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2013/SFOM11/018 Session: 5.3

Current Status and Future Agenda of the Treasury and Budget Reform in Asia Pacific Region

Purpose: Information

Submitted by: Indonesia

11th Senior Finance Officials’ MeetingManado, Indonesia

22-23 May 2013

APEC Senior Finance Official Meeting

Current Status and Future Agenda

of the Treasury dan Budget Reform

in Asia Pacific Region

Agendas

• The IFMIS and Current Progress Status

• The Cash and Debt Management

• The Spending Review

• The Proposed Actions

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Jawa Island

Sumatera Island

Sulawesi Island

Bali & Nusa Tenggara Islands

Papua

Ambon & Ternate

Kalimantan Island

524 Provincies/

Regencies/Cities

84Ministries/Agencies

GDP 2011Rp7.226,9 T

(USD 822 Bn)

Growth Rate 2011 6.5%

177 Local

Treasury Offices

(#8,500)

30 Regional Treasury Offices

(#1,000)

Headquarter- 7 Directorates- 1 Secretariate

(#900)

DG TREASURY

CurrencyRupiah (Rp)

1USD=Rp9,000

Landmass 1,9 Million mile square

With 17.508 islands London

Ankara

Population240 million

Inflation Rate Feb 2012

3.56%

Public Debt to GDP25%

Item Initial Revision Proposal

Revenue Rp1,311 T Rp1,344 T

Expenditure Rp1,435 T Rp1,534 T

Financing Rp124 T Rp190 T

Deficit to GDP 1.53% 2.23%

State Budget 2012

Ankara

Investment Grade:Fitch: BBB-

Sovereign Debt: Moody’s: BAA3

Where we are?

84 Line Ministries and 23.000 Spending Units

Roadmap of PFM Reform in Indonesia

1999-2004 2005-2009 2009-2011 and beyond

New Laws: •1999: Decentralization law •2003: White Paper of PFM reform •2003: State Finance Law •2004: State Treasury Law •2004: Audit of the management

and accountability of the state finance

Creation of new Directorate Generals : •DG Budget (budget formulation

and preparation) •DG Treasury (budget execution

and treasury mgt - 2005) •DG Fiscal Balance (management

of transfer funds to the local governments - 2006) •DG Debt Management

(management of foreign and domestic loans) •DGSAM (management of state

assets and receivables - 2006)

Establishing IFMIS Project in Indonesia: •22 Dec 2004 to 2014: Government Financial Management

and Revenue Administration Program (GFMRAP), $60 million WB investment loan for implementing IFMIS (SPAN); •12 Oct 2006 to 2017: PFM MDTF Part I ($24 m) and Part II

($10 m) grants to complement the WB GFMRAP and also to support a broad range of PFM reform initiatives.

Procedural improvements to support PFM reforms: •Unified budget system: combined recurrent and

development budget, and the introduction of PBB and MTEF •Reforming business processes in the Local Treasury Offices

(KPPN) through the establishment of pilot showcase offices that reduce payment processing time from 2 days to sometimes 1 hour. • Introduction of cash management reform, starting with the

first implementation of Treasury Single Account (TSA) in 2009 •Establishing government accounting standard and

reorienting the chart of accounts •Reforming the government procurement process •MOF as one of the selected ministries to implement

bureaucratic reform (BR) program

Continuous improvements to support PFM reforms: • Implementation of PBB (2011) •The new simplified budget document which focus on

performance rather than detailed line item. •Performance information (including its formulated target

and indicators) •Full implementation and expanded coverage of the

Treasury Single Account •Continuing improvement on cash management, including

deepening and stabilizing of TSA, cash plan, idle cash management, better coordination with debt and monetary management •Deepening bureaucratic reforms within MoF •Full integration of all information technology within MoF • Implementation of accrual accounting

