What Influences Subnational Competitiveness in a Decentralized Indonesia

Author: Puspa Armi, Ph.D. et al.

Publication: Journal of Southeast Asian Economies

Publication Date: December 2021

Abstract:
One of the objectives of Indonesia’s 2001 decentralization reform was to enable the country’s subnational regions (provinces, cities and regencies) to realize their unique potential and, thus, implicitly, maximize their competitive advantage. While we have seen some improvements in socio-economic development and democratic accountability, stark variations in economic outcomes across regions remain. Why are some more successful than others in achieving competitiveness? Focusing primarily on district-level data from 1998 to 2016, this paper systematically examines the factors that may influence variations in subnational competitiveness in Indonesia. We found significant correlations between competitiveness and fiscal decentralization measures and, separately, between competitiveness at the province level and elements of democracy.