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


Decentralisation and improved service delivery

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2.2Decentralisation and improved service delivery

2.2.1Overview


Decentralisation holds the promise of improved service delivery, and through improved service delivery, a reduction in poverty levels.

However, for decentralisation to result in improved service delivery, two sets of accountabilities need to work well. The first comprises downward accountability to local residents. As the 2004 World Development Report on ‘Improving Service Provision to the Poor’ put it: 5

Where decentralisation is driven by a desire to move service administratively close the people…the assumption is that it works by enhancing citizens voice in a way that leads to improved services…..Voters make more use of information about local public goods in their voting decisions because such information is easier to come by and outcomes are more directly affected by local government actions. And political agents have greater credibility because of proximity to the community and reputations developed through social interaction over an extended period. But on both theoretical and empirical grounds this could go either way.”

The crucial question is therefore whether or not decentralisation increases accountability relative to its alternatives. If local governments are not more vulnerable to (elite) capture than the national government, then decentralisation is likely to improve both efficiency and equity of service delivery.6 As noted in a recent publication by Transparency International:

Decentralisation must be therefore accompanied by more effective and democratic management of public affairs and establish appropriate mechanisms for citizen participation. In other words, decentralisation can only work when citizens – including those traditionally excluded from both social and political participation – are systematically involved in policy formulation, decision making and programme oversight and evaluation. In the absence of such mechanisms, there is a strong risk of state capture by the local elites.”7

The second set of accountabilities is between central and local governments. These include assignment of responsibilities for public service provision, the allocation of fiscal resources, and arrangements for regulatory, fiduciary and other forms of central oversight of local government activities. Clarifying these responsibilities in ways that give each tier of government an incentive to perform its roles effectively is thus critical (although a highly political and complex task). A comparative study on decentralisation experiences concluded that in the case of Indonesia:

The result (so far) has been a kind of institutional limbo… whether by design or as a result of slippages in the implementation process, intergovernmental structures have substantial internal inconsistency. The functions of different levels of government overlap. Bottom-up accountability of locally elected bodies is dampened by top-down methods for appointing key officials. And the discretion given to local authorities in spending unconditional fiscal transfers is effectively curtailed by central government control over human resources.”

As the 2004 World Development Report also concluded:

“… Sub-national authorities can be efficient providers and regulators of local services under the right institutional incentives and with clarity about who does what-and with what.”

The important point that this highlights is that while decentralisation may indeed result in improved service delivery, there is a complex of political and institutional factors which may either support, or frustrate, such an outcome. Indonesia currently remains ‘in the balance’, with little empirical evidence to show that decentralisation has yet improved service delivery.

One thing is nevertheless clear, improving LG service delivery is not going to be achieved by purely ‘technical’ solutions at the local level. Much depends on a shift in governmental/bureaucratic culture, getting the regulatory and fiscal framework right, and providing appropriate incentives for improved performance.

The following sub-sections provide an overview of key factors (issues and challenges) that currently impact on access to and quality of basic service delivery at the district level. As illustrated in Figure 1, these factors are divided into two main categories, namely:


  • Supply side factors; and

  • Demand side factors.

In addition, two key ‘general’ factors are identified, namely: (i) the need for reform minded leadership; and (ii) the need for effective knowledge sharing. Some ‘other’ factors are also briefly discussed in the following pages, including the diversity of circumstances and needs between different provinces, corruption and gender equality.

Figure 1 – Key factors impacting on district-level service delivery


2.2.2Supply side issues and challenges


Government policy, legislative and regulatory framework
  • As already noted, local governments can be efficient service providers under the right policy and institutional framework. However, there has not been a clear overarching government policy statement on decentralisation (e.g. a ‘White Paper’) to help guide the formulation of decentralisation legislation/regulations and implementation plans. This has contributed to a somewhat ad hoc and reactive (rather than strategic) approach to the design and implementation of decentralisation reforms. One (presumably unanticipated) result of not having clear objectives and a strategy from the outset has been the burgeoning number of new provinces and districts that have been formed since 1999. For example, of the 71 districts/municipalities in Indonesia’s four eastern most provinces, 42 (59%) were established since 1999, while one new province has also been created (Papua Barat separating from Papua in 1999). The number of new districts/municipalities in Papua and Papua Barat is particularly high, being 76% and 73% respectively. Managing this ongoing trend of fragmentation poses a significant policy challenge for national government.


