Relying on central government resource revenue-sharing transfers actually reduces a local region's financial independence.

In regions rich with primary resources, you might expect local treasuries to overflow with independent wealth. But the reality is surprising. A study of 140 resource-rich districts in Indonesia revealed that receiving natural resource revenue-sharing funds and general allocation transfers actually has a negative impact on regional financial independence. When central transfers flow too freely, local governments stop optimizing their own tax bases. They become dependent on the capital's handouts, weakening their self-reliance.