Guidebook to local governments in Indonesia. by Ade Cahyat (M.PA)

Transcription

1 Guidebook to local governments in Indonesia by Ade Cahyat (M.PA) Draft September 2011

2 Guidebook to local governments in Indonesia Draft September 2011 ii Preface This guidebook has been prepared to support the work of integrated experts deployed by GIZ Entwicklungsdienst to work with and within local governments in Indonesia. By providing knowledge on relevant structures and procedures its intention is to ease the pain every newcomer to Indonesia usually endures, when trying to figure out the logic behind the structures and procedures he observes. The first chapter briefly describes the general framework (history, levels, revenue, expenditure, legitimation and legislation of local governments). The general structures and key players are being outlined in the second chapter (local parliament (DPRD), heads of local governments, local government working units (SPKD), and internal structure of SKPD). The third chapter then gives an overview of selected procedures of external services (land titels and boundary demarcation, community empowerment, natural resources management) while the fourth chapter focuses on key internal procedures (planning-budgeting-reporting, human resources management and capacity building, salary and forms of employment). One special chapter village government briefly highlights the question of local governance on subdistrict level (structures, planning and budgeting, traditional forms of governance). The last chapter then opens the room to give a more analytical account of underlying processes (relationship between national and local governments, political decision making in Indonesia, legal product hierarchy, etc.). Please also notice the glossary at the end of the document. The guidebook has been written by Mr. Ade Cahyat (M.PA) with guiding questions from Dr. Oliver Kögler under commission of GIZ Entwicklungsdienst. Considering the very limited resources that have been made available for the project, the content is already far beyond the expectations. Still many issues could only be covered briefly or have been left out completely. The document also does not yet comply with the standards of an official publication as no professional proofreading has been carried out. It is none-the-less easy to read and extremely rich in information. We very much hope that in a second step you - the readers will contribute to further elaborating and improving this guidebook. If you have any comments, additions, corrections or additional questions, please send them to [email protected]. Depending on your feedback GIZ will then consider how to further proceed with the project.

3 Guidebook to local governments in Indonesia Draft September 2011 iii Contents The framework (Very) short history of local governments in Indonesia Levels of government in Indonesia Revenue structure Expenditure structure Legitimation of local governments Legislation by local governments 4 2 Structure and key players of local governments DPRD Local government working units Typical internal structure and functions of an LG agency The size and structure of local governments 10 3 Selected procedures of external services Land titles and boundary demarcation Community empowerment Natural resources management 12 4 Selected procedures of internal organization Planning, budgeting and reporting Human resources management and capacity building Salary and benefits of local government officials Forms of employment by local governments DPPKA and asset management 29 5 Village government Desa government structure Planning and financial system at village level Revenues Adat structures 31 6 The broader framework Working relationship between the national and local level Local government budget structure Political decision making - veto structure 38

4 Guidebook to local governments in Indonesia Draft September 2011 iv 6.4 The role of the state in society Rentier state Quality of work-tender issues Selected state institutions in national level Legal products hierarchy Elections in Indonesia 43 7 References 45 8 Glossary 51 9 Annexes Annex-1: Organization Structure of Dinas Kehutanan in the Province of Jawa Tengah Annex 2: Organization Structure of Sekretariat Daerah Kabuapaten Lombok Tengah 56

5 Guidebook to local governments in Indonesia Draft September 2011 The framework 1.1 (Very) short history of local governments in Indonesia Archipelago (nusantara) of Indonesia was the home of kingdoms before and during the colonial era. Wikipedia mentions 67 monarchic states spread out from Sumatera to Ternate. They often were dissolved or just remained by name when the Dutch conquered their territory. Some of the kingdoms were survived by exercising indirect rule in smaller territories under colonial government. Meanwhile, some others, for example Yogyakarta, were fighting the colonial rule and are well-known as a great supporter of the independence and republic movement (Kershaw 2011: 73). The extent of the Dutch colonial rule defined the territory of what later became Indonesia. During the independence movement, the Indonesian nationalists allowed no role of the constitutional monarchs because they considered the monarchs as colonial puppets. Thus the independent Indonesia formally became a republic state with some of the former kingdoms' name and territories still remaining in the form of local governments either on province level (e.g. Aceh and Banten ) or district/municipality level (e.g. Pontianak and Ubud). While political power was highly centralized under the authoritarian regime, the new democratic rule brought a quick and drastic decentralization of political power after 1999, mainly to the benefit of the district and municipality level bypassing the provincial level. Thus power relationship among national and local governments have been changing over time, from a moderate decentralized during Soekarno era known as "old order", , heavily centralized during Soeharto era known as "new order", , and profoundly decentralized during reformasi era, 2001 onwards (Marbun 2010). In reformasi era, the law on local governments has been revised two times. The first one was drafted in 1999 and was enacted since January 2001, was revised in The 2004 local government laws are still valid until now. They are Law 32/2004 about local government and Law 33/2004 about fiscal decentralization among the three government tiers. One major difference between the two is that the 2004 provide more power and roles to the province government on monitoring and supervising the kabupaten/kota. The World Bank called the 2001 decentralization a 'big bang'. That refers to the significant changes that happened since then. For example, two third of the central government workforce and more than 16,000 service facilities were transferred to the responsibility of the regions (Hofman & Kaiser 2002: 1-2). About one third of the total state expenditures is transferred to local governments under decentralization scheme (Departemen Keuangan n.d.). In addition, about half of all public investments are managed by the local governments (World Bank 2010a: 2) 1.2 Levels of government in Indonesia Indonesia has three government tiers: (1) the national level, (2) the provincial level and (3) the district (kabupaten) in rural regions or municipality (kota) level in urban regions. All sub-national levels two and three are generally called local governments. This usually causes some confusion as there are many similarities but also many differences between the provinces and the districts/municipalities in terms of their authorities, functional assignments, and organizational structure. By August 2011 there were 524 local governments, comprised of 33 provinces, 398

6 Guidebook to local governments in Indonesia Draft September /55 kabupaten, and 93 kota. There have been 205 new local governments since the 1999 decentralization law, comprised of 7 provinces, 164 kabupaten, and 34 kota (Yudhoyono 2011). Districts and municipalities have administration support units called kecamatan. Furthermore, kecamatan may comprise villages (desa, sometimes also called kampung) or urban neighborhoods (kelurahan). Although desa and kelurahan are at the same level, both differ in terms of autonomy. More about this are elaborated in Section 5. Under desa and kelurahan, there are two neighborhood administration support units. The first level is hamlet (dusun) in kabupaten or community units called Rukun Warga (RW)) in kota. The second level, either in kota or in kabupaten, is called Rukun Tetangga (RT). National (central) government Province goverrnment Kabupaten (district) government (rural region) Kota (municipality) government (urban regions) Kecamatan (adm support) Kecamatan (adm support) Desa government Kelurahan (adm support) Dusun (adm support) Rukun Warga (adm support) Rukun Tetangga (adm support) Rukun Tetangga (adm support) 1.3 Revenue structure The main components of local government revenues are the own-source revenues called Pendapatan Asli Daerah (PAD) and the transfer from central government called Dana Perimbangan. The former comes mainly from taxes and levies in service activities and vehicles ownership and is collected by local governments directly, whereas the latter come from taxes and levies in natural resource extraction activities and personal income tax and is collected by central government which then partly shared with the local governments. Therefore, resource rich regions, such as East Kalimantan, could claim that they transfer a significant amount of their income to the national level and other regions although they are still remain significantly better off than their poor neighbors. The proportion of PAD to the total income can be used as an indicator of the independency of local government revenue. Local governments with high proportion of PAD have a better control over their cash flow management compared to them who rely mostly on the national transfer. It is often the transfer from national government does not go smoothly and has been causing delayed payments (BPK 2008b). In the last five years, the proportion of PAD to the total local governments' revenues is 17 per cent (Departemen Keuangan 2011a) The transfers of the national government can then make up by far the biggest part, around threequarter, of the total local governments' revenue (Departemen Keuangan 2011a). Regions with high

7 Guidebook to local governments in Indonesia Draft September /55 population and plenty of service sector economic activities, such as all the provinces in Java, generate high PAD. Region with plenty of high value natural resources but low service sector economic activities, e.g. kabupaten Kutai in East Kalimantan, generate high income from national government transfer but low PAD. The transfers come in three forms. They are the general allocation fund (Dana Alokasi Umum = DAU), the special allocation fund (Dana Allokasi Khusus = DAK), and the shared revenues fund (Dana Bagi Hasil = DBH). While the DAU is generally being used for covering the salary of all public servants (PNS) in the region which commonly called "apparatus expenditure" (belanja aparatur), the DAK and DBH are generally providing funds for so called development activities (kegiatan pembangunan). The difference of the two is that while DAK is earmarked budget, DBH is not. Therefore, regions are in favor with DBH than DAK to allow them greater flexibility in spending their budget. Yet, it is only the resource rich regions and the regions with many people paying income tax who could earn significant amount of DBH. 1.4 Expenditure structure The expenditure structure consists of two big categories, direct and indirect expenditures. The direct expenditure comprises three components, i.e. personnel, goods and services, and capital expenditures, which mainly about expenditures related to all local government activities either implemented directly or are contracted to the third parties. The personnel costs under the direct expenditure category are for paying honorarium of PNS and others when they do activities. Meanwhile, there are eight components under the indirect expenditures. Most of them are usually allocated for the regular salary of the permanent public servant (pegawai negeri sipil/pns), while others are expenditures related to the outside parties of the entities which are not need tendering such as subsidies, social aid, and shared revenues to the lower administration entities such as to kabupaten/kota by province or to desa by kabupaten. Thus, we can see that PNS got two sources of legal income, the regular salary and the honorarium. In some regions, such as Gorontalo, the honorarium payments are replaced by performance incentives. Another way to read the expenditure structure is to group the expenses data by local government functions. There are nine local government functions; they are: general administration, orderly and security, economic development, environment, housing, health, culture and tourism, education, and social protection. The General administration includes all internal services such as the secretariat, planning, and personnel management. Expenses in general administration do not directly create benefit to the people. The proportion of general administration to the total expenditures is a good indicator of efficiency; the higher the number, the lower the efficiency. The average of indirect expenditures from the last five years, , is 53 per cent of the total local government expenditures. Interestingly, the average personnel expenditures at the same period, which are the sum of that in the direct and indirect expenditures, are 46 per cent. That is considerably a lot especially when compared to the capital expenditures which is only 25 per cent 1. By government function categories, the highest proportion has been spent for the general 1 However, the problem is not merely about the allocation of expenditures, rather it is about the low government expenditures which caused by the low revenue. The salaries for all police officers, for example, were more than three quarter of the total Police Department expenditures in Yet, highest paid officer was only around Rp.5 million per month while the number of police officers was only 0.2 per cent of the total population (World Bank 2003: 85). That means it is not the employee costs that might be the issue, rather it is the total expenditure is too low, whereas the low expenditures caused by the low revenues.

8 Guidebook to local governments in Indonesia Draft September /55 administration, 35 per cent of the total expenditures, followed by education (25 per cent), economy (9 per cent), and health (8. 75 per cent) (Departemen Keuangan 2011a). 1.5 Legitimation of local governments The heads of the local governments are called gubernur in province level and bupati /walikota in district/municipality level. All of them are directly being elected by the population. Since the gubernur position is in the middle between national and kabupaten/kota, it has two functions as the head of the provincial government and as the representative of the central government as well. As the head of the province government, the gubernur is responsible for all provincial government issues. Meanwhile, as the representative of the central government, he is responsible in supervising and monitoring the kabupaten/kota. For example, the draft budget plan (RAPBD) of the kabupaten/kota will only become final after it is reviewed and approved by the gubernur. On both levels there is also an elected parliament (local legislative), the Dewan Perwakilan Rakyat Daerah (DPRD). A similar arrangement is also applied to villages (desa) where the head (kepala desa), and the members of village legislative, called Badan Permusyawaratan Desa/BPD, are directly elected by the population. In contrast, the heads of the subdistricts (Camat) and urban neighborhoods (Lurah) are appointed by the Bupati or the Walikota. These positions are therefore held by PNS that mainly fulfill administrative tasks. 1.6 Legislation by local governments Similar to national level, any local government law, called peraturan daerah (perda), can be prepared either by the head of local government or by the DPRD. If one prepares, the draft needs to be agreed by the other. Despite the growing initiative of DPRD in drafting laws, in reality, it usually is the head of the local government who initiates laws. The scope of law making at local level is limited by the functions that are assigned to local governments which is regulated by Government Regulation 38/2007. In most cases, local governments just elaborate national regulations in order to make them contextual to the local circumstances. There are only few Perda with original idea from local political actors which usually happened in regions where the head of local government and/or the DPRD members are creative and smart. The head of local government (gubernur, bupati, walikota) could issue regulation independently in the form of 'surat keputusan' (SK) or 'peraturan'. Both do not need the approval of the DPRD. The peraturan is regulating e.g. the governor regulation on service provision procedure, whereas SK is an administration decree e.g. an appointment of someone to a certain position. The heads of local government working units (SKPD) cannot issue a decree or regulation. When they have any legislation idea, they need to bring the idea to the head of local government for further discussion. It is up to the head of the local government to decide whether to take the idea to become a decree/regulation or not. Unfortunately all the laws and regulations are often not fully congruent or even contradicting. The judicial system is too weak to clarify these discrepancies, so that in effect many legal issues are not definitely regulated or even over-regulated which confuses administrations and citizens alike.

9 Guidebook to local governments in Indonesia Draft September /55 2 Structure and key players of local governments 2.1 DPRD Three functions The local legislative (dewan perwakilan rakyat Daerah=DPRD) has three functions and is equipped with six instruments plus a secretariat. The three functions are: (a) legislation, (b) budgeting, (c) monitoring. The first two are implemented together with the head of the region, while the latter is to monitor the implementation of the first two. Secretariat It is important to note that although the DPRD (legislative) is formally separated from the government (executive), the secretariat of the DPRD is part of the local government. The secretary and his/her staff are civil servants and are appointed by the head of local government. Their role is to support all the politicians in the DPRD. Instruments The daily work of the DPRD is structured around so called 'instruments' (alat kelengkapan). All DPRD members are assigned to one or more of the following six instruments : 1. Pimpinan (the chairs, who chairing the assemblies and become the DPRD speakers), 2. Komisi (regional governance thematic group, filled up with members from different political parties), 3. Badan kehormatan (overseeing the code of conducts and ethics of the members), 4. Badan musyawarah (arranging the convene agenda and timetable), 5. Badan legislasi (arranging the legislation making agenda, its timetable, and law draft preparation), 6. Badan anggaran (discussing the draft of budget plan with government). In addition to the six instruments, DPRD may create other special instruments which can be established occasionally. Among the instruments, the pimpinan (Chairs), the komisi, and the badan anggaran may be the most popular one among those instruments, as this is where political decisions are being made. The komisi discusses all the legislation drafts and does the monitoring, whereas the badan anggaran discusses the budget plan draft (RAPBD). As discussed earlier, most of the drafts are usually prepared by the government although the DPRD is entitled to initiate its own draft through its badan legislasi. DPRD chairs Unlike the heads of government, the DPRD chairs (pimpinan) do not have absolute authority. All organizational decisions of the DPRD are the decisions of all the members through various mechanisms. Since the pimpinan must come from the majority, however, they have the power to influence members' decision. But the power depends on the leadership quality of the pimpinan. If the pimpinan is not respected by the memberso the parliament (anggota dewan), it is difficult for him/her to promote any policy ideas. Political parties and fraksi In addition to represent their electorates, all DPRD members are also the representative of their political parties. As Indonesia practices a hyper multi party system, there usually are many political parties in the DPRD. Unlike in national parliament (dewan perwakilan rakyat=dpr), there is no

10 Guidebook to local governments in Indonesia Draft September /55 parliamentary threshold in the DPRD which means that the number of political parties in each DPRD could be more than that in DPR. In order to structure the multitude of parties, they are grouped into fractions (locally called 'fraksi'). The minimum number of fraksi members is the same as the number of komisi. In case a political party has fewer members in DPRD than there are komisi, they have to form a coalition into a fraksi so that at least each fraksi is represented in each komisi. As komisi is only one among many DPRD instruments, it is possible that one DPRD member joins more than one instrument. For example, one can be a member of a komisi but also the member of badan anggaran at the same time. Every fraksi has a secretariat and is equipped with advisors (staf ahli). But these fraksi don t necessarily form strong political coalitions when it comes to decision making. Finding majorities in local parliaments depends more on the personal relationships among the political actors at local level. 2.2 Local government working units Local government is the executive branch of local governance. Within local governments, there are the heads of local governments and the local government working units (kesatuan kerja pemerintah Daerah=SKPD). Together, their core responsibility is policy implementation. However, since Indonesia practices a presidential system, the executive branch has more roles than policy implementation only. Local governments also have the authority to make policies and to prepare activities and budget plans though some of them need to be approved by the head and deputy DPRD. All decisions related to human resources are fully under local government authority except for the regional secretary (sekda) appointment where they need approval from the higher level of government, but not from DPRD or DPR. For example, the appointment of sekda of one kabupaten must be approved by the gubernur. Heads of local governments The heads of the local governments i.e. the governor for province, the bupati for district, and walikota for municipality and its deputy (the vice wakil) are the only political positions in local government. They are directly being elected by the people. Usually the head and their deputy form one package of candidacy during the election. They manage all the carrier positions which are the permanent public servants (pegawai negeri sipil =PNS) to achieve their government's objectives and expected results which were promised during the election campaign. The head and the deputy of local governments can assign tasks to the secretary (Sekretaris Daerah Sekda), the head of SKPD (e.g. kepala dinas, kepala badan), head of local public service units as well as the director of local government enterprises, such as Bank Pembangunan Daerah (BPD) and the Local Government Water Utilities Enterprise (Perusahaan Daerah Air Minum PDAM), and monitor the process and achievements. They can set incentives for motivation. They play a significant role through the recruitment and discharge of local government employees either the PNS or the temporary workers 2. They are entitled proposing the development and budget plan (RAPBD) as well as all other local government plans to the DPRD. They are the highest authority on local government finance and asset decisions. In short, they have authority to mobilize all available resources. Although there are many national guidelines to follow, still there are many spaces for them to make decisions in order to achieve their political objectives. 2 For the discharge, governor has authority for employees with rank (golongan) up to IVb, whereas bupati/walikota entitled to sack employees with rank up to IIId.

