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ABSTRACTDynamics of uncertainty and complexity shape cross-border local development. The ethnic proximity of communities in the highlands of Kalimantan creates fluid and cross-border cultural empathy in socio-cultural and economic interactions without a formal framework of cross-border cooperation. Indonesian border development policies have shifted socio-cultural relations, triggering socio-economic inequalities and conflicts of interest that impact cross-border activities. This study uses Constructivist Grounded Theory to analyze how these issues play out in the Indonesian-Malaysian border region. The study shows the management of socio-cultural relationships and networks, capital accumulation, and its role in accommodating local interests. In the case study, these efforts lead to sustainable regional development by promoting economic equality and ensuring cross-border interactions and local sovereignty in a region with different jurisdictions and limited resources and capacities. Thus, this study provides empirical evidence of how local development strategies transform into territorial politics in response to the dynamics of cross-border issues.

ABSTRACTSince the start of the reform in the late 1990s, Indonesia has implemented an ambitious decentralization policy. One of its aims is to foster regional development from below by giving subnational governments a greater discretion in determining programmes that are more aspirational to the interests of the community and to local and regional development objectives. The decentralized government system has been implemented for almost two decades, yet limited studies have been conducted to examine its trajectory. Within this context, the study offers a comprehensive review of two crucial issues in the empirical literature on decentralization, notably regional disparity and spatial fragmentation. It is found that the rapid transition toward a decentralized system during the early years of the decentralization reform had an adverse impact on regional development. However, after several adjustments and improvements throughout the process, the decentralization practice in Indonesia began to show positive outcomes, which was signified by a declining trend of regional disparity and spatial fragmentation. It is argued that institutional rearrangement has become a crucial aspect in resolving the regional issues and, thus, improving regional development.