dsf annual report 2010

DECENTRALIZATION SUPPORT FACILITYANNUAL REPORT 2010

Decentralization Support FacilityIndonesia Stock Exchange BuildingTower I, 9th Fl., Suite 901Jl. Jenderal Sudirman Kav. 52-53Jakarta 12190P: +62 21 5299 3199F: +62 21 5299 3299E: [email protected]: www.dsfindonesia.org

Printed in August 2010Cover and layout: Harityas WiyogaPhotos: World Bank and stock.xchngThe findings, interpretations, and conclusions expressed herein do not necessarily reflect the views of DSF members or the governments they represent. DSF does not guarantee the accuracy of the data included in this work.

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FOREwORDOver the last year, the Decentralization Support Facility (DSF) has designed, approved, and begun to implement a comprehensive programme of support that addresses important aspects of public service delivery, fiscal decentralization, governance capacity building, and planning. DSF support to the development of local government borrowing (bond issuance); data provision to the regional financial information system; and monitoring and evaluation of the use of special allocation funds (DAK) to local governments is particularly noteworthy. And, among activities soon to commence implementation, its contributions to spatial planning and to the strengthening of the capacity of local government legislatures and local public service providers show great promise.

The challenge now is to ensure these programmes deliver concrete outputs that improve the decentralization process in Indonesia and the quality of governance and service delivery that people experience in their local communities.

However, perhaps the most important development to date has been the deepening of government ownership and leadership of the DSF. The DSF programme now clearly accords with the Jakarta Commitment’s emphasis on government-led capacity building: ‘government will articulate and development partners will support the achievement of capacity development objectives and targets’.

Another striking feature of the DSF programme is that much of it is being - or will be - executed using government procurement and financial management systems (‘on budget’ and ‘on treasury’). This feature of the DSF, which has required close collaboration between the DSF Executive and different units of government, and sometimes between government agencies, sets it apart from other (particularly bilateral) development assistance to decentralization. It has been a time consuming and sometimes complex process, but one that has yielded considerable benefit, in terms both of government capability enhancement and ownership. This too is a cornerstone of international aid effectiveness declarations – which emphasise the need to ‘strengthen and use developing country systems to the maximum extent possible’ and for donors ‘to use country systems as the first option for aid programmes’. These are important and heartening developments.

As the Jakarta Commitment asserts and the DSF demonstrates, multi-donor facilities that take seriously the aspects of government ownership referred to above are vital to aid effectiveness in strong middle income countries like Indonesia. Along the lines set out in this report, government is considering a number of scenarios for the future of the DSF and possible revisions to its governance structure and how best – with development partners - to build on the foundations that have begun here to be laid.

We would also like to take this opportunity to express our gratitude for the hard work that has been done throughout the year by government and donor members of the DSF Management Committee and the important contributions made to the DSF by its Steering Committee founding co-chair, Dr. Max Pohan, and by its outgoing co-chair, Prof. Dr. Mardiasmo.

Prof. Dr. Heru SubiyantoroActing Co-chair DSF Steering CommitteeSecretaryDirectorate General of Fiscal BalanceMinistry of Finance

Dr. Kenny DickCo-chair DSF Steering Committee DirectorDfID, Indonesia

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PREFACE

This report again reflects solid progress by the DSF over the past year. Its program of activities continues to make useful contributions to fiscal decentralization; to service delivery; to aspects of governance reform; to planning and performance management; and to knowledge management. However, the execution and implementation of the DSF 2009-2011 programme has brought out the tension between, on the one hand, understandable donor imperatives to disburse funds as quickly as possible and, on the other, government’s ability to absorb development assistance and, associated with this, the quality of the work that is done. This is particularly so for activities whose execution entails the use of government financial management and procurement systems. Much of the year has been consumed by project design work and by preparations for different forms of execution.

The report also draws attention to the evolution of the DSF towards genuine government ownership and leadership and the way in which this has come to be reflected in the management of the day-to-day operations of the DSF. The implications of this for the formal governance structure of the DSF are discussed in the report, and we strongly endorse the general direction of such discussion.

With the help of the DSF Executive, government is now in the process of designing a major programme of support to decentralization that could become a rallying point for development assistance in this field. We feel that the DSF is well placed to continue to play a significant role in relation to this and in relation to government’s management of development assistance for decentralization more generally.

Such progress has arisen from extensive collaboration and growing levels of trust (built on mutual perceptions of competence and integrity) between government entities and between government and other components of the DSF. These are necessary and sufficient conditions for aid effectiveness.

The founding and incoming government co-chairs of the DSF Management Committee, Dr Himawan Hariyoga and Dr Nuryanto, have been instrumental to the development of these conditions, as has the government technical team that supports the DSF. We would like to thank them all for their invaluable contributions.

A special vote of thanks goes to the founding co-chair of the DSF, Dr Himawan Hariyoga, whose equanimity and consummate interpersonal skills were crucial to DSF’s successful navigation of a particularly testing time in its history.

Prof. Dr. Heru SubiyantoroCo-chair DSF Management CommitteeSecretaryDirectorate General of Fiscal BalanceMinistry of Finance

Peter Ellis, PhDCo-chair DSF Management CommitteeSenior EconomistSustainable Development DepartmentWorld Bank

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TAbLE OF CONTENTS

SUMMARY ............................................................................................................................................................ 1

Governance and Development Context ........................................................................................................... 1

work Programming .....................................................................................................................................2

work Programme Implementation .................................................................................................................3

Donor Harmonisation and Knowledge Management .........................................................................................5

The Future of The DSF .................................................................................................................................5

Aid Effectiveness ........................................................................................................................................5

Governance, Local Government Engagement, and The DSF Executive ...................................................................5

Risks and Challenges ..................................................................................................................................6

Contracts and Agreements ...........................................................................................................................6

Financial Report .........................................................................................................................................6

Conclusion .................................................................................................................................................6

INTRODUCTION ......................................................................................................................................................7

Chronology of Significant Events ...................................................................................................................7

GOVERNANCE AND DEVELOPMENT CONTEXT ................................................................................................................9

Political Stability Combined with Strong, Sustained Development .......................................................................9

benefits and Challenges of Decentralization .................................................................................................. 10

Policy Choices in Relation to Service Delivery ................................................................................................ 12

Strengthened Purpose and Roles of The DSF .................................................................................................. 12

Governance Context and Decentralization ...................................................................................................... 12

STRATEGIC FRAMEwORK AND wORK PROGRAMMING ................................................................................................. 17

Strategic Framework ................................................................................................................................... 17

work Plan Activities.................................................................................................................................... 18

Public Service Delivery .......................................................................................................................... 18

Fiscal Decentralization .......................................................................................................................... 19

Governance Reform .............................................................................................................................. 19

Planning and Performance Management .................................................................................................. 19

work Programming ....................................................................................................................................20

wORK PROGRAMME IMPLEMENTATION .....................................................................................................................25

Key Milestones ..........................................................................................................................................25

Milestone 1: Improved Regional Financial Information Systems (SIKD) .........................................................25

Milestone 2: Enhanced Fiscal Decentralization Policy .................................................................................26

Milestone 3: Strengthened Monitoring and Evaluation of Special Allocation Funds (DAK) ................................26

Milestone 4: Improved Provincial Spatial Planning.....................................................................................27

Milestone 5: For Legislative Councils (DPRD), Improved Legislative Processes, Resource Allocations,

and Oversight ..................................................................................................................................... 27

Other Parts of the work Programme .............................................................................................................27

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Governance Reform ..............................................................................................................................27

Public Service Delivery ..........................................................................................................................30

Fiscal Decentralization .......................................................................................................................... 31

Planning and Performance Management ..................................................................................................32

Donor Harmonisation and Knowledge Management ...................................................................................34

Delays and Remedies .................................................................................................................................35

THE FUTURE OF THE DSF .........................................................................................................................................37

Structural Components and Responsibilities ..................................................................................................38

Achievements and Challenges .....................................................................................................................38

Achievements ......................................................................................................................................38

Challenges ..........................................................................................................................................39

The Future of the DSF: Complementary Strands of Development?......................................................................39

Strand 1: Extension of Existing Technical Assistance? .................................................................................. 41

Strand 2: Technical Support to a Loan? ....................................................................................................42

Towards Nationalisation .........................................................................................................................42

The Future of the DSF: Governance Structure .................................................................................................43

Next Steps ................................................................................................................................................46

AID EFFECTIVENESS ...............................................................................................................................................47

GOVERNANCE, LOCAL GOVERNMENT ENGAGEMENT, AND THE DSF EXECUTIVE ...................................................................49

Governance ...............................................................................................................................................49

Engagement with Local Government .............................................................................................................49

The DSF Executive ......................................................................................................................................50

RISKS AND CHALLENGES ........................................................................................................................................ 51

Risks ........................................................................................................................................................ 51

Challenges ...............................................................................................................................................52

CONTRACTS AND AGREEMENTS ...............................................................................................................................53

CONCLUSION ........................................................................................................................................................55

ANNEX A: SOURCES ...............................................................................................................................................57

ANNEX b: FINANCIAL REPORT ..................................................................................................................................59

ANNEX C: MONITORING FRAMEwORK .......................................................................................................................66

ANNEX D: LIST OF ACRONYMS, AbbREVIATIONS, AND TRANSLATIONS .............................................................................87

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SUMMARY SThis report presents an account of progress achieved by the DSF over the period July 2009 – June 2010. It also considers a number of scenarios for the future of the DSF and the conditions that must be met in order for its life to be extended beyond the current closing date for the completion of activities, which under current funding arrangements is September 2011. In addition, the report contains short chapters that address a possible aid effectiveness role for the DSF; risks and challenges faced by the DSF; contracts and agreements signed and about to be signed; and DSF governance arrangements, interactions with local government, and the DSF Executive.

The year began with the granting to the DSF by its principal financial donor (DfID) and its other financial donors (AusAID and CIDA) of a no-cost extension through to September 2011.1 The rest of the year was devoted to intensive activity design with government, preparations for activity execution by the Government of Indonesia or the Bank under the approved DSF Work Plan 2009-2011 and, for parts of the work plan, the early stages of implementation. Towards the end of reporting period, there were discussions concerning the future of the DSF and a possible aid effectiveness role for the DSF.

GOVERNANCE AND DEVELOPMENT CONTEXT

Indonesia’s status as a stable and strong democratic country with a healthy and robust economy consolidated over the last year and is increasingly widely recognized in the international community of nations. Despite the financial crisis, Gross Domestic Product (GDP) grew an estimated 4.5% in 2009, with a recovery in trade volumes and an increase in the current account surplus. In the last few years, considerable progress has also been made by government in relation to macroeconomic management, governance reform and development performance generally, and in relation to the political objectives of decentralization. Evidence of this is to be found in Indonesia’s steady climb up the national ‘world competitive’ rankings list (51 in 2008; 42 in 2009; and 35 in 2010). In 2010, Indonesia is ranked ahead of countries like Spain, Portugal, Italy and Russia. Local and foreign investor confidence remains relatively strong.

In terms of sustainable development, according to some estimates, the poverty rate has fallen by about one percent per year since 2003. By 2006, the percentage of people living on less than $1 per day was below the Millennium Development Goal (MDG) target. Even so, progress on certain development

1 Under current funding arrangements, the formal closing date is March 2012. The six months between the cessation of activities (September 2011) and the formal closing date allows for the settlement of outstanding payments and the orderly winding down and closure of the facility.

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SUMMARY

indicators - such as maternal mortality, chronic malnutrition, access to clean water, stable energy supply, levels of infrastructure investment (3.84% of 2008 GDP), education achievements, and poverty in general - still lags behind some poorer countries in the region. As we did last year, this report again emphasises the importance of striking a better balance between reform inspired by demand and reform based on a supply-side perspective.

In this context, questions of local service delivery are crucial. Expected increases in general (DAU) and special purpose (DAK) fiscal allocations to the regions, together with transfer of responsibilities for program implementation and revenue collection (such as property tax) could help to improved service delivery, but will clearly need to be managed carefully. For financial year 2010, around 322 trillion rupiahs (30% of total) has been budgeted in the state budget (APBN) for transfer to the regions. A further 40 trillion Rupiah will be channelled through deconcentration (Dekonsentrasi) and ‘co-administrative task’ funds (Tugas Pembantuan). However, these significant transfers need to be accompanied by adequate accountability systems. In 2008, only 8 out of 500 regions received unqualified audit opinions. Low absorption of funds is another problem. By the end of 2009, around Rupiah 100 trillion that was undisbursed was returned in the form of Bank Indonesia Certificates kept at the Central Bank.

The report also summarises governance changes that have a more direct impact on decentralization and on different aspects of the DSF work program, noting in particular changes in relevant legislation; institutions; key positions and associated authorities; and practices and processes.

The purposes and roles of the DSF remain valid and important in this governance and development setting. Soundly based, equitable, and well directed and implemented development policy; strong governance institutions; capable people of high integrity; and effective development assistance are more important than ever.

wORK PROGRAMMING

The chapter opens with a brief description of the DSF strategic framework, within which the activities outlined in the DSF Work Plan 2009-2011 are situated. It also contains brief descriptions of activities supported under the work plan, which are structured according to the four priority areas stipulated by the DSF SC and address one or more of the key issues highlighted in the strategic framework.

New program development. The period July-December 2009 was devoted to intensive activity design with government (14 main activities and 9 related, subsidiary activities) and preparations for activity execution by the Government of Indonesia (GOI) or the Bank under the approved DSF Work Plan 2009. The first six months of 2010 saw the beginnings of implementation for parts of the work plan, further preparations for different forms of execution, and the commencement of discussions concerning the future of the DSF and a possible aid effectiveness role for the DSF.

Work Programming process. Before execution and implementation of activities can take place, they must be developed in sufficient detail to provide a basis for procurement - into activity concept notes (ACNs). The (implementation) work to be undertaken must also be set against relevant comparative experience and, as far as possible, should be informed by the best thinking in the field.

Important features of the ACNs developed to date include their genuine genesis in government; their strategic significance to decentralization and their inter-connectedness; their basis in healthy engagement and dialogue with government; and, where feasible, their attention to political economy issues.

During the reporting period, progress in relation to the finalisation of execution arrangements for the majority of the fourteen activities has been satisfactory in the circumstances. Trust funds for eleven of the fourteen activities are now active and the activities are being implemented or are soon to begin implementation. Nevertheless, from a disbursement standpoint, progress has been slow.

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Of the remainder, ACN 11 (Formulation of Norms, Standards, Procedures and Criteria - MoHA) is close to finalising the conditions for execution; but progress for ACNs 4 (Management Strengthening and Institution Building for Local Public Service Providers - MoHA), 8 (Institution Building for Accelerated Development of Border Areas - MoHA), and 14 (Capacity Building for Minimum Service Standards Costing and Implementation - MoHA) has been slow and puts these activities at risk of not being able to complete by the closing date of September 2011, at least without significant reduction to the scope of work.

In relation to the second round of programming, six of the nine addenda have now been completed or are covered in an existing ACN or in other documents.

However, there has been little progress in relation to proposals 3 (Local Government Evaluation - MoHA), 5 (Regional Finance - MoF), and 9 (Grand Design on the Implementation of Regional Autonomy - MoHA). For all three of these activities, time is running out and it seems improbable that they would be able to complete by September 2011 without, at least, a significant reduction in scope.

On the basis of a fiscal agency agreement signed between the World Bank and the UNDP on 26 May 2010, the $2 million Provincial Governance Strengthening Programme will commence implementation in July 2010.

Delays. From a disbursement standpoint, progress has been slow: at the end of the reporting period, disbursements totalled USD 17.33 million (39.3% of total pledged or 41.38% of allocations). However, this needs to be viewed partly against inherited ‘disbursement lag’ from 2007, when the DSF had only disbursed 10% of its funds (US$ 4 million). It should also be seen in the light of the recency of its new work program (2009-2011) , which was approved in late 2009. Further explanations for the pace of progress, particularly in relation to recipient-execution, are provided in the body of the report.

wORK PROGRAMME IMPLEMENTATION

Key milestones. Progress is satisfactory in relation to the attainment of five key milestones, although for some there has been a certain amount of drift in relation to target completion dates:

a. ‘Improved Regional Financial Information Systems’: electronic data are available for 8 local governments and the goal of having 25 districts complete electronic data submission is within reach.

b. ‘Enhanced Fiscal Decentralization Policy Framework’: data gathering workshops have been held in three provinces and a revised draft of the grand design is expected in the third quarter of 2010, but delays are probable with work on the grand design of regional autonomy (by MoHA), which will influence speed of progress with this milestone.

c. ‘Strengthened Monitoring and Evaluation of Special Allocation Funds’ (DAK): preparation for data collection is well advanced and field work in Yogyakarta and five other provinces will commence in the third quarter of 2010.

d. ‘Improved Provincial Spatial Planning’: support with the drafting of integrated plans is being provided to local governments in three provinces. The milestone should be achieved by June 2011.

e. ‘For Local Parliaments, Improved Legislative Processes, Resource Allocations, and Oversight’: Recipient execution is underway and procurement has begun. Training preparation is due to commence in the third quarter of 2010 and is on target to complete initial training targets by December 2010.

Governance reform. The DSF finances four activities in this field: (a) local legislature (DPRD) capacity strengthening (ACN 1 and addendum; and Milestone 5); (b) institution building of government education and training centres - on competency-based standards for improved public service delivery (ACN 7); (c) decentralization education and training (ACN 9); and (d) sub-national investment climate reform.

Procurement for the DPRD strengthening activity has begun and it is on track to be completed by September 2011, with initial training targets met by December 2010 (as above). Likewise, procurement

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SUMMARY

is underway for government education and training centre development and this activity is on schedule to complete by September 2011. Both activities are recipient-executed (MoHA), which necessitated extensive preparation and capacity building.

In relation to sub-national investment climate reform, further institution building of local governments is to be provided for the establishment of effective, efficient and accountable regulations and processes for business licensing. Implementation arrangements are being finalised and the activity should commence in the third quarter of 2010.

The decentralization education and training activity comprises scholarships for coursework postgraduate degrees (abroad) and short courses of training for central, local government, and civil society organization (CSO) officials. The scholarships programme is being administered by the British Council and scholars will commence study in September 2010. English language training for IELTS was conducted in June 2010. Execution arrangements for the short course and study tour components of the activity will be finalised in the third quarter of 2010.

Public service delivery. In the domain of public service delivery, the DSF continues to contribute to the development and dissemination of legislation and procedures governing functional assignments; minimum service standards (MSS) (and costing thereof); service delivery in border areas; and institution and capacity building of service providers (referred to as ‘alternative mechanisms for service delivery’).

Activities in these fields under the DSF Work Plan 2009-2011 have been slow to get off the ground however: the recipient-executed parts of the work on MSS (ACN 14) are not expected to commence until the third quarter of 2010; support to the formulation of norms, standards, procedures, and criteria (ACN 11) will commence in July 2010; and management strengthening and institution building for local public service providers (ACN 4) is also due to commence in the third quarter of 2010.

Fiscal decentralization. DSF supports four areas of fiscal decentralization: (a) sub-national borrowing (ACN 6); (b) data provision to the regional financial information system (ACN 12 – and Milestone 1); (c) the policy framework for fiscal decentralization (Addendum to ACN 13 – and Milestone 2); and (d) monitoring and evaluation of special purpose grants to local governments (ACN 3 – and Milestone 3).

Under the general heading of sub-national borrowing, the DSF has supported activities in debt restructuring; preparatory work for the issuance of a Jakarta bond and a Bandung bond; helped to draft relevant legislation; conducted pre-feasibility studies of projects to be financed; and has helped to estimate local government pay-back capability. Scoping work for a Surabaya bond is planned for August 2010.

Planning and performance management. Six important domains of planning and performance management are currently receiving DSF support: (a) spatial planning (ACN 5 and Milestone 4); (b) institution building for the development of border areas (ACN 8); (c) the strengthening of local government natural resource management capability (ACN 10); (d) capacity building for regional policy formulation; (e) local government evaluation; and (f) strategic planning for the establishment of a regional economic development facility.

In relation to institution building for the development of border areas, recommendations for the organisational design of the National Agency for Border Management (BNPP) have been put to a cross-ministerial group comprising representatives from Bappenas, the Ministry of Home Affairs (MoHA), the Ministry of Disadvantaged Areas, and the Ministry of Finance (MoF). In the third quarter of 2010, among other things, the DSF will support the production by Bappenas and MoHA of national and regional action plans to improve public service delivery in border areas.

The pilot stage of support to spatial planning began in May 2010. By the third quarter of 2010, this should have resulted in the production by local governments in three provinces (West Sumatra, East Java, and Gorontalo) of spatial plans that are integrated with national spatial plans.

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The DSF is providing technical assistance to a team comprising representatives of government, commerce and industry, CSOs, and academia whose job it is to assist government with the evaluation of newly-created regions and to make recommendations concerning policy.

Implementation of the support to the strengthening of local government natural resource management capability; capacity building for regional policy formulation; and strategic planning for the establishment of a regional economic development facility will commence in the third quarter of 2010.

DONOR HARMONISATION AND KNOwLEDGE MANAGEMENT

Donor harmonisation. A donor mapping data base (DMD) has been developed and is now in the process of being upgraded and up-dated; supported technically by the DSF; and institutionalised in government. The purpose of the DMD is to monitor and analyze aid rendered to Indonesia by the international donor community, and thereby to serve as a valuable planning and monitoring tool for government and for members of the donor community.

Knowledge management. This consists of four main elements: first, the production of occasional policy briefs arising from DSF-supported activities or other work relevant to decentralization done by others; second, the maintenance of an electronic repository of relevant documents on decentralization produced by development partners in Indonesia; third, the maintenance of a DSF web site; and fourth, knowledge sharing and knowledge building activities concerning critical aspects of the DSF strategic framework for the benefit of central and local GOI officials and CSOs.

THE FUTURE OF THE DSF

The report discusses a number of scenarios for the future of the DSF. Included among them is a scenario – in the very early stages of discussion - that involves the DSF in the design and implementation of a programme of technical assistance and capacity building associated with a Development Policy Loan (DPL) from the World Bank to the Government of Indonesia, possibly building on the Asian Development Bank’s USD 350 million Local Government Finance and Governance Reform Policy loan. This new programme possibility will be developed by government in consultation with stakeholders, including AusAid, CIDA, GTZ, USAID, UKAID, the Netherlands, and UNDP. This section also considers how all or parts of the DSF might be assimilated by government over the medium term and it makes proposals for a revised and more effective and efficient governance structure for the DSF that reinforces government leadership of the facility (‘nationalization’) and involves local government and other stakeholders.

AID EFFECTIVENESS

With a view to establishing a more clearly defined capacity building role for the DSF in relation to aid effectiveness, in the third quarter of 2010, further discussions will be held with government concerning a broad range of aid effectiveness issues – extending beyond ‘donor coordination’ or ‘harmonisation’ to data concerning ‘market’ composition, modalities of assistance, quality of design and implementation; alignment; accountability and reporting; and government ownership.

GOVERNANCE, LOCAL GOVERNMENT ENGAGEMENT, AND THE DSF EXECUTIVE

Towards the end of the second quarter of 2010, the process of formal reassignment of co-chair responsibilities for the DSF Management Committee (MC) and Steering Committee (SC) began. During the transition period, the (predominantly work plan execution and implementation) business of the DSF has been managed effectively and efficiently through breakfast meetings held periodically with the founding government co-chair of the MC, and the outgoing and (possible) incoming government co-chairs.

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SUMMARY

Also in the second quarter of 2010, there was discussion within government concerning its representation on the DSF SC and of the governance structure of the DSF as a whole (see Chapter 5).

In accordance with MC direction, in May 2010 concrete steps were taken towards the establishment of a local government consultative group for the DSF.

During the first six months of 2010, a number of professional national and international staff appointments were made, thereby bringing the DSF Executive to its full complement of professional staff.

RISKS AND CHALLENGES

Aid effectiveness issues constitute the main risks to the DSF, particularly those arising from the extent to which obligations under international aid effectiveness declarations are fulfilled by signatories to those agreements.

Challenges facing the DSF are discussed in terms of preparations for recipient execution; speed of implementation and disbursement; expectations for improvement (that are likely to be incremental rather than ‘breakthrough’ and to take a long time); and developing a more widely shared understanding of ‘government led’.

CONTRACTS AND AGREEMENTS

This chapter sets out contracts and agreements signed during the first six months of 2010; and those that are expected to be signed by September 2010.

FINANCIAL REPORT

On the basis of exchange rates prevailing at 30 June 2010, the total amount pledged to DSF stands at USD 44.06 million. Of this amount, a total of USD 41.88 million (95% of total pledged) has been formally allocated to approved activities and DSF operations. At the end of the reporting period, disbursements totalled USD 17.34 million (39.3% of total pledged or 41.38% of allocations). A full financial report is set out in Annex B.

CONCLUSION

The report concludes by observing that the DSF remains the only genuinely government-led multi-donor facility in the field of decentralization. It is unusual also in that many of the activities it supports are executed using government systems of financial management and procurement. It is making important contributions to aspects of fiscal decentralization, service delivery, governance reform, and planning and performance management.

For all of these reasons, it is highly valued by government, which is the strongest endorsement that it could receive.

This makes it a viable means for donors to fulfil many of the aid effectiveness obligations set out in the Paris Declaration (2005), the Accra Agenda for Action (2008), and the Jakarta Commitment (2008).

With help from the DSF Executive, in June 2010 government began the process of designing a programme of support to decentralization that will address significant aspects of fiscal decentralization, service delivery, and upward and downward accountability. It is envisaged that this programme (whose design should be completed by around September 2010) will provide the foundation for DSF support beyond March 2012 and the means by which closer links with other programmes of assistance to decentralization soon to commence implementation (such as those of AusAID, CIDA, GTZ, and USAID) can be forged and maintained.

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In accordance with the DSF Operations Manual, this report is submitted within 30 days following the end of the second quarter of 2010.

The report begins with a chronology of significant events that have taken place over the past twelve months. Next, progress and plans are set against a general discussion of development in Indonesia that – with up-dates - draws partly on discussions of context presented in quarterly reports submitted during the year.

Two chapters are devoted to programming and implementation of DSF-financed activities.

The report also contains a chapter that discusses possible future scenarios for the DSF and the evolution of its governance structure towards greater government ownership; as well as chapters that discuss a possible aid effectiveness role for the DSF; risks and challenges facing the DSF; contracts and agreements signed and due to be signed by the end of the third quarter of 2010; and current DSF governance arrangements, interactions with local government, and the DSF Executive.

Progress of the DSF work programme made against milestones is incorporated in a monitoring framework set out in Annex C. A financial report for the year is presented as Annex B.

CHRONOLOGY OF SIGNIFICANT EVENTS

July-October 2009. Following the granting (on 12 May 2009) by the DSF’s principal financial donor, DfID, and soon thereafter by its other financial donors (AusAID and CIDA) of a no-cost extension of their support to the Facility through to September 2011,2 intensive design work was carried out on 14 activities under the DSF Work Plan 2009-2011. Detailed ACNs were circulated to MC members for comment and to independent reviewers. Following incorporation of feedback, the ACNs were approved by the DSF MC by circulation.

28 October 2009. At a meeting held on 28 October 2009, it was agreed that a further 9 activities that were closely linked to the first batch of 14 activities under the DSF 2009-2011 Work Plan could be described and argued briefly in short concept papers (1-2 pages), reviewed by MC members, and approved by

2 This is the date for the cessation of activities. The formal closing date of the facility is currently 31 March 2012. The six months between the cessation of activities and the formal closing date allows for the settlement of outstanding payments and the orderly winding down and closure of the facility under current funding arrangements. The Contribution Agreement has been revised ac-cordingly. The Government of Indonesia and the World Bank have extended the period of the memorandum of understanding governing the DSF to December 2011.

INTRODUCTION 1

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INTRODUCTION

circulation. These 9 additional activities were then to be designed in greater detail, reviewed internally, and incorporated as addenda to relevant activities in the first batch of 14 activities.3

November - December 2009. The 9 additional activities were designed, written-up, and approved as above and work continued on preparations for recipient and Bank execution of the first batch of activities. The approval of the 9 additional activities and their associated budgets meant that by December 2009 all pledged monies under the DSF had either been disbursed or committed or allocated to approved activities.

January-June 2010. This period was given over to further design work and the writing of addenda and preparations for recipient and Bank execution of activities, and implementation. It also saw the beginning of discussions within government and the Bank and between government and development partners of future scenarios for the DSF. Steps were also taken towards the establishment of a local government consultative group for the DSF; towards identifying an aid effectiveness role for the DSF; and towards institutionalization within government of a donor-mapping database.

3 Activity concept notes - and addenda to them - set out in sufficient detail to provide a basis for procurement the purposes and ra-tionales of activities contained in the DSF Work Plan 2009-2011. They also indicate the agreed mode of execution to be employed for activities and contain a budget estimate and procurement and implementation schedule.

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Over the course of the reporting period, Indonesia’s status as a stable democracy that plays a constructive role in the regional and international communities of nations continued to grow and to be increasingly widely recognised4.

POLITICAL STAbILITY COMbINED wITH STRONG, SUSTAINED DEVELOPMENT

Political governance. The bases of such development, which were discussed in the DSF Annual Report 2009, remain solid, namely: first, the strength of the electoral system, which has become one of the more competitive in the region. Governments at all levels are elected in free, fair, and peaceful elections that result in a significant turnover of representatives. Second is the Indonesian presidential form of government, which is designed to provide checks and balances between the legislative, judicial and executive branches of government. Third, the Constitutional Court exercises critical oversight of parliament and of other institutions.

Economic governance. Fourth, as a consequence of good economic management over several years, public debt has been reduced, foreign reserves have grown, the financial sector has been strengthened, and a more robust domestic economy has been established. In short, Indonesia’s macroeconomic condition is stable and not in crisis. Fifth, all of this has helped to increase local and foreign investor confidence, and civil society organisations are better able than before to pursue their interests and to be heard. Sixth, recognizing its low standing in international comparisons of the extent of systemic corruption, the government has maintained its vigorous and well-publicised anticorruption drive.

As a result of such developments, Indonesia weathered the global financial turmoil and economic slow-down of recent years better than most other economies in the region and better than many others outside of the region. After macroeconomic stability was restored in 2004-08, economic growth has been strong and sustained. Despite the financial crisis the GDP grew an estimated 4.5% in 2009, with a recovery in trade volumes and an increase in the current account surplus.

Domestic demand has been the main driver of recent growth rates. Public debt has been reduced from more than 80 percent of GDP in 2000 to 32 percent in 2008. And while Indonesia is a net importer of oil it is a net exporter of energy. Booming exports have resulted in balance of payments surpluses, helping to produce foreign exchange reserves that provide a cushion against external shocks.

During the last few months, the country’s financial condition has also remained relatively unaffected by instability in several European sovereign debt markets. Moody’s ratings in June 2010 were positive and on an upward trajectory, noting ‘the country’s capacity for sustained strong growth, the overall stability 4 All secondary sources used as a basis for statements in this report are listed in Annex A.

GOVERNANCE AND DEVELOPMENT CONTEXT 2

10


and effectiveness of its fiscal and monetary policies, and expectations of further improvements in the government’s financial and debt position’. The World Bank’s (June, 2010) assessment is also positive – it expects ‘the (Indonesian) economy to accelerate through 2011, largely due to domestic demand’. Inflation has been moderate and is likely to remain so.

Further evidence of the extent of Indonesia’s achievements is to be found in the IMD World Competitiveness Yearbook 2010, where Indonesia’s competitiveness ranking has continued its steady improvement of recent years - from 42nd place in 2009 (up from 51st in 2008) to 35th in 2010. This ranking places Indonesia ahead of countries like Spain (36), Portugal (37), Italy (40), and Russia (51) and not that far behind Japan (27). IMD competitiveness rankings are based on careful and impartial assessments of changes to 329 criteria, two thirds of which are quantitative and ‘objective’.

Cautionary notes include the fact that government spending in the first five months of 2010 deteriorated relative to 2009, particularly for capital expenditure. A projected recovery in global commodity prices is one of a number of factors that could cause inflationary pressure in 2011. GDP growth is projected to be 6.2% in 2011, but this is heavily dependent on unreliable forecasts of increased global commodity prices.

The next phase of reform in Indonesia is likely to be less straight forward than the last one however. More, and more sophisticated, infrastructure will be needed. Special attention will need to be given to secondary and tertiary education, and to the development of sustainable health care and health insurance systems. Crucial also will be employment generation in the formal sector - by, for example, providing better access to finance for smaller firms (constrained at present by an oligopolistic banking sector).

Much will continue to depend on maintaining the commitment to governance improvement – to all legal institutions (and corruption); to public sector efficiency and effectiveness; and to sustainable growth with equity. Without such commitment, it will be difficult to avoid the ‘middle-income trap’ – or of falling between two stools: on the one hand, the speed and range of technical innovation of high-income countries and, on the other, the cheapness of labour in low-income countries. This can lead to stagnant poverty levels, the unsustainable depletion of natural resources, and disruptions to social cohesion.

bENEFITS AND CHALLENGES OF DECENTRALIZATION

In many countries that have embarked on major programmes of decentralization, the primary purposes have been political, either those of consolidating the position of a ruling party and of ruling elites or those of preventing the fragmentation of the state and ensuring political stability, or both. Our brief discussion above would suggest that in Indonesia in large measure the latter political purposes have been – and continue to be - well served by government policy on decentralization, and are well on the way to being achieved.

But as with any complex governance system, there is still room for improvement. As noted above, crucial institutions - such as the civil service, the legal system, the security sector, and provincial and district levels of government - are still weak.

