QUT Digital Repository: http://eprints.qut.edu.au/

Mardiasmo, Diaswati and Barnes, Paul H. and Sakurai, Yuka (2008) Implementation of Good Governance By Regional Governments in Indonesia: The Challenges. In Brown, Kerry A. and Mandell, Myrna and Furneaux, Craig W. and Beach, Sandra, Eds. Proceedings Contemporary Issues in Public Management: The Twelfth Annual Conference of the International Research Society for Public Management (IRSPM XII), pages pp. 1-36, Brisbane, Australia.

© Copyright 2008 (please consult author)

Implementation of Good Governance by Regional Governments in

Indonesia: The Challenges

Author: Diaswati Mardiasmo School of Management Faculty of Business Queensland University of Technology 2 George Street, Brisbane, QLD 4000 Phone: 07 3138 4015 Fax: 07 3138 1313 Email: d.mardiasmo@qut.edu.au Paul Barnes School of Management Faculty of Business Queensland University of Technology 2 George Street, Brisbane, QLD 4000 Phone: 07 3138 9019 Fax: 07 3138 1313 Email: p.barnes@qut.edu.au Yuka Sakurai School of Management Faculty of Business Queensland University of Technology 2 George Street, Brisbane, QLD 4000 Phone: 07 3138 2652 Fax: 07 3138 1313 Email: y.sakurai@qut.edu.au

Presentation Track : Local government management and local governance

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Abstract 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. This paper investigates good governance in Indonesia, with a focus on its implementation by regional / local government. Indonesia’s good governance implementation has attracted further attention with it being the vocal point of its current president’s, Susilo Bambang Yudhoyono, presidential vision and mission. Although much research has acknowledged good governance implementation at regional/local government level, the extent of implementation has varied, suggesting partial or incomplete implementation of good governance principles. This paper investigates impeding factors that do not support effective implementation of governance protocols. Analysis of findings found nine impediment variables to good governance and a large disparity gap in good governance understanding and implementation. Further investigation of findings allows a conclusion whereby the main challenge for good governance implementation is the existence of a double edged sword; lack of good governance legal instruments as well as a lack of bureaucratic reform. Key Words: Good Governance, Indonesia regional government, impeding variables, bureaucracy culture, political history, public policy, implementation guidelines.

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Introduction

Interest in the concept of Governance compliance is currently a world-wide phenomenon

resonating in all corners of life; private sector, public sector (government agencies), society,

non-profit sector, and international institutions. Interest in governance within Asia has

increased markedly in recent times due to the financial crisis but also too due to other events

derivative of poor governance practices. A growing literature is available on governance as

well as numerous standards and codes of conduct: many precipitated by institutional crises in

commerce and exposure to inappropriate government practices globally1 .

A prime factor for this has been an increase in global economic integration leading to an

increase in the demand for capital both in the developed and developing economies; thus a

need for enhanced regulatory compliance (Bhasa 2004). A further driver for this change has

been an increase in economic turbulence around the world. A sentinel event in this regard

was the 1997 Asian financial crises (Barro and Lee 2003; Mitton 2002). Corporate collapses

such as Enron Enron in the USA (Bonn 2004; Grantham 2004; Lansley, Gibson and Fogarty

2002), HIH, One Tel and Ansett Airlines in Australia (Houghton and Jubb 2003; Leung and

Cooper 2003; Milne 2002), and China Aviation oil in Singapore (Clarke, Dean and Houghton

2002; Evans 2005) have also contributed to the increase in governance and corporate controls.

While the implementation of standards in established economies is a regular topic in

professional and academic journals, as well as in commercial settings, the extent to which

good governance is implemented within government agencies remains ambiguous

(Brinkerhoff and Goldsmith 2005; Ciborra 2005; Duvall and Shamir 1980; Knack and Keefer

1995; Wu 2005). 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. These sources are also generally silent on the question of how

well good governance concepts are understood and implemented across levels of government.

