presentation2_ermanrahman_apr122007

8/12/2019 Presentation2_ErmanRahman_Apr122007

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Indonesia:Supporting Local Governance

Reform in the era ofDecentralization

Erman A. Rahman

World Bank Office, Jakarta

Presented in

Seminar on Decentralization

Inter-Regional Learning Series on Community Driven Development

April 13, 2007


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Since 1999 Indonesia has been going throughdemocratization and decentralization processes

Democratization

Freedom of press

Freedom to establish political

parties

Free elections (1999 and 2004) Direct presidential election (2004)

and provincial governor, district

head and mayor elections (starting

June 2005)

Decentralization

Autonomy at district/municipal

level

Block grant to provincial and

district/municipal governments

Budgeting and local legislation

power

New structure of village

government

Greater power of local legislative

bodies

which provide opportunities for a more transparent,

accountable governance

Context


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The Indonesian administration system changed as resultsof decentralization and democratization

President

Ministry/Agency

Governor

National Parliament

Provincial

Parliament

Deconcentrated

Agencies

Provincial

Agencies

Head of District/

Mayor

District/ Municipal

Parliament

District/MunicipalAgencies

Village

Head

Sub District Head

Village Community

Council

= Directly elected legislative

= Directly elected executive

= Appointed executive

National

(220 mil l ion

people)

Provincial

(average 6.9mil l io n people)

District/

Municipality

(average 0.5mil l io n people)

Sub-District (average 43,400 people)

Village

(averag e 3,100

people)

Context


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Central government transfers to the regions have beenincreased significantly

0

20

40

60

80

100

120

140

160

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Transfers toRegions

Source: PER 2007, World Bank

IDRT

rillion,constan

t2000price

Subsidies

Central Govt

DevelopmentExpenditures

InterestPayment

Decentralization

Context


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There are several challenges to improve governance at locallevel

New structure of local governance: from accountability to centralgovernment to the peoplelocal executive and legislative need support

Good governance has been a national discoursebad governance wasconsidered a major contributor to the 1997 economic crises. But,operationalization of good governance is still a challenge

Some reform-minded local governments have already taken reforminitiatives. However, need to deepen reforms and further support the LGs

Wide windows of opportunities to test out reforms and to create modellocal government can do anything except those against national laws andregulations

Democratization at community/village level, particularly through the work ofNGOs and CDD-type donor-funded projects yet to reach the supra-villagelevel (districts)

Context


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Significant results from CDD implementation and a lot oflessons to learn

Improved access to markets, town

centers, education & health facilities,

and clean water supply116,300

infrastructure have been built

Expanded business opportunities

and employment: 39 million

workdays generated, 751,500 loan

beneficiaries participating in KDP

credit and business activities

Improving local governance:

almost half of Indonesian villages

experienced participatory budgeting,high participation of women (26-

45%)

Low rates of corruption: less than

1% of village sub-projects showed

deviations

KDP Results

Intensive Facilitation, Technical Assistance

and Capacity Building (30% of total

budget)

Well controlled democratic and transparent

steps and mechanism

Quick disbursementincrease trust of the

community

Direct flow of fundsreduce fund leakage

Working directly with the community

trying to avoid local elite capture

Certainty and sustainability of budgetresources

Extensive monitoring: community radio,

independent journalist and NGOs

monitoring

Relatively isolated from LG interventions

Key Success Factors

Context


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At district level ILGR Project supports improvement ofgovernance to address those issues & to complement CDD

Project Development Objectives

Pilot support to district governments in improving

transparency, accountability and public

participatory practices and in undertaking reforms

in financial management and procurement.

Project Components

Local Governance Reform

Poverty Targeted Investments

Implementation Support and

Monitoring

Transparency

Public

Participation

Accountability

Better Public

Service

Local Economic

Development

Poverty

Reduction

ILGRs interventions

Brief Description of ILGR


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ILGR is implemented in phases: districts can access annualinvestment fund only if they meet the reform requirements

Component A.

