Decentralized Indonesia : Missing Links in the Bottom‑up Approach
著者 Usui Norio, Alisjahbana Armida S journal or
publication title
Kansai University review of economics
volume 7
page range 71‑97
year 2005‑03
URL http://hdl.handle.net/10112/12259
L o c a l Development Planning and Budgeting i n Decentralized I n d o n e s i a : Missing Links i n the Bottom‑up Approach*
Nerio Usui and Armida S . Alisjahbana
This paper focuses on the workings o f I n d o n e s i a ' s l o c a l development planning and budgeting mecha‑
nisms a f t e r d e c e n t r a l i z a t i o n , where c i t i z e n p a r t i c i p a ‑ t i o n becomes a c e n t r a l theme f o r a l l stakeholders i n c l u d i n g p o l i c y makers. I f r e a l l o c a l needs a r e t o be a r t i c u l a t e d , bottom‑up mechanisms needs t o be strengthened through i t s i n s t i t u t i o n a l i z a t i o n i n l o c a l government s t r u c t u r e s . At the same t i m e , i t can not be overlooked t h a t e f f e c t i v e and e f f i c i e n t l o c a l p l a n ‑ ning and budgeting i n d e c e n t r a l i z e d a d m i n i s t r a t i o n s t r u c t u r e much r e q u i r e s good coordination between higher and lower l e v e l s o f government ( v e r t i c a l l i n k ‑ a g e s ) , and between neighboring l o c a l governments ( h o r i z o n t a l l i n k a g e s ) . Indonesia needs t o make the b e s t s t r a t e g i c use o f matching or earmarked grant t o l i n k development plans and budgets a t a l l l e v e l s o f government. For h o r i z o n t a l l i n k a g e , r o l e o f p r o v i n ‑ c i a l governments need t o be enhanced t o s e t up a formal coordination system.
K e y w o r d s : P a r t i c i p a t o r y P l a n n i n g and B u d g e t i n g , P o l i c y C o o r d i n a t i o n , M a t c h i n g G r a n t s
1 . I n t r o d u c t i o n
Facing enormous d i f f i c u l t i e s i n maintaining n a t i o n a l i n t e g r i t y a f t e r economic and p o l i t i c a l c r i s e s , the Government o f Indonesia ( t h e Government) i n i t i a t e d a d r a s t i c d e c e n t r a l i z a t i o n program i n f i s c a l year ( F Y ) 2 0 0 1 . The h i e r a r c h i c a l r e l a t i o n s h i p between p r o v i n c i a l and l o c a l governments (Kabupaten/Kota) was e l i m i n a t e d , and replaced
* This paper was prepared under the Indonesia and Japan Joint Research Project on Indonesia's D e c e n t r a l i z a t i o n , which was j o i n t l y supported by the Indonesian and Japanese Governments. A p r e l i m i n a r y v e r s i o n was presented a t the 5 t h S p e c i a l Study Meeting o f Japan S o c i e t y f o r I n t e r n a t i o n a l Development, h e l d on 3 J u l y , 2 0 0 4 , Kitakyusyu I n t e r n a t i o n a l Conference C e n t e r , K i t a k y u s y u , Japan. The u s u a l d i s c l a i m e r a p p l i e s .
7 1
by f a r ‑ r e a c h i n g a u t h o r i t y delegated t o l o c a l governments. The devo‑
l u t i o n was i n the areas o f development planning, p u b l i c expendi‑
t u r e s , and s e r v i c e d e l i v e r i e s . P r o v i n c i a l governments a c t with auton‑
omy, but r e t a i n h i e r a r c h i c a l r e l a t i o n s h i p s with the c e n t r a l govern‑
ment. I n the case o f l o c a l governments, the e l e c t i o n o f l o c a l heads ( B u p a t i / W a l i k o t a ) no longer r e q u i r e s approval by higher l e v e l s o f government. The l o c a l heads are accountable only t o l o c a l p a r l i a ‑ ments (DPRD). As a p a r t o f d e c e n t r a l i z a t i o n p r o c e s s , about two m i l ‑ l i o n c e n t r a l c i v i l servants were t r a n s f e r r e d t o the r e g i o n s .
There i s a strong r a t i o n a l e f o r decentralization i n Indonesia, which has a diverse geography, c u l t u r e , and n a t u r a l and human resource endowments, and consequentially a d i v e r s i t y i n l o c a l needs as w e l l as l a r g e v a r i a t i o n s i n p u b l i c s e r v i c e d e l i v e r y c o s t s . A key o b j e c t i v e o f d e c e n t r a l i z a t i o n i s t o move decision‑making c l o s e r t o the people so t h a t p u b l i c s e r v i c e d e l i v e r y i s more responsive t o the diverse l o c a l needs, p r i o r i t i e s , and preferences. Development planning and budgeting a r e indispensable instruments i n securing the aims o f d e c e n t r a l i z a t i o n . L o c a l governments need c l e a r develop‑
ment s t r a t e g i e s t h a t f u l l y meet t h e i r c i t i z e n s ' n e e d s , and t h i s can be achieved through a c t i v e c i v i l society engagement i n planning. A s o l i d l i n k between planning and budgeting t h a t r e f l e c t s p r i o r i t i e s i s a l s o a key p r e r e q u i s i t e f o r s u c c e s s f u l d e c e n t r a l i z a t i o n .