While there is acknowledgment of the attributes of governance failures and non-compliance

available works generally lack deeper analyses of the contributory factors to good governance

nor do they examine details of why good governance is not applied to maximum potential.

1 Armijo (2004), Beck, Clarke, Groff, Keefer and Walsh (2000), Court, Gyden and Mease (2002), Hellman, Jones, Kaufmann and Schankermann (2000), Huther and Shah (1998), Kaufmann, Kraay and Zoido-Lobaton (2000), Kaufmann, Kraay and Zoido-Lobaton (2002).

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This paper, derived from research carried out across four regions in Indonesia, investigates

good governance as implemented by regional/local governments. Indonesia has been chosen

due to the contrasting paradoxical views of it being the “worst hit and slowest recovering”

country following the Asian Financial Crisis (Muljadi 2001; Muljadi 2002) yet the most

active out of the Asian economies in respect to political, economical, and social transition

(Freedman 2005; Iskander, Meyerman, Gray and Hagan 1999; McCawley 2003). Indonesia’s

good governance implementation has also attracted further attention with it being the vocal

point of its current president’s, Susilo Bambang Yudhoyono, presidential vision and mission,

sparking analysis on the extent of good governance implementation since its introduction in

2001.

Background

Indonesia is a prime example of an economy where awareness of the benefits of governance

has increased dramatically since the 1997 Asian financial crisis. As part of the recovery

phase, post-crisis, Indonesia has strived to enhance resilience to crises and collapse by

increasing governance implementation through numerous innovative policies in both the

private and public sector.

An analysis of literature related to governance systems found three important gaps as follows;

limited publication on governance policies, exclusion of commentary on economic and policy

changes in Indonesia after the financial crises, and little consideration of factors operating at a

regional/local government level. This paper therefore seeks to address issues firmly within

the context of these issues. A general consensus in this literature, however, is that ‘more

time’ is a needed to achieve effective implementation of governance capacities. One of

Indonesia’s economic and political transition policies in 1999 was the introduction of

decentralisation, allowing regional government autonomy on the development of its region

and allocation of resources. Decentralisation policy in Indonesia, as it has been implemented

in recent years has impacted strongly on regional levels of government. An examination of

how decentralisation policy has affected good governance implementation at regional of

government levels is timely.

An important gap exists with respect to the involvement of regional government officials in

the data collection process, leading to questions of reliability and an accurate rendering of

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regional government practices. Limited studies have been completed in Indonesian regions:

namely, North Lampung, Flores Island, Bali, Northern Sulawesi, and Irian Jaya (Elmhirst

2001; Erb 2005; Hassler 2005; Henley 2002; Newhouse 2005; Williams 2005; WorldBank

2005). These works however, have focused on single governments and are in the main based

on legislative review and documentation of practices without direct official government

endorsement or involvement. The scarcity of literature detailing in-depth, comparative

assessment of regional government practices in relation to governance is an important factor

requiring attention. The importance of this issue seems obvious given that extant commentary

on governance matters is either published by central government bodies (BAPPENAS 2006;

KNKG 2006), international institutions (ADB 2004; BaKTI 2006; ILGR 2004), or based on

data released by either or both (Brinkerhoff and Goldsmith 2005; Ciborra 2005; Elson 2006)

Recent approaches to governance: the regional context

Indonesia’s governance system historically 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 were those deemed to

have the role of securing democracy, supporting a market economy, and providing good

governance (Tambunan 2000; Velayutham 2003). The national government 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 international institutions to

assist in forming good governance codes that are in line with international good governance

standards (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

2001; Muljadi 2002). The central government has also realised the importance of effective

implementation of governance practices because of the mutually beneficial outcomers

possible for both the public and private sectors (KNKG 2006).

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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 nearly 400 regional governments (increased from a previously registered total of

300) as a result of decentralisation and enhanced 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 structures and re-

evaluation of current rules and regulations to ensure flexibility is extended to newly formed

regional governments

The manner in which government officials view their roles, in their daily work, is a key factor

in good governance implementation (Warwick,1978). In particular it is important 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 are significant political implications 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).

