Jointly organized by :
Background
The period of severe economic turmoil experienced by Indonesian economy seems to be over. Economic growth, exports and all the indicators of macroeconomic stability had turned around by August-September 2002. For many, this optimism had attracted attention, orientation, and effort to bring back the good memory of “miraculous” sustained economic growth of the 1980s and 1990s.
Many argue, however, that current and future environmental setting has become much different with the onset of decentralization, i.e. transfer of decision-making processes from the centre to the regions. In this decentralized era, it is believed that regional economic development will play a stronger role in the effort, not only to achieve rapid and sustained economic growth, but also to reshape it into more equitable economic growth that is pro-poor and poverty reducing. To this end, with decentralization, we need to understand more the appropriate role of public sector, especially the role of regional and local government.
There are five fundamental roles of the government (World Development Report, 1997) in the economy without which sustainable, shared, poverty-reducing development is impossible. Those are establishing a foundation of law, maintaining a non-distortionary policy environment, investing in basic social services and infrastructure, protecting the vulnerable, and protecting the environment. In regional economic development under the atmosphere of decentralization, the sharing of this responsibility among level of jurisdiction stills needs to be determined and discussed. However, it is expected that decentralization would lead to more effective functioning of these responsibility.
Many are aware; however, that rising regional income inequality, macroeconomic instability, and local capture are the risk we face with decentralization. These, in turn, may reduce the effectiveness of public services such as in providing education, health, infrastructure, safety nets, as well as protecting the environment. Those are fundamental services of public sector that could not be provided by private economic agents. In these areas, then public sector could assist and facilitate its private counterparts to achieve pro-poor economic growth, to gain more equitable and sustainable regional development.
The above problems need more understanding than what we currently have. This is unquestionably necessary to formulate the best strategy and policy for regional economic development in Indonesia that is now more decentralized, particularly, when we are aware that the role of governance, public services, and eco-tourism are of central importance and closely inter-related.






