, a heartfelt thanks to both of you for your guidance, input, revisions, ice coffees, jokes, and reading my
thesis even when you are on holiday. To Michael Brett, thank you for your support, for the arrows in my diagrams, for the dances, and for the encouraging words
pushing me to finish this thesis. To my best friends; Dominika Zerbe (Australia), Maggie Beighton (Canada), Juanita Kwarteng (Oman/Cameroon), and Victoria
Morrow (Jaipur India), my thanks for lending me your ears, for your support, and for keeping it real. My housemates; Lee Louise Sanderson, Lauren Banning, and Nobina
Morimoto – thank you for your patience and homey chats. I thank all of the lecturers in School of Management, School of Economics, and School of AMPR for providing
me the opportunity to tutor in their subjects, the opportunities you gave me increased my insights in academic writing. My outmost gratitude to my interviewees;
government officials of Denpasar, Solok, Gorontalo, and Padang, for all of your help, time, beautiful food and reception, and most importantly your insights. “The” Miss
Lindsey T H Jackson, thank you for bringing out the dancer in me – shaking it loose to the beat helped me re-focus and re-energise. I’d also like to thank my examiners
for their patience in reading this thesis and providing me with valuable input on how to make it perfect. Special thanks to Wouter Meyers for a brief but powerful appearance during my revision period, thank you for keeping me laughing, dancing,
and being in a teaseful mood throughout the “tedious” process – best of luck with your own theses!! Last but not least I’d like to thank my fellow research students in
Z701 for their endless support, hot chips, “researcher’s night outs”, chats, and for keeping this journey a fun one.
iv
Table of Contents
1. INTRODUCTION AND CONCEPTUAL FRAMEWORK ................................................... 1
1.1. INTRODUCTION .................................................................................................................... 1 1.2. PURPOSE OF STUDY ............................................................................................................. 2 1.3. RESEARCH QUESTIONS ........................................................................................................ 3 1.4. CONCEPTUAL FRAMEWORK ................................................................................................. 4
2. CONTEXT OF THE RESEARCH ........................................................................................... 5 2.1. INCREASED IMPORTANCE OF CORPORATE GOVERNANCE AND GOOD GOVERNANCE ........... 5 2.2. THE EVOLUTION OF CORPORATE GOVERNANCE AND GOOD GOVERNANCE LITERATURE IN INDONESIA ......................................................................................................................................... 6 2.3. SUMMARY.......................................................................................................................... 12
3. GOOD GOVERNANCE, INDONESIAN REGIONAL GOVERNMENTS, AND GLOBALIZATION: THE RELEVANT LITERATURE .............................................................. 14
3.1. GOOD GOVERNANCE: AN OVERVIEW ................................................................................ 14 3.2. INDONESIA’S GOOD GOVERNANCE SYSTEM ...................................................................... 15 3.3. CULTURE AND POLITICAL HISTORY OF INDONESIA............................................................ 17 3.4. DECENTRALISATION AND REGIONAL AUTONOMY ............................................................. 24 3.5. INTERNATIONAL STANDARDS ALIGNMENT IN INDONESIA ................................................. 25 3.6. THE INTERNATIONAL CORPORATE GOVERNANCE SCORECARD ......................................... 28 3.7. INTERNATIONAL GOOD GOVERNANCE STANDARD ............................................................ 32
4. THEORETICAL BASIS AND METHODS ........................................................................... 37 4.1. A TWO BY TWO MATRIX ................................................................................................... 37 4.2. GROUNDED THEORY AND METHODOLOGICAL FRAMEWORK ............................................. 39 4.3. DOCUMENT ANALYSIS ....................................................................................................... 40 4.4. IN-DEPTH INTERVIEWING .................................................................................................. 43 4.5. INTERNATIONAL GOOD GOVERNANCE STANDARDS COMPARISON .................................... 47 4.6. CONCLUSION ..................................................................................................................... 49
5. FINDINGS................................................................................................................................. 52 5.1. DENPASAR REGIONAL GOVERNMENT, BALI PROVINCE ..................................................... 52 5.2. PADANG REGIONAL GOVERNMENT, WEST SUMATRA........................................................ 58 5.3. SOLOK REGIONAL GOVERNMENT, WEST SUMATRA .......................................................... 66 5.4. GORONTALO REGIONAL GOVERNMENT, SULAWESI........................................................... 74 5.5. A VIEW FROM CENTRAL GOVERNMENT – DKI JAKARTA ................................................... 83 5.6. CONCLUSION ..................................................................................................................... 89
6. ANALYSIS: GOOD GOVERNANCE IMPLEMENTATION IN INDONESIA AND IMPEDING VARIABLES TO GOOD GOVERNANCE IMPLEMENTATION ........................ 93
6.1. CHAPTER OVERVIEW ......................................................................................................... 93 6.2. COMMUNICATION DISABILITIES......................................................................................... 96 6.3. INFLUENCE OF LEADERSHIP ............................................................................................. 107 6.4. HUMAN RESOURCE CAPABILITY AND CAPACITY WITHIN REGIONAL GOVERNMENT ....... 114 6.5. POLITICAL HISTORY......................................................................................................... 123 6.6. REGIONAL GOVERNMENT CUSTOMS AND CULTURE ........................................................ 130 6.7. REMUNERATION SYSTEM AND EMPLOYEE WELFARE ...................................................... 135 6.8. MINIMUM PUBLIC SERVICE STANDARD ........................................................................... 146 6.9. SOCIETY INVOLVEMENT .................................................................................................. 151 6.10. CONCLUSION ................................................................................................................... 156
7. RESULTS AND DISCUSSIONS: ANSWERING THE RESEARCH QUESTIONS ....... 158 7.1. TO WHAT LEVEL IS GOOD GOVERNANCE UNDERSTOOD AND IMPLEMENTED AT THE REGIONAL GOVERNMENT LEVEL? ................................................................................................... 158 7.2. WHAT ARE THE IMPEDING VARIABLES TO GOOD GOVERNANCE IMPLEMENTATION? ....... 162
v
7.3. HOW HAS INDONESIAN REGIONAL GOVERNMENT GOOD GOVERNANCE CONVERGED TO / DIVERGED FROM INTERNATIONAL GOOD GOVERNANCE STANDARDS? ............................................ 164 7.4. CONCLUSION ................................................................................................................... 168
8. RECOMMENDATIONS....................................................................................................... 170 8.1. HUMAN RESOURCE MANAGEMENT.................................................................................. 170 8.2. CREATION OF A GOOD GOVERNANCE TASK FORCE AND DEVELOPMENT OF GOOD GOVERNANCE IMPLEMENTATION GUIDELINES............................................................................... 173 8.3. PRIORITISATION OF RECOMMENDATIONS......................................................................... 176
9. LIMITATIONS AND RESEARCH DIRECTIONS............................................................ 181 9.1. LIMITATIONS OF STUDY ................................................................................................... 181 9.2. DIRECTIONS FOR FUTURE RESEARCH............................................................................... 184
10. CONCLUSION .................................................................................................................. 185 APPENDIX A – LIST OF INTERVIEWEES................................................................................ 190 APPENDIX B – CENTRAL GOVERNMENT (JAKARTA) LIST OF QUESTIONS AND INTERVIEWEES............................................................................................................................ 192 REFERENCES................................................................................................................................. 194
vi
List of Figures
FIGURE 1. CONCEPTUAL FRAMEWORK.................................................................................................... 4 FIGURE 4.1 MATRIX IDENTIFYING SAMPLE REGIONAL GOVERNMENT.................................................. 39 FIGURE 4.2 METHODOLOGICAL FRAMEWORK....................................................................................... 40 FIGURE 4.3 IN-DEPTH INTERVIEWING RESEARCH DESIGN FLOW .......................................................... 43 FIGURE 5.1.1 SAMPLE REGIONAL GOVERNMENT GOOD GOVERNANCE UNDERSTANDING AND
IMPLEMENTATION COMPARISON ................................................................................................. 54 FIGURE 5.1.2 DENPASAR GOOD GOVERNANCE ATTRIBUTES ................................................................ 55 FIGURE 5.1.3 DENPASAR IMPEDING VARIABLES TO GOOD GOVERNANCE IMPLEMENTATION............... 56 FIGURE 5.1.4 CONVERGENCE TO INTERNATIONAL GOOD GOVERNANCE STANDARDS - DENPASAR
COMPARISON............................................................................................................................... 57 FIGURE 5.2.1 PADANG GOOD GOVERNANCE ATTRIBUTE...................................................................... 62 FIGURE 5.2.2 PADANG IMPEDIMENT VARIABLES TO GOOD GOVERNANCE ........................................... 63 FIGURE 5.2.3 CONVERGENCE TO INTERNATIONAL GOOD GOVERNANCE STANDARDS - PADANG
COMPARISON............................................................................................................................... 65 FIGURE 5.3.1 SOLOK GOOD GOVERNANCE ATRIBUTES ........................................................................ 70 FIGURE 5.3.2 SOLOK IMPEDING VARIABLES TO GOOD GOVERNANCE IMPLEMENTATION ..................... 71 FIGURE 5.3.3 CONVERGENCE TO INTERNATIONAL GOOD GOVERNANCE STANDARDS - SOLOK
COMPARISON............................................................................................................................... 73 FIGURE 5.4.1 GORONTALO GOOD GOVERNANCE ATTRIBUTE ............................................................... 79 FIGURE 5.4.2 GORONTALO SPECIFIC IMPEDING VARIABLES TO GOOD GOVERNANCE IMPLEMENTATION
.................................................................................................................................................... 80 FIGURE 5.4.3 CONVERGENCE TO INTERNATIONAL GOOD GOVERNANCE STANDARDS - GORONTALO
COMPARISON............................................................................................................................... 82 FIGURE 5.5.1. DECENTRALISATION AND REGIONAL AUTONOMY EFFECTS - CENTRAL GOVERNMENT
VIEW ........................................................................................................................................... 84 FIGURE 5.5.2. REGIONAL GOVERNMENT GOOD GOVERNANCE UNDERSTANDING AND IMPLEMENTATION
- A CENTRAL GOVERNMENT VIEW.............................................................................................. 86 FIGURE 5.5.3 REGIONAL GOVERNMENT IMPEDING VARIABLES TO GOOD GOVERNANCE - A CENTRAL
GOVERNMENT VIEW.................................................................................................................... 87 FIGURE 6.A IMPEDING VARIABLES TO GOOD GOVERNANCE ................................................................. 93 FIGURE 6.B IMPEDING VARIABLES TO GOOD GOVERNANCE IN PERCENTAGE FIGURES......................... 94 FIGURE 6.C IMPEDIMENT VARIABLES TO GOOD GOVERNANCE BASED ON REGIONS............................. 95 FIGURE 6.D IMPEDIMENT VARIABLES TO GOOD GOVERNANCE BASED ON ECHELON LEVELS .............. 95 FIGURE 6.1.1 GOOD GOVERNANCE AT REGIONAL GOVERNMENT INDONESIA....................................... 97 FIGURE 6.1.2 PERCENTAGE OF SEMINARS AND LEVEL OF DISCREPANCY............................................ 100 FIGURE 6.1.3 SEMINARS AND INFORMATION DISCREPANCY BASED ON REGIONS................................ 103 FIGURE 6.2.1 GOOD GOVERNANCE UNDERSTANDING AND IMPLEMENTATION - REGIONAL COMPARISON
.................................................................................................................................................. 107 FIGURE 6.3.1 LEADERSHIP AS AN IMPEDING VARIABLE BY REGIONS.................................................. 111 FIGURE 6.3.2 LEADERSHIP AS AN IMPEDING VARIABLE BY ECHELON LEVEL ..................................... 112 FIGURE 6.4.1 HUMAN RESOURCE LEVEL AS AN IMPEDING VARIABLE TO GOOD GOVERNANCE -
REGIONAL COMPARISON ........................................................................................................... 115 FIGURE 6.4.2 HUMAN RESOURCE LEVEL AS AN IMPEDING VARIABLE TO GOOD GOVERNANCE -
ECHELON COMPARISON............................................................................................................. 115 FIGURE 6.5.1 POLITICAL HISTORY AS AN IMPEDING VARIABLE TO GOOD GOVERNANCE - REGIONAL
COMPARISON............................................................................................................................. 124 FIGURE 6.5.2 POLITICAL HISTORY AS AN IMPEDING VARIABLE TO GOOD GOVERNANCE - ECHELON
COMPARISON............................................................................................................................. 125 FIGURE 6.6.1 EFFECTS OF CULTURE ON REGIONAL GOVERNMENT PERFORMANCE ............................ 131 FIGURE 6.7.1 LEVEL OF GOVERNMENT OFFICIAL WELFARE AS AN IMPEDING VARIABLE TO GOOD
GOVERNANCE - REGIONAL COMPARISON.................................................................................. 138 FIGURE 6.7.2 LEVEL OF GOVERNMENT OFFICIAL WELFARE AS AN IMPEDING VARIABLE TO GOOD
GOVERNANCE - ECHELON COMPARISON ................................................................................... 140 FIGURE 6.7.3 LACK OF REWARDS AND PUNISHMENT SYSTEM AS AN IMPEDING VARIABLE TO GOOD
GOVERNANCE - REGIONAL COMPARISON.................................................................................. 144 FIGURE 6.8.1 MINIMUM PUBLIC SERVICE STANDARD AS AN IMPEDING VARIABLE TO GOOD
GOVERNANCE - REGIONAL COMPARISON.................................................................................. 148 FIGURE 6.8.2 MINIMUM PUBLIC SERVICE STANDARD AS AN IMPEDING VARIABLE TO GOOD
GOVERNANCE - ECHELON COMPARISON ................................................................................... 148
vii
FIGURE 6.8.3 CONVERGENCE TO INTERNATIONAL GOOD GOVERNANCE STANDARD .......................... 149 FIGURE 6.9.1 CHANGE IN SOCIETY’S ROLE IN GOOD GOVERNANCE IMPLEMENTATION – REGIONAL
COMPARISON............................................................................................................................. 153 FIGURE 6.9.2 CHANGE IN SOCIETY’S ROLE IN GOOD GOVERNANCE IMPLEMENTATION - ECHELON
COMPARISON............................................................................................................................. 154 FIGURE 7.1.1 GOOD GOVERNANCE AT REGIONAL GOVERNMENT INDONESIA..................................... 158 FIGURE 7.3.1 CONVERGENCE TO INTERNATIONAL GOOD GOVERNANCE STANDARDS ........................ 165
viii
List of Tables
TABLE 1.1 META-ANALYSIS OF CURRENT LITERATURE - GOVERNANCE................................................ 7 TABLE 4.1 NUMBER OF GOVERNMENT OFFICIALS INTERVIEWED ......................................................... 45 TABLE 4.2 LEVEL OF GOOD GOVERNANCE UNDERSTANDING CHARACTERISTICS ................................ 47 TABLE 4.3 LEVEL OF GOOD GOVERNANCE IMPLEMENTATION CHARACTERISTICS ............................... 47 TABLE 5.1 LEVEL OF GOOD GOVERNANCE UNDERSTANDING - REGIONAL COMPARISON..................... 89 TABLE 5.2 LEVEL OF GOOD GOVERNANCE IMPLEMENTATION - REGIONAL COMPARISON .................... 89 TABLE 5.3 IMPEDING VARIABLES TO GOOD GOVERNANCE IMPLEMENTATION - REGIONAL COMPARISON
.................................................................................................................................................... 90 TABLE 5.4 INTERNATIONAL GOOD GOVERNANCE STANDARDS - REGIONAL COMPARISON .................. 91 TABLE 8.1 COST EVALUATION CHARACTERISTICS ............................................................................. 177
ix
List of Boxes
BOX 1, THEME: UNEQUAL INFORMATION EXPOSURE............................................................................ 96 BOX 2, THEME: GOOD GOVERNANCE UNDERSTANDING DISCREPANCY................................................ 98 BOX 3, THEME: COMMUNICATION CEILING .......................................................................................... 99 BOX 4, THEME: STAFF RESENTMENT .................................................................................................... 99 BOX 5, THEME: UNEQUAL SEMINAR/TRAINING OPPORTUNITIES ........................................................ 101 BOX 6, THEME: IN-HOUSE SEMINAR/WORKSHOP A............................................................................. 102 BOX 7, THEME: IN-HOUSE SEMINAR/WORKSHOP B ............................................................................. 102 BOX 8, THEME: LACK OF COMMUNICATION DOCUMENTATION .......................................................... 103 BOX 9, THEME: LACK OF GOOD GOVERNANCE LEGAL BACKING ....................................................... 105 BOX 10, THEME: LACK OF GOOD GOVERNANCE CODE A ................................................................... 105 BOX 11, THEME: LACK OF GOOD GOVERNANCE CODE B ................................................................... 106 BOX 12, THEME: LEADERSHIP A......................................................................................................... 108 BOX 13, THEME: LEADERSHIP B.......................................................................................................... 109 BOX 14, THEME: LEADERSHIP C ......................................................................................................... 110 BOX 15, THEME: LEADERSHIP D......................................................................................................... 110 BOX 16, THEME: LEADERSHIP E ......................................................................................................... 111 BOX 17, THEME: LEADERSHIP F.......................................................................................................... 113 BOX 18, THEME: HUMAN RESOURCE LEVEL A................................................................................... 114 BOX 19, THEME: HUMAN RESOURCE LEVEL B ................................................................................... 116 BOX 20, THEME: HUMAN RESOURCE LEVEL C ................................................................................... 118 BOX 21, THEME: HUMAN RESOURCE LEVEL D ................................................................................... 119 BOX 22, THEME: HUMAN RESOURCE LEVEL E ................................................................................... 119 BOX 23, THEME: HUMAN RESOURCE LEVEL F.................................................................................... 120 BOX 24, THEME: HUMAN RESOURCE LEVEL G................................................................................... 121 BOX 25, THEME: POLITICAL HISTORY A............................................................................................. 126 BOX 26, THEME: POLITICAL HISTORY B ............................................................................................. 127 BOX 27, THEME: REGULATION CONSTRAINTS .................................................................................... 128 BOX 28, THEME: POLITICAL HISTORY C ............................................................................................. 129 BOX 29, THEME: REGIONAL GOVERNMENT CUSTOMS AND CULTURE EFFECTS ON PERFORMANCE A 132 BOX 30, THEME: REGIONAL GOVERNMENT CUSTOMS AND CULTURE EFFECTS ON PERFORMANCE B 133 BOX 31, THEME: REGIONAL GOVERNMENT CUSTOMS AND CULTURE EFFECTS ON PERFORMANCE C. 133 BOX 32, THEME: REGIONAL GOVERNMENT CUSTOMS AND CULTURE EFFECTS ON PERFORMANCE D 134 BOX 33, THEME: LEVEL OF GOVERNMENT OFFICIAL WELFARE A...................................................... 136 BOX 34, THEME: LEVEL OF GOVERNMENT OFFICIAL WELFARE B...................................................... 137 BOX 35, THEME: LEVEL OF GOVERNMENT OFFICIAL WELFARE C...................................................... 138 BOX 36, THEME: LEVEL OF GOVERNMENT OFFICIAL WELFARE D...................................................... 139 BOX 37, THEME: LEVEL OF GOVERNMENT OFFICIAL WELFARE E...................................................... 140 BOX 38, THEME: REWARDS AND PUNISHMENT A............................................................................... 142 BOX 39, THEME: REWARDS AND PUNISHMENT B................................................................................ 143 BOX 40, THEME: REWARDS AND PUNISHMENT C................................................................................ 145 BOX 41, THEME: MINIMUM PUBLIC SERVICE STANDARD A ............................................................... 147 BOX 42, THEME: MINIMUM PUBLIC SERVICE STANDARD B................................................................ 150 BOX 43, THEME: SOCIETY CHANGE A ................................................................................................ 153 BOX 44, THEME: SOCIETY CHANGE B ................................................................................................. 155
1
1. Introduction and Conceptual Framework
1.1. Introduction
The concept of good governance compliance is currently a world-wide phenomenon.
Good governance refers to government agencies’ conduct in implementing innovative policies and programmes to increase the quality of public service with the
ultimate aim of increasing economic growth (Grindle 2004; Hellman, Jones, Kaufmann and Schankermann 2000; Rivera-Batiz 2002). Such innovative policies
and programmes address governance aspects such as transparency, accountability, participation, and professionalism (Liddle and Mujani 2005; OECD 1995).
Numerous standards, codes of conduct, and literature are available on governance;
many precipitated by recent institutional crises in commerce and exposure to inappropriate government practices around the world (Armijo 2004; Beck, Clarke,
Groff, Keefer and Walsh 2000; Brinkerhoff and Goldsmith 2005; Court, Gyden and Mease 2002; Governance 1998; Hellman et al. 2000; Huther and Shah 1998; Shunglu
1998; Kaufmann, Kraay and Zoido-Lobaton 2000; Kaufmann, Kraay and Zoido-Lobaton 2002). Good governance in Asia is an iconic goal particularly in reference
to the responses of Association of South East Asian Nation (ASEAN) government’s to the 1998/1999 Asian Financial Crisis and a key enabler of the ASEAN 2020
vision of an Asian trading block operating with efficiency, professionalism, and uniformity of harmonised procedures (ASEAN, 1997).
While the implementation of standards in the established economies is a regular topic in professional and academic journals, as well as in commercial settings (Beck et al.
2000; Brinkerhoff and Goldsmith 2005; Ciborra 2005; Duvall and Shamir 1980; Knack and Keefer 1995; Wu 2005), the extent to which good governance is
implemented within government agencies remains ambiguous. Literature sources also have a tendency to generalise country conditions as a whole, overlooking the
status history, legislative context, and other constraints on regional government within a country.
2
This study investigates good governance in Indonesia, with a focus on its implementation by regional1 government. It concentrates on the degree of
compliance and implementation of good governance systems at the regional level in Indonesia as the country evolves through planned phases of economic and political
transition. Against the backdrop of ASEAN 2020 goal for a cohesive regional trade area, this study also analyses the extent to which Indonesia has converged with or
diverged from internationally recognised Good Governance Standards. Factors affecting the implementation of good governance practices in Indonesian regional
governments are also analysed, as well as factors impeding alignment with international norms. Finally recommendations for public policy development and
government practice in respect to governance are proposed and discussed.
The scope of this study does not consider the financial reporting from a standard corporate governance perspective. It concentrates on the interpretation of good
governance, the degree of understanding and implementation at the regional government level, and the extent of alignment with international standards. Indonesia
has been chosen as the focus of this work for a number of reasons. The first is that it was named the “worst hit and slowest recovering” country following the Asian
Financial Crisis by the International Monetary Fund (Muljadi 2002; Muljadi 2001b; Haley 2000; Pettis 2003; Barro and Lee 2003). Yet, paradoxically, it has been
recognised as one of the most active Asian economies in respect to political, economical, and social transition, and one that is willing to evaluate international
policies that align with notions of a liberalised market economy (McCawley 2003; Iskander, Meyerman, Gray and Hagan. 1999b; Freedman 2005; Ghoshal 2004; Barro and Lee 2003). It has also been chosen due to its high level of diversity across many
societal variables including customs and culture, political ideologies, and human resource capability variability. The results and findings will be used to seek
development both in theory and practical applications to central and sampled regional governments within Indonesia.
1.2. Purpose of Study
1 The terms “regional government” and “local government” are used interchangeably with the same meaning, that is government authorised at regional or local levels, and are responsible for governance in particular regions.
3
The broad purpose of this study is to explore the degree of understanding and
implementation of good governance at a regional government level in Indonesia, while addressing impeding factors that do not support effective implementation of
governance protocols. The aim is to provide practical inputs for public policy makers, government officials, and governance practitioners who are developing
current and future government strategic policy and good governance frameworks. This is delivered through;
° Analysis of the extent to which good governance concepts are recognised and understood among different strata of government official within regional
governments;
° Analysis of factors that impede the implementation of good governance;
° Examination of how Indonesian practice has converged to, or diverged from,
international good governance standards in terms of acknowledgement, understanding, and implementation, leading to;
° A set of practical recommendations addressing the main factors that impede good governance with the aim of improving the level of its implementation in
regional government.
1.3. Research Questions
There are three research questions within this study;
1. To what level is good governance understood and implemented at a regional government level in Indonesia?
2. What impeding variables exist to the implementation of Good Governance at a regional government level in Indonesia?
3. To what extent has Indonesian regional government converged to / diverged from international good governance standards?
4
1.4. Conceptual Framework
To better illustrate the purpose of this study, a conceptual framework as in figure 1 has been developed.
Figure 1. Conceptual Framework
The above diagram identifies variables such as decentralisation (regional autonomy),
cultural and political history, and the economic situation post-Asian crisis as factors that shape regional government of Indonesia.
Indonesia
Good Governance Implementation at
Regional Government Indonesia
Practical Recommendations For further Implementation and
International Alignment
International Good Governance
Standard
Economic Conditions Post-Asian Crisis
Decentralisation (Regional Autonomy)
Degree of International Alignment
Level of Understanding
Level of Implementation
Impeding Variables to Good Governance
Political Conditions Post-Asian Crisis
5
2. Context of the Research
2.1. Increased Importance of Corporate Governance and Good Governance
Corporate governance has become one of the mainstream topics among academics
and business practitioners of late due to a number of reasons. A prime factor has been an increase in global economic integration which led to an increase in the
demand for capital both in the developed and developing economies, and thus a need for enhanced regulatory compliance (Bhasa 2004). Secondly there has been an
increase in economic turbulence around the world, including economic crises such as the 1997 Asian financial crisis (Barro and Lee 2003; Mitton 2002; Muljadi 2001a),
as well as many corporate collapses such as Enron in the USA (Bonn 2004; Clarke, Dean and Houghton 2002; Grantham 2004; Lansley, Gibson and Fogarty 2002),
HIH, One Tel, and Ansett Airlines in Australia (Houghton and Jubb 2003; Leibler 2003; Leung and Cooper 2003; Milne 2002; Milton-Smith 1997) and China Aviation
Oil in Singapore (Evans 2005; Bonn 2004; Clarke, Dean and Houghton 2002; Grantham 2004; Houghton and Jubb 2003; Lansley, Gibson and Fogarty 2002;
Leibler 2003; Leung and Cooper 2003; Milne 2002; Milton-Smith 1997; Alles, Datar and Friedland 2005).
The combination of these factors have caused a re-emphasis on corporate governance
awareness globally, where many investors are prepared to pay premium prices for corporate governance practices (Bhasa 2004). As a country that is going through the
planned phases of embracing a market liberalisation economy, Indonesia is in need of viable system of corporate governance that can increase its attractiveness to foreign investors, and regain its economic soundness in international eyes (Mishra
2005; Loveridge 2006; Azra 2005).
A high interdependency between the success of corporate governance and good governance is recognised (III. The Need of Good Governance 1999; Armijo 2004;
Grindle 2004; KNKG 2006; Yunling 1999), where good governance, as an inherent capacity, is deemed as a prerequisite to corporate governance (Northover 2005;
Rogers 2003). This resulted in realisation that good governance is of high importance to a country and thus created a worldwide phenomenon in understanding
6
pre-requisites and in implementing it (Beeson 2001; Brinkerhoff and Goldsmith 2004; Sripati 2005; Weiss 2000; Woods 1999). Good governance has been a main
literary discussion in many countries, with literature heavily concentrated on African countries (Bardill 2000; Carroll 2001; Harris 2001; Hintjens 2000; Matanga 2005;
McMahon 2005; Mensah 2005; Philander and Rogerson 2001; Pillay 2004; Hope 2002), European Union (Crawford 2002; Kranenborg 2003), and Asia Pacific
countries (Bryant 2001; Guess 2005; Li 2003; Ray 1999; Sparke, Sidaway, Bunnell and Grundy-Warr 2004; Velayutham 2003).
These studies have a commonality in identifying a wide variable of issues in different
international settings. There is also a tendency to look at good governance within a country with the notion of each country’s national or central government, or the
current political grouping. What is not detailed in the literature is the more detailed question of whether or not good governance concepts are understood and
implemented across levels of government.
2.2. The Evolution of Corporate Governance and Good Governance Literature
in Indonesia
Corporate governance is recognised as an essential instrument which evolves rapidly,
thus there is a need for constant evaluation (Mathur and Melvin 2004; Narracott and Bristow 2001). In contrast to corporate governance, good governance has been
recognised as old values repackaged into a modern term (Brinkerhoff and Goldsmith 2004). The term good governance itself has been known and associated in the past as a government with a priority in servicing society (Notten 1984), where currently
known good governance terms such as transparency, accountability, and participatory decision making was assumed in the behaviour and traits of a
government official (Love 1992). Some literature suggests that the “current” good governance is simply a repackaging of the “old” good governance and an attempt to
re-introduce the “old ways” into modern society (Verschoor 2002; Taylor 2000). From table 1 contrasting differences in the wealth of literature between corporate
governance and good governance policies are evident, in particular gaps in the dearth of good governance policies literature.
7
Tab
le 1
.1 M
eta-
Ana
lysi
s of
Cur
rent
Lit
erat
ure
- G
over
nanc
e
Issu
es
Cou
ntri
es o
r R
egio
ns
Cor
pora
te G
vern
ance
C
odes
, Pol
icie
s &
St
anda
rds
Goo
d G
over
nanc
e C
odes
, Pol
icie
s &
St
anda
rds
Con
verg
ence
- D
iver
genc
e fr
om I
nter
nati
onal
C
orpo
rate
Gov
erna
nce
Stan
dard
s C
onve
rgen
ce-
Div
erge
nce
from
In
tern
atio
nal G
ood
Gov
erna
nce
Stan
dard
s
Eur
opea
n U
nion
M
aass
en, B
osch
& V
olbe
rda
2004
; Col
lier &
Mah
bub
2005
; Be
aufo
rt 20
04; T
rega
skis
& B
rew
ster 2
006;
Dee
g &
Per
ez
2000
; Hop
t 200
2
Craw
ford
200
2;
Kra
nenb
org
2003
Gre
ece
Ade
ndor
ff et
al.
2005
; Mer
tzan
is 20
01
U
nite
d K
ingd
om
Jobo
me
2006
; Mic
hie
&
Oug
hton
200
5; M
allin
200
4;
Mal
lin, M
ullin
eux
and
Wih
lbor
g 20
05; T
hom
pson
20
05; G
arra
tt 20
05; v
. W
erde
r, Ta
laul
icar
& K
olat
20
05; J
ones
and
Pol
litt 2
004
Sp
ivey
200
4; F
riedl
and
2003
; Con
sidin
e &
Lew
is 20
03;
Cony
on &
Mal
lin 1
997;
Cre
spi,
Gisp
ert &
Ren
nebo
og 2
002;
G
arra
tt 20
05; J
ones
& P
ollit
t 200
4
Spai
n
Fe
rnan
dez-
Fern
ande
z 19
99
Cres
pi e
t al.
2002
; Fer
nand
ez-R
odrig
uez,
Gom
ez-A
nson
and
Cu
ervo
-Gar
cia
2004
Fe
rnan
dez-
Fern
ande
z 19
99
Japa
n
Suto
& T
oshi
no 2
005;
Kub
o 20
05; Y
oshi
kaw
a &
Pha
n 20
05; J
acks
on &
Miy
ajim
a 20
04
D
ore
2005
; Yos
him
ori 2
005;
Jack
son
2005
; Sol
omon
, So
lom
on &
Sut
o 20
04; W
u &
Xu
2005
; Yos
hika
wa
& P
han
2005
Sim
onis
2005
Kor
ea
Chan
g an
d Sh
in 2
006;
Kim
20
05)
Tha
iland
Conn
ors 1
999
Sing
apor
e
K
oh 2
006
Hon
g K
ong
Shen
200
4 A
sia
Pac
ific
Ray
1999
A
fric
an C
ount
ries
Ca
hn 2
004;
Oke
ahal
am 2
004;
Vin
ten
1998
; Oko
th 2
005;
Ro
ssou
w 2
005
USA
D
eaki
n &
Kon
zelm
ann
2004
; Wal
ker 2
004;
Cu
nnin
gham
200
4; U
seem
&
Zel
leke
200
6
Ver
scho
or, 2
002;
Mor
rison
, 20
04
8
Tab
le 1
.1:
Met
a-A
naly
sis
of C
urre
nt L
iter
atur
e –
Gov
erna
nce
Con
t’d
Is
sues
Cou
ntri
es o
r R
egio
ns
Cor
pora
te G
vern
ance
C
odes
, Pol
icie
s &
St
anda
rds
Goo
d G
over
nanc
e C
odes
, Pol
icie
s &
St
anda
rds
Con
verg
ence
- D
iver
genc
e fr
om I
nter
nati
onal
C
orpo
rate
Gov
erna
nce
Stan
dard
s C
onve
rgen
ce-
Div
erge
nce
from
In
tern
atio
nal G
ood
Gov
erna
nce
Stan
dard
s
Can
ada
Barn
es, J
ohns
on &
Yar
mus
20
04; K
lein
, Sha
piro
&
You
ng 2
005
Sout
h A
mer
ica
A
lves
and
Men
des 2
004
G
erm
any
Cr
omm
e 20
05; V
itols
2005
Lane
200
3; B
uck
& S
hahr
im 2
005;
Bas
sen
2005
; Cla
rk &
W
ójci
k 20
05; C
rom
me
2005
; Dor
e 20
05; D
robe
tz,
Schi
llhof
er &
Zim
mer
man
n 20
04
Fra
nce
Co
ncia
ldi,
Fayo
lle,
Tuch
szire
r, Ra
veyr
e et
. al.
2004
; Tré
bucq
200
5;
Wal
ters
200
2; G
oyer
200
1;
Alc
ouffe
200
0; A
ste 1
999;
Le
tregu
illy
1998
A
lcou
ffe 2
000;
Aste
199
9; G
oyer
200
1; G
roen
eweg
en 2
000
Chi
na
Liu
& S
un 2
005;
Sun
&
Tobi
n 20
05
Ra
lston
, Hol
t, Te
rpstr
a &
Kai
-Che
ng 1
997;
Ral
ston,
G
usta
fson
, Che
ung
& T
erps
tra 1
993;
Cha
mbe
rs 2
005;
Mok
20
02; G
iaco
bbe-
Mill
er e
t al.
2003
; Prie
m, L
ove
& S
haffe
r 20
00
Indo
nesi
a
KN
KG
200
6
FCG
I, 20
02; C
apul
ong,
Edw
ards
, Web
b, &
Zhu
ang
2000
; M
ulja
di 2
002;
Ros
ser 2
003
Rus
sia
Ju
dge
and
Nao
umov
a 20
04; G
iaco
bbe-
Mill
er, M
iller
, Zha
ng
and
Vic
toro
v 20
03
Net
herl
ands
H
oogh
iem
stra
& v
an M
anen
200
4; W
eim
er 1
995
P
ortu
gal
Alv
es a
nd M
ende
s 200
4
Aus
tral
ia
Phan
200
4; G
rant
ham
200
4; F
isher
, Lee
& Jo
hns 2
004;
Co
nsid
ine
and
Lew
is 20
03
Eas
t A
sia
Be
eson
200
1; L
i 200
3 So
uth-
Eas
t A
sia
Ca
se 1
994;
Hen
ley
2002
C
’wea
lth
Cou
ntri
es
M
cMah
on 2
005
Mal
aysi
a
Sp
arke
et a
l. 20
04
9
Although literature on Indonesian corporate governance exists, much of it is focused
on the direct aftermath of the financial crisis (Kim and Haque 2002; Gingerich and Hadiputranto 2002; Muljadi 2001a; Muljadi 2001b; Muljadi 2002; Haley 2000;
Iskander, Meyerman, Gray and Hagan 1999a; Jones 2002; Sharma 2001), with little emphasis on the evolution of corporate governance codes, policies, and standards
since this period. Indonesia is currently going through a very dynamic economic and political transition embodied in decentralisation, market liberalisation, and
constitutional amendments (ADB 2004a; Agung 2005; Indonesia 2002; Indrawati 2005). This study focuses on the gap in the literature as it takes into account recent
policy changes in Indonesia, providing updated analysis and input for future policy frameworks.
Indonesia recognised the need for evaluating and improving Good Corporate
Governance (GCG)2 guidelines. The lack of such guidelines is recognised as a central factor to the financial crisis in 1997/1998 that developed into a
multidimensional crises for Indonesia (KNKG 2006). Experience from the crises has also alerted Indonesian authorities to the critical importance of behavioural aspects
and business ethics in the implementation of the GCG and the importance of behaviour related guidelines as important aspects of the GCG (KNKG 2006;
Soesastro 2000; Verschoor 2002).