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Current decentralisation policy in Indonesia emphasises robust 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 both in an advisory as well as a controlling role

(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.

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 wherein

newer regional governments would be more open to implementing good governance aspects

(Mishra 2002). Therefore another consideration variable in selecting a regional case study is

age of the region, in order to provide a contrast between regional governments that existed

pre-decentralisation and regional governments that were created due to decentralisation.

Analytical Framework & Methodology

This work derives from detailed fieldwork within Indonesia and seeks to enhance levels of

understanding of impediments to the implementation of good governance at a regional

government level. The analytical bases of this research (depicted in Figure 2 below) is

derivative of aspects of the de-centralisation policies referred to above and relates to two

hypothetical considerations. Namely:

• that differences might exist between established and more recent regional

administrations

• that proximity to the capital, Jakarta may influence the nature and flexibility of

implementation of governance.

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Figure 2 represents these considerations, contextually, in a four cell matrix allowing a contrast

between recent and well established locations, both near and distant to the national capital.

Old

New

Far from Capital Near to Capital

Solok, (West Sumatra: est. 2001)

Padang (West Sumatra: est. 1975)

Gorontalo (Sulawesi: est. 2000)

Denpasar (Central Bali: est. 1956)

Figure 1 Analytical Framework (Regional Governments)

A depicted in Figure 3 below, investigative activities in each of the four regional government

locations involved series of on-site observation, document analysis and in-depth interviews.

Five days were spent in each regional government office as part of the on-site observation

stage. Access during each visit to regional government offices included briefings on the

organisational structure, introductions to key regional government informants, including open

Solok, Padang Gorontalo

Emergent Outcomes

Denpasar

In-depth Interview

Document Analysis

On-site Observation

Figure 2 Methodological Framework

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access to required documents,2 and participation in a number meetings, as well as

opportunities to interview employees within the regional office.

A key purpose of this triangulation method was to make-sense3 of economic, political, and

approaches taken with respect to the decentralisation of governance within Indonesia.

Document analysis in combination from findings derived from on-site observation formed a

basis for initial content used in in-depth interviewing in the third stage of the data gathering

process. In-depth interviewing involved three different strata of employee within each

regional office setting. Namely: Staff Level Official (SLO), Middle Level Official (MLO),

and High Level Official (HLO). The interview protocol also involved provision for key

government officials from the central government (Jakarta) to provide a comparative view on

emergent issues detailed in the regional locations. The total number of government officials

interviewed within regional locations and for each staff level is shown in Table 1.

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

Table 1 Number of Government Officials Interviewed

Data derived empirical data collection were analysed using NVIVO and the excel

matriculation system to ensure a systematic treatment of data and test consistency. It is

recognised that there is an uneven number of government officials per informant strata level

and per region. This is related to a balance of contextual issues such as access to regional

government authorities, introduction from a senior official, the culture of reluctance and high

uncertainty, government official schedule and availability, and the sensitivity of ‘governance’

as an interview topic: all of impacted on access to government officials.

2 Regional government publications on governance and public policies, reports, public records, and regional government laws and codes as well as Central government document and a selection of international documents. 3 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.

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Results and Findings

Level of Good Governance Understanding4 and Implementation5

Good governance is understood at different levels by (strata) employees within regional

government and between each regional government as a whole. Table 2 displays a

comparative table on the level of good governance understanding.

Table 2 Level of Good Governance Understanding - Regional Comparison

Region Understanding Strata Disparity Low Medium High Denpasar Padang Solok Gorontalo

From Table 2 it is evident that Denpasar respondents reported low levels of understanding

about good governance. Padang however listed medium levels of awareness with both Solok

and Gorontalo expressing high levels of understanding. The last column (strata disparity)

indicates whether disparity in understanding of good governance between employee levels

exists, in which all government officials interviewed agreed to. This result suggests that there

is an overall disparity in the level of good governance understanding between regions and

between strata levels within each regional government.

Likewise there is variance in good governance implementation between regional governments.