Poverty. According to some estimates, the poverty rate has fallen by about one percent per year since 2003. By 2006, the percentage of people living on less than $1 per day was below the MDG target. Even so, poverty remains a problem. While considerable progress has been made on some indicators (for example, life expectancy) and there is some debate about measurement and indices, it is generally accepted that the number of people living in poverty is high for a middle income country, and (as a percentage of population) comparable to or worse than that of some low-income countries such as Vietnam. On some measures, nearly half of Indonesia’s population can be classified as poor, or as ‘near poor’ and therefore vulnerable to external shocks that can drive them into poverty. Recent increases in food, oil, and other commodity prices are likely to have a disproportionate impact on poor and near-poor households.

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Maternal mortality rates remain high - as much as three times those of Vietnam and six times those of China. Less than 1% of Indonesians have access to piped sewerage systems. And there are problems with chronic malnutrition, access to clean water, stable energy supply, levels of infrastructure investment (3.84% of 2008 GDP), and education achievements. As in many other countries, there is significant geographical variation in these indices and in poverty levels.

Cross-cutting issues. The magnitude, complexity, and speed of Indonesia’s decentralization give rise to inevitable problems: of weak capacity at all levels; of lack of clarity in the attribution and definition of roles and functions between institutions and between levels of government; and weak upward and downward accountability. Rapid urbanization is going to require heavy investment in physical infrastructure and in social services and will exacerbate the other challenges mentioned. The DSF is making important contributions in many of these areas.

Regional autonomy. There are immense challenges surrounding regional autonomy – in June 2010, proposals for up to 181 new regions were being considered by the Ministry of Home Affairs. And opinion is divided as to the benefits - some arguing that local elites benefit disproportionally and that regional proliferation has simply served to multiply the opportunities for local-level corruption. A final decision on the creation of further new regions is likely to be postponed until a ‘grand design’ for the restructuring of regions has been produced. A Grand Design for Regional Autonomy (to 2030) is also being developed. The DSF is assisting with this under its 2009-2011 work plan.

Local government. The new decentralization has changed local government throughout the nation significantly. For example, new funding mechanisms delegate significant discretionary spending authority to local governments; local legislative assemblies are empowered to oversee local allocations and approve local budgets; and the authority and responsibility of district heads (bupati) and mayors (walikota) have been expanded significantly to cover a range of new functions.

The more than 500 provincial, district, and city governments now undertake almost 40 percent of public spending. And a number of sub-national governments have undertaken major reforms of their public sector systems, introducing performance-based budgeting and one-stop public services.

In this context, the questions of local service delivery are crucial. Expected increases in general (DAU) and special purpose (DAK) fiscal allocations to the regions, together with transfer of responsibilities for program implementation and revenue collection (such as property tax) could help to improved service delivery, but will clearly need to be managed carefully. For financial year 2010, around 322 trillion rupiahs (30% of total) has been budgeted in the state budget (APBN) for transfer to the regions. A further 40 trillion Rupiah will be channelled through deconcentration (Dekonsentrasi) and ‘co-administrative task‘ funds (Tugas Pembantuan). However, these significant transfers need to be accompanied by adequate accountability systems. In 2008, only 8 out of 500 regions received unqualified audit opinions. Low absorption of funds is another problem. By the end of 2009, around Rupiah 100 trillion that was undisbursed was returned in the form of Bank Indonesia Certificates kept at the Central Bank.

Government is aware, however, that the realization of national state sovereignty and development goals and the sustainability of the advances made will depend a great deal on the impartial or equitable delivery of local-level benefits or services to ordinary citizens, and the reduction of disparities between levels of society and between geographical regions. Ensuring adequate mechanisms for providing incentives and holding local government accountable to its citizens will be crucial to this. A number of the activities approved in the DSF Work Plan 2009-2011 demonstrate government’s commitment to addressing such issues.

Getting the balance right: To the extent that local governments have grown accustomed to the greater autonomy afforded to them by decentralization (particularly since 2001), a major task facing government will be to strike a balance between national concerns such as the recurring (though seemingly diminishing)

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threat of secession, on the one hand, and legitimate demands from the periphery for the maintenance of gains in local government autonomy on the other. Policies are clearly needed that promote the common interests to be found in these positions and that address questions of social and economic exclusion. Again, recognition of this is inherent in the goal of the DSF and its strategic priorities, which accord prime importance to improvements in service delivery for ordinary citizens.

POLICY CHOICES IN RELATION TO SERVICE DELIVERY

We reiterate our observation from 2009 that (understandable early) government emphasis on supply-side social engineering, particularly up-stream; centralist tendencies among power brokers; policy complexities and imperfections; and associated problems of implementation have constrained improvements to local service delivery and, thereby, national performance in relation to certain poverty indicators (as outlined above).

Again, as in last year’s report, our brief analysis of governance and development circumstances in Indonesia confirms that in relation to good governance, and decentralization and service delivery, there is much to be gained from demand side reform that creates heightened awareness of rights (and obligations) and expectations, and thereby demand, among citizens. This should be combined with continued supply side support that (among other things) promotes the allocation of well managed incentives to local governments for service provision. These conclusions are implicit in the four priority areas specified for the DSF by its Steering Committee, which embrace both supply and demand side considerations; capacity building; policy reform; and strengthening governance and accountability.

The need to strike an appropriate balance between demand and supply-side perspectives on support to decentralization is increasingly recognised within the DSF. The programme of support to decentralization that (beginning in June 2010) is in the process of being designed by government with the assistance of the DSF Executive pays particular attention to this question.

STRENGTHENED PURPOSE AND ROLES OF THE DSF

The relevance and importance of the purpose and roles of the DSF are enhanced by these circumstances. In the current global environment, soundly based, equitable, and well directed and implemented policy; strong institutions; capable people of high integrity; and effective development assistance are more important than ever.

Discussion in subsequent sections of this report of existing and planned DSF activities demonstrates DSF’s contribution to date and its potential contribution to these ends.

GOVERNANCE CONTEXT AND DECENTRALIZATION

In the rest of this chapter we collate governance developments that have taken place during the year that have a more direct and immediate bearing on different aspects of the DSF work program (principally changes in relevant legislation; institutions; key positions and associated authorities; and practices and processes).5

Decentralization in general. Two laws that form the basis of decentralization and local government are under revision, namely Law 32/2004 on Local Governance and Law 33/2004 on Fiscal Decentralization. Discussions concerning revisions to Law 32/2004, which are coordinated by MoHA, have been held over the last three years and have involved consultations with the general public as well as a number of local governments throughout the country. The business of revising this law is stipulated in the National Legislative Program 2010-2014. Considerable progress has been made with the revision of Law 32/2004 and a large number of strategic issues have been identified, including issues surrounding the establishment of

5 This does not pretend to be a complete account of such matters.

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autonomous regions; the allocation of functions between different levels of government; the accessibility of a number of basic services; the role of the governor as a representative of the central government; inter-regional cooperation; and regional planning and data management.

Government Regulation Number 19:2010 concerning ‘Procedures for the Implementation of Tasks, General and Financial Authorities associated with the Position of Governor as Government Representative in the Provinces’ has been issued as a follow-up to Law 32:2004. Its effective implementation will require a Presidential Decree and/or Minister of Home Affairs Regulation so as to define clearly implementation processes and procedures.

This regulation is geared towards reemphasizing the coordinating, facilitating and supervising role of the governor in governmental affairs implemented by districts and municipalities; reducing the strain or improving relations between province and lower levels of local government in some provinces; providing for stricter control of performance of districts and municipalities in implementing governmental affairs; applying similar norms, standards and performance criteria (NSPK) in regional development throughout Indonesia; reducing gaps in economic development between districts and municipalities; and promoting inter governmental cooperation between districts and municipalities.

Legislative councils (DPRD). In preparation for the 2009 legislative elections, a revision to Law No.22/2003 was passed. In discussions leading up to the revision, the position of the DPRD - as an elected body accountable to local authorities as opposed to an extension of the central government - was debated but not decided, and is therefore not addressed in the revision. However, the debate on this issue continues - in discussions surrounding the proposed revisions to Law No.32/2004 on local governance. Several studies have indicated that a careful review of the system of checks and balances is needed, including the approval of local regulations (whether by judicial review or MoHA) and the relationship between the DPRD and local government heads. In addition, discussions surrounding Law No.32/2004 are examining the role of the governor and whether the position will be an appointment or directly elected. Resulting decisions will have a significant bearing on a number of aspects of governance, such as public accountability and political legitimacy.

Competency-based training. The President announced that his number one priority in the Medium-term Development Plan for 2010-2014 is bureaucratic reform, covering the revision of the system of recruitment, education, appointment, promotion, and transfer of civil servants. The Government Training and Education Centre (Diklat) will make an important contribution to this reform program. Diklat’s mission is formalized in Minister of Home Affairs Decree No.378/2009 on the ‘Formation of a Reform Team for the Government Education and Training Centres in the Ministry of Home Affairs and Regional Governments’. Diklat must map competencies, review systems and procedures, and develop a competency-based training program to transform the training apparatus into a performance-based system. Diklat continues to be involved with the State Ministry of Administrative Reform (Kemenpan), the National Civil Service Agency (BKN), and the National Institute of Public Administration (LAN) on issues of consolidation and capacity building related to bureaucratic reform.

Planning. The Medium-term Development Plan for 2010-2014 (RPJM) became law in January 2010 (Presidential Regulation No. 5, 2010). The RPJM is presented as three books: Book 1 on ‘National Priorities’; Book 2 on ‘Strengthening the Synergies between Sectors’; and Book 3 on ‘Development with a Regional Dimension’. This will clearly be a crucial reference point for all of the support provided in this area, as well as for many other DSF-supported activities. Investment climate is an important part of the RPJM and two ministries – the Ministry of Home Affairs (MoHA) and the National Development Planning Agency (Bappenas) – are designated as being responsible for improving investment climate. The DSF-financed activity will help MoHA to achieve 2010 national targets that have been agreed between the Minister and the President.

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The Government continues to press regional governments to bring their spatial plans into line with the national spatial plan, as mandated by Law No. 26, 2007. Through Presidential Decree No. 4, 2009, government established the National Agency for the Coordination of Spatial Planning (BKPRN). This is a cross-ministerial agency whose job it is to ensure sectoral coordination in spatial planning and implementation and to resolve spatial planning problems at national and regional levels. As of June 2010 – over one year since the central government’s deadline for the completion of provincial spatial plans – only a handful of provinces have finalised their spatial plans. The DSF, through Bappenas, is supporting six municipal and district governments within three provinces (West Sumatra, Gorontalo and East Java) with the drafting of spatial plans that are aligned with higher-level spatial plans and integrated with development plans.

Border areas. Presidential Regulation 12/2010 on the establishment of a National Agency for Border Management (BNPP) defines the positions, roles and responsibilities, and membership of the organization. BNPP will provide policy direction for the development of border areas, determine program budget allocations, coordinate implementation and monitoring, and evaluate the management of border areas. The head of BNPP is the Minister of Home Affairs. A permanent secretariat will be established with three deputies responsible for: state boundary management; resource potential management; and border area infrastructure management.

Inter-regional cooperation. Several recent pieces of legislation are relevant to DSF work in this field, namely:

a. Minister of Home Affairs Regulation number 19/2009 that provides guidelines for capacity building of organisations responsible for the implementation of inter-regional cooperation – it provides a syllabus for training; and directions concerning the identification and selection of participants and facilitators, organization, finance, and so on.

b. Minister of Home Affairs Regulation number 22/2009 provides: guidance for the establishment of ‘coordinating teams for inter-regional cooperation’ at both the provincial and local government levels; detailed procedures for implementing inter-regional cooperation; and a list of options for managing such cooperation.

c. Minister of Home Affairs Regulation number 23/2009 sets out procedures for the facilitation and supervision of inter-regional cooperation; and specifies roles, tasks and responsibilities of the joint secretariat for inter-regional cooperation in central government (MoHA) and the coordinating team for inter-regional cooperation, at both provincial and local government levels.

Newly-autonomous regions. In relation to the evaluation of newly-autonomous regions, two ministerial regulations are noteworthy:

a. Minister of Home Affairs Regulation 21/2010 provides guidance on the evaluation of autonomous regions that were created following the implementation of Law 22 of 1999 on regional government.

b. Minister of Home Affairs Regulation 23/2010 sets out methods and procedures for the evaluation of newly-autonomous regions.

Minimum service standards. The proper costing and implementation of minimum service standards (MSS) is clearly crucial at all levels of government. Law 25/2009 (on public services) mandates the setting of service standards in all sectors. To date, seven ministries have formalized MSS legally (health, social services, environment, public housing, home affairs, and women’s empowerment). Only the Ministry of Health has issued formal technical guidelines for MSS costing (Minister of Health Regulation 317/2009). The Ministry of Health has also set up a team to accelerate the implementation of MSS in health (through Minister of Health Decree 341/2010). In 2010, the aim is to formulate and implement minimum service standards in health, environment, social affairs, and home affairs in districts and municipalities in 33 provinces and to have these service standards reflected in local government budgets. Presidential Instruction 3/2010 among other things stresses the importance of equality of access and treatment of

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women and children; the attainment of MDGs on poverty, basic education, gender equality and women’s empowerment, infant and maternal mortality rates, HIV/AIDS, malaria and other contagious diseases; and environmental sustainability. These matters were discussed at a national seminar held on 29 June 2010 (sponsored by MoHA and the DSF).

Public services. Minister of Home Affairs Regulation 4:2010 - Guidelines for Sub-Districts’ Integrated Administrative Services – is designed to enhance the quality, efficiency, effectiveness and accessibility of public services. It does this by delegating some of the authorities in licensing and non-licensing services held by regents/mayors to heads of districts. It puts districts at the forefront of public service delivery, among other things, by establishing the circumstances under which districts can provide administrative services (such as population administration) and can form implementation teams to do this; it sets general standards of service and facilities; identifies budget sources; and provides guidelines on facilitation and supervision.

Ministry of Home Affairs strategic objectives and performance indicators. On February 12, 2010, Minister of Home Affairs Decree 061-41: 2010 was issued. The decree sets out 15 strategic objectives and 33 key performance indicators for MoHA as a whole and does likewise for each directorate general within MoHA. All DSF support to MoHA accords with relevant strategic objectives set by MoHA.

Strategic objectives of particular relevance to the DSF programs include:

a. The enhancement of the development of border areasb. The enhancement of the quality of the democratization processc. The enhancement of the implementation of minimum service standardsd. The regularization of the implementation of evaluation processes surrounding the designation of

newly-autonomous regions and the development of a ‘grand’ strategy for regional arrangementse. The enhancement of partnerships between government and the private sectorf. The widening and acceleration of public services reformg. The harmonization of local regulations with MoHA legislationh. The establishment of accountable and transparent local financial management systems.

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Following a brief account of the strategic framework that underlies the DSF Work Plan 2009-2011 and broad descriptions of the activities it supports, this chapter outlines progress with the design and execution of those activities. Implementation progress for the DSF work programme as a whole is discussed in Chapter 4.

STRATEGIC FRAMEwORK

The DSF framework builds on the four priority areas identified by the DSF SC and is reflected in the goals and purpose of the DSF monitoring framework. The strategic framework is also informed by the discussion of the general governance and decentralization context, which acknowledges, first, the considerable advances that have been made in recent years in Indonesia in relation to a number of important aspects of good governance; and second, the significant benefits yielded by the government’s decentralization program, at both national and local levels.

A summary of the strategic framework is set out in Box 1 below.

Box 1: DSF Strategic Framework Outline

Demand for Local Public Services

• There exists high reported satisfaction among citizens with the current state of local public service delivery • This co-exists with comparative evidence suggesting that performance on certain development indicators is

lower than that of some poorer countries in the region• Among a substantial proportion of citizens there is low willingness to pay for improvements to service

delivery⇒ Weak citizen demand for public services⇒ Weak citizen demand for local government accountability⇒ Weak citizen understanding of the legitimacy of demand

Supply of Local Public Services

• There are significant productivity issues surrounding current (staff) and capital inputs to service provision (technically inefficient service provision)

• There is an imbalance between current (staff) expenditure (too much) relative to capital spending (allocatively inefficient service provision)

• Service provision is not (and currently cannot easily be made to be) strongly linked to local demand (which is weak)

⇒ Weak local government capacity in provision of local services⇒ Under-responsive local government service provision⇒ Under-developed sense of service to the public

STRATEGIC FRAMEwORK AND wORK PROGRAMMING 3

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STRATEGIC FRAMEwORK AND wORK PROGRAMMING

Box 1: DSF Strategic Framework Outline

Policy Framework for Supply of Local Public Services

• There are numerous problems surrounding central/local assignment and implementation of decentralized functions

• Local staffing rules and payment are too centralized• Tax assignments are too centralized• Local own-source revenues are low • Too frequently, central-local transfers are perceived as unrestricted entitlements• The regulatory system for local infrastructure finance is incomplete and cumbersome⇒ Weak central government capacity in policy design⇒ Weak central demand for (upward) and support of (downward) local accountability

Overall Outcome

Insufficient continuing improvements to local public service provision

Generalized Factors Underlying Result

• Insufficient upward and downward accountability • Insufficient citizen demand• Inadequate local and central government capacity

DSF Strategic Framework

• Promote local government (downward) accountability to citizen demand and strengthen citizen demand• Promote local government (upward) accountability to central government• Build local government capacity in service provision• Build central government capacity in design of policies that govern service provision

The strategic framework expresses the overall purpose of the DSF in terms of: (a) demand for local public services; (b) supply of local public services; and (c) policy frameworks for the supply of local public services. A full account of the framework is presented in the DSF Annual Report 2009.

wORK PLAN ACTIVITIES

The activities supported under the work plan – described briefly below - are structured according to the four priority areas stipulated by the DSF SC and address one or more of the key issues highlighted in the strategic framework. Most activities contain significant institution building components.

Public Service DeliveryThe Government of Indonesia has been keen to specify clearly the functions that local governments should carry out and the standards to which they should perform these functions; and to strengthen generally the system of public service provision. Through the Ministry of Home Affairs, the DSF is supporting four activities in this category, namely:

a. Improved definition of service functions: this involves support for the formulation of norms, standards, procedures and criteria for service delivery and review of their implementation in selected sectors.

b. Capacity building for costing and pilot implementation of minimum service standards.c. Management strengthening and institution building for local public service providers - to begin

with, in certain sectors and selected regions.d. Service delivery in border regions: this entails a review of public services in border regions, leading

to policy recommendations and development of a national action plan for institution building.

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These activities go directly to the purpose of the DSF, and hold considerable strategic significance for the government’s overall program of decentralization. They all have potential for scaling-up nationally; and they all carry important implications for upward and downward accountability.

Fiscal Decentralization In this area, the Ministry of Finance is being provided with DSF support directed at:

a. Sub-national borrowing.b. Monitoring and evaluation of DAK.c. Strengthening regional financial information systems.d. The improvement of the policy framework (grand design) for fiscal decentralization.

All of these activities are central to accountability and to other aspects of good governance, such as transparency. They contain significant elements of policy influence and capacity building.

Governance Reform Proposed by the Ministry of Home Affairs, the activities under this heading address local government capacity in the provision of local services and central government capacity in policy design. The first batch of activities in this category is outlined below.

a. Capacity development for legislative council representatives: this involves tailor-made capacity strengthening workshops and follow-up action learning to meet DPRD performance targets and general, wide-scale DPRD orientation on basic duties and functions for DPRD provincial, district, and municipal representatives from 10 provinces.

b. Education and training on decentralization: here support comprises a limited number of coursework Master degree programmes, short courses, seminars, workshops, and study tours on fiscal decentralization and social accountability for selected local and central government officials and CSO representatives.

c. Sub-national investment climate reform. This support continues to build capacity within local governments for the effective and efficient management of business licensing.

d. Government education and training centres: this support covers: first, the refinement of a strategic framework for the introduction of competency-based training in MoHA; second, training on competency based needs assessments and development of competency based standard training; and third, the design and piloting of competency-based training and education in the public service of ‘population administration’ in MoHA and three selected provinces and districts and municipalities.

Planning and Performance Management Proposed by Bappenas and MoHA, the activities in this category analyse problems surrounding the quality and integration of different types of planning and build human and organizational capacity to do the work involved. They also provide support to local government management of natural resources and local economic development.

a. Institution building for the integration of national-regional and spatial planning: this activity builds institutional capability at different levels of government for the better horizontal and vertical integration of sectoral, development, and spatial planning.

b. Managing natural resources for local economic development: Reform of natural resource planning and management to promote local economic development and local government fiscal capacity.

c. Capacity building for regional development policy formulation: Contributing to government’s attempts to reduce inter-regional disparities, this activity is designed to produce better-informed and better-managed policy making and planning for regional development.

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d. Border area development planning: This activity builds capacity for development planning in border areas.

e. Local government evaluation: this support will help government to assess performance differences on a number of criteria (e.g., institutional, financial, and public service), first, between regions created during the last ten years and, second, between those established during the last three years.

f. Institution building for a regional economic development facility: DSF will help to establish in Bappenas strategic management and planning capability for the establishment of a regional economic development facility.

Before execution and implementation of activities under the work plan can take place, they must be developed in sufficient detail to provide a basis for procurement (into activity concept notes). The (implementation) work to be undertaken must also be set against relevant comparative experience and as far as possible should be informed by the best thinking in the field. The conditions for execution and procurement (by government or the World Bank) must then be established.

wORK PROGRAMMING

Background. As indicated in Chapter 1, in May 2009, a no-cost extension for the DSF to September 2011 was formally approved.6 Pending such approval (that is, up to late May 2009), in accordance with the wishes of the principal financial donor and so as not to raise expectations that might not be met, design and development of activities under the DSF Work Plan 2009-2011 had been put on hold. Commencing immediately upon the granting of the no-cost extension, in the seven months from May to December 2009, a total of 23 activities, each involving in one way or another one or more of 20 government directorates in three different government agencies, were designed, subjected to a thorough process of internal and external review, and formally approved by the DSF MC. Considering the large number and variety of interested parties involved, the complexity of the issues addressed, and the relatively short time within which the work was done, this was a noteworthy achievement.

Two rounds of programming. The 23 activities were separated into two rounds of programming. The first round, involving 14 full-blown activities (described in 14 separate ACNs), was largely approved in the third quarter of 2009 (12 out of 14 activities). The second round, involving 9 activities that were designed and conceived as extensions or developments of those that constituted the first round, was approved by the MC (by circulation) during November/December 2009.

Progress of first round of programming. As indicated above, to 31 December 2009, fourteen full-blown activities had been through a thorough process of development, review, and approval. These activities are now in various stages of execution and implementation. A summary of progress to 30 June 2010 is provided in Table 1 below.

Table 1: First Round of Programming under DSF Work Plan 2009-2011

ACN # Name(counterpart)

Budget Estimate

(USD)Trust Fund

Status Implementation Status

1/2009 Capacity Strengthening Program for Local Government Legislatures (MoHA)

500,000 Active Grant agreement signed and effective. See Chapter 4 for further discussion of progress (Milestone 5).

6 In December 2009, a further no-cost extension – to 31 March 2012 – was formally approved and the Contribution Agreement between the Bank and DfID was amended accordingly.

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Budget Estimate

(USD)Trust Fund


2/2009 Capacity Building for Regional Development Policy Formulation(Bappenas)

Part 1: 142,500

Part 2:700,000

Active

Funds being transferred

Policy analysis and data collection in a number of sectors underway. Report entitled, ‘A Study of Regional Development in Indonesia: a Review of Experiences and Achievements’ completed.Procurement underway; services to commence by third quarter of 2010.

3/2009 Monitoring and Evaluation of Special Allocation Funds (DAK)(Bappenas)

550,000 Active See Chapter 4 for discussion of implementation (Milestone 3).

4/2009 Management Strengthening and Institution Building for Local Public Service Providers (MoHA)

500,000 GFR approved, awaiting GA signature for activation

Financial management and procurement assessments completed. Operations manual approved. Awaiting GA signature.

5/2009 Institution Building for the Integration of National-Regional Development and Spatial Planning(Bappenas)

483,400 Active Data collection and analysis commenced (Dec 1, 2009 – June 30, 2010). See Chapter 4 for discussion of implementation (Milestone 4).

6/2009 Building Capacity for the Development of Sub-National Government Capital Markets for Municipal Bonds(MoF)

900,000 Active See Chapter 4 for discussion of implementation.

7/2009 Government Training and Education Centre Development: Introducing Competency Based Standards for Improved Public Service Delivery(MoHA)

797,0001 Active Grant agreement signed and effective. See Chapter 4 for further discussion of progress.

8/2009 Institution Building for the Accelerated Development of Border Areas(Bappenas & MoHA)

500,000

500,000

Active for Bappenas activity

Will use existing trust fund if MoHA activity is Bank executed, otherwise GFR is prepared for submission if MoHA activity is Recipient executed

See Chapter 4 for discussion of implementation.

Financial management and procurement assessments completed. Operations manual under review. Grant agreement can be prepared on the basis of this information if MoHA activity is Recipient executed.

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Budget Estimate

(USD)Trust Fund


9/2009 Capacity Building through Decentralization Education and Training for Public Service Delivery(MoHA)

1,593,520 Active(scholarships component)

See Chapter 4 for discussion of implementation.

Short course & study tour components under preparation.

10/2009 Strengthening Local Government Natural Resource Management Capability(MoHA)

749,500 Active Implementation will commence in third quarter of 2010.

11/2009 Formulation of Norms, Standards, Procedures and Criteria (NSPK) for Local GovernmentService Delivery(MoHA)

1,000,000 GFR approved, awaiting GA signature for activation

The GA has been signed by the WB and sent to MoF for countersignature. The operations manual is being finalized. Procurement and disbursement plans are being written.

The Centre for Economic and Public Policy Study, Gadjah Mada University will assess NSPK status (beginning in August 2010).

12/2009 Strengthening Data Provision to the Regional Financial Information System (MoF)


13/2009 Grand Design of Fiscal Decentralization(MoF)


14/2009 Capacity Building for Costing and Pilot Implementation of Minimum Service Standards(MoHA)

1,200,000 GFR prepared The project will be recipient and Bank executed; TOR and budget completed; division of responsibilities between MoHA and DSF agreed; and the operations manual is written. Procurement and disbursement plans are being written.

It can be seen in Table 1 that during the reporting period progress in relation to the finalisation of execution arrangements and implementation for the majority of the fourteen activities has been satisfactory in the circumstances. Nevertheless, from a disbursement standpoint, progress has been slow.

Trust funds for eleven (including part of ACN 8) of the fourteen activities are now active and are being implemented

Of the remainder, ACN 11 is close to finalising the conditions for execution; but progress for ACNs 4 (MoHA), 8 (MoHA component), and 14 (MoHA component) has been slow and puts these activities at serious risk of not being able to complete by the closing date of September 2011, at least without significant reduction to the scope of work.

Progress of second round of programming. As indicated in Table 2 below, six of the nine addenda have now been completed or are covered in an existing ACN or in other documents referred to in that table.

However, there has been little progress in relation to proposals 3 (MoHA), 5 (MoF), and 9 (MoHA). There are a number of reasons for this, some of which are discussed in a separate section below and others of

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which are discussed in the DSF quarterly report for December 2009. There are also a number of project-specific reasons for delay.

Proposal 9 in Table 2, the ‘Grand Design on the Implementation of Regional Autonomy’, is clearly a highly complex matter of considerable moment and political sensitivity for government and involves all three DSF counterpart agencies. At the same time, government is working on a revision to Law 32/2004 – on local government. This has important implications for the ‘grand design’ of regional autonomy. Discussions surrounding the addendum have therefore been protracted and senior officers from all three agencies have wanted to participate in them, making organization more difficult. The latest estimate for an approved design (addendum to an existing ACN) is the end of July 2010. Assuming no further delays and Bank execution, this activity is still at risk of not being able to complete by September 2011.

In relation to proposals 3 and 5 in Table 2, the slow rate of progress is partly due to changing priorities in government and partly a function of the lengthy delay in appointing a replacement senior economist to the DSF Executive and the increased qualitative and quantitative load this put on the fiscal decentralization specialist.

However, for all three of these activities, time is running out and it seems improbable that they will be able to complete by September 2011 without a significant reduction in scope.

Table 2: Second Round of Programming under DSF Work Plan 2009-2011

Proposal(notional budget) Link to ACN Counterpart Status

1 DPRD Orientation($500,000)

ACN 1/2009 MoHA (Diklat) Addendum approved.RAB finalized (total $473,300). Financial management and procurement assessments completed. Draft amendment to GA completed. Signature awaiting initial DIPA approval of ‘mother’ GA.

2 Regional Development Policy($700,000)

ACN 2/2009 Bappenas (Pengembangan Wilayah)

Covered in existing ACN – no addendum required.Implementation will commence in third quarter of 2010.

3 Local Government Evaluation ($300,000)

ACN on EPPD MoHA (PDOK) Activity design, budget, and mode of execution are being finalised with MoHA.

4 Inter-Regional Cooperation($760,000)

ACN 2/2009 ACN 4/2009

Bappenas (Otda)MoHA (PUM)

Addendum approved. Implementation for Bappenas component will commence in third quarter of 2010.

5 Regional Finance($850,000)

ACN 12/2009ACN 13/2009

MoF (DJPK) 1. PEA-Otsus (600K): ACN under preparation with MoF. 2. Regional fiscal incentives (250K): discontinued at MoF request (as similar support being provided by ADB).

6 Provincial Governance Strengthening Programme($2,000,000)

ACN 2/2009 ACN 4/2009ACN 5/2009ACN 14/2009

Bappenas (KKDT),MoHA (UPD, PUM)

Fiscal agency agreement & letter of understanding on performance signed.Implementation will commence in third quarter of 2010.

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Proposal(notional budget) Link to ACN Counterpart Status

7 Regional & Local Economic Development Facility($600,000)

ACN 10/2009 Bappenas (Perkotdes) Addendum approved.Implementation will commence in third quarter of 2010.

8 Sub-national Investment Climate Reform($700,000)

DSF Work Plan 2007-2008 continuation

MoHA (Bangda & Diklat)Bappenas (Biro Hukam)

Grant agreement justification and summary proposal are drafted and will be submitted to the World Bank Country Leadership Team for review in July.

9 Grand Design on Implementation of Regional Autonomy($700,000)

ACN 13/2009 MoHA (Otda) Draft addendum completed; awaiting final confirmation by the Director of Local Government Affairs. Following a decision by the Director of Local Government Affairs, the project will be Bank-executed.

The Provincial Governance Strengthening Program (PGSP). This major ($2 million) activity is designed to strengthen provincial government roles and functions, paying particular attention to policy-making, regional development planning, and public service delivery. This should lead to better integration between policies, planning, and budgeting, which in turn should translate into improved service delivery in selected pilot provinces. The counterparts for this program are Bappenas and the Ministry of Home Affairs. Initially, activities will be implemented in two provinces, Gorantalo and Bangka Belitung.

The activity is being implemented through a fiscal agency agreement (FAA) between the World Bank and UNDP. Following thorough discussion within the Bank and, subsequently, between the World Bank and the UNDP, a FAA between the two parties was signed on 26 May 2010. Resolution of the issues involved, which was outside of the sphere of influence of both the DSF MC and the DSF Executive, consumed much of the first quarter of 2010. A letter designed to enhance communication and cooperation between the parties in relation to DSF reporting requirements was drawn up during the reporting period and was signed on the date that the FAA was signed. The formal launch of the project will take place in late July 2010.

Work programme implementation and results achieved are discussed in the next chapter.

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This chapter outlines results achieved to date from the implementation of DSF-financed activities. The chapter also discusses impediments to progress, particularly problems associated with speed of execution and implementation.

KEY MILESTONES

The results achieved by five of the activities under the DSF Work Plan 2009-2011 have been designated by the principal financial donor as ‘key milestones’ for gauging DSF progress. Progress in relation to these milestones is discussed below.

Milestone 1: Improved Regional Financial Information Systems (SIKD)A well-functioning national budget and expenditure information system is clearly critical to successful budget and national fiscal policy implementation. It is also vital to redirecting resources and investments to local governments under the so-called national fiscal ‘grand design’.

The development of computer software intended for transferring electronic data from the regions to MoF is complete. For FY 2007, data from 375 of 461 districts (81%) have been uploaded and are accessible to the public. For FY 2008, realization data for 317 out of 484 (65%) of the districts have been uploaded to the government website. Realization data for FY 2007 and 2008 are available at the Directorate General for Fiscal Balance website www.djpk.depkeu.go.id/datadjpk/47/.

Officials at the Directorate for Funding Evaluation and Regional Financial Information (EPIKD) have opted to postpone further data entry for FY 2007 and instead to concentrate on data entry for FY 2008. For primarily data security reasons, EPIKD carries out manual data entry in-house.

Preliminary systems for data transfer and new data entry modules were completed in April 2010. Socialization of the new (electronic transfer) SIKD system began soon thereafter, starting with North Sulawesi province (as the data for developing the systems came from 3 local governments in North Sulawesi). During the life of the activity, MoF expects to have 25 local governments transmitting their financial data electronically - for easy transfer to its national SIKD system.

The system will be made compatible with those being developed with support from the Asian Development Bank (ADB) – in 171 local governments.

EPIKD and DSF staff have carried out several joint missions to the regions to collect regional financial data, as well as to inform and enable local governments to transfer regional financial data to the SIKD.

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Thus far, electronic data are available for 8 local governments. The goal of having 25 districts complete electronic data submission is within reach, a goal whose attainment is made more likely by the fact that EPIKD intends to undertake 2-3 socialization missions to the provincial level to solicit local government’s financial electronic datasets.

