Depok, 25 November 2025 — The issue of strengthening fiscal centralization became a key focus in Symposium Session II: Symposium of 25 Years of Decentralization, which formed part of the series of The 5th ICAS-PGS, The 6th ICBAP, and The 1st IFTAC. Speakers expressed concerns that the decline in fiscal transfers from the central government to regional governments could threaten the principle of regional autonomy while simultaneously reducing the quality of public services in Indonesia.

The session entitled “Intergovernmental Fiscal Relations” featured three speakers: Adriyanto, S.E., M.M., M.A., Ph.D. (Director of Non-Regular Financing and Transfers, Ministry of Finance), Bogor Mayor Dedie A. Rachim, M.A., and Executive Director of Regional Autonomy Watch, Herman Suparman. All three highlighted the trend of fiscal transfer cuts, which are considered to increasingly weaken regional capacity to drive development.

In his presentation, Herman Suparman stated that the downward trend in fiscal support for regions has been ongoing since 2000 and is projected to become even sharper in 2026. Fiscal transfers from the central government to regions in 2026 are estimated to reach only Rp693 trillion, a significant decrease from Rp919 trillion this year. This condition is regarded as a setback to the decentralization reform agenda because it further limits regional capacity to manage 32 governmental functions. He added that 90% of regions are in a low fiscal capacity condition and 98% of regencies are fully dependent on regional budgets and transfers from the central government.

Restrictions on regional flexibility have also emerged through the policy of shifting the General Allocation Fund (DAU) from a block grant to a specific grant. Although intended to improve the achievement of Minimum Service Standards (SPM), this policy is seen as constraining the room for maneuver of regional governments in managing the needs of their citizens. Responding to this issue, Adriyanto emphasized that the central government’s measures are aimed at ensuring budget efficiency while supporting national objectives. “Regional autonomy is still maintained, but it must be aligned with shared national goals to drive 8% economic growth,” he stated.

Meanwhile, the Mayor of Bogor highlighted issues of inconsistency in beneficiary data at the central level, resulting in misallocation of assistance. He cited the allocation of BPJS-PBI for the City of Bogor in 2026, which amounts to only Rp700 million out of a required Rp140 billion. According to him, such data discrepancies not only have the potential to cause budget inefficiencies but may also trigger social unrest due to services failing to reach vulnerable groups.

The 2025 state budget efficiency of Rp50.59 trillion is also considered to have a direct impact on the reduction of physical Special Allocation Funds (DAK) from Rp36 trillion to around Rp18 trillion. This cut is said to threaten infrastructure development, particularly in regions with low fiscal capacity. A domino effect has also occurred in local service sectors such as hotels and restaurants due to restrictions on official travel and meetings, affecting employment and regional original revenue.

Nevertheless, the speakers emphasized that the central government and regional governments share the same vision of improving public welfare. However, reforms in approach are needed to align central–regional policies, including through financing innovations, improvements to beneficiary data systems, and the design of asymmetric decentralization to address the needs of regions with differing characteristics.