Development of guidelines for GCG is also found in other countries. The Organisation for Economic Co-operation and Development (OECD) has revised its Principles of Corporate Governance in 2004 with an emphasis on the need for both
good governance implementation and society participation in order for effective CGC implementation (KNKG 2006; WorldBank 2004; Woods 1999; Shafer 2004;
Remmer 2004; Halabi 2004; Ade-Ajayi 2004; Chang and Shin 2006; de Miguel, Pindado and de la Torre 2005). In contrast, research shows that although a guideline
on GCG might exist, a clear protocol for its implementation may not (Alter 2002; Bernhut 2004; Cook 1994; Erb 2005; Haque 2001; Lindsey 2004; Northover 2005;
Roy 2005).
2 From here on the Indonesian Good Corporate Governance guidelines would be referred in the abbreviation of GCG
10
2.2.1. Good Governance in Regional Government Indonesia
One of Indonesia’s economic and politic transition policies in 1999 was the
introduction of decentralisation, allowing regional government autonomy authority on the development of its region and allocation of resources (Federspiel 2005; Silver
2003; Tambunan 2000; Devas 1997; Agung 2005; Bjork 2003; Mishra 2002). There have been extensive analyses of Indonesia’s good governance laws and regulations
as a country and a general overview of its state of implementation, where it is concluded that ‘more time’ is a needed to achieve effective implementation
(Anderson and Strutt 1999; Bubandt 2006; Graham Davies 2005; Lewis 2005; Lindsey 2004; Newhouse 2005; Soesastro 2000; Tambunan 2000; Tambunan 2005;
Warren 2005; Watson 2004). These analyses have not however taken into account current decentralisation policy in Indonesia which decentralises good governance
compliance and implementation to regional levels of government.
Although this contextual literature confirmed the allowance of time in order to achieve adequate implementation of good governance, it has not explained why more
time is needed or more importantly the impeding factors to good governance implementation (Grindle 2004; KNKG 2006; Liddle and Mujani 2005; Lindsey
2004; Rogers 2003; WorldBank 1992). Literature sources are either published by central government bodies (BAPPENAS 2006; KNKG 2006), international
institutions (ADB 2004b; BaKTI 2006; ILGR 2004), or based on data released by either or both (Brinkerhoff and Goldsmith 2005; Ciborra 2005; Elson 2006; Kiely 1998; Maher 2002; Matsushita 2004; Prasad 2003; Remmer 2004; Shafer 2004;
Sripati 2005; Woods 1999). An important gap exists with respect to the involvement of regional government officials in the data collection process, leading to questions
of reliability and reality in daily regional government practices.
Some attempt has been made in involving Indonesian regional government officials in data collection process, such as studies involving North Lampung, Flores Island,
Bali, Northern Sulawesi, and Papua (Elmhirst 2001; Erb 2005; Hassler 2005; Henley 2002; Newhouse 2005; Williams 2005; WorldBank 2005); however such literature
concentrated on one regional government and is based on legislative review and
11
observation only, not direct government official involvement. The scarcity of literature relevant to Indonesian contexts prevents the provision of standardised
results that could be utilised by central Indonesian government in its good governance reform process. Therefore there is a need for literature that involves a
representative sample of regional government, direct regional government officials in the data collection process, and identification of realistic impeding factors to good
governance implementation.
2.2.2. Comparison of Corporate and Good Governance Literature in
Convergence with / Divergence from International Good Governance
Standards
The notion of an integrated corporate governance practice, converging into an international standard (based on collective best practices) has been noted in literature
(Ade-Ajayi 2004; Ugeux 2004; Gupta and Wang 2004; Nestor 2005). The literature also implies instances of divergence from international standards due to individual
country specific economical, political, and cultural factors (Bhasa 2004; Mintz 2005; Gupta and Wang 2004; Spivey 2004). The argument of convergence with and
divergence from international corporate governance standards is also reflected in certain studies in Table 1.1.
Although many literature themes exist in regard to convergent/divergent factors in
different economies, there is a dearth in the literature on issues affecting alignment of policy and practice internationally. Research on convergence and divergence issues has been limited to assessments of possible reasons to a global governance in general
that does not address particular countries (Baratta 1999; Beeson 2001; Crawford 2002; Griffin 2004; Halabi 2004; Hassler 2005; Kranenborg 2003; Matsushita 2004;
Weiss 2000; Busco, Frigo, Giovannoni, Riccaboni and Scapens 2005). More concentrated studies are found as evident in Table .11 however the number is limited.
Therefore there is a gap in literature in two folds. The first is there is an absence of
individual countries researched in terms of convergence and divergence towards international good governance standards; the second is the absence of analyses on
Indonesia and the extent of Indonesia’s alignment with international good
12
governance standards. This study contributes to knowledge as it analyses the two aspects mentioned as well as examining the impediment to alignment.
2.3. Summary
The analysis of the contextual literature, as detailed above, indicates several gaps, potentially unfounded assumptions, and underexamined contexts for good
governance implementation and international alignment. These are shown in table 1 (meta-analysis of current literature) through the light shading areas, where gaps in
literature concerning Indonesia are shown through dark shading areas. In terms of research on good governance in Indonesian regional government, several gaps are
identified.
The first is that although increased importance of good governance for Indonesia as a nation is acknowledged there is a dearth in literature on good governance
implementation at regional government levels. This may be further affected by decentralisation and regional autonomy policies that Indonesia has implemented
post-Asian financial crisis. Thus there is a need for research that concentrates on Indonesian regional government good governance implementation which takes into
account decentralisation and regional autonomy policy. There is also a need for literature discussing impeding variables to good governance implementation that are
beyond the concepts of corruption, collusion, and nepotism (Adicondro 2002; Cole 2001; Dalton 2005; Fogel 2006; Hellman et al. 2000; Pillay 2004; Rana 2003; Smith
1971; Wu 2005).
The second literature gap exists in regards to convergence with or divergence from
International Good Governance Standards, where there is an absence in single country comparisons with international standards. Current literature has also
concentrated on the possible reasons for convergence towards international standards in general, where it is found that high level of international standard understanding is
critical in ensuring implementation. There is a need for research that concentrates on Indonesia as a single country in comparison to the international standard, where the
extent of understanding and implementation are discussed.
13
This thesis attempts to address the gaps noted above. It will also explore variables that impede the implementation of good governance, by examining contrasting views
between regional government and central government and detailing variables that have significant impact on good governance practices. Lastly the thesis examines the
degree of convergence/divergence currently existing in Indonesia.
14
3. Good Governance, Indonesian Regional Governments, and Globalization: The Relevant Literature
3.1. Good Governance: An Overview
The term governance, as generally used, encompasses all aspects of the way a
country is governed, including its economic policies and regulatory framework (Subramaniam 2001). Good governance is focused on a clean government that
provides quality service towards its society/community, transparent and participative in its decision making process, and is accountable for its actions at all times; both
under legal and society scrutiny (Alter 2002; Bardill 2000; Beeson 2001; Berman 2006; Caddy 2001; Doig 1995; Doornbos 2003; Gilbert 2006; Gorontalo 2004;
Kranenborg 2003; Lindsey 2004; Morrison 2004; Northover 2005; Ray 1999; Rogers 2003; Simpson 2006; Subramaniam 2001; Tisdell 1997; Weiss 2000).
It is acknowledged that good governance is the basic condition for stability and prosperity in all countries, where nations who are able to sustain high standards of
governance will succeed while others will struggle (Roy and Tisdell 1998; Elsner 2004). The ADB (2004) have identified that good governance comprises the
following elements; participation, rule of law, accountability, transparency, equity, effectiveness and efficiency, professionalism and effective management service
orientation, and monitoring of performance. According to the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), the true test
of “good” governance is the degree to which it delivers on the promise of human rights: civil, cultural, economic, political and social rights (UNESCAP, 2006).
In financial terms, good governance allows public funds to be collected and used in a more efficient, transparent, and accountable manner, resulting in a more efficient
public financial management system (ADB 2004b). This indicates a system where the planning for a budget, enactment, and the processes by which funds are allocated,
disbursed, and monitored is established and well implemented (Bird 2001; Ciborra 2005; ILGR 2004; Schwartz and Clements 1999). It also includes recommended
interpretation of international good governance standards and implementation of such standards at all levels of government, both central and regional governments
15
(Simonis 2005; Sripati 2005; Tisdell 1997); as well as the enactment of appropriate legislation, policy framework, and control mechanisms (Gingerich and Hadiputranto
2002; Leung and Cooper 2003; Redding 2004). Demonstrably good governance practices have become increasingly important in global capital markets; demanded as
enhanced value in the eyes of premium paying investors and as a result of environment pressure due to heightened levels of economic interdependence between
countries (Manheim 2004; Hamilton 2004; Bonn, Yoshikawa and Phan 2004; Venaik, Midgley and Devinney 2005)
3.2. Indonesia’s Good Governance System
Indonesia’s governance system previously operated under a regime in which state
institutions neglected good governance and the rule of law, where the state managed essential parts of the corporate sector, and corruption was allowed to rule over
common interests (Adicondro 2002; Resksodiputro 2002; McLeod 2000). These same institutions are those that are deemed to have the role of securing democracy,
supporting a market economy, and providing good governance (Tambunan 2000; Velayutham 2003). The national government (or at times referred to as the central
government) has recently enacted amendments to the 1945 constitution to incorporate good governance aspects in its clauses, introduced Law 22/1999 on
Regional Government and Law 25/1999 on Fiscal Balance between the Regions and the Central Government, and introduced foreign institutions to assist in forming good
governance codes that are in line with international good governance standards (Warwick 1978; WorldBank 1992; WorldBank 2004; Soesastro 2000; MPR-RI 1999; OECD 1995; Nugroho 2003) .
In 2001 the National Committee of Corporate Governance released Good Corporate
Governance Guidelines (CGC), where although the level of implementation in Indonesia is still very low the effort and enthusiasm for implementation in the private
sector is srong (Capulong, Edwards, Webb and Zhuang 2000; Gingerich and Hadiputranto 2002; Muljadi 2001b; Muljadi 2002). The central government has also
realised the importance of good governance implementation in Indonesia’s public sector, as the implementation of CGC in the private sector is dependent upon good
governance implementation in the public sector and society participation (KNKG
16
2006). Thus it is acknowledged that the there is a very interrelated and integrated dependency between the private sector, the public sector (government), and society
at large to ensure the implementation of both corporate and good governance in a bid to improve Indonesia (Anderson and Strutt 1999; Beeson 2001; Bernhut 2004;
Bubandt 2006; Elmhirst 2001; Hassler 2004; Lewis 2005; WorldBank 2004).
Good governance, the central theme of Government Governance reform in Indonesia addresses major governance issues such as the inherited poor state of public
expenditure management; particularly budgeting, auditing, and public procurement (Alter 2002; Armijo 2004; Bardill 2000; Camerer 2006; Cole 2001; Doornbos 2003;
Fukuda-Parr and Ponzio 2002; Kaufmann, Kraay and Zoido-Lobaton 1999b; Kaufmann et al. 2002; Kotter 1996; Rana 2003). An important aspect of governance
reform is involving civil society in policy deliberations and implementation to ensure transparency and accountability (Berman 2006; Carroll 2001; Edgington 2000).
As transparency and accountability are the two main aspects of good governance, the
Indonesian government has introduced Law 1/2004 on State Treasury matters which introduces a new public sector accounting standard (ADB 2004b). This law will
allow the government to stipulate provisions on budget management and financial planning, debt and property management, and consolidate a single treasury account
for the whole of government administration (ADB 2004b). Furthermore, the law has clear provisions that are designed to deter fraud, mismanagement, or corruption
leading to financial losses for the state (Armijo 2004; BAPPENAS 2006; Grace 1956; Habib and Zurawicki 2002; Henisz 2002). However literature suggests a common negative outlook and reserved opinions in the implementation of the
particular law, mainly due to factors such as: lack of training and guidelines in implementing the law, uncertainty in which budget law should be followed and
applied due to decentralisation overlap, uncertainty in government official capability in applying such a new concept, and general doubt in implementing such a new and
ambitious change after thirty two years (during Soeharto’s era) of constant procedures (Soesastro 2000; McLeod 2000; Malley 2003).
Warwick (1978) suggest how government officials view their roles in their daily
work is a key factor in good governance implementation. In particular it is important
17
that a civil service is allowed to develop its professionalism in order to more effectively serve democratically-elected governments and its people. It is also
important that political appointees are accountable, where boundaries of authority are clear and there is respect for the neutrality of civil servants (WorldBank 2001a).
Research shows that there is a lack of the aspects listed above in regional governments in Indonesia, where cultural aspects interfere with the professional
appointment of officials and there are glass ceilings in professional development in terms of information/training exposure (Beecher 2003). It has also been identified
that there is heavy political relations in the appointment of officials and promotion within its echelon system (Wray 1999). The boundaries of authority however seems
to be a clear one in Indonesia’s regional government as portrayed by a clear structure and division between echelon (Doornbos 2001; Fukuda-Parr and Ponzio 2002;
Liddle and Mujani 2005; Taylor 2000) levels of government, where there is high power distance between each level of government (WorldBank 2001a). Government
neutrality is questioned in Indonesia as it interlinks with political relations in official appointments (Manning 2000; Rijckeghem and Weder 1997).
Good governance implementation is urged by central government and the phrase has
resonated within the government since 2001 (KNKG 2006). However the presence and meaning of good governance has changed from time to time in accordance to the
four presidential changes since Soeharto’s fall. Although good governance is a constant theme in each presidential office, it is deemed as a phenomenon that has
varying degrees of importance depending on the vision and mission of the current president in office (Hellman, Hofman, Kaiser and Schulze 2003). Good governance became the vocal point in Susilo Bambang Yudhoyono’s presidential vision and
mission, sparking analysis on the extent of good governance understanding and implementation since its introduction in 2001 (Liddle and Mujani 2005). It is because
of the current president’s vision and mission on good governance that there is increasing attention towards good governance within government, increasing demand
from society for good governance, and increasing need from regional governments to show compliance to good governance aspects (Yushchenko, Yudhoyono and Abbas
2005).
3.3. Culture and Political History of Indonesia
18
3.3.1. Culture
Culture is often understood in terms of geography however by definition culture is
the unique characteristic of a social group; the values and norms shared by its members set it apart from other social groups in terms of economic, political, social
structure, concepts and assumptions, rules behaviour patterns, religion, education, conscious beliefs, and language (Hendon, Roy and Ahmed 2003; Kopelman and
Olekalns 1999; Dialdin and James A. Wall 1999; Kale and Barnes 1992). Indonesia is a multi-ethnic country with more than three hundred ethnic groups, each with its
own language, cultural tradition, social structure, and ethnic identity; causing most researchers’ reluctance to generalize Indonesian culture (Wright 1991; Sarwono and
Armstrong 2001). Some 220 million people of different cultures and speaking various local languages live on the 17,000 or so islands that stretch more than 5,000
kilometres from east to west (Curtiss 1999). The cultural differences between ethnic groups may be as great as the differences between countries in Europe (ADB 2004b).
Literature has recognised that although there is clearly much potential for dynamic development in such a vast and diverse context, there is also great risk of tensions
and difficulties (Chaisiri and Flax 2004; Redpath and Nielsen 1997; Teoh, Serang and Lim 1999).
Although there is much literature relating to theories of culture, most researchers
have built upon cultural frameworks such as those proposed by Hofstede and Hall (Palich, Carini and Livingstone 2002; Teegen and Doh 2002). Hofstede’s cultural dimension includes power distance, uncertainty avoidance, individualism-
collectivism, masculinity, and long term-short term orientation; whereas Hall is infamous for his high/low (communication) context continuum (Elahee, Kirby and
Nasif 2002; Volkema 1997; Chang 2002; Hofstede 2001).
3.3.2. Power Distance
Power distance affects the degree of centralisation of the control and decision-making structure, acceptance of differences in power and wealth among people, and
the importance of status (Volkema and Fleury 2002; Hofstede 2001). Indonesia
19
scored 78 in Hofstede’s power distance parameter thus the notion of equal distribution may not be as strong and the notion of “fair” may be tempered by the
appropriate inequalities of a hierarchy (Chaisiri and Flax 2004; Hofstede 2001). In small power distance cultures people are more likely to consult with others and act
less opportunistically, whereas in large power-distance societies they exercise power and use of coercion occur quite frequently (Gulbro and Herbig 1999; Elahee et al.
2002). Due to its high power distance Indonesians seldom violate chains of command or openly question decisions by their superiors. One of the key aspects of good
governance is innovation, especially in the area of transparency and accountability (Simpson 2006). The high power distance in Indonesian culture is suspected to
hinder the innovative process in increasing transparency and accountability as subordinates feel uncomfortable in putting forward suggestions and criticisms, as
well as questioning the actions of their superiors (BAPPENAS 2005). Thus there is a large gap between superiors and subordinates which creates a space for non-
transparent decision making processes and less accountable actions or implementation of programmes.
3.3.3. Individualism-Collectivism
Indonesia is rated towards the collectivism end with a country index of 14, thus there
is greater concern for others, a stronger desire for harmony and dislike of conflict (Hofstede 2001; Teoh et al. 1999; Wright 1991). Collectivist cultures assume that
people, through birth and later events, belong to one or more “in-groups” from which they cannot detach themselves, where in-groups protect the interest of its members (Elahee et al. 2002). Collectivist people are very trusting and emphatic toward in-
group members and behave very cooperatively with them however they tend to be very competitive with out-group members (Volkema and Fleury 2002). This explains
the initial rejection of western ideas of good governance, where Indonesian people believed that what the system possessed is efficient for Indonesia’s situation without
the need to incorporate other outside views.
3.3.4. Uncertainty Avoidance
20
Uncertainty avoidance affects the tolerance of ambiguity and trust in opponents who show unfamiliar behaviours and the need for structure and ritual in the negotiation
procedures (Hofstede 2001). It also indicates the willingness of one side to take risks – to divulge information, try new approaches, and tolerate uncertainties in a proposed
course of action (Salacuse 2005; Gulbro and Herbig 1999; Volkema and Fleury 2002). Indonesia scored 48 in uncertainty avoidance, indicating adherence to existing
practices, keeping to the guidelines and following the policy of the government (Wright 1991; Hofstede 2001). People from strong uncertainty-avoidance cultures
show “greater aggressiveness” towards foreigners and are less willing to make “risky decisions” where as people from low uncertainty-avoidance are more receptive of
foreigners and more prepared to compromise with opponents (Elahee et al. 2002). Again this explains the initial rejection of western ideas of good governance, as well
as the uncertainty factor in embracing a new concept and thus changing what has been comfortable for the past 32 years.
3.3.5. Political History
Political risk has been several definitions, both in terms of political risk within a firm
(and thus related to corporate governance) and political risk/uncertainty within a government body (and thus relate to good governance). In corporate governance,
political risks can be defined as risks to a firm’s profitability that are principally the results of external factors to the industry and which involve some sort of government
action or, occasionally inaction (Henisz 2000; Lothian 1991). ). This can be in the form of expropriation, policy shifts in taxation or regulation, imposition of capital, and foreign exchange controls (Janakiramanan and Lamba 2002). In good
governance, political risk/uncertainty is defined as the extent of political influences in a government official’s decision (Almond and Verba 1963; Florence 1947), where
it is affected by politically-related fear in career advancement opportunities (Cook 1994; Citron and Nickelsburg 1987). Thus policies are formed with a political
influence as opposed to professional reasons. Such political risk can be influenced by government culture and norms, political ideology, and society expectations (Bardill
2000; Berman 2006; Caddy 2001; Love 1992).
21
Political risk has been identified as a world wide phenomenon that influences policy implementations, transitional reforms, and market transactions; where political
uncertainty is highly present in less-developed countries (Halabi 2004; Beaulieu, Cosset and Essaddam 2005). However it has also been argued that the vulnerability
of a country or government bodies within a particular country to political risk is country specific (Beaulieu et al. 2005), dependent upon its level of economic growth
(Alesina and Weder 1999), politics and economic policy (Campos and Nugent 2002; Fielding 2003), and existence of/and or length of strong political ideology
(Carmignani 2003).
Indonesia has a long political history, both prior and after the Dutch and Japanese occupancy. After its independence from the Dutch occupancy in 1945 Indonesia
declared its independence with Soekarno as its first president. It was during his presidency (1945-1966) that Indonesia’s constitution, administration, and policies
were shaped and created (Takahashi 2006). Soekarno released a presidency mandate in 1966 to Soeharto through the SUPERSEMAR letter, essentially granting Soeharto
presidency rights and authority as his successor in recognition of Soeharto’s capability in military matters during the Japanese occupancy struggle (Bodden 2006).
Soeharto then ruled from 1966 to 1998. His resignation from presidency was forced by both Indonesian citizens at large and the People’s Representative, due to the
rejection of his counter-impeachment speech on corruption, collusion, and nepotism evidence found during his presidency (McLeod 2000; Soesastro 2000).
Soeharto’s vice president, B J Ing Habibie became the Indonesian president for the remaining period. This period (1998-2001) was characterized by turbulences in all
aspects of economy, politics, and society; in which Habibie was criticized for the separation of East Timor (Carey 2003; Kim, Liddle and Said 2006; Kammen 2003).
Indonesia’s next president, Abdurrahman Wahid or more often known as Gus Dur did not hold the presidency for long due to questions of his leadership capabilities
(Curtiss 1999). These questions were based on his disability, which prevented him from reading documents – thus there was over-reliance on his advisors informing
him of current events and document contents. He was also criticised for his tendencies in releasing controversial comments and opinions in public, and at times
contradicting previous statements (Frederick 2004; MacDonald and Lemco 2001).
22
Gus Dur introduced the concept of decentralisation. However, it was still in the form of a concept at the time without further legal backing or policy reforms. He also
introduced a concept of transparency and accountability within government officials, however although the idea was met with enthusiasm by politic experts and critiques,
there was weak reception from government officials in terms of policy reform (Smith 2000). Due to strengthening criticisms and questions of his presidency, there was an
increased pressure for him to step down from the presidential seat (Gee 2001).
In 2002 Gus Dur stepped down from his presidency, and was succeeded by Megawati Soekarnoputri, his vice president during his term (Brenner 2006). During
her term decentralisation policy was strengthened, bureaucratic reform introduced, and international institutions were further welcomed in the attempt to re-launch
Indonesia in the international arena (Curtiss 1999). Her era was also not without criticism, the two main ones being that there was over-reliance on her father’s
positive charisma (and not much on her ability to lead or political knowledge) and over-reliance on her advisors in policies and decision making (Curtiss 1999).
In 2004 Indonesia held its first public election, where citizens elect their president
directly as opposed to electing a ruling political party within the People’s Representative seat; in which the People’s Representative decided who will be
Indonesia’s President and Vice President (Liddle and Mujani 2005). The result is Indonesia’s current president Susilo Bambang Yudhoyono and Jusuf Kalla as vice
president (Azra 2004). It is during this era that decentralisation policy is implemented and the term good governance gained popularity (Liddle and Mujani 2005).
During Soeharto’s 32 years of presidency, the era was known as the New Order era,
where both positive and negative accounts exist. Positive accounts include immense growth both in Indonesia’s economy and infrastructure, where Soeharto himself was
deemed as the Father of Development (Schwarz 1997). This led to many strong bilateral ties with neighbouring countries (especially in ASEAN and APEC) and the
acknowledgement of Indonesia as one of the Four Asian Tigers in the international arena (Barro 1998; Kurlantzick 2000). Negative accounts include the lack of
transparency in his policies, the dual function of military (in both government and
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defense), his overly strong ties and reliance on chinese businessmen, and the fact that his governance was strongly associated with the term KKN or corruption, collusion,
and nepotism (Robertson-Snape 1999). This thesis will concentrate on the governance aspect of Soeharto’s era and its effect on good governance
implementation in the recent era at local government of Indonesia, evaluating the extent of influence the era has on the attempt of good governance implementation.
Indonesia post 1998 Asian Financial Crises: Politic, Economy, Society
Indonesia has attempted to improve its economic and political conditions as a
response to the 1997/1998 financial crisis aftermath through a series of policy reforms, where it is now at another new stage of transitions; from dictatorship
towards democracy, centralisation towards decentralisation, and crony economy to market economy, as formulated in the recently amended 1945 constitution (Widjojo
2005; Haley 2000; Mitton 2002). Improved corporate governance, decentralised decision making, and further international alignments have been identified as
building blocks towards an aspired competitive market economy (Mishra 2002; Muljadi 2001b; Haley 2000; Iskander et al. 1999a). Indonesia have also introduced
the concept of good governance, which is essentially corporate governance aspects applied within the public sector such as government institutions as opposed to the
private sector such as corporations or companies (Bird 2001; Brinkerhoff and Goldsmith 2004; Brinkerhoff and Goldsmith 2005; Doornbos 2003; Shafer 2004;
Simpson 2006; Weiss 2000). To strengthen rule of law in Indonesia, the Constitutional Court was created after the
fall of Soeharto in 2000 (KNKG 2006). The Court’s first demonstration of independence from the government was in their decision in regards to the 2002 Bali
bombers suspects, in which it overruled the constitutionality of the government’s application of a law (ADB 2004b). An anticorruption commission has been
established and an anticorruption court is under development (WorldBank 2001b).
International Institution observation shows that the society of Indonesia is now more critical than ever as they are exposed to further information on government best
practices, demanding a government that is transparent, accountable, and free of
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corruption, collusion, and nepotism (Federspiel 2005; ADB 2004a; Bjork 2003; Zakaria 1997; Silver 2003; Ricklefs 2005).
3.4. Decentralisation and Regional Autonomy
With the legal base of Law 22/1999 on Regional Government and Law 25/1999 on
Fiscal Balance between the Regions and the Central Indonesian government has decentralised its government authority to local government level, with the aim of a
government that is more responsive and regional executives more accountable for their actions (King 2003). This indicates a higher responsibility for local government
(both provincial and regional) in implementing good governance aspects. A House of Representatives of the Regions (DPD) was established in 2004 to strengthen the
voice of the different regional governments in political decision making, and especially the voice of poorer regions (Dwiyanto 2003).
In a company, autonomy is defined as the extent to which the headquarters allocates
marketing mix decisions to the local subsidiary, where greater autonomy is likely to motivate the local subsidiary managers to take initiatives (Bartlett and Goshal 1989).
These initiatives may result in marketing innovations that are either useful locally or are leveraged by the headquarters on a global basis (Birkinshaw, Hood and Jonsson
1998). Thus a relationship is formed, subsidiary autonomy is associated with higher levels of innovation in multinational firms (McGrath 2001; Zanfei 2000). In a
government situation, regional autonomy is given by central government to regional/local government. This is in the form of authority in managing regional finances, where regional government is responsible for self-fundraising, expenditure
planning, budgeting, and execution of budget, internal and external audit, and reporting (Hellman et al. 2003). Central government does provide a subsidy however
this is based on the general allocation fund (DAU) formula and regional project proposals (Dwiyanto 2003). The fact that such an authority is given to regional
government suggests that there is room for innovative actions in order to achieve funding sufficiency, budget utilisation, and finance management (Erb 2005; Malley
2003).
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Decentralisation and regional autonomy has also brought on a new phenomenon, where many new regional governments are formed and established (Silver 2003;
Devas 1997). Indonesia now has approximately 400 regional governments from previously approximately 300 regional governments, as a result of decentralisation
and regional autonomy (Dwiyanto 2003). This phenomenon has both positive and negative consequences. The establishment of new regional governments has sparked
a competition between “old” and “new” regions, especially in the area of innovation as “new” regional governments are suspected to be more open to adapting innovative
ways in governance (Malley 2003). Thus there is a positive effect in the sense that competition will result in overall improvement from regional governments in terms
of governance. The “new” regions however may not have the same expertise as the “old” regions or the human resource capacity to perform government related tasks
and thus will need more guidance from central government in regards to governance matters; hence the wider disparity between a mature and immature regional
government (Erb 2005; Hellman et al. 2003). The establishment of “new” regions also mean a new funding structure and re-evaluation of current rules and regulations
to ensure flexibility is extended to newly formed regional governments. Thus there is volatility created by having new regional/local governments which hinders creating a
nation that is on the same level of maturity (King 2003).
3.5. International Standards Alignment in Indonesia
Due to recent economic crises, corporate collapses, and increased globalisation, a new concept of corporate governance; the “New Age Corporate Governance” has emerged (Nestor and Thompson 2001; Anson, White and Ho 2004). The “New Age
Corporate Governance” differs from the “Old Age Corporate Governance” as its components and definitions are adopted from international standards as opposed to
each country’s preferences and national law; thus creating a standardised code of best practices (Gereffi 2001; Joo 2003; Considine and Lewis 1999; Blair 1995;
Sanders and Boivie 2004). This new concept suggests convergence in corporate governance interpretation and implementation (Nestor 2005; Mintz 2005; Gupta and
Wang 2004; Ugeux 2004), where the International Corporate Governance Scorecard has been developed as a tool to evaluate the level of international corporate
governance implementation within a country (Strenger 2004; Grantham 2004;
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Bradley 2004). However many also acknowledge divergence in corporate governance practices due to differences in economic conditions, cultural and political
history factors, country economic development goals, and different perceptions on the effects of internationalisation; especially in comparison between western
(Americas and Europe) and East Asian countries (Bhasa 2004; Ugeux 2004; Weimer 1995; Grantham 2004; Bonn et al. 2004).
Research shows that this new concept also applies to the public sector (government),
where good governance is becoming an international phenomenon with international institutions such as United Nations Development Program (UNDP) and Asian
Development Bank (ADB) promoting the need for individual countries to adapt and apply International Good Governance standards in accordance to country situation
and agenda (ADB 2004b; Baratta 1999; Brinkerhoff and Goldsmith 2005; Griffin 2004; Matsushita 2004; Remmer 2004; Weiss 2000). This phenomenon is
strengthened by many countries such as USA, Canada, European countries, New Zealand, Australia, African, and Asian countries; revoutionising its state/government
management (Adendorff, Boshoff, Court and Radloff 2005; Connors 1999; Crawford 2002; Delios and Henisz 2003; Edgington 2000; Fernandez-Fernandez 1999; Hyden
and Bratton 1992; Matanga 2005; McMahon 2005; Pillay 2004; Shen 2004) . This transformation includes several aspects such as institutional re-arrangement, civil
servant reform, new financial management reform, and the new public sector accountability reform (Weiss 2000).
Indonesia’s recent constitutional amendments have created or strengthened agencies or institutions crucial to a democratic state such as the independence of the central
bank and supreme audit institution (BPK), the independence of the election commission, creation of the Constitutional Court, and the independence of the
Judicial Commission (Meagher 2002; WorldBank 2001b). It is believed that full implementation of these changes will strengthen democracy, increase accountability,
and facilitate necessary reforms in governance. The constitutional amendments have been seen as Indonesia’s effort to align its constitution with other democratic
presidential states, thus converging to a government where accountability is clear and checks and balances are part of the system (ADB 2004b). The Indonesian
government has also revised Law 5/1973 on the subject of the Supreme Audit
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Institution (BPK), providing them with increased independence and authority in regards to local government budget auditing (WorldBank 2001a). This means that
Indonesia has the legal basis for public expenditure management that is in line with good international practice, however it is predicted that its implementation will take
time, require further implementing legislation, and capacity building (ADB 2004b).
International institutions who are involved in the formulation of good governance aspects and guidelines, socialization process within government agencies, and
implementation in different local governments in Indonesia have argued that a greater reference to international standards and good practices would both strengthen
and give focus to Indonesian reforms (ADB 2004b; Ciborra 2005; Remmer 2004; Shafer 2004). Although many governance problems may be specifically Indonesian,
other countries in transition toward democracy and a market economy have similar problems, for largely the same reasons, and are pursuing remedies that are to a large
extent similar to those of Indonesia (Case 1994; Brinkerhoff and Goldsmith 2005; Bryant 2001; Connors 1999; Edgington 2000; Guess 2005; Hintjens 2000; Li 2003;
Sing 2003; Velayutham 2003; Wu 2005). Convergence towards international good governance standards have also been vouched for by many countries such as
Australia, who claim that good governance in other countries helps build a more secure and prosperous international environment (Considine and Lewis 2003).
Literature supports this claim in that there is a dependency between countries in terms of for each country to have the capacity to formulate, implement and sustain
policies that detect and disrupt terrorists, liberalise trade and investment, and protect the environment in ways that do not distort trade; all of which is not possible without good governance (Sripati 2005).
Literature has also identified factors that lead to the conclusion that Indonesia’s good
governance diverge from international standards. Research shows that although new democracies have decentralised and introduced good governance aspects for the
same reasons as Indonesia, they have not done so with the scope and sense of urgency as Indonesia (Armijo 2004; Baratta 1999; Beeson 2001), and that culture
differences still play a large part (Blunt 1995). This is true in comparison to good governance reform in Philippines (Bryant 2001; Guess 2005), Thailand and Malaysia
(Case 1994; Connors 1999), African countries (Bardill 2000; Carroll 2001), and
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Spain (Fernandez-Fernandez 1999). Many researchers have also identified the mismatch between western and eastern values (Blunt 1995), where international
good governance standards developed in the west might not be one hundred percent applicable to Indonesia due to differences in eastern perception on what good
governance is and how it should be applied (Brinkerhoff 2005; Elson 2006; Baratta 1999; Griffin 2004). Literature also stressed that international good governance
standard concocted by international institutions mismatch Indonesia’s aspirations on a fundamental level. This mismatch is contributed to ignorance of Indonesia’s
uniqueness in their attempt to standardize the world (Kiely 1998; Prasad 2003; Remmer 2004), are based on an “ideal world” assumptions (Maher 2002; Liu 2005),
and may not match Indonesia’s reform agenda (Matsushita 2004; Morrison 2004; Rivera-Batiz 2002).
Indonesia does have a history of adapting international standards such as the ISO
standards, international accounting standards, and international auditing standards (FCGI 2002). However literature acknowledges that such alignments are always
adapted to Indonesian specific conditions and capability, where not all aspects are complied with and those that are complied with have been re-adjusted. At present
there is no evidence of diverging from international standards, where it is interpreted as Indonesia does not diverge but converge with slight adaptation (FCGI 2002).
3.6. The International Corporate Governance Scorecard
The term “standard and codes” refers to sets of provisions relating to the institutional environment (Haswell and McKinnon 2003). It is considered the rules of the game
within which policies are devised and implemented, where research shows that countries with an institutional environment that is well-regulated and transparent
tend to demonstrate higher economic performance and greater financial stability (Gleysteen and Romberg 1987). Literature also recognises that although international
standards are becoming a phenomenon on its own, its application within countries depends on countries’ own interest to adopt and implement such standards
(Newburry and Yakova 2006).
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Corporate Governance is deemed as a hot topic as its importance has increased due to the Asian financial crises and recent high-profile corporate failures in the US
(Haley 2000; Cohen and Brodsky 2004). There has been a flood of literature dissecting the causes of these corporate failures and the financial crises, identifying
neglected aspects of corporate governance, and recommending corporate governance aspects to be implemented in order to attract investors and re-establish corporate
position (Leibler 2003; Sikka 2004). In contrast there still remains much scepticism from many quarters, in particular investors and academics, of the link between
corporate governance and performance indicators (Stanwick and Stanwick 2005). Literature suggests a link between corporate governance and financial indicators
such as profit maximisation, premium investments, and stock returns (Maassen, Bosch and Volberda 2004). However companies still remain unconvinced as there is
a lack of global benchmarks to measure the practical adoption of good governance principles (Walker 2004).
In response to the lack of benchmarks market research conducted by Standard &
Poor was carried out in 1997 to determine whether investors would be interested in a service that specifically calibrated the governance standards of companies on a
global basis (Strenger 2004)3. Positive responses followed, resulting in the launch of a new service for investors, and companies and their advisers in 2001 known as the
Corporate Governance Scores (CGS). Developed in consultation with academics, experts, and practitioners, the Corporate Governance Score (CGS) reflects an
assessment of a company’s corporate governance practices and policies and the extent to which these serve the interests of the company’s financial stakeholders. Based on a CGS-10 (highest) to CGS-1 (lowest) scoring system, the standard
measures;
• Ownership Structure and Influence – transparency of the ownership structure;
• Shareholder rights and Stakeholder relations – the quality of the interaction of
the company with its financial stakeholders;
• Financial transparency and information disclosure – the quality, accessibility
and timelines of financial disclosure, and the integrity and independence of the audit process;
3 Information on International Corporate Governance Balance Scorecard in this section is obtained from the work of Christian Strenger. Full citation of his work can be found in the reference list.
30
• Board structure and process – evaluating the structure and effectiveness of the board of directors based on its role, independence, and remuneration settings.
Literature recognises that it is important to note that different models of corporate
governance around the world reflect the nature of local legal and regulatory systems, as well as differing approaches to economic management (Steane 2001). However
those who agree to the CGS stressed that by addressing the interests of both creditors and shareholders, CGS recognises the importance of stakeholder’s rights beyond the
rights of the shareholder. It is also argued that although the CGS assessment seems to be general, factors such as a country’s legal, regulatory, and market environment is
also an important element in the overall analysis of the risks associated with governance implementation; hence the CGS can be applied globally.
