IBC Highlights the Importance of Stronger Regional Capacity in Development Delivery

President Prabowo Subianto’s recent instruction for universities to support regional governments in solving local problems highlights a practical yet often overlooked part of development: implementation at the regional level. Many of the issues people experience every day are not solved in policy documents, but in cities, districts, and provinces. Waste management, city planning, basic infrastructure, public services, business permits, and support for local economic activity all depend on how well regional governments can respond on the ground.

For the Indonesian Business Council, this shows why regional capacity matters. In IBC Navigator Vol. 18, IBC notes that around 77% of civil servants work at the regional level. This means many public services and development programs are carried out by provinces, cities, and districts. In 2025, transfers from the central government to regions reached around Rp849 trillion, or 92% of the allocated budget. In other words, regions play a major role in turning public funds into services, infrastructure, and development results that people experience directly.

Regional governments are not the only engine of development. The private sector also plays a major role. Around 88.6% of total investment comes from private actors, making businesses an important driver of investment, jobs, and local economic activity. This is why stronger regional capacity also needs to be supported by a better environment for businesses to invest, operate, and grow across regions.

But regional capacity is still uneven. The report notes that 28 of 38 provinces have Human Development Index scores below the national level. Only 9% of regional governments have met the requirement to allocate at least 40% of their budgets to basic public service infrastructure, while more than 50% of households still lack access to clean water.

“Indonesia’s next phase of growth requires rebalancing attention toward regional governments and the private sector, both of which are critical engines of development. The experiences of China and India offer valuable lessons that Indonesia can adapt to its own context, particularly in transferring knowledge and building delivery capability. Ultimately, Indonesia’s transformation will depend not only on what is planned at the center, but on what can be delivered across its regions to create an investment-friendly environment,” said Bima Nur M.R., Research & Program Analyst IBC.

For IBC, the point is straightforward. National development will only be felt by people and businesses when regions have the capacity to deliver it well. Stronger collaboration between regional governments, universities, and the private sector can help make development programs more practical, better informed, and closer to the needs on the ground.