This activity is on target - to complete by December 2010.

Milestone 2: Enhanced Fiscal Decentralization Policy (through Grand Design for Fiscal Decentralization - GDFD)The GDFD is designed to strengthen links between funding, performance and regional autonomy and is therefore a cornerstone of successful decentralization in Indonesia. The GDFD will attempt to align the fiscal policy framework (transfers, revenue generation and sharing, including inputs to the revision of Law 33/2004 on fiscal balance between central- and local government), with revisions to the policy framework on regional autonomy (Law 32/2004 on the Grand Design for Regional Autonomy).

Three public consultations have been conducted - in Pontianak (West Kalimantan), Makassar (South Sulawesi) and Surabaya (East Java) – in order to gain insight into a wide range of perspectives on issues surrounding the current GDFD.

Based partly on the qualitative data produced through these consultations, a first draft of a revised GDFD document is expected to be ready by late July 2010. The draft will address a wide range of issues connected with the five pillars of fiscal decentralization, namely; human resources; institutional and organizational matters, including mandates; information systems; regulations; and know how. The draft revision will be considered initially by the Secretary of the Directorate General of Fiscal Balance.

Discussion on the improvement of balancing funds - the DAU and DAK - have been constructive and will feed into the revision of Law 33/2004 on fiscal balance between central and local government

With DSF support, efforts to harmonize the GDFD (and respective inputs to the revision of Law 33/2004) with the revision of Law 32/2004 and the Grand Design for Regional Autonomy are currently underway.

However, it now seems unlikely that MoHA will be able to finalize the Grand Design for Regional Autonomy in the near future. Consequently, the current milestone, which reads: ‘Policy Framework of fiscal decentralization improved, accepted by MoF, and harmonized with MoHA’s Design for Decentralization and Regional Autonomy by September 2010’ should be amended to read: ‘Policy framework of fiscal decentralization improved, and accepted by MoF, and a harmonization strategy for the revision of Law 33/2004 and Law 32/2004 completed’.

This (revised) activity should be completed by June 2011.

Milestone 3: Strengthened Monitoring and Evaluation of Special Allocation Funds (DAK) (in 5 Provinces and 47 Districts) DAK grants for FY09 total about $2.4 billion for 14 sectors and constitute 8% of total transfers to local governments. DAK grants are used for capital maintenance and small infrastructure investments at the local level and therefore constitute a critical area for government oversight and efficacy in capital spending. Building capacity (human capabilities and systems) for monitoring and evaluation is clearly crucial to this. A number of preparatory steps have been taken towards this end, including: preparation of explanatory (‘socialization’) materials and instruments for data collection and for training of field teams. A pre-test on data collection and facilitation thereof was conducted in Karawang district in March 2010.

Implementation will be split into two phases: the first phase in the D.I. Yogyakarta province, followed by a second phase conducted in a further 4 provinces (Jambi, Central Kalimantan, West Sulawesi and North Maluku). The purpose of this separation is to obtain data on - and lessons learned from - the

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implementation of DAK monitoring and evaluation within the province of D.I. Yogyakarta. Lessons learned will be applied in the second phase.

A seminar on lessons learned from the implementation in D.I. Yogyakarta as well as early results from the four provinces is planned for September 2010. Preliminary results on the application of a capacity strengthening strategy for central and local government will be presented in the seminar.

A revised completion date for this activity is February 2011.

Milestone 4: Improved Provincial Spatial Planning (3 provinces and 3 districts/municipalities have approved spatial plans in line with the national spatial plan)Decentralization of increased decision making authority to local governments has greatly complicated planning, allocation and coordination of capital investments in projects such as ports and airports. Ensuring that national plans and needs are aligned with island, provincial and district needs has proved to be particularly problematic. With DSF support, local governments in the provinces of West Sumatra, Gorontalo and East Java are drafting spatial plans that are aligned with the national spatial plan and integrated with other provincial planning documents (and conform to provincial policies).

Draft spatial plans should be completed by September 2010 and the milestone should be achieved by June 2011.

Milestone 5: For Legislative Councils (DPRD), Improved Legislative Processes, Resource Allocations, and Oversight Decentralization in Indonesia has devolved key functions to local parliaments. Elected officials have expanded mandates and new roles and responsibilities, but many of them do not possess the skills or knowledge needed to carry out their duties. Significant performance problems at the local level - including administrative and legislative failings - have arisen as a result of this. This activity will address skills and knowledge deficits among DPRD members, particularly those associated with legislative processes, budgeting, and oversight. Initially, the training will be provided to 150 provincial and district DPRD members, of which at least 30% will be women. By the end of the implementation period, about 1260 DPRD members will have been trained (300 under DPRD capacity strengthening and 960 under DPRD orientation). The target will be met by two parallel DPRD activities (capacity strengthening with follow-up action learning and technical assistance to meet DPRD performance targets and a separate general orientation and induction to DPRD duties). GOI has taken all of the steps necessary to bring this activity on-budget and on-treasury and has begun contracting of a local university or institute to implement the training for the first activity. An amendment to an existing grant is being prepared for the second activity and this too will be brought on-budget, on-treasury. As relevant government curricula are readily available for the second activity, it will be possible to fast-track associated training.

This activity is progressing as planned and the milestone should be completed by December 2010 (and exceeded by September 2011).

OTHER PARTS OF THE wORK PROGRAMME

Progress of activities approved in 2007, and in 2009 under the DSF Work Plan 2009-2011 is described below. Some cases are presented in a way that illustrates the range of processes that must be completed in order for an activity to be executed and implemented. For further discussion of progress, see Annex C.

Governance ReformThe DSF finances four activities in this field: (a) local legislatures capacity strengthening; (b) government education and training centre development on competency based standards for improved public service delivery; (c) decentralization education and training; and (d) sub-national investment climate reform.

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Local legislatures (DPRD) (approved in 2009). The DPRD strengthening program was proposed by the Local Government Affairs directorate of the Directorate General for Regional Autonomy in the Ministry of Home Affairs. This activity assesses the needs of selected DPRD at the provincial, district and municipality levels, develops relevant materials and modules, and provides capacity strengthening workshops for newly-elected DPRD members. Following the workshops, action learning and technical assistance will be provided to assist DPRD members in achieving performance targets. Initially, six provincial-level and six district-level legislatures will be targeted - with a view to replication in other interested DPRDs or regions identified by MoHA.

This activity is GOI-executed. With DSF support, MoHA prepared the necessary documents, including: a detailed budget that met both GOI and WB standards; and a project operations manual containing detailed project activities, financial management and procurement procedures, anti-corruption measures, and performance indicators. MoHA also underwent financial management and procurement assessments, and attended World Bank financial management and procurement training.

Once the grant agreement had been signed (January 2010), MoHA submitted the documentation required for grant effectiveness (March 2010) and researched the process for registering the grant with MoF and activating DIPA (budget implementation document). This was a complicated process, which entailed: preparation of an annual work plan, procurement plan, and disbursement plan according to MoF specifications; the issuing of a Directorate General Regulation for the project; opening a special account; and registering for DIPA funds. A contract to an implementing agency should be issued in the third quarter of 2010.

The skills and knowledge acquired by the Local Government Affairs Directorate and by procurement committee members - particularly in relation to applying procurement rules and regulations - is an achievement of significant practical value. Local Government Affairs has made considerable progress in relation to its understanding of the market for DPRD capacity-strengthening implementing agencies and it has learned how to evaluate expressions of interest. Local Government Affairs and the procurement committee have also learned about common corruption practices associated with procurement and how to avoid them. Once DIPA funding is available, Local Government Affairs will proceed with a ‘road show’, signing of MOUs with selected DPRDs, and (with the implementing agency) conduct needs assessments of participating DPRDs.

In a related activity, the Government Education and Training Centre (Badiklat) requested DSF support to implement orientation for newly-elected DPRD members. The activity includes training of trainers (TOT), together with DPRD orientation in all districts and municipalities of four high priority provinces for approximately 960 DPRD members. Using an up-date of an existing curriculum, the DSF activity will conduct TOT and training in target provinces. The activity concludes with a technical coordination evaluation meeting to review the TOT and DPRD orientation and determine recommendations for improvement and national scale-up.

This activity is recipient-executed through an amendment to an existing grant agreement (signed in January 2010 and effective in March 2010). Badiklat has registered the grant, set up a special account, and worked to obtain DIPA approvals from MoF. The grant agreement amendment for DPRD orientation will be signed following the request for initial deposit for the ‘mother’ grant. The financial management and procurement assessments have been completed and counterpart funding has been secured.

The activity will run from July-December 2010.

Competency-based standards for improved public service delivery (approved in 2009). This activity will build the capacity of government (MoHA) training and education centres so as to enable them to develop competency-based training for civil servants in important aspects of public service delivery. It does this through training of trainers for training needs assessments and the formulation of competency-based

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standard training modules. The activity will be implemented in three provinces and will be directed at provincial and district and municipality government training and education centers therein. The work will be done in collaboration with local line agencies.

The activity is recipient-executed (‘on budget’ and ‘on treasury’). Diklat prepared all documentation (as set out above in relation to ‘local legislatures’), underwent financial management and procurement assessments, and attended World Bank financial management and procurement training.

Once the grant agreement had been signed, Diklat went through the steps described above in relation to ‘local legislatures’.

DIPA funds should be available by August 2010. Diklat will then proceed with the refinement of the strategy on competency-based training (CBT) and with setting up workshops on CBT needs assessment and with the formulation of training programmes. To assist with implementation of the project, and through GOI procurement processes, Diklat will hire consultants in human resource management, competency-based standards, population administration, and finance. Procurement of these consultants commenced in May 2010 and the appointments should be made in the third quarter of 2010.

Decentralization Education and Training (DET). This activity, which provides up to 40 scholarships for coursework Master degrees at UK universities and short courses of training and study tours on decentralization, is designed to contribute to the development of a group of professionals in central and local government who are able to provide for decentralized public service delivery that has downward accountability to citizens as an integral part.

The scholarships part of the programme is being implemented through a grant agreement between the World Bank and the British Council (signed in May 2010). Scholars will commence their education in the UK at the beginning of the 2010 academic year. Before they leave for the UK they will undergo intensive English language training in Jakarta (see below).

A long list of scholarship candidates was drawn up on the basis of written applications, formal qualifications and structured interview. All long-listed candidates qualified for a six-week English language course that began on 1st June 2010 and will end on 16th July 2010. IELTS scores will constitute the final selection hurdle for scholarship awardees. The British Council will assist scholars with their applications to UK universities, and it will provide academic and other forms of support while scholars are in the UK. The British Council will also help scholars with the development of action plans for the application of knowledge and skills acquired under the program upon return to their jobs in Indonesia.

Execution arrangements for the short course and study tour components of the programme are in train.

Sub-national investment climate reform (approved in 2009). This activity builds on the achievements of a previous project of this name (approved in 2007). It responds to important sections of the government’s RPJM 2010-2014. The aim of the activity is to institutionalize capacity within local governments to implement effective, efficient and accountable regulations and processes for business licensing. The program will: (a) support MoHA in monitoring the performance of one stop services (OSS) for business licensing across the country; (b) help three selected provincial governments (PGs) with facilitating the establishment of district-level OSS and improving the performance of existing ones; and (c) through support to Bappenas and three selected PGs, assist with the diffusion of regulatory impact assessments.

The follow-on activity is being proposed for execution on the basis of a grant agreement. The grant agreement justification and summary proposal have been drafted and will be submitted to the World Bank Country Leadership Team for ‘no objection’ in July 2010.

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Public Service DeliveryMinimum Service Standards (approved 2009). Central government is aware that problems of basic service delivery must be addressed. The National Action Plan for Fiscal Decentralization (2005) commits government to improving basic public services, especially in health, education and infrastructure. One way to improve the accessibility and quality of those services is to establish minimum service standards for them, as mandated in law 32/2004 on local governance. To date, government has issued MSS in seven sectors: health, environment, public housing, social, home affairs, women’s empowerment and family planning. In addition, final draft legislation has been prepared for MSS in education and this will be formalized soon in legislation.

The objectives of this activity are to: (a) Improve MoHA’s capacity to work with other ministries to cost MSS for selected sectors, including the drafting of a manual on this subject for local governments; (b) Support central and provincial governments to implement MSS in selected local governments; (c) Develop the capacity of selected local governments to implement MSS and integrate MSS in their planning and budgeting documents; and, for selected sectors, (d) examine whether there is any relationship between MSS and the attainment of the MDGs.

Pending the formal commencement of this activity (in the third quarter of 2010), DSF support has helped MoHA to develop an electronic system for costing MSS in health that was tested using data from Kota Yogyakarta (May, 2010). Feedback has been used to modify the system, with a view to its diffusion to other local governments.

Norms, standards, procedures and criteria (approved in 2009). Law 32/2004 on Regional Administration stipulates that all sectoral ministries should amend and update their own statutes and regulations to be in accordance with the regional autonomy law (Law 32/2004 article 237 refers). Similarly, Article 9 in Government Regulation 38/2007 - on ‘Task Division between Central, Provincial and District Governments’ - requires ministries to formulate norms, standards, procedures and criteria (NSPK) that are designed to guide the implementation of regional government functions. The Directorate General of Regional Autonomy of MoHA has been helping ministries to formulate NSPK. The initial deadline for NSPK formulation was set at two years. This was an ambitious goal, as there are 31 sectors, each with a different NSPK that need to be developed and harmonised. Progress has been slow and there is no clear account of the NSPK that need to be formulated or revised.

The objectives of this activity are to: (a) Strengthen MoHA’s capacity to facilitate, monitor and evaluate the formulation of norms, standards, procedures and criteria for service delivery in all sectors; (b) Support ministries in the formulation of norms, standards, procedures and criteria for service delivery and thereby help them to define more clearly the roles and responsibilities of every level of government in a number of selected sectors; and (c) Assess the extent and quality of the implementation of NSPK by local governments.

A grant agreement for this activity has been signed and is awaiting counter-signature. The initial part of DSF-financed support will assess NSPK formulation status. The work will be done by the Centre for Economic and Policy Studies at the University of Gajah Mada and will commence in August 2010.

Alternative mechanisms for service delivery. The government also recognizes that there are widespread and significant weaknesses in the management of service delivery. Most provinces, districts and municipalities deliver public services directly through local service units and their implementing facilities. In a limited number of special cases, local government-owned enterprises are the public service providers (as with local government owned water enterprises - PDAM). While government owned not-for-profit service delivery institutions are formally permitted, they have rarely been used to assist in the delivery of public services at the sub-national level and the formal use of private sector entities to deliver public services is also rare.

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DSF support has resulted in the production of a ‘blueprint’ for promoting AMSD in regional governments that addresses basic aspects of organizational functioning and performance such as: organizational strategy and structure; human resource management; organizational culture; covering the costs of service delivery; out-sourcing; and inclusiveness, community integration, and gender.

DSF support has also assessed the legal and regulatory framework on management development and institution building for public service delivery; produced a draft plan for pilot activity in this area; and, taking into account the support offered by other donors in this field, an implementation plan.

In November 2009, a national workshop was held in Jakarta to present the AMSD system to a wider audience - including representatives from MoHA, Ministry of Finance, Bappenas, donors, and other stakeholders. The purpose was to inform and update progress on pilot regions’ implementation of the AMSD system.

The follow-on activity commissioned by GOI was formalized in ACN 4/2009 on Management Strengthening and Institution Building of Local Public Service Providers. The TOR and budget have been finalized. Financial management and procurement assessments have been completed and a report produced. The GA is awaiting signature from GOI and the Bank. The Bank-executed component comprises: (a) preparation for the implementation of a pilot project in West Java Province; and (b) development of baseline information on women’s access to selected public services.

Fiscal DecentralizationDuring the reporting period, the DSF provided support to four areas of fiscal decentralization: (a) sub-national borrowing (ACN 6); (b) data provision to the regional financial information system (ACN 12 – and Milestone 1 above); (c) the policy framework for fiscal decentralization (ACN 13 – and Milestone 2 above); and (d) monitoring and evaluation of specific purpose grants to local governments (ACN 3 – and Milestone 3 above).

Progress in relation to the three fiscal decentralization milestones is discussed above, in the section entitled ‘Key Milestones’. The remaining fiscal decentralization activities are discussed below.

Sub-national borrowing - Jakarta bond. In relation to sub-national borrowing, DSF support has done much of the background analysis and preparatory work for the issuance of such a bond, which would be the first municipal bond to be issued in Indonesia. Such analysis has included debt servicing capability. Staff training and development needs have also been identified. In addition, the support has helped government to asses a long list of mainly infrastructure projects that might be financed in this way, and to draw up a short list for approval by the Governor. In the short term, future activities will focus mainly on the preparation of documentation required by PMK 147/2006 - for presentation to local government legislatures (DPRD) and Ministry of Finance as a basis for seeking approval to proceed with bond issuance.

With DSF support, MoF has prepared a revised draft of Government Regulation 54/2005 on Regional Government Borrowing. The availability of alternative sources of financing (such as municipal bonds), and hence this piece of legislation, is important to the accelerated provision of infrastructure, regional economic development, and public service delivery. The draft has been approved by the Ministry of Finance (December 2009) and has been discussed with the Ministry of Law and Human Rights (February and May 2010). Further discussions with Ministry of Law and Human Rights are ongoing – and any issues arising therefrom must be resolved before approval by the President.

By the end of July 2010 it is planned to present the draft local regulation and related technical documents to the DPRD for approval.

In addition:a. Pre-feasibility studies and draft terms of reference for the four projects funded by the proposed

municipal bond have been completed.

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b. Two draft local regulations have been written - the first to authorize a municipal bond issue and the second to establish a bond management unit within the local government’s financial section.

c. DKI Jakarta’s ability to payback municipal bonds has been assessed.d. A ‘service note’ (Nota Dinas) is to be issued, which must be signed by the Governor to authorize

formally municipal bond preparation for DPRD approval.

Sub-national borrowing - Bandung bond. This work began in March 2009. To date, a detailed road map has been produced that sets out the steps that will need to be taken in order for Kota Bandung to be able to make use of such a financial instrument. The support has also assessed the borrowing or debt servicing capacity of Kota Bandung and various forms of capacity building have been provided.

Sub-national borrowing - Surabaya bond. A scoping mission to Surabaya was planned for late April 2010 but was postponed until the inauguration of the new mayor of Kota Surabaya has taken place (in August 2010).

Planning and Performance ManagementSix important domains of planning and performance management are currently receiving DSF support: (a) spatial planning (ACN 5 and Milestone 4); (b) institution building for the development of border areas (ACN 8); (c) the strengthening of local government natural resource management capability (ACN 10); (d) strategic planning for the establishment of a regional economic development facility; (e) evaluation of newly-created regions; and (f) capacity building for regional policy formulation.

Spatial planning (approved in 2009). This activity seeks to build central and local government institutional capacity for the better integration of development and spatial planning. The DSF is helping Bappenas (through the Directorate of Spatial Planning and Land Affairs) to map the institutional structure of planning; identify integration problems of development planning and spatial planning at the national level; make recommendations as to how better integration can be achieved; and to provide capacity building support to three provincial governments and six district/city governments to enable them to produce spatial plans that are integrated with the national spatial plan and with other regional planning documents. Progress in relation to this activity is discussed above, in the section entitled ‘Key Milestones’.

Border areas (approved in 2009). The development of border areas is a matter of great national concern. This activity is a joint endeavour by Bappenas and MoHA that is designed to provide more comprehensive national government assistance for the development of border areas, both in terms of economic development and improved service delivery.

Working under the close direction of the Director of Special Areas and Less Developed Regions (Bappenas), to date DSF support has provided input for a key government planning document – the Medium-term Development Plan 2010-2014 – for the section on border area development (Book 2, Chapter 9 on Policy Direction and Development Strategy). This required consensus between ministries on the identification of border areas and performance indicators to evaluate progress towards the attainment of development goals. This will help to improve consistency between ministries’ border area programs, the quality of such programs, and to promote more effective coordination. The activity has also helped Bappenas to address questions of organisational design and inter-institutional arrangements for the government’s nascent national agency for the management of border areas (BNPP). In February 2010, an analysis and recommendations concerning institutional arrangements for BNPP was presented to a cross-ministerial group comprising representatives from Bappenas, MoHA, the Ministry of Disadvantaged Areas and the Ministry of Finance.

From June 2010 to September 2011 technical assistance will be given to BNPP, through Bappenas, to enable them to draft a master plan for the development of border areas. Among other things, this will set

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out government policy on border areas. The master plan will be used by MoHA to develop national and regional action plans for the improvement of public service delivery in border areas.

In addition, DSF will help MoHA to develop regulations for government functions in border areas; and draw up guidelines for monitoring the implementation of border area management policies. These initiatives will be crucial to the formulation and implementation of government policies in border areas. The financial management assessment, the procurement assessment and the operations manual have all been finalized. The grant funding request has been completed and procurement will be initiated as soon as confirmation of Bank execution has been obtained.

Natural resource management. The activity will: (a) examine in a small number of local governments the ways in which a sample of natural resources is managed; (b) consider means for improving such management and propose organizational changes and capacity building measures at the local level that take into account important aspects of the political economy context and draw on comparative experience; (c) build local capacity for undertaking such organisational development in two pilot areas; (d) make suggestions for the revision of governing legislation and on broader issues of organizational design at other levels in the government system; (e) establish principles underlying the better management of the sample natural resources that may be generalized to other local governments and/or natural resources; (f) devise training and development programs that embody these general principles and can be used as the basis for their dissemination; and (g) design training and development programs for carrying out such dissemination in the relevant sections of Bappenas.

Local government evaluation. This activity deals with the evaluation of newly-created regions – those created from 1999 to 2009 and those created in the last three years. From 1999 to 2009, 205 new autonomous regions were created (Daerah Otonom Hasil Pemekaran/ DOHP) comprising: 7 provinces, 164 districts, and 34 municipalities. Government is very conscious of attendant political and development risks and has therefore put a moratorium on the creation of more new regions so that it could ensure conformity with the law. The government is also in the process of evaluating different aspects of the performance of DOHP (under Minister of Home Affairs Decree 21/2010), including, among other things, the economic, financial, public service, and human resources aspects of government; and citizen welfare. The evaluation will also attempt to explain variations in such performance; assess capacity building needs and formulate a capacity building plan; and consider policy alternatives for the creation, termination, and merger of autonomous region in Indonesia.

To do this work, the Directorate for Capacity Development and Evaluation of Regional Performance and Directorate General for Regional Autonomy, Ministry of Home Affairs have established an evaluation team, whose membership includes experts from major universities and the Indonesian Institute of Sciences, and representatives from the Indonesian Chamber of Commerce and Industry, non-governmental organizations, and mass media.

Towards this end, the DSF has supported the socialization of MoHA Decree 21/2010 among regional governments, thereby helping to pave the way for the evaluation. A national launch was held in Jakarta in February, 2010; it was opened by the Minister of Home Affairs and was attended by more than 700 representatives from more than 200 newly-created regions. DSF will continue to provide technical support to the evaluation team, particularly in terms of data collection and analysis.

Regional development policy. The aim of this activity is to build within Bappenas sustainable institutional capability to: (a) assess the empirical basis of existing Indonesian policy on regional development and related policies and make recommendations for improvements; (b) propose improvements to regional development planning processes; and (c) disseminate the results and develop a cross-ministerial and regional consensus in relation to such policy and planning improvements. A central part of the activity is

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to help local governments to produce development strategies for each of the seven major island-regions (as part of the implementation of the Medium-term Development Plan for 2010-2014).

Economic development facility. This activity is designed to help government to accelerate local economic development through the establishment of a facility with a nation-wide remit to promote local and regional economic development. The activity will help the Bappenas’ Directorate of Rural and Urban Affairs to develop a concept and strategic plan for such a facility; and to develop cross-ministerial support for the initiative, which is to be piloted in several provinces. The DSF has collaborated with GTZ’s Regional Economic Development program to provide integrated support to Bappenas.

Implementation of the support to the strengthening of local government natural resource management capability; capacity building for regional policy formulation; and strategic planning for the establishment of a regional economic development facility will commence in the third quarter of 2010.

Donor Harmonisation and Knowledge ManagementDonor harmonisation (third phase – from 2009). In 2006, the Ministry of Home Affairs commissioned the DSF to create a donor mapping database (DMD). The purpose of the DMD is to track, monitor, and analyze aid rendered to Indonesia by the international donor community, and thereby to serve as a valuable management tool for government and donors. Programme information will include: development objectives; geographic location; modalities of assistance; and monitoring methods and expected results.

Database development has proceeded in phases. In phase 1, a prototype was created. In phase 2, the design was upgraded to a web-enabled dynamic HTML database. This version is now available in both English and Bahasa Indonesia on the DSF web-site at http://www.dsfindonesia.org/apps/dsf-dm/cgi-bin/dw.cgi.

The third phase of the activity is designed to institutionalise the database and its management in government. In close collaboration with government, DSF support will therefore:

a. Upgrade design features; b. Improve data comprehensiveness and quality; c. Transfer responsibility for updating information online to respective donor agencies; andd. Hand over management responsibilities to the ‘owner’ entity in government.

Knowledge management. This consists of four main elements: first, the production of occasional policy briefs arising from DSF-supported activities; second, the maintenance of an electronic repository of relevant documents on decentralization produced by development partners in Indonesia; third, the maintenance of a DSF web site; and fourth, knowledge sharing and knowledge building activities concerning critical aspects of the DSF strategic framework for the benefit of central and local GOI officials. The latter includes specialized education and training and exposure to international experiences – for example, on different aspects of fiscal decentralization and upward and downward accountability. In July 2010 a delegation of senior government officials (Echelons, 1, 2 and 3) drawn from all three of DSF’s government counterpart agencies will attend a two week short course on these matters at the European University in Budapest. The course has been tailored to meet the special requirements of the DSF. The fourth category also includes support to MoHA’s engagement with communities, civil society and the public generally, to begin with via a series of forums and public consultations on different aspects of governance such as the election of the heads of regions (the majority favoured direct elections) and issues of public service capacity building in the regions. The next public consultation will explore questions of border area management. The Minister of Home Affairs has attended these forums, and they have generated vigorous and useful discussion.

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DELAYS AND REMEDIES

In the December 2009 and March 2010 quarterly reports, we discussed a number of factors that were contributing to delays in programming and implementation. Below, we reiterate some of these points, primarily as a means for recording our experience of implementing the processes involved, so that we – and others – can learn from it.

Recipient-execution. In order that government may commence procurement for the implementation of activities, three conditions must be satisfied:

a. First, a grant agreement between government and the World Bank must be signed. This requires that budgets, together with financial management and procurement systems, have been developed by government to standards considered to be satisfactory by the Bank (on the basis of assessments the Bank carries out).

b. Second, conditions for grant effectiveness must be established. Such conditions depend primarily on the production of an acceptable project operations manual, and the conduct of financial management and procurement training. The satisfactoriness of such conditions is assessed by the Bank.

c. Third, grant activation must be instigated by government. This requires that government takes the steps necessary to allow for disbursement to commence. These steps comprise internal GOI processes that include grant registration; the establishment of a special account; and DIPA processing.

Directorates in government naturally vary in their capacities (and eagerness) to satisfy these conditions, which in turn affects the pace of progress. For example, as earlier discussion in this report notes, some parts of MoHA have shown considerable energy and commitment in relation to the above; have sought advice and other forms of assistance when they were needed; and have been prepared to follow through on clearances and approvals in order to keep projects moving ahead. The Local Government Affairs directorate of the Directorate General for Regional Autonomy and the Government Education and Training Centre (Diklat), both in the Ministry of Home Affairs, have exhibited these qualities and are well advanced in relation to the above.

Commitment to recipient-execution - implications. In the MoHA there has been laudable commitment to the idea of recipient-execution, premised on a desire to acquire necessary skills and knowledge as a basis for creating lasting institutional capability. For the reasons we have given, this can threaten to take longer than the current lifespan of activity implementation under the DSF (September 2011) or other implementation deadlines will comfortably accommodate (e.g., for scholarships, university admission deadlines and degree program lengths).

It follows that recipient-execution slows down disbursement (for financial donors, and for the Bank, disbursement is regarded as an important performance measure). Balancing these competing claims is not easy, partly because judgements about what to do and when are subject to individual and institutional idiosyncrasies that are not amenable to any formal control that can be exercised either by the DSF’s governance structure7 or by the DSF Executive.8

Implementation of recipient-executed activities. Government-executed projects can also take longer to implement, partly because of the DIPA processing schedule and partly because of the need to follow

7 The MC has some formal authority in relation to such matters, but it is not clear how far this extends, particularly when it comes to institutional boundaries. The MC and the government technical team have done their best to influence these matters, primarily through exhortation (with strong TA and liaison support from a MC GOI position funded by the DSF). But this can only go so far. 8 The DSF Executive has no formal authority in relation to such matters and must rely exclusively on rational argument and ex-hortation, with all of the attendant limitations for getting things done efficiently and effectively. The DSF Executive is converting a part-time position devoted to supporting government in a wide range of matters associated with recipient-execution to a full-time one.

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government procurement procedures. However, the DPRD and CBT projects have anticipated these possible delays and taken a number of steps to minimise them.

Nevertheless, delays in DIPA disbursement and/or procurement processes are likely to arise in government-executed activities, which in turn will slow down project implementation and the attainment of project objectives.

The desirability of recipient-execution and associated capacity building. In all cases, however, it is clear that government capability for doing this type of work needs to be, and is being, improved. The importance of such capacity building is recognised by DSF’s counterparts in government. To date such capacity building has comprised:

a. A training and orientation workshop for government staff; andb. Day-to-day interactions between professional staff of the DSF Executive and government

counterparts; coaching; and what amounts to action learning in relation to different aspects of execution and procurement.

From time-to-time workshops or clinics have been – and will continue to be – held that address different points in the critical paths for recipient-executed activities. For example, in April 2010, a workshop was held with staff of MoHA that attempted to produce in one-sitting drafts of all or most of the documents needed for recipient-execution. In May 2010, a clinic was conducted by DSF procurement and administrative staff with MoHA project implementing units on the format and requirements for preparing Request for Expression of Interest and criteria for short-list evaluation reports.

World Bank and DSF Executive practices. The DSF Executive has taken a number of steps to help ensure that Bank and DSF Executive processes – for both recipient and Bank-executed activities - work as expeditiously as possible. These steps include:

a. The reconfirmation of internal service standards between units in the Bank for the turnaround of approvals and the conduct of financial and procurement assessments, and so on;

b. The clarification of lines of authority and communication between the DSF Executive and relevant sections of the Bank;

c. Meetings between the DSF Program Manager and Deputy Program Manager and relevant heads of units in the Bank (accounting and procurement) to explain underlying rationales for modes of execution and the number of transactions and to discuss ways of clearing bottlenecks on the Bank side and building capacity and maintaining momentum on the government side;

d. Within the DSF Executive, at least bi-weekly portfolio review meetings between the Program Manager and Deputy Program Manager and portfolio managers to examine progress and devise means for addressing obstacles to it;

e. The establishment within the DSF Executive of a greater awareness of the importance of internal service standards and a better sense of shared responsibility by all concerned for the work that has to be done; and

f. Among staff of the DSF Executive continuous review of work processes, including working lunches on critical paths related to Bank and recipient-execution.

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In its present circumstances, the formal life expectancy of the DSF is determined by two documents. The first is the memorandum of understanding between the Government of Indonesia and the World Bank concerning the DSF, which expires in December 2011.9 The second is a letter from the DSF’s principal financial donor, DfID, addressed to the World Bank as trustee, which stipulates a closing date for the DSF of 31 March 2012. Under the latter agreement, DSF activities must be completed by no later than 30 September 2011.10

If the life of the DSF is to extend beyond these dates, at least two conditions must be satisfied. First, and most important, government11 must derive sufficient benefit from the existence of the DSF for it to want the DSF (in some form) to continue. And second, sufficient funding must be committed by government and by donors to allow this to happen.

Assuming that these conditions can be met, and with a view to allowing sufficient time for an orderly transition to whatever end state is deemed desirable and feasible, the purpose of this chapter of the report is to provide a basis for discussion of some of the issues involved. It does this, first, by describing briefly the current structure and functioning of the DSF; achievements to date; and challenges.

Second, it considers a number of possible future scenarios for the DSF. One of these scenarios envisages two complementary streams of operation or strands of technical assistance: the first involving a continuation of the relatively localized and tailored technical assistance currently provided to directorates in DSF’s three counterpart government agencies; and the second involving technical support associated with a larger and strategically more significant form of support, possibly financed by a sector investment or development policy loan.

It is suggested that at least for the first of these streams the role played by the DSF Executive in its supply of technical assistance lends itself to gradual assimilation by government over the medium term12 (nationalization). The chapter considers briefly how this might be done.

9 While this document is not legally binding on its signatories, and therefore is not in any sense the legal basis of the DSF, its ab-sence would probably make the DSF untenable.10 As mentioned earlier in this report, the six months between the cessation of activities and the formal closing date allows for the settlement of outstanding payments and the orderly winding down and closure of the facility.11 As represented principally by government institutional membership of the DSF – the Ministry of Finance, the Ministry of Home Affairs, and Bappenas.12 Having in mind the gradually diminishing needs in middle income countries for technical assistance, we surmise that ‘medium term’ will be a period of about ten years.

THE FUTURE OF THE DSF 5

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Third, a revised governance structure for the DSF is proposed, which is well-suited to all of the scenarios discussed and constitutes a natural progression towards enhanced government leadership and ownership. This proposal has been reviewed by government members of the MC and by the government technical team that supports the DSF.