Literature dictates corporate governance as an evolving phenomenon in need of
constant review and evaluation (Viner 2004). This also applies in its standards where further research and testing found the need to incorporate further aspects and re-
evaluate its weighting system to provide more reliable and meaningful reports of corporate governance implementation (Ugeux 2004; Semenov 2000; Rubach and
Sebora 1998). The problem was first approached in Germany due to their privatisation regime and failures of some of their prominent corporations. Recent
empirical research in Germany showed that companies with demanding governance standards show higher market valuations, thus German investors joined international
institutions in an active drive for corporate governance and a way to measure a company’s corporate governance implementation. As a result of this a draft of the
“Code of Best Practice” was published, based on the relevant German laws and the international governance standards present at the time (CGS) and expectations
expressed by national and international investors.
The German society of Financial Analysts (DVFA) developed a “Scorecard for German Corporate Governance” based on the “Code of Best Practice” in order to
update the criteria and introduce a more realistic weighting system. Due to positive reception of the scorecard in Germany as well as other countries, an updated version
of the scorecard was released in 2002 to follow the official “German Corporate
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Governance Code” published by the German Commission on Corporate Governance. It has been identified that the main goals of the Scorecard would be:
• Facilitating the work of analysts and investors through a systematic overview of all relevant issues of corporate governance;
• Enable companies to easily assess the “reach” and the quality of their own
governance situation;
• Allow setting of minimum scores by investors for governance as part of
general investment politics;
• Enable comparisons across industries and countries;
• Accessibility to all interested parties via the internet.
The content of the Scorecard includes seven main criteria, as below;
1. Corporate Governance Commitment – checks the extent to which basic principles of good governance are anchored in the company;
2. Shareholders and the General Meeting – focusing on equal treatment of all shareholders;
3. Cooperation between Management Boards and Supervisory Board –
evaluating the communication channel and frequency between the management board and the supervisory boards;
4. Management Boards - the emphasis is on the details of the compensation elements rewarding shareholder value orientation;
5. Supervisory Board – concentrates on conflicts of interest, qualification standards for Supervisory Board members and expert committees;
6. Transparency – Equal and regular information for all shareholders; 7. Reporting and Audit of the Annual Financial Statements – international
accounting and auditing standards, focusing on the independency of the auditor.
In the case of the German scorecard, the user assesses the degree of fulfilment of
each point by marking the corresponding field in the column “fulfilment” with three choices of yes, partially, and no. These choices correspond with points of full, half,
or zero marks. The Scorecard then calculates the “Partial Scores” by weighting the achieved points of each item. The last step, also automatically achieved by the
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Scorecard, is the calculation of the “Total Score” through adding up scores in the “Partial Scores” resulting in a rating of corporate governance implementation.
A good reception of the Scorecard at an international level is evident, where it is
applied in many countries (Quinlivan 2000; Mcadam and Walker 2003; Higgins and Currie 2004; Craig and Moores 2005; Tsipouri and Xanthakis 2004). In East Asia,
the Scorecard is used as a tool for the improvement of corporate governance after the crisis in 1997 as an additional instrument to foster the implementation of “best
practice” governance principles and to promote the link between legal and voluntary changes towards good governance. Examples include its adaptation utilised inter alia
in Indonesia (Wie 2003; Muljadi 2002; FCGI 2002) and the Philippines (Capulong et al. 2000; Saldana 2000). The Scorecard has also been applied in Latin American
countries (Kim and Haque 2002; Grandmont, Fry and Iragui 2001) and Europe (Friedland 2003; Deminor 2000; Groenewegen 2000), though with slight alterations
based on local legal and business environment. In Europe the scorecard is utilised by an independent commercial rating agency, which provides companies with a publicly
disseminated “Corporate Governance Rating and Investor Report” based on the application of the Scorecard (Deminor 2000). This report is seen as a quality
certificate awarded by an independent agency, with the purpose of attracting investors.
3.7. International Good Governance Standard
As mentioned in literature above, there is a growing need and phenomenon for good governance implementation due to its integrative and pre-requisite nature for
corporate governance implementation, as well as its increasing demand by society (KNKG 2006). This applies to Indonesia and to most countries around the world,
where it is at different stages depending on factors such as good governance introduction timing, political situation, economic conditions, legal framework, and
cultural conceptions (Connors 1999; Cook 1994; Duvall and Shamir 1980; Dwiyanto 2003; Fukuda-Parr and Ponzio 2002; Grindle 2004; Hout 2002; Hyden and Bratton
1992; Knack 2002; Ray 1999). Therefore good governance has become a world-wide phenomenon. However an uncertainty exist within and between countries of what is
considered good governance as good governance is a relatively new term in
33
international terms and is deemed to be quite an abstract one (Roy 2005; Taylor 1999; Taylor 2000). Although each country has its own definition of good
governance and what is deemed as good governance aspect, literature acknowledged the lack of standardised written good governance aspects (Kaufmann, Kraay and
Zoido-Lobaton 1999a). Thus, as in the case of corporate governance, it is felt that there is a need for a standardized good governance scorecard, one that will allow
assessment of country good governance in a standardised manner and provide a weighted report, as well as act as guidance for implementing countries (Kaufmann et
al. 2002).
There is a dearth in good governance scorecard literature developed by academia, however literature is aflood with scrutiny on international institutions taking a
focused approach on developing good governance standards and aiding countries in its implementation through technical assistance (Brinkerhoff and Goldsmith 2005;
Burnside and Dollar 1998; Hout 2002; Shafer 2004). The development, dissemination, and adoption by countries of international standards is expected to
assist countries in strengthening economic institution and inform society so as to allow more effective social control (Roy and Tisdell 1998). Common practice show
international institutions providing aid both financially and technically in the country of need, where an office will be established in that particular country. Literature
sequence international institutions’ role as planning, document analysis and on-site visit, data collection, assessment, results, and recommendations; all of which is
reported in a summarized document at the end of the agreed aid period (ADB 2004b; WorldBank 2005).
The International Monetary Fund (IMF) introduced its good governance approach in 1996 after being urged by its Board of Governors to promote good governance in all
its aspects, including ensuring the rule of law, improving the efficiency and accountability of the public sector, and tackling corruption (IMF, 2006)4. The IMF
viewed this as of urgent matter as the mentioned above are considered essential elements of a framework within which economies can prosper. The IMF provides
4 Information on the IMF and good governance are extracted from IMF website; www.imf.org/external/np/exr/facts/gov.htm and www.imf.org/external/pubs/ft/exrp/govern/govindex.htm
34
policy advice to its member countries through a process known as surveillance, where good governance is also pursued in IMF-supported programs. The IMF has
not produced an international good governance standard for its member countries to adhere to, however it encourages member countries to improve the transparency and
accountability of decision making by adopting internationally recognized standards and codes such as international accounting and auditing standards that covers
government, the financial sector, and the corporate sector. However it is acknowledged that the IMF’s role is very limited to the economic aspects of
governance, thus there is a higher concentration in transparency in fiscal policy. Although literature acknowledges the definite link between a transparent fiscal
policy and the eradication of corruption, which ultimately links into good governance implementation in the public sector, the work of IMF is irrelevant in this research as
this research is more focused on the understanding of good governance aspects by government officials and social/cultural impediment factors.
The OECD and the World Bank 5 has mutually defined good governance as the
execution of development management that is solid, responsible, and is in alignment with democracy and an efficient market. It also involves prevention of misallocation
of investment funds, executing a disciplined budget, creating a strong legal and political framework to induce private sector growth, and eradicating both political
and administrative corruption.
The United Nations, through the United Nations Conference of Trade and Development (UNCTAD)6, has recognised the importance of international standards of good governance. The UNCTAD good governance division meeting identified
four main values namely predictability, accountability, transparency, and participation. It was recognised that while some developing countries were able to
put in place legislations intended for reform, problems frequently persisted in relation to implementation due to resource constraints, corruption, and the abuse of
discretionary authority that undermines the rule of law. Thus UNCTAD has
5 Information on OECD and Worldbank and their perspectives on good governance are taken from each institutions website; www.oecd.org and www.worldbank.org/governance 6 Information on UNCTAD and their perspective on good governance standards are taken from UNCTAD website; www.unctad.org
35
produced a benchmark good governance standard based on the four main values listed above as an assessment tool to be applied within countries.
As of 2000, the United Nations, through United Nations Development Programme
(UNDP) has paid a high level of attention on the subject of good governance; as the exercise of political, economic, and administrative authority to manage a nation’s
affairs at all levels (UNDP, 2006)7. Three core elements (the 3 pillars) of good governance are evident: economic, political, and administrative. Economic
governance relates to equity, poverty, and the quality of life (Clague 1997; Elsner 2004; Gasiorowski 1995; Rivera-Batiz 2002); whereas political governance concerns
the processes in decision making and policy formulating (Beeson 2001; Edgington 2000; King 2003). Administrative governance on the other hand concerns the
implementation system of a policy (Ray 1999; Ferrazzi 2005; Huddleston 1991; Taylor 1999).
The UNDP’s definition of governance also suggests three critical domains inherent
to good governance: the state (government), private sector, and society, that interacts and execute each individual functions. Governance guidelines used by the UNDP
suggest that the function of the modern state/government is to create a political and legal environment that is conducive to economic growth; a private sector that is
responsible for creating employment and income, and a society that supports social, economic, and political interactions – including encouraging groups within the
society to participate in this interaction. The UNDP encapsulates its position in nine good governance principles;
1. Participation: Society participation in decision making and formulation of
public policy; 2. Rule of Law: Legal framework that is fair and implemented without
discrimination; 3. Transparency: Public information have to be transparent, accessible, and
easily understood by the society; 4. Responsiveness: Public entities have to be able to attend to all of its
shareholders;
7 Further information in regards to UNDP Good Governance Standards are taken from the UNDP website; www.undp.org
36
5. Consensus Orientation: Good Governance is the medium between agenda differences to ensure the best decision for greater good in terms of policies
and procedures; 6. Equity: All citizens have the opportunity to increase and maintain their
welfare; 7. Effectiveness and efficiency: Public entities have to perform in accordance
to what has been agreed by utilising resources to its best possible use; 8. Accountability: Decision makers in the state/government, private sector, and
society are responsible to the public and other stakeholders; 9. Strategic Vision: Leaders of public entities have to have a good governance
perspective and human resource development that is future oriented.
Relevant literature shows a great interest by international institutions such as World Bank, UNDP, and Canadian International Development Agency (CIDA) in assessing
the level of good governance or government reform in Indonesia, where there many collaborative projects between Indonesian government and international institutions
(ADB 2004b; BaKTI 2006; OECD 1995; WorldBank 1992; WorldBank 2004). There is also a current shift in the subject of assessment, where international
institutions are advocating collaborative projects with regional governments; however there is still a need for central government approval for such a project
(ILGR 2004). Given this shift in capacity building activity, much of which supports governance, there is a dearth in literature comparing standards of governance with
that implemented within recipient economies. While the UNDP standard is commonly known within Indonesian government circles and in the Asian economies, few studies have exhausted the implementation of such standards. Thus there is a
need for research that compares the international good governance standard and its implementation in Indonesia.
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4. Theoretical Basis and Methods
4.1. A Two by Two Matrix
The research context in this thesis questions the level of understanding and
implementation of good governance at a regional government level in Indonesia. Specific issues include impeding variables to good governance at regional
government level, and the extent of convergence with or divergence from international good governance standards. Ideally a study on each of the
approximately 400 regional governments in Indonesia would provide a generalised understanding of the understanding and implementation of good governance in
Indonesia regional government. However due to time and funding limitations there is a need to sample the regions, selecting key regions as concentration cases.
Decentralisation policy in Indonesia indicates regional independence in terms of
policy making and economic autonomy (Devas 1997; Schroeder 2003; Federspiel 2005). Each region has the independence to enact policies based on the level of
benefits reaped, where central government acts as an advisory as well as a control mechanism (Tambunan 2000; Silver 2003; Kristiansen and Trijono 2005; Crane
1995). This advisory and control mechanism relationship suggests that geographical distance between the central and the regional government affects the level of control
the central government would have on policy adaptation and implementation by regional government. A phenomenon of decentralisation and regional autonomy
policy is the establishment of new regional governments, where since the introduction of decentralisation policy in 2001 there has been 135 new regional governments established (Federspiel 2005; Bjork 2003).
Literature suggest that newer regional governments tend to embrace innovative ways
of implementing government procedures as the reason for their establishment is dissatisfaction from the old ways of previous regional governments that they were
part of, thus they innovate by establishing a new regional government (Indrawati 2005; Kivimaki and Thorning 2002; Mishra 2005). As good governance is
considered an innovation by literature due to its contrasting characteristics to Soeharto’s 32 years of governance (Mishra 2001), a relationship is concluded
38
wherein newer regional governments would be more open to implementing good governance aspects (Mishra 2002). International institutions literature has identified
many new regional governments as best case practices in good governance implementation (Silver 2003; WorldBank 2003; WorldBank 2004; ADB 2004b),
however literature has not made a direct relationship between the age of regional governments and good governance implementation.
Two variables are used to contextualise the research issue, where a two dimensional
four cell matrix (thus a two by two matrix) is used. The Johari Window compares two variables on each axis, in which each category is reflected within its quadrants
(Horine 1990; Davis 2005; Sole 1997). The two variables on each dimension (X and Y) of the window define the identification of Indonesian specific conditions, and thus
the content of each quadrant identifies regional government samples. The Johari window is utilised for several reasons. First of all, current literature indicates a dearth
in Indonesian good governance comparison literature, where many western models do not apply to Indonesian current economical and political conditions (ADB 2004a;
Azra 2005; Kristiansen and Trijono 2005; Tambunan 2000). Secondly, identification of the two variable trajectories (X and Y axis) and contents of each quadrant
(window) as a regional government sample will trigger a series of questionable relationships, addressing the purpose of this study.
Based on the explanation above, “Distance from Jakarta” (in kms) is labelled on the
X axis of the Johari window, ranging from near to far. The Y axis of the Johari window is labelled “Age of Regional Government” ranging from old to new. The distance between Jakarta (central government) and region is measured in kilometres,
whereas age of regional government is measured based on a division of regional government established before decentralisation and regional autonomy (before 2001)
and after decentralisation and regional autonomy (2001). The two variables above are chosen to ensure a representative sample of the thirty provinces of Indonesia, in
terms of geographical area as well as the effects of decentralisation and regional autonomy policy.
The information above is reflected in the matrix in figure 4.1.
39
Near to Capital Far from Capital
New Solok, West Sumatra8 Gorontalo - Sulawesi
a) Established in 20019 a) Established in 2000
Old Denpasar – Central Bali Padang, West Sumatra
a) Established in 1956 a) Established in 1975 Figure 4.1 Matrix Identifying Sample Regional Government
Another consideration in choosing sample regions is the level of information and communication technology (ICT) a region possesses, where it is ensured that each
regional sample has ICT infrastructure in the form a government website. This is measured by the ease in finding information of the particular region on the World
Wide Web, the level of information provided (not limited to tourism related information but also government, economy, and political), and the availability of
contact details. This criteria is considered important because the level of ICT implementation may suggest the level of infrastructure and international exposure a
region posseses, thus affecting the level international good governance alignment.
As outlined above in the theoretical base section, the use of the Johari window has lead to possible relationships, which ultimately answers the main research question
of the study. To test or explore such possible correlations, the following research design has been adopted.
4.2. Grounded Theory and Methodological Framework
The research design is based within the grounded theory tradition where more than
one method is applied to achieve contextual triangulation (Charmaz 2004; Glaser and Strauss 1967; Wells 1995); thus increasing the validity and rigour of research (Bloor
1997; Drisko 1999; Drisko 1997; Drisko 2003). The approach involves document analysis, in depth interviews, and the application of the International Good
Governance Standard. This framework is illustrated in figure 4.2.
8 It is noted that although there is only a small distance between Padang and Solok (50kms), it is totalling the distance between each regional government with central government that is considered. 9 Information on establishment year for each region is obtained from each regional government website as evident in table 1.
40
Figure 4.2 Methodological Framework
4.3. Document Analysis
The first method within this study is document analysis. As a starting point to the information or public records, reports, government documents, and opinions (Prior
2004; Cooper and Schindler 2003).
One of the main purposes of this method is as a sense-making activity10 on economic, political, and current decentralisation condition within Indonesia.
Another is to identify issues that still need clarification and further exploratory research, thus assisting in framing questions for the next method. Lastly, document
analysis will show a generated result of issues identified which could be compared to the International Good Governance Standard for confirmation on the level of
10 Sense-making activity is defined as the process where reading of documents provide a clearer picture of current conditions in Indonesia, the reason behind activities or policies, and good governance role in the current economic and political conditions.
1. Document Analysis
3. International Good Governance
Standard compliance
analysis
2. in- Depth Interviews
Themes & Questions Generated
Material for Standard Gathered
Data Gathered Generates Material
For Standard
Outcomes / Recommendations
41
convergence toward or divergence from international corporate governance standard. Issues that are not yet in the Standard and are specific to Indonesia due to its
cultural/political history will be questioned and added to practical recommendations as an input to good governance policy making.
The documents selected for this stage are based on three aspects; who produced the
document, when the document is produced, and consistency of data (Armstrong and Overton 1977; Drisko 2003; Roche 1997). The question of who is important as the
producer needs to have necessary resources to carry out a thorough investigation, reports only facts, and is non-biased (Fay 1997). Therefore government (and
government approved) documents are analysed as they are considered to have the necessary resources and is non-biased towards a certain view.
The date of when the document is produced is important as it provides context in
regards to economic and political conditions, as well as providing a tool for pattern finding (Lazega 1997; Poynton 2000). The ideas of decentralisation in Indonesia was
initiated in 1992 by Soeharto’s government through the National Five Year Development Plan (Sadli 1998; Seetharaman, Senthilvelmurugan and Periyanayagam
2004; Summers 1998; Thoenes 1997), therefore government publications and laws in regards to decentralisation after 1992 are analysed. Good Governance became a
strong topic in Indonesia as a response to the 1997/1998 Asian Financial crisis (Ang, Tourani-Rad and Yu 2004; Capulong et al. 2000; Gingerich and Hadiputranto 2002;
Haley 2000; Husnan 2001; Jomo 2001; Jones 2002), therefore documents concerning good governance after 1997/1998 are analysed.
This stage primarily involves obtained texts from government departments such as statistical tables, certificates, laws, codes, and reports. These include:
1. The National Five Year Development Plan V (1989-1994) and VI (1994-
1999) 11 as the initial idea of decentralisation and regional autonomy stemmed in 1992;
11 The National Five Year Development Plan, or Rencana Pembangunan Lima Tahun (REPELITA) is a planning unit developed in New Order Indonesia (1967) to coordinate the country’s accelerated modernization. A summary of REPELITA history reads: REPELITA I (1967-1974), REPELITA II
42
2. Publications by the United Nations Support Facility for Indonesian Recovery as it reports annual development on Indonesia’s economic, politic, and social
transition progress; 3. The 1945 Amended Constitution of the Republic of Indonesia;
4. National Code of Corporate Governance 1999; 5. Decentralisation Laws and Regulations in Indonesia, including;
a) Law No. 22/1999 Regional Government; b) Law No. 25/1999 Fiscal Balance between Central Government and
the Regions; c) Law No. 107/2000 Regional Government Loan;
d) Law No. 105/2000 The Region’s Financial Management and Accountability;
e) Law No. 20/2001 Fostering and Supervision of Local Governance; f) Law No. 11/2001 Information on Regional Finance.
6. Indonesia National Long Term Development Plan 2004-202412; 7. Indonesia National Medium Term Development Plan 2004-200913;
8. Regional Medium Term Development Plan 2004-200914 for Solok, Gorontalo, Bali, and Padang;
9. Regional Long Term Development Plan 2004-202415 Solok, Gorontalo, Bali, and Padang;
10. Law No. 25/2004 on National Development Planning System;
(1974-1979), REPELITA III (1979-1984), REPELITA IV (1984-1985), REPELITA V (1989-1994), and REPELITA VI (1994-1999). 12 Indonesia National Long Term Development Plan, or Rencana Pembangunan Jangka Panjang Nasional (RPJP) is a twenty years development plan initiated in Bambang Susilo Yudhoyono’s new government which came to power in 2004. It replaces the National Five Year Plan (REPELITA) during Soeharto’s era. 13 Indonesia National Medium Term Development Plan, or Rencana Pembangunan Jangka Menengah (RPJM) is a five year development plan created by Bambang Susilo Yudhoyono’s government in 2004 replacing the National Five Year Plan (REPELITA) during Soeharto’s era. 14 Regional Medium Term Development Plan, or Rencana Pembangunan Jangka Menengah Daerah (RPJMD) is a five year development plan discussing a particular region’s plans in managing resources, investment creation, infrastructure development, and economic policies. The document is drafted by regional authorities, which is then submitted to central government for review and approval. 15 Regional Long Tern Development Plan, or Rencand Pembangunan Jangka Panjang Daerah (RPJPD) is a twenty year development plan containing similar information as Regional Medium Term Development Plan, however it is under constant monitoring by central government. Thus it is an amendable document depending on results from each Regional Medium Term Development Plan, The National Development Plan, and other economical, political, and social conditions at the time.
43
11. Government and international institutions publications in relation to good governance (if applicable) from each region;
4.4. In-Depth Interviewing
The second method, in-depth interviewing, is carried out in each region to discover
different thoughts and opinions of corporate governance interpretation and their perceived level of implementation within the region. Thus this method involves the
participation of government authorities within each region as outlined in the Johari window. As there is more than one activity and data collection within this method it
is acknowledged as a family of method (Anasta 2000; Angrosino and Perez 2003; Brannick 1997; Greene 2003; Miller and Crabtree 2004; Padgett 2004; Zikmund
2000); involving three different stages of interviews: Staff Level Official (SLO), Middle Level Official (MLO), and High Level Official (HLO). The in-depth
interview also involves key government officials (KIG) from the central government (Jakarta) to provide a compare and contrast view on similar issues. A research design
flow for this stage is presented in figure 4.3.
Figure 4.3 In-Depth Interviewing Research Design Flow
Interpretation and Implementation
Padang Solok Bali Gorontalo
KIG
MLO
SLO
HLO
44
The research design begins with interviews with SLO involving administrative staff within regional government, where they are asked semi-structured questions to
provide room for open ended answers and ideas.
Due to time, funding limitations, and considerable size of regional government staff , a maximum of five staff level officials are interviewed per regional government.
Data is recorded through field notes and taped interviews, coded, and analysed using NVIVO and the excel matriculation system to ensure a systematic treatment of data
and test consistency (Kelle 2004; Weitzman 2003; Roland 2004; Thorne 2004; Hesse-Biber 2004; Miles and Huberman 1994).
The second stage of this method involves interviews with MLO within regional
government, where participants are asked core questions as well as contextual opinion on information accumulated from the SLO. This will provide the opportunity
for middle management to express opinions on the views of administrative staff, creating a tool to probe for further information (Considine and Lewis 2003; Czaja
and Blair 2005; Dingwall 1997; Hall and Rist 1999).
The third stage of interview involve the HLO, where structured interview questions are asked as there is sufficient data from the previous stages to create probing and
structured questions (Couper, Traugott and Lamias 2001; Simsek and Veiga 2001; Sofaer 2002). Once again accumulated information from previous stages are fed back
to key informants to ensure constant comparation (Baskerville and Wood-Harper 1998; Lau 1997).
The last stage of the in-depth interview process involves KIG from central government (Jakarta) who will provide their views on similar issues (as presented to
the regional government officials). Their view will provide a contrast and comparison approach, which teases out the effects of decentralisation and regional
autonomy on good governance implementation. KIG’s views on similar issues (as presented to regional governments) are considered crucial as there is an
interdependent working relationship between central government and regional government.
45
This process of interviewing will result in four aspects;
1. Opinions from each different stage of SLO, MLO, and HLO on interpretation of good governance, its understanding and the extent of
its implementation within the region. This is followed by opinions on the impeding variables of good governance implementation, the extent
of alignment with international good governance standards, and forecasts for the future;
2. Contrasting opinions between each level based on the feedback loops; 3. A big picture (large arrows coming out of HLO bubble) of how the
region interprets good governance and the extent of its implementation.
4. Opinions of regional government officials are contrasted with opinions of central government officials.
The total number of government officials interviewed is 31, with a break down for
each echelon level and region as recorded in table 2.
Table 4.1 Number of Government Officials Interviewed Region Government Official Interviewees Total
SLO MLO HLO Denpasar 1 3 2 6 Padang 2 2 2 6 Solok 0 2 1 3 Gorontalo 2 4 4 10 Jakarta 2 2 2 6 Total 7 13 11 31 It is recognised that there is an uneven number of government officials per echelon
level and per region due to a balance of contextual issues. Issues such as access to regional government authorities, introduction from a senior official, the culture of
reluctance and high risk uncertainty, government official schedule and availability, and sensitivity of good governance context as an interview topic all impacts on the
number of government officials interviewed.
4.4.1. Question Design
46
Interviews will have the same approach and core questions to ensure systematic questioning and creating an equal starting level (Bowler 1997; Dingwall 1997; Fern
2001; Holstein and Gubrium 1995; Miller and Crabtree 2004; Roland 2004; Willis 2005). However there will be room for comments based on feedback loops from the
previous stages as well as newly developed questions based on interpretation of interviewee’s answers; ensuring within method triangulation (or internal
triangulation) for increased validity and rigor of research (Bloor 1997; Denzin 1989; Drisko 1997; Drisko 1999; Golden-Biddle and Locke 1997; Hall and Rist 1999;
Rank 2004)
Below is a list of questions asked at each interview; 1. What, in your opinion is unique about your region, in terms of religion, culture,
and its people? 2. How do you think the uniqueness of your region has affected the working agenda
of your regional government? 3. To what extent do you think the term Good Governance is understood and
implemented in your region? 4. What do you think are variables that impede the implementation of good
governance standards? 5. To what extent do you think International Good Governance Standards are known
and understood in your region? 6. What sort of aspirations do you have/see in terms of International Good
Governance Standards implementation in your region in the future? Once the above process is completed for one region in Indonesia, it will then be
repeated for the three other regions as identified in the Johari window; providing similar framework results as the first region (see above). The opinions and views of
each stage within each regional government is fed to participants in the same stage within another regional government, thus providing a comparison of opinions and
viewpoints of each level / stages across the four regions. The result of this step is a general census of what is common and what is not between each region in terms of
corporate governance interpretation and implementation. Also each region’s big picture interpretation and extent of corporate governance implementation is
compared. Both acts of comparison as mentioned above will validate the outcome as
47
across method triangulation (or external triangulation) is achieved, as well as theoretical application (Baskerville and Wood-Harper 1998; Biddle 2000; Bloor
1997; Drisko 1997; Drisko 2003; Hall and Rist 1999; Jagodzinski 2004; Tolman and Szalacha 2004).
4.4.2. Analytical Tool
To assist in evaluating government official responses a characteristics table is utilised
as an analytical tool. These three tables assist in classifying the level of good governance understanding (table 3) and level of good governance implementation
(table 4). These tables were derived after the interview process, based on initial assessment of interview responses.
Table 4.2 Level of Good Governance Understanding Characteristics Level of
Understanding
Characteristics
Low Acknowledge the term “good governance” and able to name good governance concepts.
Medium Acknowledge and able to name good governance
concepts, able to explain the meaning of each concept.
High Acknowledge, able to name and explain the meaning of
each concept, and able to provide examples of how concepts are applied in everyday work.
Table 4.3 Level of Good Governance Implementation Characteristics
Level of
Implementation
Characteristics
Low Introduction stage, vague plans of good governance
implementation.
Medium Concrete plans of good governance implementation (through decrees and published policies/plans).
High Concrete plans and evidence of good governance
implementation
4.5. International Good Governance Standards Comparison
48
The third method in this research design involves comparison against the
International Good Governance Standard, where this research design is aspired by the use of The International Corporate Governance Scorecard (Bradley 2004;
Strenger 2004). Recent literature on corporate governance compliance in country comparison studies have shown increased popularity in applying the Scorecard
(Mertzanis 2001; Drobetz, Schillhofer and Zimmermann 2004; Craig and Moores 2005; Quinlivan 2000; Mcadam and Walker 2003; Griffiths 2003; Higgins and
Currie 2004; Hamann 2004; Ho 2005; Tsipouri and Xanthakis 2004), indicating its validity and efficiency in evaluating the degree of international alignments.
There are many international good governance standards released by different
international institutions, such as IMF, World Bank, and UNDP. At present there is no one international good governance standard, although the UNDP good
governance standard is claimed to be the most cited and known in south-east Asian countries. Initial document analysis also shows popularity of UNDP good
governance standard as a reference in Indonesia’s central government publications. Therefore based on the two reasons above the UNDP good governance standard will
be utilised, although other standards will also be mentioned in interviews to test general knowledge of international good governance standards. The 9 Pillars of
UNDP good governance16 is as follows; 1. Participation: Society participation in decision making and formulation of
public policy; 2. Rule of Law: Legal framework that is fair and implemented without
discrimination;
3. Transparency: Public information is transparent, accessible, and easily understood by the society;
4. Responsiveness: Public entities have to be able to attend to all of its stakeholders;
16 It is recognised that the 9 PIllars of UNDP good governance might suggests corporate governance, this is expected as good governance and corporate governance are similar in principle however is applied to different sectors (corporate governance applied within private sector and good governance applied within the public sector).
49
5. Consensus Orientation: Good Governance is the medium between agenda differences to ensure the best decision for greater good in terms of policies
and procedures; 6. Equity: All citizens have the opportunity to increase and maintain their
welfare; 7. Effectiveness and efficiency: Public entities perform in accordance with what
has been agreed by utilising resources to its best possible use; 8. Accountability: Decision makers in the state/government, private sector, and
society are responsible to the public and other stakeholders; 9. Strategic Vision: Leaders of public entities have a good governance
perspective and human resource development that is future oriented.
An International Corporate Governance Balance Scorecard application takes the form of a checklist, recording whether certain aspects can be found within a
corporation as well as the level of compliance. The UNDP good governance standard is not a balance scorecard with absolute values; it is a list of good governance pillars
that is recommended to aid-receiver countries (UNDP, 2006). Therefore the good governance standard is applied differently from the corporate governance balance
scorecard. The first stage is as a question within the interview process, where government officials are tested on their knowledge and understanding of
international good governance standard. The second is to compare the 9 aspects of UNDP good governance standard with regional government development agendas,
publications, and regional decrees for identification of good governance implementation.
This stage is also coupled with questions within the interview process on government official opinion on the extent of international good governance alignment. Based on
the stages above three conclusions are drawn; such as the level of international good governance standard knowledge, the level of its understanding, and the level of its
implementation. This method will ultimately provide a clearer picture of the extent of international good governance alignment within Indonesia’s regional government.
4.6. Conclusion
50
A Johari window is utilised to assists in creating a representative sample out of approximately 400 regional governments in Indonesia, where four sample regional
governments are determined. The two determinant variables are distance from Jakarta and age of regional government. Distance from Jakarta is a variable as the
geographical distance between central and region affects the level of control central government would have on policy adaptation and implementation by regional
government, whereas the age of regional government is a variable to portrait the effects of decentralisation and regional autonomy and the possible tendency of newer
regional governments to implement innovation. The result of the Johari window is four regional samples namely; Padang, Solok, Gorontalo, and Bali.
A triangulation of methods is utilised, which consists of document analysis, in-depth
interviews, and comparison to an international good governance standard. Document analysis is used as a sense making tool of the current situation and to form questions
for the in-depth interview stage. In-depth interviews are carried out as semi-structured interviews involving government officials from each regional/local
government. Internal triangulation is achieved as three levels of government officials within each regional government are interviewed, wherein responses from each level
is looped to the next level for conformation and further information. External triangulation is achieved through comparison of interview answers between regional
governments as a whole. The International good governance standard will be compared to regional government publications and a question on the subject, in terms
of its understanding and implementation, is also asked in the in-depth interview stage.
Interview results will be analysed using NVIVO and an excel matriculation system to ensure systematic treatment towards data, ensure consistency, and conclude
relationships. Thus the process utilised during in-depth interview and systematic treatment towards data will provide rigour and validity.
51
52
5. Findings 5.1. Denpasar Regional Government, Bali Province
Bali is an Indonesian island located in a chain with Java to the west and Lombok to
the east, with a population of approximately three million (Government of Bali, 2006). Denpasar civil servants are interviewed17 as it is the capital city and is a
regency created before the decentralisation and regional autonomy policy, thus in accordance to the Johari Window (as in chapter 4, methodology section).
Balinese people are involved in agriculture, fishery, and art; where it is also
internationally known as a tourist attraction, resulting in many Balinese to be bilingual or even trilingual. The Balinese caste system is a system of social
organization similar to the Indian caste system (Government of Bali, 2006), although the Balinese caste system is simpler than India’s with only four Balinese castes:
• Sudras – peasants making up more than 90% of Bali’s population;
• Wesias – the caste of merchants;
• Satrias – the warrior caste, it also includes some nobility and kings;
• Brahmans – holy men and priests.
In recent times the caste system is used more in religious settings only, where the
differences in the economic roles of the members of the caste system are slowly eroding as the government prohibits treatments based on the caste system
(Government of Bali, 2006).
The implementation of decentralisation and regional autonomy in 2001 resulted in regional development depending much on each region’s own capability in financing.
The income of Bali was approximately Rp 543 billion (AUD 78 million)18 in 2001, with tax as the largest contributor compared to other sectors of the economy. Ratio of
that income to Bali’s income and expense in 2001 was 60.79% which is higher than that of in 2000 which was 52.42%. The other Balinese government source of revenue
in 2001 is from 21 local state-owned companies, as well as national investments 17 For a list of Denpasar regional government interviewees please refer to Appendix A 18 Currency exchange rates based on Bank of Canada currency converter on 29th August 2006.
53
(rising up to 175% in 2000 compared to 2001) and foreign investment (rising from 96 investments in 2000 to 112 in 2001)19(Peraturan Daerah Propinsi Bali - Penetapan
Anggaran Pendapatan dan Belanja Daerah Propinsi Bali tahun Anggaran 2001 2001; Peraturan Daerah Propinsi Bali - Penetapan Sisa Perhitungan Anggaran Pendapatan
dan Belanja Daerah Propinsi Bali Tahung Anggaran 2000 2001).
Bali and tourism are inseparable, as not only the provincial government but also most of its people depend very much on this sector to run the development of Bali
(Keputusan Gubernur Bali - Program Pembangunan Daerah (Propeda) Tahun 2001-2005 2001)20. The 2002 Kuta bombing marred Bali’s tropical loveland image, and
for a time the island fell into decline as it is heavily dependent on tourism. The 2005 Bali bombings were a series of explosions that occurred on October 1st, exploding at
two sites in Jimbaran and Kuta – both in south Bali. It has been concluded that evidence indicates the attacks carried out in a similar fashion to the 2002 bombings,
with an even higher after effect on Bali’s tourism and stability. These events have affected the Balinese community in a sense that it has brought them closer and
tighter as a province, affecting some of government related policies and responsibilities. Although decentralisation and regional autonomy dictates the
province of Bali to be responsible for its own tourism policies and funding, continuous crises due to international terrorist attacks have resulted in the central
government playing a substantial role in the recovery of Bali’s tourism industry.
Good Governance understanding in Denpasar regional/local government is very low, where government officials across all echelon levels are only able to acknowledge the term good governance and some of its aspects. Interviews revealed that
government officials are able to name the aspects of good governance, or the attributes to good governance, however there is an inability to explain the meaning of
these aspects. This is shown in figure 5.1.1, where in comparison to other regions Denpasar has the lowest level of understanding.
19 Data is based on Peraturan Daerah Propinsi Bali - Penetapan Anggaran Pendapatan dan Belanja Daerah Propinsi Bali tahun Anggaran 2001. No. 1. Lembaran Daerah 2001: 63-68 and Peraturan Daerah Propinsi Bali - Penetapan Sisa Perhitungan Anggaran Pendapatan dan Belanja Daerah Propinsi Bali Tahung Anggaran 2000. No 27. Lembaran Daerah 2001: 147-151. 20 Information on Bali’s Development Agenda is taken from Keputusan Gubernur Bali - Program Pembangunan Daerah (Propeda) Tahun 2001-2005. No. 15. Lembaran Daerah 2001: 58-62
54
0
1
2
3
4
5
6
7
Level of govt
officials Response
Level ofImplementation
Level ofUnderstanding
Sample Regional Government Good Governance Understanding and
Implementation Comparison
Padang
Solok
Gorontalo
Denpasar
Figure 5.1.1 Sample Regional Government Good Governance Understanding and
Implementation Comparison Good governance implementation in Bali is still at the introduction stage, where most
government officials are able to name aspects of good governance however they fail to explain the meaning of good governance in their own language, provide an
example of good governance related regional government policy, and give an example of how good governance can be implemented in their daily work.
