MIMBAR, Vol. 35 No. 2nd (2019)
Local Financial Performance and Its Impact on Border Community Welfare
SRI SUARTINI
Faculty of Economics and Business, University of Singaperbangsa Karawang, Ronggowaluyo Street Telukjambe Timur, Karawang, Indonesia email: [email protected]
Abstract. The capability and creativity of financial management conducted by the foremost and outermost local governments should support the orientation of the central government in developing the nation border areas. It needs to be carried out to able to accelerate the development of the areas and to implement regional autonomy policy and fiscal decentralization nowadays. Accordingly, this research aims to discover the local financial performance in Indonesian outermost and foremost areas based on the various calculating indicators. This research also intends to reveal the local financial independence impacts of outermost and foremost areas on their people’s welfare. The analysis results indicate that most of the outermost and foremost local governments in Indonesia possess a very low financial independent ratio. Those areas still prioritize their government expenditure to fulfill the indirect purchase which is not paying attention to develop their areas. Overall, the financial performance of those areas until now does not contribute a real impact on improving the border people’s welfare. Keywords: national border, local financial performance, regional autonomy
Introduction neighbor states. Some of the provinces are Aceh, North Sumatera, Riau, Kepulauan Riau, Raising Indonesia from the edges West Kalimantan, North Kalimantan, East by enhancing areas and villages in the Kalimantan, North Sulawesi, Maluku, North frame of unitary state is the third vision Maluku, East Nusa Tenggara, Papua, and West in a Medium-Term National Government Papua (Bappenas, 2010). Development Plan 2014-2019 (Nawacita). This commitment reflects the attention of central The nation border areas have certain government prioritizing the development in characteristic problems, such as cross-culture the underdeveloped, outermost, and foremost problems among residents, trafficking, illegal regions. As a manifestation that the state is logging, poverty, abandonment, isolated, and present and protect its all citizenships, regions other social problems. These problems possess becoming the face of Indonesia should be huge impacts on the image of Indonesia in ameliorated and encouraged towards progress the eyes of the international community. (Bappenas, 2016; Ditjen PDT, 2018). A minimum facility of basic infrastructure bolstering the economic activities and logistics Geographically, sovereignty and has deteriorated this condition such as roads, juridical territories of Indonesia are bordered ports, and airports. This limitation makes the with 10 (ten) neighborhood countries both at socio-economic conditions of people in some land and sea, namely Malaysia, Singapore, border areas are still not shifting yet to be Thailand, India, Vietnam, Australia, Papua better. This situation induces the happening New Guinea, Philippines, Timor Leste, and socio-economic gaps of people in the areas Palau. At least 13 (thirteen) provinces of highly compared to the same areas of the Indonesia which are being the national borders neighbor countries (Bappenas, 2010). Based and foremost small islands are directly facing on the data released by the Central Bureau of to the sovereignty and juridical territories of
Received: 2019-08-19, Revised: 2019-10-05, Accepted: 2019-12-25 Print ISSN: 0215-8175; Online ISSN: 2303-2499. DOI: https://doi.org/10.29313/mimbar.v35i2.5027 Accredited Sinta 2 based on the decree No.10/E/KPT/2019 until 2024. Indexed by DOAJ, Sinta, Garuda, Crossreff, Dimensions
402 MIMBAR, Vol. 35 No. 2nd (2019)
Statistics in 2017, the majority of Indonesian Central Bureau of Statistics, and the National outermost and foremost areas have the Border Management Authority. The collected Human Development Index less than the data consist of budget and realization of national average index namely 70.81. On the the Regional Government Budget, Human other hand, the poverty rate in some parts Development Index, poverty, expected of the areas is still higher than the national years of schooling, and expenditure per poverty rate (10.12 percent), especially the capita according to regency/municipality in areas in eastern Indonesia. Indonesia in 2017. Implementing the regional autonomy This research commonly applies a policy and fiscal decentralization conducting quantitative analysis method by calculating currently is expected to able to encourage financial ratios to carry out the analysis of the local creativity in driving the local income local financial performance. The calculating resources by putting the strength on the financial performances utilize formulations regional itself paying attention to competitive referring to Halim (2001), Fitriani and advantage and the existing potential revenue Dwirandra (2014), Nirwana et al. (2014), resource (Nuringsih, 2006; Baihaqi, 2012; Andirfa et al. (2016), Nugraha and Amelia Junarwati et al., 2013; Harteti et al., 2014; (2017), Pilat and Morasa (2017), and Prihastuti et al., 2015; Haryanto, 2018). Marayadnya et al. (2018) as follows. Regarding the mentioned matters above, Local Financial Independence Ratio. the outermost and foremost areas need to This indicator shows the capability of local exhibit good performance and accountability government in self-financing their own in financial management that can boost the government activities, development, and accelerating development of those areas public services. (Ratna, 2012; Fidelius, 2013; Pramono, 2014; Suryaningsih et al., 2015; Marlina et al., 2017). For this reason, research regarding the financial performance of the outermost and foremost areas of Indonesia is important to be conducted. Moreover, the research Table 1 provides