11 Guidebook to local governments in Indonesia Draft September /55 Local government working units (SKPD) The SKPD can be categorized into three groups. (1) the secretariat with coordination function to directly assist the head of region and ensuring support and coordination to the internal and external services; (2) the external service units providing services to citizens which usually called 'dinas' and some others are in the form of Badan Layanan Umum (BLU); (3) the internal service units providing management and administration support, most of them but not all called 'badan'. In terms of hierarchy, the secretariat is higher than badan dan dinas, whereas the last two are at the same level of hierarchy. The secretariat The secretariat of local governments has a central function in coordinating the operation of the administration. It directly assists the head of local government and ensuring support and coordination to the local government units providing internal and external services. As its core function is coordination, it can be said that the secretariat is doing internal services similar to 'badan'. The difference is that while 'badan' focuses on particular functions such as planning and personnel administration, the secretariat focusing on broader themes such as public administration and people welfare which combining more than one dinas or badan. Another difference is that the secretariat is also dealing with external stakeholders more than badan. For example, the secretariat must deal with community groups in managing the assistance fund (bantuan sosial) and subsidy fund, and work with the lower governments in managing the shared revenues fund i.e province to kabupaten/kota and kabupaten to desa. The regional secretary (Sekretaris Daerah Sekda), which is the head of the secretariat, is the highest structural position in the region. S/he directly supervises assistances (Asisten). Each Asisten is responsible for one or two broader themes coordinating several SKPD. For example, the Asisten Administrasi is responsible for public administration coordinates BKD, Badan Diklat, and DPPKA. The head of dinas and badan are at the same hierarchy level of Asisten. Sometimes it spoils the coordination because the head of dinas and badan do not want to be coordinated by the Asisten as they are equal in terms of hierarchy, whereas the Sekda cannot handle all the coordination him/herself. Dinas The external service providers deliver the main function of local governments by creating public values through public services. Most of them are called 'dinas' such as dinas kesehatan for health services, dinas pendidikan for education services, and dinas pekerjaan umum for public infrastructure. Dinas provides services either by itself or by contracting external service providers. Local government can establish a Technical Implementation Unit (Unit Pelaksana Teknis Daerah UPTD). For example, an UPTD for forest fire could be formed under the Forest Service (Dinas Kehutanan). BLU In the new regulation, some public service units are autonomous in their financial administration, not managed under the dinas. They are called Public Service Unit (Badan Layanan Umum BLU). BLU is only for local government public service units who sell their product or services but not for profit purposes. For example, hospitals, community health service centers (puskesmas), or PDAM can be formed as a BLU if it meets certain quality standards. Once the public service unit qualified as BLU, it

12 Guidebook to local governments in Indonesia Draft September /55 can employ workers using private sector scheme by providing salary rate more than public servant's standard. In addition, it also allowed managing all of their revenues directly. By contrast, if the service unit is not qualified as BLU, it must deposit all the revenues gain from its service charge to the local government treasury. In the case of hospital, for example, all the need to pay the operational costs as well as to purchase assets or equipments must be proposed to the RAPBD through the Health Service (Dinas Kesehatan). Badan and Kantor The internal service providers are mostly called 'badan'. This includes, for example, Bappeda and BKD which can be considered as the most powerful badan. Similar to Dinas, local government could establish an UPT under 'badan'. Addition OK: For more specific functions such as managing the local government archive, a 'kantor' can be formed. Generally kantor are smaller agencies than badan and their heads are ranked lower that the heads of Badan and Dinas. Bappeda The Regional Development Planning Agency (Badan Perencanaan Pembangunan Daerah Bappeda) is the most strategic government agency at local level for any development cooperation. This is particularly true in regards to the concern of 'local ownership' and 'alignment' as promoted by the 2005 Paris Declaration. One possible strong indicator of ownership and alignment is the existence of cofinancing budget for the development cooperation activities that are allocated in the in local budgets (APBD). The job of Bappeda mainly is to coordinate the SKPD to prepare the annual workplan that after beingt discussed by the local parliaments can do. Every local government agencies must prepare their annual and mid-term work plan to be submitted to Bappeda. If the proposal is sectoral specific, it is better to talk to the sectoral agency first e.g. to the Forestry Services (Dinas Kehutanan) for reforestation program. The role of Bappeda is to coordinate all the sectoral planning. And because of that role, it has a strong power to 'control' all the planning and budgeting products including the RAPBD. Bappeda, together with the Finance and Asset Agency (Dinas Pendapatan, Pengelolaan Keuangan, dan Aset Daerah DPPKA) are the core team in the Executive Budget Team (Tim Anggaran Pemerintah Daerah TAPD) producing RAPBD. But unlike DPPKA, Bappeda control the process from the beginning 3. That makes other agencies often called Bappeda as 'tukang coret' means 'the scratcher'. Bappeda could disagree with the draft submitted by the sectoral agency and suggest for new idea. The power relationship among Bappeda and other agencies (not to include secretariat) depend on the personal power of the head of the agency, but in general Bappeda enjoy a strong position on planning and budgeting negotiation. Apart of development planning and budgeting, Bappeda has a role on providing advice on spatial planning as a member of Regional Spatial Planning Coordination Board (Badan Koordinasi Penataan Ruang Daerah BKPRD). Although the Spatial Plan Service (Dinas Tata Ruang) is the one with the role 3 There are two segments on planning and budgeting process. The first one is the work plan which then followed by second budgeting process. The first segment is entirely Bappeda area for coordination, while the second part is where Bappeda and DPPKA joint their efforts on coordinating other agencies.

13 Guidebook to local governments in Indonesia Draft September /55 on spatial plan making, Bappeda's role is essential to ensure the consistency between the spatial plan and the development and budget plan. That is why the Head of Bappeda is the secretary in BKPRD, similar to the position of the Head of Bappenas (The Planning Minister) in the National Spatial Planning Coordination Board (Badan Koordinasi Tata Ruang Nasional BKTRN). Camat and Lurah Camat and Lurah are civil servants who appointed by walikota or bupati. The position of Camat is at the same level as the secretary of dinas/badan and the 'kepala bagian' at secretariat in kabupaten/kota, while the Lurah is at the same level with 'kepala seksi' in kecamatan, 'kepala sub bidang' at dinas/badan, and 'kepala sub bagian' at secretariat (GR 41/ 2007).

14 Guidebook to local governments in Indonesia Draft September / Typical internal structure and functions of an LG agency Province Kabupaten/kota Hierarchical rank (eselon) Sekretari at Daerah Dinas/Bada n/inspektor at Others Sekretariat Daerah Dinas/Bada n/inspektor at Others Ib Secretary IIa Asisten, staf ahli Head, Inspektur Secretary IIb Head of biro Asisten, staf ahli Head, Inspektur IIIa Head of bagian Secretary, head of bidang, Inspektur pembantu Head kantor, Head UPT of of Head bagian of Secretary Camat, Head of kantor IIIb Head of bidang Sekretaris camat IVa Head of subbagian Head of sub-bidang Head of subbagian Head of sub-bidang Head of UPT, Head of Seksi in kecamatan, Lurah IVb Secretary of kelurahan, head of seksi in kelurahan Va Head of administration in public school Source: GR 41/2007 Example of organization structure of a secretariat daerah and dinas can be seen in Annex The size and structure of local governments Local governments may vary in terms of numbers of SKPD and numbers of positions within the SKPD. Their size is determined by criteria such as fiscal ability, geographical size, and number of inhabitants. Those criteria are used to calculate the score in order to figure out the class of the region. A region with high fiscal ability, huge territory, and high number of inhabitants is eligible to form the maximum size of organization. For example, in kabupaten/kota, local government with high score could have four Asistens in secretariat, while the lowest class is eligible only to have three. The guidance is just limit the maximum size which means local government could form less size of government than what they permit to do. However, most of local governments choose the maximum option instead of thinking about efficiency. Among the few local governments with a great bupati

15 Guidebook to local governments in Indonesia Draft September /55 whom committed to efficiency is Kabupaten Jembrana in Bali. There we can see how the limited public resources are used to maximize values for citizens. 3 Selected procedures of external services 3.1 Land titles and boundary demarcation The first impression of anyone who starts to understand land administration in Indonesia is inequity distribution and full of conflict. It is only about 16 per cent of population own 69 per cent of land There are two categories of land status in Indonesia, private and state land. Under the state land there are state forest land and state non-forest land. The state forest land, which is under the control of the Ministry of Forestry, amounts to about 70 per cent of the total land or equal to around 120 million hectares (Colchester et al. 2003: 134). The outside of the state forest land, the area where we can find private land, is administered by the National Land Agency (Badan Pertanahan Nasional-BPN). Both the Ministry of Forestry and the BPN are national government who has authority in boundary demarcation and granting land title. Local government has no authority in these assignments. Ministry of Forestry is responsible in delineating the state forest land. However, the process of delineation has been going very slow. Out of 120 million hectares of state forest land, only about 10 per cent has yet been officially delineated and decided (Colchester et al. 2003: 141). Meanwhile, in fact the 120 million hectares of state forest land is not a really a land with free of claim. There are about 33,000 villages that are located within and surrounding the state forests which most of them have been there for couple of generations (Mangkusubroto 2011). At the same time, since 1960s, government promotes extractive activities investments in state forest land. That has been creating conflicts among the state, local communities, and private sector. The land dispute has been the major challenge in any initiative to develop a sustainable forest management. Similar to the delineation of the state forest land, the land title registration has been going very slow. Out of 80 million land parcels that are estimated, only less than 30 million of them are formally registered (Heryani & Grant 2004). That has been causing a real social and economic problem in Indonesia. The slow registration happens due to the traditional methodology of registration in which each land parcel is surveyed to a high standard of accuracy by centrally deployed team. With existing procedures, the BPN would need about 100 years to register all the land parcels whereas government has a target to make it in 20 years (Heryani & Grant 2004). Therefore, there is a challenge to invent new registration methodology which still assures the accuracy but also cheap and fast. 3.2 Community empowerment Channeling Local communities' aspirations at the DPRD Local communities' aspirations could be channeled either through fraksi or the instruments (alat kelengkapan). Local communities could say they words through several ways. One of them is the community aspirations capturing session (jaring aspirasi masyarakat Jaring Asmara). Jaring Asmara is usually done during reses period; that is a break time in between convene sessions. There are three convenes sessions and three reses period in a year. Every reses period is maximum six days (GR 16/2010). During the reses period, the members of DPRD either individually or in a group suppose to visit their electorate to meet their constituents. Another way to approach DPRD is by proactively visit them. In this case, it is better knowing with whom to meet. If the aspiration is highly relevant to the position of a political party, meet the fraksi will be useful. On the other hand, if position of

16 Guidebook to local governments in Indonesia Draft September /55 political party is not clear regarding the issue (as mostly happened), approaching the komisi is much better. But then we should know which komisi is relevant with the issue or aspiration. However, if we have specific proposal to be adopted in upcoming development plan and we want to make it secured in the budget plan (APBD), meeting with Badan Anggaran is more relevant (as addition to the approach to government i.e. TAPD or Bappeda or DPPKA). Having says that, of course, the key success to talk to politicians is personal relationship. Good personal relationship will make things easy; easy to meet and easy to influence. 3.3 Natural resources management Mining Compared to the pre 1999 decentralization, a significant change of authority in local government can be found in mining sector. Bupati and walikota are entitled to permit mining exploration and exploitation operations when the mining area is within their administrative territory. In addition, they also entitled to permit small scale mining between one to ten hectares. Likewise, governor is designated to permit mining activities which the area is cross-kabupaten/kota but still within its provincial administrative territory (Law 4/2009). Forestry The situation is different in forestry sector. The head of regions have authority to issue permits mainly for non-timber forest activities. They are business licenses for area utilization (Izin Usaha Pemanfaatan Kawasan/IUPK), environmental service (Izin Usaha Pemanfaatan Jasa Lingkungan/IUPJL), utilization of non-timber forest product (Izin Usaha Pemanfaatan Hasil Hutan Bukan Kayu/IUPHHBK), and collection of non-timber forest products (Izin Pemanfaatan Hasil Hutan Bukan Kayu/IPHHBK). The authority of bupati/walikota is only for activities within the kabupaten/kota territory, whereas the authority of the governor is for cross-kabupaten/kota activities. When the activities are cross-provincial territory, the authority is then in the Minister of Forestry. For timber activities, the authority to issue permit is only for the timber collection permit (Izin Pemungutan Hasil Hutan Kayu/IPHHK) which is only for one year period. This authority was introduced since 1999 but then abolished in 2002 due the poor implementation of the policy which tended to promote unsustainable forest management (Dermawan et al. 2006). However, the latter regulation, GR 6/2007, brings the authority back though it is very hard to hear any head of regions issue IPPK. The permit of the big scale forest concession called utilization timber forest product license (Izin Usaha Pemanfaatan Hasil Hutan Kayu/IUPHHK) is only issued by the Minister. The role of the governor is to provide recommendation upon the applications to the Minister, whereas the bupati/walikota is to give technical considerations to the governor. 4 Selected procedures of internal organization 4.1 Planning, budgeting and reporting (please see also the Bappeda section under 2.2)

17 Guidebook to local governments in Indonesia Draft September /55 Planning products and their making process There are three key planning products in local government. They are development plan, budget plan, and the spatial plan. The first two are connected in one process line, but the latter is a bit separated though must be supporting one to another. Development and budget plan Every level of government has its own development and budget plan. The lower level government's plan must pay attention to, but not be guided by, the higher level one. The basis of local government's plan is its own political institution. The development and budget plans within one region are hierarchical in terms of their periodical term. The long term plan (Rencana Pembangunan Jangka Panjang RPJP) is for 20 years; the mid-term plan (Rencana Pembangunan Jangka Menengah RPJMD) is for five years; and the work plan (Rencana Kerja Pemerintah Daerah RKPD) and the local government budget plan (Anggaran Pendapatan dan Belanja Daerah APBD) are made every year. The annual plan must follow the mid-term, while mid-term must support the long term (GR 8/2008). Mid-term plan (RPJMD, Renstra-SKPD) The strongest political basis is the mid-term plan because it is fully overlapped with the period of the head of local government. It is unfortunate for the long-term plan. Although it is important, nobody cares about it, in fact. But the good thing is that the plans do not suppose to be oriented on the annual basis as what practiced in the past (though many local governments are still on annualoriented). The mid-term based plan still allows the local government to manage some meaningful changes for the real benefit of the citizens. In the mid-term plan making, the development plan and budget plan making process is connected in one process line. According to the law, the budget plan must follow the development plan (money follow strategy). RPJMD document covers both the development and the budget plan. Therefore it can be very thick consisting of hundreds of pages. The budget plan is in the form of mid-term expenditure framework. Both the development plan and the expenditure framework are just an open reference for the annual plan. The new elected head of local government must prepare and complete the RPJMD soon after they come to the office. Bappeda leads the process by preparing the preliminary draft of RPJMD with reference to RPJP. It is also important to note that the frameworks must be in line with the scope of local government authority as regulated by GR 38/2007 and meet with the functions of local government agencies as guided by GR 41/2007. Based on the preliminary draft of RPJMD, each SKPD should prepare the draft of strategic plan (Rencana Strategis SKPD Renstra SKPD) which the period is exactly the same as the RPJMD, five years. Bappeda compile and assess the Renstra-SKPD draft from agencies and at the same time fixing the preliminary draft of RPJMD to become a final draft of RPJMD. Public consultation must be implemented to the stakeholders particularly for the RPJMD, but it is also important for SKPD to consult their Renstra-SKPD to their own constituent so that the public consultation could be more specific. The final draft of RPJMD is to be submitted to DPRD by the head of local government. The RJPMD becomes official when it is approved by both the head of local government and DPRD. Annual plan (RKPD, RAPBD, Renja-SKPD, RKA-SKPD, DPA-SKPD) Unlike the mid-term development plan product, the annual plan separates the work plan and the budget plan into two documents namely RKPD and RAPBD respectively. The process of the making is

18 Guidebook to local governments in Indonesia Draft September /55 in one process line but the integration of planning and budgeting is in question. The connector of the two is the general budget policy (KUA) containing priority expenditure list, revenue prediction, financing strategy, and assumptions. Similar to RPJMD, RKPD is a result of consolidation plans among agencies (SKPD) facilitated by Bappeda. Each SKPD prepare an annual work plan (Rencana Kerja SKPD Renja-SKPD) based on its Renstra-SKPD and the preliminary draft of RKPD. Although the RKPD must includes the assessment of local government finance prospect (a rough estimation of revenue and expenditure), it does not contain a budget plan. The draft of RKPD must be discussed during development plan deliberation (Musyawarah Perencanaan Pembangunan Musrenbang) which should be conducted from desa/kelurahan up to kabupaten/kota level 4. The RKPD is a basis for the annual budget plan (RAPBD) making. The Bappeda prepares budget ceiling for each SKPD according to KUA and other relevant references such as the mid-term expenditure framework (which supposed to be available in RPJMD and Renstra-SKPD). Based on the budget ceiling, each SKPD prepares the detail work and budget plan (Rencana Kerja dan Anggaran RKA- SKPD). The process is sometimes assisted by Bappeda and DPPKA. Bappeda and DPPKA compile and assess the RKA-SKPD and then prepare RAPBD for discussion with the head of local government 5. Once the RAPBD fixed from the government side, the head of local government submit the draft to DPRD for negotiation with Badan Anggaran DPRD. If DPRD and local government agree with the draft (RAPBD), it is still need approval from the higher authority. RAPBD kabupaten/kota must be assessed and approved by the governor, whereas the province RAPBD must be approved by the Ministry of Home Affairs. Once the higher authority approve, all SKPD assisted by DPPKA and Bappeda prepare the budget implementation list (Daftar Pelaksanaan Anggaran DPA-SKPD). DPA-SKPD is a legal basis for all local government activities and expenditure during the fiscal year. What can and cannot spend during the fiscal year determined by this document. The revision of DPA- SKPD must be done through the revision of the entire APBD which usually once in a year and should be approved by DPRD. The head of local government or sekda alone is only eligible for revisions on object and detail object of expenditure within the same expenditure category in one activity (MoHA Regulation 13/2006: 160). This causes inflexibility in local government activities. It is not only problem for adapting the plan to the change in local circumstances but also encourage the public servants to do a manipulation report. The budgeting process (after Musrenbang) is highly politics and far from transparent. That is one cause of why many of activities proposed by Musrenbang participants were often just dropped without notice. The activity planning is open for discussion, but the budgeting is mostly behind the close door. That happened both in executive and DPRD process. The process of negotiation in DPRD can be highly politics. There are more interests from many more parties influence the process and the content. The lobbyists without access to high level officers in executive would use their network in DPRD. Those who were making investment during election campaign supporting politicians both in government and DPRD would collect the payback. The non-transparent budgeting process leads to a significant increase of corruption cases involving local government officials (executive and DPRD). In 2006, there were 265 corruption cases involving DPRD with 1000 suspects handled by prosecutorial offices across the country (Rinaldi et al. 2007: 5). 4 Musrenbang must be conducted at province and national level as well. The province level musrenbang is facilitated by the Ministry of Home Affairs after Musrenabng in all kabupaten/kota musrenbang are completed, whereas the national Musrenbang managed by Bappenas after the completion of Murenbang at province level. 5 The negotiation between SKPD and Bappeda can be very sensitive because Bappeda has authority to delete (coret) whatever items they do not agree. Sometimes, SKPD approach politicians in DPRD to gain support.

