Unity in diversity? The creation of new local governments in a decentralising Indonesia

This paper evaluates the proliferation of local governments concurrent with Indonesia's 2001 decentralisation. Largely static for decades under the New Order, the number of municipalities (kota) and districts (kabupaten) has increased by half, from 292 before decentralisation to 434 in 2003. Most of the increase is off-Java. This represents a fundamental change in Indonesia's subnational administrative, political and fiscal landscape. We present a new dataset that elucidates the characteristics of these new kota and kabupaten, and review political, fiscal and economic incentives for creating new jurisdictions. We find that geographic dispersion, political and ethnic diversity, natural resource wealth and scope for bureaucratic rent seeking all influence the likelihood of regional splits. Since jurisdictional changes will affect local governance and service delivery, we stress the importance of providing an effective institutional framework for the creation-or future amalgamation-of local governments as part of a strategic approach to consolidating Indonesia's decentralisation.