Based on table 3 on characteristics of good governance implementation and interview results,

Table 3 is compiled to illustrate the disparity in good governance implementation. It is clear

that both Denpasar and Padang show medium levels of governance implementation, whereas

Solok and Gorontalo on the other hand shows a higher degree of implementation.

4 (Level of Understanding) 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. 5 (Level of Implementation) 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.

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Table 3 Level of Good Governance Implementation - Regional Comparison

Region Implementation Strata Disparity Low Medium High Denpasar Padang Solok Gorontalo

Interviews with government officials showed a disparity in opinion on the extent of

governance implementation. A common belief by high level officials was that a high level of

implementation was in place whereas both medium and staff level officials supported the

notion that lower levels of implementation were the norm.. Thus it may be concluded that

there is a disparity in the level of implementation between regions, however its extent is at a

lower level than good governance understanding disparity.

A view from the central government (Jakarta) contrasted with the views of regional

government officials in that officials believed that there was, in general, low levels of

understanding of the principles of good governance. Jakarta-based informants were split

evenly on the issue of implementation of governance practices regionally. The difference in

opinion exist as central government interviewees believe there are regions that are considered

“mature” in their public services provision, as well as regions that are still “young” and

“immature” in their public service provision. Interviewees believe that there is a positive

correlation between the level of public service provision (or the “stage” that regional

government is in) and the level of good governance implementation. Although the disparity in

views can be perceived as a negative there is also a positive impact, where such views

advocates the central governance to increase aid and attention in “maturing” those “young and

immature” regional governments.

Impeding Variables to the Implementation of Good Governance

Open access reports on good governance implementation in Indonesia exhibit a common

thread of recognition of the issue of inconsistent approaches (and success) in implementation.

In many instances it is noted that the intention of good governance implementation exists

(through regulations, government decrees, codes, etc) however there is disparity between

what is on paper and in reality (ADB 2004; WorldBank 1992; WorldBank 2004; WorldBank

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2001b). In short the tools and intentions of implementing good governance principles exist,

however a realistic implementation in everyday public service provision is still lacking. This

raises an interesting question of why good governance is not implemented at optimum levels.

Regional government have also examined impediments to implementation through in-depth

interviews with its employees/officials. These issues are displayed in Table 4.

Table 4 Impeding Variables to Good Governance Implementation - Regional Comparison

Impeding Variables Regional Government Denpasar Padang Solok Gorontalo Jakarta Communication Disabilities Lack of Good Governance Implementation Guidelines

Influences of Leadership 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

Analysis of work reported here identified twelve variables that could impede the even

implementation of governance. Further analysis of the interview responses identified nine of

these variables as critical to the understanding of the contexts from which impediments

emerged. These variables were: 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 standards, and societal

involvement. The degree of common support for these emergent variables is illustrated (0 as

a percentage of respondent support) in Figure 3, below.

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Discussion

Level of Good Governance Understanding and Implementation

The result of this investigation emphasises a range of factors. Good Governance exists in

regional government Indonesia at different levels depending on many factors. The level of

implementation in Indonesia is varied among different regions, however a common thread is

found in that there is a mismatch between the notion of good governance - on paper and in

reality.

Impeding Variables to

Good Governance

Bureaucratic Culture

(13%)

Law Enforcement

(6%)

Reward and Punishment

(5%)

Political History

(11%)

Goodwill (2%)

Level of Government

Official Welfare Leadership

(11%) (12%)

Level of Socialisation

(6%)

Human Resource level

(13%)

Commitment (5%)

Minimum Public Service

Standard High Frequency in changing rules and

regulations (5%)

Figure 3 Impeding Variables to Good Governance

(11%)

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Each region has its own official publications concerning good governance (Gorontalo 2004).

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 action plans

within the regional government to implement good governance. However when these

publications are compared to on-site observations and interview responses it is noticeable that

there are many mismatches. High-level government officials interviewed acknowledged that

the publications and good governance innovations within them, 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.