assessment criteria of can demonstrate the ability of local financial local financial independence levels. independence to improve the welfare of Local Financial Dependency Ratio. border communities. This indicator shows the ability of the local Based on the explanation above, government in optimizing local government this research aims to analyze the local revenue to finance their local development financial performances of outermost and activities. foremost areas of Indonesia at regency or municipality level based on five calculating ratios (local financial independence, local financial dependency, fiscal decentralization, effectiveness, and expenditure suitability). Furthermore, this research aims to analyze Table 2 provides assessment criteria of the local independence impacts of outermost local financial dependency levels. and foremost areas on the welfare of border Fiscal Decentralization Ratio. This people, which are indicated by the poverty rate indicator is a measurement of local government and Human Development Index. The results capability to escalate local government of this research hopefully can contribute revenue for financing development. as inputs for central and local government in promoting the financial performance of outermost and foremost areas to accelerate the welfare of people in the border areas.
The criteria to determine the fiscal Research and Methodology decentralization can be categorized according to Table 3. The type of data in this research is secondary data sourcing from various Effectiveness Ratio. This indicator institutions such as the Directorate General points out the capability of local government of Fiscal Balance Ministry of Finance, the in realizing the planned local government
Accredited by Sinta Rank 2 based on Ristekdikti No.10/E/KPT/2019 until 2024 403 SRI SUARTINI. Local Financial Performance and Its Impact on Border Community Welfare
Table 1 Assessment Criteria of Local Financial Independence
Ratio Range Criteria of Local Financial Independence Relationship Pattern 0.00% - 25.00% Very Low Instructive 25.00% - 50.00% Low Consultative 50.00% - 75.00% Medium Participative 75.00% - 100.00% High Delegate Source: Mahmudi (2010) in Mahulae (2018) Table 2 Assessment Criteria of Local Financial Dependency Ratio Range Criteria of Local Financial Dependency 0.00% - 10.00% Very low 10.01% - 20.00% Low 20.01% - 30.00% Medium 30.01% - 40.00% Fair 40.01% - 50.00% High >50.00% Very High
Source: Badan Litbang Depdagri RI and Fisipol UGM (1991) Table 3 Assessment Criteria of Fiscal Decentralization Level
Ratio Range Criteria of Fiscal Decentralization 0.00% - 10.00% Very low 10.01% - 20.00% Low 20.01% - 30.00% Medium 30.01% - 40.00% Enough 40.01% - 50.00% High >50.00% Very High Source: Badan Litbang Depdagri RI and Fisipol UGM (1991) Table 4 Assessment Criteria of Effectiveness Level
Ratio Range Criteria of Effectiveness <75.00% No Effective 75.00% - 89.00% Less Effective 90.00% - 99.00% Enough Effective 100.00% Effective >100.00% Very Effective
Source: Mahmudi (2010) in Mahulae (2018)
revenue compared to the assigned targets Expenditure Suitability Ratio. This based on the local real potency. indicator exhibits the ability of the local government in prioritizing its fund allocation on direct and indirect purchasing optimally. There were two calculations in this ratio that is written in the following formula. The criteria to specify the effectiveness Furthermore, the quantitative analysis level is able to be distinguished according to used in this research was multiple linear Table 4. regression. This analysis was taken to analyze
404 ISSN 0215-8175 | EISSN 2303-2499 Sri Suartini.Local Financial Performance in National Border: Has It Improved Border People’s…
2019). This analysis was conducted by other hand, for some outermost and foremost building up a model of local financial areas that are considered capable of independence impact on the poverty rate implementing regional autonomy, the central (Model 1) and a model of local financial government has started to reduce its independence impact on the Human intervention. These areas such as Bintan Development Index (Model 2). This analysis Regency, Dumai Municipality, and Berau MIMBAR, Vol. 35 No.aimed 2nd (2019) to reveal the local financial Regency have a local financial independence independence impacts of outermost and ratio of 36.06 percent, 35.13 percent, and foremost areas on border people’s welfare. 31.74 percent, respectively. These areas are the local financial independence impacts of Model 1: in the western part of Indonesia. outermost and foremost areas on the public . welfare in the border areas. The used data in
this analysis was cross-section data in 2017 0 1 2 . 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 = 𝛼𝛼 + 𝛼𝛼 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝛼𝛼 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 consisting of 41 regencies/municipalities +𝛼𝛼3𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 + 𝑒𝑒 . in Indonesia that were determined by the Model 2: . National Border Management Authority as the . outermost and foremost areas of Indonesia 0 1 2 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 = 𝛽𝛽 + 𝛽𝛽 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝛽𝛽 𝐷𝐷 + 𝑒𝑒 . (Badan Nasional Pengelolaan Perbatasan, Where: . 2019). This analysis was conducted by building = Poverty rate up a model of local financial independence = Local Financial Independence Ratio impact on the poverty rate (Model 1) and a 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 = Expected years of schooling model of local financial independence impact 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 = Expenditure per capita Kota Batam Kota umai Kab. atuna Kab. 𝐸𝐸𝐸𝐸𝐸𝐸 Kupang Kab. on the Human Development Index (Model = Human Development Index Merauke Kab. Kab. oteKab. ao Kepulauan… Kab. Kepulauan… Kab. 𝐸𝐸𝐸𝐸𝐸𝐸 eh Be ar Kab.