19 Guidebook to local governments in Indonesia Draft September /55 Many of corruption practices start from, and planned during, planning and budgeting process. There are five out of six modus operandi of local government corruptions related to planning and budgeting process; for example: mark-up budget lines, channeling government budget to fictitious institutions, and manipulation of procurement processes (Rinaldi et al. 2007: 6). Although integration of planning and budgeting process was frequently spoken by high level officers, it is not the case in the implementation. The planning and budgeting is one process line connected by KUA but the two are not integrated. It will never be integrated until the budget discussion comes into transparent since Musrebang at desa/kelurahan level. The budget ceiling must be prepared not only for SKPD but also for sub-regions e.g. desa and kecamatan. That would help Musrenbang participants to prioritize their proposal themselves by considering the available budget to be spent for their subregion. They would come with a short list proposal and ease the work of Bappeda on proposal selection. At kabupaten level, for example, every SKPD must discuss with representatives from subdistrict (and villages when possible) to decide the priority list during Musrenbang deliberation. In short, the budget and work plan must be discussed at the same time even during the musrenbang deliberation. This is one way to make the Musrenbang deliberation becomes a meaningful instrument. In summary, the current procedures on local government planning and budgeting and financial administration are very rigid with so many detail rules providing limitation to the local government to develop innovations. While the rigid rules aim to have better accountability, there is no strong evidence that it was effective reducing corruption practices. In addition, the planning and budgeting process is still far from the integration though it is the intention of the regulation. That is not only creating inefficient budget, but also providing opportunities for corruption practices. Spatial plan (RUTR, RDTR) The spatial plan is another important regional planning product. Although a spatial plan does not only cover the land but also the air and the under-ground, in practice it is only the land which commonly covered by the plan. In more specific, the spatial plan means a land use plan. One type of spatial plan is the general spatial plan (RUTR) which elaborated into a detail spatial plan (RDTR). The scope of the plan follows the administrative boundary from national down to kabupaten/kota and arranged in a hierarchical relationship. The national comes first and followed by the lower level. Similar to the legalization of RAPBD, the RUTR of kabupaten/kota must be approved by the governor after both the bupati/walikota and DPRD agree upon the draft. The same arrangement is for the province that requires approval from central government. An RUTR is made for 20 years period but the review must be conducted for every five years. Every RUTR is completed with land use guidance which valid for five years. The guidance includes land use programs plan (Law 26/ 2007). According to the law, the land use programs plan must be coordinated with the development and budget plan. However, very few of local governments, if any, make the different plan products coordinated one to another. The main reason of why the coordination is so difficult is the behavior of policy makers whom very weak on spatial perspective. They are familiar with activity plan but they do not plot the planned activities on the land, let alone space. The coordination is now even more difficult because the role of spatial planning is taken out from Bappeda to the new agency called 'Dinas Tata Ruang' or in other similar names 6. 6 In some regions, the function of spatial planning managed by the public work agency (Dinas Pekerjaan Umum dan Tata Ruang).

20 Guidebook to local governments in Indonesia Draft September /55 It is now clear that Bappeda is no longer the one who responsible on coordinating the spatial plan making, but who to responsible on spatial use control remains fuzzy. The Dinas Tata Ruang could claim the control as its authority because the GR 38/2007 includes that role under the spatial plan function. Bappeda, on the other hand, would assume the same because GR 8/08 puts Bappeda on the function of local development control. (It is hard to understand if spatial use control does not part of development control). Spatial use control is very important to enforce the development plan into practice. It requires effective coordination among different agencies particularly of those responsible on natural resource extraction activities and land utilization such as housing, forestry, mining, agriculture, public works, and fishery and maritime. Coordination among those agencies must be linked to the integrated licensing administration system such as development license and small scale mining license which is managed under one stop service center. That is something very difficult to find in current local government practices. Local government decision makers do not have absolute authority on the entire territory of their region. Neither the local government alone nor local government and DPRD is entitled to take decision affecting land use in state forest area. Besides, in some region state forest land occupy most of the territory. For example, in East Kalimantan the state forest land occupy around 70 per cent of the total administrative territory. Every change of the land use must be approved by the Minister of Forestry. This is one important issue in the local-national government relationship. Local governments argue that the Minster of Forestry impede local developments by keeping the land away from extraction activities such as mining and plantation. Spatial plan, tenurial, and demarcation Spatial plan is about land use, it is not about tenurial and administrative boundary demarcation. But the actual problems in the field often mix the three. As explained earlier, the RUTR map is actually a land use map. But it actually tells state ownership too. All land that categorized as forest area, which is about 70 per cent of the total land, means state forest land. It ignores the reality that there are about 33,000 villages in the land which have been there even long before the Independence Day. The situation becomes worst as some local governments do not respect the RUTR and issue permits for plantation and mining activities on the land. The conflict then becomes complex as it involves the state, private sectors, and local communities at the same time. Similar situation happens in the nonstate-forest land because BPN never publish tenurial map. In reality, every department uses their own map which does not integrate different kind of land use plan and existing land use with land tenure. In the mining map, for example, there is only mining concession block, as all the land only for mining activities. The administrative boundary demarcation is a different problem. Most of local governments and villages do not have clear borderline with their neighbor. This will become a serious issue when there are high value resources in the border line such as mineral deposit or timber. If it is about village boundary conflict, the kabupaten government is the one who should do the conflict resolution facilitation i.e. bagian pemerintahan (at regional secretariat). If it is a conflict between kabupaten/kota, the bagian pemerintahan of province government is the one who should do the facilitation. The resolution of village boundary conflict could be difficult when there is communal land in the borderline. The easiest way to do is to follow the communal land as the borderline. One thing that would help to resolve this problem is an effective spatial information system. The system must contain information about tenurial, existing land use and land cover, land use plan, and

21 Guidebook to local governments in Indonesia Draft September /55 administrative demarcation which can be overlying one to another. But the most important thing to do is to make the system as the single reference for spatial data. Reporting system (LPPD, ILPPD, LKPJ, LAKIP) There are two stages of reporting. The first stage is from SKPD to the head of local government through Bappeda and DPPKA. The second stage is from local government to DPRD, central government and citizens. The technical report is managed by Bappeda, while the financial report is coordinated by DPPKA. In SKPD, it is the secretariat who coordinate and responsible to prepare both reports. The financial report contains data and information about revenues and expenditures, cash flow, balance sheet, and official notes to the financial report. That requires complete and accurate data not only about finance but also about asset. Without a proper information system on finance and asset, an acceptable balance sheet report would be impossible to be prepared. Every SKPD has financial section which is under the secretariat. The financial section prepares financial and asset report for the head of SKPD to be submitted to DPPKA. DPPKA prepares the local government financial report (Laporan Keuangan Pemerintah Daerah LKPD) which will be submitted by the head of local government to the DPRD after audited by BPK. BPK provides four opinion types in its audit. They are unqualified opinion, qualified opinion, adverse, and disclaimer. The types reflect the quality of its financial administration, but not necessarily a strong evidence of integrity quality. During fiscal year 2006 to 2008, there were 60 to 70 per cent of local governments got qualified opinion, only 3 to 12 per cent with unqualified opinion, 6 to 13 per cent were adverse, and 23 to 26 per cent were disclaimer. Two major causes of the bad findings were the weakness in the internal control system and low quality of financial report (BPK 2010). Local governments whom categorized into the last two (which covers about one third) were in serious problem. The adverse indicated that the financial statement did not fairly present the financial statement. The disclaimer opinion reflected a poor financial administration which led to the inability of the auditor to provide any opinion. Although both opinions were not necessarily because of corruption practices, it was enough to indicate that something went wrong in the financial management of the respective local governments. There are three kinds of technical reports which all of them are similar in terms of content. They are local governance management report (Laporan Penyelenggaran Pemerintahan Daerah LPPD) for central government, accountability report (Laporan Keterangan Pertanggungjaawaban LKPJ) for DPRD, and information of LPPD (Informasi LPPD ILPPD) for citizens. All of them are compiled from SKPD s report and completed by Bappeda to be submitted by the head of local government. All of the reports produced annually except LKPJ which also made for five years at the end of the period of the head of local government. Content of the three are relatively similar which mainly about the implementation of RKPD (the work plan) and a summary of financial report. Yet, for ILPPD (the one for citizens), local government is expected to provide only the summary of LPPD thorough media (GR 3/2007: 27). It is not clear how local government could summarize the LPPD what information should and should not to be published. The report that normally practiced is usually about what activities have been done and haven't, what percentage of activity that have been completed, and what percentage of budget have been spent. It is not about performance report but more about implementation report. The new regulation requests local government to report the performance, not just about the activity implementation. According to GR 8/ 2008, the three reports must include the result of performance

22 Guidebook to local governments in Indonesia Draft September /55 assessment (article 39). The performance assessment must be conducted by assessing more than 100 performance indicators which listed at the annex of GR 8/2008. It is Ministry of Home Affairs who collect performance report of all local governments in Indonesia. So far, there is no report from the ministry regarding the implementation of the performance report making by local government. It is important to note that before the GR 3/2007 and GR 8/2008, all government institutions including local governments are requested to prepare the performance accountability report (Laporan Akuntabilitas Kinerja Instansi Pemerintah LAKIP). It was stipulated by Presidential Instruction 7/1999. BPKP is the state organization whom very active promoting the report. Despite the objective of the policy is to increase government accountability through a performance-based reporting, the report was dealing more with financial matter rather than revealing the level of achievement of government's objective (Turner et al. 2009: 245). Now, it is not clear whether local governments are still reporting the LAKIP or not. Data management Poor data management is a problem even at national level, let alone at local level. Since the decentralization era began in 2001, some efforts to improve administration data management have been done in several region, particularly for financial information system (for example: Sistem Informasi Keuangan Daerah SIMKEUDA, and Sistem Informasi Pengelolaan Keuangan Daerah SIPKD). Other thematic information system came later; for example: public servant information system (Sistem Informasi Kepegawaian SIMPEG), licensing service information system (Sistem Informasi Perizinan), and procurement information system (E-Proc). In addition, local governments are also urged to establish a planning information system (Sistem Informasi Perencanaan Pembangunan Daerah) and the LPPD information system. The former supposes to manage all data required in planning process, whereas the latter is about the performance report information system. There are many separated thematic information system which are not coordinated into an integrated information system. The thematic information system manages important data for local government management (e.g. SIMPEG for personnel). Most of the thematic information systems are initiated by particular SKPD through a project. Some of them are running well, but some others finish right after the project end. The challenge is how to connect all the separated information system into one regional information system. The GR 8/2008 throw the idea of having a regional information system (Sistem Informasi Daerah SIMDA) which suppose to be the umbrella of all thematic information system as discussed earlier. Unfortunately, there are no further initiatives to realize it in the field. As a result, different thematic data are produced and stored in different places. This does not only create difficulties on data accessibility but also could make different player produce same data which lead to inefficiency. In terms of data production, the national statistic body (Badan Pusat Statistik BPS) has a coordination role according to the Law 16/2007. However, BPS is not in the position to monopoly the production of all kind of data. What BPS has monopoly is only the basic statistic (statistik dasar) 7. The law stipulates that BPS has monopoly on doing three national census; they are: population, economic and agriculture which conducted every 10 years 8. The sectoral statistics, on the other hand, are to be managed by sectoral agencies or central government departments. BPS must be involved only if the 7 There is no further explanation what does it means by 'statistik dasar' except that it is a cross-sectoral statistic 8 Even every citizen cannot refuse to be a respondent in these three censuses as long as the surveyor is eligible as BPS officer. But citizens can refuse to be a respondent in other surveys. It is important to note that the current statistic law (Law 16/2007) made during Soeharto era.

23 Guidebook to local governments in Indonesia Draft September /55 survey is to be conducted through a census in national level. The result of sectoral survey must be shared with BPS. Apart of the basic and sectoral statistic, there is another category called 'special statistic' which to be produced by community or other than government institutions. Coordination on production, quality control, storage, and publication of data is still remaining a great challenge for local government. At the moment every agency produces and uses data for itself. Bappeda is the one that most potential to play the coordination role. In many regions, BPS branch office work closely with Bappeda. Ideally, Bappeda must coordinate what data need to be produced by whom, in what period, by what method, where and how to store, and how to publish and make all data users have easy access to the data. One potential solution is to strengthen the statistic community forum (Forum Masyarkat Statistik) which, according the law, supposes to be established either at national or regional level. The forum is a media for data users to communicate and discuss each other and to advice the Head of BPS. 4.2 Human resources management and capacity building Bagian Organisasi, Regional Public Servant Administration (Badan Kepegawaian Daerah BKD), and Public Servants Training Center (Badan Diklat Badiklat) are the trio of public servant management 9. Their relationship is similar to Kempan, BKN, and LAN in central government. The Bagian Organisasi, which is under the sekretariat daerah, is responsible to form and (re)design all local government organization. Once the organization design is ready, the BKD fill the organization with the right persons. Badan Diklat look after the public servants to ensure their competency is up to date in order to perform their tasks and responsibility as expected from their job description. All of them are coordinated under Asisten Administrasi in sekretariat daerah. That is what expected from them, but in reality the coordination among them is often very poor. This is particularly in badan diklat where they do many training without training need assessment and without willingness to understand the performance expected from their trainee. Similarly, BKD is often working on its own instinct without considering the suggestion from Bagian Organisasi. This is because the head of BKD is higher than the head of Bagian Organisasi in terms of structural position (echelon). Another issue is about the basis of organization design made by Bagian Organisasi. Ideally, Bagian Organisasi must refer to the regional strategy made by Bappeda. But most of bagian organisasi I found, they just design the organization following the national guidance or just copy what other regions has made. The leadership role of Asisten Administrasi is a key to make three agencies work well and coordinated one to another. This is also the great challenge of capacity development. Role of central government One example of a strong central government control is on determining the need on local government personnel recruitment (formasi jabatan). Despite of local government's role on recruitment plan, the final decision is still in central government i.e. The State Ministry of Administrative Reform (Kementrian Pendayagunaan Aparatur Negara--KemPAN) and State Civil Servant Administration Agency (Badan Kepegawaian Negara BKN). KemPAN has a final say on decision about recruitment need. In fact, many centralized and bureaucratized practices in human resource management from pre-decentralization era are still practiced by local governments (Turner et al. 2009: 231). 9 Bagian organisasi is part of regional secretariat in kabupaten/kota. In province level, it is fully equal to biro organisasi. Badan diklat is oftenly found at province level. Some kabupaten/kota have one, but not much of them.

24 Guidebook to local governments in Indonesia Draft September /55 Civil Servants Administration BKN, LAN & KPA State Civil Servants Administration Agency (Badan Kepegawaian Negara BKN), National Institute of Public Administration (Lembaga Administrasi negara LAN), and Miniatry for the Empowerment of State Apparatus (Kementrian Pemberdayaan Aparatur Negara Kempan) are the three central government organizations with very important role on public administration. Kempan is coordinating the other two with a minister as the chairman, while the other two are chaired by senior public servant (echelon 1). We can use a home building as an analogy to provide simple explanation about the relationship of the three organizations. The Kempan is responsible to design the home (organization design and its development). Once the construction is ready, BKN fill each room (position and division) with the right person. In order to ensure the sustainability of the public servants' capability, LAN is responsible to design, as well as to provide, needed competency development activities. Of course, their roles are more than that. For example, LAN is also doing researches on public administration development, and Kempan is also active on designing and promoting public sector reforms together with other key ministries such as Ministry of Finance. BKN is managing a database of public servants at national level. The up to date number of public servants are published at BKN's website 10. BKN tries to coordinate public servants database built by hundreds of local governments but it seems they still need more time to make it reliable. Kempan is only in Jakarta, but BKN and LAN have regional offices, but not in each provinces. The regional offices of BKN and LAN are not established in particular level. Regions with more public servants have more branches. For example, among nine regional offices of BKN nationwide, four of them are in Java but there is only one for the entire Kalimantan. In the case of LAN, there are only four regional offices which located in Bandung, Makasar, Samarinda, and Banda Aceh. The establishment of LAN regional office is partly determined by the request from the regions and the commitment from the governors to share some resources to support the regional office. Balitbangda Regional Research and Development Agency (Badan Penelitian dan Pengembangan Daerah Balitbangda) can be established as its own organization or be integrated with other agency such as Bappeda or Badan Diklat. Balitbangda has a potential to play an important role on capacity development as a policy advisor. If their research could be focused on policy research aiming to answer policy questions faced by local decision makers, Balitbangda would support the evidencebased policy practices. Unfortunately, many of Balitbangda at the moment do researches on their own interests and do not effectively promote their finding and advise to policy makers. As a result, policy makers take decision mostly based on intuition rather than facts. Ideally, Balitbangda must collect research questions from local policy makers both in executive and DPRD. They could contract the research implementation to research organizations or university. It is important, however, for them to formulate their own research questions and, to some extent, set a standard quality of research methods. The research report must be prepared in several forms which include a simple form such as policy brief with five to ten pages summarizing the facts and findings and policy advises. Recruitment There are two kinds of public servant recruitment; the first time recruitment and recruitment for structural positions. The first time recruitment is when somebody become a public servant (PNS) for 10

