Redesigning the Revenue Sharing Fund (DBH) as a Strategic Instrument for Equitable Development in Indonesia: A Global Comparative Analysis

Abstract

Fiscal decentralization in Indonesia relies heavily on the Revenue Sharing Fund (Dana Bagi Hasil, or DBH) to mitigate vertical fiscal imbalances. However, the current mechanism faces systemic challenges regarding revenue volatility and horizontal inequality. This study evaluates the DBH framework under Law No. 1 of 2022, integrating a comparative analysis with global practices. Utilizing empirical data from 14 major resource-producing regions, this study identifies a profound "Flypaper Effect," where extreme fiscal dependency (averaging 72.1% and peaking at 85.4%) suppresses regional economic autonomy and local tax effort. Regression analysis confirms a weak correlation between DBH windfalls and Locally-Generated Revenue (PAD) growth. The findings suggest that Indonesia must transition from a pure "by-origin" sharing model to a performance-based system, incorporating a "Revenue Smoothing" fund inspired by Mexican and Brazilian models to ensure regional fiscal sustainability.