= Dummy 1 for a regency in western Kapua ulu Kab.
2). This analysis aimed to reveal the local n ragiri ilir Kab. Kab. Mahakam lu Mahakam Kab. Kab. ulau Kab. Morotai
𝐻𝐻𝐻𝐻𝐻𝐻 Kepulauan ruKab. Sri Suartini.Local Financial Performance in National financialBorder: Has independence It Improved Border impacts People’s of outermost… Indonesia, 0 for a regency in eastern 𝐷𝐷 and foremost areas on border people’s welfare. Indonesia Source: Ministry of Finance (2019), data processed , = constant 2019). This analysis was conducted by other hand, for some outermost and foremost = regression coefficient building up a model of local financial areas that are considered capable of 0 0 Figure 1. The Local Financial Independence Ratio of Funds,𝛼𝛼 = 𝛽𝛽error and term Special Allocation Funds. There independence impact on the poverty rate implementing regional autonomy, the central 1 2 3 1 2 Indonesian Outermost and Foremost Areas in 2017 are𝛼𝛼 , 𝛼𝛼only, 𝛼𝛼 , 𝛽𝛽two, 𝛽𝛽 areas, Batam Municipality (Model 1) and a model of local financial government has started to reduce its independence impact on the Human intervention. These areas such as Bintan andResult𝑒𝑒 Karimuns and DiscussionRegency, which have the Development Index (Model 2). This analysis Regency, Dumai Municipality, and Berau local financial independence ratio which Local Financial Dependency Ratio. Based aimed to reveal the local financial Regency have a local financial independence isLocal categorizing Financial into highIndependence (101.21 percent) Ratio. on the data of 2017, this ratio signifies that independence impacts of outermost and ratio of 36.06 percent, 35.13 percent, and andBased medium on the (58.72calculation percent) results, inthe 2017, majority most of considering areas are in a range of of outermost and foremost areas of Indonesia foremost areas on border people’s welfare. 31.74 percent, respectively. These areas are respectively. According to the assessment medium to high rate on the Local Government in the western part of Indonesia. own the ratio of local financial independence Model 1: criteria of local financial independence levels Revenue in financing the local development categorizing into low and very low levels activities (Figure 2). This calculation is . in(Figure Table 1)1,. theIt happens relationship due to pattern a magnitude that of assumed without any allocating the balancing 0 1 2 . should be taken by the central government 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 = 𝛼𝛼 + 𝛼𝛼 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝛼𝛼 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 the balancing budget allocating by the central funds. In the other side, there are still areas 3 on most of the outermost and foremost areas +𝛼𝛼 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 + 𝑒𝑒 . government of Indonesia. The allocation which have low ratios and even very low Model 2: is instructive, and the other small of them is . budgets can be in the form of Tax Share and ratios of local financial dependency. Areas consultative. In other words, the role of central . Non-Tax Share, General Allocation Funds, and possessing low ratios of local financial 0 1 2 governmentSpecial Allocation needs toFunds. be more There dominant are only in two 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 = 𝛽𝛽 + 𝛽𝛽 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝛽𝛽 𝐷𝐷 + 𝑒𝑒 . dependency are consisted of Maluku Tenggara Where: the most mentioned areas which are not . areas, Batam Municipality and Karimun Barat Regency (18.39 %), Aceh Besar = Poverty rate ableRegency, to implement which theirhave regional the localautonomy. financial Regency (15.35 %), Pulau Morotai Regency = Local Financial Independence Ratio Onindependence the other hand, ratio for which some is outermost categorizing and into 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 (14.73 %), Boven Digoel Regency (13.20 %), = Expected years of schooling foremosthigh (101.21 areas thatpercent) are consideredand medium capable (58.72 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 = Expenditure per capita Kepulauan Talaud Regency (13.17 %), and Kota Batam Kota umai Kab. atuna Kab. 