And finally, fourth, it sets out the next steps to be taken.

STRUCTURAL COMPONENTS AND RESPONSIbILITIES

The DSF is made up of three structural components:

a. A Steering Committee (SC) comprising senior (Echelon 1 level) representatives of the Ministry of Finance, the Ministry of Home Affairs, and the National Development Planning Agency, and the heads of nine international development partners. This entity is responsible for the strategic management of the DSF and for determining work program priorities and the roles that the DSF as a whole shall play. The committee is co-chaired by one government and one donor member.

b. A Management Committee (MC) that is responsible for overseeing the operations of the DSF Executive and approving its work program. The committee is co-chaired by one government and one World Bank member.

c. The DSF Executive whose job it is: first, to assist government with the design, procurement, and management of projects financed by the DSF and with the realization of aid effectiveness objectives; second, to promote informed debate of decentralization and aid effectiveness issues among the decentralization development community, and action; and third, to provide secretariat support to the SC and the MC. The World Bank serves as trustee and administrator of the funds contributed by donors and it staffs and manages the DSF Executive.

ACHIEVEMENTS AND CHALLENGES

AchievementsThe achievements of the DSF fall into three categories.

Technical assistance and development support. The first and most obvious of these pertains to its work programme of technical assistance and development support. Such achievements are discussed in detail elsewhere in this report and will not be repeated here.

The second and third categories of achievement are perhaps less obvious and less remarked upon. Both are concerned with institution and capacity building - one constituted by the development of the DSF itself (as a multi-donor, government-led facility) and the other by virtue of the type and extent of interactions between different directorates within ministries and between ministries, and between professional staff of the DSF Executive and professional staff of its three counterpart government agencies, particularly in relation to preparations for recipient-execution.

Government capacity building arising from the project cycle. As mentioned in Chapter 4, this has been a product of activity design, preparations for execution, and procurement. For example, there has been considerable capacity building that has occurred as a result of joint activity design; sometimes protracted and rarely straightforward preparations for recipient-execution (including the strengthening of financial management and procurement capabilities in government); and government involvement in or exposure to procurement processes for both Bank and recipient modes of execution.

Multi-donor facility institution building. The importance to effective development of multi-donor facilities such as the DSF has long been recognised by the development community, and is clearly expressed in the Paris Declaration on Aid Effectiveness (2005), the Accra Agenda for Action (2008) and the Jakarta Commitment (2008).

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The sine qua non for the effectiveness of such facilities is that there should be genuine government leadership of them, combined with good levels of mutual trust between the executive arms of such facilities and their principal clients in government. From a starting point about 18 months ago where confidence in the DSF on the part of both government and donors had been at very low ebb, it is probably now safe to say that both of these conditions have been reasonably well satisfied. And while there is still room for improvement in relation to these conditions and in relation to other aspects of its performance, the DSF can be said to be operating satisfactorily in relation to its purposes. It therefore constitutes a viable means for realizing the advantages for development effectiveness and efficiency (through lower transaction costs for all stakeholders) contemplated by the international declarations and commitments referred to above.

In the circumstances of a fast-developing middle-income country like Indonesia, it is important that such vehicles be established, and that the sometimes considerable time and other resources needed to make them work be invested in them by all concerned.

ChallengesThe main challenge facing the DSF is that of speeding-up the transition from the general approval of an idea for support through its translation into a detailed design document and then to implementation and disbursement. A second challenge is to arrive at a more widely shared interpretation of the meaning of government-led. Both of these matters are discussed in the chapter in this report entitled ‘Risks and Challenges’.

THE FUTURE OF THE DSF: COMPLEMENTARY STRANDS OF DEVELOPMENT?

Despite the advances that have been made by the DSF, the existence of strong government support for it, and the general desirability of such facilities in middle-income countries, the future of the DSF beyond its current closing date remains uncertain. Outlined below and in Figure 1 are five possible future scenarios for the DSF.

a. Scenario 1 – closure. This would entail winding-down and closure of the Facility at the existing end date of 31 March 2012. Before then, it is possible that following a review of the DSF by its principal financial donor (DfID), a ‘culling’ of non-performing activities could take place in September 2010, with ‘savings’ either being withheld or re-allocated.

b. Scenario 1b – delayed closure. This would involve completion of as many existing activities (DSF Work Program 2009-2011) as possible by the current end date, but with a further no-cost extension (of, say, 12 months) for those that had not completed – to September 2012, with a Facility end date of 31 March 2013. This scenario also includes a possible ‘culling’ of non-performing activities following the review in August 2010. It is also likely to include a phased reduction in DSF Executive staffing.

c. Scenario 2 – continuation of existing operations with new funding. This would entail a continuation of the Facility beyond its existing end date – for, say, a period of three years - along its current lines of operation, but with additional donor funding for new and probably larger and more strategically significant technical assistance activities proposed by government. In addition, (as above) for existing activities, a further no-cost extension could be granted by the principal financial donor.

d. Scenario 3 – new program in support of a loan. This would entail the design of a new program of donor-financed technical assistance that supports a larger and more strategically significant government program financed by a loan from the World Bank and through collaboration with the ADB. Under this scenario, and following the DSF review in August/September 2010, savings from the existing program could be diverted to preparing the way for a loan to government. The closing date for the existing DSF program would remain 31 March 2012, but with the possibility of a no-cost extension for some existing activities under the DSF Work Program 2009-2011.

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e. Scenario 4 – some combination of Scenario 2 and 3. This might entail the maintenance of two somewhat inter-related but organizationally separate (within the DSF Executive) streams of activity. Under this scenario, in addition to new donor funding, a further no-cost extension might be granted by the principal financial donor for the existing DSF program.

In Figure 1 below, September 2010 is the likely submission date for a DfID review report on the DSF; 31 March 2013 is a possible no-cost extension date for uncompleted activities under current financing; and 31 March 2015 is a possible end date for a technical assistance programme in support of a loan.

Figure 1: Future Scenarios for the DSF

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Below we discuss some of the issues that are relevant, in particular, to Scenarios 2, 3 and 4.

Demand from government. There is clear demand from central government for the type of support currently provided by the DSF. As in other middle-income countries, the Government of Indonesia perceives access to national and international expertise and experience, among other things, as being vital to policy development; to institution building; and to the professional development of government officials. Moreover, government clearly likes to be able to direct development assistance to where government perceives its most important and urgent needs to lie; to play an active lead role in the design of the support that it receives; and either to execute and manage implementation itself or to be integral to non-recipient execution and implementation management. All of this is achievable under the DSF and much of it is being - and has been - done.

Systemic change. The question arises, however, as to how the relatively large number and diversity of activities currently undertaken under the auspices of the DSF can be augmented by other forms of support that cohere around (or address) some higher order unifying objective and that are capable of generating greater momentum for constructive systemic change at a faster pace.

Grounds for development. The current program of support prepares the ground for larger, more strategically significant13, and different, forms of support in at least three important ways. First, the existing DSF program, which is well-premised in the logic of piecemeal social engineering, addresses important and urgent relatively localized problems identified by central government directorates in the MoHA, MoF, and Bappenas. Some of these activities have the potential to be scaled-up. Moreover, the program has arisen from, and rests on, a foundation of trust between these units of government and the executive arm of the DSF. Such trust has been built painstakingly from the bottom up on the basis of three necessary ingredients: perceptions of sufficient levels of competence; integrity (doing what you say); and benevolence (genuine intentions).

Second, while there is still considerable room for improvement,14 important elements of the institutional arrangements that now comprise the DSF constitute strengths to be built upon.

Likewise, third, as mentioned above under ‘achievements’, the capacity building in government that has come about as a result of the extensive work that has been done with government on the preparations for recipient-execution and activity design will clearly make it easier for new activity design and for recipient-executed activities that follow.

In the next section, we consider in broad outline how the early stages of such complementary strands of technical assistance might be energised and sustained.

Strand 1: Extension of Existing Technical Assistance?The existing work program. The DSF has legal and moral commitments to complete the work that it has begun under its approved work program for 2009-2011, particularly those parts of the program for which financial commitments have been made, but also those in which government still has strong interest. To some extent, and in some cases, the degree of government interest in a particular activity can be gauged by the pace of recipient-execution and implementation progress.

Refining the program. However, at some stage soon – perhaps at the time of the forthcoming DSF evaluation in August 2010 or earlier (see Chapter below) – judgements will need to be made about which

13 In employing this much over-used term, we simply mean to imply that the support should be capable of yielding results that can be argued or, preferably, shown to contribute clearly - directly or indirectly - to the attainment of national development goals, whether expressed in terms of national unity and political stability or economic development or different aspects of poverty re-duction or sustainable human development.14 Below, we discuss some such possibilities in relation to the DSF’s existing governance structure and we have mentioned above difficulties encountered with speed of execution and implementation.

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activities are showing sufficient progress to enable them to complete by the current DSF activity end date of September 2011, and which activities are not. With the approval of the principal financial donor and the DSF MC, savings arising from a weeding-out of non-performing activities could then be put to other uses, at least one of which is discussed under Strand 2 below.

Time needed for satisfactory completion? However, for at least some of what remains of the DSF 2009-2011 program, considered and effective implementation is likely to take longer than the current activity end date allows - for some activities perhaps as much as 12 months longer.

Designing a new program. An extension of 12 months to the existing programme should allow all concerned to fulfil their obligations and should provide sufficient time and resources for the development of a second, related but strategically more substantial strand of work to be developed and implemented.

It is envisaged that at the end of this proposed extension period either:

a. If the work done by the DSF under its existing programme does not yield good enough results to sustain donor and government confidence, or government and the DSF have not been able to design new projects of a similar type that attract new donor funding, a declining Strand 1 would be absorbed by Strand 2 (see below Strand 2 and Scenario 3 above); or

b. If the work done by the DSF under its existing programme does yield good enough results to sustain donor and government confidence, and new programs are designed that attract new donor funding, then Strand 1 could continue to operate along current lines (Scenarios 2 or 4 above).

Strand 2: Technical Support to a Loan? The second strand of DSF work would be designed to:

a. First, with government, prepare the ground for a ‘development policy’ loan from the Bank. As suggested above, such preparation is likely to take at least 12 months from the date that a decision is taken by government and the World Bank to proceed with some form of loan.

b. Second, once the loan has been made, provide technical assistance in support of the loan for a period of, say, three years. As mentioned above, it is envisaged that such technical assistance would be financed partly by possible savings from the DSF work plan for 2009-2011and partly by new donor grant funding (Scenario 4 above).

c. Third, alternatively, grant-funded technical assistance channelled through the DSF might be used to support an existing WB loan to government – such as the so-called ‘DAK reimbursement loan’.

Depending on the purposes to which any loan might be put, it is possible that some existing DSF activities (under Strand 1) would be complementary to a loan technical assistance program. This would make it easier for Strand 1 to be absorbed by Strand 2.

Towards Nationalisation If Scenario 4 above were to come about, then over a period of, say, three years a process of nationalisation of at least one division (responsible for Strand 1 activities) of the DSF Executive should be well advanced. Such nationalisation might comprise some or all of the following:

a. A re-design of the governance structure of the DSF that strengthens government leadership and ownership (see below);

b. Gradual nationalisation of professional staff positions in one structural division of the DSF Executive;c. Physical relocation of one division of the DSF Executive to an appropriate location in government

(this would probably entail spinning-off one structural division of the DSF’s work into a separate organisation);

d. Nationalisation of the position of Division Manager or the creation of a new Program Manager position; and

e. Some (preferably, increasing) level of government financing.

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THE FUTURE OF THE DSF: GOVERNANCE STRUCTURE

Basic principles of organization design suggest that management systems and structures work best when they are adapted to the circumstances in which they operate. Most importantly, in designing systems of organisation and management attention should be given to the complexity of the activities to be managed, the experience and capabilities of the human resources available to do the work, and the speed and predictability of change in the surrounding environment. An environment characterised by high product or activity complexity and variability coupled with rapid and unpredictable environmental change calls for management systems and structures that are small, accessible, well-informed, flexible, and capable of rapid response. This is a reasonable representation of likely DSF operating conditions under any of the scenarios discussed above.

The structural elements proposed below and set out in the organisation chart in Figure 2 are those that are best suited to such an environment and to the type of work carried out by the DSF. They also constitute a natural progression towards the type of government leadership and ownership of development assistance envisaged in international declarations (Paris and Accra) and in the Jakarta Commitment (2008).

Figure 2: Proposed Governance Structure for the DSF

DSF Supervisory Board. Responsibility for the oversight or supervision of the DSF as a whole would be assumed by a small body comprising Echelon 1- level representatives from each of the Ministry-level entities involved on the side of the government (one from each), with the Program Manager of the DSF Executive as secretary. The roles of this body will be principally those of:

a. Good governance oversight. The Supervisory Board will act both as an assurer and facilitator of good governance (effectiveness, efficiency, upward and downward accountability, transparency, equity, inclusiveness, and so on) within the DSF itself and in so far as possible within the activities that the DSF supports.

b. Government policy amplification and guardianship. It will also act as an amplifier (downward to the DSF) and guardian of government policy concerning decentralization. With respect to the latter,

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and relying on advice received from the DSF Management Group (see below), the Supervisory Board will ensure that the DSF’s work program is supportive of such policy, and its development.

c. Review of policy recommendations. The technical assistance financed by the DSF will have implications for policy development at different levels of government. Where implications for policy cannot be considered and decided at the levels at which the technical assistance is operating or by the DSF Management Group, it will be the job of the DSF Management Group to draw such matters to the attention of the DSF Supervisory Board for their review and determination as to how best to proceed.

d. Determination of operating procedures. On the basis of recommendations received from the DSF Management Group, the Supervisory Board will approve revisions to the DSF Operations Manual.

e. Operational review. Here, the Supervisory Board could be expected to play an important facilitative role in relation to resolving bureaucratic bottlenecks or impediments to progress that cannot be resolved by the DSF Management Group. Such bottlenecks or impediments may be either intra- or inter-ministerial – for example, issues surrounding recipient-execution. This work would be done on the basis of the periodic formal written reports produced by the DSF, but also on the basis of briefings provided from time-to-time by members of the DSF Management Group.

f. Determination of Donor Consultative Group mandate and membership. On the basis of recommendations from the DSF Management Group, the Supervisory Board will determine the criteria to be employed in determining membership of the Donor Consultative Group and approve its terms of reference.

g. Donor liaison. As needs arise, the Supervisory Board will liaise with donor heads of agencies concerning DSF business, including the World Bank.

Much of this business could be done semi-formally among government colleagues, or between government and donors, or by circulation, with a necessity for, say, only one formal meeting per year.

DSF Management Group. For the DSF, experience to date and principles of organization design suggest that the management of DSF operations could best be performed by a small group comprising Echelon 2-level representatives from each of the Ministry-level entities involved on the side of the government (one from each ministry, each with representative functions). The Program Manager of the DSF Executive would act as secretary. This body would assume all of the roles and functions of the existing DSF MC and would have authority to make decisions concerning all DSF operational matters, including its work program. Meetings would be held according to need, probably bi-monthly. In summary, the roles of this body will be principally those of:

a. Work program design and oversight. The Management Group (MG) will determine the work program of the DSF and oversee its execution and implementation. This will naturally entail extensive intra- and inter-ministerial communication and coordination, which it will be the duty of the MG to foster.

b. Drafting of operating procedures. The MG or its agents will draft, and make recommendations to the Supervisory Board concerning, changes to the DSF Operations Manual.

c. Government policy implementation. Here, the MG will ensure that the work program of the DSF conforms to government policy and is supportive of it or its development or revision.

d. Policy influence filter. Where the work of the DSF has implications for government policy that cannot be dealt with at the level of the MG or at the level at which the work is done, then the MG will act as a filter of upward policy influence, which it shall direct to the Supervisory Board in whatever form it sees fit.

e. Donor liaison. The MG will draft terms of reference for the Donor Consultative Group (DCG) and criteria for membership thereof, for the approval of the DSF Supervisory Board. It will also liaise with the DCG about DSF business and about donor-supported activities outside of the DSF. The MG will determine appropriate means for periodic reporting of the latter to the DSF. The MG will also liaise with the World Bank Sector Manager or nominee in a manner and as frequently as deemed

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necessary to allow the World Bank to fulfil its fiduciary obligations, both as trustee of the DSF and as lender.

f. Determination of consultative and advisory group mandates and membership. The MG will determine the terms of reference and membership of all consultative and advisory groups apart from the DCG.

g. Inter-governmental, civil society, and community liaison. The MG will determine the extent and form of liaison with other arms and levels of government, civil society, and communities.

Government leadership and ownership. The sine qua non of DSF future scenarios 2, 3 and 4 is strong government ownership and leadership, which is reflected in the membership of the governance components outlined above. Donor Consultative Group. The DSF would manage donor support and ensure informed donor involvement in its business through a Donor Consultative Group, representatives of which could be invited – or request - to attend DSF Management Group or Supervisory Board meetings. Donors would also be provided with written quarterly and annual reports of progress and occasional policy briefs, which could be supplemented from time to time by face-to-face meetings with government or with representatives of the DSF Executive. As suggested above, formal responsibility for donor liaison on all operational matters would rest with the Management Group.DSF Technical Advisory Group. In relation to the technical assistance activities financed under the DSF, it would be desirable to have access to an advisory body comprising authorities on decentralization in Indonesia and internationally. This body would comprise, say, two national and two international members, who would be accomplished in both fiscal and administrative decentralization; knowledgeable of the latest thinking on decentralization and of international and Indonesian experience; and would be of either national or international standing in their respective fields. Members of the Technical Advisory Group would be paid a retainer, and a daily consulting fee for any work undertaken on behalf of the DSF.Local Government Consultative Group. This soon-to-be established body among other things will provide for the DSF a much-needed bottom-up perspective on decentralization in Indonesia; on possibilities for DSF support to local government; and on existing and planned DSF activities. All of the matters referred to above would be clearly spelled out in a revised operations manual.

World Bank fiduciary responsibilities. As depicted in Figure 2 above, the World Bank’s fiduciary responsibilities in relation to the DSF would be managed at different levels through close liaison with the Supervisory Board and the Management Group and through the DSF Executive. Any loan would be managed by a World Bank-designated Task Team Leader.15 When necessary, this person would liaise with the DSF Executive. Natural progression towards enhanced government leadership and ownership. The proposed governance structure outlined above, which builds on DSF experience to date, constitutes a natural progression precisely towards the ends envisaged by international declarations on aid effectiveness (e.g., Paris and Accra) and the Jakarta Commitment (2008), and particularly in relation to:

a. Enhanced (formalised) government leadership and ownership (responsibility);b. Reduced transaction costs for government and for donors or greater efficiency;c. Greater flexibility and responsiveness; andd. Better informed and more inclusive decision-making and, thereby, enhanced effectiveness.

In short, while ensuring sufficient levels of oversight and good governance for the DSF, the lightly-engineered governance structure depicted above is designed to optimise government ownership and leadership, informed management flexibility and speed of response, overall performance, and stakeholder consultation.15 It is assumed that government would put in place a separate governance structure for its management of any loan. To reiterate, the proposed DSF structure is designed only to govern technical assistance associated therewith.

46


NEXT STEPS

Next steps to be taken are likely to include:16

a. DSF Executive/World Bank discusses with government different possible scenarios for the future of the DSF.17

b. Government discusses the scenarios internally and decides what it wants to do and how it wants to proceed.

c. DSF (government) and the DSF Executive/World Bank jointly or severally discuss the above with the DSF’s principal financial donor.18

d. DSF (government) and the DSF Executive/World Bank jointly or severally discuss with other donors the scenarios for the future of the DSF.19

e. Government commissions through the DSF studies of large and strategically significant decentralization projects that would lend themselves to financing by donor grants and/or a loan from the World Bank.20

f. Building on (e) above, with government, DSF/World Bank explores program design possibilities that might be financed by a loan from the World Bank.

g. World Bank reviews its own positioning and internal organisation vis-a-vis support to decentralization in Indonesia and identifies a role for the DSF in relation to this.21

In order for there to be sufficient lead time to avoid closure of the DSF at the current end date of 31 March 2012 (Scenario 1 above) and for there to be sufficient resources available to carry out the work envisaged under Scenarios 2, 3 or 4, by no later than August/September 2010, the scenarios outlined in this paper or others like them will need to have been carefully considered by, in particular, the Government of Indonesia, the DSF’s current principal financial donor (DfID), other donor members of the DSF (and non-members), and the World Bank.

16 This is not a precise or complete critical path. The ordering of steps could vary and clearly some steps could be carried out in parallel. Moreover, as indicated below, some work has already been done in relation to most of these steps.17 The first discussions with government representatives of the DSF MC on the basis of the material set out in this chapter took place on 17 May 2010 and its contents were well-received. Further discussions were held in June 2010.18 Such discussions commenced in the fourth week of May and were continued in the first week of June 2010.19 Discussions - initially with donor members of the DSF MC (AusAID, CIDA, and USAID) and the Government of Germany (GTZ as proxy) - commenced in the second week of June. Beginning in July 2010, these discussions are likely to be extended to include donor members of the DSF SC (ADB, The Netherlands, and UNDP) and possibly others like the European Union.20 This work commenced in late May 2010.21 This work is ongoing under the direction of a former Lead Economist of the World Bank.

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AID EFFECTIVENESS 6The DSF MOU assigns a ‘donor coordination’ (or ‘harmonisation’) function to the DSF. To date, the DSF’s contribution to donor coordination has been limited to the establishment of a donor mapping data base, which is in the process of being up-dated and institutionalised within government. The DSF has also participated in donor meetings that have been held from time-to-time on the general subject of harmonisation.

Discussions with relevant arms of government – in Bappenas and MoHA – concerning how best to proceed in relation to aid effectiveness (as defined below)22 began late in the second quarter and wil continue in the third quarter of 2010. Aid effectiveness will be considered in some or all of the following (conventional) terms:

a. ‘Market’ composition – including the overall significance of development assistance in relation (for example) to government spending on decentralization; the type and number of participants; size and type of contributions; length of presence; and so on.

b. Alignment – or the extent to which development assistance is in line with government policy and government interests and variability in relation to this.

c. Modalities, accountability, and government systems – for the market as a whole and according to participant, how development assistance is rendered in terms of the full range of possibilities (budget support; stand-alone bilateral projects; multi-donor trust funds; different forms of execution and implementation; and so on); how it is governed; how it is monitored and evaluated; and how it manages questions of accountability and reporting to government.

d. Government ownership and leadership – and, in particular, the extent to which this might vary according to modality and/or participant.

e. Harmonisation – or the extent to which different programs of development assistance take account of one another, so as to optimise complementarity and to avoid so-called ‘duplication’ and ‘overlap’.

f. Programme emphases and geographical dispersion – or a typography and geographical mapping of development assistance programmes.

g. Quality of design and implementation – or the way in which programmes are designed and, in particular, the extent to which they can be said, genuinely, to represent government ownership and leadership and to represent government interests and concerns; but also the quality of technical assistance rendered and how this is managed and by whom.

22 Donor coordination per se is a relatively minor contributor to aid effectiveness. A role for the DSF should be fashioned in relation to the support that it could provide to government across the full spectrum of aid effectiveness constituents.

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AID EFFECTIVENESS

It is envisaged that discussions concerning these aid effectiveness matters between different arms of government and the DSF may result in some rational division of labour and responsibilities, and a program of support rendered by the DSF.

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Governance arrangements that have evolved during the transition period (from January to June 2010) between the incoming and outgoing MC and SC government co-chairs are discussed briefly below. This is followed by an account of progress in relation to DSF engagement with local government and then by a description of developments in the DSF Executive.

GOVERNANCE

Transfer of co-chair responsibility. The government-held positions of co-chair of the MC and the SC are in the process of being reassigned.

Government membership of SC. There has been discussion in government concerning government representation on the SC. Adjustments to such membership are likely to be mooted formally during the third quarter of 2010 – see Chapter 5 above.

Management and conduct of DSF business. During this transition period, the business of the DSF has continued uninterrupted and more than satisfactorily under the guidance of breakfast meetings held from time to time between the DSF Executive and government members of the DSF MC (principally, the first government co-chair of the MC, from Bappenas; the outgoing co-chair, from the Ministry of Finance; and the - possible - incoming co-chair, from the Ministry of Home Affairs).

ENGAGEMENT wITH LOCAL GOVERNMENT

In late October 2009, a paper outlining a number of possibilities for DSF engagement with local government was put to the MC for its consideration. The MC agreed that the idea of a ‘local government consultative group reporting to the DSF MC be endorsed and recommended to the DSF Steering Committee for its consideration.’ The relevant minute of the meeting also states that: ‘subject to Steering Committee approval of the recommendation, a MC task force be established comprising members drawn from the government technical team and the DSF Executive, whose job it would be to make detailed recommendations concerning terms of reference for the consultative group; membership; and forms of logistical and other support to be provided.’

A discussion paper on the roles and responsibilities of the Local Government Consultative Group (LGCG) has been reviewed by the GOI technical team and approved by the MC co-chair. The LGCG initial membership will consist of the heads of the six local government associations and representatives from local governments participating in DSF projects. An invitation for expressions of interest was sent by the MC co-chair to the potential membership mentioned above and an inaugural workshop is scheduled for August 2010.

GOVERNANCE, LOCAL GOVERNMENT ENGAGEMENT, AND THE DSF EXECUTIVE 7

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GOVERNANCE, LOCAL GOVERNMENT ENGAGEMENT, AND THE DSF EXECUTIVE

THE DSF EXECUTIVE

Institution building. Further progress has been made throughout the year in building an effective, efficient, and cohesive DSF Executive. All aspects of institution building continue to receive attention, namely: organizational structure and design, including roles and responsibilities and distribution of authority; internal communication, meetings, and team working; internal work processes and interactions with other sections within the World Bank; selection, placement, induction, and development of staff; performance management, quality control, and discipline; organizational culture and staff morale; corporate image and external relations, including engagement with government; and reporting.

Our philosophy in relation to all of these matters remains one of continuous improvement.

Staffing. International and national professional staff appointments (replacements and new appointments) during the year were as follows: Adviser Decentralization (Anahit Karapetyan, July 2009); Senior Adviser Decentralization (Widjono Ngoedijo, February 2010); Senior Economist (Soren Nelleman, March 2010); and Senior Governance Adviser (Henrik Lindroth, April 2010).

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RISK AND CHALLENGES 8RISKS

In the DSF 2009 Annual Report, we drew attention to five significant and inter-related categories of risk faced by the DSF, namely: aid effectiveness; the management of expectations concerning civil service reform; project design, execution, and implementation (the project cycle); engagement with local government; and the DSF’s governance structure. Elsewhere in this report, we have dealt with questions surrounding the DSF’s governance structure, engagement with local government, and with the project cycle. Our earlier (2009) arguments concerning the character of civil service reform remain valid and relevant, but will not be repeated here.

Aid effectiveness considerations continue to be of paramount importance to the DSF. The extent to which the aid effectiveness commitments made by donors under the Paris Declaration (2005), the Accra Agenda for Action (2008) and the Jakarta Commitment (2008) are not fulfilled constitutes the main risk to the DSF. These declarations emphasise the importance of government ownership and leadership of development assistance, a reduction in the number of stand-alone bilateral projects, and the use wherever possible of national (financial and procurement) systems. On the question of government leadership, we reiterate that the Jakarta Commitment (2008) states that ‘government will articulate and development partners will support...development objectives’ and that ‘development partners will align themselves more fully with government programmes and systems’ (p. 2).

The Jakarta Commitment (2008) also points out that ‘multi-donor trust funds have emerged as important vehicles for (the provision of)...support to Indonesia’s development’ (p. 3), and the DSF is mentioned as an example. Moreover, it goes on to state that ‘government and development partners commit to reduce the number of ad hoc freestanding (projects)’ (p. 3), which multiply transaction costs for government and donors alike.

In relation to the use of government systems, the Accra Agenda for Action (2008) states that: ‘we will strengthen and use developing country systems to the maximum extent possible’ and ‘donors agree to use country systems as the first option for aid programmes’.

The DSF is the only genuinely government-owned and led multi-donor trust fund in the field of decentralization. It is well placed to provide some of the efficiency and effectiveness gains contemplated in the declarations and commitments referred to above. It is also the only programme of development assistance to decentralization that employs recipient execution for a significant percentage of its activities, that is, it provides grants to government that are both ‘on budget’ and ‘on treasury’ and thereby makes use of government systems of financial management and procurement.

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RISKS AND CHALLENGES

The main threats to significant movement towards the use of multi-donor facilities like the DSF and away from stand-alone bilateral projects remain as stated in the DSF Annual Report 2009. These stem from donor hesitancy occasioned, first, by perceived dilution and increased complexity of control of project design, execution, implementation, and identity; second, by disbursement delays and inefficiencies that could arise from different forms of project execution; and third, by the perceived crowding-out effects (in a shrinking market) on participants whose operations depend either on sole-source bi-lateral funding or on third party contributions more generally.

CHALLENGES

Speed of implementation and disbursement. As mentioned in Chapter 5, the main challenge facing the DSF is that of speeding-up the transition from the general approval of an idea for support through its translation into a detailed design document and then to implementation and disbursement. As for much development assistance, the DSF experiences acutely the tension between, on the one hand, its principal donor’s imperative to disburse funds as quickly as possible and, on the other, government’s ability to absorb technical assistance, particularly its capacity to execute and implement activities. Almost inevitably, the latter takes longer than donors want or are able easily to accommodate.

Recipient-execution. For recipient-execution in particular, the various steps that need to be taken – design; establishing the necessary conditions for procurement and financial management; and implementation - generally require extensive preparation and capacity building and involve government budgetary and other processes that have largely predetermined and inflexible (and long) timelines. This is not to say, however, that there is not scope for speeding things up, on the parts of all involved.

Progress. And some headway is being made, particularly as a result of the groundbreaking preparatory work already undertaken by the DSF in relation to recipient-execution. But improvement is always likely to be incremental and to take longer than is ideal. Even so, all parties would agree that if the idea of government ownership is to be taken seriously, then an important part of it should comprise government execution, that is, execution based on government financial management and procurement systems.

The meaning of government-led. A second challenge is to arrive at a more widely shared interpretation of the meaning of government-led. Interpreted literally (as we think it should be, and as we have done), it means that government will decide what support it needs and wants and how such support will be rendered. This interpretation is stated explicitly in the Jakarta Commitment (2008) and is consistent with Indonesia’s status as a strong lower-middle income country and with the sentiments expressed in signed declarations of intent arising from international aid effectiveness meetings such as those held in Paris (2005) and Accra (2008).

This view implies that the role of donors and their agents should be to help government: first, to make the best use of international experience in the design and implementation of the support that it (government) says that it needs and wants; second, to build capacity for recipient-execution and the management of implementation; and third, to make the long term commitments that these things require.

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This chapter sets out contracts and agreements signed during the first six months of 2010 (Table 3); and those that are expected to be signed by September 2010 (Table 4).

Table 3: Signed Agreements and Contracts for First & Second Quarters of 2010

Activity Amount of Signed Legal Contract or GA Notes

Public Service Formulation of Norms, Standard, Procedures, and Criteria for Local Gov. Serv. Delivery

905,000 Grant Agreement (GA)

Support to Public Service Delivery 26,053 Short Term Consultants (STC)

Fiscal Decentralization Improving the Policy Framework for Fiscal Decentralization

260,986 STC

Strengthening Data Provision to the Regional Financial Information System by Sub-National Governments with Stand-Alone Electronic Data Bases

1,360 STC

Building Capacity for the Development of Sub-National Government Capital Markets for Municipal Bonds

90,951 STC

Governance Reform Strengthening Program for Local Government Legislatures

500,000 GA

Introducing Competency Based Standards for Improved Public Service Delivery

797,576 GA

Decentralization Education and Training (DET) Scholarships for Public Service

908,059 GA

Provincial Governance Strengthening Program (PGSP) 2,000,000 FAAPlanning and Performance Measurement Inst. Building for the Integration of Nat. Reg. Dev. and Spatial Planning

376,496 Firm

3,568 STC

CONTRACTS AND AGREEMENTS 9

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CONTRACTS AND AGREEMENTS

Activity Amount of Signed Legal Contract or GA Notes

Institution Building for the Accelerated Development of Border Areas

409,832 Firm

Regional Development Policy 31,609 STCKnowledge Management MoF Budapest training 13,392 CEUCommunications Assistant 14,674 STC

Total 6,339,556

Table 4: Projections of Contracts and Agreements to be Signed by 30 September 2010

ActivityAmount of Projected

CommitmentNotes

Unsigned Grant Agreements MSIB (Public Service) 429,000 GABorder Areas MoHA (Public Service) 450,000 GASub-national Investment Climate (Governance Reform)

700,000 GA

Amendments to Existing Grant AgreementDPRD Orientation (Governance Reform) 473,300 GAUnsigned ContractsInter-regional Cooperation (Public Service & Planning and Performance Measurement) *

760,000 Firm & STC

NRM (Planning and Performance Measurement) 631,842 FirmLocal Government Evaluation (Planning & Performance Measurement)

300,000 Workshops and STC

DET Bank Executed activities (Gov Reform) 685,461 Study Tours & Short CoursesMSS Bank Executed activities (Public Service) * 450,000 Workshops, travel & STCRegional Development Policy 700,000 FirmRegional & Local Economic Development 600,000 FirmsRegional Finance 250,000 Workshops and STCSupport for EPPD / EDOHP 100,000 Workshops and STCGrand Design for Regional Autonomy 500,000 Workshops and STCKnowledge ManagementMoF Budapest training 43,848 Travel & accommodationMoHA Public Consultations 50,000 Workshops & documentationKnowledge Management 150,000 Aid effectiveness; workshops;

& STC Total 7,273,451

*This activity will commence procurement in the 3rd quarter and contracts should be signed in the 4th quarter of 2010.

