Decentralization and Democracy in Indonesia and Vietnam

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Both Indonesia and Vietnam are undergoing an unprecedented transfer of power to local government entities. What is the effect of this decentralization on local institutions, economic health, and openness to foreign investment?

According to Alasdair Bowie, the interplay between decentralization and democracy is more complex than often assumed, and the two phenomena are not necessarily mutually reinforcing. In Indonesia, for example, elected parties are strongly centralized, and local government officials must defer to politicians in Jakarta if they want to maintain their positions in the party. Tax revenues are determined at the national level, and citizens often fail to perform an oversight role. At the same time, however, Indonesian districts enjoy high voter turnouts and lively competition between parties.

In Vietnam, on the other hand, the non-democratic government has decentralized authority to a degree where many provincial governments display flexibility and innovation in attracting foreign investment. Officials in certain areas have authority to borrow, contract and regulate. According to Bowie's criteria, Vietnam scores "medium" —the same as Indonesia—in achieving certain criteria of administrative and fiscal decentralization.

In conclusion, Bowie suggested that the party structure in Indonesia needs reform, and emphasized the importance of district politics to the overall health of the democratic system. Bowie expressed concern that the international community will neglect the importance of local institutions in Indonesia, now that the national elections are over and the media spotlight has moved to other parts of the world. Failure of governments at the sub-national level could cause inter-ethnic violence and other serious problems.

David Timberman, who served as commentator, congratulated Bowie on examining the understudied but important phenomenon of decentralization. However, he expressed concern about the validity of comparing Indonesia and Vietnam, whose governments and economies differ in many substantial ways. For example, Vietnam has enjoyed political stability and rapid economic growth; moreover, its decentralization has been achieved by increments. Indonesia's big-bang decentralization is bound to be "messy," he asserted.

Bowie maintained that Vietnam and Indonesia are similar in their levels of economic development, and argued that he took care to choose parts of the two countries that could be compared usefully. (His research involved four provinces in Vietnam and five districts in Indonesia.)