25 Guidebook to local governments in Indonesia Draft September /55 the first time which usually forever until s/he reach pension, whereas the recruitment for structural position is to fill the vacant structural position by public servants. Structural position is only filled by PNS, but not all PNS is qualified to fill structural position. PNS are qualified to fill a structural position if they meet administrative requirements which include the rank (golongan), level of formal education, and good performance record (measured by DP3). Apart of level of formal education, completion of particular leadership training (Pendidikan dan Latihan Kepemimpinan Diklat PIM) is also a must. There are several package of Diklat PIM which follows the structure of echelon. A public servant hold an echelon II position, for example, must complete the Diklat PIM II. However, the person could take the position first and complete the training later. In order to be able to get promoted for one more level of structural position, the public servant must serve the current position for at least two years. Most of structural position recruitment is a close recruitment. That is a recruitment which is not publicly announced and available only for public servants in the region. However, it does not mean there was no case of open recruitment. For example, the Aceh Province was experienced with an open recruitment for number of senior positions. Another example was from Tarakan where the Head of Bappeda in 2006 was from public servant in one of the central government Ministries. The decision of structural position recruitment is fully on the head of local government except for the Sekda. Recruitment for Sekda in kabupaten/kota must be approved by the governor, whereas for Sekda in province must be approved by the Minister of Home Affairs. In order to reduce the short term political interest by the head of local government, there is a promotion advisory board (Badan Pertimbangan Jabatan dan Kepangkatan Baperjakat) established in every local government. Baperjakat is chaired by Sekda, whereas the head of BKD is the secretary. One important factor for the quality of the advisory is the personnel database managed by BKD. The better the quality of advisory, the more possibility is for the head of local government to be objective in promotion decision. Unlike the recruitment for structural position, the first-time public servant recruitments are mostly open. By law, local governments must publicly announce the recruitment plan which contains information about available positions and their job requirements. Every Indonesian citizen whom meets the requirements is eligible to apply and has a right to be equally treated in the selection process 11. One of the requirements is age; only those with age 18 to 35 years old could apply as a public servant. The local government, in this case is BKD, must prepare a recruitment plan before announcing to public. The output of the plan is what they call 'formasi jabatan' which contains information about available positions and their job requirements. Ideally the formasi jabatan is a result of job assessment conducted by Bagian/Biro Organisasi. In practice, most BKD conducted their own assessment by directly asking all local government agencies about their recruitment needs. Once an applicant passes all the tests, s/he should serve as public servant candidate for one to two years before qualified as a full PNS. As the candidate becomes a full PNS, s/he entitled to one particular rank (golongan) which determined by the level of education. For example, those with bachelor (S1) degree are automatically starts with golongan IIIa. If s/he in functional position, s/he entitled to all benefits for that position on top of the basic salary. The new recruited public servant 11 It is important to note that in some regions the prioritization to local citizens might be applied. This is particularly happened for the local government which just newly established where they still have a spirit of locality. Sometimes, the applicants applied to have local ID (KTP) first before submit his/her public servant application.

26 Guidebook to local governments in Indonesia Draft September /55 should not take any structural position (echelon). Therefore, of those who are not in functional position will be automatically classified as JFU. Ranking system and promotion There are two ranking arrangements for Indonesian public servants. One is dealing with structural positions of the job called eselon (echelon), while the other rank the person of the public servant (regardless of the job and position) called golongan. Every structural position requires certain level of golongan as one of its requirement. Jobs with higher echelon require higher golongan. For example, the sekda at kabupaten/kota is at echelon IIa requires public servant with golongan at least IVc and maxium IVd. The sort of numbering of echelon is the reverse of the golongan. The lowest golongan is Ia and the highest is IVe, while the lowest echelon is V and the highest is Ia 12. The highest echelon in local government is always the sekda. Sekda at province (Ib) is one level higher than in kabupaten/kota (IIa). That means the sekda at kabupaten/kota is at the same level with the Asisten and the head dinas/badan at province. The head of dinas/badan at kabupaten/kota are at the same level with the head of biro at province; that is echelon IIb. Interestingly, the echelon structure allows comparing structural position among the three tiers of government. For example, a Sekda at province shared similar level with a Direktur Jendral in the Ministry, whereas the head of dinas/badan at kabupaten kota are at the same level with kepala sub-direktorat at the Ministry. Please see table under Section 2.3 for more detail elaboration. It is only PNS who entitled to be promoted to a structural position (echelon). They can have any position if they meet the requirements and appointed by the head of local government. Most of the requirements are administrative such as golongan and the length of service. Performance does not much considered in promotion, rather the duration of service is the most acknowledge consideration (Turner et al. 2009: 238). Sometimes the head of local government "help" his/her staff to meet the requirement to enable the staff to take the position. For example, the bupati could promote a public servant who is currently the sekretaris camat (echelon IIIb) and s/he is at golongan IIId (as the minimum requirement) to become the camat (echelon IIIa) which the minimum golongan requirement is IVa. Once the position is hold, the new appointed camat could propose his/her golongan from IIId to IVa as long as s/he has been at golongan IIId and serving as the position of sekretaris camat at least for one year (GR 12/2002: 12). However, the promotion of golongan IVa and IVb for kabupaten/kota public servants must be approved by the governor, whereas IVc and IVd must be approved by the president (GR 9/2003: 5). This arrangement allows a speed promotion for potential public servants. This is the reason why at the moment we can see some a relatively young public servants hold a high position, which is something impossible during pre-decentralization era. There are several ways to get promoted in the golongan. For public servants who promoted to a higher structural position, they can get their promotion in two to three years after the latest one (GR 12/2002: 12; GR 13/2003: 7A). But for the normal one, they can propose or granted the promotion for every four years under the regular promotion option (kenaikan pangkat reguler) as long as their performance assessments are good. In some local governments where the BKD manage a nice public servants database and with service oriented behaviors, the regular golongan promotion is granted. That means the public servant does not need to propose. Level of education determines the limit of regular promotion. For example, public servant with master degree could have regular promotion up 12 There are sub-ranks a to e in every rank in golongan from I to IV where I is the lowest rank and a is the lowest sub-rank within one rank. In the case of echelon, the rank is from V to I with sub-rank a and b except the V that without sub-rank. V is the lowest rank and b is the lowest sub-rank.

27 Guidebook to local governments in Indonesia Draft September /55 to IVa, the rest would be optional promotion which require more efforts. The regular promotion is only for public servants in structural and JFU position. Public servants with functional positions could get promoted for every two years as long as they meet the credit point standard. In the case of teacher, for example, number of teaching hours, participation on trainings, and publications are some things which would earn credit points. BKD and BKN calculate the credit points before the head of local government or the president grant the promotion. Promotion to a particular echelon and golongan is a kind of mutasi. That is a when a public servant change the status of a particular part of his/her personal profile; for example change in echelon, golongan, placement, and even residency address. In the case of the change in job and position, the ideal is that if BKD has a kind of 'carrier path web map' which could help any public servant to find the possible future carrier according to his/her expertise and academic background and personal potential. The fact, however, is hard to find BKD using that tool. The result is a chaotic mutasi. I would not surprise to see a person with education and experience in geology leads BKD. The cause is not only because of the absence of carrier path, it is very often only because BKD is not equipped with a useful personnel database. This chaotic mutasi system is, of course, affect the overall performance. This is because the public servants do not get a position where s/he is the most possible to be at his/her best. The improvement requires an effective leadership in BKD and equipped with useful instruments such as carrier path and personnel database. Performance and integrity monitoring Performance assessment model that nation-wide used for public servants is the Evaluation List of Task Performed (Daftar Penilaian Pelaksanaan Pekerjaan DP3). This is a very famous one because it has been used since The objective of the DP3 assessment, according to the regulation, is to obtain information as a basis for the consideration of public servant personal development. The model contains eight variables; they are: loyalty, work achievements, obedience, honesty, cooperation, initiative, and leadership (GR 10/ 1979: 4). The assessment must be done once every year by the direct superior. If the assessee disagrees with the assessment made by the assessor, the assessee may complaint to the superior of the assessor 13. One doctoral thesis about the implementation of DP3 in Province Government of West Java concludes that the application does not well-functioned (Bestari 2010). Three out of the four reasons are, according to the thesis, related to the culture of assessment such as resistance, reluctant or unwilling to report the truth, and the common perception that DP3 is only about formality which make both the assessee and the assessors do not respect to the instrument and its process. The DP3 assessment is highly subjective and potentially abused by the superior. In practice, particularly during Soeharto era, the variable of loyalty and obedience were commonly perceived as to be loyal and to obey to the superior, rather than the loyalty to the government or to the organization as stipulated by the guidance. The assessment can be very artificial. As public servants work for more than 25 years, the level of increase is managed in such a way so that the increase can be maintained until they got pension. It seems that public servants just care about DP3 when they are going to complete the requirements for upgrading their golongan. It shows that the instrument is not utilized as its purpose i.e. for public servant personal development. 13 One report reveals that the employees often complete their own evaluation form without a serious and proper review by the superiors (Turner et al. 2009: 244).

28 Guidebook to local governments in Indonesia Draft September /55 There are several ways to improve the DP3. The variables are certainly must be reviewed to make it more relevance and relatively measurable for performance assessment which aims to support the personnel development. It is also important that some indicators must be in line with the organization performance targets. The 360 degree assessment may be applied to increase the objectiveness and to reduce the dependence to the superior's judgment. But the most important thing is to change the culture of assessment so that both the assessor and the assessee must feel comfortable to say and report the truth and pay respect to the process as well as to all actors that involved. The integrity monitoring is implemented by multi-level state auditors comprised of local government auditor (Inspektorat), internal-state auditor (BPKP), and external-state auditor (BPK). The object of the monitoring is the organization, not to the person. Some local governments promote integrity pact to all senior officers, but they paid attention only to the ceremony of the signature of the pact. There is no systemic practice to prevent corruptions. For example, it is hard to find local government who apply code of conducts which may contain the obligation to report when public officials receive 'gift' from anybody for any purpose. It is also very few of local governments who committed and consistently apply information technology on financial management, procurements and licensing whereas that would decrease the corruption risks. Public servants training management Public servants training can be categorized into two groups; they are pre-service training (diklat pra jabatan) and in-service training (diklat jabatan). As discussed earlier, the pre-service training must be completed by the PNS candidates after they succeeded to pass all the recruitment tests, while the inservice trainings are for the definitive public servants. The in-service training grouped into leadership trainings (Diklat PIM), functional training (Diklat Fungsional), and technical training (Diklat Teknis). The focus of pre-service training, as defined by the GR 101/2000, is on developing nationalism perspective, ethics, and personality, while the introduction to the (local) government organizations and culture is just secondary aims. Looking at the curricula, however, it seems that the nationalism, ethics and personality development are expected to be delivered through what they call co-curricular such as physical exercising and marching which take almost one third of the total 135 hours training. Introduction to (local) government organizations and culture occupies only about 20 per cent of the total training time. The rests are some soft skills sessions such as communication and pro-service behaviors (Head of LAN Decree Number 4 Year 2007). The pre-service trainings are packaged for incoming public servants whom start their assignment as golongan I, II, and III. Diklat PIM is a requirement for promotion in structural positions (echelon). The public servants could either complete the training before sit on the position or vice versa. The Diklat PIM is designed into packages follows the structure of the echelon. Those who take position at echelon II must complete Diklat PIM II, Diklat PIM III for echelon III, and so on 14. According to the 2001 Diklat PIM III Guidance from LAN, which seems to be valid until now, there are 345 hours training required for the entire Diklat PIM III. The leadership traits and behavior take only 21 per cent, the rest are related to public management, development study, and actualization. There are no sessions for managing the changes and managing for achievements. What they have is a session about performance assessment (not performance management) which takes only about three per cent of the total time. About the same 14 It is not clear whether Dilat PIM V is available for echelon V since that level is very new created and only for administration officers at public schools.

29 Guidebook to local governments in Indonesia Draft September /55 time allocation is allocated for stakeholder relationship management (Head of LAN Decree Number 540 Year 2001). The role of Diklat Fungsional is to ensure the fulfillment of competency standard required for certain level of functional positions. The levels of functional position usually follow the golongan, the higher the golongan the higher the level. That is because to get into the higher golongan the public servant must meet credit point standard (see the grading system section). The credit points could be earned through work, education and training experiences. Diklat Teknis has not particular relationship to positions, neither to certain functional position nor to structural position. The topic of Diklat Teknis can be very flexible including the immediate needs. The management of pre-service training and Diklat PIM is fully under LAN. LAN prepares the curricula and the guidance as well as certifying the trainers. The implementation, however, could be done by Badan Diklat in local governments as long as the Badan Diklat is accredited to organize the particular kind of training. For example, if Badan Diklat in one kabupaten accredited to organize pre-service training and Diklat PIM IV, the Badan Diklat only allowed to organized those two trainings. For other trainings, the public servants in respective kabupaten must find other providers outside their region 15. LAN is also responsible to monitor the quality of the training as well as to evaluate the training impacts. However, what they did in the evaluation so far is more on the implementation evaluation. It is hard to find evidence of impact evaluation which aim to understand how their training contribute to the overall (local) government performance. Unlike the pre-service training and Diklat, the functional and technical trainings are managed by related technical ministries. For example, curricula of functional and technical training for forest officers are prepared by Badan Diklat in Forest Department. The role of LAN is to develop the capacity of the Badan Diklat on training management which includes organizing and curricula development. Capacity development Capacity development is much more than training. UNDP's capacity development framework includes three dimensions. They are: (a) the three levels at which capacity is nurtured (enabling environment, organizations, and individuals), (b) the five functional capacities (capacity to engage stakeholders; capacity to assess a situation and define a vision; capacity to formulate policies and strategies; capacity to budget, manage and implement; and capacity to evaluate), and (c) the four core issues (institutional arrangements, leadership, knowledge, accountability) (UNDP 2009: 11-45). This requires strong coordination and effective leadership. Sekda is the key position in leading the capacity development management. That is because s/he is in coordination function. The Asisten, particularly Asisten Administrasi, could be the second important position because s/he leads administration agencies i.e. BKD (personnel), Bagian/Biro Organisasi (organization), and DPPKA (finance and asset). Although capacity development is now specifically mentioned in official regulation i.e. GR 38/2007 and GR 6/ 2008, the common practice still perceives capacity development as just about training. That leads to uncoordinated capacity development measures. For example, training does not respond to the need; financial plan and organization design do not support the strategy; the strategy does not correspond to the public interests; and so on. Even the competency development activities are not well-coordinated. There are many comparison 15 In practice, public servants love to go for training out of their region. Beside for refreshment, they could earn more pocket money as they qualified to receive official trip benefit.

30 Guidebook to local governments in Indonesia Draft September /55 studies (studi banding) and similar kind of activities that are standing alone and are not related to the competency development needs. This kind of uncoordinated practices would not develop capacity to improve public sector performance. Suggestions for expert working with local government A straight forward suggestion for expert working with local government is to create and work with local change agents. A change agent should come from a relatively high rank public servant such as the head of SKPD or other higher positions. That is because a change agent needs sufficient range of authority. Leader and leadership is a key in promoting a policy reform in Indonesian local governments (von Luebke 2009: 201). The first challenge is to identify a public official that potential to be a change agent. One important criterion is that the person must have a clear vision of change and a passionate to achieve the vision. That could be assessed from the clarity of expression when the person explains his/her vision and from the consistency of the behavior of the person with his/her vision of change. Once the potential agent of change is identified, it is easy to support the person to create improvements. Moreover, with a change agent, it is clear that the role of the expert is only a supporter; the changes belong to the agent and his/her organization. In order to be able to work smoothly with the counterpart (including the change agent), good relationship is crucial. All advise and suggestions will only be listened through a good relationship. Therefore, personal relationship is crucial as addition to business relationship. It is important to consider the best way of approach to develop a personal relationship. One important requirement for personal relationship is trust. Trust can be developed through expertise and good behavior. A serious counterpart would expect high expertise and sometimes unrealistic. For example, they may expect the expert knows about everything. It is very important to clarify the expectation for the beginning. Making a promise must be done in a very careful way. Once it made, it is very important to fulfill it. 4.3 Salary and benefits of local government officials Every public servant is entitled to receive basic salary and other benefits. The golongan of public servant determines the basic salary which transparently published through a government decree. The basic salary of PNS is the same for any public servants at the same golongan with similar length of service. For example, sekda with golongan IVc got the same amount of salary with a IVa teacher as long as they have similar length of service, the difference is the benefits. The rate of basic salary was decided through a government regulation in 1977 (GR 7/1977) which already revised for 13 times until the latest one of 2010 (GR 11/2011). According to the latest rate, the lowest basic salary is Rp. 1, 175,000 per month for public servant at golongan Ia with zero year length of service, whereas the highest is Rp. 4,100,000 for public servant at golongan IVe with 32 years length of service. While basic salary is uniform nationwide and cross-level of government, the benefits are vary. The benefits comprised of allowances related to position and personal needs. Structural and functional positions allowance is standardized at national level through Presidential Regulation. The structural position allowance is regulated under Presidential Regulation Number 26 Year The allowance is ranged from Rp. 360,000 for echelon V to Rp. 5,500,000 for echelon Ia per month. The functional positions allowance is regulated through different Presidential Regulation. The amount of allowance depends on the level of position. For example, for a doctor, there are four levels of doctor, the allowance is ranged from Rp to Rp. 1 million per month (President Regulation 5/ 2004).