However, the enormous d i v e r s i t y o f the country can be a strong basis f o r c e n t r a l i z a t i o n or top‑down i n t e r v e n t i o n s , given t h a t the Government needs t o ensure c e r t a i n minimum standards (Devas 1 9 8 9 ) . Indonesia adopted t h i s approach f o r more than 30 years under the New Order regime, and, as shown by the experiences o f many decentralized c o u n t r i e s , top‑down approach i s s t i l l needed even a f t e r d e c e n t r a l i z a t i o n . The debate t h e r e f o r e tends t o be c o n t i n ‑ uous over the balance between c e n t r a l c o n t r o l and r e g i o n a l autono‑
my. A key challenge f o r the Government i s t o f i n d the r i g h t balance between the top‑down and bottom‑up approaches.
Coordination mechanisms between l o c a l and higher l e v e l s o f government ( v e r t i c a l l i n k a g e s ) and between neighboring l o c a l gov‑
ernments ( h o r i z o n t a l l i n k a g e s ) acquire importance i n l o c a l planning
and budgeting a f t e r d e c e n t r a l i z a t i o n . I n I n d o n e s i a , there are three
l e v e l s o f autonomous s u b ‑ n a t i o n a l governments: p r o v i n c e s , d i s t r i c t s
(Kabupaten/Kota), and v i l l a g e s (Desa/Kelurahan). There are also sub‑
d i s t r i c t s (Kecamatan) between d i s t r i c t s and v i l l a g e s . I n d o n e s i a ' s p o l i ‑ cy makers need t o consider how these d i f f e r e n t l e v e l s o f govern‑
ment can coordinate t h e i r planning and budgeting. A question i s how higher l e v e l s o f government can e f f e c t i v e l y promote t h e i r p r i o r ‑ i t i e s a t the l o c a l l e v e l i n d e c e n t r a l i z e d a d m i n i s t r a t i o n s t r u c t u r e s w i t h ‑ out i n t e r f e r i n g i n l o c a l government a f f a i r s . Another requirement i s an e f f e c t i v e coordination network t o maximize synergies with neigh‑
boring l o c a l governments. Successful d e c e n t r a l i z a t i o n r e q u i r e s both v e r t i c a l and h o r i z o n t a l i n t e g r a t i o n o f planning and budgeting.
This paper analyzes I n d o n e s i a ' s three years o f post d e c e n t r a l i z a ‑ t i o n experience i n l o c a l development planning and budgeting.
Discussion i n t h i s paper i s based l a r g e l y on our f i n d i n g s i n a s e r i e s of f i e l d studies i n Kabupaten Lombok Tengah ( . C e n t r a l Lombok D i s t r i c t ) and Kabupaten Bandung (Bandung D i s t r i c t ) 1 . Major changes i n l o c a l development planning p r a c t i c e a f t e r d e c e n t r a l i z a ‑ t i o n are discussed i n Section 2 , Section 3 reviews l o c a l budgeting processes and implementation, and Section 4 focuses on v e r t i c a l and h o r i z o n t a l l i n k a g e s i n l o c a l development planning and budget‑
i n g . The f i n a l section i s conclusions and summaries with policy i m p l i c a t i o n s .
2 . L o c a l Development Planning
L o c a l development planning i n Indonesia has been, and s t i l l i s , a mixture of top‑down and bottom‑up approaches. The top‑down process s t a r t s from discussions on n a t i o n a l p o l i c y g u i d e l i n e (GBHN) a t the c o n s u l t a t i v e assembly (MPR) l e v e l , which i s followed by the preparation of f i v e ‑ y e a r development plans (Propenas) t o provide guidelines on n a t i o n a l development o b j e c t i v e s , p o l i c i e s and pro‑
grams. S t r a t e g i c development plans o f c e n t r a l l i n e m i n i s t r i e s and agencies ( R e n s t r a ) a r e then based on the Propenas. These are f o l ‑ lowed by annual n a t i o n a l development plan (Repeta) d e f i n i n g p r i o r i ‑ t i e s f o r the n a t i o n a l development budget. A l l l o c a l governments are required t o produce a b a s i c s t r a t e g y statement ( P o l d a ) with a s i m i l a r
1
F i l e d s t u d i e s were conducted i n August 2 0 0 2 , and July t o August 2 0 0 3 . Armida Alisjahbana covered the case
study i n Ka bu paten Bandung, and Usui joined the one i n Kabupaten Lombok Tengah
s t a t u s t o GBHN a t the n a t i o n a l l e v e l . This i s a master plan document incorporating p o l i t i c a l commitment with v i s i o n , mission, d i r e c t i o n and s t r a t e g y f o r l o n g ‑and medium‑term l o c a l development. L o c a l governments use the Polda as the b a s i s f o r t h e i r f i v e ‑ y e a r develop‑
ment plans ( P r o p e d a ) , s t r a t e g i c development plans ( R e n s t r a d a ) , and annual development plans ( R e p e t a d a ) . I t i s expected t h a t l o c a l gov‑
ernments w i l l consider n a t i o n a l and p r o v i n c i a l development p r i o r i ‑ t i e s i n t h e i r planning processes. I n p r i n c i p l e , coordination between d i f f e r e n t l e v e l s o f government i s secured through consultations a t development planning coordination meetings.
The bottom‑up process o f consultation involves each l e v e l o f government formulating d r a f t annual development proposals t h a t are based on propositions submitted from lower government l e v e l s . The process starts with sub‑village development meeting (Musbangdus) t h a t feed i n t o p r o j e c t proposals reviewed a t v i l l a g e l e v e l meetings (Musbangdes). S i m i l a r c o n s u l t a t i o n processes con‑
t i n u e a t s u b ‑ d i s t r i c t (UDKP), d i s t r i c t (Rakorbang Kabupaten/Kota), p r o v i n c i a l (Rakorbang P r o p i n s i ) , and n a t i o n a l (Rakorbangnas) l e v e l s . On the b a s i s o f the discussions a t Rakorbangnas, the c e n t r a l govern‑
ment f i n a l i z e s p r o j e c t proposals t h a t w i l l be financed by the n a t i o n a l budget (APBN) i n the next f i s c a l y e a r .
Indonesia's t r a d i t i o n a l development planning p r a c t i c e s , which
consisted o f the top‑down and bottom‑up approaches, seemed t o
guarantee a d e l i c a t e balance between c e n t r a l p r i o r i t i e s and l o c a l
demand i n l o c a l development p l a n s . However, i n r e a l i t y , they f a i l e d
t o p i c k up t r u e l o c a l demands because l o c a l r e s i d e n t s were almost
completely l e f t out o f the decision making process from the very
beginning o f l o c a l development planning. Before d e c e n t r a l i z a t i o n ,
t h e r e was no separation o f executives and l e g i s l a t i v e s powers a t the
v i l l a g e l e v e l . The v i l l a g e head was the chairman of the v i l l a g e
assembly (LMD) and other LMD members were appointed by the v i i ‑
lage head. The v i l l a g e head was not accountable t o LMD, but t o
higher a u t h o r i t y ( s u b ‑ d i s t r i c t chairman ( C a m a t ) ) . Moreover, the v i i ‑
l a g e community r e s i l i e n c e boards (LKMD), which were, i n p r i n c i p l e ,
i n s t i t u t i o n f o r forwarding villagers'needs were dominated by v i l l a g e
e l i t e s appointed by the v i l l a g e head; t h e r e f o r e , p r o j e c t proposals
consisted mostly o f p r i o r i t y p r o j e c t s o f the v i l l a g e head and e l i t e s
( A n t l o v Hans 2000 and L e n i Dharmawan 2 0 0 2 ) . F u r t h e r , most p r o j e c t proposals from v i l l a g e s were f i l t e r e d out a t a s e r i e s o f coordination meeting, where higher l e v e l government's proposals were tabled without i n c o r p o r a t i n g p e o p l e ' s a s p i r a t i o n s . Consequently, f i n a l p r o ‑ posals were u s u a l l y dominated by p r i o r i t y p r o j e c t s o f higher l e v e l s o f government, p a r t i c u l a r l y those o f the c e n t r a l government. Despite the formal coordination mechanism, l o c a l development planning was a c t u a l l y i n the f i r m c o n t r o l o f the c e n t r a l government.
I n the l a s t three y e a r s , community p a r t i c i p a t i o n has become a r e a l i t y i n many r e g i o n s , which was confirmed by our case s t u d i e s where many stakeholders expressed s a t i s f a c t i o n with t h e i r deeper involvement i n the planning p r o c e s s . A d e c i s i v e f a c t o r i n s u c c e s s f u l community participation i s the regional government law (UU No.29/1999) t h a t d i c t a t e s v i l l a g e government r e f o r m . A f t e r d e c e n t r a l ‑ i z a t i o n , the v i l l a g e head has become responsible t o the v i l l a g e r e p r e ‑ s e n t a t i v e c o u n c i l ( B P D ) , which replaced the LMD. The members o f the BPDs a r e e l e c t e d by v i l l a g e r s . BPDs a r e authorized d r a f t v i l l a g e l e g i s l a t i o n , approve v i l l a g e budgets, monitor v i l l a g e governments, and propose replacements of v i l l a g e heads t o l o c a l government.
Thus, the v i l l a g e head i s no longer the s o l e a u t h o r i t y i n the v i l l a g e . These reforms have brought about more transparency and account‑
a b i l i t y i n t o decision‑making a t the v i l l a g e l e v e l .
Local governments are currently creating more genuine l o c a l development planning system, instead of the former centrally i n s p i r e d systems, t o tap i n t o l o c a l demands and a s p i r a t i o n s . L o c a l governments have developed some innovative and creative responses, even though t h e i r magnitude and q u a l i t y vary across the r e g i o n s . Examples a r e : 1 ) some l o c a l governments reorganized t h e i r planning process by empowering t r a d i t i o n a l communities. As men‑
t i o n e d , the bottom‑up planning system s t a r t s from the s u b ‑ v i l l a g e l e v e l . However, i n some r e g i o n s , l o c a l governments r e a l i z e t h a t t r a ‑ d i t i o n a l communities are more e f f i c i e n t than a d m i n i s t r a t i v e v i l l a g e u n i t s i n p i c k i n g up l o c a l demands by s t i m u l a t i n g voluntary p a r t i c i p a ‑ t i o n o f l o c a l p e o p l e . A t y p i c a l case can be found i n the'Nagari'sys‑
tem i n West Sumatra (Widjono Ngoediji 2 0 0 0 ) ; 2 ) l o c a l governments
have been, and s t i l l a r e , s u f f e r i n g from o v e r ‑ s t a f f i n g problems a r i s ‑
i n g from the l a r g e ‑ s c a l e s t a f f t r a n s f e r from the c e n t r a l government.
Many regions t r i e d t o r e s o l v e t h i s problem by e s t a b l i s h i n g new t e c h ‑ n i c a l bureaus (Dinas and Badan) t o absorb the t r a n s f e r r e d o f f i c i a l s . Some regions enabled e f f e c t i v e absorption of l o c a l needs through c l o s e r communications with t h e i r c o n s t i t u e n t s by e s t a b l i s h i n g new branches a t s u b ‑ d i s t r i c t l e v e l (Cabang Dinas Kecamatan) and a l l o ‑ cate more s t a f f there. A t y p i c a l case was found i n KabLJpaten Lombok Tengah; and 3 ) some l o c a l governments, including Kabupaten Lombok Tengah, introduced discretionary transfers t o s u b ‑ d i s t r i c t s and v i l l a g e s t o b e t t e r support bottom‑up p r o j e c t s .
Despite these innovative moves and the p o s i t i v e impacts o f the v i l l a g e government reform, many l o c a l people f e e l t h a t they are s t i l l outside the planning p r o c e s s . They claim t h a t , even when they are i n v i t e d t o coordination meetings, i t i s a f o r m a l i t y and t h e i r demands w i l l not be r e f l e c t e d i n l o c a l development p l a n s . Some l o c a l govern‑
ments, d e s p i t e ̲ r e a l i z i n g the need f o r a c t i v e community involvement, are r e l u c t a n t t o increase public p a r t i c i p a t i o n because i t implies longer planning and budgeting processes. To address t h i s i s s u e , the Government enacted a M i n i s t r y o f Home A f f a i r s c i r c u l a r l e t t e r (SE MOHA No. 050/987/SJ) i n FY2003 t o provide general guidelines f o r p a r t i c i p a t o r y planning, and t o define procedures f o r consultation and p a r t i c i p a t i o n i n coordinating meetings. Development coordina‑
tion meetings a t l o c a l l e v e l are divided i n three stag~s: Pre‑
Rakorbang, Rakorbang, and Post‑Rakorbang. I n the f i r s t , heads o f t e c h n i c a l bureaus and Camats are i n v i t e d t o attend and guidelines f o r development a c t i v i t i e s are discussed on the basis o f the l o c a l development s t r a t e g y and shared among the p a r t i c i p a n t s t o f a c i l i ‑ t a t e discussion a t Rakorbang. The Post‑Rakorbang checks f o r c o n s i s ‑ tency between the r e s u l t s o f Rakorbang and the l o c a l budget f o r the coming f i s c a l y e a r .
Another new system with the c i r c u l a r l e t t e r i s a scoring sheet f o r the p r i o r i t i z a t i o n o f l o c a l development proposals. I t provides a gen‑
e r a l guide t o s e t t i n g q u a n t i t a t i v e p r i o r i t y rankings f o r a l l p r o p o s a l s .
I n d i c a t o r s include degree of p a r t i c i p a t i o n , consistency with l o c a l
development p l a n s , and impacts on human resources and regional
development. Following the g u i d e l i n e s , l o c a l governments prepare
t h e i r own scoring s h e e t s . This arrangement can f a c i l i t a t e discussion
a t Rakorbang and improve i t s transparency. However, i n our i n t e r ‑
views, t h e r e was an impression t h a t the d i v e r s i t y o f views i n c o o r d i ‑ nating meetings a t lower l e v e l s may r e s u l t i n s m a l l e r , minimum s c a l e , and l e s s b e n e f i c i a l programs because the e x t e r n a l i t i e s across v i l l a g e s and s u b ‑ d i s t r i c t s cannot be w e l l e x p l o i t e d . The i m p l i c a t i o n i s t h a t l o c a l t e c h n i c a l b u r e a u c r a t s , while r e s p e c t i n g the bottom‑up p r o ‑ p o s a l s , may need t o i n t e r v e n e t o make necessary adjustments i n the planning p r o c e s s . The success o f the new scoring system depends on whether l o c a l governments can prepare a well‑balanced mecha‑
nism t h a t can guarantee a balance between the bottom‑up approach and top‑down i n t e r v e n t i o n ( U s u i and Catur Sugiyanto 2 0 0 3 ) .
With the aim o f c l o s e r i n t e g r a t i o n between annual development plans and budgets, the c i r c u l a r l e t t e r s e t s an e a r l i e r l o c a l planning c a l e n d a r . However, because l o c a l budgets depend h e a v i l y on t r a n s ‑ f e r s from the c e n t r a l government, e a r l i e r planning makes i t more d i f ‑ f i c u l t f o r l o c a l governments t o consider revenue estimates i n t h e i r planning p r o c e s s . For e f f e c t i v e planning, lower l e v e l s o f government need budget information of higher l e v e l s of governments. The Government needs t o f i n d a compromise between e a r l i e r p l a n n i n g , f o r c l o s e r i n t e g r a t i o n between development plans and budgets, and e f f e c t i v e planning r e f l e c t i n g r e a l f i n a n c i a l c o n d i t i o n s .
A key challenge f o r l o c a l governments i s how t o i n s t i t u t i o n a l i z e p a r t i c i p a t o r y planning i n t o government structures and planning mechanisms. I n many c o u n t r i e s , stakeholder p a r t i c i p a t i o n i s i n s t i t u ‑ t i o n a l i z e d through c o u n c i l s and boards representing the main s e c ‑ t o r s . For example, i n the P h i l i p p i n e s , stakeholder p a r t i c i p a t i o n i s b u i l t i n t o l o c a l government s t r u c t u r e s through development coun‑
c i l s , h e a l t h boards, and school boards by laws (Guevara 2 0 0 3 ) . I n Indonesia, Propenas 2001‑2005 mandates the establishment of Education Boards (Dewan Pendidikan) and School Committees (Komite Sekolah). Many regions have not yet established them, although i n some r e g i o n s , i n c l u d i n g Kabupaten Bandung, these new i n s t i t u t i o n s have become p r o a c t i v e i n l o c a l planning and budgeting.
The Government may wish t o consider the e x t r a p o l a t i o n o f the good p r a c t i c e i n the education s e c t o r t o other s e c t o r s .
The major challenges that confront l o c a l . governments a f t e r d e c e n t r a l i z a t i o n are discussed n e x t . As mentioned, a l l l o c a l govern‑
ments are required t o produce planning documents such as P o l d a ,
FIGURE 1 New L o c a l Planning and Budgeting Calendars
Jun I Jul I Au Oct I Nov I Dec I Jan I Feb I Mar P l r 1 n n i n g
P r e↓ R a k o r b l a n g Kapupateh/Kota SEMOHA
No.050/987/SJ
nrrnr翠賽啜義墨i繹攣甚攣後F後：汲：嗜攣事翫．心••砂；立l翌寮燃忍；
i ¥
瓢 澤n Before'APBD P o s t ‑ R a k o r b a r h g Kab~paten/Kota
？
・
Budgeting
KepmenMOHA No.29/2003
C e n t r a l Budget
巨言璽RAPB
APBD
三藍旦APBN
SE MOHA N o . 0 5 0 / 9 8 7 / S J keeps s i l e n c e on the t i m i n g s o f Rakorbang P r o v i n c e and Rakorbang N a t i o n a l .
Propeda, Renstrada, and Repetada. Although, i n p r i n c i p l e , a l l these
documents should be prepared i n a c o n s i s t e n t manner t o r e a l i z e the
development goals r e v e a l e d i n the P o l d a , i n p r a c t i c e they o f t e n l a c k
mutual consistency. Some l o c a l governments produce only the
Renstrada without the Polda and Propeda, because the Renstrada i s
a p o l i t i c a l document, i . e . , the performance o f l o c a l head can be e v a l ‑ uated on the b a s i s o f the Renstrada a t the end o f h i s / h e r term o f o f f i c e . ~ven i n regions t h a t have the complete s u i t e o f planning doc‑
uments, they may contain'cut‑and‑paste'type d e s c r i p t i o n s of each o t h e r . I n p a r t i c u l a r , i t i s not always easy t o f i n d d i f f e r e n c e s between the Propeda and Renstrada. I n p r i n c i p l e , the Renstrada needs t o p r o ‑ vide a short l i s t o f program and p r o j e c t a c t i v i t i e s f o r each sector i d e n t i f i e d i n the Propeda. However, the vagueness o f development goals i n the Propeda has l e d t o very wide i n t e r p r e t a t i o n s by l o c a l executives and l e g i s l a t u r e s i n preparing the Renstrada. This has r e s u l t e d i n f a i l u r e t o s e t up c l e a r p r i o r i t i e s , timetables and i n s t i t u ‑ t i o n a l r e s p o n s i b i l i t i e s f o r implementation. Government r e g u l a t i o n s (PP No. 108/2000 and PP No. 1 0 6 / 2 0 0 0 ) s t i p u l a t e t h a t the Renstrada t a r g e t s development a c t i v i t i e s funded only by l o c a l budgets (APBD), whereas the Propeda covers overall a c t i v i t i e s funded from a l l sources including off‑budget revenues such as c e n t r a l l i n e min‑
i s t r i e s ' b u d g e t s or D I P s . This means t h a t , under the c u r r e n t arrange‑
ment, l o c a l development plans are fragmented according t o funding sources, which makes i t d i f f i c u l t t o e s t a b l i s h a d i r e c t l i n k between the two p l a n s . F u r t h e r , i t i s d i f f i c u l t t o assess o v e r a l l performance o f l o c a l heads, because they are responsible only f o r development a c t i v i t i e s funded by l o c a l budgets. I n our case s t u d i e s , l o c a l govern‑
ment o f f i c i a l s repeatedly r a i s e d t h i s i s s u e as a major f a u l t i n the c u r ‑ r e n t requirements o f the Renstrada.
One o f the key elements introduced with d e c e n t r a l i z a t i o n i s a p e r ‑ formance based s t r a t e g i c planning approach. L o c a l governments are required t o prepare c l e a r i n d i c a t i v e t a r g e t s , d e t a i l e d costed p l a n s , and t h e i r f i s c a l perspectives f o r planning a c t i v i t i e s . Although we found i n Kabupaten Bandung, the Renstrada containing i n d i c a t i v e t a r g e t s t o be achieved a t the end o f the plan f o r each s e c t o r , most
l o c a l governments have not yet produced i n d i c a t i v e t a r g e t s , and, even where there are t a r g e t s , they remain q u a l i t a t i v e , r a t h e r than q u a n t i t a t i v e . Reliance on q u a l i t a t i v e t a r g e t s c r e a t e s d i f f i c u l t y i n the evaluation o f performance o f development a c t i v i t i e s .
Before d e c e n t r a l i z a t i o n , l o c a l governments had been discouraged
from b u i l d i n g t h e i r own planning information system. Indeed, there
was l i t t l e need t o have i t , because l o c a l development a c t i v i t i e s were
dominated by c e n t r a l l y p r i o r i t i z e d p r o j e c t s , and f i n a n c i a l resources were provided from c e n t r a l budgets. As a r e s u l t , capacity b u i l d i n g f o r planning and budgeting o f f i c i a l s was a b s e n t . A l a c k o f q u a l i f i e d o f f i c i a l s now makes i t d i f f i c u l t t o e s t a b l i s h much needed develop‑
ment information system. Consequently, l o c a l development plans tend t o remain only'wish l i s t ' .
There i s a need t o r e f e r t o the unclear r o l e s o f Kecamatan i n the planning p r o c e s s . At a l l l e v e l s o f government, t h e r e i s separation o f power between the executives and l e g i s l a t u r e s . However, t h e r e i s no l e g i s l a t i v e i n s t i t u t i o n a t the Kecamatan l e v e l . Camats and t h e i r s t a f f are a l l l o c a l government employees, and t h e i r posts r e g u l a r l y r o t a t e . These o f f i c i a l s worked f o r t e c h n i c a l bureaus o f l o c a l government before f i l l i n g t h e i r Kecamatan p o s t s , and w i l l r e t u r n t o t e c h n i c a l bureaus a f t e r f i n i s h i n g t h e i r s e r v i c e s a t the Kecamatan. However, i n the planning system, UDKP i s granted the same s t a t u s as other c o o r ‑ dinating meetings. One o f UDKP's r o l e s i s t o f i l t e r out proposals from the v i l l a g e l e v e l before they go t o Rakorbang Kabupaten/Kota.
I f the Government needs t o m a i n t a i , n UDKP, the authority o f the Camat needs t o be strengthened t o guarantee t h a t i t can a c t i n d e ‑ pendently o f i t s p o s i t i o n as a l o c a l government employee t o absorb v i l l a g e needs and a s p i r a t i o n s . However, t h i s w i l l be d i f f i c u l t because the job p o s i t i o n ( e c h e l o n ) o f Camat i s below t h a t o f heads o f l o c a l t e c h n i c a l b u r e a u s 2 .
I n some r e g i o n s , l o c a l l e g i s l a t o r s openly argue t h a t they a r e r e p ‑ r e s e n t a t i v e s o f c o n s t i t u e n t s and, hence, there i s no need t o f o s t e r community p a r t i c i p a t i o n . I n t h e i r l o g i c , a l l o f the p e o p l e ' s demands can be incorporated i n t o l o c a l development plans and budgets through t h e i r discussions a t DPRD. However, there seems t o be a general f e e l i n g among people t h a t l e g i s l a t o r s do not represent them because voting i s f o r r e g i s t e r e d p o l i t i c a l p a r t i e s and not f o r DPRD members. This has been the p r a c t i c e under the current system which may a l s o be the case a t c e n t r a l l e v e l . The proposal f o r reform‑
i n g the l o c a l e l e c t i o n system, by MOHA i n 2 0 0 2 , i s a r e f l e c t i o n o f t h i s concern.
3 . L o c a l Budgeting Processes and Implementation
2
Echelon p o s i t i o n of Camats i s 1 1 1 / 8 , while t h a t of l o c a l t e c h n i c a l bureaus heads (Kepala Dinas/8agian) i s 1 1 / 8 .
L o c a l governments have long followed a MOHA manual ( R e g i o n a l F i n a n c i a l Administration Manual 1 9 8 0 ) , which regulates budget p r e p a r a t i o n , t r e a s u r y a d m i n i s t r a t i o n , accounting, and r e p o r t i n g . I n a d d i t i o n , MOHA annually provides budget g u i d e l i n e s t o l o c a l gov‑
ernments f o r the coming f i s c a l y e a r . Under d e c e n t r a l i z a t i o n , there have been no c l e a r g u i d e l i n e s f o r l o c a l budgeting and f i n a n c i a l man‑
agement; however, d e c e n t r a l i z a t i o n laws do r e q u i r e l o c a l govern‑
ments t o prepare t h e i r own f i n a n c i a l management systems. I n July 2002, MOHA released a M i n i s t e r i a l Decree (Kepmen No. 29/2002) r e q u i r i n g l o c a l governments t o adopt performance budgeting. The decree o u t l i n e s the r e q u i r e d s t r u c t u r e o f r e g i o n a l budgets, budget preparation and approval processes. I t includes d i r e c t i v e s on the budgeting calendar, budget revisions, f i n a n c i a l management, accounting p r i n c i p l e s , and r e p o r t i n g and a c c o u n t a b i l i t y i s s u e s . A major change introduced i s the switch from the t r a d i t i o n t h a t d i s t i n ‑ guishes between r o u t i n e and development budgets, t o a u n i f i e d budget with double‑entry a c c o u n t i n g .
Because of the delayed release of the new guideline, many regions s t i l l use the o l d budget formats and follow o l d budgeting p r a c t i c e s . Over the period o f July t o September, each t e c h n i c a l bureau formulates a budget team (Tim Anggaran) and draws up i t s budget f o r both r o u t i n e and development expenses. These propos‑
a l s a r e submitted t o an executive budget team (Komite Anggaran), which usually comprise the Secretary o f the Region ( S e k w i l d a ) , Finance Bureau (Bagian Keuangan), Planning Agency (Bappeda), Revenue Office (Dispenda) and chiefs of spending u n i t s . T r a d i t i o n a l l y , the Bagian Keuangan ( f o r routine budget) and the Bappeda ( f o r development budget) dominated t h i s process.
Simultaneously, the Dispenda prepares revenue forecasts. I n O c t o b e r , the team s t a r t s reviewing the revenue estimates and budg‑
e t proposals from each u n i t t o f i n a l i z e l o c a l budget p r o p o s a l s . I n the p r o c e s s , a couple o f b i l a t e r a l meetings a r e held by the team with spending u n i t s t o d i s c u s s d e t a i l s o f t h e i r p r o p o s a l s . I n t h e o r y , l o c a l demands a r e i n c o r p o r a t e d i n t o the budget proposal on the b a s i s o f discussion a t the Rakorbang Kabupaten/Kota, h e l d i n p a r a l l e l with the budgeting p r o c e s s .
Once the f i n a l budget proposal i s approved by the
B u p a t i / W a l i k o t a , i t i s submitted t o DPRD, as annual budget proposal (RAPBD), i n October or November. The DPRD budget team (Komisi C ) l e a d s discussions and i s authorized t o make amendments t o the p r o p o s a l . Before d e c e n t r a l i z a t i o n , amendments were g e n e r a l l y m i n i ‑ mal, because Komisi C members were already involved a t the RAPBD preparation s t a g e . The approved budget (APBD) serves as a c e i l i n g on expenditures f o r the f i s c a l y e a r . On the b a s i s o f the APBD, Bagian Keuangan as w e l l as a l l spending u n i t s s t a r t preparing budg‑
e t documents, f o r both r o u t i n e and development expenses, f o r the purpose o f funds a l l o c a t i o n . Then, the APBD moves t o i t s implemen‑
t a t i o n s t a g e .
I n p r i n c i p l e , budgeting i s the most e f f e c t i v e t o o l t o r e a l i z e the l o c a l needs, p r i o r i t i e s , and p r e f e r e n c e s , e s t a b l i s h e d i n l o c a l develop‑
ment p l a n s . I n t h e o r y , the annual budget should be based on the Repetada which r e f l e c t s the key s t r a t e g i e s o f the Renstrada. I n r e a l i ‑ t y , t h e r e i s o f t e n no strong l i n k a g e between the p l a n s , which r e s u l t s i n another weak l i n k a g e between budget a l l o c a t i o n s and develop‑
ment p l a n s . There i s a p o s s i b i l i t y t h a t the present annual c o n s u l t a ‑ t i o n e x e r c i s e may worsen t h i s problem. As mentioned, the coordina‑
t i o n meetings a r e held annually a t a l l l e v e l s o f government, with d i s ‑ cussions being dominated by i s s u e s o f development s t r a t e g y and budget f o r the coming f i s c a l y e a r . The annual nature o f c o n s u l t a t i o n tends t o make l o c a l planning and budgeting shortsighted. Local budgets tend t o be prepared i n each year on the b a s i s o f fund a v a i l ‑ a b i l i t y , even though medium‑term s t r a t e g i c planning and perform‑
ance budgeting t h e o r e t i c a l l y become the new p r a c t i c e s with decen‑
t r a l i z a t i o n . Project selection i s based mainly on ad hoc factors ( r e s u l t s o f the Rakorbang Kabupaten/Kota and b i l a t e r a l n e g o t i a t i o n s within l o c a l governments) r a t h e r than medium‑term development p r i o r i t i e s . F u r t h e r , they f a i l t o t a k e i n t o account the e f f e c t on subse‑
quent years'expenditures t h a t r e s u l t from c u r r e n t year p r o j e c t s . The Government may wish t o consider the p o s s i b i l i t y o f s h i f t i n g from the c u r r e n t annual system t o a medium‑term c o n s u l t a t i o n system o r , even b e t t e r , i f i t could adopt both simultaneously.
I n our case s t u d i e s , numerous complaints about DPRD i n t e r v e n ‑
t i o n were r a i s e d by l o c a l o f f i c i a l s , who had t r i e d t o maintain c o n s i s ‑
tency o f budget a l l o c a t i o n with s t r a t e g i c p r i o r i t i e s . E v i d e n t l y , DPRD
members o f t e n intervened f o r the sake o f t h e i r own i n t e r e s t s , d i s r e ‑ garding p r i o r i t i e s s e t i n the Repetada and Renstrada. An a d d i t i o n a l problem i n d e f i n i n g development goals has been t h e i r vagueness i n planning documents leading t o d i f f e r e n t i n t e r p r e t a t i o n s by DPRD members i n t h e i r discussions on RAPBD.
TABLE 1 Aggregated Regional Budgets (Rp t r i l l i o n )
FY2000
1FY2001 Provinces L o c a l Gov‑
Provinces L o c a l Gov‑
（ ％ ） ernments ( % ) ernments
（ ％ ） ( % )
Revenues 1 3 . 0 1 0 0 . 0 3 9 . 7 1 0 0 . 0 2 9 . 4 1 0 0 . 0 7 9 . 5 1 0 0 . 0 Previous Y e a r ' s Surplus 1 . 2 9 . 1 1 . 8 4 . 4 4 . 1 1 3 . 8 2 . 2 2.7.
Region's Own Revenues 4 . 0 30.4 3 . 6 9 . 1 1 0 . 1 3 4 . 5 5 . 2 6 . 6 C e n t r a l T r a n s f e r s 7 . 8 6 0 . 2 3 3 . 3 8 4 . 0 1 4 . 2 4 8 . 2 6 8 . 8 8 6 . 6 Revenue Sharing 1 . 7 1 3 . 1 4 . 5 1 1 . 2 7 . 5 2 5 . 5 1 4 . 0 1 7 . 6 DAU2 6 . 1 4 7 . 1 2 8 . 4 71.6 6 . 5 2 2 . 1 5 4 . 0 6 7 . 9 DAK3 0 . 0 0 . 0 0 . 5 1 . 2 0 . 2 0 . 5 0 . 8 1 . 1 L o c a l Borrowing 0 . 0 0 . 2 1 . 0 2 . 5 0 . 0 0 . 0 0 . 5 0 . 6 Others 0 . 0 0 . 0 0 . 0 0 . 0 1 . 0 3 . 5 2 . 8 3 . 5 Expenditures 1 1 . 6 1 0 0 . 0 3 7 . 7 1 0 0 . 0 2 3 . 1 1 0 0 . 0 6 9 . 6 1 0 0 . 0 Routine Expenditure 5 . 9 5 1 . 0 2 5 . 1 6 6 . 7 1 4 . 7 6 3 . 7 4 8 . 3 6 9 . 3 Development Expenditure 5 . 7 4 9 . 0 1 2 . 5 3 3 . 3 8 . 4 3 6 . 3 2 1 . 4 3 0 . 7 Balances(% t o t o t a l revenues) 1 . 3 1 0 . 4 2 . 0 5 . 0 6 . 3 2 1 . 4 9 . 8 1 2 . 4
1
a n n u a l i z e d . 2 SDO plus INPRES f o r FY2000. 3 S p e c i f i c purpose INPRES f o r FY2000.