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The DSF remains the only genuinely government-led multi-donor facility in the field of decentralization in Indonesia. It is clearly government owned and is valued by government as a means for managing development assistance to decentralization. It has made, and will continue to make, important contributions to capacity building for fiscal decentralization, public service delivery, planning, and good governance. Its support to the development of local government borrowing (bond issuance); data provision to the regional financial information system; and monitoring and evaluation of the use of special allocation grants to local governments is particularly noteworthy. And, among others, its strengthening of the capacity of local government legislatures and local public service providers shows great promise.

Many of the activities financed under the DSF Work Plan 2009-2011 are in the process of being implemented using government systems of financial management and procurement (‘on budget’ and ‘on treasury’). The DSF is unusual in this respect.

While there is still room for improvement (mainly in terms of speed of execution and implementation), the DSF constitutes a viable means for donors to fulfil many of the aid effectiveness obligations set out in the Paris Declaration (2005), the Accra Agenda for Action (2008), and the Jakarta Commitment (2008). Currently, most development assistance to decentralization in Indonesia is delivered via stand-alone bilateral projects, which can dilute government leadership and ownership and multiply transaction costs for government and donors alike. Signatories to the Jakarta Commitment (2008, p. 3) have undertaken ‘to reduce the number of ad hoc freestanding (projects)’.

In the context of discussion on the future of the DSF, the report raises the question as to how the relatively large number and diversity of activities currently undertaken under the auspices of the DSF can be augmented by other forms of support that cohere around (or address) some higher order unifying objective and that are capable of generating greater momentum for constructive systemic change at a faster pace.

Led by government, and in consultation with other interested parties, the DSF is in the process of designing such a programme. A vital part of programme design will be to identify links to development assistance to decentralization provided outside of the DSF and to consider prospects for genuine collaboration and synergy between these different elements. The aim is to have this (programme design) completed by around September 2010 and for it to provide the basis upon which assistance to decentralization managed through the DSF beyond 2012 can be built and the means by which links with other programmes of development assistance to decentralization soon to commence implementation (such as those of AusAID, CIDA, GTZ, and USAID) can be forged and maintained.

CONCLUSION 10

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CONCLUSION

57

ANNEX A: SOURCES

Blunt, Peter. 2002. ‘Public Administrative Reform and Management Innovation for Developing Countries.’ Paper presented at the Fourth Global Forum on Reinventing Government organized and sponsored by The United Nations Division for Public Economics and Public Administration of the Department of Economic and Social Affairs (New York). Marrakesh, Morocco, 10-11 December.

Blunt, Peter. 2003. ‘The Anatomy of Development Cooperation: Principles and Prospects Derived from Exemplars at the Ministry of Finance Government of Lebanon.’ UNDP, pp. 44.

Blunt, Peter. 2004. ‘UNDP Programme Support to Governance Reform in Lebanon: An Outcome Evaluation.’ Beirut: UNDP, pp. 23.

Blunt, Peter. 2006. ‘Support to Policy Development and Implementation in the Government of Lebanon: A Review of UNDP Modalities.’ Beirut: UNDP, pp. 41.

Blunt, Peter, & Turner, M. 2007b. ‘Decentralization, Deconcentration and Poverty Reduction in the Asia Pacific.’ In S. Cheema & D. Rondinelli (Eds.), ‘Decentralized Governance: Emerging Concepts and Practices’. Brookings Institution Press and the Ash Institute for Democratic Governance and Innovation, John F.K. Kennedy School of Government, Harvard University.

Blunt, Peter. 2009. ‘The Political Economy of Accountability in Timor-Leste: Implications for Public Policy.’ Public Administration and Development, 29 (2), 89-100.

British Cabinet Office 1999. ‘Professional Policy Making in the Twenty-First Century.’ London: Strategic Policy Making Team, British Cabinet Office, pp. 78.

Bullock, H., Mountford, J., & Stanley, R. 2001. ‘Better Policy Making.’ London: Centre for Management and Policy Studies, British Cabinet Office, pp. 44.

Cheema, S., & Rondinelli, D. (Eds.). 2007. ‘Decentralized Governance: Emerging Concepts and Practices’. Brookings Institution Press and the Ash Institute for Democratic Governance and Innovation, John F.K. Kennedy School of Government, Harvard University.

DSF Policy Brief No.5. 2008. ‘Exploring Reform Options in Functional Assignments.’

DSF Policy Brief No.7. 2008. ‘Local Tax Effects on the Business Climate.’

Government of Indonesia. 2009. ‘National Action Plan on Fiscal Decentralization.’

ANNEXES A

58

ANNEX A: SOURCES

Government of Indonesia. 2009. ‘National Framework for Capacity Building to Support Decentralization.’

Government of Indonesia. 2004. ‘National Medium-Term Development Plan (RPJMN 2004-2009).’

Government of Indonesia, Director of Special and Less Developed Regions, Bappenas. 2008. Discussion document: ‘Preparation for Formulation of RPJM 2010-2014, Program for Development of Border Regions.’

Government of Indonesia. ‘Regional Autonomy Implementation Strategy.’

IMD. 2010. ‘World Competitiveness Yearbook 2010’. Geneva.

Lewis, Blane D., & Daan Pattinasarany. 2009. ‘Determining Citizen Satisfaction with Local Public Education in Indonesia: The Significance of Actual Service Quality and Governance Conditions.’ Growth and Change 40(1), pp. 85-115.

Lewis, Blane D., & Daan Pattinasarany. 2008. ‘The Cost of Public Primary Education in Indonesia: Do Schools Need More Money?’ Working Paper, DSF.

Lewis, Blane D., & Smoke, P. 2008. ‘Fiscal Decentralization in Indonesia: Where to Now?’ Working Paper, DSF. Mimeo, pp. 15.

MacIntyre, A., & Ramage, Douglas E. 2008. ‘Seeing Indonesia as a Normal Country.’ Canberra: Australian Strategic Policy Institute.

Silver, C. 2003. ‘Do the Donors have it Right? Decentralization and Changing Local Governance in Indonesia.’ The Annals of Regional Science, 37 (3), pp. 421-434.

The Jakarta Commitment: Aid for Development Effectiveness-Indonesia’s Road Map to 2014. December 2008.

UNDP (P. Blunt & D. Rondinelli). 1997. ‘Reconceptualising Governance’. UNDP Division of Public Affairs: New York, pp. xi & 93.

USAID-DRSP. 2009. ‘Stocktaking on Indonesia’s Recent Decentralization Reforms.’

World Bank. 2010 (June). ‘Indonesia Economic Quarterly: Continuity Amidst Volatility’. Jakarta, pp. 60.

World Bank. 2009. ‘The Online Sourcebook on Decentralization and Local Development’. http://www.ciesin.org/decentralization/SB_entry.html

World Bank Institute. 2005. ‘Country-Tailored Capacity Development.’ Chapter of WBI Annual Report 2005.

ANNUAL REPORT 2010

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ANNEX b: FINANCIAL REPORT

Summary• Donor Contributions: Three donors have pledged a total of USD 44.06 million (exchange rate June

30, 2010).• Commitments: USD 41.88 million or 95% of total pledges has been allocated to 58 projects, the

approved DSF Work Plan 2009 – 2011, and DSF operations.• Disbursements: USD 17.34 million or 39.33% of total contributions pledged or 41.38% of allocations. • Remaining Funds: USD 3.19 million in Unallocated and Uncommitted Funds.

I. Donor Contributions

DSF has 9 donor partners, 3 of whom are financial contributors: DFID, AusAID, and CIDA. Total pledges amount to USD 44.06 million (30 June 2010 exchange rate). About 96.6% of the total amount (USD 42.56 million) has been pledged by DFID. As of 30 June 2010, DSF had received USD 29 million or 65.82% of total pledges (see Table 1): USD 27.50 million from DFID, USD 1 million from AusAID, and USD 500K from CIDA.

Table 1: Pledges Received on the Basis of Signed Contribution Agreements

Contributors Contribution Currency

Contribution Amount

USD equivalent

Cash Received in USD million

DFID GBP 24.36 42.56 27.5AusAID USD 1 1 1CIDA CAD 0.5 0.5 0.5 Total 44.06 29

II. Fund Allocations and Commitments

The projects and allocations set out in Table 2 were approved by the MC at its meetings of 24 January 2007, 16 February 2007, 12 February 2009, and 28 October 2009 and by circulation in November 2009.

Table 2: Fund Allocations and Commitments to 30 June 2010

Budget (USD)

Total Pledges 44,058,315Investment income (as of June 30, 2010) 1,421,933Projected Administration fee (1% of total pledges) -440,583Other Income (as of June 30, 2010) 24,836Total Available Funds 45,064,501

Fund Allocations approved in January 2007 20,547,866Focal Area 1 2,968,714Tax Assignment and Own-source Revenue - Transfer 350,000Borrowing 600,000

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Budget (USD)

Surplus and Reserves 275,000Data for Monitoring and Evaluation 480,000Assessing and Revising the System for Setting Territorial Boundaries 227,500Fiscal Agency Intergovernmental Framework Fund 476,214Exploring Future Reform Options in Functional Assignment 55,000Supporting the Establishment of Financially Feasible Minimum Service Standards 305,000Alternative Mechanism of Service Delivery 200,000

Focal Area 2 1,395,774Local Government Performance Measurement 187,174Identification and Replication of Good Practice 382,392Appraisal : Sub national Investment Climate Reform 600,000Knowledge Management for Effective Local Government Support Programs 58,823Mapping and Analysis of Local Planning and Budgeting Processes 49,703Improved Evidence Base of Good and Bad Local Perda 117,682

Focal Area 3 5,413,244National Program for Community Empowerment 1,072,961CDD Summit 421,705Policy Development for PNPM 58,666Cost Accounting Review for CDD Programs 16,512Technical Assessment for CDD Programs 53,685Information, Education and Communication for PNPM 484,739User Fee Assessment for CDD Programs 419,000MIS Improvement for PNPM 106,000Short Term Monitoring and Evaluation 710,385Medium / Long Term Monitoring and Evaluation 399,926CCT Baseline Survey 1,669,665

Support Office for Eastern Indonesia (SOfEI) 2,972,226

Quick starts 97,908

Project Operations thru March 31, 2010 7,700,000Staff costs 4,200,000Operations costs 3,500,000

Approved Work Plan 2009 - 2011 (1st round) 10,890,520ACN 1/2009: Capacity Strengthening Program for DPRD (Local Government Legislatures)

500,000

ACN 2/2009: Capacity Building for Regional Development Policy Formulation 150,000ACN 3/2009: Improving and Piloting the Implementation of Monitoring and Evaluation System of Special Allocation Funds Utilization

550,000

ACN 4/2009: Management Strengthening and Institution Building for Local Public Service Providers (MSIB-LPSP)

500,000


ANNUAL REPORT 2010

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Budget (USD)

ACN 5/2009: Institutional Building for the Integration of National Regional Development and Spatial Planning

500,000

ACN 6/2009: Building Capacity for the Development of Sub-National Government Capital Markets for Municipal Bonds

900,000

ACN 7/2009: Government Training and Education Centre Development: Introducing Competency Based Standards for Improved Public Service Delivery

797,000

ACN 8/2009: Institution Building for the Accelerated Development of Border Areas 500,000ACN 9/2009: Capacity Building through Decentralization Education and Training (DET) for Public Service Delivery

1,593,520

ACN 10/2009: Strengthening Local Government Natural Resource Management Capability

750,000

ACN 11/2009: Formulation of Norms, Standards, Procedures and Criteria (NSPK) for Local Government Service Delivery

1,000,000

ACN 12/2009: Strengthening Data Provision to the Regional Financial Information System by Sub-National Governments with Stand-Alone Electronic Data Bases

250,000

ACN 13/2009: Improving the Policy Framework for Fiscal Decentralization 900,000ACN 14/2009: Costing and Pilot Implementation of Minimum Service Standards 1,200,000Service Delivery in Border Regions 500,000Support for EPPD 300,000

Approved DSF Work Plan 2009 - 2011 (2nd round) 7,650,000DPRD Orientation 500,000Regional Development Policy 700,000Local Government Evaluation 300,000Inter-Regional Cooperation 1,000,000Regional Finance 850,000Provincial Government Support Program 2,000,000Regional & Local Economic Development 600,000Sub-National Business Climate Reform 1,000,000Grand Design on Implementation of Regional Autonomy 700,000

Approved additional DSF Executive Operations Work Plan 2009 - 2011 2,788,505Knowledge Management for Aid Effectiveness 700,000DSF Executive Operations 1,502,043Additional donor contribution for DSF Operations 586,462

Total allocations to programming & DSF Executive staffing & operations 41,876,891Total Unallocated and Uncommitted Funds[1] 3,187,609

[1] Fund balance for unallocated and uncommitted funds fluctuates according to the prevailing exchange rate and return on investment.

III. Disbursement Status

To date, DSF has received USD 30.45 million, consisting of USD 29 million of donor contributions and USD 1.42 million of investment income. As of June 30, 2010, USD 17.34 million had been disbursed to work streams and operations. In addition, a total of USD 290,001 has been charged as WB administration fee (see Table 3).

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Focal Area 1 (Strengthening Inter-Governmental Framework) has disbursed USD 2.23 million or 75% of the total approved budget of USD 2.97 million.

Focal Area 2 (Support to Sub-National Entities) has disbursed USD 1.39 million or 100% of the total approved budget.

Focal Area 3 (Strengthening Accountability, Participation and Civic Engagement) has disbursed USD 5.37 million or 99.26% of the total approved budget of USD 5.41 million.

Table 3: Disbursement Status of the DSF as of June 30, 2010

Budget (USD)

Actual (USD)

Commitments (USD)

Receipts Paid in Contributions 44,058,315 29,000,052 Investment Income 1,421,933 Other Income 24,836 Total Receipts 44,058,315 30,446,821 DisbursementsFocal Area 1 2,968,714 2,233,522 30,391 Tax Assignment and Own-source Revenue * - - - Transfer 350,000 90,754 - Borrowing 600,000 588,973 7,967 Surplus and Reserves 275,000 183,105 - Data for Monitoring and Evaluation 480,000 360,467 - Assessing and Revising the System for Setting Territorial Boundaries

227,500 227,500 -

Fiscal Agency Intergovernmental Framework Fund 476,214 476,214 - Exploring Future Reform Options in Functional Assignment 55,000 47,467 3,140 Supporting the Establishment of Financially Feasible Minimum Service Standards

305,000 59,287 19,283

Alternative Mechanism of Service Delivery 200,000 199,755 - Focal Area 2 1,395,774 1,394,890 - Local Government Performance Measurement 187,174 187,174 - Identification and Replication of Good Practice 382,392 382,392 - Appraisal : Sub national Investment Climate Reform 600,000 599,116 - Knowledge Management for Effective Local Government Support Programs

58,823 58,823 -

Mapping and Analysis of Local Planning and Budgeting Processes

49,703 49,703 -

Improved Evidence Base of Good and Bad Local Perda 117,682 117,682 - Focal Area 3 5,413,244 5,373,135 11,985 National Program for Community Empowerment 1,072,961 1,072,961 - CDD Summit 421,705 421,705 - Policy Development for PNPM 58,666 58,666 - Cost Accounting Review for CDD Programs 16,512 16,512 - Technical Assessment for CDD Programs 53,685 53,685 - Information, Education and Communication for PNPM 484,739 484,739 -


ANNUAL REPORT 2010

63

Budget (USD)

Actual (USD)

Commitments (USD)

User Fee Assessment for CDD Programs 419,000 391,215 - MIS Improvement for PNPM 106,000 93,676 11,985 Short Term Monitoring and Evaluation 710,385 710,385 - Medium / Long Term Monitoring and Evaluation 399,926 399,926 - CCT Baseline Survey 1,669,665 1,669,665 -

Decentralization Support for Eastern Indonesia (SofEI) 2,972,226 2,972,226 - Quick starts 97,908 97,908 - Project Operations 8,700,000 4,894,770 175,692 Staff costs 5,200,000 2,990,925 20,240 Operation costs 3,500,000 1,903,845 155,452

Approved Work Plan 2009 - 2011 (1st round) New projects approved and registered in FY09 (1st round) 7,071,635 371,670 1,821,991 Support to Public Service Delivery 366,000 5,222 26,020 Strengthening Data Provision to the Regional Financial Information System by Sub-National Governments with Stand-Alone Electronic Data Bases

250,000 9,826 59,118

Improving and Piloting the Implementation of Monitoring and Evaluation System of Special Allocation Funds Utilization

550,000 9,967 4,334

Improving the Policy Framework for Fiscal Decentralization 900,000 113,605 232,734 Building Capacity for the Development of Sub-National Government Capital Markets for Municipal Bonds

900,000 42,991

66,047

Decentralization Support Facility II Capacity Strengthening Program for Local Government Legislatures

500,000 75,000

-

Government Training and Education Center Development: Introducing Competency Based Standards for Improved Public Service Delivery

797,576 - -

Institutional Building for the Integration of National Regional Development and Spatial Planning

500,000 53,071 343,280

Capacity Building for Regional Development Policy Formulation 150,000 49,171 31,609 Institution Building for the Accelerated Development of Border Areas

500,000 10,756 416,409

Strengthening Local Government Natural Resource Management Capability

750,000 2,061 642,441

Capacity Building through Decentralization Education and Training (DET) Scholarships for Public Service

908,059 - -

Approved Work Plan 2009-2011 in process of registration (1st round)

3,818,885

Approved DSF Work Plan 2009 - 2011 (2nd round) Approved DSF Work Plan 2009 - 2011 (2nd round) registered 3,300,000 - - Provincial Government Support Program 2,000,000 - - Regional & Local Economic Development 600,000 - - Regional Development Policy 700,000 - -

64

Budget (USD)

Actual (USD)

Commitments (USD)

Approved DSF Work Plan 2009 - 2011 (2nd round) in process of registration

4,350,000

Approved additional DSF Executive Operations Work Plan 2009 - 2011

1,788,505 - 28,358

Knowledge Management for Aid Effectiveness 700,000 - 28,358 Approved additional DSF Executive Operations Work Plan 2009 - 2011 in process of registration

1,088,505 - -

Total Project Disbursements 41,876,891 17,338,121 Administration fee 440,583 290,001 Total Disbursements 42,317,474 17,628,122 Outstanding commitments 2,068,417 2,068,417 Total Cash Available (= receipts - disbursements - commitments)

10,750,282

Support Office for Eastern Indonesia (SOfEI) has disbursed USD 2.97 million or 90% of the total USD 3.31 million approved budget. Since this project was ended, fund balance of SOfEI was returned back to Main TF.

For DSF operations, USD 4.90 million has been disbursed. This includes office and project operations as well as staff costs.

Outstanding commitments: as indicated in footnote 8 above this refers predominantly to formal contractually-based financial commitments. Such commitments amount to USD 5.6 million in DSF operations, including staff contracts over the life of the DSF plus the existing programmatic contracts of USD 2,068,417.

Total cash available as of June 30, 2010 is USD 10.75 million. These funds are fully committed, that is, either in the process of being allocated to child TF or earmarked for such allocation – for programming and for DSF Executive staffing and operations.

IV. Outlook

Table 4 shows expected cash receipts and disbursements for the current and projected portfolio of projects. The Fund expects to disburse USD 32.38 million to project accounts through to the end of fiscal year 2011.

Table 4 is based on total project funds committed, as set out in the current Contribution Agreement and Administrative Agreement. The current DSF TF closing date is March 31, 2012.

Table 4: Projection of Cash Receipts and Disbursements 2007 – 2011

Actual per June 30, 2010

Year ended June 30, 2011 (USD million)

Projections as of Apr. 30, 2012

(USD million) Expected ReceiptsProjected Cash Remaining from prior period - 10.76 13.14 Paid in Contributions

DFID 27.50 15.06 - AusAID 1.00 - - CIDA 0.50 - -

Cash Receipt during current period 29.00 15.06 -


ANNUAL REPORT 2010

65

Actual per June 30, 2010

Year ended June 30, 2011 (USD million)

Projections as of Apr. 30, 2012

(USD million) Investment Income 1.42 - - Other Income 0.03 - - Expected Cash Available to DSF TF 30.45 25.82 13.14 Disbursements Focal Area 1 2.23 0.80 - Focal Area 2 1.39 - - Focal Area 3 5.37 - - Eastern Indonesia projects (SoFEI) 2.97 - - Quick starts 0.10 - - Project Operations 4.89 3.30 2.30 Priority Area per FY09 Public Services 0.01 3.19 1.50 Fiscal Decentralization 0.22 2.38 0.85 Planning and Performance Measurement 0.08 2.12 3.60 Governance Reform 0.08 2.82 1.70

Total Project Disbursements (Projections) 17.33 14.61 9.95 Administration fee 0.29 0.15 - Total Disbursements (Projections) 17.62 14.76 9.95 Outstanding commitments 2.07 (2.07) - Total Cash Available for subsequent year(s) 10.76 13.14 3.19

66

ANNE

X C:

MON

ITOR

ING

FRAM

EwOR

K

Proj

ect N

ame

Dece

ntra

lizati

on S

uppo

rt F

acili

ty (

DSF)

Pha

se 2

Goa

l sIn

dica

tors

Prog

ress

Ratin

gCo

mm

ent

Impr

oved

soci

o-ec

onom

ic

deve

lopm

ent a

nd re

duce

d po

vert

y

Indo

nesia

’s Hu

man

De

velo

pmen

t Ind

ex (H

DI)

Purp

ose

Indi

cato

rsPr

ogre

ssRa

ting

Com

men

tEq

uita

ble,

acc

ount

able

and

hi

gh q

ualit

y pu

blic

serv

ices

pr

ovid

ed b

y na

tiona

l and

lo

cal g

over

nmen

ts

Loca

l gov

ernm

ent

expe

nditu

re a

nd

loca

l gov

ernm

ent

perf

orm

ance

in b

asic

pu

blic

serv

ice

deliv

ery

Furt

her c

ontr

ibuti

ons t

o th

e de

velo

pmen

t and

di

ssem

inati

on a

nd im

plem

enta

tion

of le

gisla

tion

and

proc

edur

es g

over

ning

func

tiona

l ass

ignm

ents

; m

inim

um se

rvic

e st

anda

rds i

nclu

ding

cos

ting;

in

stitu

tion

and

capa

city

bui

ldin

g of

serv

ice

prov

ider

s;

and

iden

tifica

tion

and

diffu

sion

of g

ood

prac

tices

.

3*

* Fi

rst m

ilest

one/

targ

et

1 –

Fully

ach

ieve

d

2

– La

rgel

y ac

hiev

ed

3

– Pa

rtial

ly a

chie

ved

4 –

Achi

eved

to a

ver

y lim

ited

exte

nt

5

– N

ot a

chie

ved

at a

ll

X–

Too

early

to ju

dge

ANNEX C: MONITORING FRAMEwORK

ANNUAL REPORT 2010

67

Out

put 1

: Pub

lic S

ervi

ce D

eliv

ery

Obj

ectiv

esIn

dica

tors

Prog

ress

Ratin

gCo

mm

ent

1.1.

Gui

delin

es (n

orm

s,

stan

dard

s, p

roce

dure

s and

cr

iteria

-NSP

K) fo

r ser

vice

de

liver

y in

sele

cted

sect

ors

form

ulat

ed

Num

ber o

f new

gui

delin

es

(nor

ms,

stan

dard

s,

proc

edur

es a

nd c

riter

ia) f

or

serv

ice

deliv

ery

com

plet

ed/

issue

d

Phas

e 1:

Con

sulta

tions

hel

d w

ith re

gion

s in

July

200

9 fo

r for

mul

ation

of

26

norm

s, st

anda

rds,

pro

cedu

res a

nd c

riter

ia (N

SPK)

in h

ealth

. Th

is re

sulte

d in

con

firm

ation

that

10

out o

f 26

NSP

K w

ere

defin

ed

as e

ligib

le fo

r fur

ther

acti

on. P

rese

ntly

5 o

ut o

f the

10

NSP

K ha

ve

been

issu

ed b

y th

e M

inist

er o

f Hea

lth a

s reg

ulati

ons i

nclu

ding

: ho

spita

l lic

ensin

g; fo

reig

n he

alth

wor

kers

in In

done

sia; a

nd h

ospi

tal

clas

sifica

tion.

As

sess

men

t on

the

conf

orm

ity o

f the

26

draft

NSP

K in

hea

lth w

ith

Gove

rnm

ent R

egul

ation

38/

2007

resu

lted

in p

rioriti

zatio

n of

at l

east

5

heal

th fu

nctio

ns fo

r NSP

K fo

rmul

ation

. Brie

f ass

essm

ents

wer

e al

so

mad

e of

NSP

K in

oth

er fi

elds

i.e.

agr

icul

ture

, tra

de, l

and

man

agem

ent,

ener

gy a

nd m

iner

al re

sour

ces.

A ke

y pr

oduc

t of t

his a

ctivi

ty is

a p

aper

on

“Exp

lorin

g Re

form

Opti

ons

in F

uncti

onal

Ass

ignm

ents

,” w

hich

was

com

plet

ed in

Mar

ch 2

008.

The

final

repo

rt o

n th

e N

SPK

asse

ssm

ent w

as su

bmitt

ed in

Aug

ust

2009

, mar

king

the

end

of p

hase

1. T

he d

iscus

sion

proc

ess p

rovi

ded

inpu

ts fo

r dev

elop

ing

the

Activ

ity C

once

pt N

otes

for p

hase

2.

Phas

e 2:

ACN

11/

2009

on

Form

ulati

on o

f Nor

ms,

Sta

ndar

ds,

Proc

edur

es a

nd C

riter

ia (N

SPK)

was

app

rove

d in

Oct

ober

200

9. It

was

ag

reed

by

MoH

A an

d th

e DS

F Ex

ecuti

ve th

at a

ppro

xim

atel

y 90

% o

f th

e bu

dget

wou

ld b

e re

cipi

ent e

xecu

ted

and

10%

Ban

k ex

ecut

ed.

The

term

s of r

efer

ence

and

bud

get h

ave

been

pre

pare

d. F

inan

cial

m

anag

emen

t and

pro

cure

men

t ass

essm

ents

hav

e be

en c

ondu

cted

by

the

Bank

and

the

asse

ssm

ent r

epor

ts h

ave

been

com

plet

ed.

The

Gran

t Agr

eem

ent (

GA) w

as si

gned

by

the

Bank

in Ju

ne 2

010

and

subm

itted

to M

oF fo

r cou

nter

signa

ture

, and

disc

ussio

n an

d co

nsul

tatio

n w

ith M

oHA,

and

Bap

pena

s. T

he o

pera

tions

man

ual w

as

prep

ared

and

subm

itted

for a

ppro

val.

The

annu

al p

lan,

incl

udin

g a

proc

urem

ent a

nd a

disb

urse

men

t pla

n ha

s bee

n fin

alize

d. It

is

expe

cted

that

the

Gran

t Agr

eem

ent w

ill b

e sig

ned

by M

oF in

July

20

10.

With

rega

rd to

the

Bank

exe

cute

d co

mpo

nent

, req

uest

s for

ex

pres

sions

of i

nter

est f

or a

sses

smen

t of N

SPK

stat

us h

ave

been

co

mpl

eted

. The

impl

emen

ting

agen

cy h

as b

een

sele

cted

. Tec

hnic

al

and

finan

cial

pro

posa

ls ha

ve b

een

subm

itted

and

revi

ewed

. The

co

ntra

ct w

ill b

e sig

ned

in Ju

ly 2

010.

Thi

s acti

vity

is e

xpec

ted

to

achi

eve

mile

ston

e 1

in D

ecem

ber 2

010.

1 4

68

Out

put 1

: Pub

lic S

ervi

ce D

eliv

ery

Obj

ectiv

esIn

dica

tors

Prog

ress

Ratin

gCo

mm

ent

1.2.

Min

imum

Ser

vice

St

anda

rds (

MSS

), in

ta

rget

ed se

ctor

s bud

gete

d an

d im

plem

ente

d in

sele

cted

dist

rict

gove

rnm

ents

Impl

emen

tatio

n of

MSS

in

sele

cted

sect

ors i

n se

lect

ed

dist

ricts

and

mun

icip

aliti

es

Phas

e 1:

A M

anua

l for

Min

imum

Ser

vice

Sta

ndar

ds (M

SS) C

ostin

g ba

sed

on fi

eld

testi

ng o

f reg

iona

l dat

a w

as p

repa

red

by M

oH in

co

oper

ation

with

MoH

A an

d DS

F. Th

e m

anua

l was

form

alize

d by

M

inist

er o

f Hea

lth D

ecre

e 31

7/20

09.

DSF

supp

orte

d th

e pr

intin

g of

10

00 c

opie

s of t

he m

anua

l whi

ch w

as d

istrib

uted

to th

e re

gion

s by

MoH

A an

d M

oH.

An e

lect

roni

c in

stru

men

t for

MSS

cos

ting

in h

ealth

has

bee

n de

velo

ped

with

ass

istan

ce fr

om D

SF. A

fter fi

rst t

estin

g th

e co

sting

in

stru

men

t Yog

yaka

rta

is no

w u

ploa

ding

MSS

rela

ted

data

.M

oHA,

in c

oope

ratio

n w

ith D

SF, o

rgan

ized

a se

min

ar in

co

mm

emor

ation

of R

egio

nal A

uton

omy

Day

title

d “C

reati

vity

of

Regi

ons i

n Im

prov

ing

Publ

ic S

ervi

ces”

, whi

ch w

as o

pene

d by

the

Min

ister

of H

ome

Affai

rs. A

TV

dial

ogue

on

the

sam

e th

eme

was

also

or

gani

zed.

The

se e

vent

s rec

ogni

zed

regi

ons a

nd h

eads

of r

egio

ns fo

r th

eir c

reati

vity

and

inno

vativ

e id

eas a

s wel

l as a

ction

s for

impr

ovin

g pu

blic

serv

ices

. Reg

ions

wer

e en

cour

aged

to b

e m

ore

crea

tive

and

inno

vativ

e in

impl

emen

ting

thei

r fun

ction

s, a

nd to

mor

e eff

ectiv

ely

docu

men

t and

diss

emin

ate

expe

rienc

es fr

om se

rvic

e de

liver

y an

d co

mm

unity

impr

ovem

ents

. It w

as a

lso su

gges

ted

that

a re

visio

n of

La

w 3

2/20

04 sh

ould

enc

oura

ge in

nova

tion

by re

gion

s.Ph

ase

2: A

CN 1

4/20

09 o

n Ca

paci

ty D

evel

opm

ent f

or M

inim

um

Serv

ice

Stan

dard

s Cos

ting

and

Impl

emen

tatio

n w

as a

ppro

ved

in N

ovem

ber 2

009.

Initi

ally

the

GOI w

as to

exe

cute

mos

t of t

he

activ

ities

. How

ever

in M

ay 2

010

the

GOI d

ecid

ed o

n a

new

allo

catio

n of

exe

cutio

n re

spon

sibili

ties w

ith 5

0.1%

MoH

A ex

ecut

ed a

nd 4

9.9%

Ba

nk e

xecu

ted.

Conc

erni

ng th

e re

cipi

ent e

xecu

ted

com

pone

nt, a

TO

R an

d bu

dget

ha

ve b

een

final

ized.

Fin

anci

al m

anag

emen

t and

pro

cure

men

t as

sess

men

ts w

ere

com

plet

ed b

y th

e Ba

nk. A

fina

ncia

l rep

ort h

as

been

pre

pare

d an

d a

proc

urem

ent r

epor

t is e

xpec

ted

to b

e fin

alize

d.

The

Gran

t Agr

eem

ent w

ill b

e pr

oces

sed

as so

on a

s the

pro

cure

men

t re

port

is c

lear

ed w

hich

is e

xpec

ted

to b

e in

Aug

ust.

In p

aral

lel,

an

oper

ation

s man

ual i

s bei

ng p

repa

red

and

an a

nnua

l pla

n, in

clud

ing

proc

urem

ent a

nd d

isbur

sem

ent p

lans

, has

bee

n co

mpl

eted

. Co

ncer

ning

the

Bank

exe

cute

d co

mpo

nent

, an

asse

ssm

ent o

f MSS

st

atus

will

be

cond

ucte

d. W

hen

the

city

of Y

ogya

kart

a ha

s com

plet

ed

the

costi

ng fo

r MSS

ach

ieve

men

t of t

arge

ts th

e co

sting

for M

SS

heal

th w

ill c

ontin

ue in

oth

er d

istric

ts/m

unic

ipal

ities

in th

e pr

ovin

ce

of Y

ogya

kart

a. A

Cos

ting

Man

ual w

ill b

e co

mpl

eted

for o

ther

sele

cted

se

ctor

s, in

clud

ing

elec

tron

ic in

stru

men

ts fo

r the

MSS

cos

ting

data

sy

stem

.

2 4Dr

awn

out d

ecisi

on-

mak

ing

proc

ess r

egar

ding

ex

ecuti

on re

spon

sibili

ties

has d

elay

ed p

roje

ct

initi

ation


ANNUAL REPORT 2010

69

Out

put 1

: Pub

lic S

ervi

ce D

eliv

ery

Obj

ectiv

esIn

dica

tors

Prog

ress

Ratin

gCo

mm

ent

1.2.