31 Guidebook to local governments in Indonesia Draft September /55 Other benefits related to personal needs include allowances for staple food (rice), family, housing, pension and health insurance. The rice allowance is equal to 10 kg rice per public servant plus the registered family members and given in the form of money (not in the form of rice). For the 2010, the price of 1 kg rice was standardized to Rp. 5, The family allowance is for the legally registered spouse (husband/wife) and children. The spouse gets 10 per cent of total basic salary, whereas the children receive two per cent with maximum two children (Remunerasipns 2010). Housing allowance is provided in the form of saving managed by a state-institution called Badan Pertimbangan Tabungan Perumbahan PNS (Bapertarum). The amount of saving depends on the golongan which ranged from Rp. 3,000.- for golongan I to Rp. 10,000,- per month for golongan IV (Kompas 2009). The pension of all public servants managed by a state enterprise named PT.Taspen, which also serves the police and military TNI, both civilian and military personnel (ADB 2002: 4). The health insurance is managed by another state enterprise named PT. ASKES. The last benefit but very popular one at the moment is the performance allowance. For this allowance, local government has authority to set their own standard according to their financial ability. One major issue here is about how to assess the performance of every single public servant. The problem starts from the low quality of the planning document. The planning documents do not identify specific results 16. That leads to the absent of specific performance indicators and target to be achieved by each position. As a result, performance assessment is nearly impossible. Some local governments have been applying the idea of pay for performance approach with different arrangements; for example: Kabupaten Solok, Kota Pekanbaru, Provinsi Gorontalo, and Kabupaten Jembrana. Three out of the four assess the performance using only one variable i.e. discipline which was mainly about attendance. It was only Gorontalo who tried to combine the discipline with other variables that more relevance to performance (Pemprov Gorontalo 2008: 102). A team at national level has been working to formulate performance-based-payment policy for Indonesian public servants. Among them are Kempan, Bappenas and Ministry of Finance. Other legal sources of public servants' revenue are activity honorarium and official trip allowance. The activity honorariums are allcoated under the indirect expenditures. One public servant could join more than one activity. The higher position of the public servant means the more possibility to get involved in more activities even only as an advisor. Every involvement is legalized through a decree either from the head of local government or the head of SKPD. The honorarium per activity is usually not much, it could be between Rp.100,000.- to Rp.400,000.- per month; but the total amount could be significant if one person involved in many activities for the total of 12 months. The Province of Gorontalo had initiated removing the entire activity honorariums and re-arranged the allocation for the performance-based allowance (Pemprov Gorontalo 2008: xx). The official trip allowance is the most controversial one. It could be a wrong incentive for public servant. That is because public servants could be paid for travelling without any purpose 17. During my work in GTZ between 2006 and 2009, the amount of allowance could be higher than GTZ's standard. All expenses were in the 16 Besides the official budgeting forms in Permen 13 force to do so. 17 One common example I found in East Kalimantan was official trip to Jakarta for the purpose of handing in documents to certain ministry. That is something that could be done by sending the stuff through courier (most of international well-known courier company are available in the city). It was even more ridiculous because the official courier was not enough if only one person.

32 Guidebook to local governments in Indonesia Draft September /55 form of per diem (as oppose to 'at cost') 18. Some local government officials used this opportunity as a source of income which led to a high spending on travel costs in local government expenditures. 4.4 Forms of employment by local governments Structural or functional position and JFU One important debate related to the size of local government is whether local governments need more structural or functional position. Structural position refers to managerial which are not directly exercising the core organization function (e.g. the head of SKPD, the secretary, the head bidang, etc). Other than structural position are classified as functional positions (technical). Some of functional positions specifically regulated by a Presidential Regulation (Peraturan Presiden Perpres), while others do not which often called Jabatan Fungsional Umum (JFU). Functional positions should have tasks that implementing the core function of the agency such as teaching (teacher) in Education Agency and nursing (nurse) in Health Agency. One popular opinion is that what local governments need more is the functional instead of structural positions. The opinion called 'miskin struktur kaya fungsi' ('poor structure but reach functions'). This is absolutely right particularly for Indonesia where government revenue is very low (as relative to GDP) that calling for a high efficiency. Although the ratio of public servants to population is relatively low which is just around two per cent, there are many resources are allocated to structural positions. The latest news about this issue is that central government is going to do moratorium of public servant recruitment for about one year starting from September During the moratorium period, central government is going to review the distribution and the effectiveness of public servants. The JFU positions are usually there to assist structural position. In old term they just called 'staf'. The spirit behind the JFU naming is to define all available position. All employees should have particular position, and each of them must be named and come with job description. This is to respond to many critics of public servants without structural position during pre-decentralization era where they were there only to follow what the boss say; neither job name nor job description exist for them. The examples of JFU are data collectors and processors, courier, and driver. TKK The structural, functional, and JFU positions are permanent government employees which commonly called Pegawai Negeri Sipil (PNS). There are other employees who are directly employed by government or government agency or public service units but only for temporary. There are several terms to call them such as Tenaga Kerja Kotrak (TKK), Tenaga Kontrak Daerah (TKD), Pegawai Tidak Tetap (PTT), Tenaga Honor Daerah (THD), or just Honor Daerah (Honda). They are usually low rank positions to do practical works such as teachers or general helper. One important issue on temporary worker is about coordination and control on the recruitment. Without control and coordination, agencies would recruit employees even if they do not really need them. The interest could be to make their job easier by having general helpers or to provide jobs to relatives and friends or just simply to take bribe from people who really want to work in government. A famous case on temporary workers was happened in Kabupaten Kutai Kartanegara where number of temporary workers was as much as one third of the total local government employees (BKD Kalimantan Timur 2009). 18 The case is different for public servants in central government that should use 'at cost' for transport cost since 2-4 years ago, that is why most of central government officials fly with Garuda Indonesia instead of low-cost airline as what most of local governments' officials would prefer.

33 Guidebook to local governments in Indonesia Draft September /55 Another issue is about temporary workers who serve government for long time e.g. more than 15 years. The previous Minister of Kempan, Mr.Taufik Efendi, was really concern about this issue which led him to promote the government policy on designating the government temporary employees to become PNS. The policy was issued in 2005 which revised on 2007 (GR 48/2005 which revised by GR 43/2007). The designation is prioritized for functional position such as teachers and health workers. The temporary employees should have been working at least for one year prior to the designation. As a result, between 2005 and 2009 there were 899,196 out of 920,702 temporary employees designated as PNS candidate 19 (Solo Pos 2010). That was a spectacular number because it was almost 20 per cent of the total PNS in 2009 according to BKN statistic (BKN n.d.). Now this designation policy becomes a real issue concerning the control of the number and the quality of PNS. There are some complaints that those who designated through this privilege path have no sufficient competency as those went through the normal recruitment procedure. Outsourcing It is also important to acknowledge the role of outsourcer personnel in local government. As promoted by New Public Management (NPM) paradigm in creating efficiency, governments are suggested to specialize themselves and outsource any functions out of their core roles and/or their best expertise. Indonesian local governments contract out many of their works to the third party. The contractors employ their own staff working for local governments. The most obvious one to see is the cleaning services in local government premises which in many local governments are outsourced. Outsourcer employees are just hanging around with government employees in the same building. They do not subject to public servants regulation, rather to the general labor regulations. Some of them got higher salary, some of them lower, depend on the positions. The one that outsourced since long time ago is public works such as road construction and maintenance. While outsourcing makes government organization simpler, this also creates corruption opportunities due to the more transactions. 4.5 DPPKA and asset management The Finance and Asset Agency (Dinas Pendapatan dan Pengelolaan Keuangan dan Aset Daerah DPPKA) is responsible on the entire financial and asset management. That includes revenue collection, expenditure administration, and asset management. The Revenue Division responsible for collecting the own-source revenues (Pendapatan Asli Daerah PAD) and monitoring the revenues sfrom fiscal balance fund (Dana Perimbangan) from central government. For the expenditures, DPPKA involve in the budgeting process together with Bappeda in the TAPD. DPPKA's roles in asset management include asset inventory and administration. Most of local governments are most probably not experienced on asset planning. Some local governments do the asset inventory just occasionally, not continuously and integrated in their financial management system. The most crucial role of DPPKA is managing and coordinating the financial administration including coordinating all the treasure assistances posted at every agency. DPPKA is responsible on setting up the standard operation procedure of financial administration following the national guidance. They must taking care the computer system that run the procedure and managing all financial and asset 19 PNS candidate is one step toward a full PNS. They just need to complete the pre-service training and work for about one to two years to become a full PNS.

34 Guidebook to local governments in Indonesia Draft September /55 data in integrated way. In addition, they are responsible to prepare and communicate with the state auditors both the internal auditor (Badan Pengawasan Keuangan dan Pembangunan BPKP) and the external auditor (Badan Pemerika Keuangan BPK) as well as from other parties included DPRD on any enquiries regarding financial information. 5 Village government Beside the three tiers government, desa is another level of government which exists only in kabupaten (rural region). Desa is often translated as 'village'. While both terms may be equal in terms of geographic or social, a desa is also a political and administrative designation (Alatas et al. 2003: 7). Nonetheless, unlike the three tiers, desa government is not part of the state government. The legal definition of desa refers to 'self governance' of community group which already exist before the Indonesian's independence (asal-usul). The relationship between state and desa government is vague. 5.1 Desa government structure The model of desa government structure is legally bound by state government laws for uniformity. The desa law which is one chapter in 2004 local government law requires the establishment of two organization i.e. village government (pemerintah desa Pemdes), as executive branch, and village legislative (Badan Permusyawaratan Desa BPD) as legislative branch 20. The desa secretary should be appointed from state government officers 21. Apart of the original functions (hak asal usul), most of the functions and authority of desa government depend on tasks delegation from the three tiers, particularly the kabupaten. BPMPD Coordinating Agency for Community and Village Institutions Empowerment (Badan Pemberdayaan Masyarakat dan Pemerintahan Desa BPMPD) plays coordinating roles for most of development activities at village level. Just like other 'badan', the main roles of BPMPD is not for providing direct services to citizens, rather to coordinate other agencies working for citizens in rural areas. The aim is to optimize local government efforts on rural developments to make it more coordinated and gaining more achievements and to provide advice to the head of government for the necessary policy and actions. They collect data on the villages socio-economic structures, coordinate the participatory planning process (Musrengbang) on village and kecamatan level, and also communicate the programs and activities of the SKPD towards the population. Considering the scope of BPMPD functions according to GR 38/ 2007, agencies to coordinate are, among others, Women Empowerment, Agriculture, Cooperative and Small Entrepreneurs and Trading, Public Works, Land Administration, and Labour Empowerment. In addition, BPMPD is also expected to coordinate activities of other government agencies from province and even central government. For example, beside the PNPM Mandiri as discussed later, the State Ministry for Acceleration of Development in Backwards Regions could have a very specific activity (e.g. the village institution strengthening) at couple of villages in one kabupaten. Moreover, there are many nongovernment organizations (NGO) and private sector that also concern to village development. This includes corporate social responsibility program of resource-extraction companies (CSR), and local 20 Unlike the 1999 local government laws, the 2004 laws reduce key authorities of the BPD. It is no longer entitled to monitor the Pemdes and has no function to protect the local customs (Cahyat 2005: 4). 21 In practice, it is rarely head of desa appoints government officer for his/her secretary; rather they request kabupaten government to promote his/her secretary to become government employee (PNS). Now the desa officials association insist government to get all desa officials to be government employee (Antara 2010)

35 Guidebook to local governments in Indonesia Draft September /55 and national level NGOs who concern on village development, village government institution, adat institution empowerment, and community based natural resources management. BPMPD organization model is similar to other coordinating 'badan' such as the food security coordinating agency (Badan Ketahanan Pangan BKP) who suppose to coordinate other agencies and organizations to support the food security efforts. However, similar to BKP, BPMPD often fail to coordinate and end up with doing things themselves. This leads to the creation of some overlapped activities with others. Making its coordinating function effective is a great challenge for BPMPD. 5.2 Planning and financial system at village level A similar planning and budgeting structure is also applied for desa government. There is a mid-term development plan (Rencana Pembangunan Jangka Mengengah Desa RPJMDes), an annual development plan (Rencana Kerja Pembangunan Desa RKPDesa), and an annual budget plan (Anggaran Pendapatan dan Belanja Desa APBDesa). The head of Desa is the top decision maker on APBDesa, while the desa secretary is the coordinator of financial administration which report to the head of desa. The head of desa reports the implementation of APBDesa and the RKPDesa to village legislative (Badan Permusyawaratan Desa BPD). The RPJMDes and RKPDes must be a result of Musrenbang deliberation. The village musrenbang is the earliest part of the series of Musrenbang for state government planning. As discussed earlier, in current practice, the Musrenbang participants do not informed about the financial resources available for the village development. That creates uncertainty in planning and leads to the tendency of proposing as much as it can. If you proposed 100 items you got 10 out of it, you might get double if you propose 200 items. The incentive is to create the whist list as long as it can. That would provide the Bappeda officers a headache and would end up with the neglect of village Musrenbang result. Bappeda would come up with their own proposal to avoid assessing the complicated proposals from villages. By providing information about financial resources available for village development, Musrenbang deliberation participants could sort their priorities and only come up with the shorted list. And most importantly, the shorted list does not include only the work plan but also the budget plan. That would help the executive budget team (TAPD) to consolidate the interests from regions (desa and kecamatan) and sectors (represented by agencies). 5.3 Revenues The sources of village government comprised of own-source revenue (Pendapatan Asli Desa PADesa) and transfer from the state government. It seems that the main source of village government revenue is the latter. That includes ten per cent share of kabupaten's local taxes and retributions, another ten per cent share of the amount of balanced fund received by kabupaten after deducted by personnel expenses (also called Alokasi Dana Desa ADD), and financial assistance either from the kabupaten, central and the provincial government. The sources of PADesa include revenue from commercial activities conducted by desa government (e.g. village market place), participation and self-help of village community, and mutual cooperation activities (gotong royong). 5.4 Adat structures Adat is another self-governing entity. It can be either integrated into, or separated from, desa. The term 'adat' can be translated as 'custom' or something stronger i.e. 'rule' and 'institution' (KBBI 2008). Therefore, 'masyarakat adat' could be translated as 'customary community' or 'self-governing community'. The latter is the one which many adat activists fight for. There was one significant event in March 1999 where masyarakat adat from all provinces attend their inaugural congress in Jakarta

36 Guidebook to local governments in Indonesia Draft September /55 and formed a national assembly with fifty-four representatives (Li 2001: 647). The event was organized by Aliansi Masyarakat Adat Nusantara (AMAN) and was held in the middle of many other political reforms following the fall of Soeharto. It was recognized as symbol of a fight of adat community against the state. They were demanding their rights, particularly in regards to the land, forest and natural resources. The spirit of the fights influence some significant changes in natural resources policy e.g. the small scale logging for community ( ) and small scale mining which the intensity has been increasing since then 22. The demand of pro-adat activists is mainly to revive the rights of adat community to govern their own land and natural resources under adat institution. They believe that adat communities will manage the nature wisely and sustainably for the sake of communities' prosperity. While that claim is proven in several community groups (see for example DTE 2001), there are some doubts in some other groups which already interacted with market culture and consumerism (Li 2001: 648). One important question of those who criticize the demand is how any adat community will sustain their pro-sustainability self-governance since their culture will always changing particularly by the market influence and commercialism. Apart of the definition given by AMAN, a crucial issue is how to distinguish adat community with others which is still remaining unclear (Li 2001: 647). Sustainable natural resources management requires the role of self-governing communities such as adat communities. State institutions have no sufficient capacity to look after the vast state forest land. However, The capacity of adat communities' institutions are not very good as well. Due to many disturbances since the Dutch colonial era to the evolution of the institution, most of them I have seen are weak. During the small scale logging time, it was easy to find where revenues from the extraction activities did not equally shared and the activities were far from sustainable practices because they broke their own traditional wisdoms. What we need to do is to revive the institution of local community (regardless the adat is still current or not) before they were given some authority. The forest management must be managed in co-management model where the state and adat institution share rights and responsibilities. This will create a check and balance system among the two institutions and the sustainability will be more likely because the local communities have long term interests to the resources. The great challenge is how to strengthen both the adat and state institutions in managing the natural resources which most of them are common pool resources. 6 The broader framework 6.1 Working relationship between the national and local level Budgeting Although about one third of the total state expenditures are managed by local government under decentralization scheme, some rigid guidelines are imposed by central to local governments. The expenditure structure for local governments has, for example, been outlined in Regulation Number 13/2006 of the Ministry of Home Affairs (MoHA) and has been revised but not replaced by MoHA Regulation 59/2007. Considering the fact that local governments often lack the human resources for a thorough and independent planning process, they tend to just follow the guidelines by the letters, maybe picking more or less erratically some activity items in the list for their expenditure plan without much considering the strategic plan. This leads to a common situation where the budget plan does not support the strategy. 22 For further elaboration about adat and small scale mining can be found in (McCarthy 2005) and (Andiko 2005); for a analysis opposing the small scale mining practices, see (Aspinall 2001).