  • A clear regulatory framework is also required to ensure clarity of roles, responsibilities and authorities. However, ten years on from the enactment of the first decentralisation legislation, there remains significant lack of clarity regarding the authority and roles of different levels of government. The latest Government Regulation on ‘Division of Authorities among different levels of government’ (GR 38/2007) was issued in 2007 to try and address this problem. However this regulation has had little impact and has merely added to the ‘tangle’ of often conflicting (and poorly drafted) government regulations emanating from central government agencies (e.g. Ministry of Home Affairs, Ministry of Finance and Line Ministries) as well as from P/LGs.
  • For LGs to be able to exercise their autonomy and be accountable for the services they provide, they need to have adequate decision making control over financial resources. While in theory LGs have substantial financial autonomy, in practice most of their revenue is still ‘tied/earmarked’ to centrally determined priorities.8 For example, the Special Allocation Funds (DAK) are earmarked for specific (centrally approved) infrastructure projects, and a significant proportion of General Allocation Funds (DAU) are used to cover public servant salary costs.9 In addition, the central government continues to disburse significant financial resources (e.g. the De-concentrated and Co-managed Funds) which do not pass through district government budgets.10 The overall result is that districts generally have limited scope (fiscal space) to allocate any substantial funds to their own locally determined development priorities. It also means that many provincial and district leaders spend much of their time in Jakarta trying to influence funding allocation decisions, and accountability for the use of these funds focuses more on Jakarta rather than the local electorate. Limited tax decentralisation also weakens LG accountability and responsiveness to their citizens and raises cost efficiency concerns.


Performance assessment and incentive mechanisms

  • A well functioning decentralised system requires that mechanisms be in place for assessing LG performance. The GOI has passed three major government regulations which aim to help evaluate the capacity and performance of local governments, namely: (i) GR 78/2007 on the guideline for formation, eradication, and merging of autonomous regions, (ii) GR 6/2008 on evaluation of sub-national government performance, and (iii) GR 8/2008 on the guideline for formulation, controlling, and evaluation of sub-national development plans. However, there is as yet little evidence that these regulations are being effectively applied, most likely because of their relative complexity and because the regulations do not clearly specify how the information is actually to be collected, analysed and used.
  • In order to promote good performance by LGs (e.g. in terms of meeting service delivery standards/targets), a system which links their performance to national government financial allocations is desirable. However, to date no clear financial incentive mechanisms have been established (by the national government) for P/LGs to perform better. Most of the fiscal transfers from national government to P/LGs are based on their factor endowment (particularly natural resources revenue sharing) or are at the discretion of the national government to determine (especially for DAK funds). Indeed, the formula for DAU allocations actually creates a disincentive for P/LGs to improve their performance as, if they reduce the number of civil servants and/or improve their Human Development Index ranking, their DAU allocation would be decreased. In the last few years, MOF has tried to create a ‘disincentive’ for P/LGs which do not issue their budgets and financial reports on time, by threatening to reduce their allocation and delay fiscal transfer disbursements. This initially had some positive impact on the timely submission of financial reports, but latest data for districts in NTB (see working paper at Annex 2) shows that 2/9 and 0/10 districts submitted their budgets on time in 2008 and 2009, respectively.