𝐸𝐸𝐸𝐸𝐸𝐸 Kupang Kab. ofpercent) implementing in 2017, regional respectively. autonomy, According the to Raja Ampat Regency (10.49 %). Furthermore, = Human Development Index Merauke Kab. MIMBAR, Vol.33, No. 1 (June, 2017): 01-08 Kab. oteKab. ao Kepulauan… Kab. Kepulauan… Kab. 𝐸𝐸𝐸𝐸𝐸𝐸 eh Be ar Kab. centralthe assessment government criteria has started of local to reducefinancial the areas which have the lower ratios of local
= Dummy 1 for a regency in western Kapua ulu Kab. Kab. n ragiri ilir Kab. Kab. Mahakam lu Mahakam Kab. Kab. ulau Kab. Morotai independence levels in Table 1, the Indonesia,𝐻𝐻𝐻𝐻𝐻𝐻 0 for a regency in eastern Kepulauan ruKab. financial dependency are composed of 𝐷𝐷 relationship pattern that should be taken by Indonesia Source: Ministry of Finance (2019), data processed 90 50 Mahakam Ulu Regency (6.90 %), Supiori , = constant the80 central government on most of the 45 Regency (6.78 %), Keerom Regency (6.17 40 = regression coefficient Source: Ministry of Finance (2019), data outermost70 and foremost areas is instructive, 0 0 Figure 1. The Local Financial Independence Ratio of 35 %), and Pegunungan Bintang Regency (2.71 𝛼𝛼 = 𝛽𝛽error term processed and the other small of them is consultative. In 1 2 3 1 2 Indonesian Outermost and Foremost Areas in 2017 60 30 %). 𝛼𝛼 , 𝛼𝛼 , 𝛼𝛼 , 𝛽𝛽 , 𝛽𝛽 Figure 1. The Local Financial Independence other50 words, the role of central government 25 𝑒𝑒 Results and Discussion Ratio of Indonesian Outermost and needs40 to be more dominant in the most 20 15 Local FinancialForemost Dependency Areas in 2017Ratio. Based mentioned30 areas which are not able to Local Financial Independence Ratio. on the data of 2017, this ratio signifies that 10 Based on the calculation results, the majority implement20 their regional autonomy. On the 5 Resultsmost of considering and Discussion areas are in a range of 10 0 of outermost and foremost areas of Indonesia medium to high rate on the Local Government 0 own the ratio of local financial independence LocalRevenue Financial in financing Independence the local development Ratio categorizing into low and very low levels activities (Figure 2). This calculation is (Figure 1). It happens due to a magnitude of assumedBased without on anythe allocatingcalculation the results, balancing the Kota Batam Kota Dumai Kab. SambasKab. Kab. Alor Kab. the balancing budget allocating by the central Malinau Kab. Kab. Bengkalis Kab. majorityfunds. In theof outermostother side, thereand foremostare still areas areas Berau Kab. Kab. BintanKab. Kab. Rote Kab. Ndao Kepulauan… Kab. Kab. Rokan Hilir Kab. Sintang Kab. Kab. Kupang Kab. Kab. Aceh Besar Kab. Kab. SambasKab. Kab. Sangihe Kab. KeeromKab. Kab. RajaKab. Ampat Kab. Sabu RaijuaKab. Malinau Kab. government of Indonesia. The allocation ofwhich Indonesia have low own ratio thes ratioand ofeven local very financial low Kab. TimorKab. Tengah… Kab. Mahakam Ulu Mahakam Kab. Kab. Rote Ndao Kepulauan… Kab. budgets can be in the form of Tax Share and ratios of local financial dependency. Areas RajaKab. Ampat
independence categorizing into low and very Hilir Indragiri Kab.