37 Guidebook to local governments in Indonesia Draft September /55 Moreover, kabupaten/kota budget plan will only valid after the approval from the governor although both bupati/walikota and DPRD kabupaten/kota had been agreed. Similarly, the province budget plan which had been agreed by the governor and DPRD must be submitted to the Minister of Home Affairs for his/her approval. Central government transfer to local governments Although central government transfer has been nearly three quarter of the total local government revenues, its contribution to the total local government revenues has been slightly decreasing in the last five years, from 78 per cent in 2007 to 68 per cent in The increase of the transfer in the same period is about 45 per cent, whereas the increase of PAD is almost one and a half time in the same period. That means that there is a signal of improvement in the independency of local government revenues. The majority of the transfer is in the form of DAU, 67 per cent, whereas the DBH and DAK share only 25 and eight per cent of the total transfer respectively. All the three components of the transfer are increasing in the last five years where the increase of DBH (56%) is higher than that of DAU (42%) and DAK (36%) (Departemen Keuangan 2011a). Decentralization, deconcentration, and co-administration funds The transfer of authorities from central to local governments is managed through three schemes; they are: decentralization, deconcentration, and co-administration. Decentralization has the highest degree of autonomy compare to the other two. The entire APBD is decentralization fund. As discussed earlier, APBD comprises of own source and transfer revenue. Although nearly three quarter of local government revenues comes from central government transfer, local governments do not require a report to central government. Instead, the report must be prepared by bupati/walikota/governor to DPRD. By contrast, local governments must report to central government on the use of deconcentration and co-administration funds. Deconcentration is transfer of activities followed by budget under central government' functions to governor (as the representative of central government), whereas co-administration is the assignment of central to local governments (either province or kabupaten/kota, even to desa) to implement (part of) activities under central government's authority. Both are not part of APBD, earmarked, and must be reported to the relevant ministry as part of APBN report. The deconcentration activities are mostly related to coordination, monitoring and capacity building of kabupaten/kota within one province. The co-administration activities, on the other hand, are mostly related to infrastructure development activities (Departemen Keuangan 2008: 16). The deconcentration and co-administration funds are central government's instrument to advocate its interests to local government. The funds can be used as an incentive to direct local governments' behaviors towards central government's interest. Therefore the 2004 Fiscal Balance Law (Law 33/2004) requests central government to transform all deconcentration and co-administration funds to Special Allocation Fund (Dana Alokasi Khusus DAK) gradually. However, the instrument cannot be optimally used without clarity on central government strategy and the clear division on functions and activities (ADB 2008: 6) The distribution of functions and activities under decentralization scheme from central to province and kabupaten/kota is regulated under GR 38/2007. Despite of the detail in its elaboration, the

38 Guidebook to local governments in Indonesia Draft September /55 The deconcentration and co-administration could slim down central government's structure in the long run. The more the central government transfers its functions, activities and funds to local governments, the less it needs structure in its organization. However, the process of transfer is highly political. Since central government is very strong at the moment, the transfer could be either very slow or continuously vague in the future to sustain the power at the center. During the period of , the average amount of deconcentration and co-administration fund is about three percent of the total state expenditures or just about five per cent of the total central government expenditures. The amount of deconcentration fund has been more than twofold of coadministration fund (Departemen Keuangan 2011b). There are two criteria that used to distribute deconcentration and co-administration fund, the human development index (HDI) and the fiscal capability (FC). The HDI is taken from the regular assessment made by Bappenas, BPS, and UNDP, whereas the fiscal capability is the sum of PAD and DBH. Regions with low HDI and low FC and regions with high HDI and low FC are the first and the second priority respectively. Regions with high FC, either high or low HDI, are not the priority. In 2010, there were 14 and 11 provinces that fall under the first and the second priority regions among the total 33 provinces. Most of the planning decisions came from out of Musrenbang and more as a result of bilateral communication between one local government and one ministry (Departemen Keuangan 2011b). Program Nasional Pemberdayaan Masyarakat The establishment of the national program for community empowerment (Program Nasional Pemberdayaan Masyarakat PNPM) was similar to the idea of co-administration fund. That is to shorten the financial administration line by directly finance the field-level activities. That would potentially reduce transaction costs and corruption opportunity. This is what the World Bank learnt from the Kecamatan Development Project (KDP) and Urban Poverty Project (UPP) which then transformed into PNPM Mandiri since The original KDP and UPP were the World Bank loan projects which started in 1998 and 1999 respectively just after the great monetary crisis. The basic approach of the projects was to directly finance the community based development activities which initiated and planned by local people in participatory way. This would lead to the increase of the effectiveness and efficiency of local developments, not only because of better allocation but also because the voluntary contributions from local people (World Bank 2010b). The administration of PNPM funds is under deconcentration and co-administration scheme. Most of the funds went to kabupaten/kota and province. There is no evidence of co-administration funds for PNPM went directly to desa. The governor (province) received co-administration fund for PNPM limited for personnel and management costs (PNPM-Lampung 2008). The budget is allocated through central government ministries that have relevance to the PNPM program/activities; for example, the ministry of maritime and fisheries for fishermen empowerment activities. Some kabupaten/kota allocated co-financing budget for activities in their region. For example, Kabuapten Boyolali financed around 10 per cent of the total PNPM budget (Pemkab Boyolali 2008: 403). distribution is ambiguous (ADB 2008: 6; World Bank 2010a: 1). It is very hard to clearly distinguish which functions and activities belong to what level of government. This is a source of overlapping and uncoordinated activities and a high potential for corruption through a double financing practice.

39 Guidebook to local governments in Indonesia Draft September / Local government budget structure Local government budget structure is comprised of revenue, expenditure, and financing. The revenue and expenditure are elaborated by budget categories and by local government functions. There are three categories (kelompok) of revenue; they are: own-source revenues (Pendapatan Asli Daerah PAD), fiscal balance fund (dana perimbangan), and other revenues. The expenditures comprised of two categories: direct and indirect expenditures. Financing includes revenue financing and expenditure financing. In addition to the own-source revenues (Pendapatan Asli Daerah PAD), Indonesian local governments manage more than 30 per cent of the total state budget or about 5.9 per cent of the national Gross Domestic Product GDP (Departemen Keuangan n.d.) 24. In turn, the local governments are managing, and paying, almost 80 per cent of the total government employee (JPNN 2010) to co-manage all government functions except defense, justice, religion, fiscal and monetary, foreign affairs, and security. Sources of revenues and their interpretation PAD revenues are collected directly by local government agency i.e. DPPKA which comprised of local taxes, user charges (retribusi), revenue from separate equity (kekayaan yang dipisahkan), and other PAD. The central government arranges all kind of taxes and devolves the collection of some taxes to local governments. Taxes which subject to central government (though must be shared to local governments) are collected by central government. The sources of PAD are different between kabupaten/kota and province. In the case of kabupaten/kota, the local taxes include service taxes of hotel, restaurant, entertainment, street advertisement/banner, parking, and electricity; mineral taxes that include non-metal and non-rock mineral resources; sub-ground water tax; bird nest tax; Rural and urban property tax (excluding property tax of extractive concession company), and the transaction tax of the rural and urban property. The province government collects the following local taxes: motor registration, motor s transfer of ownership, fuel, surface water, and cigarette 25. There are three categories of retribusi: local government related functions services (jasa umum) 26, commercial services (jasa usaha) 27, and licensing services (jasa tertentu) 28. The categories are similar between kabupaten/kota and the province though the object could be different. Other PAD covers some small things such as bank interest and bonus from vendors. PAD reflects the financial autonomous of local government. The higher ratio of PAD to the total revenue shows a better financial independency. In 2009, the PAD only contributed 17 per cent to the total local governments' revenue at national level where the main sources of PAD were local taxes and user charges (World Bank 2010a: 2). But the situation from one to another province varies. For example, in 2007, the ratio of PAD to the total local government's revenue ranges from 3.9 per cent in West Papua to 70.3 per cent in West Java (Departemen Keuangan 2007). Local government with 24 This is less than the average of European countries which is about 22 per cent of total government budget or 9 per cent of GDP (European Commission 1997, cited in Bailey 1999: 84), and also less than China which is around 77 per cent of total government budget or 23 per cent of GDP (Starmass 2010), but higher than Australia which is around 7 per cent of total government budget or 2.5 per cent of GDP (National Office of Local Government 2002, cited in Aulich 2005: 197). 25 Provincial government must share the revenue from its local taxes to kabupaten/kota in their area. The minimum shares for kabupaten/kota are 30 per cent for motor registration and motor s transfer of ownership, and 70 per cent for fuel and surface water taxes (Law 34/2000) 26 For example: revenue from local government s hospital, garbage collection fee, ID card fee, etc. 27 For example: recreation and sport places, hotel, etc. 28 For example: development license, trading licence, etc.

40 Guidebook to local governments in Indonesia Draft September /55 high independency on finance less dependent to central government and has ability to manage their cash flow better than others. Fiscal balance funds are revenue coming from central government transfer. That covers three revenue categories: shared revenue funds (Dana Bagi Hasil DBH), general allocation funds (Dana Alokasi Umum DAU), and special allocation funds (Dana Alokasi Khusus DAK). DBH is central government's revenue that collected in the region which the region has right of some share from the revenue. DBH comprised of revenue from central government taxes e.g. income taxes and from natural resources royalties such as royalty from oil, gas, coal and timber. This means region with rich of natural resources and full of people with high income would enjoy high DBH. Regions with rich of natural resources e.g. East Kalimantan are frequently demanding the higher rate of share 29. Although DBH reflects part of regional economic potential, it does not indicate financial independency because how much the regions would actually get depends on the policy and quality of central government financial management. Central government could change the rate of the share or simply by making a belated transfer. DAU has nothing to do with regional economic potential. 'The role of DAU is to equalize fiscal capacities across districts and provinces in order to finance their expenditure needs' (World Bank 2010a: 2). One major role of DAU is to ensure any local government able to pay for the basic salary of all their public servants (PNS). The ratio of DAU to the total local government revenue reflects the opposite to the PAD. The higher DAU ratio to the total local government revenue indicates the greater dependency. There was about one third of 444 local governments with DAU ratio to the total government revenue 75 per cent or more (Departemen Keuangan 2007). This ratio could be used as an indicator to abolish local government. DAK is a central government fiscal instrument to drive the local governments' interests. If central government would like a particular local government to pay more attention to education, for example, central government could transfer DAK fund in the field of education services. There is a plan to transform all deconcentration and co-administration fund to DAK, but it requires the clarity of functional divisions among the three levels of government (ADB 2008: 6). Other local government revenues (pendapatan daerah lainnya) cover grants, and shared revenue and financial assistance from the province. The grants can be either from other local governments or central government or private sectors. The shared revenues from province government come from local taxes collected by province government (see the PAD section). Financial assistance from the province has similar role to DAK. It is often that the real power of governor to influence kabupaten/kota depends on how significant the contribution of financial assistance to the total kabupaten/kota revenue. In a region where the kabupaten/kota has limited sources of revenue and therefore depends on provincial financial assistance, the governor is usually strong in his/her coordination role. By contrast, in a region where kabupaten/kota has good economic potential such as in East Kalimantan, the governor power to influence is weak. Categorizations of expenditures and their interpretation The classification of expenditure is not as meaningful as the revenue. The direct expenditure means expenses spent by SKPD for their programs and activities. Salary and allowance for public servants are categorized as indirect, while expenditures on goods and services, investments and honorarium for activities and programs are included in direct expenditure. In addition to salary and allowance, there are other expenditures which spent directly by the local government treasury (not by SKPD) i.e. 29 In regards to the debate on fiscal balance composition, one academic report which done a simulation calculation suggest that increasing fiscal transfer to regions that are lagging behind would impact negatively on the national economy overall though at the same time it would reduce gaps among regional economies (Resosudarmo et al. 2009: 145).

41 Guidebook to local governments in Indonesia Draft September /55 interests, subsidy, grant, social assistance (bantuan sosial), shared revenues 30, financial assistance, and contingency costs. The direct and indirect categorization creates difficulties to distinguish expenditures spent for development (belanja pembangunan) and for management (belanja aparatur). This categorization is different with the 2002 guidance which distinguishes the expenditure into public services expenditure (belanja publik) and apparatus expenditure (belanja aparatur). One way to distinguish expenditures for public service activities and management cost in current expenditure categorization is by calculating the expenditure based on the budget categorization per function. Expenditure could be sorted out by local government functions. Each function could cover one or more relevant SKPD 31. The total expenditure of each function is a sum up of direct and indirect costs of all SKPD within the function. Among nine local government functions, the general administration function (Fungsi Pelayanan Umum) covers SKPD responsible in internal services such as secretariat, planning, finance, and personnel. The proportion of general administration function to the total local government expenditures is a good indicator to assess the efficiency; the higher the proportion, the lower the efficiency. Financing The role of financing is to close the gap of revenue and expenditure. If the budget plan is set for deficit, the financing plan should be seek more for revenues to be gained, for example, from loan or from the sale of separated equity. On the other hand, if the budget is set for surplus, the financing plan must specify how to use the surplus e.g. investment, loan payment, etc. Local government is possible to borrow money when it sets a deficit, but the criteria and control from central government is very strict. The sum of accumulated debt should be less than 75 per cent of the total revenue (GR 54/2005). The total deficit of one fiscal year must be less than 4.5 per cent of the total revenue (Permenkeu 138/PMK.07/2009), whereas at national level the accumulation of local government budget deficit must be less than 0.3 per cent of the total GDP (Permenkeu 138/PMK.07/2009). Lobbying for funds for local governments at national level The state budget plan (Anggaran Pendapatan dan Belanja Negara APBN) is the subsequent product after the annual government work plan (Rencana Kerja Pemerintah RKP). For the APBN making coordination, Ministry of Finance has important role besides Bappenas. The two ministries are very important for local government revenue and to gain support from central government development programs/activities, particularly in regard to deconcentration, co-administration, and special allocation fund (Dana Alokasi Khusus DAK). This is particularly important for local government with low fiscal capacity such as East Nusa Tenggara. However, approaching Bappenas and Ministry of Finance would be not enough without securing support from the relevant sectoral ministries (e.g. Public Works Department for road construction), and, of course, DPR. This is one reason why there are many bupati/walikota or other high rank local government officials spend many times to travel to Jakarta. 30 For kabupaten, the share is to desa, while for the province is to kabupaten/kota. 31 For example, under education function there are education service (dinas pendidikan) and local library.

42 Guidebook to local governments in Indonesia Draft September / Political decision making - veto structure Although Indonesia practices a unicameral parliamentary structure 32, the veto power in current Indonesian political system is relatively dispersed. This is particularly because of the large number of political parties 33. In addition, there are Constitutional Court (Mahkamah Konstitusi) with power to revoke any laws inconsistence with the state constitution and the Supreme Court (Mahkamah Agung) with ability to abolish any local laws incompatible with the national laws. Similar arrangement is also in local government where head of regions share their power with DPRD in the law making and budget planning. Indonesia practices a hyper multi party system where power is being shared among many political parties. For example, the participants of the 2009 election were 34 political parties where nine of them reach the parliamentary threshold and have representatives in the DPR. The Demokrat Party, as the largest representation where the President SBY comes from, occupies just slightly more than a quarter of the total 560 DPR members (DPR RI n.d.). The Demokrat party established a coalition in DPR embracing the other five parties which altogether occupy around three-quarter of the total parliament members. The coalition, however, is not cohesive in supporting the president's policy. Similar situation could be expected in most of the local governments. The dispersed veto power makes decision making and reform program are relatively slow and uneasy. This is because there are many parties to convince and to negotiate 34. A significant structural reform is difficult to achieve unless there is a strong and charismatic leadership in government. This is very hard to expect at national level but the possibility is more at local level. Considering the complex stakeholders, effective and strong leadership is a key to have good performance as well as to manage a success reform. 6.4 The role of the state in society The characteristic of Indonesian social welfare system is close to East Asian model called 'productivist' (Holiday 2000:709; Jacobs 2000: 2-4; Aspalter 2006: 297). The social welfare system relies more on individual and family rather than public. In general, state is not responsible even when the market fails. For example, there are 49.2 per cent of Indonesian citizens who do not have any health insurance (Kompas 2010). That is because Indonesian public budget is limited to cover social welfare costs. In 2009, for example, total government revenue was only 16.1 per cent of national Gross Domestic Product (GDP) (Departemen Keuangan n.d.: 1-12). Furthermore, social policy in Indonesia is positioned to support economic development (Bappenas 2010, p. II.3-1). In 2009, social expenditures which include health, education, subsidies other than fuel, and social protection were just 6.8 per cent of GDP (Departemen Keuangan n.d., pp. 1-12; Departemen Keuangan 2007). Therefore, government's policy is always to keep tax low and allow people to spend their money for their own welfare. As a result, ratio of tax revenue to GDP was only 9.9 per cent compared to an average of 14 per cent among non-oecd countries in Asia (IMF 2008, p. 11). 32 Other references categorize Indonesian legislature as bicameral because of the existence of Regional Representative Council (Dewan Perwakilan Daerah--DPD), see for example IFES 2010a. In practice, that is not the case because DPD has not strategic power as what Senat has in the U.S.. Neither laws nor budget influenced directly by DPD. 33 However, the current development shows that the leaders of the major political parties are strong enough to control their member's decision in DPR. That means although there are multiple parties in DPR but the power is relatively centered in the parties' leaders 34 Veto power holders are in formal structure. Apart of them, there are some more interest groups which in some cases could be more influencing than the veto power holders. For example, religious groups, ethnic groups, NGOs, expert network (epistemic community), and even organized gangster groups.

43 Guidebook to local governments in Indonesia Draft September / Rentier state Is Indonesia a rentier state? I will argue that Indonesia was a rentier state but it is not longer like that. According to Hossein Mahdav, rentier state is 'those countries which receive on a regular basis substantial amounts of external economic rent' (Mahdavy 1970, cited in Douglas 1996: 11). In other word, rentier state is a country that relies on externally generated rents rather than the surplus production of the population (Karl 2007: 2). In regard to Indonesian context, the source of state revenues that can be categorized as 'external economic rent' are taxes and non-taxes revenues from oil and gas and other natural resources' extractive activities, and foreign debt. During the New Order era, for example in 1980, the external economic rent was 72.6 per cent of the total state revenues (Tanter 1991: 140). This is a strong indicator of a rentier state. Indonesia rentier state during Soeharto era was associated with the strong military role that supported the survival of the Soeharto regime (Tanter 1991: 158). Since the fall of Soeharto, the role of natural resource rents and the foreign debt in their contribution to the state revenues have been declining. In 2010, for example, the contribution from oil & gas income tax, natural resources non-tax revenues, and foreign debt were only 27.4 per cent of the total state revenues (Departemen Keuangan n.d.). Similarly, the 1980 non-oil and gas income taxes (personal & corporate) were only about five per cent and have been increasing to 29 per cent of the total state revenues in That means the external economic rent is no longer a substantial source of state revenues anymore. In addition, the military has been significantly losing its role in politics in post-soeharto era (Schwarz 2004: 398). That indicates the improvement of the quality of democracy. Government sector is not the major source of the Indonesian economic activities. In terms of GDP, the contribution from the government consumptions sector is only around five per cent during the period of 2004 to 2009 (BPS 2009). This is very low compared to the advance economy such as the OECD countries which the public sector expenditures contribute more than 30 per cent to the total GDP (Rosen & Gayer 2010: 10). A similar finding can be found in the employment statistic. The total number of public servant is only slightly more than two per cent of the total population or less than four per cent of the total labor force. This is considerable low compared to Germany, for example, which the number of public sector employees is more than five per cent of the total population or 10 per cent of the total labor force Quality of work-tender issues It is commonly known that procurement is the main source of corruption in Indonesia. A report from KPK shows that the procurement units in any government level are those with the lowest integrity among other government units (KPK 2010: 116). KPK predicts that of the total procurements, about 30 to 40 per cent of them have been corrupted (IPW 2011). As a result, the quality of public services is low. A World Bank report notes that the justice system in Indonesia is widely viewed as dysfunctional (World Bank 2003: 80). Among the ASEAN five, Indonesia's infrastructure quality is just better than the Philippines but far below Singapore, Malaysia, and Thailand (Schwab 2010, pp ). However, in terms of quantity, the length of Indonesia's roads per arable land area in 2003 was even below the Philippines as well as other Asian countries such as Lao PDR, Mongolia, and Vietnam (World Bank 2005, p. 15). There are various issues associated with procurements in public sectors which covering, among others, regulatory framework, management capacity which monitoring and feedback mechanism, 35 Number of public sector employees and total population from DGAFP (2010: 10), whereas the number of labour force is from CIA (2010).