Public Financial Management systems and access to information

  • Building the institutional capacity of provincial and district level authorities, including local parliaments, to more effectively manage available resources is a key challenge. A series of Public Expenditure Reviews recently conducted in eastern Indonesia have 11 demonstrated that: (i) local governments did not generally have a full understanding of the total envelope of budgetary resources available to them; (ii) district-level budget allocations rarely matched overall development priorities, and they lacked consistency and logic; (iii) bottom-up proposals did not play a significant role in funding decisions; and (iv) public discussion and scrutiny of plans and budgets improved the quality of planning and resource allocation. Also, According to the Ministry of Finance, LGs do not pay the necessary attention to public financial management. Only eight districts received an unqualified opinion on their financial reports by the external audit agency BPK in 2008. 120 financial reports got “Disclaimer” in 2007.12

  • The main implication of these findings is that significant scope exists to improve the allocation and management of existing resources, and that the main constraint to improved LG service delivery is not the availability of resources per se.
  • Access to good quality and timely socio-economic data (including on such issues as poverty and gender equality), as well as information on service delivery (quality and access), budget envelopes, expenditure details, etc is critical to improving (evidence based) decision making on resource allocation and management. In many cases, such information is not readily accessed and/or is not effectively used at P/LG levels. As one key BAPPENAS director commented to the design team, “In many of our government bureaucracies, what happens is not filing of data, but piling of data”. The main concern therefore is often not that data does not exist, but that it cannot be readily accessed and/or is not used.


Public service reforms and human resource management systems

  • The ability of LGs to deliver services to the public depends greatly on the quality of their staff, their ability to manage these staff effectively, and the development of a service culture within the bureaucracy. In recognition of this, Law No. 25/2009 on Public Service was recently passed by the national parliament, which requires, among others, establishment of public service standards, complaint handling mechanisms, and implementation of customer satisfaction surveys. This is a very positive development.13

  • However, there remain many challenges to implementing these requirements. P/LGs do still not have full authority over their staffing structures or numbers, low civil service salaries provide little incentive to work diligently or full time, and many public officials remain influenced by the work patterns and attitudes of the previous regime’s extremely centralised and hierarchical system of patronage. Change is occurring, but old habits die hard.

Effective partnerships between public and private service delivery agencies
  • In all of the AIPD targeted provinces, a significant proportion of education and health services are provided through non-government entities, mostly religious-based organisations.14 Yet in discussions with LG officials, there appears to be little in the way of effective collaboration between LGs and these providers, in terms of planning, resource allocation, and monitoring of service delivery. This lack of collaboration not only limits the capacity of local governments to ensure effective service provision within their jurisdictions, but also constrains the growth and possible support role of strong, private sector providers. The lack of private sector providers in turn maintains high levels of expenditure on government apparatus.


  • Developing more effective partnerships between LG and non-government service providers, particularly for education and health services, offers significant opportunities to improve overall access to and quality of these services within LG jurisdictions.

2.2.3Demand side issues and challenges


Quality of democratic processes and representation

  • The quality of leadership at provincial and district level is one of the most critical determinants of whether or not service delivery reforms can, or cannot, be effectively developed and implemented. By most accounts, democratic processes are now well established in Indonesia, with recent parliamentary (and presidential) elections being viewed as relatively free and fair. The high turnover of parliamentarians during the 2009 elections also suggests that citizens are expressing their interest in seeing change/more responsive government. The election of an increasing number of reform minded leaders at both provincial and district levels is similarly very encouraging. Nevertheless, there is significant variation in the quality of leadership in different provinces and districts, and accountability mechanisms remain relatively weak.

Informed parliamentarians, with respect to resource allocation and management processes and trade offs
  • Given the key role that local parliamentarians (legislators) play in framing policy, making regulations, approving the budget and monitoring the activities of the bureaucracy (including service delivery), it is critical that they are adequately equipped to undertake these tasks. Interviews conducted by the design team with both provincial and district level parliamentarians (primarily in NTT province), as well as officers within Parliamentary Secretariats, indicate that they generally have a strong interest in accessing both more and better information (related to their responsibilities) as well as skill development opportunities.