Non-Tax Share, General Allocation Funds, and Pulau Kab. Morotai Kepulauan Talaud Kab. lowpossessing levels (Figurelow ratios 1). Itof happens local financialdue to a Special Allocation Funds. There are only two dependency are consisted of Maluku Tenggara Source:Source: Ministry Ministry of Finance of Finance (2019), (2019), data processed data Source: Ministry of Finance (2019), data processed areas, Batam Municipality and Karimun magnitudeBarat Regency of the (18.39balancing % ),budget Aceh allocating Besar processed Regency, which have the local financial byRegency the central (15.35 government %), Pulau Morotaiof Indonesia. Regency The Figure 2. The ratio of Local Financial Dependency Figure 3.The Ratio of Local Fiscal Decentralization independence ratio which is categorizing into allocation(14.73 %), budgets Boven Digoel can beRegency in the (13.20form of % Tax), for IndonesianFigure 2. Outermost The ratio and of Foremost Local AreasFinancial in 2017 for Indonesian Outermost and Foremost Areas in 2017 high (101.21 percent) and medium (58.72 Dependency for Indonesian Outermost and ShareKepulauan and Non-TaxTalaud Regency Share, General(13.17 %Allocation), and percent) in 2017, respectively. According to Raja Ampat Regency (10.49 %). Furthermore, Foremost Areas in 2017 Effectiveness Ratio. Based on this ratio, it the assessment criteria of local financial the areas which have the lower ratios of local Fiscal Decentralization Ratio. This ratio indicates that Berau is regency possessing the independence levels in Table 1, the financial dependency are composed of indicates that most of the considering areas have both low and very low fiscal highest ratio of the effectiveness of all relationship pattern that should be taken by AccreditedMahakam by Sinta Ulu Rank Regency 2 based on Ristekdikti(6.90 No.10/E/KPT/2019%), Supiori until 2024 405 outermost and foremost areas of Indonesia in the central government on most of the Regency (6.78 %), Keerom Regency (6.17 decentralization levels (Figure 3). Only a few actualizing the planned Local Government outermost and foremost areas is instructive, %), and Pegunungan Bintang Regency (2.71 of them are categorized into high, fair, and Revenue at all outermost and foremost areas and the other small of them is consultative. In %). medium decentralization fiscal levels. These other words, the role of central government few areas are Batam Municipality (45.15 of Indonesia (Figure 4). The ratio of the needs to be more dominant in the most percent), Karimun Regency (34.22 percent), effectiveness in 2017 categorizes this regency mentioned areas which are not able to Bintan Regency (24.25 percent), and Dumai and two other regencies, Sintang and implement their regional autonomy. On the Municipality (22.40 percent). The happening Sangihe, as very effective regencies that low fiscal decentralization rate of the consist of 110.87%, 109.44%, and 108.81%, mentioned areas above is caused by the Local respectively. In general, the majority of Government Revenue is still smaller than the outermost and foremost areas in Indonesia Total Revenue of Local Government. In are grouped into criteria of effective enough return, the budgets of implementing and very effective. Unfortunately, there are development in those areas still depend on seven regencies/municipalities which are still the income resource coming from the Central categorized into criteria of less effective such Government. This finding confirms, the ratio as Raja Ampat, Batam, Rokan Hilir, of local financial independency, most of the Kepulauan Meranti, Sabu Raijua, Mahakam outermost and foremost areas are not capable Ulu, and Kupang. yet to optimize authorities to push developing 120 their locals. 100 80 60 40 20 0 Kab. Alor Kab. Kab. Berau Kab. Kab. Malaka Kab. Kab. KeeromKab. Kab. Sanggau Kab. Karimun Kab. Kab. NunukanKab. Kab. Kepulauan… Kab. Kab. Rokan Hilir Kab. Aceh Besar Kab. Kab. Indragiri Hilir Kab. Kab. Maluku Barat… Maluku Kab. Kab. Mahakam Ulu Mahakam Kab. Kab. Serdang Bedagai Kab.