44 Guidebook to local governments in Indonesia Draft September /55 and market capacity. Transparency International highlights the issue of the legal jurisdiction of the procurement regulation which is in the form of Presidential Regulation 36. Presidential Regulation has a lower than law (undang-undang) in the legal products hierarchy. That leads to some ambiguity and discrepancies with national laws and regional laws. The 2010 procurement guidance increases the threshold of direct award (sole sourcing) from Rp.50 million to Rp.100 million which would increase the corruption opportunities. In regard to monitoring system, Transparency International points out the lack of procedure for the losing bidders to provide and receiving feedbacks which would clarify the reason why they got lose (Transparency International 2011). Meanwhile, OECD emphasizes the role of audit system which is complex and ineffective with high overhead costs. The role of private sector suppliers is also interesting point that raised by OECD. It is only less than five per cent of privet sector suppliers who participate in public sector procurements. In addition, both OECD and KPK recognize and recommend the need to increase the capacity of procurement units in applying e- procurements. Both organizations believe that e-procurements would reduce corruption opportunities (KPK 2010; OECD 2007). 6.7 Selected state institutions in national level MPR People Consultative Assembly (Majelis Permusyawaratan Rakyat MPR) is the Indonesian parliament. It comprised of two houses i.e. the DPR with 560 members and DPD with 130 members (four members per each province). Its most important authority is to change the constitution. In addition, it also entitled to sack the president and vice president as long as it meets the requirements according to the constitution. It used to be the one who select the president and vice president before the first direct presidential election of Now, according to the latest version of constitution, the MPR just swore in the president and vice president instead of select them. The MPR chairs are selected from DPR and DPD members. MPR is rarely met; the minimum frequency is once in five years. There is no institution in local level equal to MPR. DPR House of Representative (Dewan Perwakilan Rakyat DPR) is not only the majority in MPR but also hold all strategic roles of the parliament. MPR is only possible to sack the president and vice president if proposed by DPR 37, not the DPD. By contrast, the president cannot abolish the DPR in anyhow. All the legislations making (undang-undang) and budget plans must be approved by DPR. In addition, DPR could initiate a law as same as the president. Selection of chairs of some state institutions e.g. KPK, BPK, and central bank governors are in DPR. The selection is made based on the candidate list given by the president. Members of DPR are from political party which elected in their electorate. In regards to local governments, DPR is important for: (a) proposing budget for local developments either to be implemented by central government itself or through deconcentration and co-administration funds; (b) channeling aspiration for particular law and national policy which important for the regions; and (c) reporting any deviation of central government policies and projects implemented in the regions. The DPR, through the relevant komisi, could question the responsible Ministers (even the President) and other state institutions. 36 The latest one is Presidential Regulation Number 25/2010 which effective starting per January But the DPR's proposal must be approved by the Constitution Court and supported by at least two third of the MPR plenary meeting which must be attended by at least three quarter of MPR members.

45 Guidebook to local governments in Indonesia Draft September /55 KPK The Corruption Eradication Commission (Komisi Pemberantasan Korupsi KPK) is the most popular state commission. That is because they have arrested high profile officials for corruption charges. There were 59 completed dossiers ready for prosecutions where many of whom had high public profile between 2004 and 2007; for example: the Golkar governor of Aceh sentenced for 10 years, the Megawati' s Minister of Maritime Affairs and Fisheries got the conviction in 2007, and two former Ambassadors to Malaysia (Crouch 2010: 218-9). For the 2010, the commission claims they have handed 170 billion Rupiah back to the State Treasury from the corruptors, and have prevented state's loose of more than 500 billion Rupiah from the state' s asset misuses (KPK 2010). KPK is recognized as the last resort in Indonesian judicial system in corruption fighting (Schütte 2007: 57). Interestingly, KPK 's function is not limited to the legal action but also to the corruption prevention and organizing a whistleblower's system. Local people could report corruption practices in their local government to KPK through this following link The Prevention Division manages some initiatives such as promoting code of conducts and gifts/gratification reporting system. Local governments can cooperate with KPK on these prevention activities. GIZ has been cooperating with KPK on developing the corruption clearing house system included the whistleblower's system. The Audit Board The Audit Board of the Republic of Indonesia (Badan Pemeriksa Keuangan BPK) is the external state auditor. BPK conduct audits to all state institutions, central bank, all ministries, local governments, state enterprises either owned by central (BUMN) or local government (BUMD), public service units, and other institutions using public funds. All local governments and local government enterprises as well as local public service units are audited by BPK. BPK has regional offices in the most of the province capital. BPK does not only conduct the financial audit but also the performance audit. However, unlike the financial audit which applied to all local government agencies, the performance audits are conducted only to selected agencies related to basic services such as health and education (BPK 2008a: 4). Considering the quality of local government development plan which is still far from a result based plan, it is hard to imagine how BPK could manage performance audit in a meaningful way.. It is important for local governments to pay attention to the findings and recommendation, and take the recommendation as a basis for capacity building in local finance and performance management. Bappenas The National Development Planning Agency (Badan Perencanaan Pembangunan Nasional Bappenas) is one of the most strategic ministry for development cooperation program. Bappenas has a role to coordinate development planning process and responsible on producing the national development plan either the annual, mid-term (five years), or the long term (20 years). The state budget plan (Anggaran Pendapatan dan Belanja Negara APBN) is the subsequent product after the annual government work plan (Rencana Kerja Pemerintah RKP). However, for the APBN coordination, Ministry of Finance has important role besides Bappenas. The two ministries are very important for local government revenue and to gain support from central government development program/activity, particularly in regard to deconcentration, co-administration, and special allocation fund (Dana Alokasi Khusus DAK). This is particularly important for local government with low PAD but also poor in natural resources such as East Nusa Tenggara. However, approaching Bappenas and Ministry of Finance would be not enough without securing support from the relevant sectoral ministries (e.g. Public Works Department for road construction), and, of course, DPR. This is one

46 Guidebook to local governments in Indonesia Draft September /55 reason why there are many bupati/walikota or other high rank local government officials spend many times to travel to Jakarta. MoHA Departemen Dalam Negeri (Depdagri) Ministry of Home Affairs (Departemen Dalam Negeri Depdagri) is used to be the 'god father' of local governments before the decentralization era. Most of budget transferred to local governments went through Depdagri. Now, the situation is totally different. Depdagri has not that power anymore because the decentralization funds are transferred directly from the Ministry of Finance (the state treasure) to local governments. Yet, Depadgri is still recognized as the advisor or facilitator of local governments. They still provide some key guidance for local government administration. Among the famous one is the Permen 13 about local finance administration guidance. Depdagri is expected to be the coordinating ministry on providing guidance to local governments. However, in practice it seems not easy to do. Therefore it is not surprise if we hear some conflicting guidance made by different ministries which confusing local governments. This is particularly dangerous in local finance administration. The strong roles of Depdagri which still exist at the moment are, among others: (a) approving provincial budget plan which being agreed by governor and DPRD, (b) final selection of provincial regional secretary (sekda) based on short list submitted by the governor, (c) advising on establishment and abolishment of local government, (d) providing local finance administration guidance, (e) supporting local government on social conflict mitigation. 6.8 Legal products hierarchy Pancasila Pancasila, the five principles, is Indonesian state philosophy. It is also the basis for all state legal products. The five principles are: the belief to one god, just and civilized humanity, the unity of Indonesia, consensus and representative democracy, and social justice for all Indonesian. The history of the debate during Pancasila formulation is evidence that Indonesians love pluralism, accepting the facts that the archipelago comprised of many different cultures and beliefs but should be united into one nation for the sake of prosperity of all Indonesian. Legal products hierarchy Indonesian legal products are arranged in a hierarchical structure under the 1945 constitution (Undang-Undang Dasar 1945 UUD 1945). UUD 1945 is the main source of all Indonesian laws (undang-undang) which has been revised four times. It is only MPR who entitled to revise the constitution. Legal products under the UUD 1945 hierarchically in sequence are: undang-undang (law), peraturan pemerintah (government regulation), peraturan presiden (presidential regulation/decree), and peraturan daerah (regional law). The latter includes provincial law (Peraturan Daerah Perda Provinsi), kabupaten/kota law (Peraturan Daerah Perda kabupaten/kota, and desa law (peraturan desa Perdes). Undang-undang is made by the government and DPR. The draft could come from both sides although in practice the government has more initiative. Regardless the source of the draft, the discussion of the draft is only in DPR. In the case of one legal issue both DPR and government come with their own draft, the draft from DPR is the one to be discussed, whereas the draft from government is to be used as a comparison reference. In an urgent situation, government (the president) could set a government regulation as substitute to undang-undang (peraturan pemerintah pengganti undangundang PERPU) without approval from the DPR. PERPU is equal to undang-undang. Any Perpu could effective only for one year before reviewed by DPR to be transformed into undang-undang.

47 Guidebook to local governments in Indonesia Draft September /55 The process PERPU review by DPR (to be transformed into undang-undang) follows a similar process as the undang-undang making procedure. Government regulation (peraturan pemerintah) and presidential decree is purely government policy. No approval from DPR is required. Government regulation is made to elaborate the undang-undang for its implementation, while presidential decree is a regulation within the scope of the president authority. Both are created by president with support from the Ministers. The process of Peraturan daerah (perda) making is similar to undang-undang. The draft could come either from the head of local government or DPRD, but the discussion for final decision in only in DPRD. Perda could be made to elaborate the higher legal products to make them relevant to the regional context. It also could be made to regulate a particular issue which is unique to the region. Similar to the practice at national level, the initiator of perda is usually from the executive side. All legal products are subject to be reviewed. Any undang-undang could be reviewed to assess whether there is or there is no contradiction to the constitution. The Constitution Court (Mahkamah Konstitusi) is the one who can review and abolish undang-undang. The review of legal products under undang-undang could be done by the Supreme Court (Mahkamah Agung) and government i.e. Ministry of Home Affairs. The aim of the review is to ensure that the Perda has no contradiction to undang-undang. The position of ministerial regulation (peraturan Mentri) is vague in the hierarchical structure of legal product. It is not exist on the list of the hierarchy as regulated by Law 10/2004. However, judging from what being practiced at the moment, the ministerial regulation is positioned between presidential decree and peraturan daerah. 6.9 Elections in Indonesia Who to elect Every five years, Indonesian citizens who eligible to vote could use their right in four different times; One is at national election where they could vote for legislatures at national and regional level (DPR and DPRD provinisi and DPRD kabupaten/kota), and Regional Representative Council (Dewan Perwakilan Daerah DPD); two is at president and vice president election; three is at governor election; and four is at bupati or walikota election. On top of that, for citizens who leave in rural regions, they could participate in head of village election and a community deliberation to select their representative in village legislative. Both of them are conducted every six years. Voter turnout Taking a vote in election is a right, not a compulsory; therefore the voter turnout was never full. For example, the last 2009 Presidential election was per cent, while in 2009 Legislative election was only per cent (IFES 2010b). From the experience, participations in some local elections were less than national elections. It depends on the compatibility of voters' preference with the available candidates. Executive election The presidential election is an absolute majority vote. The winner must win more than a half of the votes, and must gain at least 20 per cent of votes in each province spread out in more than a half of the provinces. Therefore the presidential election could be more than one round as what happened in the 2004 election. The local elections, however, are not that tough. If there is no one win more

48 Guidebook to local governments in Indonesia Draft September /55 than a half of votes, the candidates who get the most with more than 30 per cent of votes are the winner (Law 23/2003: 26; Law 12/2008: 107). Legislative election The legislative election is a proportional representation vote. For DPR and DPRD election, voters may select the party or individual candidates. In preparing candidate list, each party must include female candidates of at least 30 per cent of the total candidates. Number of parliament members in DPRD and number of representative of each province in DPR depend on the number of eligible voters. In the case of DPD, number of representative per province is fixed that is four seats for each province. DPD candidates do not come from political party, their candidacy is personal. KPU The election is governed by an independent election commission (Komisi Pemilihan Umum KPU). The KPU members must be free from political party; they cannot be registered as the member of any political party. KPU exist at national level as well as at all provinces and kabupaten/kota. The National KPU members were selected by independent team appointed by the President. The short listed candidates are handed in to the DPR for the final selection. Meanwhile, the selection at local level is a bit different. The independent selection team candidates are proposed by the head of local government (governor/bupati/walikota) and DPRD to the National KPU to be appointed. The independent team manages an open and transparent selection process which attracts anyone who meets the requirements. The short listed is handed in to the National KPU for the appointment. General problems with elections Although the KPU is designed to be independent and professional, in practice there has been some complaints about its performance. The major complaint of the latest legislative election was the messy voter registration where significant number of eligible people did not registered. Public, especially the loosing parties, had suspicion on KPU that the messy was made on purpose because of behaviors of some KPU commissioners. The most obvious one was the move of one commissioner to the winning party not so long after the election over. Although it was not a violation to the law, it was not ethically appropriate. That has had raise a question whether the messy voter registration was caused by incapable or lack-of independency of the KPU leadership (the commissioners). The independency of the election commissioners will become a more serious issue in the next election. There has been idea on the amendment to the 2007 Election Administration Law, which the debate is still going on, to allow someone who has resign from political party to become a candidate of the election commissioners (The KPU leaders). In the 2007 law, the election commissioner candidate should be a member of political party at least for the last five years. If the idea is adopted in the new law, it will increase the potential of 'politicizing' of election administration (IFES 2011). Regardless what the main reason of the messy voter registration in the 2009 legislative election was, it is most likely the citizenship administration will still contributing to the same issue in the next election. KPU has a job to prepare the voter list. In doing so, it relies on the citizenship data called DP4 provided by the Ministry of Home Affairs (MoHA). The problem is that the data is lack of quality and KPU has no resources and infrastructure to process and improve the data to become accurate voter lists per each polling station. It is likely the inaccurate voter list will still a major problem in the upcoming election as there has been no significant improvement in the DP4 making by MoHA (IFES 2011).

49 Guidebook to local governments in Indonesia Draft September /55 Electoral dispute resolution is another major election issue. There were 230 disputes out of 224 local elections held in All the disputes are handled by the Constitutional Court (Mahakamah Konstitusi). This is another task of the Court beside the law review as discussed earlier. Despite the relatively good credibility of the Court, the number of the disputes reflects the lack of trust to the election governance and the unwillingness of the losing candidates to accept the election results (IFES 2011). The socio-political stability is in threat when people do not longer trust to the Court. One important concern is 'the heightening of solidarity within ethnic and religious groups' which was observed in several local elections between 2005 and 2008 (Liddle 2010) 38. The high corruption practice and the low quality of election candidates seem to have causal link one to another. The direct election is one result of the democratization than began in Some prodemocracy organizations argued that direct election would reduce corruption practices in election process. The fact is that what changes is not the level of corruption practice, rather the pattern of the corruption. During indirect election, the bribe was flown from the candidates to DPRD members. Now in direct election, the flow is from the candidates to the political parties (Choi 2007: 341). As the party-ticket price is high, it is only rich and/or powerful people who could run for candidacy. That is a significant barrier for potential leaders who has strong integrity and knowledge to run local government but has no money. At the same time, it will also sustain the corrupt practices as the winners would find all possibilities to pay back their "investment". It seems that the institutionalization of democratic practices at local level is more important to reduce corruption rather than the implementation of the direct election per se (Legowo 2003, cited in Choi 2007). The independency, in terms of politic and economic, of voters is central to develop a quality democracy. Independent and smart voters will drive the interest of political party to the common and long-term interests rather than to the short-term and individual or group interests. 7 References ADB 2008, Supporting an effective institutional framework for fiscal decentralization reforms: ADB TA No.4682-INO: final report, Asian Development Bank, Manila. 2002, Report and recommendation of the President to the Board of Directors on a proposed cluster, first loan and technical assistance grant to the Republic of Indonesia for the financial governance and social security reform program, Asian Development Bank, Manila. Alatas, V, Pritchett, L & Wetterberg, A 2004, Voice lessons: local government organizations, social organizations, and the quality of local governance, SSRN Working Paper Series, The World Bank East Asia and Pacific Region, Washington, D.C. Antara 2010, 'Ribuan perangkat desa tuntut jadi PNS' (Thousands of desa officials demanded to be employed as PNS), AntaraNews, viewed 20 December 2010, < Aspalter, C 2006, 'The East Asian welfare model', International Journal of Social Welfare, vol. 15, no. 4, pp Another finding shows that although solidarity within ethnic and religious group is important, particularly for the majority group, the cross-ethnic coalition development during campaign is also crucial for the victory of the candidates. However, it is still not very clear whether the cross-communal communication could prevent communal violence (Aspinall et al. 2011: 54).

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52 Guidebook to local governments in Indonesia Draft September /55 Hofman, B & Kaiser, K 2002, The making of the big bang and its aftermath: a political economy perspective' paper presented to Can Decentralization Help Rebuild Indonesia? Conference, George State University, Atlanta, 1-3 May, viewed 19 December 2010, < Holliday, I 2000, 'Productivist welfare capitalism: social policy in east asia', Political Studies, vol. 48, no. 4, pp IFES 2011, IFES Indonesia factsheet: brief overview of elections in Indonesia, International Foundation for Electoral Systems, Jakarta. 2010a, 'Voter turnout', Election Guide, International Foundation for Electoral Systems (IFES), viewed 9 December 2010, < b, 'Country profile: Indonesia, description of government structure', Election Guide, International Foundation for Electoral Systems (IFES), viewed 9 December 2010, < IPW 2011, Pengadaan barang dan jasa paling rawan korupsi (procurement as the highest corruption risk), Indonesian procurement watch, viewed 25 August 2011, < korupsi.html>. Jacobs, D 2000, 'Low public expenditures on social welfare: do East Asian countries have a secret?', International Journal of Social Welfare, vol. 9, no. 1, pp JPNN 2010, 'Jumlah PNS di daerah melonjak' (number of PNS in regions is significantly increased), JPNN Nasional, viewed 26 December 2010, < KBBI 2008, 'Adat', Kamus Besar Bahasa Indonesia (KBBI), viewed 3 January 2011, < Karl, TL 2007, Oil-led development: social, political, and economic consequences, Center on Democracy, Development, and the Rule of Law, Working Paper number 80, Stanford University, CA. Kershaw, R 2001, Monarchy in South-East Asia: the faces of tradition in transition, Routledge, London. Kompas 2010, 'Baru 50,8 persen masyarakat punya jaminan kesehatan' (It is only 50.8 per cent of people with health insurance), Kompas.com, viewed 29 December 2010, < minan.kesehatan>. 2009, Tabungan perumahan PNS diusulkan naik 400 persen' (Civil servants' housing allowance is proposed to be increased for 400 per cent). Kompas.com, viewed 5 January 2010, < KPK 2010, Integritas sektor publik Indonesia tahun 2009: fakta korupsi dalam layanan publik (2009 Indonesian sector public integriti: facts of corruption in public services), Komisi Pemberantasan Korupsi (Corruption eradication commission), Jakarta.