Contracts for implementing SPAN • IVV (Independent Validation and Verification) consultant to

assist project preparation and procurement •COTS and Systems Integrator (Turnkey) to deliver COTS

Solution; Infrastructure, DC & DRC; Telecom links; Cabling •BPI (Business Process Improvement) consultant (2007-2011) •CMC (Change Management and Communication) •PMQA (Project Management and Quality Assurance) •SAKTI (Spending Unit Application developer)

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The Significance of IFMIS Development

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The Significance of IFMIS Development

• IFMIS is the core of treasury and budget system, enabling the well-functioning of the financial management, better transparency and accountability, and easing any policy decision making

• The development of IFMIS creates opportunities to further reform, within the treasury and budget areas such as cash and debt management, budget process, or on much wider aspect of reform such as bureaucratic reform

• IFMIS which mostly developed based on best practices, in many occasions, has set up common standard of financial management practices, and proven facilitating easier standardized reporting and information exchange among APEC economies

• The last recent years, the common interest on IFMIS development has strengthened the cooperation among APEC economies and international organization as shown by many seminars, joint researches and trainings involving staff from many APEC economies

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PFM is very complex systems, and an IFMIS is very fundamental to make them function efficiently

The Significance of IFMIS Development

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O

B

O

T

Asset /

Inventory Mgmt

Procurement/

Purchasing

Mgmt of Budget

Authorizations(DG Treasury)

Commitment of

Funds(DG Treasury)

Payments and

Receipts Mgmt(DG Treasury)

Cash

Management(DG Treasury)

Debt and Aid

Management(DG Debt)

Audit and

Evaluation(Supreme Audit)

Budget

Preparation (DG Budget)

Payroll Calcs

HR Mgmt

Publishing, EIS,

DW, Web Portal,etc

Tax and

Customs

SPAN= B + T

Treasury System

(Budget Execution)

Accounting

Daily

operations

Market Operation

System & Tools

17

Fiscal Reports &

Budget Review(Dg Treasury)

Policy Development

and ReviewDG Budget & Fiscal

Policy Office

Debt and Aid Mgt

(DG Debt)

Market Operation System & Tools (Treasury Dealing Room)

DG Treasury

Cash Management (DG Treasury)

Some Facts about IFMIS Projects in Indonesia

Some Facts about IFMIS Projects (World Bank Study, 2011)

IFMIS implementation is an art, not a science‟ -- emblematic of complex systems which constantly evolve and expand in parallel to changes in PFM needs and advances in technology.

As with the design and implementation of any complex system, leadership, collaboration and innovation are important to the process.

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The Significance of Cash and Debt Management Improvement

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Objectives: 1. Minimizing Cost of Fund 2. Managing Government Account 3. Achieving Ideal Cash Liquidity 4. Optimizing Excess Liquidity

Goals: 1. Harmonizing Fiscal and Monetary

Policies 2. Enhancing Fiscal Transparency and

Fiscal Control 3. Resource Generation

Minimizing Risks: 1. Forex Risk 2. Maturity Risk 3. Liquidity Risk 4. Market Risk 5. Hedging Risk

IFMIS: 1. Automated Transactions 2. Standardized Rules 3. Integrated Database

TSA and TNP

TDR

Cash Forecasting

Revenue Centralization

ALM

ICT –IFMIS Tools

The Cash and Debt Management

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The Significance of Spending Review

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SPENDING REVIEW

PROGRAMS

ORGANIZATION

POLICY FUNCTIONAL

REVIEW

STRATEGIC REVIEW

1. Improvement in the quality of spending

2. Better allocation of budget limited resources

3. Increase the effectiveness of the government programs and their outcomes

Expected Outcome

The Spending Review

1. Enlarging Fiscal Space to finance Compulsory Expenditure, Infrastructure and increasing Saving

2. Improve inefficiency of Budget Execution

Immediate Output

IFMIS Environment

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The Proposed Real Actions

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The Proposed Real Actions

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Thank You