Further analysis found that the level of good governance implementation differs for
each aspect of good governance, as can be seen in figure 5.1.2.
55
0
1
2
3
4
5
6
Numberof govt officials
Response
Denpasar
Denpasar Good Governance Attributeaccountability
alignment to rules andregulation
external audit
innovation
justification ofperformance
professionalism
participatory
transparency
Figure 5.1.2 Denpasar Good Governance Attributes
Figure 5.1.2 shows Denpasar regional government officials identifying Denpasar’s strength in following rules and regulations as set by the central government.
However they have identified weaknesses in other good governance aspects such as accountability, external audit, justification of performance, and professionalism.
Interviews reveal that Good Governance is implemented at different levels by different sections or departments within the Denpasar regional government, due to
differences in human resource capabilities and the mission and vision of each department. This explains why there is quite strong implementation of different
aspects of good governance such as innovation, participatory, and transparency; as in the figure above. It also explains the introductory stage that Denpasar is currently at, as good governance is implemented sporadically and not equally throughout all
departments within Denpasar regional government.
Impeding variables to good governance are variables that prevent full implementation of good governance aspects. Denpasar regional government have
identified three main impeding variables; bureaucracy culture, commitment, and the level of government official welfare, as illustrated in figure 5.1.3.
56
0
1
2
3
4
5
6
Number of govt
officials Response
Denpasar
Denpasar Impeding Variablesbureaucracy culture
commitment
goodwill
High frequency in changingrules and regulationshuman resource level
law enforcement
leadership
level of government officialwelfarelevel of socialisation
minimum public servicestandardpolitical history
reward and punishment
Figure 5.1.3 Denpasar Impeding Variables to Good Governance Implementation
Bureaucracy culture as a main impediment variable show that there is a high
reluctance to change as government officials are used to the “old” way of governance that has been deeply rooted during the 32 years of Soeharto’s governance. In
correlation to the low impeding impact of commitment and goodwill from government officials, a relationship can be deduced in that there is commitment and
goodwill in implementing good governance from individual government official interviewed, however to change from old ways of governance to good governance as
a whole regional government office is a challenge. The level of government official welfare is another main impeding variable to good governance, where government
officials feel that they are lowly remunerated and therefore are attempting other possibilities in generating income to fulfil everyday needs. These include consulting work for private companies / small businesses, sitting on the board of directors for
private entities, or owning their own tourism related business. Denpasar regional government officials are in agreement that if they are remunerated at a level that will
allow them to fulfil everyday needs and live comfortably it will speed good governance implementation, as government officials are no longer concerned with
their income and thus do not look for loopholes in the system. Loophole opportunities include condensing time spent at work by “cutting corners” yet
57
claiming for original hours, accepting underhand payments, and claiming leisure expenses as work expenses. Thus there is a need for a remuneration reform in
Denpasar regional government; where the remuneration level will allow government welfare levels to increase, reducing the level of loopholes opportunities taken by
regional government officials.
Human resource capacity is identified as another main impeding variable where government officials agree there is a need for further training and workshops in
regards to good governance aspects. It is found that higher and middle level government officials are in favour of good governance seminars that will explain the
essence and philosophy behind good governance aspects, whereas staff level officials prefer more technical workshops teaching them how to implement good governance
in their daily work.
The international good governance standard is not widely known in Denpasar regional government, where government officials claim that there is very little
knowledge of the international standard. This can be seen in figure 5.1.4 where the international good governance standard knowledge and understanding is among the
lowest out of all sample regions.
0
1
2
3
4
5
6
Number of
govt officials
Response
conditions toconverge
converge andalign
globalisation Knowledgeand
understanding
Convergence to International Good Governance Standards - Gorontalo Comparison
Padang
Solok
Gorontalo
Denpasar
Figure 5.1.4 Convergence to International Good Governance Standards - Denpasar Comparison
From the figure above we can see that Denpasar regional government is highly
agreeable to the idea of converging to international good governance, where
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Denpasar regional government is the highest identifier of globalisation as a reason to converge. However Denpasar regional government is also the region that has
identified the highest level of conditions to converging, or the amount of aspects that needs to be prepared in pre-requisite stage prior to converging to international good
governance standards. Pre-requisite steps prior to alignment are needed as currently there is a lack of legal instruments (in terms of good governance) and good
governance system in Denpasar regional government. Pre-requisite conditions to converging include; bureaucracy reform, re-evaluating and re-designing good
governance rules and regulations, and increasing the level of human resource capability through seminars held in conjunction with international institutions.
5.2. Padang Regional Government, West Sumatra
Padang21 is the capital and largest city of West Sumatra, Indonesia. It lies on the west
coast of island Sumatra, with an area of 695km2 , a population of over 750,000 people, and are habited by “The Minangkabauans” or “Orang Minangkabau” in
Indonesian language. The Minangkabau people are predominantly muslim, with a belief within the community of “Adat Basandi Syara, Syara basandi Kitabullah”, or
customs and ways that is based on the holy Qur’an Islamic book.
Padang’s main vision for 2020 is the establishment of an independent society that is based on industry, high quality and competitive commerce and service industry
within a city/community that is systemic and well regulated. One of the agendas announced by the Padang Regional government is the agenda for a good and clean government, which consists of six priorities; 1) increasing regional government
capacity, 2) increasing the quality of public service, 3) eradication of corruption, collusion, and nepotism, 4) law development and enforcement and increased
protection for human’s rights, 5) increasing security and discipline, and 6) improvement in the management of regional finance.
Padang is considered to be one of the “old” regional governments as it was
established prior to the introduction of the two decentralisation and regional
21 For a list of Padang regional government interviewees please refer to Appendix A
59
autonomy laws, and has a history dated from the 14th century (1340-1375). It was not until 1975 however that Padang was recognised as the capital of West Sumatra,
through constitution number 5 year 1974 (UU No 5/1974).
Although recognised as one of the “older” regional governments, decentralisation and regional economy policy has brought and fundamental change in the planning
and implementation of development in Padang. History shows that Padang has always been different in that instead of recognising a village as its lowest
government authority it recognises the existence of “nagari” as its lowest government authority (Government of Padang, 2006)22. The difference between village and
nagari is that village is based on a geographic area whereas nagari is based on clan and ancestral culture as determined by history and culture. In 1979 the central
government forced Padang to conform to a unitary government system where Nagari was to be changed to a Village, which caused social unrest and a belief that the
Minangkabau culture would be eradicated. However the introduction of decentralisation and regional autonomy meant that authority is given to each
provinces and regions in determining its government structure, which was seen (and acted upon) as an opportunity to restore nagari. Thus the term and concept of nagari
was restored in Padang regional government, where nagari became the lowest level of government authority.
The Good Governance paradigm is well known among Padang regional government
officials however there is a disparity between echelon levels in terms of understanding of its concepts. It is found that each Padang regional government official interviewed knew the term “good governance” and is able to name the
concepts of good governance, however when asked the meaning behind those concepts, answers vary. High level government officials were able to provide a
detailed account on the meaning of each good governance concept and provide examples of its implementation; middle level government officials were not able to
provide a description (or meaning) for each concept, however they were able to provide examples of implementation; whereas staff level officials were unable to do
both and were only able to name the concept.
22 Information on Padang history are retrieved from Padang Government website, www.padang.go.id
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Further analysis found a mismatch in the level of perceived good governance
understanding between echelon levels. Middle and staff level government officials acknowledge the good governance paradigm and have minimum understanding of
the concept, claiming that maximum or higher understanding of the concept is only at top level management (or high level government officials). However high level
officials claim that all government officials (thus inclusive of middle and staff level officials), are already in full knowledge and understanding of the good governance
concept. Therefore there is a mismatch with the perception of each echelon level on the extent of good governance understanding at other echelon levels. This mismatch
has the possibility of a multiplier effect in furthering good governance understanding within the Padang regional government, as high level officials are the decision
makers (in terms of possible good governance seminars, etc) and yet they believe that all government officials are already at full knowledge and understanding.
Therefore there is a disparity of good governance understanding between echelon
levels of government officials, as well as a mismatch in the perceived good governance understanding between echelon levels. This leads to a misleading
conception that there is good governance understanding within the Padang regional government. Misconception exists in that there is a good governance
“understanding”, as there are positive responses when interviewees are asked if they understand good governance, yet when probed further there are different levels in the
ability to show good governance understanding. Misconception also exists in that high level officials believe all government officials (including middle and staff level) understand good governance and yet in reality they do not. This misconception is
illustrated in figure 5.1.1, where good governance understanding in the Padang regional government is very high in comparison to other regions.
Therefore the term “good governance understanding” in Padang regional government
is found to be used loosely, where acknowledgement of good governance concepts is also deemed as understanding of the concepts. An implication of this is that not only
does it skew the results in comparison to other regions but most importantly it provides a false sense of security within the Padang regional government which may
result in further impediments in increasing good governance understanding.
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In terms of good governance implementation in Padang regional government, there
are two main issues that need to be addressed prior to discussing examples of good governance implementation within the region. The first issue is that there is a
different understanding between echelon levels on what is considered to be good governance implementation, which resulted in a mismatch of good governance
implementation opinions between echelon levels. High level officials believe that there is evidence of good governance implementation in different areas based on
planning documents of good governance implementation, whereas middle and staff level officials believe there are still low levels of (actual) good governance
implementation.
Therefore the term “good governance implementation” in Padang regional government is again used loosely, where it can refer to both planned implementation
(documents outlining activities, decrees, etc) and actual implementation (of those planned good governance documents). As in the above section on good governance
understanding, this has resulted in a very high level of good governance implementation as well as to be the highest in comparison with other regions (figure
5.2.1). Again this result not only skew the perception and conclusions drawn in regards to Padang good governance implementation, it also misleads the perception
of decision makers in that there is already a high level of good governance implementation, where in reality the figure includes both planned and actual
implementation, as the meaning of the term “implementation” is used loosely and interchangeably.
The second issue is that there is a mismatch between planned good governance implementation and opinions of government officials in regards to good governance
implementation. Planned good governance implementation refers to document related good governance implementation, where plans of implementation (such as
practices, events, etc) are outlined. Based on planned good governance implementation (documents, website) there is a high level of good governance
implementation including the establishment of Padang government website, application of good governance aspects in the area of budget formulation and
execution, eradication of corruption, and positioning or allocating government
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personnel based on certain rules (such as education and experience). High level officials have recognised the early stages of good governance implementation
however middle and lower staff levels claim difficulties in implementing good governance due to three aspects; confusion on how to implement good governance
concepts in their everyday work, lack of good governance implementation system, and high level of reluctance in changing from the old way (32 years of Soeharto’s
governance) to the new way (good governance).
Padang regional governments have recognised several good governance attributes that are evident within the region, which is illustrated in figure 5.2.1;
0
1
2
3
4
5
6
7
Numberof
govt officials
Response
Padang
Padang Good Governance Attributeaccountability
alignment to rules andregulation
external audit
innovation
justification ofperformance
professionalism
participatory
transparency
Figure 5.2.1 Padang Good Governance Attribute
Based on the above figure it is clear that Padang believes itself to excel in the areas of accountability, alignment to rules and regulations, and transparency. These three
aspects were constantly mentioned by government officials as the current main concern in Padang regional government. Government officials were in agreement
that the current emphasis is on accountability and transparency, where there are attempts to increase transparency and accountability. An evidence of increasing
transparency is the creation of Padang government website which contains general information (tourism, history, current events) on Padang, and most importantly on
Padang regional government agendas and policies.
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Padang regional government has identified four main impeding variables to good governance; bureaucracy culture, human resource level, level of government official
welfare, and the absence of a minimum public service standard. This is illustrated graphically in figure 5.2.2;
0
1
2
3
4
5
6
7
Number of
govt officials
Response
Padang
Padang Impediment Variablesbureaucracy culture
commitment
goodwill
High frequency in changing rulesand regulations
human resource level
law enforcement
leadership
level of government officialwelfare
level of socialisation
minimum public service standard
political history
reward and punishment
Figure 5.2.2 Padang Impediment Variables to Good Governance
Bureaucracy culture is a main problem in Padang regional government, as Padang is
one of the regions considered to be “old” (or established before the decentralisation and regional autonomy policy). It is admitted by government officials interviewed
that there is a high reluctance from government officials to change or transition from the old way (32 years of Soeharto’s governance) to the new way (good governance).
Part of this reluctance is evident in Padang’s communication lines, where there is still a perception that all decision making should be left to high level officials and
thus a closed communication line. Padang staff level government officials experience a closed line of communication in terms of conveying new ideas of innovations, where it is felt that bureaucracy levels impede new ideas being discussed and
potentially implemented.
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In terms of human resource levels there are three issues that have caused to be an impediment to good governance implementation. Firstly Padang is considered to be
an “old” region and thus government officials that are currently in position are still “old” government officials who have held positions since Soeharto’s era. Secondly
both middle and staff levels have claimed that there is only a minimum level of opportunity in terms of being exposed to further information such as seminars,
training, availability publications, etc. This limits the possible learning curve that could be gained from attending such events, creating a human resource base that is
stagnant in its knowledge. Thirdly, government officials have claimed that due to family oriented culture in Minangkabau (Padang) society there has been evidence of
government officials recruited and promoted not in accordance to their capability and experience. Although there is no concrete evidence of this, the fact that it is
mentioned by more than one government officials and there are no statements from other government officials disputing it show that it is a possible problem. If that is
the case, not only will such practice increases resentment within the regional government, it will also have a possible multiplier effect of hindering
implementation of government agenda.
Government official welfare is admittedly an issue in Padang regional government, where all government officials believe there should be an adjusted remuneration
system that will allow them to stop looking for loopholes in the regulations, live comfortably, and thus start to think about implementing good governance aspects. In
terms of minimum public service standard, it is claimed by all government officials the absence of such a standard has caused them to lose direction in performing public services as there isn’t a standard to go by as a guideline.
The International Good Governance Standards term is widely recognised by all
Padang regional government officials, where each government official has claimed being fed information on the standard through seminars and workshops at one stage
of their career. This is evident from figure 5.2.3, where in comparison to other regions Padang region shows a higher level of international good governance
standard knowledge and understanding.
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0
1
2
3
4
5
6
Number of
govt officials
Response
conditions toconverge
converge andalign
globalisation Knowledgeand
understanding
Convergence to International Good Governance Standards - Padang Comparison
Padang
Solok
Gorontalo
Denpasar
Figure 5.2.3 Convergence to International Good Governance Standards - Padang Comparison
Although there is a high level of international good governance standard knowledge, there is disparity in the level of its understanding. There is one general understanding
that the international good governance standard was established by UNDP or other international institutions however that is where the similarity of understanding
between echelons levels end; there are different levels of understanding between echelon levels on the meaning of the concepts within the standard.
High level officials gave a detailed account of their understanding of the standard,
concluding that the main core of the standard is transparent, responsible, accountable, and having the rule of law. In contrast middle and staff level officials
have very different opinions in regards to international good governance standards. Although middle level officials are able to name some of the concepts staff level
officials are unable to go further than acknowledgment of the international standard. Middle level officials believe international good governance standards are already
well known among government officials however there is confusion in its implementation as there is uncertainty in merging the concepts with current work
practices. It is the middle level officials who believe there are certain pre-requisites before
Padang is able to converge to the international standard, including a well established national good governance legal bases which will create a system and eliminate the
66
high dependency on people or the mission and vision of the regent head. This belief is illustrated in figure 5.2.3 where there is only a low level of conditions to converge,
as this pre-requisite statement was only voiced by middle level officials.
In terms of the possibility of Padang converging to international good governance standards there is a confident response that Padang regional government will
converge to international standards; however it is noted that government officials believe this will happen over the long term period with several periodical steps.
5.3. Solok Regional Government, West Sumatra
Solok is a regional government in West Sumatra, Indonesia; two hours drive from
Padang regional government. With an area of 3.738 km2 and a population of over 350,433 people23, Solok region has been named as the best case practice for good
governance implementation by institutions such as Transparency Indonesia, as well as recognized as one by the central government and other provincial/regional
governments around Indonesia. This is evident by the number of other regional governments visiting Solok for comparative studies purposes on the subject of good
governance; where current data show 35 visitation studies in 2006 and 52 planned visitation studies in 2007.
There were a lower number of government officials interviewed due to unavailability
and reluctance of government officials being interviewed, where those reluctant to be interviewed claimed low knowledge of good governance issues and that there are another officials with higher knowledge in the matter24. Due to the restricted number
of government officials interviewed, each interview conducted was longer time wise and more in-depth. It is recognised that this affects the results of data compiled in
comparison with other regions, thus further analyses is taken through Solok government publications and observation at Solok regional government office.
23 Area and demographic information is based on 2005 data provided on Solok Regional Government website, www.solok.go.id 24 For a list of Solok regional government interviewees please refer to Appendix A
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Solok regional government has two sets of vision and mission, one for a shorter term of 2006-2010 and another for a longer term of 2006-2025. Solok’s main vision and
mission for 2006-2025 is to be the best regional government out of the best, whereas its main vision and mission for 2006-2010 is to create leadership, government, and
society that is responsible, well mannered, and confident towards establishing an independent Solok region. The three main pillars of development for Solok region
(2006-2010) include the education, health, social economic sector.
Solok regency was established in 1956 based on UU No. 12 tahun 1956 (constitution number 12 year 1956), however the regional government was expanded in 1970 to
Solok regency and Solok City. It was not until 1997 that the executive and legislative (of regional government Solok) pioneered the suggestion of the re-establishment of
Solok regency, separate from Solok city. Opportunity came in 1999-2000 with the decentralisation and regional autonomy, where executive, legislative, and society
leaders decided to re-establish Solok regional government. As a result Solok regency became a separate entity from Solok city in 2001 through Regional Decree no 4 year
2001, with a new regional government office in Kayu Aro – Sukarami (Arosuka), which is mid-way between Padang and Solok city. It is not until the establishment of
Solok Regional Decree no 39 year 2004 that government authority and function is transferred from Solok city to Solok regency, and thus 2nd April 2005 is the official
date of Arosuka functioning as “central government” for Solok regional/local government. Hence Solok regency is considered to be one of the “new” regional
governments. Similarly to Padang regional government, Solok regional government also
experienced a restructuring in their government system. As both Padang and Solok regional government are still within the jurisdiction of West Sumatra province, they
have similarities in the culture of Minangkabau and “nagari” as the lowest government authority. In the year 1979, with the purpose of a uniform government
system for the whole of Indonesia, the central government established constitution/regulation number 5 in 1979 (UU No. 5/1979) on Village level
government (Government of Solok, 2006)25. This regulation caused a change of
25 Information on Solok history and good governance related policies were retrieved from Solok regional government website, www.solok.go.id
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status of nagaris, where they are no longer recognised and are to be known and treated as a village – the lowest level of government of authority. This caused social
unrest as many Solok people believed the regulation interfered with government system based on Minangkabau culture. However a change in the Indonesian politics
revived Solok society’s hope for the re-establishment of the Minangkabau government system. Nagari as the lowest government authority was once again
restored shortly after the introduction of decentralisation and regional autonomy.
In the west Sumatra province, Solok regional government was the first regional government that is most ready to implement decentralisation and regional autonomy.
Solok regional government had a master plan to implement regional autonomy, where the master plan was based on constitution number 22 year 2000 (UU No
22/2000). The master plan included restoring nagari and decentralising 111 government authority and functions to nagari level, establishing partnerships with
international institutions to further embrace innovation and improvement of social welfare, and to create a government that is free of corruption, collusion, and
nepotism. Solok regional government officials agree that the establishment of Solok regency as its own entity has resulted in Solok being more open to new innovations
as they are attempting to break the mould and “prove themselves” as a new regional government.
Based on interviews with government officials in Solok it can be induced that Good
Governance understanding and adaptation in Solok is of high level, where it is claimed that it is a must for Solok regional government officials to understand the aspects. This high level of understanding is as illustrated in figure 5.1.1; where due to
the lower number of interviewees it seems as if the level of understanding is low in comparison to other region, yet in reality all government officials interviewed had
high level of understanding.
Despite the full agreement that good governance understanding is of high level it is surprising when all government officials admit to different levels of good governance
understanding. It is even more surprising when they all also agree that this disparity is the key to good governance implementation. It is explained by government
officials interviewed that good governance understanding exists in three levels.
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The first applies to high level officials where understanding is very high, very
theoretical, and related to decision making in the regional government agenda and future directions. Middle level officials understands good governance concepts and
its application on a level where they know how to control their staff so that staff level officials are able to work based on what is agreed (work contract) and set by the
regulations. Staff level officials understands good governance in a totally different manner, where they do not know them as good governance concepts but as ways that
will improve public service in real and everyday terms. Thus staff level officials “stick” to their job description and are well trained at it, which increases the quality
of their performance and thus public service. Therefore there is a more application and practical approach than a conceptual theory based approach. Although surprising
and in contrast with current literature, which reasoned full understanding must be reached before full implementation (Erb 2005; McNutt and Batho 2005; Scott and
Pandey 2000; Taylor 2000), it is proven by Solok regional government that this strategy works in ensuring understanding of the concepts (though in different ways
and levels) and thus ensure implementation of good governance.
Analysis on Solok regional government publication and interviews with government officials reveal a high level of good governance implementation. This is evident from
figure 5.1.1 on the level of good governance implementation, where all government officials agree to high levels of good governance implementation. One form of good
governance implementation that is Solok’s regional government pride is accountability and transparency, which explains the very high level of accountability and transparency in figure 5.3.1.
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0
1
2
3
Number of
govt officials
Response
Solok
Solok Good Governance Attributeaccountability
alignment to rules andregulation
external audit
innovation
justification ofperformance
professionalism
participatory
transparency
Figure 5.3.1 Solok Good Governance Atributes Accountability and transparency is achieved in Solok regional government in two
ways. The first is the introduction of a one gate service26 (or Posyantu – Pos Pelayanan Terpadu as known in Solok), where society is able to find all public
services under one roof. The purpose of the one gate service is to provide certainty and explanation to the Solok society in terms of the public service standard that is
offered by Solok regional government such as; public service offered, mechanisms and procedures, documentation and other pre-requisites needed, charges and fees,
and expected processing time. The one gate service provides the society with the transparency they seek (documentation, fees, processing time) as well as
accountability tool should one feel wronged or have questions (Government of Solok, 2006).
The second tool to accountability and transparency is the signing of an integrity pact. An integrity pact is a pact signed by all government officials in Solok regional
government, declaring their commitment to increasing the level of respect towards government authority and increasing social welfare through not giving or receiving
anything that is illegal in nature, with the purpose of a good and clean government that is free of corruption, collusion, and nepotism (Transparency International
Indonesia, 2006). The integrity pact was signed in November 2003 by all government officials, and has been in effect since then. International institutions such
26 Also widely known as “one-stop-shop” service.
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as Transparency International has recognised Solok’s integrity pact and has seconded its success especially in the area of public procurement (Transparency International
Indonesia, 2006). Despite this recognition however government officials interviewed believe that the integrity pact is only 80% implemented as there are government
officials who still do not fully understand the weight of responsibility in signing the integrity pact and thus merely signed it in order to retain their current positions.
It is surprising for a regional government that is considered to be one of the best
good governance practices to have identified many impeding variables to good governance. Based on figure 5.3.2 we can see that all government officials have
identified bureaucracy culture, human resource level, law enforcement, leadership, level of government welfare, minimum public service standard, and political history
as impediment variables.
0
1
2
3
Level of govt
officials Response
Solok
Solok Impediment Variablesbureaucracy culture
commitment
goodwill
High frequency in changingrules and regulations
human resource level
law enforcement
leadership
level of government officialwelfare
level of socialisation
minimum public servicestandard
political history
reward and punishment
Figure 5.3.2 Solok Impeding Variables to Good Governance Implementation
Government officials claim that although Solok regional government is considered to
be innovative in its good governance, other regions around Solok do not. Therefore they still apply the “old” ways (of Soeharto’s 32 years of governance) and this may
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cause personal dissatisfaction and temptation upon Solok regional government when they are on visitation duty to another region. Government officials also admit to the
low human resource level within Solok regional government, thus the need to increase the amount of seminars, workshop, and government officials sent to study.
Two impediment variables are currently heavily addressed by the decision makers of
Solok regional government; government official welfare and minimum public standard. Government official welfare is addressed by offering regional subsidy to
government officials, wherein honorarium project money is abolished and instead pooled into one money resource. This is then dispersed through the government
officials based on their echelon levels and responsibility. As an ongoing project the results of such a subsidy is yet unclear, however government officials interviewed
are confident that it will increase the comfort level of government officials in general and thus inducing them to perform good governance practices. Minimum public
standard is addressed through the one gate service, however it is still in a period where there needs to be more socialisation towards the society as currently there are
still some who attempt to bribe government officials.
International institutions are not foreign to Solok regional government officials as the region has many partnerships with international institutions such as GTZ Germany,
Transparency International (TI), International Procurement Watch (IPW), Asian Foundation, and the World Bank (Government of Solok, 2006). Therefore it is not
surprising that there is a high level of knowledge in terms of International Good Governance Standards, as shown in figure 5.3.3.
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0
1
2
3
4
5
6
Number of
govt officials
Response
conditions toconverge
converge andalign
globalisation Knowledgeand
understanding
Convergence to International Good Governance Standards - Solok Comparison
Padang
Solok
Gorontalo
Denpasar
Figure 5.3.3 Convergence to International Good Governance Standards - Solok Comparison
It is noted that the government officials interviewed are those of echelon 2, 3, 4, thus
the level of international good governance standards understanding and implementation among staff levels is not yet evaluated, thus conclusions are drawn
based on observation and opinions of higher level government officials. Government officials interviewed however admit to discrepancy in knowledge and understanding
between echelon levels, where staff level officials may not have heard of the international standard let alone understand the meaning of such concepts. In defense,
government officials interviewed believe that it is sufficient for staff level to concentrate on improving public service standards in their everyday work, where
without realising it they may already be applying international good governance standards. This way staff levels are not burdened by theories and concepts, which
may confuse them, but is more concentrated on the application and practical side of things.
There is a slight deterrence in the confidence of converging to international good
governance standards, as illustrated in figure 5.3.4 above. This is caused by the uncertainty of international standards matching Islamic and Minangkabau culture, as well as being considerate of current Solok regional government conditions. As seen
in the figure above it is believed that there are no conditions prior to convergence, which shows that there is readiness and willingness to converge however uncertainty
as explained above. Thus for convergence to happen it would have to be a slightly modified standard, one that takes account both international standards, current Solok
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regional conditions, and Minangkabau culture; all of which will take time and periodical steps.
5.4. Gorontalo Regional Government, Sulawesi
Gorontalo27 is a province located on the island of Sulawesi, bordering Central
Sulawesi and North Sulawesi provinces. It was separated from North Sulawesi in December 2000, thus forming Gorontalo as a stand alone province (Gorontalo
2006)28.
Gorontalo province is among the new provinces that were born as a result of decentralisation and regional autonomy, where the province was recognised through
regulation No 38 year 2000. Gorontalo has taken five approaches in utilising its decentralised and autonomy status, which are;
1. Focusing on Development Programs – which include sectors such as Human Resources, Agriculture (Corn), and Maritime and Fisheries (Fishery Display);
2. Bureaucracy reform in conjunction with good governance aspects implementation, which include aspects such as innovation, teamwork, prosperity, society trust, and
speed; 3. Limited government intervention;
4. Continuous innovation to raise society standards of living; 5. Partnerships with the private sector.
As Gorontalo is a new province established in 2000 as a result of decentralisation, the coincidental nature that the year 2000 was also the year regional autonomy was
enacted suggests a transitional period between centralised autonomy (prior 2001) and regional autonomy did not occur. There are advantages and disadvantages to this
matter, one where the government of Gorontalo felt is more towards the advantage. On one hand the region does not experience regional autonomy transition as other
provinces – thus there is a lack of training, seminars on transition period, workshops, and guidance. On the other hand there is the advantage of starting fresh without the 27 For a list of Gorontalo regional government interviewees please refer to Appendix A. 28 Further historical, decentralisation and regional autonomy policies, and other regional government policies of Gorontalo are retrieved from Gorontalo regional government website; www.gorontalo.go.id
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old ways of centralised economy affecting implementation effort of regional autonomy. It is for this reason that the government of Gorontalo feels an advantage
in not practicing centralised economy but straight into regional autonomy. This fact has also been identified as one of the reasons as to why Gorontalo is able to execute
its independent approaches, be more innovative, and implement good governance aspects.
Gorontalo has also introduced innovations which include:
1. Introducing TKD (Tunjangan Kinerja Daerah), a subsidy for the execution of government related programmes and tasks;
2. To be a pioneer in implementing the Regional Government Accounting System and becoming a national pilot study;
3. Pioneering the implementation of Good Governance principles, in which Gorontalo becomes a leading example alongside Yogyakarta and Riau province;
4. Memorandum of Understanding with the High Court and the Indonesian State Finance and Development Surveillance Committee in the implementation of Good
Governance; 5. Develop and build a Regional Government Bureaucracy Cultural Values which
include values such as innovation, teamwork, trustworthiness, prosperity, and speed.
Interviews with Gorontalo government officials indicate that Gorontalo is still actively looking and learning, through practical developments, for a combination of
good governance practices and local culture and norms that is most effective and efficient in assisting Gorontalo to reach its goals. There is a high level of good governance understanding within Gorontalo regional government, however each
echelon level provided mixed messages in regards to their level of understanding.
Higher level government officials believe that not only government officials are aware of good governance principles, the society at large is also aware of it. It is
believed that there is high level of understanding among government officials, with equal understanding between echelon levels. What is meant by good governance
understanding here is not only understanding of what each concept means, it is also understanding whereby each government official is aware that they have to be
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accountable as their performance will be evaluated at the end of their work performance contract.
Middle level government officials believe that they have adequate understanding of
good governance aspects, where they believe that those in higher level positions would have a more comprehensive understanding of the concepts and its application
in government regulations and policy. Staff level government officials by contrast believe that there is a minimum understanding within the level, where staff has been
exposed to seminars and workshops (thus information) in regards to good governance, but they do not fully understand the concept yet. These opinions are
illustrated in figure 5.1.1, where the level of good governance understanding is quite high.
An important observation is made when comparing the level of good governance
understanding between Gorontalo regional government officials and other regional government officials (of the same echelon level). It is found that there is a different
meaning (or perception) in the level of understanding even though the same words such as “minimum and high” are used. Gorontalo staff level officials for example,
though they claim minimum level of understanding it is in fact high in comparison to other staff levels from other regions. For example, Gorontalo staff level have been
exposed to good governance information on a frequent basis and are able to explain the meaning of the concepts whereas Padang staff level officials are only aware of
the concepts, are unable to explain the meaning, and have not been sent to seminars or workshops.
Interviews with government officials reveal a belief in high level of good governance implementation, as illustrated in figure 5.1.1. This belief is followed by the ability to
explain different activities and programmes that are put in place in order to ensure good governance implementation, strengthening the evidence to high level of good
governance implementation. Good Governance implementation in Gorontalo is clarified through government publications such as “Good Governance
Implementation Guidelines in Gorontalo Provincial Government”, “Gorontalo: From a developing region to a developed region”, and “Operational Guidelines: Towards
strategic and operational advantage of Gorontalo Provincial Government”.
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The implementation of good governance principles in Gorontalo starts with
bureaucracy reform, based on the national constitution. Modern organisation principles dictate delegation of authority, with the assumption that a leader does not
have the capabilities to take on and complete all organisational tasks (Manz and Sims 2001). On the other hand, authority delegation is crucial to build competence and
capacity of staff, with the ultimate goal of increasing its professionalism (Bacal 1999/2002; Beecher 2003; Rotger 1997). Authority in Gorontalo Provincial
government if mapped according to the modern management concept is as follows: 1. Governor, functioning as Chief Executive Officer (CEO);
2. Vice Governor, functioning as Chief Operating Officer (COO); 3. Regional Financial Body, functioning as Chief Financial Officer (CFO);
4. Regional Secretary, functioning as Corporate Secretary; 5. Head of Bureau/Body/Section, functioning as Head of Division.
Following the bureaucracy reform above, Gorontalo government has committed to
six areas of improvement in relation to good governance namely; 1) implementation of management based on working agenda, 2) increasing the level of public service, 3)
increasing technical capacity and capability of government officials, 4) increasing awareness in eradicating corruption, 5) putting in place a society/public complaint
mechanism, and 6) continuous evaluation. To achieve these areas of improvement the Gorontalo government has created a working agenda containing eight steps or
phases. The agenda is as follows; 1. Formation of a monitoring team as agreed by all parties to follow up on
clauses agreed during stakeholders meeting;
2. Identification and mapping of problems and challenges; 3. Formulation of alternative solutions, where a document containing various
solution alternatives and contingency planning to current problems and challenges is produced;
4. Formulation of a Technical Guidelines document which entails: a) Technical Guideline draft;
b) Experiment and pilot implementation of technical guidelines draft; c) Finalisation of technical guidelines.
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5. Formulation and discussion of Governor Decree draft on Technical Guidelines on implementation of Good Governance;
6. Finalisation of Governor Decree on Technical Guidelines on implementation of Good Governance;
7. Socialisation and training on the implementation of good governance technical guidelines;
8. Formulation of operational standards as an accompanying explanation for the technical guideline.
The government has also identified a five year implementation time frame as of
2005, however there are dependent factors such as priorities in regional development and resources availability that may effect the time frame. A roll over plan is also in
place, where plans that are not executed in a particular year’s budget will be rolled over to the following year’s budget.
Based on the descriptions above we can see that there are certain good governance
principles and areas that Gorontalo regional government is strong in. There is a very high level of compliance with rules, regulations, and programmes that has been set
up in the attempt to implement good governance concepts; as well as a very high attention rate and efforts in ensuring transparency in programmes, its application, and
communication process. This explains the graphical result as in figure 5.4.1, which identifies alignment to rules and regulation and transparency as the two main
attributes of good governance in Gorontalo.
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0123456789
10
Numberof
govt officials
Response
Gorontalo
Gorontalo Good Governance Attributeaccountability
alignment to rules andregulation
external audit
innovation
justification ofperformance
professionalism
participatory
transparency
Figure 5.4.1 Gorontalo Good Governance Attribute
Other than the attributes as illustrated above, one of the main variables of good governance implementation is government official will and commitment to the idea
of good governance aspects, where without a strong will and commitment the lure to return to the old ways of governance during Soeharto’s era is great. The Government
of Gorontalo has recognised this aspect and the first commitment made by each official is that they are not there as government officials to get rich. It has been
recognised by officials that remuneration of government positions will not result in great wealth, but is adequate to lead a comfortable life within each province’s
standards. By each official resigning to a lower wealth level, it is anticipated that officials will not be tempted by loophole opportunities that will create greater wealth.
Gorontalo regional government officials have identified four main impeding
variables to good governance, namely bureaucracy culture, human resource level, (lack of) minimum public standard, and political history; as illustrated in figure 5.4.2.
80
0
1
2
3
4
5
6
Number of
govt officials
Response
Gorontalo
Gorontalo Impeding Variablesbureaucracy culture
commitment
goodwill
High frequency in changing rulesand regulations
human resource level
law enforcement
leadership
level of government official welfare
level of socialisation
minimum public service standard
political history
reward and punishment
Figure 5.4.2 Gorontalo Specific Impeding Variables to Good Governance Implementation
The government of Gorontalo recognises that its organisation is not an ideal one,
where issues such as inefficiency in human resources utilisation and inflated number of staff causing technical difficulties in executing tasks exist. The main issue
identified however, is the size of the organisation where there is an overload in the number of government officials. This has caused problems such as a wider span of
control, institutional incoherence as there is a derivation of tasks execution between working units/sections, and bureaucracy proliferation. Thus based on Government
Decree no 8/2003 the Government of Gorontalo has identified 6 ideal organisation indicators as below and is set out to perform a bureaucracy reform;
1. Organisation formed based on clear vision, mission, and strategy; 2. A flat organisational structure, as this will increase the speed of decision making
and public service; 3. A trim organisational body where there is no overload in the number of
(unnecessary) sections and units; 4. An organisation that promotes networking to increase efficiency and effectiveness;
5. Government organisation that is occupied with functional positions, where there is heavier emphasis on competence and professionalism in execution of tasks;
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6. Organisation that applies the learning organisation strategy, as this will allow the organisation to transform and adapt itself to answering future challenges and
opportunities.
In addressing remuneration system and official welfare impeding variable, the Gorontalo Government has put into plan a system known as “Tunjangan Kinerja
Daerah” or regional government work agenda subsidy; where the subsidy will be implemented in three steps. The first step is the signing of an integrity pact, in that all
Gorontalo government officials will not receive monies other than what has been regulated in the remuneration system. An example of this is that all honorariums
from projects will be abolished and will be re-directed as a subsidy to all government officials. The honorarium will be amalgamated and distributed to all government
officials based on their workload – that is based on the regulated remuneration system. It is aspired that this will eliminate resentment and suspicion between
echelon levels.