Community access to information on available resources/services, awareness of rights/responsibilities, and ability to organise and advocate

  • Improving service delivery at district level requires a strong and active civil society that is adequately informed and can put pressure on P/LGs to perform. In Indonesia, the process of decentralisation has primarily focused on granting local autonomy without simultaneously promoting accountability of local governments to their citizens. As a result, civil society remains relatively weak at the local level and does not always have the capacity to exert effective public control over local governments. The involvement of, and capacity for, women to influence or exert control over local governments is particularly weak. Civil society is still suffering from the results of 32 years of the New Order era, when they were either coopted or had a confrontational relationship with the Government.

  • Recent studies15 confirm the importance of educating non-governmental stakeholders, especially communities, on budget issues to help establish effective checks and balances. The Ford Foundation study finds that there is real interest in budget work among civil society organisations in Indonesia, and that this work is largely driven by civil society’s own priorities and interests rather than in response to donor pressure. It further argues that to date, much less attention has been devoted to establishing an effective budget oversight system, or to ensuring that independent stakeholders have the information and capacity necessary to hold governments to account.
  • The “business” of government also continues to be cloaked in what a recent article in Jakarta Post termed “the Indonesian bureaucracy’s culture of secrecy”. Despite various efforts to reform and increase transparency and accountability through a range of regulations established by the central government,16 many provincial and district governments have yet to fully comply with these obligations. There are nevertheless positive changes taking place in some provinces/districts, for example with the establishment of One Stop Shop services (which are designed to improve citizen’s access to information and services), the publication of P/LG budgets, and the use by P/LGs of independent ‘experts’ (e.g. from Universities) to ‘independently’ review the performance of their service delivery programs.


  • At the village level, citizens often have little awareness of their rights, entitlements, as well as of legal processes and available legal resources. Because women frequently do not attend meetings and other fora where information is conveyed, they are even less likely to be aware of their entitlements and the resources available to them in comparison with men. In general, women’s disempowerment severely curtails their capacity to push for their entitlements or take advantage of any resources of which they are aware. In 2001, a survey conducted by the Asia Foundation found that only 56% of respondents – and only 33% in rural areas – were able to identify a single right they were entitled to.17 While this situation has most likely improved in the past eight years, it is nevertheless likely that awareness remains low, particularly in rural areas and among women and the poor.

Appropriate partnership fora to bring demand and supply side stakeholders together to address problems and take opportunities

  • The ability for CSO/NGOs to access information, organise themselves and effectively work with their community constituents is one thing. Effectively influencing government policies and actions is another. For CSO/NGOs to be more effective in influencing government policies/actions requires that they: (i) be able to clearly articulate and argue for specific reform/service delivery improvements; (ii) take more of a problem solving, rather than confrontational, approach with government; and (iii) engage in/with appropriate ‘partnership fora’ which bring multiple stakeholders together to address common concerns.
  • Discussions between supply and demand side stakeholders have (as a legacy of the Soeharto era) been largely limited to the ‘bottom-up planning process’ (through Musrenbang), which in most cases does not then get reflected in the annual budget. Meanwhile, the ‘top-down planning process’ (sectoral planning by technical units) and the budgeting process are, in most cases, not transparent. The latter is more significant in influencing the budget.


  • There are nevertheless a number of promising initiatives being taken at LG and community levels that can be built on and supported. Some CSO/NGOs are indeed now taking a more informed and less confrontational approach in trying to influence government policies and actions, and have formed multi-stakeholder fora (involving both government and non-government representatives) to discuss specific issues of common concern. Use of mass media channels, including radio and television has also increased the responsiveness of LGs. Some LGs are also actively promoting the use of such consultative mechanisms, including the use of ‘Parliamentary Forums’ which bring parliamentarians and constituents together to discuss service delivery, resource allocation and related issues. Effective practices, including those which improve gender equality and/or are pro poor in their orientation, need to be supported, shared and more broadly applied.

2.2.4Knowledge management

Effective generation, sharing and use of knowledge about decentralisation experiences (including what works and what doesn’t) is considered a key enabling factor to make decentralisation work, and is relevant to both the supply and demand sides of the equation. It offers the prospect of being able to scale up and replicate what works, as well as to avoid repeating the same mistakes.