5 ISSN 0215-8175|EISSN 2303-2499
MIMBAR, Vol.33, No. 1 (June, 2017): 01-08
90 50 80 45 40 70 35 60 30 50 25 40 20 15 30 10 20 5 10 0 0 Kota Batam Kota Dumai Kab. SambasKab. Kab. Alor Kab. Kab. Malinau Kab. Kab. Bengkalis Kab. Kab. Berau Kab. Kab. BintanKab. Kab. Rote Ndao Kepulauan… Kab. Kab. Rokan Hilir Kab. Sintang Kab. Kab. Kupang Kab. Kab. Aceh Besar Kab. Kab. SambasKab. Kab. Sangihe Kab. KeeromKab. Kab. RajaKab. Ampat Kab. Sabu RaijuaKab. Kab. Malinau Kab. Kab. Timor Tengah… Kab. Mahakam Ulu Mahakam Kab. Kab. Rote Ndao Kepulauan… Kab. Kab. RajaKab. Ampat Kab. Indragiri Hilir Indragiri Kab. Kab. Pulau Kab. Morotai Kepulauan Talaud Kab. Source: Ministry of Finance (2019), data processed Source: Ministry of Finance (2019), data processed
Figure 2. The ratio of Local Financial Dependency Figure 3.The Ratio of Local Fiscal Decentralization for Indonesian Outermost and Foremost Areas in 2017 for Indonesian Outermost and Foremost Areas in 2017
Fiscal Decentralization Ratio. This ratio Effectiveness Ratio. Based on this ratio, it indicates that most of the considering areas indicates that Berau is regency possessing the have both low and very low fiscal highest ratio of the effectiveness of all decentralization levels (Figure 3). Only a few outermost and foremost areas of Indonesia in of them are categorized into high, fair, and actualizing the planned Local Government medium decentralization fiscal levels. These Revenue at all outermost and foremost areas few areas are Batam Municipality (45.15 of Indonesia (Figure 4). The ratio of the percent), Karimun Regency (34.22 percent), effectiveness in 2017 categorizes this regency Bintan Regency (24.25 percent), and Dumai and two other regencies, Sintang and Municipality (22.40 percent). The happening Sangihe, as very effective regencies that low fiscal decentralization rate of the consist of 110.87%, 109.44%, and 108.81%, mentioned areas above is caused by the Local respectively. In general, the majority of Government Revenue is still smaller than the outermost and foremost areas in Indonesia Total Revenue of Local Government. In are grouped into criteria of effective enough return, the budgets of implementing and very effective. Unfortunately, there are development in those areas still depend on seven regencies/municipalities which are still the income resource coming from the Central categorized into criteria of less effective such SRI SUARTINI. Government. ThisLocal finding Financial confirms Performance, the ratio and asIts ImpactRaja onAmpat, Border CommunityBatam, WelfareRokan Hilir, MIMBAR, Vol.33, No. 1 (June,of 2017 local): 01 -financial08 independency, most of the Kepulauan Meranti, Sabu Raijua, Mahakam outermost and foremost areas are not capable Ulu, and Kupang. yet to optimize authorities to push developing 90 50 120 45 their locals. 80 100 40 70 35 80 60 30 60 50 25 40 20 40 15 30 10 20 20 5 0 10 0 0 Kab. Alor Kab. Kab. Berau Kab. Kab. Malaka Kab. Kab. KeeromKab. Kab. Sanggau Kab. Karimun Kab. Kota Batam Kab. NunukanKab. Kota Dumai Kab. SambasKab. Kab. Alor Kab. Kab. Malinau Kab. Kab. Kepulauan… Kab. Kab. Rokan Hilir Kab. Aceh Besar Kab. Kab. Bengkalis Kab. Kab. Berau Kab. Kab. BintanKab. Kab. Rote Ndao Kepulauan… Kab. Kab. Indragiri Hilir Kab. Kab. Rokan Hilir Kab. Sintang Kab. Kab. Kupang Kab. Kab. Aceh Besar Kab. Kab. Maluku Barat… Maluku Kab. Kab. SambasKab. Kab. Sangihe Kab. KeeromKab. Kab. RajaKab. Ampat Kab. Sabu RaijuaKab. Kab. Mahakam Ulu Mahakam Kab. Kab. Malinau Kab. Kab. TimorKab. Tengah… Kab. Mahakam Ulu Mahakam Kab. Kab. Rote Kab. Ndao Kepulauan… Kab. Kab. Serdang Bedagai Kab. Kab. RajaKab. Ampat
Kab. Indragiri Hilir Indragiri Kab. Kab. Pulau Kab. Morotai Kepulauan Talaud Kab. Source: Ministry of Finance (2019), data Source: Ministry of Finance (2019), data processed Source:Source: Ministry Ministry of Finance of (2019),Finance data (2019), processed data processed processed Figure 2. The ratio of Local Financial Dependency Figure 3.The Ratio of Local Fiscal Decentralization Figure 4.The Effectiveness Ratio of for Indonesian Outermost and Foremost Areas in 2017 for Indonesian Outermost and Foremost Areas in 2017 5Figure 3.The Ratio of Local Fiscal Indonesian OutermostISSN 0215-8175|EI and ForemostSSN 2303-2499 Areas Decentralization for Indonesian Outermost in 2017 Fiscal Decentralization Ratio. This ratio Effectiveness and Foremost Ratio. Based Areas on in this 2017 ratio, it indicates that most of the considering areas indicates that Berau is regency possessing the have both low and very low fiscal highest ratio of the effectiveness of all its intervention. These areas such as Bintan These few areas are Batam Municipality decentralization levels (Figure 3). Only a few outermost and foremost areas of Indonesia in of them are categorized into high, fair, and Regency,actualizing Dumaithe planned Municipality, Local Government and Berau (45.15 percent), Karimun Regency (34.22 medium decentralization fiscal levels. These RegencyRevenue athave all outermosta local financial and foremost independence areas percent), Bintan Regency (24.25 percent), few areas are Batam Municipality (45.15 ratioof Indonesia of 36.06 (Figure percent, 4). 