The second step is to implement tight sanctions on officials that do not comply with the rules and regulations of standard work ethics, as well as to the integrity pact as
above; thus a rewards and punishment system. An example would be if an official is absent for a day there will be a 4% deduction from his/her’s subsidy allocation. If an
official is late coming into work, 2% will be deducted. The same rules apply if an official decides to go home early before working hours have ended. This way the
Gorontalo government will be able to implement a carrot and stick principle within its entity that is agreed upon and is consistent.
Hence the Gorontalo regional government has identified several impeding variables to good governance; however alongside such identification they have also designed
programmes and actions that will address the impeding variables.
International Good Governance Standards is well known among Gorontalo government officials, where officials also understand the general meaning of the
standard’s concepts. This can be seen in figure 5.4.3, where graphical results indicate a high level of knowledge and understanding.
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0
1
2
3
4
5
6
Number of
govt officials
Response
conditions toconverge
converge andalign
globalisation Knowledgeand
understanding
Convergence to International Good Governance Standards - Gorontalo Comparison
Padang
Solok
Gorontalo
Denpasar
Figure 5.4.3 Convergence to International Good Governance Standards - Gorontalo
Comparison
Gorontalo regional government officials recognised several conditions that need to be fulfilled prior to converging fully to the international standards. Such conditions
are only expressed by middle and staff level officials, and when confirmed to high level officials they are acknowledged however high level officials also provided
possible actions to fulfil conditions, affirming that the conditions posed can be solved and fulfilled without challenge. This can be seen in figure 5.4.3 where there is only a low level in terms of conditions to converge. These conditions include; increasing
middle and staff level exposure to the standard through further on-hand seminars and workshops, establishment of a minimum public service standard, and a clear step by
step proposal on how to converge to the international standard (inclusive of implementation examples).
There is a strong belief that Gorontalo will converge to the international good
governance standards, which is strengthen by the fact that Gorontalo regional government has worked with several teams from several international institutions in
the past, and has been provided by information in regards to the international standard by these teams. Graphical result (figure 5.4.3) show a belief in converging
to international standards that is at the same level as other regions, in the sense that confidence to converging exists however convergence will need time, have to be
done in periodical steps, and will include a process in which the international standard is “modified” to take account regional culture and current conditions.
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5.5. A view from Central Government – DKI Jakarta
As the capital city of Indonesia, Jakarta is also known as the “central government”. It
is here that national regulations and government departments reside, as well as many international corporations and international institutions offices. Therefore
government officials in Jakarta29 are interviewed to provide their point of view on good governance understanding and implementation at the regional level, as well as
to provide their forecasts on whether Indonesia will converge with or diverge from International standards of good governance.
Due to interviewees required to provide their opinions on regional government good
governance implementation and their forecast of international standard alignment, a set of minor adjusted questions have been prepared30
As there are many government departments and institutions at the central
government level, there was a need to limit the amount of officials interviewed. This is due to time and funding limitation, but most importantly to prevent data overload.
Therefore government officials with the highest level of involvement with regional governments were chosen. Central Government (Jakarta) was the last place visited
for information gathering therefore government officials chosen for interviews are those who have been recommended by government officials interviewed at sample
regional governments visited. It is also ensured that different levels of government officials were involved in the interview process, as dictated by in-depth interviews methodology design.
Central government officials have a very different view of the effects of
decentralisation and regional autonomy than regional government officials. Although positive effects such as innovation and creativity are recognised, there is a higher
concern for negative effects such as misinterpretation and implementation of
29 Government officials in Jakarta will be referred to as the central government for the remaining thesis 30 Please refer to Appendix B for a list of Jakarta interviewees and set of question.
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regulations due to lack of regional government readiness and decentralisation euphoria (out of control autonomy); as illustrated in figure 5.5.1.
0
1
2
3
4
5
6
7
Numberof
govt officials
Response
Decentralisation and RegionalAutonomy Effects
Decentralisation and Regional Autonomy Effects - Central Government View
Culture Change
Unreadiness
Uncompleted
Euphoria
Leader Dependent
Separation
Central GovtDependent
Figure 5.5.1. Decentralisation and Regional Autonomy Effects - Central Government View
A reason offered addressing the unreadiness of regional government is that regional government officials have been oppressed and under central government control for a
very long time (32 years of Soeharto’s regime). As a result they are used to being controlled and regulated and thus did not have the opportunity to increase capacity,
think innovatively and creatively, and learn how to stand independently. This explains instances where regional government have acted slightly out of regulation,
and are considered to be slightly losing balance and slightly behind current developments.
Another negative effect of decentralisation and regional autonomy is decentralisation euphoria, as illustrated in figure 5.5.1. Decentralisation euphoria is also known as
out-of-control regional autonomy, where regional government insists on full authority in every aspect after being repressed for so long. As a result regional
government perceive their authority as if they are a little country, where the regent head have equal authority of a president or a king, which is more authority than they
actually have. Further interviews reveal cases where some regional governments refuse to be monitored or evaluated, believing that central government have “no
right” to interfere with regional government business.
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One of the contradictions of decentralisation and regional autonomy is the fact that regional government is still dependent on central government, especially in the
financial area as the regional budget is still 90% funded by the central government. Therefore there is a high level of dependence in terms of financial resources,
guidance, formulation of regulations, and implementation of innovation plans. Yet there are regional governments who refuse to be monitored and evaluated, showing a
contradiction in the way of thinking – regional government feel they have full authority and yet their income is still provided by the central government. As a result
there is a disturbance in the regional – central government relationship, which is why this dependence is rated highly as one of the negative effects of decentralisation and
regional autonomy as illustrated in figure 5.5.1.
Central government officials believe that there still a very low level of good governance understanding at regional government level, although they admit that
there are several regional government officials who fully understand the concept wherein such understanding is reflected on the level of good governance
implementation. It is also claimed that there is a very high disparity in levels of good governance understanding between regions and also between different positions (or
levels) of government officials within the region.
Central government believe a common problem found in regional governments is a belief within regional government officials that there is high level of good
governance understand where in fact there is only medium level or low level of understanding. Therefore referring back to interview results from regional government officials who have identified high, medium, or low levels of good
governance understanding it seems that there is a difference between central and regional government in the standard or meaning used when evaluating the level of
good governance understanding. Nevertheless central government officials believe that there is still a very low good governance understanding at regional government
level, as illustrated by figure5.5.2.
86
01
2345
67
Level of
govt officials
Response
Understand Implement
Regional Government Good Governance Understanding and Implementation - Central
Government View
Yes
No
Figure 5.5.2. Regional Government Good Governance Understanding and Implementation - A Central Government View
Good governance implementation at regional government level have sparked a difference in opinion however, where 50% of interviewees believe it is not yet
implemented and the other 50% believe that it is implemented; as illustrated in figure 5.5.2 above. A reason for such difference is the belief that good governance
implementation at regional government level can not be generalised due to the large number of regional governments (approximately 400 regional governments) but have
to be evaluated on a case to case basis, where it is found that there are several regional governments who have implemented good governance and are recognised as
best practices, regions who are still in the introduction stage of good governance implementation, and some regions who are yet to implement good governance.
Central government officials have identified fourteen impeding variables to good
governance, as opposed to the nine impeding variables identified by regional government officials. Five main impeding variables were further identified,
including; the lack of good governance system, lack of goodwill and commitment, bureaucracy culture, lack of security, and the lack of good governance legal backing;
as illustrated in figure 5.5.3.
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3%12%
6%
6%
12%
12%16%
6%
6%
3%
3%
3%
3%9%
External Factors
System
Society Unreadiness
Leader Dependent
Goodwill & Commitment
Bureaucracy Culture
Security
Human Resource
Socialisation
Helpdesk
Rewards & Punishment
Training
Proactiveness
Legal Backing
Regional Government Impeding Variables to Good Governance - Central Government View
Figure 5.5.3 Regional Government Impeding Variables to Good Governance - A Central
Government View A lack of good governance system refers to a delivery system that does not adopt
good governance aspects in its stages, such as in its planning, application, monitoring, and evaluation. The lack of such a system concerns central government
officials as this suggests good governance implementation is heavily dependent on the current regent leader, where its implementation may deter if there is a new regent
head that does not campaign for good governance implementation. Thus there is a need for regional governments to build a system that comprises planning,
application, monitoring, and evaluation where good governance concepts are well diffused in each stage.
Central government officials have also identified lack of goodwill and commitment
of regional government officials as an impediment variable to good governance, which ties in with the bureaucracy culture factor. The bureaucracy culture is
currently in transition from Soeharto’s governance to good governance, where there is a high level of uncertainty in terms of the effects of the new regulations and innovations; thus reluctance to change.
As illustrated in figure 5.5.3, lack of security is voted the main impeding variable to
good governance at regional government level. Here security overarches government official welfare (remuneration system) and career uncertainties (meritocracy). As a
88
result regional government officials are more concentrated on increasing their income levels and living comfortably in everyway possible as opposed to
concentrating on good governance implementation. There is also a belief that regional government officials’ uncertainty in regards to their career (and being
promoted to the next echelon level) is also having an effect on good governance implementation in two ways. Firstly regional government officials are more
concerned in ensuring its career path than implementing good governance concepts, and secondly regional government officials use good governance in political terms to
advance their career as opposed to for the benefit of public service / society.
Lastly the lack of good governance legal backing is recognised as an impeding variable to good governance, where currently good governance is still a soft concept.
Currently good governance is seen as an option or a voluntary matter, where a regional government can choose whether or not it will implement good governance.
There is also confusion among regional governments on how to implement good governance and which regulation/standard should be used as guidance. Hence the
need for a set of good governance regulations that makes good governance compulsory and provides guidance on how to implement good governance.
International good governance standards convergence is regarded as an “individual”
choice by central government officials, where regional governments have the authority to decide whether they will converge or diverge. It is recognised that if a
regional government decides to converge they will need time to adapt the international standard in a way that incorporates both regional culture and current conditions. It is also believed that regional governments are starting to understand
and show interest in adapting the international standard however this is a long term goal as there needs to be time for further information and socialisation, training, the
design of a “modified” standard, and implementation stages. Therefore convergence to international good governance standards is believed to be possible; however it is a
lengthy process in periodical steps that will take time before full convergence and implementation.
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5.6. Conclusion
Good governance is understood at different levels both between echelon levels within a regional government and between regional governments as a whole. Based
on table 4.1 on the characteristics separating the levels of understanding and government official interviews; a comparative table on the level of good governance
understanding is compiled in table 5.1.
Table 5.1 Level of Good Governance Understanding - Regional Comparison Name of Region
Good Governance Understanding Echelon Disparity
Low Medium High Denpasar � � Padang � � Solok � � Gorontalo � �
Based on the table 5.1 we can see that Denpasar has a low level of good governance
understanding, Padang has medium level of good governance understanding, and both Solok and Gorontalo has high level of high good governance understanding.
The last column (echelon disparity) indicates whether disparity in understanding between echelon levels exists or not, in which all government officials interviewed
agreed to. Thus it can be concluded that there is an overall disparity in the level of good governance understanding between regions and between echelon levels within
each regional government.
Likewise there is variance in good governance implementation between regional governments. Based on table 4.2 on characteristics of good governance
implementation and interview results, table 5.2 is compiled to illustrate the disparity in good governance implementation.
Table 5.2 Level of Good Governance Implementation - Regional Comparison Name of Region
Good Governance Implementation Echelon Disparity
Low Medium High Denpasar � � Padang � � Solok � � Gorontalo � �
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Based on the table 5.2 it is clear that both Denpasar and Padang are at medium level
of good governance implementation, whereas Solok and Gorontalo on the other hand shows a high level of good governance implementation. Government officials’
interviews show a disparity in the extent of good governance implementation opinions, where most commonly high level officials believe in high level of
implementation and both medium and staff level officials believe in low level of implementation. Thus it can be concluded that there is a disparity in the level of good
governance implementation between regions, however it is at a lower level than good governance understanding disparity; and there is a disparity between echelons in
terms of the level of good governance implementation within the regional government.
A view from central government (Jakarta) contrasts the view from regional
governments however, where central government officials believe that there is an overall low level of good governance understanding among regional governments.
There is a difference in opinion between central government officials, where half of interviewees believe good governance is implemented at regional government and
the other half does not. The reason for these controversies is that in the mind of central government, regional government development stages ranges from pre-
mature and mature, where there is a positive correlation between these stages and the level of good governance.
This thesis identifies nine main impeding variables to good governance, where each regional government has identified their own main impeding variables to good
governance; as illustrated in table 5.3.
Table 5.3 Impeding Variables to Good Governance Implementation - Regional Comparison Impeding Variables to Good Governance
Regional Government
Denpasar Padang Solok Gorontalo Jakarta Communication Disabilities Lack of Good Governance Implementation Guidelines
� �
Influences of Leadership �
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Human Resource Capability and Capacity
� � �
Political History � � Local Government Bureaucracy Culture
� � � � �
Remuneration System and Employee Welfare
� � � �
Minimum Public Service Standard
� � �
Society Involvement Commitment � � Lack of Good Governance System
�
Based on the table above it can be concluded that each regional government has their own set of main impeding variables to good governance, where there is a variance in
the number of impeding variables and which impeding variables. The impeding variables that are experienced by most regional governments include; local
government bureaucracy culture, remuneration system and employee welfare, human resource capability and capacity, and (the lack of) minimum public service standard.
Thus it can be concluded that although each regional government has individual impeding variables to good governance government there are some impeding
variables that are of concern for all.
International good governance standard receives a varying reception from each regional government, as illustrated in the table below.
Table 5.4 International Good Governance Standards - Regional Comparison
International Good Governance
Regional Government
Standard Denpasar Padang Solok Gorontalo Identification � � � Knowledge and Understanding � � Convergence (and Implementation Plans)
� � � �
Convergence Pre-requisite Conditions
� � � �
Based on table 5.4 it is evident that only Solok and Gorontalo have knowledge and
understanding of the standard, as well as are confident in the eventual convergence towards the standard. Denpasar is not aware of the international standard as yet, and
92
do not have knowledge and understanding of the standard, however is enthusiastic in the notion of converging towards to international standard in the future. Padang on
the other hand does not have knowledge and understanding of the international standard, but is enthusiastic at the prospect of converging to the standard.
Table 5.4 also show an agreement between all four regional governments to pre-
requisite conditions prior to converging to the international standard, which include increasing information exposure towards the international standard and adopting the
international standard to regional cultures and current conditions. It is also agreed that convergence would be a slow process over a long term period, where it is
executed in periodical steps. Thus it can be concluded that there is a positive reception towards convergence to international good governance standards, however
there are pre-requisite conditions to be fulfilled and it would be a long term period goal.
The central government believe that decentralisation and regional autonomy will
spark a sense of competition between regional governments, where the delegated authority of regional development will push regional governments to innovate. The
central government also speculated that due to decentralisation euphoria there will be newly established regional governments who will challenge “old” regional
governments in the area of innovation and embracing internationalism. This view is supported by the findings, both in terms of good governance understanding and
implementation, and convergence towards international good governance standards. Based on the tables in this section it can be concluded that newly established regions
such as Solok and Gorontalo are more mature in their level of good governance understanding and implementation. It can also be concluded that both regions have
embraced internationalism in terms of working with international institutions in improving the level of their public service, and have a higher confidence in
converging to international good governance standard.
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6. Analysis: Good Governance Implementation in Indonesia and Impeding Variables to Good Governance Implementation
6.1. Chapter Overview
This chapter analyses the impeding variables to good governance implementation,
explaining how each variable is an impediment to good governance and the extent of its impact. This chapter consists of ten sections, where the first nine sections analyses
nine impeding variables to good governance implementation and the tenth section concludes. The impeding variables of good governance implementation are
modelled in figure 6.a, which contains 12 variables.
Figure 6.a Impeding Variables to Good Governance
Level of Government
Official Welfare
Leadership
Commitment
Goodwill
Political History
Reward and Punishment
High Frequency in changing rules and
regulations
Minimum Public Service
Standard
Law Enforcement
Level of Socialisation
Human Resource
Level
Bureaucracy Culture
Impeding Variables to Good
Governance
94
Figure 6.b Impeding Variables to Good Governance in Percentage Figures
Based on statistical data nine variables are of the highest percentage in interviewees’
responses, as shown in figure 6.b. These main impeding variables are identified by 10% (and above) of interviewees, and thus it is these nine variables that are discussed
in depth. These nine variables are: communication disabilities, lack of good governance implementation guidelines, influences of leadership, human resource
capability and capacity within local government, political history, local government customs and culture, remuneration system and employee welfare, minimum public
service standard, and society involvement.
Within each section views from different echelon levels within a regional government will be compared, as well as views between each regional government as
a whole. To enable such comparison figures 6.c and 6.d are utilised. Views from central government officials will also be incorporated, reflecting the in-depth
interviewing method.
Impeding Variables to Good Governance Implementation
13%
5%
2%5%
13%
6% 11%
12%
6%
11%
11%5%
bureaucracy culture
commitment
goodwill High frequency in changing rulesand regulationshuman resource level
law enforcement
leadership
level of government official welfare
level of socialisation
minimum public service standard
political history
reward and punishment
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0123456789
10
Numberof
govt official
response
bure
aucr
acy
cultu
re
good
will
hum
anre
sour
ce
lead
ersh
ip
leve
l of
soci
alis
atio
n
polit
ical
hist
ory
Impediment Variables to Good Governance Based on Regions
Padang
Solok
Gorontalo
Denpasar Figure 6.c Impediment Variables to Good Governance Based on Regions
0
2
4
6
8
10
12
14
Number of
govt official
response
bur
eauc
racy
cultu
re
com
mitm
ent
goo
dwill
Hig
hfr
eque
ncy
inhu
man
reso
urce
law
enf
orc
em
ent
lea
ders
hip
leve
l of
gov
ern
men
tle
vel o
fso
cia
lisat
ion
min
imum
publ
icpo
litic
al
hist
ory
rew
ard
an
dp
unis
hm
ent
Impediment Variables to Good Governance based on Echelon Level
High Level Official
Middle Level Official
Staff Level Official
Figure 6.d Impediment Variables to Good Governance Based on Echelon Levels
It is important to note that in comparing echelon levels the results are highly affected by the amount of government officials within an echelon level is interviewed; as
availability of certain echelon levels for interviews, such as echelon 1, are limited. In context with the in-depth interviewing method, echelon levels are grouped as
follows; echelon 1 and 2 as High Level Official, echelon 3 and 4 as Middle Level Official, and staff as Staff Level Official.
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6.2. Communication Disabilities
Communication disability is referred to as the breakdown in either sending or receiving messages due to noise, where noise is defined as all aspects preventing
mutual understanding between receiver and sender (Tazelaar, Lange and Ouwerkerk 2004; Markham and Hazan 2004; Alexander and Rivett 2002; Vanes 1993; Ryan and
Laurie 1990). Noise ranges from technical faults to softer concepts such as culture (Maccoby 2006; Beier and Zautra 1972), where the term noise have been use in a
negative context in that it causes actual outcomes to be worse than intended (Robinson 1991; Gunaratne 1987). Therefore communication disability has been
deemed a large impact on the function of organisations, hindering optimum performance and innovation due to the negative atmosphere experienced by its
employees (Grace 1956; Kelly 2000; Wu and Newell 2003).
In terms of good governance understanding and implementation, it is found that communication disability occurs in three different aspects. The first is a breakdown
in communication line between echelon levels, the second an unequal opportunity to information exposure, and the third a lack in communication documentation. All of
the three aspects have an impact on the level of good governance understanding and implementation, though at various impact levels.
6.2.1. Breakdown in communication line
A breakdown in communication line within a regional government occurs in two instances. The first instance is when new information is not equally disseminated to
all levels of echelon, as accounted by a staff official in box 1; Box 1, Theme: Unequal Information Exposure
“ There is also no access to publications. Information from central government
is only for higher level officials, not socialised or told to be read in the lower
staff, unless we personally ask for it” (SLO, Padang)
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This causes a discrepancy in the level of information exposure and the level of good governance understanding. Thus a pattern exists where good governance is
understood at different levels; higher level officials have full understanding of the theory and concepts, middle level officials have a vague understanding of how to
implement the concepts and lower level officials can only claim having heard of the term without understanding of any theory/concept. As we can see in figure 6.1.1 13%
of interviewees believes that the level of good governance understanding is an important pre-requisite to good governance implementation.
Good Governance at Local Government Indonesia
15%
17%
17%17%
13%
15%
1%
5%
capabilities of each region
change in society
good governance code
Level of Implementation
Level of Understanding
periodical steps
push from the centralgovernmentvision and mission of theregion
Figure 6.1.1 Good Governance at Regional Government Indonesia
Thus there is a high concern of understanding discrepancy, which needs to be addressed. This is confirmed by many government officials in box 2.
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Box 2, Theme: Good Governance Understanding Discrepancy
The second form of communication line breakdown is caused by the bureaucracy
culture of regional government Indonesia, where there is a rigid hierarchy system that causes a closed communication line (Elsner 2004). Hence there is a
communication ceiling between each government echelon level, where staff level officials are reluctant to suggest new ideas of innovation to the upper hierarchy and
there is a tendency of opinion dismissal by upper hierarchy. As claimed by a several staff in box 3;
“It is hoped that each working unit is given an understanding of good
governance aspects at least once a year so that we are all on the same level of
understanding” (MLO, Denpasar)
“There is still very high disparity level of understanding between regions and
then between different positions of government officials within the region” (HLO, Padang)
“ In my opinion, understanding at staff level is still very minimum. In the
application side it still has a long way to go” (Staff, Padang)
“So understanding is not very deep, good governance at regional level have
to be legal driven from the central government – once we have this the
regional government will simply follow” (MLO, Gorontalo)
“ In terms of understanding I believe in the high level official is adequate, but
at staff level there is still very little almost non-existent understanding. So
there is still a difference in perception, the level of understanding is still not
the same. In the middle level it is not fully understood, there is still a
difference with high level official. In terms of perception, implementation,
really understand what is meant by transparency, what is accountable, or
even what are the substances of good governance; there is still a discrepancy
in the level of understanding” . (HLO, Solok)
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Box 3, Theme: Communication Ceiling
This has caused resentment within staff level officials, especially as staff level officials feel they are the backbone of the bureaucracy who deals directly with the
society. Staff also claimed that their opinions are not taken into account in new regulation formation or decision making, as evident in box 4.
Box 4, Theme: Staff Resentment
This added resentment has caused a lack of motivation to innovate and reluctance in accepting new regulations or decrees. Thus there is an indirect impact to good
governance implementation, where staff level officials feel it is another concept or regulation imposed upon them without their input.
6.2.2. Unequal opportunity to information exposure
The first form of communication disability is further emphasised by the unequal
opportunity to information exposure, where although there is an abundance of good
“The potential to be open in discussions is also very limited. If we have in
idea it has to go through the bureaucracy, and sometimes at the lowest level
of bureaucracy we are already cut, with comments such as “ there’s no way I
can think about this, this will be difficult, this will be hindered by politics” . So
in the end we withdraw the idea, because if we keep on going with it we will
be at fault too. If we speak out our idea to someone at a much higher level
than our section heads then we will be at fault as well” (SLO, Padang)
“ There is still a very strong culture from the previous era that can not be
eradicated overnight, and there are still closed lines of communication –
young staff members still can not present ideas to their seniors” (SLO, Denpasar)
“ All of these leaders and higher level officials seem to be just delegating
tasks to staff only, they just sit there at meetings and they give all the hard
work in executing tasks to us. And sometimes us staff is not even involved in
the decision making” (SLO, Padang)
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governance seminars or workshops there isn’t an equal opportunity for all government officials to attend. This is shown in figure 6.1.2, where although many
seminars are identifies (65%) a high degree of discrepancy or unequal opportunity (35%) to attend these seminars are also recognised.
Seminars and Information Exposure Discrepancy
35%
65%
discrepancy
seminars
Figure 6.1.2 Percentage of Seminars and Level of Discrepancy
There is a general agreement between all levels of government that the current
bureaucracy culture and system prevents equal opportunity to attend seminars and workshops, unless it is internally held (by that regional government). Most of good
governance related workshop and seminars are either held by other regions, academic institutions, non-government organisations, or international institutions.
Thus government officials mostly attend through invitation, where the regional government office will send representatives to attend the event. Therefore unequal
opportunity occur in that the higher level government official will always be the one attending such events, or in the event that this is not possible the higher level official
will appoint other officials to represent the region. It is this appointment system that is considered of unequal opportunity, as there is heavy politics and certain
favouritism involved in the decision making as opposed to objectivity based on regional government needs and regional government officials’ capability. As claimed
by many government officials in box 5;
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Box 5, Theme: Unequal Seminar/Training Opportunities
As a result of unequal opportunity to information exposure, further good governance understanding is impeded and a tension is created between different echelon levels of regional government. This tension can lead to resentment and a lack of motivation,
thus ultimately impeding the implementation of good governance.
A solution implemented by few regions is an in-house seminar or workshop, where instead of relying on invites the regional government holds its own seminars and
workshop; inviting key sources of informants. This is deemed to be more effective as all government officials receive the same information on certain theories, and then
receive different training on the application of that theory based on their levels of authority. As voiced by a government official in box 6;
“ There are many seminars, etc but the amount that is invited is very limited,
especially for staff level, so the socialisation to lower levels is quite
restricted” (SLO, Gorontalo)
“ In terms of training we haven’ t hosted one, I think we’ve been invited but
only high level officials are invited, us at the lower levels are not invited” (MLO, Denpasar)
“ It is in our experience that in the workshop to discuss the regional budget in
2003, 2004, 2005, for three years, there is always a problem with other
government officials. The problem is, in choosing the executing staff (for the
budget) it is always that same staff members, it is not evenly distributed” (SLO, Padang)
“ So only few staff will go to trainings and workshops, so the socialisation is
not equally distributed. For example to go to workshops/trainings, I see that it
is always the same person that is being sent, mainly because there is that
family relationship between officials – thus this is an effect of family
relationships in the government body too” (MLO, Solok)
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Box 6, Theme: In-house Seminar/Workshop a
The only impeding factor to such in-house seminar and training is funding, though there are opinion differences in this matter. Some regions informed a lack of funding
whereas others informed funds for such programmes are included in the regional budget. This can be seen in the two contrasting quotes in box 7; Box 7, Theme: In-house Seminar/Workshop b
Therefore this second form of communication disability is widely acknowledged by
government officials, and steps of improvement are taken by regional governments.
6.2.3. Communication documentation
The third form of communication disability is in the lack of communication documentation. This includes: minutes not taken after discussions or meetings, lack
of reports from government official representing regions at national events (seminars, workshops, etc), and a lack of documentation in society’s suggestions. As one
government official accounted in box 8;
“ Beforehand we would go to central government (Jakarta) for training, now
we usually invite keynote speakers and trainers to our region where a lot
more government officials can attend the event, I believe that this is more
efficient than only sending one or two delegates to Jakarta” . (MLO, Gorontalo)
“ There are some seminars and workshops, and these are included in our
regional budget…” (HLO, Solok)
“ There are some trainings however sometime the funds to carry out programs
are very limited. I believe this is wrong as civil servants need to be looked
after as we are the country’s assets. Sometimes we have already put forward
a programme proposal but the limitation or impediment is always on the
funding part. So we can only hold internal workshops that do not require a lot
of funding. Of course we can read about theories of good governance, but we
have to hear from the native speaker too so that we can understand fully”
(HLO, Padang)
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Box 8, Theme: Lack of Communication Documentation
As a result any concerns or resolutions discussed are not documented and thus are
unavailable for future references; lessening any learning curve possibilities and giving less meaning to the outcome of discussions and meetings. Another side effect
of the lack of documentation is in the quality of data possessed by the regions. Although data is usually taken on a more analysis approach, the habit of not documenting meetings, reports, etc has a multiplier effect in terms of poor
documenting in many aspects. It has also been discovered that sanctions (from the central government) do not apply to regions that do not document important
communication or submit reports on time. Thus there is a need for enforcement in regional government documentation, where a reward and punishment system could
be an option in doing so.
6.2.4. Difference between Regions
Further analysis show that the above communication disability is experienced at different levels by the sample regions, ranging from negatively affected to not
affected at all. This can be seen in figure 6.1.3;
Figure 6.1.3 Seminars and Information Discrepancy based on Regions
“We need to provide information to staff according to their function and job
authority; I believe 3 times a year would be sufficient. It is a shame that these
meetings are not documented yet but I aim to document it in the near future” (MLO, Padang).
0
2
4
6
8
10
Number of
govt officials
Response
discrepancy seminars
Seminars and Information Exposure Discrepancy based on Regions
Padang
Solok
Gorontalo
Denpasar
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The above figure shows that there is a difference in the level of seminars, workshops, and trainings recognised by each region, with Padang recognising the highest level of
seminars. It also shows the level of discrepancy or unequal opportunity as recognised by government officials. It is ironically concluded that although Padang has the
highest level of seminars recognised it is also the region with the most discrepancy or unequal opportunity.
It is concluded that the three forms of communication disability; breakdown in
communication line, unequal opportunity in information exposure, and lack of communication documentation; are impeding variables to good governance
understanding and implementation. However the impacts of each disability differ between each region, causing difference in the level of good governance
understanding and implementation between regional governments.
6.2. Lack of Good Governance Implementation Guidelines
Good Governance is considered to be a soft management concept as each aspect of it can be interpreted and implemented with slight differences, where implementation of
these concepts are directly correlated with behavioural tendencies (Bass and Avolio 1993; Bird 2001; Doornbos 2003; Rogers 2003; Ludwig 2006). Good Governance is
also recognised as a new term in many countries thus its concepts are still not well defined and its implementation on a day to day basis still vague (Adendorff et al.
2005; Anderson and Strutt 1999; Brinkerhoff and Goldsmith 2004; Kranenborg 2003; Pillay 2004; Taylor 1999). It is recognised that although some countries may have a good governance code that contains rules, regulations, and clauses; these
codes do not guide governments on how to implement good governance aspects (Verschoor 2002). This is attested by few Indonesian government officials in box 9;
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Box 9, Theme: Lack of Good Governance Legal Backing
Therefore it is concluded that there is a need for good governance implementation
guidelines, one that is a step above good governance code. This implementation guideline should contain ways and examples that each good governance concept can
be implemented on a day to day basis, is adapted to country conditions and needs, and contains indicators for each aspect as control mechanisms.
From figure 6.1.1 on good governance at local government Indonesia it can be seen
that the existence of a good governance code plays a large part (17% of interviewees) in its implementation. However interviews with government officials on the subject
of good governance code has revealed that the code has not been updated since 2001 and that an implementation guideline for each aspect, based on echelon levels and
job description, does not exist. As attested by regional government officials below in box 10;
Box 10, Theme: Lack of Good Governance Code A
“ The adoption of the standard needs to be mandatory so that the
government will adopt it, there has to be a clear coordination of the
standard rules and the implementation stage” (HLO, Solok)
“ …there is still no indicators of instruments that shows commitment to
international good governance standards or good governance
implementation” (HLO, Padang)
“ There has to be a mandatory system that is backed by legalities before we
can expect implementation. However we have to treat this on a case by case
basis as each region have different needs and conditions” (HLO, Solok)
“ Good governance doesn’ t have a proper legal base yet, the aspects are
still soft concepts, so there has to be more steps to really reach good
governance. Participation doesn’ t bring your anywhere because most of it
is not recorded and there is no technical expertise behind it. There needs to
be set framework that is clear enough but also leaves room for
interpretation and application” (HLO, Jakarta)
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This has caused government officials to be wary of relying or referring to the
governance code as it was created during a different presidential era (not the current Susilo Bambang Yudhoyono presidential era) and before decentralisation and
regional autonomy was socialised and implemented. It has also caused confusion among all government levels, especially those in the middle and staff level.
Confusion exists in how to inject or implement good governance in their daily work, how to create a work environment that is in accordance to good governance code; yet
is suitable, comfortable, and will ensure high performance rate. As claimed by many government officials in box 11;
Box 11, Theme: Lack of Good Governance Code B
Further interviews discovered that there is an absence of good governance indicators,
preventing a control mechanism of good governance. Lack of good governance indicators is related to the lack of good governance experts in Indonesia as well as
the fact that it is not an easy task to design one as good governance is considered to be a soft concept.
Figure 6.2.1 illustrates factors that are considered essential to good governance
implementation, where each region has approximately equal responses from government officials identifying good governance code as a pre-requisite to
understanding and implementation of good governance.
“There needs to be a standard that is mutually agreed, so that it becomes a
system and there is no confusion in the implementation stage. There needs to
be a national agreement that can be referred to for 25 years, which is also
open to evaluation” (HLO, Gorontalo)
“Sometimes what is done, or the actions, are actually the reverse of good
governance essence, because they don’t really know what is the essence of
good governance, and they don’t know how to actualise it in their everyday
job/task.”(HLO, Jakarta)
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0
1
2
3
4
5
6
7
Number of
govt official
response
Padang Solok Gorontalo Denpasar
Good Governance Understanding and Implementation based on Regions
capabilities of each region
change in society
good governance code
Level of Implementation
Level of Understanding
periodical steps
vision and mission of theregion
push from the centralgovernment
Figure 6.2.1 Good Governance Understanding and Implementation - Regional Comparison
Thus it is concluded that the absence of an updated good governance code, lack of good governance implementation guideline specific to regional government level
Indonesian bureaucracy, and lack of good governance indicators as a control mechanism has played a large role in impeding good governance implementation in Indonesian regional government.
6.3. Influence of Leadership
Leadership, or the importance of leadership, was named as one of the factors that
influenced the degree of good governance implementation. This conclusion was reached based on primary data from interviews as well as the undeniable link
between regional governments in Indonesia identified as an organization and how organizational behaviour and work performance is strongly affected by leadership
factor (Armstrong and Baron, 1998; Gilley et all, 2000; Politis, 2000; Kotter, 1996; Manz & Sims, 2001; Umemoto et all, 2002). This can also be seen in figure 6.b,
where 11% of interviewees identified leadership as a strong impeding variable to good governance implementation.
In Indonesia’s regional government the role of the ultimate leader is the Regent Head
(Head of the Regional Government), who answers or reports to the Governor (Head of the Province). Informants claimed that it is the vision and motivation from their
leaders that encouraged them to learn more about good governance, formulate
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regulations on the subject, and implement it in their everyday public service performance. As attested by several interviewees in box 12;
Box 12, Theme: Leadership A
Theories on leadership show that there are many styles a leader can adopt however
there are only a few that will succeed; depending on certain factors such as the history of the geographical region that he/she would lead, the culture and customs of
the place, as well as the assumed mindset of those that he/she will lead (Lussier and Christopher 2001). Of course as it is the assumed mindset, a leader needs to confirm
is whether or not this particular mindset is as implemented or whether it is as assumed. Rachmany (2006, p.6) believes that a leader that adopts a democratic or
participative style will be more successful. It is also believed that there are two new leadership styles that may suit current decentralization in Indonesia, namely
transactional leadership and transformational leadership (Rachmany, 2006, p.7). A transactional leadership is sometimes also known as an instrumental leadership
where it is more often than not focused on the reciprocity relationship between a
“ regent head or the governor, good governance will depend if it is included
in the mission and vision of the leader or not. So I don’ t believe that it is
political well, but goodwill and leadership – these two factors can force good
governance implementation” (MLO, Solok) “ But the most important aspect is the capacity of government officials and
goodwill from leaders, as well as each government official itself. So they can
and want to implement good governance, that is the key” (MLO, Padang)
“ Leadership factor is also very strong, the current governor is very good
governance minded” (HLO, Gorontalo)
“ If we look closely it really does depend on the leader. For example if we
were to buy fish what is the first thing that we look at? We look at the eye”
(HLO, Padang)
“ leadership factor and willingness play a very big part, in regions where
there is already reform it is usually a product of reformist leaders” (MLO, Denpasar)
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leader and their subordinates (Bass & Avolio, 1993). On the other hand, transformational leadership is more focused on visionary and enthusiasm, with an
inherent capability of the leader to motivate its subordinate (Bycio et all 1995; Howell & Avolio 1993). A dominant characteristic of the transformational leader is
charisma, as well as the capability of the leader to inspire and motivate its sub-ordinates in producing high level work quality and implement regulations in daily
work.
These variables were claimed to be evident in Gorontalo province and Solok regency leaders; of which both places have been named as best practice examples of good
governance implementation. Informant from both Gorontalo and Solok claim that it is their supervisor’s and leader’s trust that has encouraged innovative and honest
behavior from government official staff members, especially as the opportunity for direct contribution of opinion and expertise on certain regulation and implementation
areas exist. It is also acknowledged that leaders in both places communicate and makes democratic work related decisions which resulted in a quicker transition in
staff adopting own/individual leadership mentality. These were attested by government officials of both regions at all levels in their interviews in box 13;
Box 13, Theme: Leadership b
Rachmany (2006, p 46) suggested three procedures that can be undergone by leaders
to guide and help government staff members in transitioning from the rigid to the liberated, with the ultimate goal of creating self-leadership. The first is to provide
examples, or known as initial modelling, which constitute of putting into practice self-leadership concepts both physically and mentally. Interviewees has identified
this stage as government officials at higher levels take the plunge in committing
“So that is how Solok can operate within the principles of good
governance, clean government, etc is by example. The leader gives an
example, gives definite opinions and outlook on certain aspects, the middle
level officials provide the control in executing” (MLO, Solok)
“Have to realise the responsibilities together. We have to give them
authority, so if they do not have the capabilities it will be difficult for them
to be included in the system” (HLO, Gorontalo)
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themselves to good governance aspects, whereby in the process some personal sacrifices are made. As a government official described in box 14;
Box 14, Theme: Leadership C
Initial modelling is evident in Gorontalo and Solok province, where higher level
officials made the commitment to implement good governance standards and in the process proceeded to sacrifice any project honorariums received. This became an
income pool that will later be turned into regional subsidy, increasing all government salary rates. Providing increased levels of welfare will in turn create an ease in
thinking of good governance aspects as officials are no longer thinking or finding ways of increasing their income through regulation loopholes.
The second procedure is guided participation, where government staff members
pursue self leadership in a more secure and controlled environment (Rachmany, 2006). In this case, the leader still has to provide guidance and advice to his/her sub-
ordinates; thus verbal behavior of the leader is crucial in this phase. This is evident in Solok region, where leaders provide his/her subordinate with certain authorities in
decision making; as well as providing them with necessary training and information to increase performance. As attested by a Solok regional government official in box
15; Box 15, Theme: Leadership D
“ If the leader is already in good governance practice then it will be easy
to apply good governance concepts. But if the leader is acting not in line
with clean government standards then how can we apply good
governance. So the leader plays a crucial role, if he doesn’ t have the
commitment to improve then it will be difficult too…” (MLO, Padang)
“ The people of Solok knows that its regional government is
transparent, which is reflected in our “ prime service” , where we have
eliminated red tape and complicated bureaucracy procedures. There is
delegation of authority to lower level officials. It is no longer figure
oriented but systems oriented, so decrees and regulations are in place,
because there is delegation of authority” (HLO, Solok)
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The last procedure is gradual development of self-leadership, where the leader
enforces self-leadership characteristics that are interrelated with a specific task (Rachmany, 2006). This is only evident in Gorontalo and Solok, where each
government official of all levels is assigned specific job descriptions, whereby there are certain authorities related to it. Thus decision making does not need to wait for
the higher level officials to be present but can be made at lower levels. This has proven to increase good governance implementation as each government official
think twice before making a decision, as the responsibility and consequences of that decision will be upon him/her. As attested by a government official in box 16;
Box 16, Theme: Leadership E
The importance of a strong leader is undisputed in good governance implementation,
both through all echelon levels and different regions as seen in figures 6.3.1 and 6.3.2. Although there are slight differences in the number of government officials
and regions agreeing that leadership is a strong impediment factor, it can be seen that as an approximation there is a high general agreement that leadership matters.
0
1
2
3
4
5
6
Numberof
govt officials
Response
leadership
Leadership as an impeding variable by Regions
Padang
Solok
Gorontalo
Denpasar
Figure 6.3.1 Leadership as an Impeding Variable by Regions
“So if you have a leader that is honest most likely the lower levels
will not have the courage to deviate, because if they do there is
no protection from the leader, and thus self fear will develop”
(HLO, Gorontalo)
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0
2
4
6
8
10
12
Number of
govt officials
Response
leadership
Leadership as an impeding variable by Echelon Level
High Level Official
Middle Level Official
Staff Level Official
Figure 6.3.2 Leadership as an Impeding Variable by Echelon Level
The reason that a strong leader is needed is due to the strong leadership of Soeharto
for 32 years which has shaped the bureaucracy culture in a certain way. Therefore to change this old way into the new way of good governance there needs to be a strong
leader that has a high commitment level, one that can not be persuaded by the old ways of corruption collusion and nepotism, and one that has the charisma to be
looked upon and followed. Indonesian hierarchy and bureaucracy culture shows that what the leaders decide, the lower levels will execute; as attested by comments in box 17.
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Box 17, Theme: Leadership F
The argument of leadership being a strong factor in impeding good governance implementation also raised concerns from government officials interviewed in two
aspects. The first is that Indonesia now practices direct election of its leaders, from regional level to national level, indicating a need for a sophisticated society that will
not choose leaders based on their campaigns and promises. Secondly, leaders have a limited timeframe to make an impact, and there is a weakness in Indonesian politics where rules and regulations change depending on the leader in office. Thus it is
feared that due to heavy reliance on leadership and not on the system, good governance implementation will never be maximised or, if implemented it would be
volatile in its characteristics depending on the leader.
Therefore it is concluded that leadership is a strong impediment to good governance implementation for two reasons. The first is that there is still a lack of strong leaders
that are willing to take the challenge of good governance implementation, and the second is that heavy reliance on leadership will cause volatile good governance
implementation.
“This is what is needed by the bureaucracy now, for there to be goodwill,
strong leadership, good management, prepared to work hard, and will
admit if there has been a mistake in their actions” (HLO, Jakarta)
“There is a need for a very strong leadership and a sophisticated society
to provide focused input, and this needs a lot of time” (MLO, Padang)
“In Indonesian politics there has to be agreement and permission from
the highest leader before anything can be implemented” (MLO, Solok)
:I believe that the critical point is the middle level government officials,
once the leader or high level officials have the commitment and goodwill
that makes new regulations a mandatory, the middle level will simply
follow” (MLO, Gorontalo)
“The leader gives an example, gives definite opinions and outlook on
certain aspects, the middle level officials provides the control in
executing” (MLO, Denpasar)
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6.4. Human Resource Capability and Capacity within Regional Government
Education is a very important factor to improve the quality of human resources for
we can adopt the advancement of science by our knowledge and skill we attain from education (WorldBank 2003). Human resource capacity and capability has been
identified as one of the stronger impediment variable to good governance, as it is identified as a factor that impedes the ability of government officials to fully
understand the concepts of good governance and work out how to implement it in their daily work. This is shown in figure 6.b where 13% of interviewees believe
human resource is an impeding variable.
Interviewees have commented at the human resource level in regional governments as in box 18;
Box 18, Theme: Human Resource Level A
“But with the level of human resources within our staff at the moment we
still need to give many instructions to our staff, we need to give them an
understanding where in according to aspects; their level of education and
their function” (MLO, Padang)
“There is still a low level of human resource capability in terms of good
governance so we need to improve that through training, seminars, etc”
(MLO, Denpasar)
“Its true that human resources and level of welfare can be impeding
variables to good governance implementation” (HLO, Solok)
“This is because the level of capabilities between officials is not equal,
there is an equality in human resources level”(SLO, Padang)
“You can’t only transform the system; you need to also transform the
human resources. Its not good trying to implement a new system with the
same people” (HLO, Gorontalo)
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Further analysis show that human resource as an impeding variable in good governance is equally identified across regions and echelon levels, showing that it is
a common problem across regional governments of Indonesia; as shown in figures 6.4.1 and 6.4.2.
0
1
2
3
4
5
6
7
Numberof
govt officials
Response
human resource level
Human Resources as an impeding variable by Regions
Padang
Solok
Gorontalo
Denpasar
Figure 6.4.1 Human Resource Level as an Impeding Variable to Good Governance - Regional
Comparison
02468
101214
Number of
govt officials
Response
human resource level
Human Resource as an impeding variable by Echelon levels
High Level Official
Middle Level Official
Staff Level Official
Figure 6.4.2 Human Resource Level as an Impeding Variable to Good Governance - Echelon
Comparison
6.4.1. Seminars, Training, Workshops
Civil service training must be geared towards acquiring technical and managerial skills instead of merely being a mandatory formal requirement for promotion
between ranks and echelons (ADB 2004b). In the government education can be in
116
the form of formal education at university to pursue higher degree education or seminars, trainings, workshops, and technical guidance on particular aspects of
government administration (Beecher 2003).
Both middle and high level government officials across regional governments selected claimed they have had experiences in being sent to a technical information
session or training of some kind in regards to particular policies or general government administration. However they claimed that although good governance
related training or workshops do exist the frequency of it is not as often as needed and topics discussed tend to be repetitive, concentrating on concepts and theory as
opposed to practical application of good governance aspects. It is also claimed by higher level officials that many delegates from both their own regional office and
other regions do not maximise the learning opportunity at seminars, in the sense that officials are present to fulfil government duties and not to learn. As explained by a
higher level official in box 19; Box 19, Theme: Human Resource Level B
Thus currently there is a concern on the materials that are given in seminars,
trainings, and workshops, as well as a concern in the motivation of attendees.
Another concern in regards to seminars and workshop is unequal opportunity, as discussed in section 6.1 on communication disability. There is an unequal
opportunity in information exposure where government officials at different echelon
“The number of seminars and information exposure is quite high;
however the weakness lay in the attendees. They just come and sit,
without any participation, so there is no after effect. In terms of training,
there is still no change in behaviour even though they have attended
training. They do not think of how these trainings will further their self,
all they do is demand or argue that they need to be given the opportunity
to go to training, whereas when they actually got there they do not
concentrate and learn anything” (HLO, Padang)
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levels have different levels of opportunity at being sent to seminars, training, and workshop.
It is found that in regional governments seminar invites are usually addressed only to
higher level officials, and representation is delegated when a higher level official is unable to attend. Representatives are chosen based on echelon level, thus if higher
level officials are unable to attend it is delegated to middle level officials who are also hungry for such opportunities. In some regional governments where there is a
very strong family culture it has been evidenced that family relations play a role in task and invite delegation, furthering unequal opportunities to information. Thus staff
level officials are disadvantaged as their window of information exposure opportunity is very small.
Staff level officials have claimed that it is a luxury for them to be sent to civil
trainings, seminars, or workshops, as those sent tend to be of middle level management, or the same group of people. It is claimed that they heard about such
trainings vaguely but without any real knowledge as information are not disseminated and invitations not extended. Thus when asked on the subject of good
governance workshops or seminars, staff level officials claimed that they have never been sent to one, and are reliant on information passed by their upper managers
which is rich in theory but lacks in practice.
This has led to discrepancy in information received by government officials, which has caused a very large gap in human resource level within a regional government. Not only does this hinder equal good governance understanding within the region, it
also causes resentment within lower level government officials which will have an effect on the execution of tasks and performing working agendas, and ultimately
rejecting good governance implementation not because they do not favour the concept but because they simply do not know how to implement it, have no
motivation in learning a new system, and are comfortable with the old way of governance. Therefore human resource level in this sense does not refer to the
education levels of government officials but to the opportunity of gaining more information and the opportunity to learn in order to innovate.
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6.4.2. Human Resource Management
Human resource is an impeding variable in another form, relating more to the human
resource management aspects such as size, recruitment, positioning, and career planning. Currently human resource management policies and practices do not
supply regional government with the human resources they need for improved performance. The first aspect is size, where it is quoted from interviews that the
regional bureaucracy is ineffective in performing tasks due to its sheer size. As quoted from a government official in box 20;
Box 20, Theme: Human Resource Level C
This opinion is further enhanced by observation during regional office visits, where it is witnessed that there is an unequal ratio between workspaces (desks) and government officials, with the amount of government officials overwhelming
workspaces. It is witnessed that there are many government officials without workspaces, not performing tasks, and being unproductive. Observation was carried
out during full work hours for the period of regional visit, where it was observed that there was no change in the government official/work space condition. This
observation occurred repeatedly in all of regional government offices, except in central government office Jakarta. Therefore it is concluded that the current size of
regional government bureaucracy is at a point where marginal output diminishes, indicating low levels of efficiency and productivity.
Recruitment and positioning is identified as a sub-variable in impediments of good
governance implementation; as incorrect recruitment and positioning has caused inefficiency, resentment, and it is hindering understanding of possible good
governance implementations. Research on Indonesian government recruitment practices has shown that although there is a standard procedure of recruitment there
“Another impediment factor is rationalisation of the amount of
government officials within a regional body. At the moment there are
approx 10000-12000, rationally should be 5000. There needs to be a
2/3 rationalisation of government officials but in reality each year
more government officials are added” (MLO, Padang)
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is an absence of detailed job descriptions (Manning 2000). Interviews with regional government officials also reveal that regional culture plays a large part in the
recruitment of a government official, where regions with family oriented culture evidenced a higher possibility of family members being recruited. As quoted from
one government official in box 21; Box 21, Theme: Human Resource Level D
However it is recognised that such recruitment malpractice does not occur in every
region, thus there are different experiences in terms of recruitment functions.
Positioning is defined as allocating newly (or even current) government officials at the right position based on the needs of the regional government and the capability of
the official (WorldBank 2001a). Interviewees across staff and middle level officials agreed that civil servants are not allocated according to institutional needs,
educational background, or professional classifications, but more towards political history and the concept of “its not what you know but who you know”, claiming that
this is a long run phenomenon based on both political history mindset and local culture. Thus it has been concluded from the interviews that there is currently mis-
positioning within regional government bureaucracy, where there is a mismatch between need and capability. As commented by a government official in box 22;
Box 22, Theme: Human Resource Level E
“This will also have its effects on the government system. Especially if
someone has reached that certain level of decision making or policy
making, then there will be family-related influences in his or her
decisions. Examples include making decisions on certain policies, staff
allocation, etc” (MLO, Solok)
“At regional level there is a confusion on how to make policies and
regulations because they are not educated on this matter yet, due to
mis-positioning of personnel. At regional level positioning of
people is more towards trust as opposed to capability” (SLO, Jakarta)
120
Further interviews found several reasoning for the miss-positioning of government officials. High level government officials across regional governments selected
agreed that many government personnel might be misplaced; however this is due to the large transfer of civil servants from central to regional level during the
decentralisation period. It is also reasoned that in the East of Indonesia, especially Sulawesi, there are many government functions and projects, and yet currently there
are less people qualified for the positions or are interested in becoming a civil servant. A government official voiced opinion in box 23;
Box 23, Theme: Human Resource Level F
Therefore it is reasoned that mis-positioning is not due to a human resource management malfunction but is due to the lack of human resources available.
Career planning, or meritocracy, is also identified as an impeding factor in good
governance implementation; as government officials are uncertain of whether they can climb the bureaucracy and how to climb the bureaucracy ladder. Once again this
is caused by the absence of job descriptions, resulting in the absence of a career planning reference. This has caused uneasiness in performing tasks as a government
official will not know whether his/her career in the bureaucracy is secure or not. This insecurity has strengthened as there has been an increase of government officials’
dismissals due to non-compliance with their job descriptions, something that is unclear and unknown to them at the first place. As put by a government official in
box 24;
“ Human resource level is still quite low, especially in the east
Indonesia regions. There are many people that are positioned
incorrectly in the bureaucracy” (SLO, Gorontalo) “ There is goodwill within government officials and this is supported by
the level of human resources – although we do not have many
government officials they all have high human resource levels” (MLO, Gorontalo)
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Box 24, Theme: Human Resource Level G
Therefore there needs to be a reform in the human resource management system; one that will address the need of a bureaucracy size slimming, recruitment and
positioning, and career planning.
6.4.3. Authority Confusion
Three central bodies; the State Minister for the Empowerment of the State Apparatus (MenPAN), the National Civil Services Board (BKN), and the National Institute of
Administration (LAN), have the ultimate responsibility for public administration and civil service issues (KNKG 2006; ADB 2004b). Other responsibilities of the three
bodies include; forming public servant related policies, managing the database on civil servants, monitoring civil service management accrediting training programs,
and other remaining central civil service functions (MenPAN, 2006; BKN, 2006). However it has been acknowledged that this divided arrangement hampers civil
service reform and the effective allocation of human resources (ADB 2004b).
This acknowledgement is strengthened by opinions of high level management government officials in Denpasar, Padang, and Gorontalo; who all claimed there is
confusion in which central body they should adhere to in terms of civil servant regulations. There is also confusion as each of the central bodies has regional representatives and in more than one occasion an overlap in policies and
responsibilities occurred. Therefore although civil servant restructuring is recognised as an urgent need and laws and regulations in regards to restructuring exists there is
“Another problem is meritocracy, so in the career system within the
bureaucracy there needs to be a reform so that those with high
potential can rise and be in positions that will excel their potential.
This system is not yet in place in most bureaucracies. If we are secure
in terms of our career and salary then we will be happy and content
and the society can demand good governance from us” (SLO, Jakarta)
122
confusion in the implementation stage. An agreement in the need for the three central bodies to be restructured and merged to avoid confusion and provide efficiency in
regional public servant re-structuring was opinionated by each high level management government officials interviewed, thus validating recommendations
suggested by international institutions (ADB 2004b), and should be taken with heavier weight by the central government.
High level government officials in Jakarta claimed that although the ability of
regional governments to adapt to decentralisation is of great concern, there does not seem to be enough attention given that require changes in the role and tasks of the
national Government, which includes the organisation and staffing of central ministries. This could be accounted to the lack of reform at the central level, where
ministries have not settled comfortably into their new responsibilities, especially in setting standards for and in monitoring regional governments (ADB 2004b).
Therefore there is already a mismatch of conceptions and the reality of civil servant re-structuring, which leads to further confusion and impedes good governance
implementation.
6.4.4. Summary
Human Resource is considered to be a main impediment variable to good governance implementation, as seen in the figures above. This is due to the fact that good
governance will be implemented by government officials, who are the core human resource of a government body. Thus it is necessary to identify the three main areas of concern in human resource. Firstly there is a concern in regards to seminars,
training, and workshops. Concern is directed to the quality of information given to government officials, possible misuse of education opportunities, and unequal
opportunity in information exposure between different echelon levels. Secondly there is a concern in human resource management. Here concern is directed at the
inefficient size of regional government bureaucracy, incorrect recruitment and positioning process, and the absence of meritocracy or concrete career planning
opportunities. Lastly there is a concern in the national authorities with human resource related responsibilities, as there is an overlap of responsibility which causes
regulation conflicts and confusion.
123
Therefore both regional and national government needs to work together in creating
a human resource management body and system that will address the above concerns. It is recognised that due to decentralisation and regional autonomy there
could be complications and a certain degree of reluctance, however analysis has shown that human resource is a large impediment to good governance
implementation and is experienced by all regions interviewed, making it a national concern as opposed to a regional specific concern. Thus a national reform on human
resource management addressing the above main three concerns is considered to be a necessity.
6.5. Political History
The fall of Soeharto in May 1998, triggered by the Asian financial crisis, led the
country into a new phase known as the era of reformasi (McLeod 2000; Curtiss 1999). This era witnessed Indonesia targeting specific areas for governance reform
such as the Constitution, public expenditure, and decentralisation (Soesastro 2000). The Indonesian transition toward democracy and market economy affects the
political system, the business community, civil society, and in particular governance system (Takahashi 2006).
Indonesia’s governance institutions previously operated in an environment where
good governance was neglected, the rule of law was absent, and corruption ruled over common interests (ADB 2004b; Yunling 1999). Literature acknowledge that Indonesia has limited capacity to develop and support a rapid national good
governance reform especially as there are 32 provinces and 437 districts each with its own culture and administrative agenda; thus Indonesia needs to step in a sequenced
manner to effect change (Berman 2006; ADB 2004b; Bird 2001; Doornbos 2003; KNKG 2006; Northover 2005; Soesastro 2000).
6.5.1. Resistance to Change and Innovation
Research has shown that embedded norms and practices within an organisational
structure can cause reluctance to change, especially if the change required is of bi-
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polar opposite to the embedded norm (Adicondro 2002; Smith 1971; Reynolds 1994). The Soeharto era of 32 years is closely linked with corruption, collusion, and
nepotism in terms of governance, whereas his successors have pushed for governance that is transparent, accountable, professional, and participative; thus a bi-
polar change. This suggests possible reluctance within government bodies to change its normal procedure. This is evident in figure 6.b where 11% of interviewees
identified political history as one of the main impeding variables to good governance.
It can also be seen from figure 6.5.1 and 6.5.2 that there is a general agreement between regions on the effect of political history on good governance
implementation as an impeding variable. However there is a disparity based on echelon levels opinions; where although each level recognises political history as in
impeding variable there is a tendency of political history recognition and importance decrease as the echelon level decreases. This is evident that higher level echelons
feel a stronger sense of impediment from political history influences than those in lower echelon levels. It is suspected that those in higher level echelons feel the
influence more than lower levels as they establish new regulations and decree; with the expectancy that the new regulations and decisions will be carried out by the
lower levels. Whereas those at the lower levels are the “doers” and implementers of new rules and regulations and thus do not feel the effects of political history.
0
1
2
3
4
5
6
Numberof
govt officials
Response
political history
Political History as an impeding variable by Regions
Padang
Solok
Gorontalo
Denpasar
Figure 6.5.1 Political History as an Impeding Variable to Good Governance - Regional
Comparison
125
0
2
4
6
8
10
Number of
govt officials
Response
political history
Political History as an impeding variable by Echelon Level
High Level Official
Middle Level Official
Staff Level Official
Figure 6.5.2 Political History as an Impeding Variable to Good Governance - Echelon
Comparison It is recognised that the success of a reform is positively correlated with the reform of
actors within an organisation (Beecher 2003). Soeharto’s successors have initiated for bureaucratic reform without significant success due to the possibility of creating
further unemployment and political fears (King 2003; Schwarz 1997). Therefore there has not been a bureaucratic reform in Indonesia, indicating officials in authority
during Soeharto’s New Order are still in its position in the current era. This further strengthens reluctance in governance changes. As claimed by many government
officials, to change a way that has been imbedded for 32 years is not easy as ultimately there would be resistance. Government officials relate this resistance to
insecurity, where familiarity with the old system is now replaced with uncertainty of a new system. As quoted from many government officials in box 25;
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Box 25, Theme: Political History A
Thus it can be concluded that political history plays a large role in impeding good
governance implementation by inflicting a resistance to change and innovation within government officials.
6.5.2. Rules and Regulations Uncertainty
Numerous agencies with regulatory and monitoring functions have been established
since 1998, however their roles and responsibilities are still ambiguous, as well as
“ There has been cases where the leader or high level officials are
already comfortable with the old system and thus changing to the new
system will reduce their comfort zone” (MLO, Gorontalo)
“ …as behaviour is the most difficult to changes since there is a
reluctance to change from the old ways – most government officials are
used to the old ways of governance” (SLO, Padang)
“ It is very difficult to change old behaviours, it really depends on the
commitment level” (MLO, Solok)
“ We are used to the old ways of governance it is not easy to change that,
we need time but we also have to start innovating. Old cultures and ways
of doing things will have to be changed” (HLO, Padang)
“ Training is important too, if officials are not stimulated to learn then
they wont develop. Old ways that have been around for years needs to be
freshened” (MLO, Denpasar)
They might already understand these aspects but there is no willingness
from within them so they still follow the old practices…. if there is a
chance to be efficient then they should do it, they would rather do it the
old way. They do not think innovatively, they think the old way, which is
very monotone. So I think there are three reasons why good governance
is not implemented correctly.” (HLO, Jakarta)
127
their independence from government intervention (BaKTI 2006). Due to decentralisation there is a lack of capacity building in such functions as well as
overlapping and unclear mandates at both central and regional government level; causing general confusion in authority structure, law reference, and roles of
responsibilities of each government official. Further confusion is caused by the fact that central government is still in a transition stage, attempting to establish a set of
good governance rules and regulations that can be used as a point of reference by regional government. As a result there is confusion at regional government level as
to which regulation is the point of reference, where regional governments feel that there is not enough time to understand and implement a set of regulations before a
new revised version of the regulation is released. As experienced by many regional government officials in box 26;
Box 26, Theme: Political History B
“The central government also plays a part as there is a high frequency in
changing rules and regulations, there are many reforms. So we are only
starting to understand the regulation, its already changed again. This
causes a lot of confusion and impedes implementation of new regulation.
They do have a socialisation period, but I believe that they don’t take into
account the capabilities of each region, because not all regions can
implement it at the same time at the same level, sometimes not all regions
have implemented and already they change the new regulation” (SLO, Denpasar) “However sometimes we have just started to implement or perfecting the
implementation of a new regulation when there is already a new
regulation. So sometimes regional officials are confused, there is not
enough time to implement a regulation and to understand it fully” (MLO, Solok)
128
6.5.3. Central and Regional Government Relationship
Political history in Indonesia shows that a centralised government is the practice since the first president, Soekarno, in 1945 until Soeharto in 1999 (McLeod 2000).
Therefore the concept of decentralisation is very new in Indonesia, a concept that many government officials are still attempting to grasp and fully understand.
Decentralisation and autonomy dictates that regional governments have full authority to innovate and develop its own region based on regional conditions and resource
availability, providing they are still within the corridor of central government regulations. However it is felt by regional governments that due to the political
history of centralisation, central government is still reluctant to delegate regional government full authority to innovate. Regional government feel there is a regulation
constraint from the central government to innovate, where there have been cases of regional governments innovating and receiving sanction. As experienced by some
regional government officials in box 27; Box 27, Theme: Regulation Constraints
Central government answered such opinions by claiming that due to political history
where centralisation is common, it is feared that regional governments are not prepared for decentralisation responsibilities and there is a need to provide them with
“From the central government, there are regulation constraints toward
regions who wanted to innovate” (MLO, Gorontalo)
“Even with regional autonomy there is still no independence in deciding
this amount. Some regions are courageous and try to innovate, however
they are also in fear of violating rules and regulations set by the central
government” (HLO, Gorontalo)
“There is to many regulations, starting from constitution becoming
presidential decree, presidential decree becoming ministry decree, from
that to regional/governor decree, etc. So the further down you go (in the
bureaucracy) the more concentrated the regulations, which leaves no
room for innovation” (HLO, Solok)
129
strict corridors of rules and regulations and guidance. It is also feared that if one region is given too much freedom to innovate the possibilities of development
discrepancy between regions will be too high and will cause tension and unrest instead of further development. Central government officials’ claim that many
regional governments interpret regional autonomy incorrectly, causing tension between central-regional governments. Thus the central government’s main aim is
that regional government does innovate however innovation is within national vision and mission, where in the long run innovation is spread evenly nationwide.
Comments in box 28 from central government include; Box 28, Theme: Political History C
“ …through regulation number 22 and 25, where in 2001 we implemented
regional autonomy. There is a surprised element from the regional government in
accepting this authority, because in terms of capacity they are not ready yet. So
there are instances happening that are not quite right or in accordance to the
regulations. The regional government are not ready for the responsibility of a
regional autonomy” (SLO, Jakarta)
“ Looking at the government aspect, local government have been controlled by the
central government for far too long, they have been long repressed and
centralised – for the past 32 years, so they do not have any initiatives or
creativity. What they are doing is actually just copying the central government
from past era. The capacity of local government has never increased because they
are used to being controlled and regulated by the regional government. So now
they are losing balance and a little bit behind, especially with globalisation
demands such as good governance. So they have minimum capacity but maximum
authority” (MLO, Jakarta)
“ Good governance is not fully implemented due to regional governments feeling
that they have regional autonomy, so the regent head and governors feel that they
have the same authority level as the president. There is a contradiction in this
way of thinking by the regional government, as regional government feel that they
have authority yet the regional income is still provided by the central
government” (HLO, Jakarta)
130
6.5.4. Summary
Political history is identified as a strong impediment to good governance implementation. This is further complicated by the fact the 32 years of governance
known to government officials is the bureaucracy culture, where the bureaucracy culture is identified with negative aspects. Thus there is a strong resistance to change
and innovate which results in a very slow good governance implementation process, where understanding and implementation needs to be introduced on a step by step
periodical basis over a long period of time. A concern also lies in the tense relationship between central and regional governments in terms of regulation
changes frequency and the level of central government control and guidance. There is a necessity for a standard good governance regulation and guidelines that is
formulated jointly by central and regional government, to ensure steady reference in the implementation process and to create a network between central and regional
governance,
6.6. Regional Government Customs and Culture
Regional government customs and culture was suspected to have an impact on good governance implementation, however further interviews and analysis has shown that
cultures in the sense of norms within a group only have a very minimum effect on good governance implementation, it is the bureaucracy culture within a regional
government that has a large impact; as discussed in the above section. Research on the effects of culture on good governance has found that there are many
cultures within Indonesia, where each region is unique in their own culture (Maccoby 2006). These cultures are heavily related to the majority religion of the region.
Denpasar for example identifies itself with the Hindu religion, whereas Padang, Solok, and Gorontalo identify itself with the Islamic religion. There is a varied
opinion of how religious culture effect government performance, where 44% of informants felt there are negative effects and 56% of informants expressed positive
effects.
131
Effects of Culture on Government Performance
44%
56%
Negative effects ofculture
positive effects
Figure 6.6.1 Effects of Culture on Regional Government Performance
6.6.1. Positive Effects
Positive effects include a family-oriented atmosphere within the regional government and a feeling of responsibility towards both religious beliefs and the society. Many
regional government official claims that the strong belief in religion has helped officials to defend themselves from well known bureaucracy culture of corruption, as
the act is condemned in the religion and there is fear of higher consequences than regulated sanctions. As evident in box 29;
132
Box 29, Theme: Regional Government Customs and Culture Effects on Performance A
Thus it can be seen that there are positive effects of culture and religion towards government performance, creating a system that is family oriented and has a higher
degree of responsibility.
6.6.2. Negative Effects
There are also some negative effects of culture on performance and the working agenda however, relating to the level of disruption religious ceremonies have on
performance and the degree of openness towards change and innovation. Higher level officials in Denpasar recognised that the amount of religious ceremonies can
“ …directly supports the working agenda as government officials are
required to socialise and be transparent with each other, have discussions
together, be discipline, and build a family-oriented atmosphere within the
organisation – that is the concept” (SLO, Denpasar)
“ Well there is a very strong culture of helping out one another, supporting
each other and coordinating with each other” (MLO, Gorontalo)
“ …For example corruption. If in the government there is a corruption case
it is not only that official that will be shamed, but also his/her family,
his/her village, his/her race/tribe. Therefore there is quite a strong
prevention culture, to be involved in a particular case for example will
usually involve thinking it over 1000 times because there is a multiplier
effect…” (HLO, Solok)
“ I believe that the characters of personnel here, which is shaped by culture,
norms, and religion; is quite effective in preventing personnel to be tempted
to be involved in corruption, collusion, and nepotism. I believe that because
there are strong religious believes there is a smaller corruption indicator
level in west Sumatra, this is because there is some sort of self-responsible
feeling, that you are responsible to your soul” (HLO, Padang)
133
cause a slight disruption in the working agenda as there are many religious ceremonies, both regionally recognised and private occasions. Denpasar region has
anticipated this by making regionally recognised religious ceremonies a regional holiday; however the amount of absence is heightened with private ceremonies and
officials capitalising on the opportunity. As viewed by Denpasar officials in box 30; Box 30, Theme: Regional Government Customs and Culture Effects on Performance B
This view is counteracted by other Denpasar officials however, who claimed that
such religious ceremonies do not have a negative effect;
Box 31, Theme: Regional Government Customs and Culture Effects on Performance c
This is not evident in other regions however, which brings to conclusion that
religious culture has a very minimum impact on good governance implementation, where the level of impact depends on the majority religion of the region.
“ This is because they use religion or cultural label to not go into work,
and there are no government leaders that can say no when their staff asks
for permission for absence if the reason is religion or culture” (HLO, Denpasar)
“ During these official holidays the regional government have already
spent inefficient money as it will be a total holiday without a single
official coming into work – thus there is a delay in the working agenda.
What we are afraid of is if government officials are not disciplined and
add in their own holiday, for example extending it by one or two days”
(MLO, Denpasar)
“ There are no negative effects, because economic wise, the society will
have ceremonies to actually increase economic activity in the society.
We have holidays and absences merely because we are following our
culture, and that is coordinated at work” (SLO, Denpasar)
134
A concern in regards to culture is how it affects the degree of openness towards change and innovation. It is feared that closed cultures still rely on the old way of
recruitment and positioning of government officials – through family relations. It is also feared that closed cultures do not welcome new innovations and will reject new
concepts such as globalisation or good governance, which will have a negative impact on the performance of the region and impede good governance
implementation. As few government officials commented in box 32;
Box 32, Theme: Regional Government Customs and Culture Effects on Performance D
It can be seen from section 6.1 that there is still a very high power distance between
echelon levels of bureaucracy, where there is unequal opportunity to information exposure and a communication ceiling between higher level officials and lower level
“…however there are many more who have exploited culture and thus culture
resulted in negative effects. This is especially in closed cultures, where
culture does not improve the bureaucracy’s performance but is used as a
reason to position personnel within the bureaucracy. There are some cultures
that have positive influences, those that are open and force accountability
towards the society/people” (SLO, Jakarta)
“…a healthy bureaucracy, is one that eliminates narrow local cultures from
everyday practices and performance, and one that can take on positive
aspects of both local and international culture” (HLO, Solok)
“…strong family ties with someone in the government who are from that
family, then no doubt there will be some effects/influence in the government
though probably not a very strong influence. So family orientation is present
in the government structure” (SLO, Padang)
“There are some regions that has utilised culture to increase the welfare of
their society, however there are many more who have exploited culture and
thus culture resulted in negative effects. This is especially in closed cultures,
where culture does not improve the bureaucracy’s performance but is used as
a reason to position personnel within the bureaucracy” (HLO, Jakarta)
135
officials. Further research shows that this culture is not only found and common in government bureaucracies; it is common within the society as a way of life, where
there is a communication ceiling based on age, position, social status, and education.
6.6.3. Summary
Culture is recognised as a way of life in Indonesia, where with approximately 400 regions there is a high level of variety in culture and norms. It is important to
differentiate culture and bureaucracy culture, where culture is associated with norms within a society such as folklore and customs; and bureaucracy culture is associated
with certain organisational culture behaviours. Evidence exist in both positive and negative effects of culture on the performance of government in relation to its
working agenda, however there is only a minor effect of culture on good governance implementation. It is bureaucracy culture, specific within a bureaucracy, which is
recognised to have a larger impact on good governance implementation.
6.7. Remuneration System and Employee Welfare
Research shows that government remuneration system is increasingly becoming a concern, especially those in South East Asian countries as it is considered
inefficiently managed and the amount remunerated are at a lower level than the world government official standards (Rijckeghem and Weder 1997; Woolsey 2002).
Indonesia is considered to be one of the countries with an inefficient remuneration system where the level of employee or government official welfare is still low (Manning 2000; Cole 2001). Therefore there is a nationwide concern in regards to
government official welfare. Another aspect of the remuneration system that is of concern is the absence of a rewards and punishment system, causing a lack in
motivation to increase performance and innovation adoption. Thus these two main topics are discussed in this section, where its implications are discussed as an
impediment variable to good governance implementation.
136
6.7.1. Official Welfare Level
Research shows that Indonesian government employees and other public service officials are considered to be ranked low in its salary level (Cole 2001; Manning
2000), causing tension within the government department at central and regional levels. Low salary levels have caused a problem in two main areas; dissatisfaction of
welfare level among government officials and reluctance from quality graduates to join the bureaucracy. These two main areas have impeded good governance
implementation in the sense that high levels of dissatisfaction and low levels of recruitment quality caused an increase in resistance and reluctance in adapting new
systems. As seen in figure 6.b, 12% of interviewees identified level of government official welfare as a high impediment to good governance implementation.