Analysis of regional government publications on good governance and interviewee’s

responses reveal mixed understanding of what is meant by good governance and the

supporting detail of the term. Differences in understanding can occur in two ways. The first is

that there are differences in understanding between different levels of government officials

within single regional governments: in relation to different ideas on how to implement aspects

of good governance. The second is that understanding between equal levels of government

officials from different regions vary, depending on each region’s current position or level of

good governance implementation. Interestingly, although there is a different understanding of

each aspect, there is a mutual acknowledgement between all government officials that good

governance equates to a clean government, which is identical to transparency and

accountability.

A further differentiating issue with regions is evidence of clear differences between levels of

officer within the governments. Results suggest that: (1) Higher level officials are able to

explain the theory of good governance and current rules and regulations in relation to it; (2)

Middle level officials have an idea of what good governance is and can provide examples of

its implementation within the regional government; and (3) Lower level officials have only

heard and acknowledged its existence.

It seems apparent that the Indonesian government faces an issue common to most of the

global pubic sector, where innovations exist on paper, policies and in publications but lack

degrees of the on-the-ground reality. It is important to acknowledge that realistic timeframes

and implementation plans may not have been available to regional governments. Recognition

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of this with suitable advocacy and support would provide a framework for enhancing the

balance and understanding of how to realise good governance in their everyday work life.

Impeding Variables to Good Governance Implementation

As detailed in Figure 3 nine main impediment variables to good governance implementation

were identified. Each is discussed below:

o Communication Disabilities: In terms of good governance understanding and

implementation, it is found that communication disability occurs in two different aspects;

unequal opportunity to information exposure and a lack in communication documentation.

Unequal opportunity is evident in each regional government, where although there is an

abundance of good governance seminars or workshops there unequal opportunity for all

government officials to attend. Most of good governance related workshop and seminars

are either held by other regions, academic institutions, non-government organisations, or

international institutions. 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 appointment as opposed to objectivity

based on regional government needs and regional government officials’ capability.

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. This tension can lead to resentment

and a lack of motivation, thus ultimately impeding the implementation of good

governance.

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o Lack of Good Governance Implementation Guidelines: Indonesia has its own governance

codes and laws however this is restricted to corporate governance through the creation of

National Code of Corporate Governance in 1999 and Good Corporate Governance

Guidelines in 2001. Good governance is mentioned within these two codes, in particular

in the Good Corporate Governance Guidelines, as well as numerous presidential,

ministerial, and governor decrees (Agung 2005; Kristiansen and Trijono 2005; Mishra

2002; Tambunan 2000). Yet the presence of an exclusive good governance code is yet to

be written. Regional government officials interviewed claim that an official good

governance code does not exist, and governmental (presidential, ministerial, and

governor) decrees are considered to be the base or code for good governance

implementation.

It is recognised that although some countries may have a good governance code that

contains rules, regulations, and clauses; however these codes do not guide governments on

how to implement good governance aspects (Verschoor 2002). Interviews with

government officials on the subject of good governance code have revealed the need for

an implementation guideline for each aspect, based on echelon levels and job description.

Currently there is confusion among all government levels, especially those in the middle

and staff level. Confusion exists in how to 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.

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.

o 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 &

16

Sims, 2001; Umemoto et all, 2002). This can also be seen in figure 7, where 11% of

interviewees identified leadership as a strong impeding variable to good governance

implementation.

Analyses of interviews show that traits of a transformational leader (Bycio et all 1995;

Bowel & Avolio 1993; Rahmany 2006) are evident in Gorontalo province and Solok

regency leaders; of which both places have been named as best practice examples of good

governance implementation. Informants from both Gorontalo and Solok claim that it is

their supervisor’s and leader’s trust that has encouraged innovative and honest behaviour

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 quicker transition in staff adopting

own/individual leadership mentality.

The importance of a strong leader is undisputed in good governance implementation, both

through all echelon levels and different regions. 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 unique way (Bubandt 2006; Warren 2005). Indonesian hierarchy and

bureaucracy culture shows that what the leaders decide, the lower levels will execute;

which is also attested by interviewees. 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.

o Human Resource Capability and Capacity within Regional Government: Human resource

capacity and capability has been identified as one of the stronger impediment variable to

good governance. 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 7 where 13% of interviewees

believe human resource is an impeding variable.

