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การประชุมวิชาการสถาบันพระปกเกล้า 137
ครั้งที่ 20 ประจำาปี 2561
ประชาธิปไตยไทย: ก้าวย่างเพื่อการพัฒนา

Fiscal Decentralisation for Local Development

One important component in the policy of decentralisation is financial responsibility.
To ensure that local governments are able to carry out their functions effectively, they must

have sufficient income and have the authority to make expenditure decisions. According to
the World Bank, fiscal decentralisation can take various forms: a) self-financing or cost recovery

through user charges, b) co-financing or co-production arrangements through which the users
participate in providing services and infrastructure through monetary or labor contributions;

c) expansion of local revenues through property or sales taxes, or indirect charges;
d) intergovernmental transfers that shift general revenues from taxes collected by the central

government to local governments for general or specific uses; and e) authorization of municipal
borrowing and the mobilization of either national or local government resources through loan

2
guarantees (World Bank 2001) .

With the enactment of Law No. 22 and 25 of 1999 there has been a very fundamen-
tal change regarding the regulation of central and regional relations, particularly in the field

of government administration and in financial relations between the central and regional
governments, which in many literature is called intergovernmental fiscal relations which in

Law 25/1999 are called financial balances. In accordance with Law No. 22 of 1999, the region
is given the authority to carry out all government functions, except governmental authority in

the fields of defense, foreign policy, fiscal and monetary, judiciary, religion and government
administration which are strategic. With the division of authority/function, the implementation

of governance in the regions is carried out based on the principles of decentralisation,
the principle of deconcentration and co-administration.

In terms of state finances, the policy of implementing fiscal decentralisation has

brought consequences to a fairly basic fiscal management map. In the first year of fiscal
decentralisation of the 2001 State Budget (Anggaran Pendapatan dan Belanja Negara, APBN),
the total funds raised through the balancing fund amounted to Rp 82.40 trillion or 5.6% of

GDP (Gross Domestic Products), which means the total funds to this region increased quite

sharply, because when compared with the realization of the funds that were donated in FY

2 http://www1.worldbank.org/publicsector/decentralisation/fiscal.htm