This represents a significant challenge. The four AIPD targeted provinces characterise conditions faced in Indonesia’s eastern regions, namely limited access to reliable information as well as weak coordination and information exchange mechanisms both internally (between providers and users of public services at LG level) and externally (with other districts and provinces, and with national government).

A number of provinces and districts have sought to address such constraints by developing communication and coordination units. For example, NTT established the Provincial Joint Secretariat for International and Inter-regional Cooperation, through Governor Decree No. 108/2004 in March 2004. This joint secretariat (commonly referred to by the abbreviation SEKBER), has operated as a support unit under the Provincial BAPPEDA. Similar district level units have also been established (i.e. in Kabupaten Timor Tengah Selatan) to bring together information on activities underway in the district, particularly those implemented with international support. Papua Province has established the Papua Knowledge Center, which is a repository for data provided through village facilitators (PNPM-RESPEK) as well as from other research activities conducted in the region. It is currently developing community information programs (including through a reported 1,500 television sets to be distributed to villages throughout the province).

Notable efforts have also been made at the sub-regional level to develop and exchange knowledge on development and decentralisation issues, primarily through the establishment of the Eastern Indonesia Knowledge Exchange (BaKTI) based in Makassar. In 2009, following positive reviews regarding the role and functions of BaKTI (BAPPENAS Review 2008), steps are being taken to establish the organisation as an independent foundation.

BaKTI’s main strengths include the following:


    1. Established linkages with ongoing AusAID projects and programs that have utilized or collaborated with BaKTI, and also linkages with other donors supporting BaKTI, including the World Bank and CIDA;

    2. Linkages with a broad range of stakeholders in each of the targeted provinces who are already familiar with BaKTI as recipients of newsletters or participants of activities facilitated by BaKTI;

    3. Established links to local CSOs which are well positioned to support increased public demand for improved public services;

    4. Direct cooperation with the Eastern Indonesia Forum as a knowledge sharing community of reformers in government and civil society, led by BaKTI. This includes sub-forums such as the Eastern Indonesia Heads of BAPPEDA Network and the Eastern Indonesia Researchers Network;

    5. Existing systems for managing, storing, adapting into appropriate media and distributing data and information to government and civil society leaders; and

    6. Experienced and skilled personnel able to support organising and facilitating meetings, discussions and events. BaKTI also has ongoing collaboration in provinces where local governments have established information centers (i.e. SEKBER in NTT and the Papua Knowledge Center).

However, it should be noted that BaKTI will require institutional strengthening as it shifts from being a program funded through trust funds managed by the World Bank, to becoming an independent indigenous institution. Capacity building should also ensure that BaKTI is gender responsive and that women’s organisations and women’s issues are firmly integrated into the knowledge sharing process.

With respect to supporting improved resource allocation and management at P/LG levels, four areas of information sharing and knowledge exchange need particular attention, namely: (i) improved access to and use of reliable information within P/LGs to support more informed resource allocation and management decision making; (ii) more effective sharing of information by LGs to the general public; (iii) more effective sharing of knowledge and effective practices between provinces and districts (peer to peer learning opportunities); and (iv) the transfer of knowledge (on both effective practices and critical constraints) from provinces and districts to the central government, so that it can be used to inform evidence-based policy making.


The Working Paper on Knowledge Management and Communication (see Annex 3) provides a more detailed review of knowledge management issues and opportunities.

