Sepriani Lalimbat, Anderson Guntur Kumenaung, Ita Pingkan F. Rorong

The influence of regional original revenue, general allocation fund, and special allocation fund on gross regional domestic product through capital expenditure in North Sulawesi Province for the 2011–2022 period

Introduction

The influence of regional original revenue, general allocation fund, and special allocation fund on gross regional domestic product through capital expenditure in north sulawesi province for the 2011–2022 period. Examines how Regional Original Revenue, General Allocation Fund, and Special Allocation Fund influence Gross Regional Domestic Product via Capital Expenditure in North Sulawesi (2011-2022).

Abstract

The amendment of Law Number 22 of 1999 to Law Number 32 of 2004 represents a policy initiative by the central government to grant broader autonomy to local governments, allowing them to manage their own administrative and financial affairs with minimal intervention. In this context, local governments also gain wider authority to utilize financial resources in accordance with regional needs and the aspirations of the local population. This study aims to examine the influence of Regional Original Revenue, the General Allocation Fund, and the Special Allocation Fund on Gross Regional Domestic Product, with Capital Expenditure serving as an intervening variable in the Provincial Government of North Sulawesi. The research utilizes secondary data obtained from the Regional Revenue and Expenditure Budget Realization Reports of North Sulawesi Province and the Central Bureau of Statistics for the period 2011–2022. The relationships among variables are analyzed using multiple linear regression and path analysis. The results show that Regional Original Revenue and the General Allocation Fund have a significant positive effect on Capital Expenditure, while the Special Allocation Fund has no significant effect. Regional Original Revenue also has a significant positive effect on Gross Regional Domestic Product. In contrast, the General Allocation Fund and the Special Allocation Fund have no significant effect on Gross Regional Domestic Product. Meanwhile, Capital Expenditure has a significant positive effect on Gross Regional Domestic Product.

Review

This study provides a timely and relevant examination of how various financial resources influence economic output in the context of Indonesia's decentralized governance. Focusing on North Sulawesi Province from 2011 to 2022, the research meticulously investigates the direct and indirect impacts of Regional Original Revenue (ROR), the General Allocation Fund (GAF), and the Special Allocation Fund (SAF) on Gross Regional Domestic Product (GRDP), with Capital Expenditure (CE) serving as a critical intervening variable. The motivation behind this research, rooted in the policy shift towards greater local autonomy, underscores its significance in understanding the effectiveness of fiscal decentralization. Methodologically, the study employs a quantitative approach, utilizing secondary data from provincial budget realization reports and the Central Bureau of Statistics. The application of multiple linear regression and path analysis allows for a comprehensive assessment of the complex relationships among the variables. Key findings reveal that ROR significantly boosts both Capital Expenditure and GRDP, highlighting its central role in regional development. The General Allocation Fund also positively influences Capital Expenditure, yet surprisingly, it shows no significant direct effect on GRDP. The Special Allocation Fund, however, demonstrates no significant impact on either Capital Expenditure or GRDP, a finding that warrants further scrutiny. Crucially, the study confirms that Capital Expenditure itself is a significant positive driver of GRDP, affirming its role as a vital channel for economic growth. Overall, this research offers valuable insights into the dynamics of fiscal decentralization in North Sulawesi. The robust empirical evidence underscores the importance of regional self-generated revenues and well-directed capital expenditures in fostering economic growth. While the study effectively quantifies these relationships, the non-significant effects of the Special Allocation Fund and the lack of direct GRDP impact from the General Allocation Fund present intriguing avenues for further investigation. Future research could delve into the specific allocation mechanisms and efficiency of these funds, perhaps through qualitative analysis or comparative studies with other provinces, to provide a more nuanced understanding of their contributions to regional development.

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