The Struggle to consolidate the gains of Indonesian independence has been dramatically reflected in the fiscal field. In the six years since the transfer of sovereignty from the colonial masters to the new Indonesian Republic, the central government has striven for an unprecedented degree of centralization of fiscal functions. What has emerged appears to be the broadening of central responsibility for expenditures, particularly on Java, without corresponding increases in revenues to meet these new responsibilities. The problems of sharing with localities these responsibilities and the resources to finance them have received much thought but little action. Virtually no attention has been given to the ways in which local governments might contribute to Indonesian economic development by utilizing the resources available to them. The case for greater decentralization of Indonesia's fiscal system is based on the argument that the rate of economic growth could be accelerated by the extension of greater fiscal autonomy to local levels of government and by more effective coordination between central and local development plans, particularly on the matter of financing.

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