Dissatisfaction among government officials in terms of welfare is evident in
interviews, with many government officials expressing a monthly income level that will barely cover minimum living expenses, as in box 33;
Box 33, Theme: Level of Government Official Welfare A
“ At the moment there is a unit cost system that is very unreasonable,
that is not in accordance to the living costs, so government officials are
trying to save money in any way possible – we are looking for ways to
ensure that we live comfortably” (SLO, Jakarta)
“ Our wages as government officials is the lowest one here. My own
wage is not enough to pay for this and that – my children’s college
education, electricity, mobile phone, etc – its not enough. That’s why
we need additional income. Officials here find that additional income
from trip allowances, honorariums, etc” (MLO, Padang)
“ Official welfare I think is also another very important variable. For
example is we are expected to work all the time but the reward is not
there or there is no change in the salary then this is an unreasonable
expectation too” (SLO, Gorontalo)
137
This has caused government officials to perform without peace of mind and security as they are constantly trying to think of ways to increase their monthly income. This
causes two problems; the first is that government officials lose partial concentration affecting the quality of performance, and secondly it creates creative options in
manipulating systems to which they are very familiar with. In terms of good governance impediment, the first problem impede understanding of good governance
aspects as officials are only partially concentrated on performance and thus ignore innovation; whereas the second problem impede the implementation stage of good
governance as government officials are reluctant to change to systems which might prevent them from creative options of manipulation. Government officials feel that
there is a strong need to reform the remuneration system where welfare levels are increased, as this will give peace of mind in performing government agendas and
decrease the need to find creative options. Many strong opinions expressed that the current salary level shows a lack in gratitude towards government officials who
provides public service, causing further reluctance towards good governance implementation. As expressed by government officials in box 34;
Box 34, Theme: Level of Government Official Welfare B
“The simplest form of security is in the subject of welfare. I believe that
as long as the public sector salary is not equal or almost equal to
private sector good governance will not be implement, If we are
remunerated well then there is hope to not be tempted with temptations
to corrupt” (SLO, Padang)
“They also understand the old system very well so they know where are
the loopholes, whereas with the new system they do not master it yet so
they do not know where the loopholes are” (MLO, Gorontalo)
“…impeding factor is this, as long as official’s income is not enough, it
will definitely impede good governance. Therefore official welfare
needs to be prioritised. If an official feels he is content in his welfare
then he will think about his people. If he is not content in his welfare
then it would be difficult for him to think of his people” (HLO, Padang)
“…and then improve the level of welfare so that we do not need to
worry about our finances and can concentrate on implementing good
governance" (SLO, Denpasar)
138
There is a slight difference in regards to government official welfare between regions and echelon, where although the impact of welfare is recognised it is recognised at
different levels; as shown in figure 6.7.1.
0
1
2
3
4
5
6
7
Numberof
govt officials
Response
level of government official welfare
Level of Government Official Welfare as an impeding variable by Regions
Padang
Solok
Gorontalo
Denpasar
Figure 6.7.1 Level of Government Official Welfare as an Impeding Variable to Good
Governance - Regional Comparison The difference in official welfare levels between regions can be attributed to regional
autonomy, where each region has different policies in regards to its remuneration system. As put by few government officials in box 35;
Box 35, Theme: Level of Government Official Welfare C
In Gorontalo and Solok for example, who have introduced a regional subsidy there is
a lower recognition of welfare problems. Regional subsidy is the result of pooling of
“In terms of welfare, there will be many opinions. I agree that it
needs to be improved and increased however we need to understand
the fiscal level as well. Welfare is relative in each region, we can not
standardise it” (HLO, Denpasar)
“Increasing official’s welfare have to be a national exercise, if its
only regional then it will depend on the region’s funding capabilities,
so there will be different results” (HLO, Padang)
139
honorariums from projects, which is then dispersed within the regional government based on echelon level. Therefore there is an increase in government officials’
income. This initiative was introduced as part of the strategy in introducing good governance, as explained by a Gorontalo and Solok government officials in box 36;
Box 36, Theme: Level of Government Official Welfare D
Gorontalo and Solok have also been recognised as two best cases in good governance implementation since the introduction of regional subsidy (Transparency
International, 2006), thus there is a direct correlation between the effectiveness of regional subsidy in increasing government officials’ welfare and good governance implementation.
Although both regions have shown innovation with positive outcomes, it has also
been commented by many regional government officials that remuneration matters
“This includes budgeting based on performance and regional subsidy –
that way we can motivate and increase official’s welfare” (HLO, Gorontalo)
“Before there was a very big discrepancy level between officials in terms
of economic welfare. Now we have introduced a regional subsidy
programme that is based on echelon levels, so subsidy based on position
and responsibilities. This increases welfare and motivates officials”
(MLO, Gorontalo)
“This makes solok unique in its government performances as this induces
a clean bureaucracy with welfare satisfaction, where there is less
corruption and increasing good governance” (MLO, Solok)
“Its true that human resources and level of welfare can be impeding
variables to good governance implementation. It is important to give
regional subsidy to the government officials because if we don’t give them
then they will try and find extra money elsewhere, so its better to give it to
them to ensure that there is no leakage. Therefore officials can work
comfortably as they don’t have to worry about welfare level” (HLO, Solok)
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should also be a national matter where the central government pays increasing attention to the low salary levels of government officials. As put by an official in box
37;
Box 37, Theme: Level of Government Official Welfare E
Therefore there is an urge to implement good governance equally nationwide the subject of welfare discrepancy will not be used as a reason to non-compliance.
The difference between echelon levels in terms of welfare as an impeding variable
can be seen in figure 6.7.2, where there is a common theme that the level of concern towards salary levels decreases with the echelon level.
0
2
4
6
8
10
12
Numberof
govt officials
Response
level of government officialwelfare
Level of Government Official Welfare as an impeding variable by Echelon levels
High Level Official
Middle Level Official
Staff Level Official
Figure 6.7.2 Level of Government Official Welfare as an Impeding Variable to Good
Governance - Echelon Comparison It is suspected that high and middle level officials have higher levels of concern in
welfare due to two factors. The first one is they have been recognised as echelons with decision making authority, as well as exposed to higher levels of information;
hence a feeling of superiority that should induce higher rewards. Thus there is a certain degree of disappointment in that there is always someone higher in the hierarchy of decision making and that their salary levels still do not support the
“There needs to be a new national salary standard so that region
officials will not compare salaries” (SLO, Gorontalo)
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lifestyle that an echelon should have. Psychology studies have revealed that these types of disappointment are common among people who are in a certain authority
decision yet they are frustrated at the lack of authority they actually have (Ferrazzi 2005; Newhouse 2005). Further analysis show that echelon 1 has a very low concern
in welfare, which can be explained by the psychology study mentioned and the fact that echelon 1 officials are very highly paid in Indonesia with many benefits.
Likewise staff levels concern can also be explained by the psychology study where staff felt that they are merely staff without decision making authority, thus the salary
level that they receive is acceptable or in par with their responsibilities.
In summary there are differences in welfare concern among government officials; however data analysis has shown that regions with increased welfare among its
officials are the best practice cases of good governance implementation. Level of welfare impedes through the absence of security within government officials, causing
a higher level or resistance and reluctance towards innovation. This shows that welfare is an impeding variable to good governance implementation and there needs
to be attention in the possibilities of a remuneration reform that will increase the level of welfare on a national scale.
6.7.2. Rewards and Punishment
The lack of a rewards and punishment system is also a concern within regional
government officials, as it is felt that the absence of such system de-motivates government officials from discipline, innovation, and compliance to current rules and regulation. Although only a small percentage of interviewees (5%, based on figure
6.b on Impeding Variables to Good Governance Implementation) identified lack of rewards and punishment system as an impediment variable, those who did have
claimed that the absence of such system has a very high impact on good governance implementation.
Lack of rewards and punishment system has caused problems in three areas;
discipline, innovation, and compliance to rules and regulations. This is mainly due to the fact that sanction regulations do not exist, and even if they do exist there is very
little chance that it would be enacted and the government official or regional
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government will be punished/sanctioned. As expressed by few government officials in box 38;
Box 38, Theme: Rewards and Punishment A
This comment is strengthened by other government officials, who claim that the lack of a rewards and punishment system has caused non-discipline and lack of
innovation within the region. Officials expressed that currently there are no incentives to innovate, where there is no recognition should one suggest a new way
of performing tasks or initiated a programme. It is also expressed that there isn’t a system that will reward officials for overtime work or a sanction for those who are
undisciplined in regards to work such as coming in late, prolonging days off, and not meeting deadlines. Therefore there is a lack of motivation in innovating, increasing
the discipline level, and complying with rules and regulations. As famously known in Indonesia; no matter what you do - whether you are smart or not, disciplined or not,
you will still get paid the same salary. Thus interviewees across regional governments agreed that there is a need for a rewards and punishment system, as
voiced in box 39.
“Also if you do not give the data there are no sanctions, so there isn’t
an actual mechanism to actually make regional government report –
on paper it is there but there is no implementation” (SLO, Jakarta)
“If there is anything that is really out of line then we can degrade
their position/level, decrease their salary. Up until now we can not do
this. None of us have the courage to do so. For example within a
month how many times was the official late, and then given a
sanction. We don’t have the courage to do that. If we force something
like that on to officials we can get hit” (MLO, Padang)
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Box 39, Theme: Rewards and Punishment B
It is however recognised that there are only 5% of interviewees that identified the
lack of rewards and punishment system as an impeding variable; therefore not all regions are deprived of a rewards and punishment system; as shown in figure 6.7. 3.
“This is also because there is no clear reward and sanction system in
place. If that can be put in place it will make our jobs easier. For example
there is a clear sanction if someone doesn’t do a particular task their
wage will be decreased or have a pay cut.” (MLO, Gorontalo)
“There needs to be a change in the human resource management system,
where rewards and punishment system, and performance appraisal and
incentive system are introduced.” (HLO, Denpasar)
“…For example is we are expected to work all the time but the reward is
not there or there is no change in the salary then this is an unreasonable
expectation too….”(SLO, Padang)
“I also believe that there should be a punishment system, if there are
officials that are just sitting in the canteen drinking coffee and reading
the newspapers and they still given subsidies it wont be fair on us, so if
he/she does not work there should be a sanction too” (HLO, Solok)
“So on hand we are asked to work hard, however there is no extra
reward for doing so. Being sent for socialisation programs, workshops,
trainings, etc is also a form of reward and appreciation. Not only salary
or money form…”(SLO, Padang)
“Lack of rewards and punishment system is also a factor as it is
connected with discipline and this will provide motivation” (MLO, Denpasar)
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0
1
2
3
4
5
6
Numberof
govt officials
Response
rew ard and punishment
Lack of Rewards and Punishment System as an impeding variable
Padang
Solok
Gorontalo
Denpasar
Figure 6.7.3 Lack of Rewards and Punishment System as an Impeding Variable to Good
Governance - Regional Comparison A sound rewards and punishment system is found in Gorontalo and Solok, the two
best case practices of good governance implementation. Officials from both regions, at all echelon levels, explained that a rewards and punishment has been introduced in
both regions (though at different times, in direct relation to the start of governor term in each region) and is now at a mature stage; as explained by government officials
from both regions in box 40;
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Box 40, Theme: Rewards and Punishment C
Thus there is a difference in the extent of lack of rewards and punishment system between regions, where those who expresses lack of the system are struggling with
good governance implementation and those who apply a rewards and punishment system are deemed as best case practices in good governance implementation.
6.7.3. Summary
Rewards and punishment system is considered an important aspect of governance as
it promotes discipline, innovation, and compliance. Although only 5% of respondents identified the lack of such system as an impediment variable, those who did
expressed high level of impact towards implementation. The lack of a rewards and punishment system in some regions has resulted in a lack of discipline and
“There is a rewards and punishment system that also influences
personnel motivation as this system has an influence on the amount of
regional subsidy one would receive. Rewards include further or higher
education, certificates, or money. If someone makes a mistake then
there will be a sanction, if they are not performing then they will be
fired” (MLO, Gorontalo)
“…are clear control mechanisms, where there is also a rewards and
punishments system…” (MLO, Solok)
“…not performing they will be evaluated, and if they fail evaluation
they will be fired. There is a rewards and punishment system, where
there is a regional subsidy based on echelon level. This is in
accordance to constitution number 32…” (HLO, Solok)
“…copy another country we have to also copy what will achieve results
not only the outcome, for example rewards and punishment system, and
incentive and sanction system” (HLO, Gorontalo)
“…the number of officials breaking the law has decreased – which I
think its because of the rewards and punishment system that is in
place”(SLO, Gorontalo)
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innovation; which impeded good governance implementation. It is noted however that the system is present in some regions, which has supported the regions to be
named best case practices in good governance implementation. Thus there is a need for a rewards and punishment system in each region that is backed by legalities;
where incentive structures, including remuneration and promotion system must become transparent and must focus on performance.
6.8. Minimum Public Service Standard
Government is identic to public service, where its main objective is to provide
service to its society in a manner that will improve society welfare and economic growth (Wray 1999; Rotger 1997; Mariner 1994; Hyde, Boyd and Daniels 1987). An
aspect that has continuously been scrutinised in the government is red tape, as it impedes efficiency of public administration service (Pandey and Kingsley 2000;
Scott and Pandey 2000; Griffin, Pandey and Bozeman 1995). Thus there is much discussion on the need to reduce red tape within government in order to increase its
efficiency with the main aim of increasing society welfare (Stanbury and Thompson 1995; Wright 2006; Pandey and Welch 2005).
In Indonesia itself red tape is well known within government where for many years
during the Soeharto regime the amount of red tape has increased. Since decentralisation and regional autonomy was introduced in 1999 and implemented in
2001 there has been attempt for red tape reduction, which is further strengthened when corporate governance was introduced in 2001 (Ferrazzi 2005).
Good governance dictates efficiency in public administration services, where processes are clear and transparent to avoid potential unrest and to provide a clear
standard guideline that the society at large can follow (Beecher 2003; Woolsey 2002). Therefore there is a need for a minimum public service standard; one that
outlines the services a government offer, processes within that service, a standard time frame and documentation necessary for a particular service, and the authorities
(or level of government official) that is responsible for services available (Huddleston 1991; Mitchell 1990; Reynolds 1994; Stanbury and Thompson 1995).
As illustrated in figure 6.b regional government authorities found there is an absence
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of a minimum public service standard, where 11% of interviewees claimed its absence is an impediment to good governance implementation.
It is found that after 32 years of red tape in public administration services, the
demand to perform good governance and the absence of a national public service standard has caused confusion and uncertainty within regional governments on how
to perform public services in the “correct” way. Thus this uncertainty has left government officials guessing and still attempting to find the “right” public
administration procedure standard, causing confusion within the regional government itself. This has a multiple effect within society, where confusion impedes good
governance implementation. As evident through government officials’ responses in box 41;
Box 41, Theme: Minimum Public Service Standard A
“Government decrees have to be designed to improve public service,
one that is heading towards the direction of minimum standards. We
are still not established, still very volatile…” (HLO, Padang)
“I believe that the central government should create a standard that
can be referred to for the next 25 years… There needs to be a standard
that is mutually agreed, so that it becomes a system and there is no
confusion in the implementation stage…” (HLO, Gorontalo)
“This includes the public service minimum standard. To be honest the
understanding of this standard is still among the higher level officials.
At staff level they do not understand, what is the public service
minimum standard. They don’t know what it looks like, or the level of
service that they need to give in order to reach that standard” (HLO, Denpasar)
“There is also a lack of minimum public service standard, some already
have it on paper but that is only paper as a show-off, its not actually
implemented.” (MLO, Denpasar)
148
Further analysis showed no great variance in opinion on minimum public service standard between regions and echelons, as shown in figures 6.8.1 and 6.8.2.
0
1
2
3
4
5
6
7
Numberof
govt officials
Response
minimum public service standard
Minimum Public Service Standard as an impeding variable by Region
Padang
Solok
Gorontalo
Denpasar
Figure 6.8.1 Minimum Public Service Standard as an Impeding Variable to Good Governance -
Regional Comparison
0
2
4
6
8
10
12
Numberof
govt officials
Response
minimum public servicestandard
Minimum Public Service Standard as an impeding variable by Echelon Levels
High Level Official
Middle Level Official
Staff Level Off icial
Figure 6.8.2 Minimum Public Service Standard as an Impeding Variable to Good Governance -
Echelon Comparison
Therefore minimum public service standard is recognised as an impediment to good governance by all regions and echelons, whereby its absence has caused confusion
and uncertainty within regional government of the “correct” way in providing public administration service.
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6.8.1. Minimum Public Service Standard and Convergence to International
Standards
Interviews with regional government showed that there are certain conditions
Indonesia needs to fulfil before converging to International standards, which is believed by 15% of interviewees as shown in figure 6.8.3.
Convergence to International Good Governance Standards
15%
22%
48%
15% conditions to converge
converge and align
Knowledge andunderstanding
globalisation
Figure 6.8.3 Convergence to International Good Governance Standard
Further interviews with the 15% of government officials reveal that one of the
conditions to convergence is the existence of a national minimum public service first, as this will provide us with the experience of implementing a certain standard.
Therefore the absence of a minimum public service standard is also identified as an impediment to aligning or converging to International Good Governance Standards,
as government officials feel that a national minimum public service standard should be a pre-requisite to international standard convergence. As expressed by the
following government officials in box 42;
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Box 42, Theme: Minimum Public Service Standard B
“When we have that standard then we can start aligning to international
standards. So yes it can be done, but at the moment there is still a lot of
confusion, there needs to be a commitment in implementing the standard
and coordination between government departments at central level. A
national standard involves regions so each region have to be involved in
the design of the standards…”(HLO, Gorontalo)
“…but we are not connected yet, we are not on the same par. If we do
implement the standard it will be adapted with the culture, because culture
will affect behaviour. So we need an “Indonesian standard” where the
essence is still based on the same principles as international standard but
its characteristically Indonesian” (MLO, Solok)
“Currently there is a lack of minimum standards, let alone international
standards. I have to admit that we do not know the international good
governance standards yet…” (HLO, Padang)
“Health, education, and poverty issues have to be solved first, there needs
to be a public service standard first. We have to target the regional and
national standards first before we move on to international standards”
(MLO, Denpasar)
“We might have heard it in passing but we don’t understand it, at the
moment there is a lack of minimum public service standard at the national
and regional level, let alone introducing us to international standards”
(SLO, Padang)
“There needs to be a minimum public service standard first before we think
about international standards. We still need a lot of time, and we have to do
things…” (SLO, Denpasar)
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Based on the opinions of interviewees above it is clear that the absence of a minimum public service standard has caused certain degree of confidence loss within
government officials, where it is felt that a national standard (the minimum public service standard) is needed first before venturing out to convergence with
international standards.
6.8.2. Summary
Government has the role of providing public service to its society in the attempt to increase society welfare and economic growth, where one of those services includes
public administration service. Red tape is deeply embedded within Indonesia’s regional government and there has been an attempt to reduce red tape since the fall of
Soeharto in 1998. However up to this day there is an absence of a national minimum public service standard, which has cause confusion and uncertainty from regional
government as they do not have a guideline to refer and base their practices on. As good governance dictates public service that is professional and transparent, the
absence of a minimum public service standard has impeded good governance implementation; where it has prevented government officials to create a public
service that is clear and transparent in its processes.
This absence has also impeded convergence to international good governance standards as it has deterred regional government’s confidence in the international
arena. It is felt that there is a need to have a national standard first prior to convergence to International standards. Therefore there is a need to create a minimum public service standard, or a good governance implementation guideline
that takes into account both national conditions and the international good governance standard, to boost confidence, ensure alignment, and further implement
good governance.
6.9. Society Involvement
Society is identified as an important aspect of good governance, as the society can play an important role in demanding good governance from its government and
aiding government in good governance implementation through providing
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cooperation when new rules and regulations are introduced (Berman 2006; Edgington 2000; PricewaterhouseCoopers 2001; Cook 1994; Carroll 2001). This is
especially true in Indonesia, where the Indonesian people’s aspiration for reform is strong and there is a clear support to eradicate authoritarianism that has characterized
the country for decades (Habir 1999; Hamayotsu 2002). The widespread perception of systemic corruption afflicting public services is another reason for Indonesian
people’s continuing and accelerating reforms, where the society has screamed for a government that is transparent and accountable – in short good governance
(Soesastro 2000; Velayutham 2003).
Interviews with government officials has also confirmed that this change in the society has caused for a greater push in good governance implementation, as shown
in figure 6.b where 17% of interviewees believe that society change has an important role in good governance implementation.
This is supported by comments from government officials as in box 43, and is further
strengthened by the figures 6.9.1 and 6.9.2 showing a general agreement between regions and echelons that there is a change in society which demands good
governance.
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Box 43, Theme: Society Change A
0
1
2
3
4
5
6
7
Numberof
govt official
response
change in society
Society Change Role to Good Governance Implementation
Padang
Solok
Gorontalo
Denpasar
Figure 6.9.1 Change in Society’s Role in Good Governance Implementation – Regional
Comparison
“Since elected into this position we have tried to enforce thinking of the
future or the long term, mainly because society demands have changed,
they now ask for discipline, being on time, speed in solving problems,
and problem solving in accordance to the rules and regulations” (MLO, Denpasar)
“Sometimes the society demands too much from the bureaucracy… If
we are secure in terms of our career and salary then we will be happy
and content and the society can demand good governance from us”
(MLO, Jakarta)
“…then they’re really out of line as the regulations are there, there is
also high scrutiny from the society…” (SLO, Padang)
“We had an open auction for projects due to socialisation. The society
act as auditors. So everyone has to work together to create that
matched…”(SLO, Gorontalo)
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02468
101214
Number of
govt official
response
change in society
Society Change Role to Good Governance Implementation
High Level Official
Middle Level Official
Staff Level
Figure 6.9.2 Change in Society’s Role in Good Governance Implementation - Echelon
Comparison Although society change has been identified as a driver to good governance, it has
also been identified as an impediment to good governance. The difference here is that society change is identified as a driver to good governance idea, causing regional
governments to contemplate and change its current public service procedures through new rules and regulations. However society change is identified as an impediment to
good governance implementation, as the society is yet to be educated in the practices of good governance. Thus there are instances where regional government have
attempted to implement good governance practices however there are still members of society who attempts “the old way” practices (prior to good governance
introduction), as commented by few regional government officials in box 44;
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Box 44, Theme: Society Change b
Based on the experiences above it can be deduced that the society can be an impediment to good governance implementation, where there is a disparity in good
governance understanding between bureaucracy and society, and that there is a tendency for society to attempt “the old ways” (of governance) when utilising
regional government services.
“We need to improve the discipline of staff as well. However the
implementation of good governance also depends on the society, they
can not try to find loopholes or bribe the government officials” (HLO, Solok)
“…the government transparent, where all reports, especially budgets,
are reported in the newspaper/media, and we encourage participation
from the society where they are included in the discussion and design of
the budget. However sometimes the society misinterpret transparency
with being totally naked, where they demand but without the knowledge
– so there are blind demands of being transparent…” (HLO,
Gorontalo)
“The public/society have to also be able to be a control mechanism,
complain, give suggestions, report abuse when the government is
executing a certain policy, a certain program. Now sometimes they
don’t do it, sometimes it is the society that are testing out the
boundaries, they try to cross or go against the rules. So we have drawn
the red thread but the society tries to cross them. Sometimes they’re the
ones who even try to bribe officials” (HLO, Denpasar)
“The problem is there is a disparity between bureaucracy and the
public/society in terms of good governance knowledge…They cant
demand to look at the account books, that is just impossible. Sometimes
they demand, where is the openness? Where is the transparency? But
sometimes they can not understand that we can not release
everything…” (MLO, Padang)
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6.9.1. Summary
Indonesia has been under an authoritarian and centralised regime for 32 years, where
the society has felt a high degree of oppression. After the fall of Soeharto in 1999 there has been a strong change in society which demanded a government that is
transparent, accountable, and professional; a government that practices good governance. Society no longer acted as an oppressed mass of individuals; instead
they acted as auditors who scrutinises every move that the government makes, expressing opinions and demands openly. This has caused a change in government of
Indonesia, where the aspects of good governance such as transparency and accountability are taken more seriously. As a result there have been some changes in
the processes of public administration and other public service which was introduced and socialised through new decrees and regulations. However society itself has
proven to be an impediment factor in the implementation of these new decrees and regulations because of two factors. The first is that there is a disparity between
government officials and the society in terms of good governance understanding. Secondly although society asked for changes they are also used to the 32 years of
procedures. Therefore old habits of attempting previous procedures exist, causing an impediment to good governance implementation.
In conclusion society change has pushed for good governance idea however society
change has impeded the implementation of that new good governance idea. Thus there is a need for further socialisation of good governance aspects and the form of these aspects in real life, where implementation of these aspects within procedures
needs to be clearly shown to society. Hence society will no longer be an impediment to good governance implementation but will stand side by side with regional
government as an educated auditor of good governance practices.
6.10. Conclusion
This chapter has analysed the nine main impeding variables to good governance namely; communication disabilities, lack of good governance implementation
guidelines, influences of leadership, human resource capability and capacity within
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local government, political history, local government customs and culture, remuneration system and employee welfare, minimum public service standard, and
society involvement. Each section has analysed the effects that the variable in question has on good governance practices, based on statistical data (figures) and
opinions of government officials interviewed. It has also compared opinions between echelon levels and regions, discussing any differences in opinions and drawing
conclusions.
It is concluded that there are many aspects that impede good governance implementation in regional government Indonesia, where each aspect has sub-
variables within it that contributes to the level of good governance in Indonesia. From the amount of impeding variables and its effects itself it is concluded that good
governance implementation is a complicated matter in Indonesia, where there are many aspects or variables that needs attention, further evaluation, and improvement.
It is acknowledged that Indonesia is at a transitional stage from centralisation or authoritarianism to decentralisation, which means that Indonesia itself is still looking
and experimenting to find a form that will suit both regional and national needs.
The introduction of decentralisation and regional autonomy in 1999, and implemented in 2001, showed influence in the results, whereby regions are at
different levels of good governance implementation due to specific regional capabilities. This suggests that there is still disparity between regions in
implementing good governance. The variance in opinions between echelons levels also suggest that there is disparity when it comes to good governance understanding. This concludes good governance implementation as a complicated nature that will
take time if nation-wide good governance is to be achieved.
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7. Results and Discussions: Answering the Research Questions
7.1. To what level is good governance understood and implemented at the
regional government level?
The results of this study emphasise a range of factors. Good Governance exists in regional government Indonesia at different levels depending on many factors, both
some are regional government specific and others that are related to the central government. Good governance in Indonesian regional government is dependent on
factors such as the level of implementation, human resource capacity and capability level of each region, periodical steps taken to full good governance implementation,
the level of understanding, vision and mission of the region, good governance code, change in society, and influence of central government for implementation of good
governance. This is illustrated in the Figure 7.1.1;
Figure 7.1.1 Good Governance at Regional Government Indonesia
Push from the Central
Government
Level of Implementation
Capability of Each Region
Change in Society Periodical Steps
Good Governance
Code
Vision and Mission of the Region
Level of Understanding
Good Governance at Indonesia
Regional Government
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Further interviews and analysis show that the two main factors effecting good governance in Indonesian regional government are disparity in understanding of
good governance and status of implementation. These two factors are the overarching reasons for good governance impediment at regional government
Indonesia; however there is a range of subsidiary factors (as in the figure above) which supports the two main factors. There is a disparity in the level of
understanding of good governance between echelon levels within a regional government. This causes variations in understanding within and across regional
government, which in turn impedes implementation.
It is found that there is a disparity in the level of understanding and implementation due to decentralisation and regional autonomy, where regional government plays a
larger role than central government in decision making. Decentralisation and regional autonomy suggest good governance innovation is dependent on the mission and
vision of the/regional government, human resource capabilities of each regional government, and the level of society change in each regional government. The
central government does play a role in good governance implementation; however its role is more concentrated on providing regulations and guidance. It is a role that is
related to the establishment of a national good governance code which considers different situations of each region, and can be referred to by regional government.
Push from central government is defined as the provision of the good governance code, where the central government urges regional government to adhere to the code.
However due to decentralisation and regional autonomy such a push only has minimum effect, as non-adherence to any central government legislation is not sanctioned.
Good governance understanding and implementation is explained in detail in the
below sections, where three aspects are discussed. The first is a mismatch between regional government good governance innovation and implementation publications,
secondly the disparity in good governance understanding, and thirdly the need for a stronger legal backing in good governance rules and regulations.
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7.1.1. A Mismatch between Good Governance on Paper and Reality
The level of good governance implementation in Indonesia is varied among different regions, however a common thread is found in that there is a mismatch between good
governance on paper and in reality. Each region has its own official publications concerning good governance. These contain information on good governance
definition, how the region’s vision and mission align with the central government’s notion of good governance, and directions planned within the regional government to
implement good governance. However when such publications are compared to interview responses it is found that there are many mismatches, in terms of
understanding and the implementation of certain good governance innovations. Government officials interviewed acknowledge the publications and good
governance innovations within it, where all high level officials confirmed that such innovations have been discussed and are in the planning documents of regional
governments’ working agenda. However all interview participants agreed that only a small number of the written innovations are implemented. Based on interviewees
comments and literature it can be concluded that this is a common problem within the Indonesian government, where innovations look good on paper and publications
however the implementation is still in question as there is a lack of realistic timeframe and implementation plan.
7.1.2. Variable Understanding of Good Governance
Analysis of regional government publications on good governance and interviewees responses reveal mixed understanding of what is meant by good governance and the
aspects within it. Difference in understanding occurs in two ways. The first is that there is still a mismatch of good governance understanding between different levels
of government officials within one regional government, where there are different ideas on how to implement good governance aspects. The second is that
understanding between equal levels of government officials from different regions vary, depending on its current position or level of good governance implementation.
Therefore this creates a challenge in not only comparing and contrasting good governance understanding but also in concluding the level of understanding as a
whole. Interestingly, although there is a different understanding of each aspect, there
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is a mutual acknowledgement between all government officials that good governance equates to a clean government, which is identic to transparency and accountability.
Therefore a general definition of good governance in real terms is established; however there is still variance in understanding what each good governance aspects
mean and how to implement good governance.
As the above suggest, there is a difference in good governance understanding between different levels of government officials within one regional government.
Difference occur in the sense that higher level officials are able to explain the theory of good governance and current rules and regulations in relation to it, middle level
officials have an idea of what good governance is, whereas lower level officials have only heard and acknowledged its existence. This shows that there is a discrepancy in
the level of good governance understanding which will impede its implementation. The main reason for discrepancy is the difference in information exposure between
government officials. From interviews with staff level officials it is clear that there is minimum opportunity for information exposure due to the lack of available
publications within the office, restricted internet access, and lack of opportunities to attend seminars and workshops. This view is ironically confirmed by both middle
and higher level officials who believed that information should be given to higher level officials first and then dispersed within the bureaucracy, where staff level
officials should only concentrate on functional matters and not theoretical matters. This method may work however both literature and interview responses indicate that
there is still very high glass ceiling within the bureaucracy and that more often than not a closed line of communication is evident. Therefore it is clear that the discrepancy in good governance understanding is caused by minimum information
exposure opportunity and closed communication line that is common in Indonesian bureaucracy.
7.1.3. Legal Standing of Good Governance Regulation
Good governance regulation in Indonesia is yet to be established and lack strong rule
of law, therefore the basis of good governance implementation is still vague and weak. Although there has been several attempts in establishing good governance
regulations, the result is aspects of good governance indicated within general
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government regulations. These regulations are also in its pilot stage of implementation, therefore there are amendments and re-release of regulations on a
frequent basis which confuses regional government officials and impede the design and implementation of good governance at regional government level. As a result
there is high reliance on officials and leaders at regional level. This is very fragile as this indicates good governance is not embedded in the system but is dependent on the
political agendas and visions of leaders, yet leaders have a limited timeframe (term) to induce change and they carry possible election risks. A region could be innovative
in its good governance design during a particular leader’s term, however there needs to be continuation of that particular leader in power to ensure the implementation of
good governance design. There is also a need for a leader’s continuation to ensure maintenance and further innovation of good governance implementation. At present
Indonesia’s regional government has introduced a direct election of its governors and regent heads, which increases the uncertainty level of leader’s terms and current
governor and regent head positions. Therefore implementation of good governance aspects in Indonesia is still very dependent on individual leader charisma and
political visions as opposed to strong good governance instruments that are embedded in the system.
7.2. What are the impeding variables to Good Governance implementation?
There are nine main impediment variables to good governance implementation as discussed in Chapter 6, however there is a high consensus between government
officials interviewed that the main impediment variable is the culture and political history of Indonesia. It is clarified that culture in this sense refers to the bureaucratic culture of Indonesian government. This indicates that culture as an impeding variable
is not one that is related to different regional customs, norms, or point of views; it is the bureaucratic culture of how the government is run, the intricacies of performing
government agenda and its budget, and the fine line of utilitarianism and political needs.
Indonesian political history is considered as one of the main crucial factors impeding
good governance implementation, mainly due to the fact that old habits die hard. After 32 years of Soeharto’s governance it is challenging to change the old ways of
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how the government is run. Since the fall of Soeharto’s rule an amendment of the constitution and certain regulations have taken place, as well as the introduction of
decentralisation and regional autonomy policy, and the introduction of rules and regulations aimed to improve governance. This however has not been matched by a
complete bureaucratic reform, therefore government officials that held positions during Soeharto’s era and are used to its governance is in either the same position or
at the very least still within the bureaucracy. A slow bureaucracy reform is recognised, however there is still a strong presence of the old ways of governance
(from Soeharto’s era). It is recognised that even if there are changes in the rules and regulations there will still be a high dependence on the people implementing these
new rules and regulations. Good governance is considered an innovation of new ideas; however implementers of good governance are government officials that are
still reluctant to leave the old ways of governance (during Soeharto’s regime). Hence non-conjunction between regulation/instrument reform and bureaucratic reform has
caused a challenge in implementing new innovations, implying a challenge in good governance implementation.
Although it has been recognised that non-conjunction of bureaucratic reform with
regulations reform is an impediment to good governance implementation, a double edged sword situation exist. Good governance is still a fairly new term in Indonesia,
with its first sounds in 1999 (WorldBank 2001b). After approximately seven years since the term was first sounded Indonesia has experienced four presidential changes,
economic liberalisation, and a more democratic approach to political elections (Liddle and Mujani 2005; Smith 2000; Takahashi 2006). These events have caused political instability in Indonesia, which has a deep effect on the legal instruments of
Indonesia. There have been many changes and amendments of presidential decrees, rules and regulations, regional decrees, and ministerial decrees. Good governance
legal instruments in Indonesia is not yet strongly established, where rules and regulations that specifically address good governance implementation is virtually
non-existent. A close look at rules and regulations concerning governance, regional governance, and public sector services resulted in good governance aspects being
acknowledged and included; however the fact that these aspects are still widely spread across many regulations indicates that there is yet to be a set of rules and
regulations specifically engineered to implement good governance aspects.
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The Indonesian government has attempted to formalise legal good governance
instruments, however there has been frequent changes in these regulations. These changes and the re-release of regulations potentially confuse regional government
officials. This confusion is increased as the re-release of amended regulations are of annual frequency, thus even before the previous (or original) regulation is understood
and about to be implemented, a new one (or a revised one) is released. As a result there is a high level of uncertainty within regional government in terms of good
governance legal instrument. This also caused regional governments to work with the current regulation released, though fully aware that there could be an amendment
released within a short timeframe. Thus the design of good governance implementation in regional governments itself have the potential to change within a
short time framework, which contributes to its lack of implementation. Therefore there is a need to strengthen good governance legal instruments and to release a more
permanent set of rules and regulations.
Based on the discussion above it is clear that a double edged sword exist, as there is a lack of good governance legal instruments as well as a lack of bureaucratic reform.
The lack of good governance legal instruments cause uncertainties in interpreting good governance aspects and designing a good governance implementation plan that
is more concrete. Whereas the lack of bureaucratic reform cause reluctance in applying new innovations and good governance implementation plan, as the
government officials that were in position during Soeharto’s era are still within the bureaucracy and they are used to the old ways or the Soeharto way of governance. Hence the combination of both aspects have concluded that the main impediment to
Indonesia’s good governance implementation is a political history variable.
7.3. How has Indonesian regional government good governance converged to /
diverged from international good governance standards?
Although on the surface it seems that there is only one international good governance
standard to converge to (released by UNDP), in reality there are many international good governance standards (released by different international institutions and
countries) (ADB 2004b; ILGR 2004; OECD 1995; UNDP 2002; WorldBank 1992).
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UNDP’s international good governance standard is utilised as a focal point in this theses due to it being recognised by the majority of regional government officials
interviewed. It is acknowledged that there are differences between each international good governance standard in terms of its releasing institution/country, pillars/aspects
within the standard, and accompanying implementation guidelines (Baratta 1999; Hout 2002; Doornbos 2003; Matsushita 2004). However it is also recognised that
these international standards of good governance share similar origins, purpose, and concept. All of the international standards of good governance originated from
observation and experience of inefficient government systems (Yunling 1999; Velayutham 2003), have the purpose of improving government systems and public
service provision (Anderson and Strutt 1999; Beeson 2001; Connors 1999; Kurlantzick 2000; Lindsey 2004), and is similar in concept in terms of good
governance aspects itself however varying in wording/expression (Brinkerhoff and Goldsmith 2004; Newhouse 2005; Morrison 2004). Therefore due to these
similarieties it is logical to assume a movement towards a common implementation of one international good governance standard.
Four key factors explain the degree of convergence towards international good
governance standards.
Figure 7.3.1 Convergence to International Good Governance Standards
Knowledge and
Understanding
Converge and Align
Globalisation
Conditions to Converge
Convergence and Divergence to
International Good Governance Standards
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The four aspects are: decision to converge and align with international good governance standards, the level of knowledge and understanding of the standard,
globalisation, and conditions to converge to international good governance standards. This section is based on the four aspects as above, where each aspect will be
discussed in greater detail.
