The state finance law: overlooked and undervalued

After a lengthy process of deliberation, the Indonesian parliament recently passed Law 17/2003 on State Finance. The prime objective of the legislation is to ensure that public finances are managed in an efficient, effective, transparent and accountable manner. To achieve this objective, the law stipulates the implementation of a number of reforms in the management of state finance. It therefore marks a major step forward in Indonesia's drive to establish a sound system of public finance management and realise good governance. This paper highlights some of the salient features of the new law and discusses its potential contribution to addressing Indonesia's chronic problems of corruption. It also highlights several problems that could affect the capacity of government to implement the new law effectively.     

The Sustainability of Indonesia's Upland Conservation Projects

The Upland Agricultural and Conservation Project in Central and East Java is representative of Indonesia's upland conservation efforts. An important component of the project was the use of subsidies to promote activities which increased farmer incomes and soil conservation. Two types of subsidies were used: an operating subsidy for annual inputs such as seed, fertiliser and pesticides; and a capital subsidy for terracing and related construction. This study measures the extent to which the effects of the subsidies were sustained over varying periods following termination of the project. The results show that the effects of the operating subsidies are clearly not sustainable; the effects of the capital subsidies may persist longer, but they too are probably not sustainable.