Min

imum

Ser

vice

St

anda

rds (

MSS

), in

ta

rget

ed se

ctor

s bud

gete

d an

d im

plem

ente

d in

sele

cted

dist

rict

gove

rnm

ents

Impl

emen

tatio

n of

MSS

in

sele

cted

sect

ors i

n se

lect

ed

dist

ricts

and

mun

icip

aliti

es

Phas

e 1:

A M

anua

l for

Min

imum

Ser

vice

Sta

ndar

ds (M

SS) C

ostin

g ba

sed

on fi

eld

testi

ng o

f reg

iona

l dat

a w

as p

repa

red

by M

oH in

co

oper

ation

with

MoH

A an

d DS

F. Th

e m

anua

l was

form

alize

d by

M

inist

er o

f Hea

lth D

ecre

e 31

7/20

09.

DSF

supp

orte

d th

e pr

intin

g of

10

00 c

opie

s of t

he m

anua

l whi

ch w

as d

istrib

uted

to th

e re

gion

s by

MoH

A an

d M

oH.

An e

lect

roni

c in

stru

men

t for

MSS

cos

ting

in h

ealth

has

bee

n de

velo

ped

with

ass

istan

ce fr

om D

SF. A

fter fi

rst t

estin

g th

e co

sting

in

stru

men

t Yog

yaka

rta

is no

w u

ploa

ding

MSS

rela

ted

data

.M

oHA,

in c

oope

ratio

n w

ith D

SF, o

rgan

ized

a se

min

ar in

co

mm

emor

ation

of R

egio

nal A

uton

omy

Day

title

d “C

reati

vity

of

Regi

ons i

n Im

prov

ing

Publ

ic S

ervi

ces”

, whi

ch w

as o

pene

d by

the

Min

ister

of H

ome

Affai

rs. A

TV

dial

ogue

on

the

sam

e th

eme

was

also

or

gani

zed.

The

se e

vent

s rec

ogni

zed

regi

ons a

nd h

eads

of r

egio

ns fo

r th

eir c

reati

vity

and

inno

vativ

e id

eas a

s wel

l as a

ction

s for

impr

ovin

g pu

blic

serv

ices

. Reg

ions

wer

e en

cour

aged

to b

e m

ore

crea

tive

and

inno

vativ

e in

impl

emen

ting

thei

r fun

ction

s, a

nd to

mor

e eff

ectiv

ely

docu

men

t and

diss

emin

ate

expe

rienc

es fr

om se

rvic

e de

liver

y an

d co

mm

unity

impr

ovem

ents

. It w

as a

lso su

gges

ted

that

a re

visio

n of

La

w 3

2/20

04 sh

ould

enc

oura

ge in

nova

tion

by re

gion

s.Ph

ase

2: A

CN 1

4/20

09 o

n Ca

paci

ty D

evel

opm

ent f

or M

inim

um

Serv

ice

Stan

dard

s Cos

ting

and

Impl

emen

tatio

n w

as a

ppro

ved

in N

ovem

ber 2

009.

Initi

ally

the

GOI w

as to

exe

cute

mos

t of t

he

activ

ities

. How

ever

in M

ay 2

010

the

GOI d

ecid

ed o

n a

new

allo

catio

n of

exe

cutio

n re

spon

sibili

ties w

ith 5

0.1%

MoH

A ex

ecut

ed a

nd 4

9.9%

Ba

nk e

xecu

ted.

Conc

erni

ng th

e re

cipi

ent e

xecu

ted

com

pone

nt, a

TO

R an

d bu

dget

ha

ve b

een

final

ized.

Fin

anci

al m

anag

emen

t and

pro

cure

men

t as

sess

men

ts w

ere

com

plet

ed b

y th

e Ba

nk. A

fina

ncia

l rep

ort h

as

been

pre

pare

d an

d a

proc

urem

ent r

epor

t is e

xpec

ted

to b

e fin

alize

d.

The

Gran

t Agr

eem

ent w

ill b

e pr

oces

sed

as so

on a

s the

pro

cure

men

t re

port

is c

lear

ed w

hich

is e

xpec

ted

to b

e in

Aug

ust.

In p

aral

lel,

an

oper

ation

s man

ual i

s bei

ng p

repa

red

and

an a

nnua

l pla

n, in

clud

ing

proc

urem

ent a

nd d

isbur

sem

ent p

lans

, has

bee

n co

mpl

eted

. Co

ncer

ning

the

Bank

exe

cute

d co

mpo

nent

, an

asse

ssm

ent o

f MSS

st

atus

will

be

cond

ucte

d. W

hen

the

city

of Y

ogya

kart

a ha

s com

plet

ed

the

costi

ng fo

r MSS

ach

ieve

men

t of t

arge

ts th

e co

sting

for M

SS

heal

th w

ill c

ontin

ue in

oth

er d

istric

ts/m

unic

ipal

ities

in th

e pr

ovin

ce

of Y

ogya

kart

a. A

Cos

ting

Man

ual w

ill b

e co

mpl

eted

for o

ther

sele

cted

se

ctor

s, in

clud

ing

elec

tron

ic in

stru

men

ts fo

r the

MSS

cos

ting

data

sy

stem

.

2 4Dr

awn

out d

ecisi

on-

mak

ing

proc

ess r

egar

ding

ex

ecuti

on re

spon

sibili

ties

has d

elay

ed p

roje

ct

initi

ation

Out

put 1

: Pub

lic S

ervi

ce D

eliv

ery

Obj

ectiv

esIn

dica

tors

Prog

ress

Ratin

gCo

mm

ent

A na

tiona

l sem

inar

on

“Im

plem

enta

tion

of M

inim

um S

ervi

ce

Stan

dard

s Tow

ards

Ach

ieve

men

t of M

illen

nium

Dev

elop

men

t Go

als (

MDG

s)”

was

con

duct

ed in

June

201

0. T

he o

bjec

tives

of t

his

sem

inar

wer

e: (a

) diss

emin

ate

the

issue

d M

SS to

regi

ons t

o in

crea

se

com

mitm

ent o

f reg

ions

in M

SS a

chie

vem

ent;

(b) l

aunc

hing

of t

he

capa

city

bui

ldin

g pr

ogra

m o

n M

SS c

ostin

g an

d im

plem

enta

tion;

and

(c

) ann

ounc

emen

t of M

SS a

s a n

ation

al p

riorit

y an

d eff

ort i

n M

DG

achi

evem

ent.

The

sem

inar

was

follo

wed

by

disc

ussio

ns w

ith p

ilot

regi

ons i

n pr

epar

ation

for C

apac

ity D

evel

opm

ent f

or M

inim

um S

ervi

ce

Stan

dard

s Cos

ting

and

Impl

emen

tatio

n ac

tivity

. Sev

eral

pilo

t reg

ions

co

nfirm

ed th

eir p

artic

ipati

on, o

ther

s are

like

ly to

follo

w.

Mile

ston

e 1.

MSS

impl

emen

tatio

n in

hea

lth a

nd w

omen

’s em

pow

erm

ent i

n 5

sele

cted

dist

ricts

is e

xpec

ted

to b

e un

derw

ay b

y De

cem

ber 2

010.

1.3.

Alte

rnati

ve se

rvic

e de

liver

y sc

hem

es e

stab

lishe

d in

sele

cted

sect

ors a

nd

dist

ricts

and

mun

icip

aliti

es

with

bett

er a

cces

s for

w

omen

(ACN

Titl

e: M

anag

emen

t St

reng

then

ing

and

Insti

tutio

n Bu

ildin

g fo

r Lo

cal P

ublic

Ser

vice

Pr

ovid

ers (

MSI

B-LP

SP))

Num

ber o

f sel

ecte

d di

stric

t go

vern

men

ts d

evel

oped

pi

lot a

ltern

ative

sche

mes

in

serv

ice

deliv

ery

and

num

ber

of w

omen

reac

hed

by th

ese

pilo

t sch

emes

Phas

e 1:

Ass

essm

ent o

f Leg

al a

nd R

egul

ator

y Fr

amew

ork

repo

rt

com

plet

ed in

Oct

ober

200

9.Re

gion

al W

orks

hop

was

con

duct

ed in

Aug

ust 2

009.

The

pro

gres

s re

port

s of e

ach

sele

cted

pilo

t reg

ion

(dist

rict S

eran

g, L

ebak

and

city

Ci

lego

n) w

ere

pres

ente

d at

the

wor

ksho

p.

Nati

onal

Wor

ksho

p on

Alte

rnati

ve M

echa

nism

s for

Ser

vice

Del

iver

y (A

MSD

) was

hel

d in

Nov

embe

r 200

9. R

epre

sent

ative

s fro

m 3

re

gion

s in

Prov

ince

Ban

ten

pres

ente

d pr

epar

ation

for t

he p

ilot

impl

emen

tatio

n of

: Man

agem

ent S

tren

gthe

ning

and

Insti

tutio

n Bu

ildin

g fo

r Loc

al P

ublic

Ser

vice

Pro

vide

rs.

The

‘Alte

rnati

ve M

echa

nism

s for

Ser

vice

Del

iver

y’ (A

MSD

) acti

vity

was

su

cces

sful

ly c

ompl

eted

in D

ecem

ber 2

009.

A fi

nal r

epor

t con

tain

ing

a bl

uepr

int f

or p

rom

oting

AM

SD w

as p

repa

red

and

subm

itted

to D

SF.

Phas

e 2:

The

follo

w-o

n ac

tivity

com

miss

ione

d by

GO

I was

form

alize

d in

ACN

4/2

009

on M

anag

emen

t Str

engt

heni

ng a

nd In

stitu

tion

Build

ing

of L

ocal

Pub

lic S

ervi

ce P

rovi

ders

. Thi

s is a

reci

pien

t exe

cute

d ac

tivity

. Th

e TO

R an

d bu

dget

hav

e be

en fi

naliz

ed. F

inan

cial

man

agem

ent

and

proc

urem

ent a

sses

smen

ts h

ave

been

com

plet

ed a

nd a

repo

rt

prod

uced

. The

pro

ject

ope

ratio

ns m

anua

l was

app

rove

d. T

he G

rant

Ag

reem

ent i

s aw

aitin

g sig

natu

re fr

om G

OI a

nd th

e Ba

nk.

The

Bank

exe

cute

d co

mpo

nent

con

sists

of t

wo

activ

ities

: (a)

pr

epar

ation

of t

he im

plem

enta

tion

of p

ilot p

roje

ct M

SIB-

LPSP

in

Wes

t Jav

a Pr

ovin

ce a

nd (b

) dev

elop

men

t of b

asel

ine

info

rmati

on o

n w

omen

’s ac

cess

to se

lect

ed p

ublic

serv

ices

.

1 3

70

Out

put 1

: Pub

lic S

ervi

ce D

eliv

ery

Obj

ectiv

esIn

dica

tors

Prog

ress

Ratin

gCo

mm

ent

Pilo

t reg

ions

sele

cted

incl

ude:

Wes

t Ban

dung

(for

pop

ulati

on

adm

inist

ratio

n se

rvic

es),

Sum

edan

g (fo

r hos

pita

l ser

vice

s) a

nd

Maj

alen

gka

(for w

ater

supp

ly se

rvic

es).

Prel

imin

ary

findi

ngs i

ndic

ate

that

Rum

ah S

akit

Um

um D

aera

h (R

SUD)

in S

umed

ang

has p

artia

lly

impl

emen

ted

som

e of

the

MSI

B-LP

SP e

lem

ents

such

as t

he u

se

of p

erfo

rman

ce in

dica

tors

, per

form

ance

con

trac

ts a

nd d

esig

n of

st

rate

gic

plan

ning

mea

sure

s, w

hich

sign

ifica

ntly

impr

oved

pro

visio

n of

se

rvic

es. I

t was

agr

eed

with

Dire

ctor

Gen

eral

of P

ublic

Ser

vice

s, M

oHA

(Ditj

en. P

UM

), pr

ovin

cial

gov

ernm

ent o

f Wes

t Jav

a an

d pa

rtici

patin

g re

gion

s to

cond

uct t

rain

ing

wor

ksho

ps fo

r loc

al M

SIB-

LPSP

faci

litat

ors

by A

ugus

t 201

0Tw

o ge

nder

spec

ialis

ts h

ave

com

plet

ed th

eir fi

eld

wor

k, in

clud

ing

reco

rdin

g ba

selin

e da

ta o

n w

omen

’s ac

cess

to a

ltern

ative

serv

ice

deliv

ery

in th

e ab

ove

pilo

t reg

ions

. Ini

tial fi

ndin

gs in

dica

te th

at

in B

ante

n w

omen

’s ac

cess

to w

ater

and

hea

lth se

rvic

es is

still

low

. Sub

stan

tial i

mpr

ovem

ents

hav

e be

en m

ade

in p

opul

ation

ad

min

istra

tion

serv

ices

. In

Sum

edan

g W

est J

ava,

subs

tanti

al

impr

ovem

ents

in w

omen

’s ac

cess

to h

ospi

tal s

ervi

ces h

ave

been

m

ade.

Mile

ston

e 1.

The

repo

rt o

n ba

selin

e da

ta is

exp

ecte

d to

be

com

plet

ed

by e

nd o

f Aug

ust 2

010.

1.4.

Im

prov

ed p

ublic

serv

ice

deliv

ery

by se

lect

ed lo

cal

gove

rnm

ents

in b

orde

r ar

eas

Actio

n pl

ans f

or im

prov

ed

publ

ic se

rvic

e de

liver

y co

mpl

eted

by

sele

cted

loca

l go

vern

men

ts in

bor

der a

reas

The

TOR

has b

een

final

ized

for t

his g

over

nmen

t-exe

cute

d (M

oHA)

ac

tivity

. A p

rocu

rem

ent p

lan

and

finan

cial

man

agem

ent a

sses

smen

t is

sche

dule

d to

be

com

plet

ed in

July

201

0.Th

e O

pera

tions

Man

ual w

as p

repa

red

by G

OI w

ith D

SF su

ppor

t and

aw

aits

cle

aran

ce b

y th

e Ba

nk.

This

activ

ity li

nks t

o ac

tivity

4.3

on

bord

er a

rea

deve

lopm

ent.

ACN

2/

2009

cov

ers o

bjec

tives

1.4

and

4.3

and

repr

esen

ts th

e DS

F’s s

uppo

rt

for o

ne o

f the

gov

ernm

ent’s

key

dev

elop

men

t prio

rities

. For

obj

ectiv

e 1.

4 th

e cl

ient

is M

oHA

and

the

focu

s is o

n im

prov

ed se

rvic

e de

liver

y.

The

TOR

has b

een

final

ized

for t

his g

over

nmen

t-exe

cute

d ac

tivity

.M

ilest

one

1. P

ublic

serv

ice

asse

ssm

ent i

n se

lect

ed se

ctor

s in

sele

cted

bo

rder

are

as is

exp

ecte

d to

be

met

in D

ecem

ber 2

010.

For o

bjec

tive

4.3

the

clie

nt is

Bap

pena

s and

the

focu

s is o

n im

prov

ed

plan

ning

. Thi

s is a

Ban

k ex

ecut

ed a

ctivi

ty o

n be

half

of B

appe

nas.

4M

oHA

and

Bapp

enas

are

se

ekin

g to

stre

ngth

en c

ross

-m

inist

eria

l sup

port

for

bord

er a

rea

deve

lopm

ent.

Activ

ity 4

.3 p

rovi

des

supp

ort t

o Ba

ppen

as

for t

he p

rodu

ction

of a

m

aste

r pla

n fo

r bor

der

area

dev

elop

men

t. Th

is w

ill c

onsti

tute

the

basis

fo

r acti

vity

1.4

, whi

ch

is co

ncer

ned

with

the

deve

lopm

ent o

f nati

onal

an

d re

gion

al a

ction

pla

ns.


ANNUAL REPORT 2010

71

Out

put 1

: Pub

lic S

ervi

ce D

eliv

ery

Obj

ectiv

esIn

dica

tors

Prog

ress

Ratin

gCo

mm

ent

1.5.

Im

prov

ed lo

cal

gove

rnm

ent s

yste

ms

for d

issem

inati

on a

nd

repl

icati

on o

f goo

d pr

actic

es in

serv

ice

deliv

ery

Nati

onal

pol

icy

on g

ood

prac

tices

issu

edCo

mpa

rativ

e an

alys

is of

goo

d pr

actic

e pr

ogra

ms i

n In

done

sia

com

plet

ed in

Apr

il 20

09.

MoH

A ha

s hel

d se

vera

l rou

nds o

f con

sulta

tions

on

a dr

aft

perm

enda

gri (

min

ister

ial r

egul

ation

) on

best

pra

ctice

s.

The

proj

ect i

mpl

emen

tatio

n co

nsul

tant

s pre

sent

ed a

mid

-term

re

port

to M

oHA

in A

ugus

t 200

9. In

spite

of D

SF e

ffort

s to

recti

fy

the

situa

tion,

it w

as n

oted

that

pro

gres

s was

disa

ppoi

nting

. The

co

nsul

tant

s had

not

subm

itted

an

ince

ption

repo

rt in

Bah

asa

Indo

nesia

, nor

com

plet

ed th

e pi

lots

and

dat

abas

e w

ork

as sti

pula

ted

in th

e TO

R.

In o

rder

to e

nabl

e th

e co

nsul

tant

s to

mee

t with

GO

I and

recti

fy th

e de

ficie

ncie

s, a

one

mon

th n

o-co

st e

xten

sion

was

allo

wed

bey

ond

the

proj

ect c

losin

g da

te o

f 30

Sept

embe

r 200

9. A

s the

con

sulta

nts f

aile

d to

com

ply,

the

proj

ect w

as c

lose

d on

31

Oct

ober

200

9.

4Pr

ojec

t im

plem

enta

tion

was

han

dica

pped

by

key

mem

bers

of t

he se

lect

ed

cons

ulta

ncy

team

not

bei

ng

avai

labl

e as

pro

pose

d an

d po

or c

ompl

ianc

e to

TO

Rs.

MoH

A (D

irect

orat

e fo

r Ca

paci

ty B

uild

ing

and

Loca

l Go

vern

men

t Per

form

ance

Ev

alua

tion)

and

DSF

ex

pres

sed

diss

atisf

actio

n w

ith a

ctivi

ty p

erfo

rman

ce.

As a

con

sequ

ence

, the

pr

ojec

t was

clo

sed

on 3

1 O

ctob

er 2

009.

1.

6. L

ocal

gov

ernm

ents

ado

pt

effec

tive,

effi

cien

t and

ac

coun

tabl

e re

gula

tions

an

d pr

oces

ses f

or b

usin

ess

licen

sing

Loca

l gov

ernm

ent

perf

orm

ance

in

impl

emen

ting

OSS

for

busin

ess l

icen

sing

Phas

e 1:

The

pro

ject

has

succ

essf

ully

del

iver

ed a

ll ou

tput

s stip

ulat

ed

in th

e co

ntra

ct, w

ith re

gard

to b

oth

One

Sto

p Sh

ops (

OSS

) for

bus

ines

s lic

ensin

g an

d us

e of

Reg

ulat

ory

Impa

ct A

sses

smen

ts (R

IA).

A pr

esen

tatio

n of

pro

ject

ach

ieve

men

ts to

all

key

stak

ehol

ders

, in

clud

ing

the

DSF

Man

agem

ent C

omm

ittee

, was

hel

d in

Janu

ary,

2010

. Thi

s mee

ting

refle

cted

on

less

ons l

earn

t and

disc

usse

d na

tiona

l st

rate

gies

to sc

ale

up th

e pa

ce a

nd p

erfo

rman

ce o

f sub

nati

onal

bu

sines

s lic

ensin

g re

form

s in

orde

r to

impr

ove

the

over

all b

usin

ess

and

inve

stm

ent c

limat

e in

the

regi

ons.

The

Sub-

Nati

onal

Bus

ines

s clim

ate

Refo

rm a

ctivi

ty w

as su

cces

sful

ly

com

plet

ed in

Janu

ary

2010

. Fin

al re

port

was

subm

itted

.Ph

ase

2: To

ens

ure

the

mom

entu

m o

f thi

s wor

k, a

follo

w-o

n pr

ojec

t w

as a

ppro

ved

by th

e DS

F M

anag

emen

t Com

mitt

ee in

late

200

9.

The

aim

of t

he

proj

ect i

s to

insti

tutio

naliz

e ca

paci

ty w

ithin

loca

l go

vern

men

ts to

impl

emen

t effe

ctive

, effi

cien

t and

acc

ount

able

re

gula

tions

and

pro

cess

es fo

r bus

ines

s lic

ensin

g. T

he p

roje

ct w

ill: (

a)

supp

ort M

oHA

in m

onito

ring

the

perf

orm

ance

of t

he O

SS fo

r bus

ines

s lic

ensin

g ac

ross

the

coun

try;

(b) s

uppo

rt th

ree

sele

cted

pro

vinc

ial

gove

rnm

ents

(PGs

) to

faci

litat

e es

tabl

ishm

ent o

f dist

rict-l

evel

OSS

an

d im

prov

e th

e pe

rform

ance

of t

he e

xisti

ng o

nes;

and

(c) s

uppo

rt

the

Nati

onal

Dev

elop

men

t Pla

nnin

g Ag

ency

( Ba

ppen

as) a

nd th

ree

sele

cted

PGs

in d

issem

inati

ng a

nd u

tilizi

ng th

e RI

A m

etho

d.Gr

ant j

ustifi

catio

n an

d su

mm

ary

prop

osal

for p

hase

2 h

ave

been

pr

epar

ed b

y th

e DS

F an

d ar

e ex

pect

ed to

be

appr

oved

by

July

201

0.

1 4

72

Out

put 1

: Pub

lic S

ervi

ce D

eliv

ery

Obj

ectiv

esIn

dica

tors

Prog

ress

Ratin

gCo

mm

ent

Mile

ston

e 1

(a) 1

0% in

crea

se in

OSS

ope

ratin

g un

der r

evise

d gu

idel

ines

is o

n tr

ack

to b

e ac

hiev

ed in

Sep

tem

ber 2

010,

and

(b) t

arge

t pro

vinc

es a

nd

dist

ricts

app

ly R

IA to

eva

luat

e dr

aft lo

cal r

egul

ation

s will

be

achi

eved

as

sche

dule

d as

sum

ing

the

proj

ect i

s ini

tiate

d be

fore

mid

Aug

ust

2010

.1.

7. I

mpr

oved

und

erst

andi

ng

of i

nter

natio

nal b

est

prac

tices

, soc

ial p

oliti

cal

dim

ensio

ns, c

osts

and

be

nefit

s an

d al

tern

ative

s fo

r ter

ritor

ial r

efor

m

Evid

ence

d ba

sed

rese

arch

on

terr

itoria

l ref

orm

ado

pted

by

thre

e ke

y m

inist

ries:

MoF

, Ba

ppen

as a

nd M

oHA

for

polic

y in

put

Six

anal

yses

com

plet

ed fo

r Ba

ppen

as, M

oF, M

oHA,

DPD

, DPR

, an

d lo

cal g

over

nmen

t, w

ith in

form

ation

on

less

ons l

earn

ed fr

om

inte

rnati

onal

, nati

onal

, and

loca

l exp

erie

nce

of te

rrito

rial r

efor

m:

•Ex

perie

nces

in Te

rrito

rial R

efor

m: I

mpl

icati

ons f

or In

done

sia•

Terr

itoria

l Res

truc

turin

g: C

ount

ry C

ase

Stud

ies

•Pr

oces

s and

Impl

icati

ons o

f the

Soc

ial-P

oliti

cal D

imen

sions

of

Terr

itoria

l Ref

orm

: Cas

e St

udie

s fro

m S

amba

s and

But

on.

•Co

sts a

nd B

enefi

ts o

f Pro

lifer

ation

of R

egio

ns (P

emek

aran

) an

alys

is co

mpl

eted

for M

oF w

ith k

ey fi

ndin

gs fo

r fisc

al tr

ansf

er

form

ulas

rela

ted

to p

emek

aran

, Nov

embe

r 200

7•

Eval

uatio

n of

the

Prol

ifera

tion

of A

dmin

istra

tive

Regi

ons i

n In

done

sia 2

001-

2007

•Te

rrito

rial R

efor

m a

nd P

eopl

e’s W

elfa

re: F

indi

ng A

ltern

ative

sCo

nsul

tatio

ns a

nd d

issem

inati

on w

orks

hops

with

nati

onal

and

loca

l m

ulti-

stak

ehol

der f

orum

s wer

e he

ld d

urin

g pr

epar

ation

, fina

lizati

on,

and

outr

each

for t

he a

naly

ses.

Par

ts o

f the

repo

rts h

ave

been

us

ed in

pre

sent

ation

s and

sem

inar

s by

seni

or G

OI c

entr

al a

nd lo

cal

gove

rnm

ent o

ffici

als.

The

rese

arch

also

info

rmed

pol

icie

s rel

ated

to

fisca

l, ad

min

istra

tive,

and

soci

al-p

oliti

cal a

spec

ts o

f ter

ritor

ial r

efor

m.

1 A

Fisc

al A

genc

y Ag

reem

ent

(FAA

) with

UN

DP fo

r co

vera

ge o

f wor

k un

der

terr

itoria

l ref

orm

, disa

ster

m

anag

emen

t, an

d su

b na

tiona

l dat

a w

as

oper

ation

al u

ntil J

une

30,

2009

. UN

DP su

bmitt

ed th

e fin

al re

port

cov

erin

g th

e en

tire

body

of w

ork

unde

r th

e FA

A in

Dec

embe

r 200

9.

How

ever

, the

wor

k th

at

form

ed th

e ba

sis o

f the

re

port

was

car

ried

out b

y RT

I Int

erna

tiona

l, U

NDP

, an

d a

free

lanc

e co

nsul

tant

. Th

e tr

ust f

und

for t

he FA

A ha

s bee

n cl

osed

.


ANNUAL REPORT 2010

73

Out

put 2

: Fis

cal D

ecen

tral

izatio

n an

d Ca

paci

ty D

evel

opm

ent

Obj

ectiv

esIn

dica

tors

Prog

ress

Rate

Com

men

t2.

1. T

he M

inist

ry o

f Fi

nanc

e Re

gion

al

Fina

ncia

l Inf

orm

ation

Sy

stem

reco

rdin

g lo

cal

gove

rnm

ent b

udge

ts is

up

grad

ed

Num

ber

and

proc

ess o

f dat

a en

try

of lo

cal g

over

nmen

t bu

dget

s rec

orde

d in

the

Min

istry

of F

inan

ce R

egio

nal

Fina

ncia

l Inf

orm

ation

Sys

tem

Phas

e 1:

DSF

supp

orte

d da

ta e

ntry

of M

oF’s

Regi

onal

Fin

anci

al

Info

rmati

on S

yste

m (S

IKD)

for F

iscal

Yea

r 200

7 Su

ppor

t dur

ation

: May

-Au

gust

200

9.Da

ta e

nter

ed a

nd v

erifi

ed in

Pha

se 1

: Bu

dget

dat

a (A

PBD,

200

9): 4

81 d

istric

ts a

nd m

unic

ipal

ities

(94

perc

ent

of to

tal)

Real

izatio

n da

ta (L

RA, 2

007)

: 351

dist

ricts

and

mun

icip

aliti

es (7

5 pe

rcen

t of t

otal

).Tw

o us

er m

anua

ls w

ere

prep

ared

: dat

a en

try

proc

edur

e in

tend

ed fo

r da

ta e

ntry

ope

rato

rs; a

nd a

gui

de fo

r use

rs to

acc

ess t

he d

ata.

Phas

e 2:

ACN

12/

2009

on

Stre

ngth

enin

g Da

ta P

rovi

sion

to th

e Re

gion

al

Fina

ncia

l Inf

orm

ation

Sys

tem

by

Sub-

Nati

onal

Gov

ernm

ents

with

Sta

nd-

Alon

e El

ectr

onic

Dat

a Ba

ses,

app

rove

d by

DSF

MC

in O

ctob

er 2

009.

Scop

ing

miss

ion

to 4

loca

l gov

ernm

ents

in N

orth

Sul

awes

i and

2 in

Ea

st Ja

va to

revi

ew re

gion

al fi

nanc

ial i

nfor

mati

on sy

stem

s car

ried

out

in D

ecem

ber 2

009,

Janu

ary

and

June

201

0. E

lect

roni

c da

ta fr

om th

e re

gion

s is a

vaila

ble

for 8

dist

ricts

as o

f Jun

e 20

10.

The

deve

lopm

ent o

f com

pute

r app

licati

on/s

oftw

are

inte

nded

for

tran

sfer

ring

elec

tron

ic d

ata

from

the

regi

ons t

o th

e M

oF S

IKD

syst

ems

was

com

plet

ed in

June

201

0. In

add

ition

to tr

ansf

errin

g th

e da

ta,

the

softw

are

is al

so d

esig

ned

for d

ata

entr

y pu

rpos

e; th

e la

tter i

s an

add

ition

al re

ques

t fro

m D

irect

orat

e fo

r Fun

ding

Eva

luati

on a

nd

Regi

onal

Fin

ance

Info

rmati

on (E

PIKD

). •

Data

ent

ry fo

r LRA

200

7 w

as su

spen

ded

by th

e go

vern

men

t in

orde

r for

it to

focu

s on

LRA

2008

inst

ead.

The

curr

ent L

RA 2

007

data

is th

us, i

n eff

ect,

100

perc

ent c

ompl

ete

(Mile

ston

e 1

and

mile

ston

e 2

i).•

For s

ecur

ity re

ason

s dat

a en

try

for 2

008

will

be

cond

ucte

d by

the

gove

rnm

ent i

n-ho

use.

As a

resu

lt DS

F ca

nnot

be

resp

onsib

le fo

r the

com

pleti

on o

f LRA

200

8 da

ta e

ntry

(Mile

ston

e 2

ii).

•Th

e go

al o

f hav

ing

5 pe

rcen

t, or

25,

dist

ricts

subm

it da

ta

elec

tron

ical

ly to

the

EPIK

D by

Dec

embe

r 201

0 is

with

in re

ach.

Be

twee

n Ju

ne a

nd D

ecem

ber 2

010,

EPI

KD in

tend

s to

unde

rtak

e 2-

3 so

cial

izatio

n se

ssio

ns a

t the

pro

vinc

ial l

evel

to so

licit

loca

l go

vern

men

t’s fi

nanc

ial e

lect

roni

c da

tase

ts. (

Mile

ston

e 2

iii)

1 3

74

Out

put 2

: Fis

cal D

ecen

tral

izatio

n an

d Ca

paci

ty D

evel

opm

ent

Obj

ectiv

esIn

dica

tors

Prog

ress

Rate

Com

men

tPr

ocur

emen

t for

cap

acity

bui

ldin

g fo

r EPI

KD st

aff is

on-

goin

g. T

he

capa

city

bui

ldin

g w

ill b

e un

dert

aken

thro

ugh

(a) a

wor

ksho

p on

re

gion

al fi

nanc

e an

d da

ta a

naly

sis to

be

cond

ucte

d by

LPE

M, a

rese

arch

in

stitu

te u

nder

the

Depa

rtm

ent o

f Eco

nom

ics,

Uni

vers

ity o

f Ind

ones

ia,

and

(b) c

onsu

ltatio

ns w

ith e

xper

ts fr

om L

PEM

for p

repa

ring

shor

t an

alys

is on

var

ious

regi

onal

fina

nce

topi

cs. T

hese

will

be

post

ed o

n th

e DG

FB w

ebsit

e by

Sep

tem

ber 2

010.

2.2.

Im

prov

ed fi

scal

de

cent

raliz

ation

pol

icy

Impl

emen

tatio

n of

‘G

rand

Des

ign

of F

iscal

De

cent

ralis

ation

’ acr

oss

gove

rnm

ent m

inist

ries a

nd

loca

l gov

ernm

ents

ACN

13/

2009

ACN

on

Impr

ovin

g th

e Po

licy

Fram

ewor

k fo

r Fisc

al

Dece

ntra

lisati

on (‘

Gran

d De

sign

of F

iscal

Dec

entr

aliza

tion’

- GD

FD)

appr

oved

by

DSF

MC

in N

ovem

ber 2

009.

Proj

ect i

mpl

emen

tatio

n pl

an fo

r the

who

le su

ppor

t com

plet

ed in

Ja

nuar

y 20

10Th

ree

wor

ksho

ps/p

ublic

con

sulta

tions

wer

e co

nduc

ted

in P

ontia

nak

(Wes

t Kal

iman

tan)

, Mak

assa

r (So

uth

Sula

wes

i) an

d Su

raba

ya (E

ast

Java

). Th

e pu

rpos

e of

thes

e w

orks

hops

was

to g

ain

insig

hts f

rom

a w

ide

rang

e of

stak

ehol

ders

in In

done

sia, r

egar

ding

the

appr

opria

te st

rate

gy

to im

prov

e th

e cu

rren

t GDF

D.

Inpu

ts to

the

revi

sion

of L

aw 3

3/20

04 a

re b

eing

pro

vide

d th

roug

h im

plem

enta

tion

of st

udie

s rel

ated

to in

terg

over

nmen

tal t

rans

fers

(in

parti

cula

r on

the

gene

ral-

and

spec

ific

allo

catio

n fu

nd);

thes

e st

udie

s ar

e on

-goi

ng.

Effor

ts to

har

mon

ize th

e GD

FD (a

nd re

spec

ted

inpu

ts to

the

revi

sion

of

Law

33/

2004

) with

the

revi

sion

of L

aw 3

2/20

04 a

nd, t

here

fore

, Gra

nd

Desig

n fo

r Reg

iona

l Aut

onom

y (G

DRA)

are

cur

rent

ly u

nder

way

.Re

visio

n to

the

mai

n id

eas o

f fisc

al d

ecen

tral

izatio

n po

licy

fram

ewor

k is

curr

ently

bei

ng fi

naliz

ed a

nd is

exp

ecte

d to

be

com

plet

ed fo

r MoF

ap

prov

al b

y Se

ptem

ber 2

010

(Mile

ston

e 1)

.