7.3.1. Globalisation
Throughout interviews with regional government officials the term “globalisation” is continuously mentioned, though it is used with variable meanings. Environmental
pressures of an increasingly integrated global economy and the need for local responsiveness (Venaik, Midgley and Devinney 2004a; Venaik, Midgley and
Devinney 2004b) has sparked the debate of whether a government should converge itself with international standards or formulate its own policies to suit the nation’s
current situation. International institutions such as the World Bank has emphasized the complexity and diversity of government practices, comprising a large number of
factors and multiple formative and/or reflective measures underlying each factor (Venaik et al. 2005). The convergence of good governance practices would involve
interdisciplinary measures, that of economics, political science, and the legal issues (Sundaram and Black 1992; Henisz 2000; Guisinger 2001). Regional government
officials recognise that globalisation leaves no choice but to converge to international good governance standards as divergence will leave regional governments
uninformed and alienated in the international arena. Therefore globalisation is identified as the main reason for convergence.
7.3.2. Convergence and Alignment to International Standards
The nine aspects of Good Governance released by UNDP is the international standard that is most recognised by regional government officials, although there was
acknowledgement of other standards released by other international institutions. There is a varied degree of convergence amongst the regions interviewed; where in
Solok and Gorontalo there is an unawareness of convergence towards international standards, and in Denpasar and Padang there is an acknowledgement of the
international standard but very minimum evidence of its
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implementation/convergence. Solok and Gorontalo have shown evidence in convergence through its procurement integrity pacts, performance based budgeting
regime, one stop public service, and an open communication line both within the bureaucracy and between government, business, and society. It is recognised that
some of these activities would be categorised as some aspects of international good governance standard, however government officials from both regions do not seem
to realise that they are already in compliance with international good governance standards.
7.3.3. Knowledge and Understanding
It is noted that although UNDP good governance standards are the most recognised,
it was recognised and understood at different levels in accordance to echelon levels within the bureaucracy. High level officials acknowledged the standard and were
able to name and explain the aspects of it, middle levels acknowledged it and were able to give a vague list of the nine aspects (not a complete list), whereas staff level
did not acknowledge the standard at all. Therefore there is a discrepancy in the knowledge of international good governance standards, which impedes convergence.
An agreement was concluded among officials in that there is a lack of exposure, lack of ongoing training, seminars, and workshops on how to converge/implement
international standards. Therefore government officials are still at an early acknowledgement stage with a lack of in-depth knowledge on the aspects and theory
of the standard, and especially very minimum knowledge of its implementation. All government officials interviewed agreed that steps are made in the direction of convergence however there needs to be a time factor attached to these steps due to
Indonesia’s transitional period and political history.
7.3.4. Conditions Needed to Ensure Converge
Indonesian regional government interviewed have identified several conditions that Indonesia must fulfil before significant convergence and alignment with International
Good Governance Standards could be achieved. These include: the establishment of a National Good Governance Standard, further education to all echelon levels on the
subject of International Good Governance Standard, reform of the remuneration
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system to increase government official welfare so that it is at par with government officials in other countries, bureaucratic reform, and further education to society in
regards to globalisation and the need of an international standard. It is felt that these pre-requisites are crucial to international good governance standard as fulfilling these
factors will bring regional government Indonesia to the same level as its neighbouring countries allowing them to follow the standard. It is also recognised
that due to political instability and current transitional condition, such alignment will need time and periodical steps.
7.4. Conclusion
In conclusion, the level of good governance understanding and implementation vary
between regions due to differentiating variables such as leadership, political will, and bureaucratic culture in a regional government. An overarching conclusion is that the
level of implementation of good governance is still low across all regions mainly due to political history and bureaucratic culture of Indonesian government. There are
other supporting variables impeding good governance such as employee welfare, lack of information exposure, and closed communication lines, and lack of training
on the implementation of good governance. However both document analysis and interview results show that political history and bureaucratic culture, in the form of
non-conjunction between good governance instrument reform and bureaucratic reform, is the main reason for minimum level of understanding of good governance
and implementation. Regional governments in Indonesia are at different stages of good governance
implementation, due to lack of control from central government as a result of decentralisation and regional autonomy policy. Therefore it is a challenge to
standardise good governance implementation across Indonesia regional governments. However decentralisation policy and regional autonomy was dismissed by regional
officials in its interviews as an impeding variable as it is believed that the policy provides regions with the opportunity to innovate and implement good governance if
it chooses to. Thus it is concluded that it is not an impediment factor to the implementation of good governance itself, however it is a factor that has increased
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the challenge in generalising good governance implementation in Indonesia as a whole.
Indonesia is slowly converging to International standards as there are
acknowledgements of the standard and evidence of its adoption. However this is still an uncommon occurrence and there is a varied level of convergence between
regional governments, as well as a varied level of understanding of the standard depending on government official position within the bureaucracy level. Based on
interviews with government officials it is concluded that steps have been taken in the direction of alignment towards international standards however there are pre-
requisite conditions such as strong governance instruments that are backed by the rule of law and nation-wide bureaucratic reform. In short, good governance in
Indonesia exists at a minimum level with strong potential to emerge fully however it needs to be planned in periodical steps and certain pre-requisites fulfilled before its
implementation is maximised.
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8. Recommendations
8.1. Human Resource Management
Interviews with government officials revealed aspects such as bureaucratic reform,
remuneration system, closed communication lines, lack of information exposure and training among staff, and the absence of a clear rewards and punishment system as
variables impeding good governance implementation. Based on comparisons of human resource literature and the impeding variables it has been recognised that
there are similarities and correlations, which shows the impeding variables (or the problems) identified as that of human resource discipline. Literature sources
confirms the limitation in the human resource skillset in Indonesian regional governments, and where there is a human resource department its functional purpose
and contribution to the regional government is unclear (Manning 2000; Warwick 1978; WorldBank 2001a; Beecher 2003). Therefore it is recommended that each
regional government establishes a human resource management functionality, with the following:
1. Consist of a mix of human resource management professionals (for objectivity
and knowledge of the discipline) and government officials who have been trained or are currently in the human resource management (to provide the balance of
bureaucratic culture). 2. Provisions of a full job description for each human resource management
personnel, including clear authority levels. 3. Outsourcing Human Resource Management. Personnel of the human resource management department do not necessarily have to be a civil servant as the
presence of independent professionals will provide independent audit of current practices and innovation.
Based on the impediments identified above it is recommended that the human
resource management department perform functions as below
1. Recruitment and selection based on merit and capacity – positioning the right people in the right positions. This includes writing full job descriptions for each
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positions, re-writing the promotion system (or meritocracy) within the bureaucracy, and introducing a recruitment system that is based on need and human resource
capacity. This will assist in the process of bureaucratic reform, resulting in a slimmer government body that is more efficient in performing public service and government
duties.
2. Remuneration System, which is adjusted to current living standards and prices, is based on the combination of official’s position within the bureaucracy and official’s
performance, and have accounted for the abolishment of the honorarium system from external projects. As welfare is one of the repeated impediment variables to good
governance implementation, this function is of high importance.
3. Employee relations, as a body that will listen to all officials (without discriminating the position within the bureaucracy) opinions, new ideas of
innovation, and critique. Employee relations will schedule a forum on a timely basis where all opinions, new ideas, critiques, etc are clearly stated in the agenda and
presented to the floor for discussion and consideration. Minutes of the forum will be recorded and dispersed to all government officials to ensure an open communication
line and transparency.
4. Teaching and Learning, as a body that ensures a regulated system of teaching and learning opportunities. Based on a rotation system this function ensures that each
government official is given the opportunity to attend a seminar, workshop, or training on government related matters; especially that of good governance aspects. All invites to seminars, workshops, etc reach the human resource management
department and this function will assign or appoint a government official based on previous records. This will ensure the equal distribution of information exposure and
training opportunities within the bureaucracy, which will not only increase the capacity level of government officials but also decrease the level of resentment
within staff level officials. This function will also work with non-government bodies, universities, and other regions to provide further seminars, workshops, and trainings
to its government officials and others. Thus not only does the region receive invites it also initiates invites and discussions.
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Learning is regarded as an important source of sustainable competitive advantage, and of the key determinants of organizational effectiveness (Nonaka 1994). There is
extensive existence in the literature of strategic management on inter-organizational learning and knowledge transfer mechanisms for gaining competitive advantage and
improving firm performance (Inkpen and Beamish 1997). Inter-unit learning refers to the extent to which marketing knowledge and information are shared among the
corporate headquarters, regional headquarters and country subsidiaries of a multinational firm (Venaik et al. 2005). In terms of governance, this suggests
possible learning between regional governments in the form of study visits where government officials visit other regions to observe, learn, and question good
governance policies and implementation. At an international level this suggests government officials from one country on study visitation in another country, with
the same purpose of observation, contrast and comparison, and learning.
The weakness of such study visitation within Indonesia regional government is the reluctance to ask questions, be self-critical, and take back what has been learnt into
application in home regional government. Such possible weaknesses are expressed by staff level government officials, who felt there is political pride within middle
manager level in admitting weaknesses within their regional government. Therefore it is the teaching and learning unit duty to schedule a discussion session after a study
visitation and produce a report of results that is dispersed with the regional government.
5. Rewards and Punishment system, where there is a clear reward procedure for those who perform according to agenda or have worked overtime; as well as a sanction
procedure for those who deviate from the agenda and regulations. It is aimed that this will increase motivation of government officials to maximise performance and
provide improved public service.
Based on the explanation and justification of functions as above, it is undeniable that a human resource management department is needed within regional governments to
address certain impeding variables to good governance implementation.
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8.2. Creation of a Good Governance Task Force and Development of Good
Governance Implementation Guidelines
Analysis of government official interviews and regulations show that there is a
discrepancy in good governance understanding within each regional government bureaucracy as well as a discrepancy in implementation between regional
governments. Reasons for this include lack of good governance socialisation and the lack of good governance implementation guideline. Therefore there is a need to bring
both understanding and implementation of good governance aspects to the same level.
Literature show there has been an increase in government related special task forces
which involves multiple independent parties employed by the government to perform a concentrated task (Meagher 2002). Successes of these task forces are predicted at
73% which is dependent on response level, political and economic stability, planning activities, society support, and availability of resources (Meagher 2002; OECD 1995;
WorldBank 2005; WorldBank 2004; WorldBank 2001b). As there is a lack in good governance specific legal instruments and a lack of socialisation and enforcement
encouragement from central government, it is concluded that to date a good governance team within the Indonesian government does not exist. Therefore based
on the reasons above and literature on developing good governance indicators (Landman and Hausermann 2003) it is recommended that a good governance task
force is established, with characteristics as below; 1. Multiple independent parties as team members. This includes personnel from
international institutions, non-government organisations representatives, private sector representatives (businessmen/industry representatives/employer’s
associations), and academia. The purpose of independent parties is to reduce bias, provide fresh perspectives, reduce political history influence, and encourage
innovation.
2. Minimum government official presence within the task force. Government representatives should be limited to few numbers of central government officials and
regional government representatives. Although it is recognised government official
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involvement is important as it is government officials who will be implementing good governance aspects in real life, due to political history and bureaucratic culture,
it is crucial to ensure third party involvement and that government officials involved have a strong will in good governance implementation.
Based on the current level of good governance understanding and implementation, as
well as impediment variables identified, it is recommended that the task force perform functions as below.
1. Formulate a standard for Indonesia implementation of good governance
that is based on international standards, current Indonesia/regional government conditions, government rules and regulations, and good governance
implementation experiences from various countries and literature. It is recommended that this standard will become the official good governance
instrument that is backed by the rule of law. This standard will comprise of: a) Definition of good governance
b) Pillars and theory of good governance, detailing what is theoretically within each aspect (or in this case pillar) of good governance
c) Implementation plan for each pillar of good governance, where examples of implementation of each pillar at a job/position/functional
level is included in a supplementary document. d) A clause on flexibility of each region to adjust the implementation of
good governance aspects at position/functional level depending on regional development agenda. This clause will comply with the current decentralisation policy and regional autonomy in the sense that a standard
and examples of how to implement the standard is given, however there is still an independent flexibility factor to implement the standard.
2. Create a helpdesk that is located at central government to enable direct
communication with team members. Regional government official good governance task force members (or regional government good governance
helpdesk) can call with questions and queries. There will also be a different number for society and interested persons in general to call should there be any
questions or queries.
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3. It is recommended that the central government, in conjunction to discussions
with the task force team, appoint a mini-team of minimum two personnel to
concentrate on a particular region.
Regional government officials interviewed has identified distance between regional
government and central government as an impediment in implementing regulations or innovations. It is felt that there is inadequate amount of socialisation,
implementation training, support, and a lack of regional government ownership of the program. Therefore the task of this mini-team is solely in regards to the regional
government in question, where the mini-team will spend most of their time in the region in order to build trust among regional government officials and to create a
sense of ownership of the good governance implementation program. The mini-team will perform a series of scheduled good governance related activities such as
seminars, workshops, and training days with the aim of creating a good governance standard and implementation design that has taken into account international and
national standards of good governance but is also specific to regional development agenda, resource capability, and institutional culture. The mini-team will spend a
considerable amount of time in the early stages of good governance implementation, ensuring that not only an implementation design was established but also that it is
embedded within the system. This suggests that the mini-team will be an integral part of the regional government office with a good governance implementation audit and
support role, which ideally is not tempered with other government related roles. The mini-team will periodically report to the central government and task force both in written and oral format, where results from such monitoring is socialised to the
regional government for further improvement. Direct visitation from the central task force or other mini-teams of neighbouring region is also recommended to create a
strong network of good governance implementation advocates.
This recommendation not only closes the psychic distance between central and regional government innovations, it will also answer regional government reasoning
of lack of support in good governance implementation. Ownership of a certain innovation is considered to be crucial in order for full implementation; therefore the
recommendation has been designed in a manner that allows flexibility for regional
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specific requirements and regional input, however still ensures the implementation of national standards of good governance and alignment towards international
standards.
4. In order to reduce the number of loopholes attempted by society it is recommended that there is a socialisation program to increase awareness of
good governance within the society.
Analysis and interviews with regional government officials has identified the society as a supporting actor in good governance implementation, where there reduced
understanding of good governance remains within society. This is illustrated by the many occasions where the public attempts to find loopholes within the system of
public service, whether that is through extra payment or ‘official connections’. This impedes innovative attempts towards public service, hindering its implementation.
The socialisation program aforementiond can be executed in the form of a campaign, public forums, or direct seminars open to the public; all carried out by the mini-team
good governance task force in conjunction with the regional government. Information socialised will include the meaning and definition of good governance,
explanation of regional government innovations and attempts, detailed explanation of what is the link between good governance and society, and how society can actively
participate and benefit the implementation of good governance.
8.3. Prioritisation of Recommendations
Literature and government officials’ interviews reveal “time” as a crucial element in reaching full good governance implementation in Indonesia, where it is recognised
that “more time” is needed to ensure good governance implementation (Curtiss 1999; Doornbos 2001; Robertson-Snape 1999; Woolsey 2002). Thus it can be deduced that
“time” will be a crucial element in implementing the above recommendations. Therefore there is a need to use “time” as effectively as possible to ensure good
governance implementation in a nearer future. In order to use “time” effectively there is a need to consider the costs and benefits of each recommendation, concluding in
prioritisation of recommendations.
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It is acknowledged that there are possible implementation and recurrent costs associated with the implementation of the above recommendations. Some of the
acknowledged possible costs, but not limited to, include human capital costs, infrastructure set-up costs, administrative costs, training costs, and socialisation
costs. These costs will vary from one regional government to another depending on several factors such as, but not limited to; the level of good governance already
implemented within the regional government, size of personnel within regional government office, available funding, and the level of commitment from regional
government to good governance implementation. In order to evaluate the costs of each recommendation it is necessary to create an evaluative scale ranging from low
cost to high level, as evident in table 8.1. This table is created based on the named possible costs above, National Development Planning Agency (BAPPENAS) report
on good governance implementation (BAPPENAS 2006), and international institutions reports on good governance implementation in Indonesia (WorldBank
2001; ADB, 2004).
Table 8.1 Cost Evaluation Characteristics Cost Level Characteristics
Low (L) Low amount of funding required, good governance
practices are evident in regional government agenda, high level of good governance practice as evident
through supporting interview, high level of commitment towards good governance implementation.
Medium (M) Substantial amount of funding required, good governance practices evident in regional government agenda, high
level of commitment towards good governance implementation, lack of supporting interview evidence.
High (H) High level of funding required, good governance
practices not yet evident in regional government agenda, absence of supporting interview evidence, high level of
commitment towards good governance.
As mentioned above the cost of each recommendation will vary for each regional government. Therefore there is a need to classify the cost of each recommendation
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for each regional government. Based on table 8.1, document analysis of each regional government’s good governance related publication/agenda, and analysis of
each regional government officials’s interview, table 8.2 is created. This table allows us to conclude the cost of each recommendation for each sample regional
government.
Recommendations Regional Government
Denpasar Padang Solok Gorontalo
Human Resource Management
Recruitment and Selection M H L L
Remuneration System M H L L
Employee Relations H H M L
Teaching & Learning H H M M
Rewards and Punishment M M L L
Good Governance Task Force and
Development of Good Governance
Implementation Guidelines
Task Force M H M L
Good Governance Implementation Guideline
M H L L
Mini team H H M M
Helpdesk H H M L
Socialisation program H H M L
Table 8.2 illustrates the projected costs for implementing each recommendation for
each regional government. It is evident that human resource management related recommendations would be of high cost to Padang, medium cost to Denpasar, and
low cost to Solok and Gorontalo. Table 8.2 deduce good governance task force and development of good governance implementation guidelines as a high cost for both
Denpasar and Padang, a medium cost for Solok, and a low cost for Gorontalo. Two overall conclusions can be made based on table 8.2; the first is that the suggested
recommendations are of lowest cost to Gorontalo regional government and the
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second is that good governance task force and development of good governance implementation guidelines is of highest cost for all regional government.
On the flipside of costs, benefits of each recommendation need to be considered.
Here benefits refer to the efficiency of each recommendation in terms of being relevant to Indonesian needs and ability to push good governance implementation.
Therefore there is a need to prioritise recommendations that is most “needed” in terms of its efficiency and ability to push for good governance implementation.
Both literature and regional government officials’s interviews identified “people” as
a crucial element in implementing change, where it is the mindset and commitment of “people” that determines the success of a particular change (Adicondro 2002;
Caddy 2001; Curtiss 1999; Liddle and Mujani 2005; Manning, Ranjana, Omer and Hofman 2001; McNutt and Batho 2005; PricewaterhouseCoopers 2001;
Resksodiputro 2002). Therefore in order to push good governance implementation the “people” aspect, which in this case are regional government officials, needs to be
addressed. Recommendations suggested that address and involve “people” are human resource management, task force, mini-team formation, and socialisation
program. Looking at the explanations of each recommendation it can be deduced that human resource management addresses the “people” aspect on a more basic day-to-
day level, as it is targeted specifically at addressing regional government officials’s issues. Cross analysis with cost evaluation of recommendations reveal human
resource management having a lower overall cost than good governance task force and development of good governance implementation guidelines for all regional governments. Therefore it is recommended that human resource management related
recommendations are prioritised.
Another crucial element to good governance implementation is a strong legal backing to good governance, in terms of rules and regulations. Interviews with
regional government officials support the need for stronger good governance rules and regulations as well as voice the need for a good governance implementation
guideline. Interviews reveal that many regional government officials find it a challenge to translate good governance concepts to everyday work. Therefore there is
a need to create good governance implementation guidelines to push good
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governance implementation. Cross analysis with cost evaluation of recommendations table show good governance implementation guideline as the lowest cost
recommendation within the good governance task force and development of good governance implementation guidelines category for all regional governments.
Therefore it is recommended that creation of good governance implementation guidelines is prioritised within the category, alongside the implementation of human
resource management related recommendations.
In conclusion both costs and benefits of each recommendation need to be considered when prioritising which recommendation to implement. Based on cost evaluation of
each recommendation (as in table 8.2) and “needs” analysis it is concluded that hieghest priority is given to human resource management related recommendations,
followed by creation of good governance implementation guidelines. Subsequent to the implementation of both recommendations the following are recommended in
descending order; creation of good governance task force, good governance helpdesk, socialisation program, and mini team.
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9. Limitations and Research Directions
9.1. Limitations of Study
Indonesia is made of thirty three provinces, thus ideally to provide a clear picture of
good governance implementation and conclude to what level regional governments in Indonesia have implemented good governance aspects and aligned itself to
international standards one should observe and question each province, as well as interview all regional government officials. Due to time restrictions within a
postgraduate study and limited funding, a limited amount of interviews within sample regions were conducted. However bias is reduced as the in-depth interview
process ensured three different levels of government official interviewed, where internal triangulation was achieved through a loop feedback process within a regional
government and external triangulation achieved through comparisons between government officials of equal positions in different regions.
The limitation mentioned above also minimised prolonged observation of work
performance and realistic day-to-day dynamics in offices. Literature has identified short term observations within a certain setting increases the possibilities of biased
conclusions as there could be short term manipulation of the setting that cloaks the long term reality of the setting (Adcock and Collier 2001; Angrosino and Perez 2003;
Dingwall 1997).
While access to data and information would be a limitation in many research studies (Bowler 1997; Ely, Vinz, Anzul and Downing 1997; Golden-Biddle and Locke 1997; Hodder 2003), this research was framed at enhancing understanding and defining
theoretical bases for future studies. Difficulties such as obtaining the documents and the ability to interview necessary government officials at the level of government
hierarchy identified are discovered. These limitations would be overcome in larger, official research efforts and as such, while noted, are beyond the scope of this work.
It is discovered that limitations in the two areas mentioned above were minimized as the study is directed towards further understanding of concepts where there are
possible concurrent benefits for the sample regions. Experience of prior researchers in Indonesia has identified reluctance in information sharing as a limitation, where
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those who have identified such limitations are not of Indonesian citizenship. Literature dictates that informants are more open to people they are able to identify
with (Bowler 1997; Bloor 1997; Condren 1997; Denzin 2003; Denzin 2004; Drisko 2005; Hooks 2004), which inclines minimized resistance in information sharing
during interviews as the researcher is an Indonesian citizen.
Language barriers have been suggested in country studies, due to differences in native language between researcher and the country studied (Bowler 1997; Dingwall
1997; Drisko 2003; Hodder 2003; Poynton 2000; Roland 2004; Silverman 2003). However this barrier is not identified as a limitation in this study as the researcher is
an Indonesian citizen, thus fluent in the Indonesian language.
Extent literature suggests methodology and findings of niche research is questioned in terms of transferability and applicability (Friedman and Levinsohn 2002; Bloor
1997; Drisko 1997; Padgett 2004). Limitations have been identified in the transferability of the findings of this study for two reasons. First of all findings of
this study is specifically engineered based on Indonesia’s needs and Indonesian specific conditions, thus there are limits in transferring its findings within the
framework and conditions of another country. Secondly, this study has a government focus in its analysis, thus findings might not be transferable to other industries or the
private sector.
There are also limits in the applicability of the findings in this study. As Indonesia is currently in transition towards a more liberal economy and decentralised power sharing, and corporate governance international standards is constantly evolving;
findings from this study may have limited time applicability and needs to be updated.
However research shows that although findings of some studies might not be transferable or applicable in other instances, the methodology might (Tolman and
Szalacha 2004; Strong 1997; Sprague and Zimmerman 2004; Rank 2004; Harman 1976). The methodology of this research involves a triangulation of document
analysis, in-depth interviewing, and international good governance standard comparison. This methodological approach transferable and applicable to other
countries or industries, as the methodology provides a flexible framework. The
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methodology of this study can also be repeated in future researches to ensure that findings and recommendations are up to date in accordance to new policies within
Indonesia itself and in international good governance standards.
This study utilises the Johari Window approach in sampling Indonesian regional government, where age (old/new) of regional government and distance between
regional government and central government (near/far) are its identifying variables. It is noted that Padang and Solok are of close proximity to each other, which may
have affected findings and results as the two regional governments share provincial identities (both are within the jurisdiction of West Sumatra) and culture. This may
partly explain why the distance between regional government and central government (near/far) is not supported strongly in the research findings, and that age
of regional government is more dominant in explaining research findings.
Relevant literature suggests possible bias within in-depth interviews results if the subject of interviews has similar background and segmentation variables (Miller and
Crabtree 2004; Dingwall 1997; Fontana and Frey 2003; Holstein and Gubrium 1995). In-depth interviews in this research are concentrated on regional government
officials, where there is a similar background in the sense that interviewees are all civil servants. Independent party interviews with international institutions
representative and few academias were conducted to provide a diverse opinion, therefore conclusions made within the study do take into account opinions of those
not from a similar background. It is also acknowledged that there are an unbalanced number of government officials
interviewed across regions; in particular Solok region as there is an absence of staff level government officials (SLO) interviewed. This may have resulted in a slight
skew in data findings, however it is noted that the emphasis of this study is on the strength of government regional opinions, where for regions which lacked in officials
numbers it was compensated by longer more in-depth interview sessions.
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9.2. Directions for Future Research
As identified in section 9.1, Indonesia society is the end beneficiary of the
implementation of good governance through the provision of improved public services that are transparent and efficient. Therefore there is a need to perform a
research on the implementation of good governance systems and practice with the society as a focus, to evaluate the effectiveness of public service after
implementation of good governance aspects within the regional government. It is recognised that the population in Indonesia is approximately 220million, which poses
a great challenge in research methodology and data analysis. Thus the proximity of such research might have to be condensed to social institutions, society leaders, and
social associations; through careful sampling and methodology design.
Indonesia is still within a transitional period in respect to implementing good governance and time is an important factor in the implementation agenda.
Indonesia’s political history and budgeting cycle overtime show a pattern of five year periods31 which seem to reflect the term of the president. A useful consideration is
that further evaluation of good governance might be aligned to this five year planning cycle to allow a greater alignment with decision making both nationally and
regionally. Such a framework of re-evaluation research could also be set up as a continuous evaluation/audit within the regional governments of Indonesia to ensure
continuous innovation and improvement in its governance and public service.
31 REPELITA or Five Years Development Plan; now known as RPJP or Short Term Development Plan), and budgeting agenda (APBN or National Budgeting Agenda)
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10. Conclusion Good governance has become a rising phenomenon in Indonesia after the 1998 Asian
Financial Crisis, where the central government issued a commitment to be free of corruption, collusion, and nepotism. This was followed by a commitment for
democracy and a less centralised government, as subsequently embodied in a decentralisation and regional autonomy policy introduced in 1999 and fully
implemented in 2001. While this policy imitation is very important the extent of its implementation at regional government level is still unclear. Governance, generally,
became a pressing issue for international institutions who stressed the need to adapt international standards to Indonesia’s needs and settings in order to ensure less
ambiguity and more confidence in an increasingly interconnected world.
There are three main questions in this study; to what extent is good governance understood and implemented at regional government, what are the impeding
variables to good governance implementation, and to what extent has Indonesia regional government convergenced with or diverged from International Good
Governance Standards. The first question aims to analyse whether there is a similar level of good governance understanding among different levels of regional
government officials and whether there is a similar perception of the extent of good governance implementation within the regional government. The second question
aims to identify variables impeding government officials from good governance implementation, where main variables are explored in detail in order to form
recommendations for good governance implementation. Lastly, the third question explores Indonesian regional governments’ responses to the adaptation of International Good Governance Standards.
Indonesia is made up of 33 provinces with approximately 400 regional/local
provinces. A two by two matrix is utilised to deduce sample regional governments, where the two variables determinants are distance from Jakarta (central government)
and the age of regional government. It is found that the age of regional governments had a more significant impact on the level of good governance implementation than
the distance between regional government and central government. The age variable of “old” and “new” differentiated the level of innovative response towards good
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governance, resulting in “newer” regional governments (i.e Solok and Gorontalo) to have a higher level of good governance understanding and implementation than the
“older” regional governments (i.e Denpasar and Padang). The distance from Jakarta impacted the level of communication and visits between regional governments and
central government, where “near” regions had a higher level than “far” regions. This at times impacts the number of delegates from regional governments in central
government held seminars and workshops, however this is deemed to only have a slight impact as regional governments are prioritising increasing their human
resource level by sending government officials to seminars and workshops.
There is a disparity in good governance understanding between echelon levels within a regional government, which leads to a disparity in government officials’ perception
of good governance implementation level within that region. This is common and is found in all regional governments studied; however there is a difference between
each regional government in terms of good governance implementation level. It is found that the “newer” regional governments such as Solok and Gorontalo are more
compliant in implementing good governance aspects than the “older” regional governments such as Bali and Padang. The difference in good governance
implementation is due to decentralisation and regional autonomy policy. The policy induced a disparity in regional government capacity and capability, as well as
different levels of regional government responses to good governance concepts. This disparity has an implication towards standardising good governance understanding
and implementation across regional governments, which creates a challenge in establishing good governance policy and guidelines that will is viable for each regional government.
There are twelve impeding variables to good governance implementation; however
nine prominent impeding variables are identified as variables with higher impact and in need of immediate action. These nine variables are;
• Communication disabilities;
• Lack of good governance implementation guidelines;
• Influences of leadership;
• Human resource capability and capacity within regional government;
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• Political history;
• Regional government customs and culture;
• Remuneration system and employee welfare;
• Minimum public service standard;
• Societal involvement.
Further analysis drew the conclusion that political history and bureaucracy culture (or regional government customs and culture) are the main impediment variables to
good governance implementation. Indonesia’s political history has been very volatile after the 1998 financial crisis, where Indonesia is in its transition period to finding a
form of governance that suits Indonesia’s current condition. This transition period is made even more volatile with the rapid change of four presidents and the underlying
resistance to change as the influence and inertia of thirty two years of the Soeharto regime is still very prominent. Therefore there is a weak legal backing and rapid
changes in rules and regulations concerning governance (in relation to the change of president vision and mission) which causes implementation confusion at regional government level and stronger reluctance to adaptation.
Thirty two years of the Soeharto regime have created an imbedded culture of
collusion, corruption, nepotism, and weak rule of law within regional governments, which has shaped the bureaucratic culture. The introduction of good governance is a
contrasting change to the current bureaucracy culture thus there is resistance from government officials which makes the transition a challenge. Such a resistance is
more common for government officials who have been in the bureaucracy for those thirty two years, and also for regional governments that are considered “older”
regional governments. The problem is that there is a lack of bureaucratic reform, which means that government officials during the thirty two years of Soeharto’s era
are still within the government body, with authority in decision making. Thus it is difficult to change the mindset of these government officials as they are familiar with
the old system. Hence there can not only be a reform in the system there has to be a reform in the people also.
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There is a varied response in regards to convergence towards international good governance standards, depending on the level of knowledge within the regional
government. There is a high level of awareness and acknowledgement of the International Good Governance Standards, however there is a low level of
understanding. There is a lower level of adaptation, however it is recognised that the “newer” regional governments have a higher level of awareness and adaptation than
the “older” regional governments, in the sense that “newer” regional governments have been working with international institutions to increase its good governance
performance. There is an overall realisation among government officials that convergence to international good governance standards are inevitable due to
globalisation, however there are pre-requisites to convergence and should Indonesia adapt the international good governance standard there is a need to adapt it with
Indonesian regional governments conditions. Thus acknowledgement of international good governance standards and the need to converge exist, however there needs to be
time and periodical steps to full alignment to standards.
Recommendations are addressed to the two main impeding variables to good governance implementation, wherein each recommendation implicitly address the
challenge of good governance understanding disparity and alignment towards international good governance standards. Changes in the way staff are trained and
inducted can assist in re-inforcing good governance. The formation of a good governance task force is also recommended with three main aims:
1. Create a set of good governance related rules and regulations that has compulsory legal backing (where input from regional governments are considered) yet has room for flexibility in factoring regional government
capacity; 2. Ensure the implementation of good governance aspects through a consulting
and monitoring system; 3. Create a tangible agenda of periodical steps in international good governance
standards alignment.
Although limitations exist within this study, it is also a unique one as it provides insights to good governance understanding and implementation at a regional
government level. Moreover it derives insights from regional government official’s
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responses to identify impeding variables to good governance implementation, which in turn are utilised to create recommendations to further good governance at regional
government level. The thesis also explores international good governance standard alignment at regional government level, arriving to the conclusion of positive
convergence after a period of preparation and adaptation. An insight derived from the thesis is the implementation of good governance, both at country level or in
alignment with international standards, is a complex process which requires intricate networking of many actors, patience, and clearly defined periodical steps towards
implementation.
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Appendix A – List of Interviewees
Denpasar Regional Government
1. Mrs Siwi, SLO – Assistant to Head of Accounting Working Unit, Denpasar
Regional Government, Department of Finance Bali Province. 2. Hasan Rahmany, HLO – Head of Director General of Regional Tax,
Denpasar Regional Government, Bali Province 3. Aa Ngurah Lanang Bagus, MLO – Head of Budgeting Section, Finance
Bureau, Denpasar Regional Government, Bali Province 4. Joko Ngurah Pemayung, MLO – Head of Technical Services for the Regional
Revenue Office, Denpasar Regional Government, Bali Province 5. Anung Gusti Rah, MLO – Head of Vehicle Tax and Registration Tax Section,
Regional Revenue Office, Denpasar Regional Government, Bali Province 6. Nuryante, HLO – Secretary for Regional Development Planning Agency,
Denpasar Regional Government, Bali Province.
Padang Regional Government
1. Mahmudi Alhusain, SLO, Budgeting Staff under Head of Development Unit
2. Sylviana, SLO, Staff in Development Budget Section 3. Yulius Honesti, MLO – Head of the Education, Religion, Culture, and
Technology Unit in Regional Development Planning Agency for West Sumatra
4. Faisal Chen, HLO – Head of Human Resource Management, Governance, and Welfare Section in Regional Development Planning Agency for West Sumatra.
5. Yunasri, MLO - Head of Budgeting Unit for Finance Bureau of West Sumatra Governor office
6. Mr Mardi, HLO – Secretary of Regional Oversight Body, Padang.
Solok Regional Government
1. Emildouliah Khairah, MLO - Head of Governance Section in Solok Regency
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2. Doni Samulo, MLO - Head of Regional Government Official Human Resources and Inter-governmental Relations Working Unit in Solok Regency.
3. Bustamar, HLO - Government Assistant for Head of Solok Regency
Gorontalo Regional Government 1. Muhammad Monpangoi, HLO – Administration Assistant, Third Assistant in Human Resources, Finance, Procurement, and Society Relations for Gorontalo
Regency 2. Indra Kreola, HLO – Regional Secretary for Gorontalo Regency
3. David Bobihoe, HLO – Regent Head of Gorontalo Regency 4. Masran Rauf, MLO – Head of Budgeting Working Unit at the Regional
Development Planning Agency of Gorontalo Province
5. Andha Fauzi Miraza, HLO – Head of Regional Finance Department of Gorontalo
Province 6. Ismail Mo’otalu, MLO – Head of Macro Planning and Development Coordination
Section at the Regional Development Planning Agency of Gorontalo Province
7. Mr Asrul, MLO – Head of Accounting Section at Regional Finance Department of
Gorontalo Province 8. Mr Darmadi, MLO – Head of Budgeting Section at Regional Finance Department
of Gorontalo Province 9. Rismawati Arsa, SLO - Bookkeeping and Accounting Working Unit at the
Finance Department of Gorontalo Regency 10. Usdi Murawi, SLO –Budgeting Working Unit at the Finance Department of Gorontalo Regency
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Appendix B – Central Government (Jakarta) List of Questions and Interviewees List of Questions 1. What, in your opinion is unique about Indonesia’s Local/Regional Government, in
terms of religion, culture, government, and its people? 2. How do you think the uniqueness of local/regional government has affected the
working agenda of both regional and central government?
3. To what extent do you think the term Good Governance is understood and implemented in Indonesia?
4. What do you think are variables that impede the implementation of good
governance standards?
5. To what extent do you think International Good Governance Standards are known and understood in Indonesia?
6. What sort of aspirations do you have/see in terms of International Good
Governance Standards implementation in Indonesia in the future? List of Interviewees 1. Agus Mansur - SLO, National Development Planning Agency 2. Siswo Suyanto, HLO – Directorate General Secretary of Treasury, Department of Finance.
3. Ahmad Mu’am, MLO – Head of Regional Finance Information Section, Directorate General of Budget and Fiscal Balance, Department of Finance
4. Jessica Ludwig – World Bank representative in the field of Financial Management and Performance Measurement
5. Luki Eko Waluyanto, HLO - Deputy for Regional Autonomy, National Development Planning Agency
6. Mulharris, SLO, Staff – Regional Finance Unit, National Development Planning Agency
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7. Setiabudi. MLO – Director of Human Resources (Government Officials), National Development Planning Agency.
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