53 Guidebook to local governments in Indonesia Draft September /55 Li, TM 2001, 'Masyarakat adat, difference, and the limits of recognition in Indonesia's forest zone', Modern Asian Studies, vol. 35, no. 3, pp Liddle, RW 2010, Deepening democracy in Indonesia? direct elections for local leaders (pilkada), Pacific Affairs, vol. 83, no. 3, p von Luebke, C 2009, 'The political economy of local governance: findings from an Indonesian field study', Bulletin of Indonesian Economic Studies, vol. 45, no. 2, p Mangkusubroto, K 2011, Pidato kepala UKP4 di forest tenure, governance and enterprise conference, Lombok 12 Juli Marbun, BN 2010, Otonomi Daerah, : proses dan realita (Regional autonomy, , process and reality, 2nd ed., Pustaka Sinar Harapan, Jakarta. McCarthy, J 2005, 'Between adat and state: institutional arrangements on Sumatra s forest frontier', Human Ecology, vol. 33, no. 1. OECD 2007, Snapshoot assessment of Indonesi's public procurement system: piloting OECD/DAC procurement JV baseline indicator (BLI) benchmarking methodlogy version 4, Organization for Economic Co-operation and Development, Paris. Pemkab Boyolali 2008, 'Laporan penyelenggaraan tugas pembantuan' (Co-administration implementation report), Pemerintah Kabupaten Boyolali, Boyolali, viewed 28 December 2010, < Pemprov Gorontalo 2008, 'Pengelolaan keuangan daerah dan pelayanan publik di provinsi pemekaran: kajian pengeluaran publik Gorontalo 2008' (Study on public expenditure in the Province of Gorontalo 2008), Pemerintah Provinsi Gorontalo (Provincial Government of Gorontalo), Gorontalo. PNPM-Lampung 2008, 'Info update', Program Nasional Pemberdayaan Masyarakat Mandiri Pedesaan Provinsi Lampung, viewed 6 January 2010, < Rosen, HS & Gayer T 2010, Public finance, 9th edn., McGraw Hill, New York. Resosudarmo, B, Nurdianto, D & Hartanto, D 2009, 'The Indonesian inter-regional social accounting matrix for fiscal decentralisation analysis', Journal of Indonesian Economy and Business, vol. 24, no. 2, pp Rinaldi, T, Purnomo, M & Damayanti, D 2007, 'Fighting corruption in decentralized Indonesia: case studies on handling local government corruption', World Bank Office Jakarta, viewed 14 January 2010 < Indonesia.pdf>. Schütte, S 2007, 'The fights against corruption in Indonesia', Journal of Current Southeast Asian Affairs, vol. 26, no. 4, pp Schwab, K 2010, The global competitiveness report , World Economic Forum, Geneva. Schwarz, A 2004, A nation in waiting: Indonesia's search for stability, Talisman, Singapore.

54 Guidebook to local governments in Indonesia Draft September /55 Solo Pos 2010, 'Pemerintah kurangi pengangkatan tenaga honorer di 2010' (Government reduces the recruitment of temporary workers in 2010), Solo Pos.com, viewed 20 December 2010, < Starmass 2010, 'China government revenue of the central government vs local governments', Starmass Dream Co., viewed 17 December 2010, Stoker, G 2010, The comparative study of local governance: towards a global approach perspective', paper presented to the symposium on Chinese Societal Capacity Building in International and Comparative, Zhejiang University, Hangzhou, November. Tanter, R 1991, Intelligence Agencies and Third World Militarization: A Case Study of Indonesia, , with Special Reference to South Korea, , A thesis submitted in fulfilment of the requirements for the Degree of Doctor of Philosophy, Department of Politics, Faculty of Economic and Politics, Monash University, Vic. Transparency International 2011, APEC procurement transprency standards in Indonesia: a work in progress, Transparency International-USA and Center for Interantional Private Enterprise. Turner, M, Imbaruddin, A & Sutiyono, W 2009, 'Human resource management: the forgotten dimension of decentralisation in Indonesia', Bulletin of Indonesian Economic Studies, vol. 45, no. 2, p UNDP 2009, Capacity development: a UNDP premier, United Nations Development Programme, New York. World Bank 2010a, 'Completing decentralization', Indonesia Rising: Policy Priorities for 2010 and Beyond 53471, The World Bank, Washington, D.C. 2010b, 'Empowering Indonesian communities through direct participation in developing infrastructure and services', The World Bank, Washington, D.C., viewed 28 December 2010, < 2005, EAP infrastructure at a glance: benchmarks and comparisons, The World Bank, Washington, D.C. 2003, Combating corruption in Indonesia: enhancing accountability for development, East Asia Poverty Reduction and Economic Management Unit, The WOrld Bank, Washington DC. Wright, DS 1978, Understanding intergovernmental relations: public policy and participants' perspectives in local, state, and national governments, Duxbury Press, North Scituate, Mass. Yudhoyono, SB 2011, 'Pidato Presiden Republik Indonesia pada penyampaian keterangan pemerintah atas rancangan undang-undang tentang anggaran pendapatan dan belanja negara tahun anggaran 2012 beserta nota keuangannya di depan rapat paripurna Dewan Perwakilan Rakyat Republik Indonesia' (Presidential speech on the 2012 state budget plan in the front of plenary session of DPR), Jakarta, 16 Agustus <

55 Guidebook to local governments in Indonesia Draft September /55 8 Glossary APBD ADD AMAN APBDesa APBN ASEAN Badiklat (Badan Diklat) Baperjakat Bapertarum Bappeda Bappenas BKD BKD BKN BKP BKPRD BKTRN BLU BPD BPD BPK BPKP BPMPD BPN BPS BUMD BUMN Bupati Camat CSR DAK DAU Anggaran Pendapatan dan Belanja Daerah/Local government annual budget plan Alokasi Dana Desa/Village allocation fund Aliansi Masyarakat Adat Nusantara/ Indigenous peoples alliance of the archipelago Anggaran Pendapatan dan Belanja Desa/Village budget plan Anggaran Pendapatan dan Belanja Negara/State budget plan Association of Souteast Asian Nations Badan Pendidikan dan Latihan/Regional public servant training center Badan Pertimbangan Jabatan dan Kepangkatan/Promotion advisory board in local government Badan pertimbangan tabungan perumahan PNS/state agency managing public servants' saving for housing Badan Perencanaan Pembangunan Daerah/Regional planning agency Badan perencanaan Pembangunan Nasional/National development planning agency Badan Kepegawaian Daerah/Personnel management agency Bakan Kepegawaian Daerah/Regional public servant administration agency Badan Kepegawaian Nasional/State civil servant administration agency Badan Ketahanan Pangan/Food security coordinating agency Badan Koordinasi Penataan Ruang Daerah/Regional spatial planning coordination board Badan Koordinasi Tata Ruang Nasional/National spatial planning coordination board Badan Layanan Umum/Public service unit with autonomy in financial management Badan Permusyawaratan Desa, village legislative. Bank Pembangunan Daerah/Local developmet bank owned by local government. Badan Pengawas Keuangan/The audit board Badan Pengawasan Keuangan dan Pembangunan/Internal state auditor Badan Pemberdayaan Masyarakat dan Pemerintahan Desa/Coordinating Agency for Community and Village Institutions Empowerment Badan Pertanahan Nasional/National land agency Badan Pusat Statistik/National statistic body Badan Usaha Milik Daerah/Local government owned enterpise, sometimes also called Perusahaan Daerah (Perusda) Badan Usaha Milik Negara/State own enterprise The head of kabupaten government The head of kecamatan administration support unit Corporate Social Responsibility Dana Alokasi Khusus/special allocation fund, LG revenue source from national government transfer. DAK is an earmrked revenue where national government has some power to control and monitor. Dana Alokasi Umum/general allocation fund, a LG revenue source from national government transfer which equal to the need of PNS salary payement plus fiscal gap. The function of PAD is to minimize the gap of revenues among local governments.

56 Guidebook to local governments in Indonesia Draft September /55 DBH Depdagri Desa Diklat PIM DP3 DPA-SKPD DPD DPPKA DPR DPRD Dusun Eselon FC GDP Golongan GR Gubernur HDI ILPPD IPHHBK IPHHK IUPHHBK IUPHHK IUPJL IUPK Jaring Asmara JFU Kabupaten KDP Kecamatan Kelurahan Kempan Kepala desa Kota Dana Bagi Hasil/shared revenue fund, a LG revenue source from national government transfer which is coming from natural resources taxes, income tax, and non-household property tax Departemen Dalam Negri/Ministry of home affairs (MoHA) An autonomus community governance unit administered by kabupaten governments and have techincal supports from kecamatan Pendidikan dan Latihan Kepemimpinan/Leadership training Daftar Penilaian Pelaksanaan Pekerjaan/Staff performance evaluation format Daftar Pelaksanaan Anggaran Satuan Kerja Pemerintah Daerah/Budget implementation list of local government working units Dewan Perwakilan Daerah/Regional representative council (another chamber in parliament beside DPR) Dinas Pendapatan dan Pengelolaan Keuangan dan Aset Daerah/Finance and asset management agency Dewan Perwakilan Rakyat (DPR)/national parliament Dewan Perwakilan Rakyat Daerah (DPRD), local legislative which exist both at province level and at kabupaten/kota level Administration support unit under desa Hierarchical structural position of jobs, only public servants with managerial position has eselon Fiscal capability Gross Domestic Product Rank of public servant, regardless the job and the position, all public servants have golongan Government regulation/peraturan Pemerintah Governor, the head of province government Human Development Index Informasi LPPD/The summary of LPPD (local government management report) for citizens Izin Pemungutan Hasil Hutan Bukan Kayu/Collection of non timber forest product license Izin Pemanfaatan Hasil Hutan Kayu/Collection of timber license Izin Usaha Pemanfaatan Hasil Hutan Bukan Kayu/Utilization of non-timber forest products license Izin Usaha Pemanfaatan Hasil Hutan Kayu/Utilization of timber forest products license Izin Usaha Pemanfaatan Jasa Lingkungan/Environmental service license Izian Usaha Pemanfaatan Kawasan/Forest area utilization license Jaring aspirasi masyarakat/community aspiration capturing session Jabatan Fungsional Umum/General functional position District, the third tier of Indonesian government under the national and the province governments, in rural regions. Kecamatan Development Project Administration support unit under kabupaten/kota Administration support unit under kecamatan in kota Kementrian pemberdayaan aparatur negara/ministry for the empowerment of state apparatus The head of desa Municipality, the third tier of Indonesian government under the national and the province governments, in urban regions.

57 Guidebook to local governments in Indonesia Draft September /55 KPK KPU KUA LAKIP LAN LKPD LKPJ LPPD Lurah MA MK MoHA MPR Musrenbang Mutasi NGO OECD PAD PADesa Pancasila PDAM Perda Perdes Perpres Perpu Perusda PNPM PNS PP RAPBD RDTR Renja-SKPD Renstra-SKPD RKPD RKPD RKPDesa RPJMD Komisi Pemberantasan Korupsi/Corruption eradication commission Komisi Pemilihan Umum/General election commission Kebijakan Umum Anggaran/General budget policy Laporan Akuntabilitas Kinerja Instansi Pemerintah/Government institution permormanc accountability report Lembaga Administrasi Negara/National institute of public administration Laporan Keuangan Pemerintah Dearah/Local government financial report Laporan Keterangan Pertanggungjawaban/Local government accountability report for DPRD Laporan Penyelenggaraan Pemerintahan Daerah/Local governance management report for central government The head of kelurahan administration support unit Mahkaman Agung/Supreme court Mahkamah Konstitusi/Constitution court Ministry of Home Affairs (Departemen Dalam Negeri) Majelis Permusyawaratan Rakyat/People consultative assembly (the parliament) Musyarawah Perencanaan Pembangunan Daerah/Regional development plan deliberation The change of status of particular part of public servant personal profile; for example, the change of rank and base Non Government Organization Organization for Economic Cooperation and Development Pendapatan Asli Daerah/own-source revenue, a LG revenue source which directly collected by local governments Pendapatan Asli Desa/Village own-source revenue The five principle, Indonesian state philosophy Perusahaan Daerah Air Minum/Local government water utilities enterprise Peraturan daerah/regional law Peraturan desa/desa (village) law Peraturan Presiden/Presidential regulation Peraturan pemerintah pengganti undang-undang/government regulation as substitue to undang-undang (law) Perusahaan Daerah/Local government enterprise Program Nasional Pemberdayaan Masyarakat/National program for community empowerment Pegawai negeri sipil/permanent public servants. Usually people stay as PNS till pension once they've recruited. Peraturan Pemerintah/Government regulation Rencana Anggaran Pendapatan dan Belanja Daerah/the draft of local annual government budget plan Rencana Detail Tata Ruang/Detail spatial plan Rencana Kerja Satuan Kerja Pemerintah Daerah/Annual work plan of SKPD Rencana Strategis Satuan Kerja Pemerintah Daerah/Medium term strategic plan of local government working unit (5 years) Rencana Kerja Pemerintah Daerah/Local government annual work plan Rencana Kerja Pemerintah Daerah/Annual regional development plan Rencana Kerja Pemerintah Desa/Village annual work plan Rencana Pembangunan Jangka Menengah Daerah/Medium term regional development plan (5 years)

58 Guidebook to local governments in Indonesia Draft September /55 RPJMDes Rencana Pembangunan Jangka Panjang Desa/Village medium term development plan (5 years) RPJPD Rencana Pembangunan Jangka Panjang Daerah/Long term regional development plan (20 years) Rukun Warga (RW) Rukung Tetangga (RT) RUTR Sekda SIMDA SIMKEUDA SIMPEG SIPKD SK SKPD TAPD TKK UPP UU UUD Walikota Administration support unit under kelurahan Administration support unit under dusun/rw Rencana Umum Tata Ruang/General spatial plan Sekretarit Daerah/regional secretary, the highest carrier position in one region Sistem Informasi Daerah/Regional information system Sistem Informasi Keuangan Daerah/Local Govenment Financial Information System (promoted by BPKP) Sistem Informasi Manajemen Kepegawaian/Personnel management information system Sistem Informasi Pengelolaan Keuangan Daerah/Local government financial management information system (promoted by MoHA) Surat Keputusan/decree Satuan Kerja Pemerintah Daerah/local government working units or local government agencies Tim Anggaran Pemerintah Daerah/Executive budget planning team Tenaga Kerja Kontrak/Temporary local government employees; Other names include Tenaga Kerja Daerah (TKD), Tenaga Honor Daerah (THD), and Honor Daerah (Honda) Urban Povery Project Undang-undang/law Undang-Undang Dasar/the Constitution The head of kota government

59 Guidebook to local governments in Indonesia Draft September /55 9 Annexes 9.1 Annex-1: Organization Structure of Dinas Kehutanan in the Province of Jawa Tengah Kepala Dinas Kehutanan Sekretaris Jabatan Fungsional Program Umum Kepegawaian Keuangan Bidang Planologi Kehutanan Bidang Pengusahaan Hutan Bidang Rehabilitasi & Pengembangan Sumberdaya Hutan dan Lahan Bidang Pengukuhan Hutan Konservasi Alam Seksi Inventarisasi & Sistem Informasi Kehutahan Seksi Pengendalian Industri Pengolahan Hasil Hutan Seksi Rehabilitasi Dearah Aliran Sungai Seksi Pengendalian Pemanfaatan Kawasan Konservasi dan Hutan Lindung Seksi Pengolahan Hutan Seksi Pengukuhan & Penatanagunaan Hutan Seksi Pengendalian dan Penatausahaan Hasil Hutan Seksi Pengendalian dan Budidaya Kehutanan Seksi Pengembangan Hutan Hak dan Kelembagaaan Seksi Pengendalian Pemanfaatan Tumbuhan & Satwa Liar Seksi Perlindungan Hutan UPTD/Balai Pemanfaatan Peredaran Hasil Hutan I, II, III & IV UPTD/Balai Penelitian Tumbuhan dan Pengelolaan Tahura Source:

60 Guidebook to local governments in Indonesia Draft September Annex 2: Organization Structure of Sekretariat Daerah Kabuapaten Lombok Tengah B U P A T I WAKIL BUPATI Kelompok Jabatan Fungsional SEKRETARIS DAERAH SETWAN Asisten Adm. Pemerintahan dan Kesejahteraan Rakyat Asisten Adm. Perekonomian dan Pembangunan Asisten Administrasi Umum Bagian Administrasi Pemerintahan Umum Pemerintahan Umum Otonomi Daerah Pemerintahan Desa dan Kelurahan Bagian Humas dan Protokol Pemberitaan dan Hubungan Masyarakat Protokol Sandi dan Telekomonikasi Bagian Administrasi Kesejahteraan Agama, Nakertrans dan Ormas. Pemb. Masy., PP KB dan Kesehatan Pendidikan, Seni Budaya, Pemuda dan Olahraga Bagian Hukum Perundangundangan Dokumentasi dan Penyuluhan Hukum Bantuan Hukum dan Hak Asasi Manusia Bagian Administrasi Perekonomian Indag., Koperasi dan UKM Sarana dan Prasarana Perekonomian Sumber Daya Alam Bagian Administrasi Pembangunan Perencanaan Pengendalian Pelaporan Bagian Pengolahan Data Elektronik Perekaman dan Verifikasi Data Telematika dan Manajemen Sistem Informasi Penelitian dan Pengembangan Tekno. Informasi Bagian Penanaman Modal dan BUMD Promosi dan Kerjasama Pengendalian & Pengawasan Izin Investasi Informasi dan Data Bagian Umum Rumah Tangga Tata Usaha Administrasi Keuangan Bagian Aset Daerah Pengadaan dan Pengawasan Penatausahaan Penilaian dan Ganti Rugi Bagian Organisasi Kelembagaan Ketatalaksanaan Analisis Beban Kerja dan Adm. Kepegawaian Bagian Keuangan Anggaran Perbendaharaan, Verifikasi dan Kas Daerah Pembukuan Source: