Dispute over local-national government revenue distribution in Indonesia

Source: PWYP Indonesia
Date: 4 Apr 2022

Local PWYP-Indonesia members support Judicial Review to address revenue-sharing between national and local governments.

On 28 February 2012, local PWYP-Indonesia member, Mr. Carolus Tuah travelled from his home town in East Kalimantan, to attend a constitutional court hearing of a lawsuit filed by local groups against the Republic of Indonesia’s Law No. 33 of Year 2004, regarding the Fiscal Balance between Central Government and Regional Governments.

This was the ninth in a series of court hearings since the case was first filed in October 2011 by a group calling itself the Assembly of East Kalimantan United People (MRKTB). Subsequently, four senators from the region (Anggota DPD) also submitted a constitutional complaint, together with two other farmers as plaintiffs.

The MRKTB argues that the revenue sharing clauses of Law 33/2004 effectively serves to hamper local developments and does not award local people their fair share of the revenues generated by the natural resources in their locale.

Specifically, the MRKTB demands a justification for the oil and natural gas revenue allocations: “84.5% to 15.5% for the government and the district” (oil), and “69.5% to 30.5% for the government and the district” (for natural gas) in the provisions of Article 14 letters e and f of Law 33 in 2004. Local communities argue that the article is not fair, not consistent and discriminatory, as it confers Aceh and Puas a higher share of the revenues due to their special autonomous status. Furthermore, they feel it does not fairly reflect the proportion of natural resources with which the East Kalimantan region is endowed .

The government has argued that most revenues need to be directed towards central government, as it is responsible for large expenditures such as defence and has to direct revenues to regions without natural resources. However, the central government did recognise that the figures for revenue allocation were not based on any specific formula, nor had they consulted stakeholders in East Kalimantan when drawing the numbers up. MRKTB said it was as though the government had “plucked the figures out of thin air”.

To strengthen their arguments, MRKTB Bojonegoro Regent Regent had witnesses testify that this behavior is similar in Bojonegoro East Kalimantan, where natural resource wealth from the oil sector has not been able to respond to the needs of development, high unemployment and poverty.

The applicants and their lawyer feel optimistic about winning the lawsuit. The latest hearing was on 9 March 2022 but the case is still on-going.

With thanks to CarolusTuah, PWYP-Indonesia member.