LocalGovernance

Reform

Governance

Reforms

(Pre-

Investment)

Participatory

PovertyStrategy

Formulation

Component B.

Poverty-targetedInvestment

Component C.

Implementation

Support

MinimumE

ntryRequirements

MinimumP

re

-InvestmentRequirem

ents

ILGR

InvestmentYear 1

Technical

Support &

Monitoring

Technical

Support &

Monitoring

MinimumI

nvestmentYear1

Require

ments

ILGR

InvestmentYear 2

Technical

Support &

Monitoring

ILGR

InvestmentYear 3

Technical

Support &

Monitoring

Governance

Reforms

(Year 1)

Governance

Reforms

(Year 2)

MinimumI

nvestmentYear2

Require

ments

PRE-INVESTMENTPHASE

(18-24 months)

INVESTMENT PHASE

(3 years)



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ILGR Local Governance Reform Framework (transparency& participation, financial management, procurement)

Transparency and Participation

Public information disclosure; public complaint handling; publicparticipation in decision making process; preparation of LocalRegulation on Transparency & Participatory

Financial Management

Preparation of Local Regulation on principals of Regional FinancialManagement; transparent budgeting; revenue management; financialreporting and accountability; development of Regional FinancialInformation System

Procurement

Establishment of Procurement Anchor Unit; preparation of Head ofDistrict Decree on Regional Procurement System and Procedure;enhance procurement information system; improvement of control, auditand feed-back system in procurement.



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Where is ILGR now?

Results of Project Preparation:

Local regulations on access to information (transparency) and to decision-making process

(participation) were formulated through participatory process and enacted in 13 districts

District-level poverty reduction strategies were formulated through participatory processes

and issued in all 14 districts

Two districts enacted local regulations on Village Block Grant with specific target (5-10% of

local budgets)

All districts have fulfilled entry and pre-investment requirements of the Local

Governance Reform Framework

12 districts started implementing Year 1 poverty target investment in 2006 (utilizing

about 80% of total budget ceiling)

Through JSDF-Participatory Budgeting and Expenditure Tracking (PBET), capacity ofdistrict-level civil society in analyzing and disseminating budget information and in

monitoring budget execution is being enhanced, executed by National Democratic

Institute (NDI) and 8 national NGOs



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Challenges for future ILGR implementation

Evolving regulatory framework in decentralization. E.g., unclear mechanism for on-granting to the regions and inefficient budgeting process has significantly delayed theproject implementation

Highly dependent on local politics

Local government leadership is still the key success factor change ofleadership in the middle of implementation significantly impede the reform

processes

Need to align reform agenda with political leaders

Investment fund is certainly an incentive for reforms, but not sufficient national-level recognition, capacity building also create incentives for LGs

Limited numbers (and lack of capacity) of local civil society, particularly outsideregional centers. Need to specifically build the capacity of linking, linking community

leaders to involve in district-level process Building on the existing initiativesone size fits all clearly does not work

Several aspects of public services are not necessarily impacted from enhancedbudgeting processes, need direct interventions as well

Competition among LGs (with rewards) promotes innovation among regions, and alsolearning from peer encourages and convinces others to initiate reforms

Challenges


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Challenges to both LG & CDD programs to institutionalizegood governance practices that have been introduced

Need to link community to supra community/village level players (LLI

Study). Most resources rest with LGs and need to work with them.

A lot of districts (endorsed by Central Government) have allocated

significant amount of funds as a Block Grant to Village. However, most of

them have not adopted CDD key success factors, such as intensive

facilitation, promotion of participation of women, transparent management offunds, etc.

Adopt CDD principles in LGs regular processes

CDD and LG programs need to work together to make this happened:

Supporting community leaders to participate district-level processes

Supporting LG to adopt CDD principles for their regular project cycle Blending CDD project funds with LGs Village Block Grant

Challenges

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