Does decentralization foster a good trade and investment climate? Early lessons from Indonesian decentralization
Good public governance has emerged as a key determinant of the economic performance of countries, in part because the quality of public governance influences both local and foreign investment decisions. Many countries in the Asia and Pacific region have made improvements in their government effectiveness between 2004 and 2007. The progress made by many Asian countries has been achieved through the adoption and implementation of reforms and initiatives specifically designed to improve public governance. A common feature of many of these programmes is the devolution of responsibility and accountability from central government to lower government levels. This policy brief reviews the experience of Indonesia, and highlights the importance of coordination between all levels of governments for fostering trade and investment.