35.13The ratio percent, of the and and Dumai Municipality (22.40 percent). The percent), Karimun Regency (34.22 percent), 31.74effectiveness percent, in 2017respectively. categorizes These this regencyareas are happening low fiscal decentralization rate of and two other regencies, Sintang and Bintan Regency (24.25 percent), and Dumai in the western part of Indonesia. the mentioned areas above is caused by the Municipality (22.40 percent). The happening Sangihe, as very effective regencies that Local Government Revenue is still smaller low fiscal decentralization rate of the Localconsist ofFinancial 110.87%, Dependency109.44%, and 108.81%, Ratio mentioned areas above is caused by the Local respectively. In general, the majority of than the Total Revenue of Local Government. Government Revenue is still smaller than the outermostBased and on foremost the data areas of 2017, in Indonesia this ratio In return, the budgets of implementing Total Revenue of Local Government. In signifiesare grouped that into most criteria of considering of effective areasenough are development in those areas still depend on return, the budgets of implementing inand a veryrange effective. of medium Unfortunately, to high ratethere onare the the income resource coming from the Central seven regencies/municipalities which are still development in those areas still depend on Local Government Revenue in financing the Government. This finding confirms, the ratio the income resource coming from the Central categorized into criteria of less effective such local development activities (Figure 2). This of local financial independency, most of the Government. This finding confirms, the ratio as Raja Ampat, Batam, Rokan Hilir, of local financial independency, most of the calculationKepulauan Meranti,is assumed Sabu without Raijua, any Mahakam allocating outermost and foremost areas are not capable outermost and foremost areas are not capable theUlu, balancingand Kupang. funds. In the other side, there yet to optimize authorities to push developing yet to optimize authorities to push developing are still areas which have low ratios and even their locals. 120 their locals. very low ratios of local financial dependency. 100 Areas possessing low ratios of local financial 80 Effectiveness Ratio dependency are consisted of Maluku Tenggara Barat60 Regency (18.39 %), Aceh Besar Regency Based on this ratio, it indicates that (15.3540 %), Pulau Morotai Regency (14.73 %), Berau is regency possessing the highest ratio Boven20 Digoel Regency (13.20 %), Kepulauan of the effectiveness of all outermost and Talaud0 Regency (13.17 %), and Raja Ampat foremost areas of Indonesia in actualizing Regency (10.49 %). Furthermore, the areas the planned Local Government Revenue at all which have the lower ratios of local financial outermost and foremost areas of Indonesia Kab. Alor Kab.
dependency Berau Kab. are composed of Mahakam Ulu (Figure 4). The ratio of the effectiveness in Kab. Malaka Kab. Kab. KeeromKab. Kab. Sanggau Kab. Karimun Kab. Kab. NunukanKab.
Regency (6.90 %), Kepulauan… Kab. Supiori Regency (6.78 %), 2017 categorizes this regency and two other Kab. Rokan Hilir Kab. Aceh Besar Kab. Kab. Indragiri Hilir Kab. Kab. Maluku Barat… Maluku Kab.
Keerom Regency (6.17 %), and Pegunungan Ulu Mahakam Kab. regencies, Sintang and Sangihe, as very
Bintang Regency (2.71 Serdang Bedagai Kab. %). effective regencies that consist of 110.87%,
109.44%, and 108.81%, respectively. In general, the majority of outermost and Fiscal Decentralization Ratio foremost areas in Indonesia are grouped into criteria of effective enough and very effective. This ratio indicates that most of the 5 ISSN 0215-8175|EISSN 2303-2499 Unfortunately, there are seven regencies/ considering areas have both low and very low municipalities which are still categorized into fiscal decentralization levels (Figure 3). Only criteria of less effective such as Raja Ampat, a few of them are categorized into high, fair, Batam, Rokan Hilir, Kepulauan Meranti, Sabu and medium decentralization fiscal levels.
