This delivery strategy for the Australia Indonesia Partnership for Decentralisation (AIPD) builds on work initiated through the current AusAID funded Australia Nusa Tenggara Assistance for Regional Autonomy (ANTARA) program. It also builds on two key AusAID documents, namely an AIPD Concept Note and a document entitled ‘Sub-National Level Engagement In Indonesia – A Framework for AusAID 2010 – 2015’.
The AIPD design team spent three weeks working together in Indonesia. Following a preliminary workshop with AusAID staff in Jakarta, the team made field visits to NTT, Papua and NTB provinces. Discussions were held with a wide range of government and civil society stakeholders at both provincial and district levels. On return to Jakarta, meetings were also held with Bappenas, Ministry of Finance (MOF), the World Bank and CIDA.
An Aide Memoire was prepared and presented to AusAID officials at a wrap-up meeting in Jakarta on 31 July 2009.
This document now represents the third full draft of the AIPD Delivery Strategy document, subsequent to taking on board comments from: (i) a panel of internal reviewers; (ii) informal comments from a selection of AusAID staff; and (iii) a formal Peer Review meeting held in Canberra on 9 October 2009.
Key findings from the situation analysis
Key findings include:
The provinces of NTT, NTB, Papua and Papua Barat have a combined population of some 11 million people. Between a quarter and just over a third of these people (depending on the province) are estimated to be living below the poverty line. They also suffer from poor access to, and quality of, basic health, education and infrastructure services. This is both a cause and consequence of their poverty.
Significant progress has been made since 2001 with implementing decentralisation and other governance reforms in Indonesia, but much work remains to be done.
Local government can be efficient providers and regulators of local services under the right institutional incentives and with clarity about who does what and with what. However, Indonesia currently remains ‘in the balance’, with little empirical evidence to show that decentralisation has yet improved service delivery.
Improving service delivery requires that both ‘supply’ and ‘demand’ side factors be addressed. A profile of key issues that impact on the quality of district level service delivery are profiled in Figure (i). Additional factors include: (i) the diversity of circumstances and needs, with provinces such as Papua and Papua Barat facing additional challenges specific to their socio-economic and political circumstances; (ii) corruption, which remains a cause for concern, and undermines effective resource allocation and management; and (iii) gender inequalities in both access to resources (including information) and participation in decision making, which results in (among other things) significant untapped potential for improving community welfare.
One issue stands out as being of particular strategic importance, namely improved resource allocation and management, at the heart of which is Public Financial Management (PFM). PFM is considered of particular importance because: (i) significant resources are available to both provincial and district governments, but are not being optimally allocated or managed; (ii) improved PFM is a ‘public good’, in that it supports systemic improvements that impact on all areas/sectors of government activity; (iii) improved PFM is a key platform for good governance, including increased transparency and accountability; (iv) improved PFM directly supports the aid/development effectiveness agenda, in that it builds P/LG capacity to effectively allocate and manage resources from any source, including donor funds; and (v) there is both a clear capacity building need and (at least in those provinces and districts with reform minded leadership) a demonstrated demand for support.
Figure (i) – Key factors impacting on district level service delivery
While it is recognised that all elements of PFM are important, AIPD needs to focus its attention/resources on priority areas with the highest likely returns in terms of supporting improved service delivery. Lessons learned from previous governance projects which address PFM have also shown that a focus on specific sub-areas is needed to achieve tangible results.
As shown by the results from Public Expenditure Analysis (PEA) already conducted, lack of strategic resource allocation across sectors, poor spending prioritisation within sectors, low absorption rates, and lack of sound planning/management information are key constraints to improving service delivery, rather than the availability of financial resources as such. The development returns can thus be high from reviewing public expenditures to identify those with high potential returns, and on-going, low-return expenditures that could be usefully re-prioritized toward high-return uses. Where this process works well, the fiscal space opened up for new investment or more productive current expenditures can be large. One goal of public expenditure management reforms is thus to put into place systems that routinely review and recalibrate priorities. Also, without first tackling planning and budgeting issues, the other elements of PFM will not by themselves lead to improved service delivery outcomes.
A natural strategic entry point for AIPD support would therefore be on supporting improvements in planning and budgeting (resource allocation/spending mix), budget execution (monitoring) and establishing a clearer link to service delivery priorities and targets. This will include support to improving access to relevant planning/management /service delivery information (for both government and community), and strengthening the (demand side) mechanisms through which the public can participate in policy formulation, plan and budget preparation and service delivery monitoring.
While planning and budgeting will therefore be the primary focus for AIPD support, where there is demonstrated need/demand, AIPD will nevertheless also be responsive to providing capacity building support to strengthen other PFM elements, such as for procurement and audit processes. Indeed, there is a high level of demand for general PFM knowledge/skill development at the P/LG level, which AIPD plans to address through supporting the expansion of the MOF/Universities PFM network. Also, through the use of a number of existing analytical and measurement tools (such as the PFM measurement framework and PEA), AIPD will support ongoing analysis and monitoring of progress/change in all PFM sub-systems, not just planning and budgeting.