3Th

e DS

F w

ill p

rovi

de

supp

ort t

o M

oF te

am in

ch

arge

for t

he re

visio

n of

La

w 3

3/20

04.

In th

e ab

senc

e of

a d

ecen

t dr

aft o

n GD

RA a

s wel

l as

MoF

and

MoH

A im

med

iate

ne

eds t

o sy

nchr

onize

an

arra

y of

subs

tanti

ve is

sues

re

late

d to

the

revi

sion

of

Law

32/

2004

and

33/

2004

, eff

orts

shou

ld b

e re

dire

cted

to

the

harm

oniza

tion

betw

een

the

revi

sion

of

Law

33/

2004

(whi

ch is

ba

sed

on G

DFD)

and

that

of

Law

32/

2004

.

2.3.

Nati

onal

pol

icy

on lo

cal

gove

rnm

ent b

orro

win

g,

incl

udin

g iss

uanc

e of

m

unic

ipal

bon

ds, a

dopt

ed

Mun

icip

al b

ond

issua

nce,

in

clud

ing

cred

it w

orth

ines

s as

sess

men

ts

Phas

e 1:

Rev

iew

of I

ndon

esia

n Ci

vil C

ode

on is

sues

rela

ting

to d

ebto

r, cr

edito

r, an

d ba

nkru

ptcy

/inso

lven

cy c

ompl

eted

May

200

9.Re

view

of R

egul

ator

y Fr

amew

ork

and

Best

Pra

ctice

s Stu

dy o

n Lo

cal

Gove

rnm

ent F

inan

cial

Em

erge

ncy

Proc

edur

es c

ompl

eted

in D

ecem

ber

2009

.Su

ppor

t for

revi

sion

of G

over

nmen

t Reg

ulati

ons G

R 54

/200

5: L

ocal

Go

vern

men

t Bor

row

ing

and

GR 5

7/20

05: L

ocal

Gov

ernm

ent G

ranti

ng,

is co

mpl

ete.

Dra

ft re

visio

ns h

ave

been

sign

ed b

y th

e M

inist

ry o

f Fi

nanc

e an

d ar

e cu

rren

tly b

eing

disc

usse

d w

ith th

e M

inist

ry o

f Law

and

Hu

man

Rig

hts (

MLH

R).

2


ANNUAL REPORT 2010

75

Out

put 2

: Fis

cal D

ecen

tral

izatio

n an

d Ca

paci

ty D

evel

opm

ent

Obj

ectiv

esIn

dica

tors

Prog

ress

Rate

Com

men

tPh

ase

2: A

naly

sis a

nd p

repa

rato

ry w

ork

for i

ssua

nce

of D

KI Ja

kart

a an

d ci

ty o

f Ban

dung

bon

ds:

•pr

efea

sibili

ty st

udie

s and

dra

ft te

rms o

f ref

eren

ce (k

eran

gka

acua

n ke

giat

an/K

AK) d

ocum

ents

for t

he fo

ur p

roje

cts t

o be

fund

ed b

y th

e pr

opos

ed m

unic

ipal

Jaka

rta

bond

wer

e co

mpl

eted

in Ju

ne 2

010.

•

Thes

e fo

ur p

roje

cts a

re:

o p

rovi

sion

of im

prov

ed se

wag

e fa

ciliti

es in

the

cent

ral b

usin

ess

dist

rict a

nd ja

lan

Casa

blan

ca a

reas

;o c

onst

ructi

on o

f an

inte

r-city

bus

term

inal

at P

ulo

Geba

ng;

o lo

w-c

ost h

ousin

g re

habi

litati

on a

t Tan

ah P

asir;

and

o a

dditi

on o

f a tr

aum

a w

ing

at P

asar

Reb

o ho

spita

l.(to

tal e

stim

ated

val

ue o

f the

four

pro

ject

s is R

p 1.

7 tr

illio

n in

201

1 pr

ices

)•

Two

draft

Per

da (l

ocal

regu

latio

n) to

i) a

utho

rize

a m

unic

ipal

bon

d iss

ue a

nd ii

) est

ablis

h a

Satk

er (i

mpl

emen

tatio

n un

it) w

ithin

the

loca

l go

vern

men

t’s fi

nanc

ial u

nit t

o m

anag

e an

d ad

min

ister

the

Jaka

rta

bond

wer

e co

mpl

eted

in

June

201

0.•

Anal

ysis

on D

KI Ja

kart

a’s a

bilit

y to

pay

bac

k m

unic

ipal

bon

ds

com

plet

ed in

June

201

0.•

The

DSF

team

has

supp

orte

d th

e pr

epar

ation

of a

pre

sent

ation

on

the

mun

icip

al b

onds

with

in D

KI Ja

kart

a.•

A N

ota

Dina

s (offi

cial

mem

o) h

as b

een

prep

ared

whi

ch m

ust b

e sig

ned

by th

e Go

vern

or o

f Jak

arta

to fo

rmal

ly a

utho

rize

mun

icip

al

bond

pre

para

tion

for D

PRD

appr

oval

in Ju

ne 2

010.

•Ca

paci

ty b

uild

ing

has b

een

prov

ided

to th

e go

vern

men

t of c

ity

Band

ung,

but

thei

r pro

ject

, a th

eme

park

, req

uire

s con

sider

able

te

chni

cal d

efini

tion

and

may

be

beyo

nd th

e le

vel o

f ass

istan

ce w

hich

th

e DS

F ca

n re

ason

ably

pro

vide

. Tw

o ro

unds

of d

iscus

sions

on

revi

sion

of G

R 54

/200

5 on

loca

l bo

rrow

ing

betw

een

MoF

and

MLH

R to

ok p

lace

in F

ebru

ary

and

May

20

10. A

dditi

onal

mee

tings

are

war

rant

ed to

com

plet

e re

visio

n.M

ilest

one

1: C

redi

t wor

thin

ess a

sses

smen

t of t

wo

pilo

t mun

icip

aliti

es

for i

ssua

nce

of m

unic

ipal

bon

ds w

ill b

e co

mpl

eted

by

an in

depe

nden

t cr

edit

ratin

g co

mpa

ny b

y De

cem

ber 2

010.

Mile

ston

e 2:

Dat

es fo

r fut

ure

disc

ussio

ns to

fina

lize

the

GR w

ill b

e de

term

ined

by

MLH

R. It

is e

xpec

ted

that

the

revi

sed

GR w

ill b

e sig

ned

by th

e Pr

esid

ent b

y la

te 2

010

or e

arly

201

1.

3Di

rect

orat

e of

Reg

iona

l Fi

nanc

ing

and

Capa

city

-M

oF h

as su

bmitt

ed re

ques

t to

exp

and

the

scop

e of

ac

tiviti

es to

the

Prov

ince

s of

Kep

ulau

an R

iau

and

Kota

Su

raba

yaSc

opin

g m

issio

n to

Kot

a Su

raba

ya w

ill ta

ke p

lace

aft

er th

e in

augu

ratio

n of

th

e ne

w m

ayor

of K

ota

Sura

baya

in A

ugus

t 201

0.

76

Out

put 2

: Fis

cal D

ecen

tral

izatio

n an

d Ca

paci

ty D

evel

opm

ent

Obj

ectiv

esIn

dica

tors

Prog

ress

Rate

Com

men

t2.

4. I

mpr

oved

pub

lic fi

nanc

ial

man

agem

ent o

f Spe

cial

Al

loca

tion

Fund

s (SA

F) b

y lo

cal g

over

nmen

ts

Publ

ic fi

nanc

ial a

naly

sis o

f SA

F co

mpl

eted

by

sele

cted

lo

cal g

over

nmen

ts a

s a

basis

for l

ocal

gov

ernm

ent

plan

ning

and

bud

getin

g

Phas

e 1:

Em

piric

al a

naly

sis o

f reg

iona

l gov

ernm

ent s

urpl

uses

bas

ed o

n da

ta fr

om 2

7 pr

ovin

ces a

nd 2

20 d

istric

ts a

nd m

unic

ipal

ities

resu

lting

in

repo

rt w

ith re

com

men

datio

ns c

ompl

eted

in Ju

ne 2

008.

Empi

rical

ana

lysis

on

regi

onal

gov

ernm

ent i

nves

tmen

t in

publ

ic

infr

astr

uctu

re b

ased

on

audi

ted

finan

cial

dat

a fo

r 200

4-20

07 c

ompl

eted

in

June

200

9.Ph

ase

2: A

CN fo

r Pub

lic E

xpen

ditu

re A

naly

sis o

n SA

F in

Ace

h un

der

prep

arati

on w

ith M

oF. K

ick-

off m

eetin

g to

solic

it in

puts

on

this

activ

ity

is sc

hedu

led

for A

ugus

t 201

0.

1 4

Phas

e 2

was

on

hold

unti

l go

vern

men

t app

rova

l was

re

ceiv

ed in

May

201

0. D

ue

to ti

me

cons

trai

nts,

MoF

an

d DS

F ha

ve a

gree

d to

lim

it th

e co

vera

ge o

f the

st

udy

to o

nly

one

prov

ince

, Ac

eh. I

mpl

emen

tatio

n in

th

e re

mai

ning

2 p

rovi

nces

, Pa

pua

and

Wes

t Pap

ua, a

s tim

e pe

rmits

. Con

sequ

ently

m

ilest

one

1, w

hich

m

anda

tes t

he a

ctivi

ty to

be

com

plet

ed in

3 p

rovi

nces

, m

ay n

ot b

e ac

hiev

ed.

2.5.

Gov

ernm

ent p

ro-p

oor

spec

ial a

lloca

tion

fund

(D

AK) m

onito

red

and

eval

uate

d

Mon

itorin

g an

d ev

alua

tion

repo

rts c

ompl

eted

on

expe

nditu

res o

f pro

-poo

r go

vern

men

t fun

d in

sele

cted

lo

cal g

over

nmen

ts

ACN

3/2

009

on S

ocia

lizati

on a

nd P

ilot I

mpl

emen

tatio

n of

Join

t Circ

ular

Le

tter (

SEB)

on

Mon

itorin

g of

Tech

nica

l Im

plem

enta

tion

and

Eval

uatio

n of

Use

of S

peci

al A

lloca

tion

Fund

s (DA

K) a

ppro

ved

by D

SF M

C in

July

20

09.

Proj

ect i

mpl

emen

tatio

n pl

an fo

r the

enti

re a

ctivi

ty c

ompl

eted

in

Janu

ary

2010

.In

ord

er to

obt

ain

initi

al fe

edba

ck o

n SE

B-DA

K fo

cus g

roup

disc

ussio

ns

and

soci

aliza

tion

on S

EB-D

AK c

ondu

cted

for B

appe

da, c

ity o

f Bog

or in

Ja

nuar

y 20

10.

Mod

ules

for fi

eld

faci

litat

ors a

nd d

ata

colle

cting

acti

vitie

s com

plet

ed

by D

AK C

oord

inati

on, P

lann

ing,

Mon

itorin

g an

d Ev

alua

tion

Team

(T

KP2E

-DAK

) Sec

reta

riat,

Bapp

enas

, Feb

ruar

y 20

10. T

hese

doc

umen

ts

com

prise

(a) D

AK g

ener

al c

ompr

ehen

sion

(pem

aham

an u

mum

tent

ang

DAK)

; (b)

DAK

mon

itorin

g (p

eman

taua

n DA

K); (

c) D

AK e

valu

ation

(e

valu

asi D

AK);

(d) D

AK re

porti

ng sy

stem

(sist

em p

elap

oran

DAK

); (e

) org

aniza

tion

of D

AK m

onito

ring

and

eva

luati

on (o

rgan

isasi

pela

ksan

aan

mon

itorin

g da

n ev

alua

si DA

K); a

nd (f

) gui

delin

es o

n da

ta a

nd in

form

ation

col

lecti

ng in

the

field

(pen

gum

pula

n da

ta d

an

info

rmas

i di l

apan

gan)

.SE

B da

ta fo

rms t

este

d an

d te

chni

cal a

ssist

ance

to fi

ll ou

t the

se fo

rms

prov

ided

to o

ffici

als i

n Ka

raw

ang,

Wes

t Jav

a in

Mar

ch 2

010.

3Im

plem

enta

tion

will

be

split

into

two

phas

es: t

he

first

pha

se in

the

Daer

ah

Istim

ewa

Yogy

akar

ta (D

IY)

prov

ince

, fol

low

ed b

y a

seco

nd p

hase

con

sistin

g of

4

prov

ince

s (Ja

mbi

, Cen

tral

Ka

liman

tan,

Wes

t Sul

awes

i an

d N

orth

Mal

uku)

. The

pu

rpos

e of

this

sepa

ratio

n is

to o

btai

n le

sson

s lea

rned

on

how

to p

rope

rly

impl

emen

t DAK

mon

itorin

g an

d ev

alua

tion

Thes

e in

puts

will

be

utiliz

ed in

the

exec

ution

in th

e ot

her f

our

prov

ince

s.


ANNUAL REPORT 2010

77

Out

put 2

: Fis

cal D

ecen

tral

izatio

n an

d Ca

paci

ty D

evel

opm

ent

Obj

ectiv

esIn

dica

tors

Prog

ress

Rate

Com

men

tTa

rget

(a) “

Gove

rnm

ent d

esig

ned

mon

itorin

g an

d ev

alua

tion

syst

em fo

r DA

K w

ill b

e im

plem

ente

d in

the

dist

rict o

f the

pro

vinc

e of

Yog

yaka

rta

by S

epte

mbe

r whi

le in

the

othe

r fou

r pro

vinc

es im

plem

enta

tion

will

be

com

plet

ed b

y Ja

nuar

y 20

10.

Targ

et (b

) A se

min

ar o

n le

sson

s lea

rned

from

the

impl

emen

tatio

n in

D.I.

Yo

gyak

arta

as w

ell a

s ear

ly re

sults

from

the

four

pro

vinc

es a

re p

lann

ed

for S

epte

mbe

r 201

0. P

relim

inar

y re

sults

on

capa

city

stre

ngth

enin

g st

rate

gy fo

r cen

tral

- and

loca

l gov

ernm

ent w

ill b

e pr

esen

ted

at th

e se

min

ar.

78

Out

put 3

: Inc

reas

ing

Acco

unta

bilit

yO

bjec

tives

Indi

cato

rsPr

ogre

ssRa

teCo

mm

ent

3.1.

Effe

ctive

legi

slativ

e pr

oces

ses,

reso

urce

al

loca

tion

and

over

sight

fu

nctio

ns d

emon

stra

ted

in

sele

cted

loca

l leg

islat

ures

Num

ber o

f pro

vinc

ial a

nd

dist

rict M

Ps, i

nclu

ding

w

omen

MPs

, tra

ined

in

legi

slativ

e pr

oces

ses,

bu

dgeti

ng a

nd o

vers

ight

DSF

II Ca

paci

ty S

tren

gthe

ning

for D

PRD

(Loc

al G

over

nmen

t Leg

islat

ures

) TF

095

584

Gran

t Agr

eem

ent w

as si

gned

by

the

Wor

ld B

ank

in Ja

nuar

y 20

10 a

nd c

ount

ersig

ned

by th

e Go

vern

men

t of I

ndon

esia

(rep

rese

nted

by

the

Min

istry

of F

inan

ce) i

n Fe

brua

ry 2

010.

MoH

A su

bmitt

ed a

re

ques

t for

gra

nt e

ffecti

vene

ss w

ith su

ppor

ting

evid

ence

and

the

Gran

t Eff

ectiv

enes

s Dec

lara

tion

lette

r was

sign

ed b

y th

e Ba

nk in

Mar

ch 2

010.

MoH

A to

ok th

e st

eps n

eces

sary

to re

gist

er th

e Gr

ant A

gree

men

t w

ith th

e M

inist

ry o

f Fin

ance

(MoF

); to

ope

n a

spec

ial a

ccou

nt w

hich

re

quire

d pr

epar

ation

and

app

rova

l of a

n an

nual

wor

k pl

an a

nd is

suan

ce

of a

Per

dirje

n (D

irect

or G

ener

al re

gula

tion)

for t

he p

roje

ct; a

nd to

co

mpl

ete

budg

et im

plem

enta

tion

docu

men

t (DI

PA).

MoH

A ad

verti

sed

requ

est f

or e

xpre

ssio

ns o

f int

eres

t for

the

impl

emen

ting

agen

cy in

June

201

0. S

hort

listi

ng, r

eque

st fo

r pro

posa

ls an

d ne

gotia

tions

will

pro

ceed

in th

e ne

xt q

uart

er. M

oF re

ques

ted

and

rece

ived

the

initi

al d

epos

it fo

r the

pro

ject

in Ju

ne 2

010.

Nee

ds

asse

ssm

ent,

curr

icul

um d

evel

opm

ent a

nd te

sting

, and

impl

emen

tatio

n of

cap

acity

bui

ldin

g w

orks

hops

are

sche

dule

d fo

r com

pleti

on in

the

four

th q

uart

er 2

010

and

first

qua

rter

201

1.

The

adde

ndum

for t

he D

PRD

orie

ntati

on im

plem

ente

d th

roug

h th

e Go

vern

men

t Edu

catio

n an

d Tr

aini

ng C

ente

r (Ba

dikl

at) w

as c

ompl

eted

an

d a

draft

am

endm

ent w

as p

repa

red

to th

e Ba

dikl

at G

rant

Agr

eem

ent

TF09

5995

. The

pol

itica

l affa

irs u

nit o

f Bad

ikla

t suc

cess

fully

com

plet

ed

finan

cial

man

agem

ent a

nd p

rocu

rem

ent a

sses

smen

ts a

nd in

tern

al

budg

et re

view

to a

lloca

te c

ount

erpa

rt fu

ndin

g fo

r the

acti

vity

, a fi

rst f

or

this

unit.

The

am

endm

ent i

s sch

edul

ed fo

r sig

ning

in th

e ne

xt q

uart

er

with

Tra

inin

g of

Tra

iner

s (TO

T) im

plem

enta

tion

and

DPRD

Orie

ntati

on

com

plet

ed b

y De

cem

ber 2

010.

Th

e m

ilest

one

of 1

50 D

PRD

mem

bers

trai

ned

by D

ecem

ber 2

010

in th

e DS

F lo

gica

l fra

mew

ork

will

be

met

and

will

dra

w fr

om D

PRD

mem

bers

tr

aine

d th

roug

h th

e DP

RD c

apac

ity st

reng

then

ing

prog

ram

(Loc

al

Gove

rnm

ent A

ffairs

/Reg

iona

l Aut

onom

y) a

nd/o

r the

DPR

D or

ient

ation

ac

tivity

(Loc

al G

over

nmen

t Tra

inin

g an

d Ed

ucati

on C

entr

e) w

hich

is a

lso

adm

inist

ered

by

the

DSF.

3Th

e DP

RD a

ctivi

ties a

re

impl

emen

ted

thro

ugh

gove

rnm

ent s

yste

ms.

Bot

h th

e Lo

cal G

over

nmen

t Aff

airs

Dire

ctor

ate

of th

e DG

Reg

iona

l Aut

onom

y an

d Ba

dikl

at h

ave

been

acti

ve

in b

ringi

ng th

e pr

ojec

t on-

budg

et, o

n-tr

easu

ry. W

ith

DSF

supp

ort t

he p

roje

ct

impl

emen

ting

units

hav

e ga

ined

cap

acity

in p

rogr

am

man

agem

ent a

nd h

ave

broa

dene

d th

eir n

etw

orks

w

ith k

ey c

ount

erpa

rts

with

in M

oF. T

hey

have

al

so g

aine

d kn

owle

dge

on

finan

cial

man

agem

ent,

proc

urem

ent,

and

anti-

corr

uptio

n m

easu

res

appl

icab

le to

oth

er

gove

rnm

ent p

roje

cts.

The

MoH

A DP

RD a

ctivi

ties

incl

ude

two

appr

oach

es:

1) D

PRD

capa

city

st

reng

then

ing

cove

ring

tailo

r-mad

e tr

aini

ng b

ased

on

nee

ds a

sses

smen

ts in

se

lect

ed p

rovi

nces

and

di

stric

ts fo

llow

ed b

y ac

tion

lear

ning

and

tech

nica

l as

sista

nce

to a

chie

ve

perf

orm

ance

targ

ets;

and

2)

DPR

D or

ient

ation

in

targ

eted

pro

vinc

es a

nd

dist

ricts

for n

ewly

ele

cted

DP

RD m

embe

rs p

rovi

ding

ba

sic k

now

ledg

e on

na

tiona

l affa

irs, l

ocal


ANNUAL REPORT 2010

79

Out

put 3

: Inc

reas

ing

Acco

unta

bilit

yO

bjec

tives

Indi

cato

rsPr

ogre

ssRa

teCo

mm

ent

gove

rnm

ent,

and

basic

du

ties a

nd fu

nctio

ns o

f DP

RD. T

he tw

o ac

tiviti

es

shar

e re

spec

tive

curr

icul

um

and

teac

hing

/lear

ning

m

etho

dolo

gy to

enc

oura

ge

syne

rgy

whe

re a

ppro

pria

te,

and

coor

dina

te re

gard

ing

geog

raph

ical

dist

ributi

on

of p

artic

ipati

ng D

PRDs

to

avoi

d ov

erla

p.3.

2. E

ffecti

ve a

nd a

ccou

ntab

le

publ

ic se

rvic

e de

liver

y by

loca

l gov

ernm

ent

offici

als a

nd e

ffecti

ve

mon

itorin

g by

CSO

lead

ers

dem

onst

rate

d in

sele

cted

lo

cal g

over

nmen

ts

Num

ber o

f nati

onal

and

loca

l go

vern

men

t offi

cial

s and

CSO

le

ader

s pro

fess

iona

lly tr

aine

d in

effe

ctive

and

acc

ount

able

pu

blic

serv

ice

deliv

ery

ACN

No.

9/2

009

on C

apac

ity B

uild

ing

thro

ugh

Dece

ntra

lized

Edu

catio

n an

d Tr

aini

ng (D

ET) a

ppro

ved

for a

tota

l bud

get o

f USD

1.5

93,5

20.

The

activ

ity h

as 3

com

pone

nts t

hat a

im to

enh

ance

the

prof

essio

nal

capa

city

of l

ocal

and

nati

onal

offi

cial

s to

prov

ide,

and

CSO

s to

mon

itor,

im

prov

ed p

ublic

serv

ice

deliv

ery:

•Sh

ort c

ours

es in

Ind

ones

ia a

nd th

e Re

gion

•St

udy

tour

s •

Scho

lars

hips

for M

aste

r deg

ree

prog

ram

s in

dece

ntra

lizati

on re

late

d st

udie

s in

the

UK.

Follo

win

g a

”no

obje

ction

” by

the

Coun

try

Lead

ersh

ip Te

am (C

LT) o

f th

e gr

ant j

ustifi

catio

n an

d su

mm

ary

prop

osal

, the

gra

nt a

gree

men

t was

sig

ned

in M

ay 2

010b

y th

e Ba

nk, a

nd th

e Br

itish

Cou

ncil

whi

ch w

ill b

e th

e im

plem

entin

g pa

rty

of th

e sc

hola

rshi

p pr

ogra

m.

After

rigo

rous

inte

rvie

win

g, th

e se

lecti

on c

omm

ittee

iden

tified

ca

ndid

ates

for a

1.5

mon

th E

nglis

h la

ngua

ge p

rogr

am w

hich

will

be

com

plet

ed b

y m

id Ju

ly. T

he c

andi

date

s will

sit t

he In

tern

ation

al E

nglis

h La

ngua

ge Te

sting

Sys

tem

(IEL

TS) e

xam

and

the

resu

lts o

f the

IELT

S te

sts

will

det

erm

ine

who

will

be

prov

ided

with

a sc

hola

rshi

p. S

ucce

ssfu

l ca

ndid

ates

will

be

supp

orte

d by

the

Briti

sh C

ounc

il in

app

lyin

g to

UK

univ

ersiti

es, a

nd w

ill a

lso re

ceiv

e ac

adem

ic a

nd p

racti

cal g

uida

nce

whi

le e

nrol

led.

The

Briti

sh C

ounc

il w

ill fo

llow

-up

with

the

scho

lars

on

the

deve

lopm

ent o

f acti

on p

lans

for t

he a

pplic

ation

of k

now

ledg

e an

d sk

ills a

cqui

red

unde

r the

pro

gram

upo

n re

turn

to th

eir j

obs i

n In

done

sia.

3AC

N 9

/200

9 ha

s bee

n di

vide

d in

to 2

gra

nts:

1)

scho

lars

hips

and

2) s

hort

co

urse

s and

stud

y to

urs.

In v

iew

of t

he ti

ght ti

mel

ine

for t

he e

xecu

tion

of th

e sc

hola

rshi

ps p

roje

ct, o

n 31

M

arch

201

0 AK

LN/M

oHA

aske

d th

at th

e Ba

nk a

ssum

e re

spon

sibili

ty fo

r the

ex

ecuti

on o

f the

scho

lars

hip

com

pone

nt o

f the

pro

ject

.

80

Out

put 3

: Inc

reas

ing

Acco

unta

bilit

yO

bjec

tives

Indi

cato

rsPr

ogre

ssRa

teCo

mm

ent

By S

epte

mbe

r 201

0, 2

0 ca

ndid

ates

are

exp

ecte

d to

be

enro

lled

in

Briti

sh u

nive

rsiti

es fo

r prim

arily

adv

ance

d p

rogr

ams t

hat o

ffer a

on

e ye

ar M

aste

rs p

rogr

am sp

ecia

lized

in fi

scal

dec

entr

aliza

tion(

such

as

tax

polic

ies,

fisc

al tr

ansf

ers,

sub-

natio

nal b

orro

win

g), a

nd so

cial

/ad

min

istra

tive

polic

ies h

avin

g a

bear

ing

on se

rvic

e ou

tcom

es.

The

scho

lars

hip

prog

ram

is o

n tr

ack

to b

e co

mpl

eted

by

Sept

embe

r 20

11 a

nd w

ill m

eet m

ilest

one

2.In

add

ition

an

estim

ated

30

natio

nal a

nd lo

cal g

over

nmen

t offi

cial

s and

Ci

vil S

ocie

ty o

rgan

izatio

ns (C

SO) l

eade

rs w

ill h

ave

rece

ived

trai

ning

in

effec

tive

and

acco

unta

ble

publ

ic se

rvic

e de

liver

y pa

rtici

patio

n in

shor

t co

urse

s in

line

with

mile

ston

e 1.

Sho

rt c

ours

es a

nd st

udy

tour

s will

be

orga

nize

d in

the

third

qua

rter

pen

ding

dec

ision

on

exec

ution

met

hod.

3.3.

Loc

al tr

aini

ng a

nd

educ

ation

cen

tres

de

mon

stra

ted

impr

ovem

ent i

n co

nduc

ting

trai

ning

pr

ogra

mm

es fo

r loc

al

gove

rnm

ent o

ffici

als

Com

pete

ncy-

base

d tr

aini

ng p

rogr

amm

es o

n de

cent

raliz

ed p

ublic

serv

ice

deliv

ery

deve

lope

d by

loca

l go

vern

men

t tra

inin

g ce

ntre

s

DSF

II Go

vern

men

t Tra

inin

g an

d Ed

ucati

on C

entr

e De

velo

pmen

t: In

trod

ucin

g Co

mpe

tenc

y-Ba

sed

Stan

dard

s for

Impr

oved

Pub

lic S

ervi

ce

Deliv

ery

TF 0

9599

5 Gr

ant A

gree

men

t was

sign

ed b

y th

e Ba

nk in

Ja

nuar

y 20

10 a

nd c

ount

ersig

ned

by th

e Go

vern

men

t of I

ndon

esia

(r

epre

sent

ed b

y th

e M

inist

ry o

f Fin

ance

) in

Febr

uary

201

0. D

ikla

t su

bmitt

ed a

requ

est f

or g

rant

effe

ctive

ness

with

supp

ortin

g ev

iden

ce

and

the

Gran

t Effe

ctive

ness

Dec

lara

tion

lette

r was

sign

ed b

y th

e Ba

nk

in M

arch

201

0.Aft

er th

e Gr

ant A

gree

men

t was

sign

ed in

Janu

ary,

MoH

A to

ok th

e ap

prop

riate

step

s to

regi

ster

the

Agre

emen

t with

MoF

; ope

n a

spec

ial

acco

unt w

hich

requ

ired

prep

arati

on a

nd a

ppro

val o

f an

annu

al w

ork

plan

and

issu

ance

of a

Per

dirje

n fo

r the

pro

ject

; and

com

plet

ed th

e bu

dget

impl

emen

tatio

n do

cum

ent (

DIPA

). Ba

dikl

at a

dver

tised

for i

ndiv

idua

l con

sulta

nts i

n Ju

ne 2

010.

The

co

nsul

tant

s will

be

offici

ally

hire

d an

d th

e ki

ck-o

ff w

orks

hop

impl

emen

ted

in th

e ne

xt q

uart

er w

hen

DIPA

fund

s are

exp

ecte

d to

be

ava

ilabl

e. P

rovi

ncia

l Dik

lats

in E

ast J

ava,

Wes

t Kal

iman

tan,

and

Ea

st N

usa

Teng

gara

hav

e al

loca

ted

regi

onal

bud

get f

or p

artic

ipati

on

in tr

aini

ng a

nd a

re p

repa

red

for i

mpl

emen

tatio

n. O

ther

acti

vitie

s sc

hedu

led

in th

e ne

xt q

uart

er in

clud

e tr

aini

ng fo

r ass

essm

ent,

verifi

catio

n, a

nd d

evel

opm

ent o

f com

pete

ncy

base

d st

anda

rds

incl

udin

g pr

epar

ation

for c

ompe

tenc

y ba

sed

trai

ning

in th

e pu

blic

se

rvic

e of

pop

ulati

on a

dmin

istra

tion

and

civi

l reg

istra

tion.

The

mile

ston

e of

cap

acity

bui

ldin

g ne

eds a

sses

smen

t on

man

agem

ent

of se

rvic

e de

liver

y tr

aini

ng is

on

trac

k to

be

met

by

Dece

mbe

r 201

0.

3Th

is is

the

first

tim

e Ba

dikl

at h

as m

anag

ed a

gr

ant t

hrou

gh g

over

nmen

t sy

stem

s (on

-bud

get,

on-

trea

sury

). W

ith D

SF su

ppor

t Ba

dikl

at h

as d

evel

oped

ca

paci

ty in

pre

parin

g go

vern

men

t doc

umen

ts

for t

he p

lann

ing

bure

au

of B

adik

lat a

nd M

oHA

and

for t

he tr

easu

ry, d

ebt

man

agem

ent,

and

budg

et

office

s with

in M

oF. B

adik

lat

has d

evel

oped

cap

acity

in

pro

gram

man

agem

ent

and

dem

onst

rate

d pr

oper

ow

ners

hip

of g

rant

fund

ed

activ

ities

. Bad

ikla

t has

also

de

mon

stra

ted

the

abili

ty

to u

se th

e co

ncep

t of a

nd

appr

oach

to c

ompe

tenc

y ba

sed

trai

ning

dev

elop

ed

with

DSF

ass

istan

ce to

m

eet t

he st

rate

gic

need

s of

Bad

ikla

t with

oth

er

dono

r sup

port

ed p

roje

cts

incl

udin

g U

NDP

ACT

P in

Ac

eh, A

usAI

D LO

GICA

in

Aceh

, and

CID

A BA

SICS

pr

ogra

m in

Sul

awes

i.


ANNUAL REPORT 2010

81

Out

put 3

: Inc

reas

ing

Acco

unta

bilit

yO

bjec

tives

Indi

cato

rsPr

ogre

ssRa

teCo

mm

ent

3.4.

Im

prov

ed p

ublic

ac

coun

tabi

lity

of lo

cal

gove

rnm

ents

del

iver

ed b

y CS

Os

Publ

ic a

ccou

ntab

ility

m

echa

nism

s dev

elop

ed a

nd

impl

emen

ted

by C

SOs

In O

ctob

er 2

009

a pa

per o

utlin

ing

optio

ns fo

r loc

al g

over

nmen

t en

gage

men

t in

the

DSF

was

revi

ewed

by

the

DSF

Man

agem

ent

Com

mitt

ee a

nd th

e fo

rmati

on o

f a L

ocal

Gov

ernm

ent C

onsu

ltativ

e Gr

oup

was

end

orse

d. A

disc

ussio

n pa

per d

etai

ling

the

role

s,

resp

onsib

ilitie

s, a

nd m

embe

rshi

p of

the

LGCG

was

pre

pare

d in

May

20

10, d

iscus

sed

with

the

GOI t

ask

forc

e ap

poin

ted

for t

his p

urpo

se, a

nd

final

ized.

An

invi

tatio

n fo

r exp

ress

ions

of i

nter

est/

parti

cipa

tion

in th

e LG

CG w

as se

nt b

y th

e DS

F co

-cha

ir in

June

201

0 to

loca

l gov

ernm

ent

asso

ciati

ons a

nd lo

cal g

over

nmen

ts p

artic

ipati

ng in

DSF

pro

ject

s. T

he

kick

-off

wor

ksho

p is

sche

dule

d fo

r Aug

ust 2

010.

Task

forc

e es

tabl

ished

an

d op

erati

ons i

nitia

ted.

Disc

ussio

n pa

per o

n lo

cal g

over

nmen

t con

sulta

tive

grou

p pr

oduc

ed in

M

ay 2

010

appr

oved

by

the

Man

agem

ent C

omm

ittee

.

N/A

The

Loca

l Gov

ernm

ent

Cons

ulta

tive

Grou

p is

mov

ing

tow

ard

achi

evin

g th

e in

dica

tor o

f im

prov

ed

publ

ic a

ccou

ntab

ility

of

loca

l gov

ernm

ents

but

doe

s no

t yet

invo

lve

CSO

s.

The

Man

agem

ent

Com

mitt

ee d

id n

ot

com

miss

ion

wor

k on

pub

lic

acco

unta

bilit

y de

liver

ed

by C

SOs i

n th

e 20

09-2

011

wor

kpla

n. H

owev

er G

OI

has r

eque

sted

incl

usio

n of

pub

lic a

ccou

ntab

ility

m

echa

nism

s in

the

futu

re

DSF

prog

ram

cur

rent

ly

unde

r disc

ussio

n.3.

5. I

mpr

oved

kno

wle

dge

shar

ing

on su

ppor

t to

loca

l go

vern

men

ts

Publ

icly

acc

essib

le d

ata

base

on

supp

ort t

o lo

cal

gove

rnm

ent d

evel

oped

and

nu

mbe

r of

deve

lopm

ent

foru

ms a

nd h

arm

oniza

tion

activ

ities

faci

litat

ed

In 2

006,

the

Min

istry

of H

ome

Affai

rs c

omm

issio

ned

the

DSF

to c

reat

e a

dono

r map

ping

dat

abas

e (D

MD)

The

pur

pose

of t

he D

MD

is to

tr

ack,

mon

itor,

anal

yze

and

prio

ritize

aid

rend

ered

to In

done

sia b

y th

e in

tern

ation

al d

onor

com

mun

ity, a

nd th

ereb

y se

rve

as a

val

uabl

e pl

anni

ng a

nd m

onito

ring

tool

for t

he g

over

nmen

t and

mem

bers

for t

he

dono

r com

mun

ity. F

or th

e go

vern

men

t and

don

ors a

like,

it is

cle

arly

de

sirab

le to

mai

ntai

n su

ch a

n up

-to-

date

map

of d

onor

-sup

port

ed

activ

ities

, one

that

pro

vide

s com

para

ble

data

on

key

dim

ensio

ns:

matt

ers a

ddre

ssed

; geo

grap

hic

loca

tion;

tool

s and

app

roac

hes u

sed;

na

ture

of a

ssist

ance

- w

heth

er lo

an/g

rant

/TA;

mon

itorin

g fr

amew

orks

; ex

pect

ed re

sults

; and

so o

n. T

he d

atab

ase

deve

lopm

ent h

as p

roce

eded

in

pha

ses.

In p

hase

1, a

pro

toty

pe w

as c

reat

ed. I

n ph

ase

2, th

e de

sign

was

upg

rade

d to

a w

eb-e

nabl

ed d

ynam

ic H

TML

data

base

. Thi

s ver

sion

is no

w a

vaila

ble

in b

oth

Engl

ish a

nd B

ahas

a In

done

sia o

n th

e DS

F w

eb-

site

at h

ttp:

//w

ww

.dsfi

ndon

esia

.org

/app

s/ds

f-dm

/cgi

-bin

/dw

.cgi

.

3Th

e da

taba

se is

wel

l re

ceiv

ed a

nd c

omm

ende

d as

a u

sefu

l too

l for

co

ordi

natio

n an

d m

onito

ring

of d

onor

su

ppor

t to

dece

ntra

lizati

on.

GOI i

s kee

n to

inco

rpor

ate

the

tool

in a

gov

ernm

ent

syst

em fo

r mon

itorin

g an

d re

porti

ng o

n de

velo

pmen

t ass

istan

ce in

de

cent

raliz

ation

. DS

F w

ill su

ppor

t MoH

A to

up

date

and

adm

inist

er th

e DM

D

82

Out

put 3

: Inc

reas

ing

Acco

unta

bilit

yO

bjec

tives

Indi

cato

rsPr

ogre

ssRa

teCo

mm

ent

The

third

pha

se o

f the

acti

vity

is d

esig

ned

to in

stitu

tiona

lize

the

data

base

and

its m

anag

emen

t in

gove

rnm

ent.

A co

nsul

tant

is th

eref

ore

in th

e pr

oces

s of b

eing

bee

n hi

red

in o

rder

to, i

n cl

ose

colla

bora

tion

with

gov

ernm

ent,:

•up

grad

e de

sign

feat

ures

, inc

reas

e an

d re

fine

data

con

tent

, an

d pr

ovid

e te

chni

cal m

aint

enan

ce su

ppor

t;•

tran

sfer

resp

onsib

ility

for u

pdati

ng in

form

ation

onl

ine

to

indi

vidu

al d

onor

age

ncie

s; a

nd•

iden

tify

and

hand

ove

r adm

inist

rato

r rig

hts a

nd

resp

onsib

ilitie

s to

the

“ow

ner”

enti

ty in

MoH

A


ANNUAL REPORT 2010

83

Out

put 4

: Pla

nnin

g an

d Pe

rfor

man

ce M

easu

rem

ent

Obj

ectiv

esIn

dica

tors

Prog

ress

Rate

Com

men

t4.

1. P

rovi

ncia

l and

dist

rict/

mun

icip

al sp

atial

pla

ns

prod

uced

whi

ch a

re in

lin

e w

ith n

ation

al sp

atial

pl

an a

nd in

tegr

ated

with

pr

ovin

cial

and

dist

rict/

mun

icip

al d

evel

opm

ent

plan

s

Prov

inci

al a

nd d

istric

t/m

unic

ipal

spati

al p

lans

co

mpl

eted

and

app

rove

d by

re

spec

tive

parli

amen

ts

ACN

5/2

009

on In

stitu

tion

Build

ing

for t

he In

tegr

ation

of N

ation

al-

Regi

onal

Dev

elop

men

t and

Spa

tial P

lann

ing

appr

oved

. Ini

tial w

ork

was

im

plem

ente

d by

a c

onsu

ltant

bet

wee

n De

cem

ber 2

009

and

Mar

ch

2010

. Pap

er p

repa

red

on: “

Iden

tifyi

ng th

e Co

nnec

tions

bet

wee

n Re

gion

al S

patia

l Pla

ns w

ith R

egio

nal D

evel

opm

ent P

lans

.”Th

is ac

tivity

was

des

igne

d to

supp

ort t

hree

pro

vinc

ial a

nd si

x di

stric

t/ c

ity g

over

nmen

ts to

dra

ft sp

atial

pla

ns. T

hree

pro

vinc

es a

re

clos

e to

fina

lizin

g th

eir p

lans

. In

line

with

evo

lvin

g ne

eds a

nd a

t the

go

vern

men

t’s re

ques

t DSF

will

focu

s mor

e on

the

dist

rict/

city

leve

lA

firm

has

bee

n co

ntra

cted

to d

raft

spati

al p

lans

and

to st

reng

then

th

e na

tiona

l age

ncy

for t

he c

oord

inati

on o

f spa

tial p

lann

ing

(BKP

RN).

The

firm

has

beg

un w

ork

in c

ities

/dist

ricts

in a

ll th

ree

prov

ince

s- W

est

Sum

atra

, Gor

onta

lo a

nd E

ast J

ava.

M

ilest

one

1 (a

) sho

uld

be a

men

ded

to fo

cus o

n di

stric

t/ci

ty le

vel

inst

ead

of p

rovi

ncia

l lev

el a

nd th

ree

dist

rict/

city

pla

ns w

ill b

e su

bmitt

ed

to p

arlia

men

t by

Dece

mbe

r 201

0. M

ilest

one

1 (b

) cap

acity

bui

ldin

g pl

ans w

ill b

e de

velo

ped

for t

arge

ted

dist

rict/

citie

s by

Sept

embe

r 201

0.

ACN

2/2

009

on C

apac

ity B

uild

ing

for R

egio

nal D

evel

opm

ent P

olic

y Fo

rmul

ation

is li

nked

to O

bjec

tive

4.1.

Par

t 1 w

as im

plem

ente

d by

fiv

e co

nsul

tant

s bet

wee

n Se

ptem

ber 2

009

and

July

201

0. T

he m

ain

outp

uts a

re a

n in

put p

aper

for t

he R

PJM

N 2

010-

2014

(for

Boo

k 3

on

Deve

lopm

ent w

ith a

Reg

iona

l Dim

ensio

n) a

nd th

e re

port

: “A

Stud

y of

Re

gion

al D

evel

opm

ent i

n In

done

sia.”

Part

2 o

f thi

s acti

vity

will

dev

elop

isl

and

base

d de

velo

pmen

t str

ateg

ies t

o be

impl

emen

ted

by a

firm

. Pr

ocur

emen

t is u

nder

way

; req

uest

for p

ropo

sals

will

be

issue

d in

July.

3 3

Activ

ities

und

er A

CN 5

/200

9 ar

e de

signe

d to

impr

ove

the

cons

isten

cy b

etw

een

regi

onal

gov

ernm

ent

plan

ning

doc

umen

ts (s

patia

l pl

ans a

nd d

evel

opm

ent

plan

s) a

nd a

lso th

e co

nsist

ency

bet

wee

n sp

atial

pla

ns a

t diff

eren

t le

vels

of g

over

nmen

t. A

key

com

pone

nt o

f the

ac

tivity

is to

dev

elop

the

capa

citie

s of t

he 3

pro

vinc

ial

gove

rnm

ents

and

3 d

istric

t/ci

ty g

over

nmen

ts in

eac

h to

pr

oduc

e sp

atial

pla

ns th

at

are

alig

ned

with

the

natio

nal

spati

al p

lan

and

inte

grat

ed

with

regi

onal

dev

elop

men

t pl

ans.

The

impl

emen

ting

agen

cy w

ill fo

cus o

n pr

ovid

ing

capa

city

bui

ldin

g su

ppor

t to

dist

rict a

nd c

ity

gove

rnm

ents

to d

raft

spati

al

plan

s.

ACN

2/20

09 is

an

addi

tiona

l ac

tivity

requ

este

d by

Ba

ppen

as’ D

irect

orat

e of

Re

gion

al D

evel

opm

ent.

It is

linke

d to

acti

vity

4.1

but

not

lis

ted

in th

e Lo

g Fr

ame.

The

first

par

t of t

he a

ctivi

ty

has p

rodu

ced

a su

bsta

ntial

re

view

pap

er o

n re

gion

al

deve

lopm

ent p

olic

y th

at

draw

s on

less

ons l

earn

ed

from

pas

t exp

erie

nces

and

bu

ilds u

pon

the

RPJM

N fo

r 20

10-2

014

to p

rovi

de k

ey

84

Out

put 4

: Pla

nnin

g an

d Pe

rfor

man

ce M

easu

rem

ent

Obj

ectiv

esIn

dica

tors

Prog

ress

Rate

Com

men

t

An a

dden

dum

to A

CN 2

/200

9 co

vers

inte

r-reg

iona

l coo

pera

tion

and

addr

esse

s iss

ues o

f con

cern

to b

oth

Bapp

enas

(Dire

ctor

ate

of S

peci

al

Regi

ons a

nd L

ess D

evel

oped

Are

as) a

nd M

oHA

(Dire

ctor

ate

for

Deco

ncen

trati

on a

nd C

oope

ratio

n). B

oth

min

istrie

s see

k to

stre

ngth

en

inte

r-reg

iona

l coo

pera

tion

thro

ugh

the

prov

ision

of c

apac

ity b

uild

ing

inte

rven

tions

and

supp

ort t

o im

plem

ent n

ation

al le

gisla

tion.

The

ad

dend

um is

the

resu

lt of

inte

r-dep

artm

enta

l disc

ussio

ns o

n ho

w D

SF

supp

ort c

an b

est a

ddre

ss g

over

nmen

t’s d

evel

opm

ent o

bjec

tive

of

impr

ovin

g se

rvic

e de

liver

y an

d ac

cele

ratin

g ec

onom

ic g

row

th in

bor

der

area

s.

4

inpu

t int

o go

vern

men

t’s

appr

oach

to re

gion

al

deve

lopm

ent p

olic

y.

Bapp

enas

is th

e cl

ient

. The

se

cond

par

t bui

lds u

pon

this

wor

k by

form

ulati

ng

deve

lopm

ent s

trat

egie

s for

th

e m

ajor

isla

nd g

roup

s, w

ith

a fo

cus o

n ea

ster

n In

done

sia.

Impl

emen

tatio

n is

expe

cted

to

com

men

ce in

the

third

qu

arte

r of 2

010.

This

activ

ity h

ighl

ight

s th

e im

port

ance

of c

ross

-m

inist

eria

l coo

pera

tion

in

activ

ity d

evel

opm

ent a

nd

impl

emen

tatio

n, w

hich

is

likel

y to

yie

ld p

ositi

ve

resu

lts in

term

s of g

reat

er

coor

dina

tion

betw

een

rela

ted

inte

r-reg

iona

l co

oper

ation

pro

gram

s.

Impl

emen

tatio

n is

expe

cted

to

com

men

ce in

the

last

qu

arte

r of 2

010.

4.2.

Nat

ural

reso

urce

pla

nnin

g an

d m

anag

emen

t pol

icie

s de

velo

ped

by ta

rget

ed

loca

l go

vern

men

ts

Loca

l gov

ernm

ents

ado

pting

po

licie

s and

syst

ems

for

natu

ral r

esou

rce

plan

ning

an

d m

anag

emen

t pol

icy

ACN

10/

2009

on

Stre

ngth

enin

g Lo

cal G

over

nmen

t Nat

ural

Res

ourc

e M

anag

emen

t Cap

abili

ty w

as a

ppro

ved.

A

firm

has

bee

n co

ntra

cted

to su

ppor

t loc

al g

over

nmen

ts in

Pap

ua

and

Sout

h Ea

st S

ulaw

esi t

o de

velo

p im

prov

ed n

atur

al re

sour

ce

man

agem

ent s

yste

ms.

Pro

cure

men

t of t

hese

serv

ices

has

take

n lo

nger

th

an e

xpec

ted

due

to d

elay

s ass

ocia

ted

with

tech

nica

l pro

blem

s w

ith th

e on

-line

pro

cure

men

t sys

tem

. As a

resu

lt th

e ac

hiev

emen

t of

mile

ston

e 1,

impr

oved

nat

ural

man

agem

ent s

yste

ms d

rafte

d in

4 lo

cal

gove

rnm

ents

, is e

xpec

ted

to b

e m

argi

nally

del

ayed

but

ach

ieve

d by

N

ovem

ber 2

010.

4Th

is ac

tivity

seek

s to

impr

ove

the

way

nat

ural

reso

urce

s ar

e m

anag

ed b

y lo

cal

gove

rnm

ents

. The

cap

acity

to

do

this

type

of w

ork

will

be

deve

lope

d in

loca

l go

vern

men

ts in

2 p

ilot t

arge

t pr

ovin

ces a

nd is

inte

nded

to

assis

t loc

al g

over

nmen

ts to

id

entif

y th

e po

tenti

al


ANNUAL REPORT 2010

85

Out

put 4

: Pla

nnin

g an

d Pe

rfor

man

ce M

easu

rem

ent

Obj

ectiv

esIn

dica

tors

Prog

ress

Rate

Com

men

t

An a

dden

dum

to A

CN 2

/200

9 co

vers

inte

r-reg

iona

l coo

pera

tion

and

addr

esse

s iss

ues o

f con

cern

to b

oth

Bapp

enas

(Dire

ctor

ate

of S

peci

al

Regi

ons a

nd L

ess D

evel

oped

Are

as) a

nd M

oHA

(Dire

ctor

ate

for

Deco

ncen

trati

on a

nd C

oope

ratio

n). B

oth

min

istrie

s see

k to

stre

ngth

en

inte

r-reg

iona

l coo

pera

tion

thro

ugh

the

prov

ision

of c

apac

ity b

uild

ing

inte

rven

tions

and

supp

ort t

o im

plem

ent n

ation

al le

gisla

tion.

The

ad

dend

um is

the

resu

lt of

inte

r-dep

artm

enta

l disc

ussio

ns o

n ho

w D

SF

supp

ort c

an b

est a

ddre

ss g

over

nmen

t’s d

evel

opm

ent o

bjec

tive

of

impr

ovin

g se

rvic

e de

liver

y an

d ac

cele

ratin

g ec

onom

ic g

row

th in

bor

der

area

s.

4

inpu

t int

o go

vern

men

t’s

appr

oach

to re

gion

al

deve

lopm

ent p

olic

y.

Bapp

enas

is th

e cl

ient

. The

se

cond

par

t bui

lds u

pon

this

wor

k by

form

ulati

ng

deve

lopm

ent s

trat

egie

s for

th

e m

ajor

isla

nd g

roup

s, w

ith

a fo

cus o

n ea

ster

n In

done

sia.

Impl

emen

tatio

n is

expe

cted

to

com

men

ce in

the

third

qu

arte

r of 2

010.

This

activ

ity h

ighl

ight

s th

e im

port

ance

of c

ross

-m

inist

eria

l coo

pera

tion

in

activ

ity d

evel

opm

ent a

nd

impl

emen

tatio

n, w

hich

is

likel

y to

yie

ld p

ositi

ve

resu

lts in

term

s of g

reat

er

coor

dina

tion

betw

een

rela

ted

inte

r-reg

iona

l co

oper

ation

pro

gram

s.

Impl

emen

tatio

n is

expe

cted

to

com

men

ce in

the

last

qu

arte

r of 2

010.

4.2.

Nat

ural

reso

urce

pla

nnin

g an

d m

anag

emen

t pol

icie

s de

velo

ped

by ta

rget

ed

loca

l go

vern

men

ts

Loca

l gov

ernm

ents

ado

pting

po

licie

s and

syst

ems

for

natu

ral r

esou

rce

plan

ning

an

d m

anag

emen

t pol

icy

ACN

10/

2009

on

Stre

ngth

enin

g Lo

cal G

over

nmen

t Nat

ural

Res

ourc

e M

anag

emen

t Cap

abili

ty w

as a

ppro

ved.

A

firm

has

bee

n co

ntra

cted

to su

ppor

t loc

al g

over

nmen

ts in

Pap

ua

and

Sout

h Ea

st S

ulaw

esi t

o de

velo

p im

prov

ed n

atur

al re

sour

ce

man

agem

ent s

yste

ms.

Pro

cure

men

t of t

hese

serv

ices

has

take

n lo

nger

th

an e

xpec

ted

due

to d

elay

s ass

ocia

ted

with

tech

nica

l pro

blem

s w

ith th

e on

-line

pro

cure

men

t sys

tem

. As a

resu

lt th

e ac

hiev

emen

t of

mile

ston

e 1,

impr

oved

nat

ural

man

agem

ent s

yste

ms d

rafte

d in

4 lo

cal

gove

rnm

ents

, is e

xpec

ted

to b

e m

argi

nally

del

ayed

but

ach

ieve

d by

N

ovem

ber 2

010.

4Th

is ac

tivity

seek

s to

impr

ove

the

way

nat

ural

reso

urce

s ar

e m

anag

ed b

y lo

cal

gove

rnm

ents

. The

cap

acity

to

do

this

type

of w

ork

will

be

deve

lope

d in

loca

l go

vern

men

ts in

2 p

ilot t

arge

t pr

ovin

ces a

nd is

inte

nded

to

assis

t loc

al g

over

nmen

ts to

id

entif

y th

e po

tenti

al

Out

put 4

: Pla

nnin

g an

d Pe

rfor

man

ce M

easu

rem

ent

Obj

ectiv

esIn

dica

tors

Prog

ress

Rate

Com

men

t

An a

dden

dum

to A

CN 1

0/20

09 o

n th

e es

tabl

ishm

ent o

f a fa

cilit

y to

su

ppor

t loc

al e

cono

mic

dev

elop

men

t was

app

rove

d in

Mar

ch 2

010.

Th

e cl

ient

is th

e Di

rect

orat

e of

Urb

an a

nd R

ural

Affa

irs (B

appe

nas)

. Pr

ocur

emen

t of s

ervi

ces i

s und

erw

ay. R

eque

st fo

r pro

posa

ls w

as is

sued

in

July

201

0 an

d it

is ex

pect

ed th

at b

y De

cem

ber 2

010

the

conc

ept a

nd

impl

emen

tatio

n pl

an fo

r the

faci

lity

will

be

final

ised.

4

for r

esou

rce

deve

lopm

ent

in a

sust

aina

ble

man

ner.

Less

ons w

ill b

e de

rived

fr

om th

ese

pilo

ts a

nd m

ade

avai

labl

e on

a w

ider

scal

e.

Key

reso

urce

s with

in th

e sc

ope

of th

is ac

tivity

incl

ude

land

for p

lant

ation

s, m

arin

e re

sour

ces f

or fi

sher

ies,

and

re

sour

ces w

ith to

urism

de

velo

pmen

t pot

entia

l.Th

is ac

tivity

has

bee

n de

signe

d in

col

labo

ratio

n w

ith B

appe

nas a

nd

GTZ’

s Reg

iona

l Eco

nom

ic

Deve

lopm

ent p

rogr

am (R

ED).

Impl

emen

tatio

n is

expe

cted

to

star

t tow

ards

the

end

of

the

third

qua

rter

of 2

010.

4.

3. L

ocal

gov

ernm

ents

in

bord

er re

gion

s hav

e

impr

oved

cap

acity

in

econ

omic

dev

elop

men

t pl

anni

ng

Actio

n pl

ans f

or im

prov

ed

econ

omic

dev

elop

men

t pl

anni

ng c

ompl

eted

by

se

lect

ed lo

cal g

over

nmen

ts

in b

orde

r are

as

ACN

8/2

009

on In

stitu

tion

Build

ing

for t

he A

ccel

erat

ed D

evel

opm

ent

of B

orde

r Are

as a

ppro

ved.

Thi

s ACN

cov

ers a

ctivi

ties r

elat

ed to

bor

der

area

dev

elop

men

t, pr

ioriti

zed

by b

oth

Bapp

enas

and

MoH

A. T

his

obje

ctive

is li

nked

to a

ctivi

ty 1

.4 o

n se

rvic

e de

liver

y in

bor

der r

egio

ns.

The

activ

ities

are

clo

sely

inte

r-rel

ated

and

bot

h in

volv

e Ba

ppen

as,

MoH

A an

d th

e M

inist

ry o

f Disa

dvan

tage

d Re

gion

s.DS

F co

ntra

cted

a c

onsu

ltant

to p

rovi

de in

put f

or th

e RP

JMN

201

0-20

14

(Boo

k 2

on S

tren

gthe

ning

the

Syne

rgie

s bet

wee

n De

velo

pmen

t Sec

tors

; Ch

apte

r IX

on R

egio

ns a

nd S

patia

l Asp

ects

). A

pape

r on

suita

ble

insti

tutio

nal a

rran

gem

ents

for t

he n

ation

al b

orde

r are

a ag

ency

(BN

PP)

was

pre

sent

ed a

t an

inte

r-min

ister

ial f

orum

in M

arch

201

0. A

firm

ha

s bee

n co

ntra

cted

from

June

201

0 to

Sep

tem

ber 2

011

to su

ppor

t Ba

ppen

as d

raft

a na

tiona

l mas

ter p

lan

and

to p

ilot a

ctivi

ties i

n se

vera

l ke

y bo

rder

are

as. A

ctivi

ties t

o re

ach

mile

ston

e 1

are

in p

rogr

ess a

nd

the

mile

ston

e w

ill b

e ac

hiev

ed b

y Se

ptem

ber 2

010.

3Th

roug

h th

is ac

tivity

, MoH

A an

d Ba

ppen

as a

re se

ekin

g to

st

reng

then

cro

ss-m

inist

eria

l in

stitu

tions

and

to im

prov

e th

e po

licy

fram

ewor

k fo

r th

e de

velo

pmen

t of b

orde

r re

gion

s. T

he im

plem

entin

g ag

ency

is a

lso p

rovi

ding

ca

paci

ty su

ppor

t in

3 pr

ovin

ces:

Wes

t Kal

iman

tan,

Ea

st K

alim

anta

n an

d Ri

au.

86

Out

put 4

: Pla

nnin

g an

d Pe

rfor

man

ce M

easu

rem

ent

Obj

ectiv

esIn

dica

tors

Prog

ress

Rate

Com

men

t4.

4. I

mpr

oved

qua

lity

and

avai

labi

lity

of su

b-na

tiona

l st

atisti

cs fo

r loc

al d

ecisi

on

mak

ing

Stud

y of

sect

oral

dat

a sy

stem

s at c

entr

al a

nd

regi

onal

leve

l with

pol

icy

reco

mm

enda

tions

ado

pted

by

BPS

(Cen

tral

Sta

tistic

s Ag

ency

)and

par

ticip

ating

lo

cal g

over

nmen

ts

“Im

prov

ing

the

Qua

lity

and

Avai

labi

lity

of S

ub-N

ation

al S

tatis

tics f

or

Loca

l Dec

ision

Mak

ing

& S

trea

mlin

ing

the

Flow

of S

tatis

tics b

etw

een

Regi

ons a

nd th

e Ce

ntre

” st

udy

com

plet

ed in

supp

ort o

f BPS

and

loca

l go

vern

men

ts, J

anua

ry 2

009.

Nati

onal

and

loca

l lev

el se

ctor

al d

ata

syst

em a

naly

sed

for 1

9 go

vern

men

ts (6

pro

vinc

es, 4

citi

es, 9

dist

ricts

), Ja

nuar

y 20

09.

Asse

ssm

ent o

f hea

lth d

ata

for 1

1 di

stric

ts/m

unic

ipal

ities

and

as

sess

men

t of e

duca

tion

data

for 1

2 di

stric

ts/m

unic

ipal

ities

com

plet

ed

in Ja

nuar

y 20

09.

Fina

l rep

ort w

ith 2

1 po

licy

reco

mm

enda

tions

gro

uped

in th

e ca

tego

ries

of:

•sy

stem

des

ign,

setu

p an

d m

aint

enan

ce;

•pr

omoti

on o

f dat

a qu

ality

; app

licati

on o

f inf

orm

ation

and

co

mm

unic

ation

tech

nolo

gy;

•hu

man

, phy

sical

and

fina

ncia

l res

ourc

es; s

tren

gthe

ning

of d

ata

shar

ing,

ana

lysis

, and

util

izatio

n; a

nd

•le

gisla

tion

and

regu

latio

n, M

ay 2

009.

BP

S is

usin

g th

e re

sults

of t

his a

ctivi

ty in

neg

otiati

ons w

ith th

e Ba

nk

conc

erni

ng a

nati

onal

stati

stics

cap

acity

bui

ldin

g pr

ogra

m (S

TATC

AP)

loan

.

1Th

is pr

ojec

t is c

ompl

ete

and

has m

et it

s obj

ectiv

es.

The

findi

ngs f

rom

this

proj

ect a

re re

leva

nt to

man

y ot

her D

SF p

roje

cts,

sinc

e th

ese

rely

on

the

avai

labi

lity

of g

ood

qual

ity su

b-na

tiona

l se

ctor

al d

ata.

A fo

llow

-on

to th

is pr

ojec

t cou

ld in

clud

e ex

tens

ion

of th

e w

eb-b

ased

sy

stem

for t

rans

mitti

ng d

ata

from

tech

nica

l age

ncie

s at

the

sub-

natio

nal l

evel

to

rele

vant

min

istrie

s in

Jaka

rta.

Cap

acity

bui

ldin

g re

com

men

ded

for l

ocal

go

vern

men

ts in

rela

tion

to u

se o

f inf

orm

ation

te

chno

logy

.


ANNUAL REPORT 2010

87

ANNEX D: LIST OF ACRONYMS, AbbREVIATIONS, AND TRANSLATIONS

ACN: Activity Concept NoteADB: Asian Development BankAIDS: Acquired Immune Deficiency SyndromeAKLN: Administrasi Kerjasama Luar Negeri (Bureau of Foreign Cooperation)AMSD: Altenative Mechanisms of Service DeliveryAusAID: Australian Agency for International Development Badiklat: Badan Pendidikan dan Pelatihan (Government Education and Training Centre)Bappenas: Badan Perencanaan dan Pembangunan Nasional (National Development Planning Agency)BKN: Badan Kepegawaian Negara (National Civil Service Agency)BKPRN: Badan Koordinasi Penataan Ruang Nasional (National Agency for the Coordination of Spatial Planning)BNPP: Badan Nasional Pengelola Perbatasan (National Agency for Border Management) BPK: Badan Pemeriksa Keuangan (Audit Board of the Republic of Indonesia)BKN: Badan Kepegawaian Negara (National Civil Service Agency)CBT: Competency-Based TrainingCIDA: Canadian International Development AgencyCSO: Civil Society OrganizationDAK: Dana Alokasi Khusus (Special Allocation Fund)DAU: Dana Alokasi Umum (General Allocation Fund)DCG: Donor Consultative GroupDepdagri: Departemen Dalam Negeri (Ministry of Home Affairs)DET: Decentralization Education and Training DfID: Department for International DevelopmentDG: Director GeneralDiklat: Pendidikan dan Pelatihan (Education and Training)DIPA: Daftar Isian Pelaksanaan Anggaran (Budget Implementation Document / Issuance of spending authority)Ditjen Bangda: Direktorat Jenderal Pembangunan Daerah (Directorate General of Regional Development)DI. Yogyakarta: Daerah Istimewa Yogyakarta (Yogyakarta Special Region)DJPK: Direktorat Jenderal Perimbangan Keuangan (Directorate General of Fiscal Balance)DKI: Daerah Khusus Ibukota (use in DKI Jakarta, Special Region of the Capital of Jakarta)DMD: Donor Mapping DatabaseDOHP: Daerah Otonom Hasil Pemekaran (Newly Autonomous Regions)DPRD: Dewan Perwakilan Rakyat Daerah (Provincial Legislative Council)DRSP: Democratic Reform Support ProgramDSF: Decentralization Support FacilityEPIKD: Evaluasi Pendanaan dan Informasi Keuangan Daerah (Directorate for Funding Evaluation and Regional Financial Information)EPPD: Evaluasi Penyelenggaraan Pemerintahan Daerah (Guidelines for Regional Government Evaluation)FA: Focal AreaFAA: Fiscal Agency AgreementFMA: Financial Management AssessmentFY: Financial Year GA: Grant Agreement

88

GDFD: Grand Design of Fiscal DecentralizationGDP: Gross Domestic ProductGFR: Grant Funding RequestGOI Government of Indonesia GTZ: Gesellschaft für Technische ZusammenarbeitHIV: Human Immunodeficiency Virus HTML: Hyper Text Markup LanguageIELTS: International English Language Testing SystemIMD: International Institute for Management DevelopmentKemenpan: Kementerian Pendayagunaan Aparatur Negara (State Ministry of Administrative Reform) KKDT: Kawasan Khusus dan Daerah Tertinggal (Directorate of Special Regions and Less Developed Areas)LAN: Lembaga Administrasi Negara (National Institute of Public Administration)LGCG: Local Government Consultative GroupMC: Management CommitteeMG: Management GroupMoF: Ministry of FinanceMoHA: Ministry of Home AffairsMOU: Memorandum of UnderstandingMSIB-LPSP: Management Strengthening and Institution Building for Local Public Service ProvidersMSS: Minimum Service StandardNGOs: Non Governmental OrganizationsNRM: Natural Resource ManagementNSPK: Norma, Standar, Prosedur, dan Kriteria (Norms, Standards, Procedures and Criteria)OSS: One Stop ServicesOtda: Otonomi Daerah (BAPPENAS: Directorate of Regional Autonomy; MoHA: Directorate General of Regional Autonomy)Otsus: Otonomi Khusus (Special Autonomy)PAN: Pendayagunaan Aparatur Negara dan Reformasi Birokrasi (State Ministry of Administrative Reform)PDOK: Penataan Daerah dan Otonomi Khusus (Directorate of Regions Management and Special Autonomy) PEA: Public Expenditure AnalysisPerda: Peraturan Daerah (Local Regulation)Perdirjen: Peraturan Direktur Jenderal (Director General Regulation)Perkotdes: Perkotaan dan Perdesaan (Directorate General of Urban and Rural Development)Permendagri: Peraturan Menteri Dalam Negeri (Ministry of Home Affairs Regulation)PGs: Provincial GovernmentsPGSP: Provincial Governance Strengthening ProgramPMK: Peraturan Menteri Keuangan (Ministry of Finance Regulation)PUM: Pemerintahan Umum (Directorate General for General Governance)RAB: Rencana Anggaran Biaya (Government Budget Estimation)RPJM: Rencana Pembangunan Jangka Menengah (Medium-Term Development Plan)RPJMN: Rencana Pembangunan Jangka Menengah Nasional (National Medium-Term Development Plan)SC: Steering CommitteeSIKD: Sistem Informasi Keuangan Daerah (Regional Financial Information System)

ANNEX D: LIST OF ACRONYMS, AbbREVIATIONS, AND TRANSLATIONS

ANNUAL REPORT 2010

89

STC: Short-Term ConsultantTAF: The Asia FoundationTF: Trust FundToR: Terms of ReferenceTOT: Training of TrainersUK: United Kingdom UNDP: United Nations Development ProgrammeUPD: Urusan Pemerintahan Daerah (Directorate of Local Government Affairs) USAID: United States Agency for International DevelopmentUSD: United States Dollar WB: World Bank

dsf annual report 2010

Documents

dsf support

dsf programme

government procurement

government agencies

dsf executive

different units of government

important development

views of dsf members