Australia Indonesia Partnership for Decentralisation (aipd) Delivery Strategy 2010 2015 Contents



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1Introduction

1.1Background

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. ANTARA is a A$30 million, five-year program (due to end in 2010) which has three main objectives, namely to: (i) improve district and provincial governance, (ii) increase incomes for women and men; and (iii) improve quality of and access to basic services.

A Mid-Term Review (MTR) of ANTARA was undertaken in May and June 2008. The review concluded that the program had demonstrated its ability to provide flexible and responsive mechanisms to improve governance and reduce poverty in Nusa Tenggara. The program was also considered to have demonstrated effective governance arrangements and a strong management structure and management team, using best practice approaches to gender mainstreaming and monitoring and evaluation. The MTR recommended that the program continue for another five years, from 2010 – 2015, and that it go ahead with the planned expansion to Nusa Tenggara Barat (NTB) province.



Nevertheless, the MTR recommended some changes/enhancements to the next phase of support, namely:

  • sharpening the program focus (to address key issues impacting on basic service delivery by Local Governments);

  • promoting stronger links with national government;

  • supporting the ‘regional architecture’ for disseminating lessons and good practices across the region; and

  • creating a ‘contingency funding’ window to further enhance the program’s ability to respond quickly to identified high priority activities.

AusAID broadly accepted the recommendations outlined in the MTR, and ANTARA has since established a presence in NTB. In addition, in March 2009 the Indonesian Government (GOI) agreed, via an Exchange of Letters under the current Subsidiary Arrangement (SA), to an expansion to Papua and Papua Barat provinces. ANTARA offices have also recently been established in these two provinces, and preliminary discussions are underway with local stakeholders regarding the development of a program of collaborative work.

1.2AIPD preparation steps


The main steps leading up to the preparation of this AIPD1 delivery strategy have included the following:

  • AusAID held a multi-stakeholder workshop in Bali on 23 February 2009 to consult with Indonesian government counterparts and other AusAID programs on the development of the design for the new program (AIPD). Representatives from central government and the four ANTARA provinces were invited. Representatives from Ministry of Home Affairs (MOHA) and the NTT, NTB, Papua and Papua Barat provincial governments attended, including the Governor of NTT and the Provincial Secretaries (Sekda) from NTT and NTB. Some of the main recommendations from the Bali workshop included: (i) endorsement of the approach that focuses on improved planning and budgeting processes for local governments; (ii) that the use of performance incentives should be explored; (iii) that effective monitoring and evaluation systems need to be developed, based on government requirements and providing consistency across donor programs; and (iv) learning strategies were important and needed to be resourced within a general capacity building framework.

  • AusAID then held an internal sub-national governance workshop on 5-6 March 2009, to discuss the Agency’s approach to sub-national governance in Indonesia and future engagement with National Community Empowerment Program (PNPM). The workshop discussions have helped to consolidate thinking around the directions of the proposed sub-national program.
  • Further consultation took place at a Governors’ Roundtable held in Lombok on 6 May 2009. Four provinces participated in the roundtable – NTT, NTB, Papua and Papua Barat – as well as senior officials from the Ministry of Home Affairs. The meeting was hosted by Australia’s Parliamentary Secretary for International Aid with the Ambassador to Indonesia and AusAID’s Minister Counsellor in attendance. Discussions focused on challenges faced by provincial government in the implementation of decentralisation.


Taking into account the outcomes from these consultations, two key documents were subsequently prepared by AusAID, namely an AIPD ‘Concept Note’ and a document entitled ‘Sub-National Level Engagement In Indonesia – A Framework for AusAID 2010 – 2015’. Based on these documents, Terms of Reference for an AIPD design mission were then prepared (see Annex 1), and the design team mobilised on 12 July 2009.2

The 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.

Finally, an Aide Memoire was prepared and presented to AusAID officials at a wrap-up meeting in Jakarta on 31 July 2009. Taking into account feedback on the presentation, a first full draft of the AIPD delivery strategy was then prepared. This first draft was circulated for internal review within the design team, edited and then formally submitted to AusAID for appraisal at the end of August 2009.

2Situation analysis

2.1Decentralisation policy and democratisation

After the collapse of Soeharto’s centralist and autocratic New Order regime, a political environment conducive to democratisation and substantial political and administrative decentralisation emerged in Indonesia.

In 1999, two decentralisation laws were enacted, namely Law 22/99 on Regional Autonomy and Law 25/99 on Fiscal Balance between the Central Government and the Regions. This legislation and the required implementing regulations became effective in January 2001, bringing about fundamental changes in intergovernmental relations.


  • Firstly, responsibility and authority for the delivery of key public services was devolved directly to local (district and municipal) governments (LGs).3 The exceptions (retained at the central level) were for such functions as security, foreign affairs, monetary and fiscal policy, judiciary and religious affairs.

  • Secondly, the hierarchical relationship between LGs and provincial governments (PGs) was eliminated, making districts fully autonomous. The district head (bupati) and head of municipality (walikota) were no longer required to report to the provincial governor, but rather to the locally elected district parliament (DPRD). In contrast, provinces retained a hierarchical relationship with central government.

  • Thirdly, substantial parts of the national budget were allocated to provincial and local governments (P/LGs), and they were given effective budgetary and financial autonomy.4 For example, on average 30% of the national budget (APBN) is now being channeled each year to P/LGs, up from 12% in the mid 1990s.

The two original decentralisation laws were then revised in 2004 to become Law 32/2004 on Regional Autonomy and Law 33/2004 on Fiscal Balance. These revised laws were designed to give back some specific roles and authority to provincial governments, for example authority to supervise and build the capacity of LGs, and to review local regulations issued by the LGs (i.e. regarding their annual budget preparation process and imposition of local taxes and user fees). These laws also somewhat decreased the power of DPRDs, emphasising their function as ‘partners’ in governance rather than authoritative ‘controllers’ of district and municipal heads.

In 2005 the first direct elections for provincial governors, heads of district (Bupati) and mayors (Walikota) were successfully held. The recent 2009 parliamentary elections have since demonstrated that the electorates are keen to use their vote to bring about change, with up to 80% of provincial and local government parliamentarians being replaced by new members. The election into office of a number of reform minded governors (i.e. in NTT and NTB) and Bupati/Walikota further reflects a growing awareness of citizens regarding their rights and a growing demand for improvements in P/LG performance.

The transition to democracy has been supported by the emergence of a free press, free speech and a stronger civil society. Considerable progress has been achieved in a very short period of time. Indonesia has now emerged to become one of the most stable and pluralistic democracies in Southeast Asia. The success of this transition needs to be acknowledged and supported through ongoing strengthening of LGs in implementing their roles and functions.




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