Middle and high level government officials across regional governments interviewed

claimed they have had experiences in being sent to a technical information session or

17

training in regards to particular policies or general government administration. However

they claimed that although good governance related training or workshops 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 only and not

to learn new concepts.

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 found from interviews that the regional bureaucracy is

ineffective in performing tasks due to its sheer size. The second aspect is recruitment and

positioning as incorrect recruitment and positioning has caused inefficiency, resentment,

and is hindering understanding of possible good governance implementations.

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 bureaucracy culture. Thus it is concluded from the interviews

that there is currently mis-positioning within regional government bureaucracy, where

there is a mismatch between need and capability.

Career planning, or meritocracy, is identified as the third aspect that impedes 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.

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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.

o 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 reformation era or era 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).

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-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 (Tambunan 2000; WorldBank

2004). This suggests possible reluctance within government bodies to change its normal

procedure.

Analysis of interviews reveals that there is a general agreement between regions on the

effect of political history on good governance implementation as an impeding variable.

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. Government

officials relate this resistance to insecurity, where familiarity with the old system is now

replaced with uncertainty of a new system.

Furthermore 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

19

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.

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. 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.

Central government expressed a different opinion on this matter, claiming that due to

Indonesia’s political history it is feared that regional governments are not prepared for

decentralisation responsibilities and there is a need to provide them with 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.

In conclusion political history is a strong impediment to good governance as it has

multiple effects on regional government. This is evident through the lack of bureaucratic

reform which induces reluctance in embracing an unknown concept (good governance)

which is of such contrast to the old familiar concept (Soeharto’s ways for the past 32

years). This reluctance is further enhanced by a general confusion in terms of authority

structure, law reference, and roles of each government official as a result of the newly

20

introduced concept of decentralisation - which is a contrast to the old ways of

centralisation.

o Regional Government Customs and Culture: Regional government customs and culture

proved to have a large impact on the lack of good governance implementation, as shown

in figure 7. Evidence exists in both positive and negative effects of culture on the

performance of government in relation to its working agenda. 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.

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 cause a slight disruption in the

working agenda as there are many religious ceremonies, both regionally recognised and

private occasions. 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.

o 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). This is evident within Indonesian government employees and other

public service officials, (Cole 2001; Manning 2000), where 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.

21

Dissatisfaction among government officials in terms of welfare is evident in interviews,

causing 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.

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. 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. 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 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, and

as Gorontalo and Solok have been recognised as two best cases in good governance

implementation since the introduction of regional subsidy (Transparency International,

2006), there is a direct correlation between the effectiveness of regional subsidy in

increasing government officials’ welfare and good governance implementation.

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.

22

Although only a small percentage of interviewees (5%, based on figure 7 on Impeding

Variables to Good Governance Implementation in Percentage Figures) 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. 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 government will be sanctioned.

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.

o 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), where in Indonesia itself red

tape is well known within government (Ferrazzi 2005).

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 7 regional

government authorities found there is an absence of a minimum public service standard,

where 11% of interviewees claimed its absence is an impediment to good governance

implementation.

23

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.

o 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 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 3

where 17% of interviewees believe that society change has an important role in good

governance implementation. 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

24

used to the 32 years of procedures. Therefore old habits of attempting previous procedures

exist, causing an impediment to good governance implementation.

In conclusion societal 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.

Conclusion

The importance of 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. There are two purposes

within this study; to explore the extent of good governance understanding and implementation

at regional government, and identify the impeding variables to good governance

implementation.

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 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).

There is a disparity in good governance understanding between echelon strata levels within

each regional government, which inturn suggests disparity in perception of good governance

25

implementation level within that region: this seems common to all regional governments

studied. However there is a difference between each regional government in terms of the

level of implementation of good governance. 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 Denpasar 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 is viable for each regional

government.

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. 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.

26

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