2.2.5 ‘Other’ factors


  • Diversity of circumstances and needs. The specific cases of Papua and Papua Barat pose particular challenges. Law No. 21/2001 on Special Autonomy for Papua Province gives the Provincial Government significant levels of authority in financial, political and social matters. The law secures the provision of a Special Autonomy (Otsus) Fund which is set at 2% of the total national allocation to the General Allocation Fund (DAU), with a particular focus on education, health and infrastructure development.18 However, the implementation of the Law has been slow and incomplete. Presidential Instruction No. 5/2007 on ‘Acceleration of Papua and Papua Barat Provincial Development’ was subsequently issued, requiring the Governors of Papua and Papua Barat (in collaboration with national government agencies) to develop and implement action plans for accelerating their provinces’ development. However, the complex and fragmented nature of Papua and Papua Barat’s socio-political economy, combined with the inconsistency of central government in applying the special autonomy law, indicates that effective implementation of any such plans will be extremely challenging. The key points to make here are therefore that: (i) any support for Papua and Papua Barat must be tailored to their particular circumstances; (ii) a process of incremental engagement will be particularly important; and (iii) access to resources is not currently the binding constraint in terms of improved service delivery.
  • Corruption.19 There is contradictory evidence on the impact of decentralisation on levels of corruption. A few studies indicate positive trends in terms of control of corruption, such as a study looking at firm level data set from 2001 and 2004 to investigate whether local democratisation reduced corruption in the post-Soeharto era. Findings suggest that local corruption dropped substantially between 2001 and 2004 in some districts. However, according to many experts, while corruption used to be centralised in Jakarta, decentralisation has contributed to spreading it out to the local and regional levels, leading to more fragmented forms of corruption. A 2008 survey conducted in 39 cities to investigate public satisfaction towards their local governments found that the majority of respondents were disappointed with their local government’s commitment to eradicate corruption, and to report practices of corruption, collusion and nepotism.


Nevertheless, there are also positive signs, with more corruption cases coming to the public’s attention (through the media), an increasing number of high profile prosecutions coming to court, as well as evidence that some LGs are taking direct action to investigate and prosecute local officials suspected of corruption.20

  • Gender. As noted in the Australia Indonesia Partnership Country Strategy (2008-2013), the Indonesian Government has strong in-principle commitment to advancing gender equality and women’s empowerment. Progress, however, has been mixed and significant implementation challenges remain. For example, gender inequalities in accessing health and education in poor rural areas are considerable, and Indonesia has the highest maternal mortality rate in the region with 307 deaths per 100 000 live births (this figure is more than 1000 in Papua).

Women are also under-represented in elected leadership positions and management positions in the public service. At community level, men dominate decision making as the household representatives in the public sphere and CSO leadership is dominated by and reflects the perspectives of men, except where organisations focus on women’s issues.

Although there may be awareness about the issue of gender equality, there appears to be a lack of understanding about how to practically go about planning and budgeting to reduce gender disparities and also a lack of commitment amongst some officers to make necessary changes. At LG level there is generally less understanding and commitment to integrating gender into policy and planning amongst leaders and policy makers than in PGs. However this varies between LGs and between government agencies.

Gender is still viewed by governments as women’s business, not that of men, and is associated with Dharma Wanita and Family Welfare Program (PKK) activities (which were established under the Soeharto regime, and therefore have some associated ‘stigma’). Meetings concerning gender issues are dominated by women who are sent by their superiors. There is a need for greater involvement of men, especially those in decision making positions, in understanding the importance of gender equality and being committed to achieving it.

Monitoring and evaluation indicators related to service delivery are rarely gender sensitive and gender disaggregated data (which is necessary for analysis and identification of gender disparities for improved planning) is not always routinely collected or analysed for planning purposes (although much of the BPS data is now gender disaggregated). There is also an expectation within government that any gender activities will require specific budgets in order for them to be implemented, rather than seeing these activities as being integrated into routine planning and programming which already have budgets.

The fourth meeting of the Eastern Indonesia Regional Forum (Forum KTI) which was held in April 2007 discussed the topic of gender perspectives in government services. It concluded that although the government acknowledged the importance of integrating a gender perspective in development planning, there was a lack gender mainstreaming in policies, programming, and activities at both national and local levels. Planning and budgeting was not participatory nor gender responsive. There was a lack of gender equality in access to education, health services and economic development. The human resources of women were not developed to their potential and local women’s organisations’ capacities were not maximised.

The challenge is therefore to find practical and effective ways in which to promote and institutionalise the mainstreaming of gender equality initiatives into government ‘business’.





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