It is also recognised that planning and budgeting is a deeply political (and complex) process, and improvements cannot be expected through purely technical solutions.
In order to contribute effectively to improving service delivery, a broad range of stakeholders therefore need to be involved. These are profiled in Figure (ii).
Figure (ii) – Profile of stakeholder partners involved in improving service delivery
Figure (ii) also highlights that AIPD is designed as a mechanism to support both demand and supply-side stakeholders, and work through their organisational structures and systems. It will not ‘directly’ or unilaterally undertake any activities. AIPD will also play a key role in ‘bridging’ communication gaps between key stakeholders, and helping to ‘broker’ differences in interests/perceptions (e.g. through providing support for evidence-based decision making and through facilitating dialogue). AIPD will also provide a ‘platform’ for more coordinated and coherent GOA engagement at P/LG levels.
There have been, and still are, a large number of donor programs aimed at supporting decentralisation, good governance and improved service delivery. It is therefore imperative that AIPD assistance be delivered in close collaboration with these donor partners.
While Australia intends to build on the successes of the current ANTARA program through AIPD, AIPD will differ from ANTARA through its proposed focus on building capacity in a specific reform area (improving resource allocation and management) and its mandate to enhance coordination and coherence of GOA engagement with P/LGs. In addition, it will revise its approach towards the use of TA for capacity building, making much greater use of local organisations/partners rather than ‘external’ and short-term TA. It will also engage more actively at the national level in order to support the development and implementation of more effective decentralisation policies and regulations, based on evidence from the field.
AIPD scope and objectives
AIPD will initially be financed for a period of five years, from 2010 to 2015. However, it is clearly recognised that the objective of improving service delivery is an ongoing endeavour, and one which may merit donor support over a much longer period of time.
AIPD will initially focus its work in four targeted provinces (namely NTT, NTB, Papua and Papua Barat) as well as at the national level. Within these provinces there are a total of 71 districts (NTB 10, NTT 21, Papua 29 and Papua Barat11), and clearly AIPD cannot provide support to every one of these.
An important part of AIPD’s strategy is therefore to be selective in deciding which districts to work with in terms of providing any significant level of sustained support. Selection of districts will be undertaken in partnership with provincial authorities (e.g. the Governor, Sekda and Bappeda), with a view to identifying districts with a clear commitment (and basic ability) to engage in PFM and related reforms aimed at improving service delivery. A process of ‘self-selection’ may be trialed, as this will likely promote ownership of, and commitment to, resource allocation and management reform initiatives by interested LGs.
In terms of the phasing and pace of AIPD support, this will be determined primarily by an ongoing assessment of circumstances on the ground. Prior to providing any targeted and sustained support at the district level, it will be important to analyse the situation, collect basic data/information, establish working relationships and a clear joint commitment to objectives, and reach agreement on a program of work and responsibilities.
The process of providing AIPD support is profiled in Figure (iii) below. This diagram should be read from the bottom up.
Figure (iii) – Process for providing AIPD support
A summary of AIPD’s objectives (impact, outcome and outputs) are profiled in Figure (iv) in the form of an ‘objective tree’. Further details are provided in the main body of the delivery strategy document.
Figure (iv) – AIPD objective tree
AIPD will directly contribute to achievement of Millennium Development Goals in the targeted provinces, specifically with respect to: (i) achieve universal primary education; (ii) promote gender equality and empower women; (iii) reduce child mortality; (iv) improve maternal health; and (v) combat HIV/AIDs, malaria and other diseases.
The primary beneficiaries of AIPD support are expected to be the men, women and children of NTT, NTB, Papua and Papua Barat who depend on government supported services for their health, education and infrastructure needs. Particular focus will be given to targeting the needs of women, children and the poor.
AIPD’s primary partners are members of the provincial and district executive and legislatures, civil society groups working to improve governance and service delivery, and key decision makers in central government agencies such as MOHA and MOF.
Governance and implementation arrangements
AIPD’s overall governance and coordination arrangements will be similar to those currently used by the ANTARA program.
A Program Coordinating Committee (PCC) will continue to operate, with similar membership and terms of reference as currently in place. The PCC will be the official government forum for strategic decision making on the scope and focus of AIPD. It will be jointly chaired by MOHA and AusAID, and include representation from MOF, BAPPENAS, provincial BAPPEDAs and from any co-contributing donors. It will meet six-monthly.
The Program Advisory Group will meet back-to-back with the PCC, and its membership will be primarily drawn from the P/LG executive in the targeted provinces and civil society. It will be chaired by the AIPD Program Director, who will be directly engaged by AusAID to provide high level strategic and advisory support for implementation of the AIPD.
Figure (v) provides a schematic overview of the governance structure.