Source: M i n i s t r y o f F i n a n c e .
Uncertainty about the l e v e l o f c e n t r a l t r a n s f e r s , which s t i l l form the bulk o f l o c a l revenues, remains a problem. Even a f t e r d e c e n t r a l ‑ i z a t i o n , l o c a l governments r e l y on t r a n s f e r s from the c e n t r a l govern‑
ment f o r over 80% o f t h e i r revenues. I n discussing budget propos‑
a l s , Komite Anggaran reviews revenue f o r e c a s t s before assessment
of expenditure proposals. However, i n the l a s t three years, the
announcement o f c e n t r a l t r a n s f e r s has been delayed because o f the
l a t e approval of the APBN. For example, i n Kabupaten Lombok
Tengah, APBD f o r FY2003 was approved by DPRD i n l a t e March
2 0 0 3 , t h r e e months a f t e r t h e f i s c a l year s t a r t e d , because APBN was passed by the people's representative council (DPR) i n early December 2 0 0 2 . L a t e budget approval makes i t d i f f i c u l t f o r l o c a l gov‑
ernments t o formulate APBDs with r e l i a b l e i n f o r m a t i o n on t h e i r fund a v a i l a b i l i t i e s , and f u r t h e r r i s k s i n e f f i c i e n t resource management through delays i n program and p r o j e c t implementation. T h i s prob‑
lem i s exacerbated by delayed disbursements o f c e n t r a l t r a n s f e r s , p a r t i c u l a r l y shared revenues from n a t u r a l resources, during the budget implementation s t a g e . I n FY2001, shared revenues from n a t ‑ u r a l resources were disbursed t o regions a t a very l a t e stage and, according t o l o c a l o f f i c i a l s , were d e l i v e r e d a f t e r the end o f t h e f i s c a l y e a r . As a r e s u l t , many regions were forced t o c a r r y over most o f t h e i r r e c e i v e d revenues i n t o the f o l l o w i n g f i s c a l y e a r .
FIGURE 2 Q u a r t e r l y Disbursements o f Sha
『i n gRevenues:
Cumulative Share (%)
75
50
25
2 Quarter Source: M i n i s t r y of F i n a n c e .
3 4
L o c a l governments are f a c i n g extreme d i f f i c u l t y i n obtaining
information on DIP budgets, or'deconcentration'funds. Because
deconcentration funds a r e not i n c l u d e d i n APBD and a r e d i s t r i b u t e d
d i r e c t l y t o l o c a l technical bureaus v i a the provinces, even the
Bappeda, which t a k e s primary r e s p o n s i b i l i t y f o r l o c a l development
planning and development budget preparation, cannot e a s i l y o b t a i n the information. I n the case of Kabupaten Lombok Tengah, the Bappeda contacts a l l t e c h n i c a l bureaus and the p r o v i n c i a l Bappeda t o obtain i n f o r m a t i o n . However, the required information cannot be obtained even a f t e r the DPRD approved the APBD.
L o c a l governments have long adopted the'target system'in t h e i r l o c a l revenue a d m i n i s t r a t i o n , where a c e r t a i n t a r g e t was s e t f o r each revenue item and the Dispenda, which i s responsible f o r a l l l o c a l revenues, c o l l e c t e d them. Even a f t e r d e c e n t r a l i z a t i o n , many l o c a l governments s t i l l use t h i s p r a c t i c e . The revenue t a r g e t s are g e n e r a l ‑ l y based on the previous y e a r ' s achievements, which have nothing to do with actual revenue potentials. For example, i n Lombok Tengah, Dispenda o f f i c i a l s acknowledged t h a t t h e i r revenue p r o j e c ‑ t i o n s a r e prepared・on the b a s i s o f the previous y e a r ' s achievements, and by t a k i n g i n t o account an i n f l a t i o n f a c t o r ( u s u a l l y a t 10 % ) . This t a r g e t system a l s o has a negative impact on l o c a l revenue m o b i l i z a ‑ t i o n because there i s no i n c e n t i v e f o r Dispenda o f f i c i a l s t o c o l l e c t revenues over the t a r g e t s because l a r g e r revenues imply higher t a r ‑ gets i n the next f i s c a l y e a r . The same problem can be found on the expenditure s i d e . Major r o u t i n e expenditure items such as u t i l i t i e s , supplies and r e n t s are estimated from current p r i c e s p l u s an i n f l a ‑ t i o n f a c t o r . To improve budgeting e f f i c i e n c y , the Dispenda needs t o submit l o c a l revenue p r o j e c t i o n s f o r budget p r e p a r a t i o n s .
I n considering the implementation of performance budgeting, l o c a l governments need t o f u l l y recognize t h e i r o b l i g a t o r y f u n c t i o n s (Kewenagan Wajib or KW) and t h e i r minimum service standards (Standar Pelayanan Minimal or SPM) that they need to achieve.
Q u a n t i t a t i v e , not q u a l i t a t i v e , i n d i c a t i v e t a r g e t s need t o be based on SPMs. Furthermore, c a r e f u l l y estimated u n i t costs f o r each SPM must be u t i l i z e d to cost up each p r o j e c t . However, Indonesia's decentralization was initiated without clear expenditure assignments3. Local governments'expenditure responsibility has been only vaguely defined, which causes considerable confusion
3