406 ISSN 0215-8175 | EISSN 2303-2499 MIMBAR, Vol. 35 No. 2nd (2019) Sri Suartini.Local Financial Performance in National Border: Has It Improved Border People’s… Raijua, Mahakam Ulu, and Kupang. explain the variation of poverty rate variable o r e n str of nan e data pro essed t e isad about sted 48.67 s ared percent. of . While the denotes remaining, t at all ndependent ar ables to et er t at Figure 4.The Effectiveness Ratio of Indonesian 51.33 percent can be defined by other factors an e pla n t e ar at on of po ert rate ExpenditureOutermost and Suitability Foremost Areas Ratio in 2017 outside of the model. ar able s abo t . per ent. le t e According to this ratio, in 2017, more rema n n . per entTable an 5be def ned b Expenditurethan half of the Suitability outermost Ratio. and foremost ord n areas to ot erThe fa tors Model o ts de Estimation of t e model. of Local Financial t sof Indonesia rat o n prioritize more the t anlocal alfgovernment of t e Independence e est mat on res lts Impacts of t s on model Poverty ad Rate o termostexpenditures and onforemost indirect areas purchase of ndones a needs been pro essed s essf ll from some pr or t e t e lo al o ernment e pend t res lass al ass mpt on tests be om n stat st al (Figure 5). Only a few of them allocating Independent Error on nd re t p r ase needs re . nl a re rements t atCoefficient m st be a ompl s edp-value n a their local government expenditure at higher Variable Standard few of t em allo at n t e r lo al o ernment m lt ple l near re ress on anal s s based on e pend t refor the direct at erpurchase, for t e such d re t as p r asMahakame t e ord nar Constant least245.1637 s are .41.5134 s 0.0000***model s Ulu Regencyas a a am (71.67%), l e en Batam Municipality . ad passed a m lt oll near t test nd at n LFIR 0.0553 0.0753 0.4671 atam(64.33%), n pal t Raja Ampat . Regency a a (62.20%), mpat free of m lt oll near t problems. t s e en Maluku Barat . Daya al Regency arat (62.09%), a a representedlogEYS t ro 3.3987 t e orrelat on12.1630 0.7815matr e en Kepulauan . Aru Regency ep la an (61.06%), r e en and al elogEPC of all ar ables-59.6411 w are11.4149 nder . .0.0000*** o . and en al s e en . . do t e eteros ad t and a to orrelat on Bengkalis Regency (58.38%). Commonly, Dependent Variable= PovRate ommonl most of t ose ment oned areas tests po nt o t t e model does not an most of those mentioned areas allocate their Adjusted R-squared = 0.4867, F-statistic = allo ate t e r nd re t p r ase for emplo ee problem of t ose tests. n t e eteros ad t indirect purchase for employee expenditures. 13.6441, Prob (F-statistic) = 0.0000 e pend t res. s nd ates one of t e test t e enerated p al e bs s ared s reasonsThis indicates w most one ofof thet ose reasons areas whyare mostnot . ***Significant and er ont an level α1 percent per ent. pa n of those attent on areas are et not to de elop n paying attention t e r areas. yet to oreo er **Significant t e a to orrelat on on level 5 percenttest denotes p *Significant on level 10 percent developing their areas. al e bs s ared as . w s er t an α per ent. Source: results of data processed art all t e ar able of lo al f nan al ndependen e rat o s not s n f antl affe t n aThe ar at on estimation of t e po ert results rate.of this s model res lthad nd ates been processed ea lo al successfully f nan al pol from of some ndones anclassical o termost assumption and tests foremos becomingt areas statistical nt lrequirements now s not able that to must mpro e be accomplishedt e r p bl in welfare n t e border areas espe all n a multiple linear regression analysis based br n n down po ert . e low apab l t n del n on t ethe e st n ordinary lo al least f nan al square poten (OLS). as This s ownmodel t ro had t e passed ment oned a multicollinearity res lts abo e s test
Kab. eluKab. pres medindicating to a se free of l m multicollinearityted f nan n forproblems. t e It Kab. e au Kab. Kab. up Kab. Kab. Kupan Kab. po ert alle at on pro ram n t ose areas. t Kab. Ka unKab. is represented through the correlation matrix Kab. e au e Kab. Kab. unu anKab. Kab. Kepulauan… Kab.
Kab. abu a uaKab. s alsovalue n l neof all w t variables t e res lts which of aree pend t re under 0.8. So Kab. n a Kab. l Kab. Maluku Barat… Maluku Kab. Kab. a a a lu a a a Kab. Kab. ulau Kab. a s tab l t do the rat o heteroscadicity anal s s w ere and t e ma or t autocorrelation of Kab. e an e a a Kab. t osetests areas point st ll pr or t eout the t e rmodel e pend t res does not any on emplo ee aspe ts. pen u e u ab l a e u a e problem of those tests. In the heteroscadicity