DSF Quarterly Report December 2010

DSF QUARTERLY REPORT DECEMBER 2010

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DSF Quarterly Report December 2010

Table of Contents Introduction ......................................................................................................................................1 DFID Review of the DSF: Follow-Up .............................................................................................1 Programme Implementation .............................................................................................................1 Local government borrowing (municipal bonds). ........................................................................1 Regional financial information systems (SIKD). .........................................................................2 Monitoring and evaluation of special allocation funds (DAK). ...................................................3 Policy framework (grand design) for fiscal decentralization (GDFD).........................................3 Evaluation of ‗proliferated autonomous regions‘.........................................................................3 Costing and implementation of minimum service standards (MSS) ............................................4 Formulation of norms, standards, procedures and criteria (NSPK) .............................................4 Spatial planning............................................................................................................................4 Border area development. ............................................................................................................4 Inter-regional cooperation. ...........................................................................................................5 Sub-national investment climate reform. .....................................................................................5 DPRD orientation .........................................................................................................................5 Government training and education centre development: introducing competency-based standards for public service delivery. ...........................................................................................6 Quality Assurance ............................................................................................................................6 The Future of the DSF ......................................................................................................................7 Monitoring Framework ....................................................................................................................7 Financial Status Snapshot .................................................................................................................7 DSF Executive ..................................................................................................................................9 Risk Management .............................................................................................................................9 Annex A: Monitoring Framework ..................................................................................................11 Annex B: Financial Report .............................................................................................................29 Annex C: List of Abbreviations, Acronyms, and Translations........................................................33

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DSF Quarterly Report December 2010

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DSF Quarterly Report December 2010

Decentralization Support Facility Quarterly Report (For the quarter ending 31 December 2010)

Introduction 1.

In accordance with the DSF operations manual, this report is submitted within 30 days of the end of the fourth quarter of 2010.

2.

The report discusses implementation progress for a cross-section of activities within the body of the report and for all activities in the monitoring framework in Annex A. 3.

In Table 1, a summary is presented of total projected disbursements and commitments (programming and operations) against cash held and confirmed transfers.

Table 2 charts disbursement for 2009/10 and, for October/November 2010, compares it with projections. A full financial report is set out in Annex B.

DFID Review of the DSF: Follow-Up 4.

In late August/September 2010, a review of the DSF programme was conducted on behalf of the DSF‘s principal financial donor (DFID).

5.

Among other things, the reviewers recommended that a detailed DSF work plan be drafted through to September 2011 – based on realistic disbursement estimates and the necessity to ensure good quality implementation in the time remaining.

6.

Discussions on the work plan and associated matters - within government and between government and the DSF Executive - were held on several occasions during the reporting period, notably at a government DSF technical team retreat held in Bandung on the 18th and 19th of November, and – for Ministry of Home Affairs (MoHA) activities – a meeting chaired by the Head of the Division for International Financial Institutions and International Organization Cooperation, Center for Administration of Overseas Cooperation that was held on 1st December 2010.

7.

These meetings recommended that, where necessary, activities should be ‗rationalised‘ (meaning reduced in scope and/or complexity or terminated) so as to accommodate speed of disbursement estimates and confirmed closing date constraints and so as to optimise good quality in activity implementation. It was suggested that this be done by government in close collaboration with staff of the DSF Executive.

Programme Implementation 8.

A detailed up-date of programme implementation during the quarter is set out in Annex A. Noteworthy features of such implementation are discussed briefly below.

9.

Local government borrowing (municipal bonds). Discussions concerning revisions of the government regulation on local borrowing (PP 54/2005) were completed during the reporting period. All articles in the revised government regulation have been

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DSF Quarterly Report December 2010

agreed by Ministry of Finance (MoF), MoHA, BAPPENAS, Ministry of Law and Human Rights, and the Secretary of Cabinet. In January 2011, a draft of the revised regulation will be sent officially by the Minister of Finance to the Secretary of Cabinet for final approval and sign-off by the President. With regard to the preparation of the (Jakarta Special Capital Region) DKI municipal bond, DSF consultants have provided technical assistance to the team responsible for preparing the issuance of DKI municipal bonds.

The assistance, among other things, includes: preparation of a budget for bond issuance; socialisation of municipal bond underlying principles and issues to the finance committees of local parliaments; drafting of local regulations required for the issuance and management of municipal bonds; liaising with underwriters and other agencies; and communicating with MoF on remaining requirements for bond issuance. In addition, DSF consultants have drafted two local regulation templates for generic use by DG Fiscal Balance in the context of municipal bonds. The first such regulation defines procedures for issuing the bond, while the other is concerned with managing the bond during disbursement, interest payments, and principal redemption periods. The templates have been approved by DG Fiscal Balance and the Capital Market and Financial Institution Supervisory Agency.

10. Regional financial information systems (SIKD). In early November 2010, a mini application (‗patch‘) that enables local governments to present data in accordance with the standard requirements of the SIKD database at the MoF was disseminated to more than 200 local governments that utilise the regional management information system (SIMDA). This was done during a technical workshop in Denpasar held by the Audit and Development Supervising Agency (which developed the SIMDA system). During the event, the electronic data transfer mechanisms were tested using data from 9 local governments. The result is that to date a total of 35 local governments have now submitted data electronically in the standardised format. Local governments have proposed that the request for the submission of regional financial data to the SIKD be instituted through a regulation that stipulates the level and type of data required. A Minister of Finance‘s Regulation is therefore being drafted that specifies the format and requirements of data to be submitted to SIKD by local governments that are using the ‗patch‘.

11. A second group of local governments is using a system known as the regional financial management system and discussions have been held with the DG Regional Finance, MoHA about obtaining electronic data from these local governments as well, and incorporating those data into SIKD. 12. The remaining local governments still employ manual data entry, and a contract for manual data entry is being drafted. Data to be entered manually comprise budget (APBD) and budget realisation information for FY 2008-2010.

13. Finally, as follow-up to the capacity building on regional financial analysis provided to the Directorate for Funding Evaluation and Regional Finance Information (see September 2010 Quarterly Report), the top four working papers have been finalised and published on the DG Fiscal Balance website (http://www.djpk.depkeu.go.id/information/all/).

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14. Monitoring and evaluation of special allocation funds (DAK). A contract for the implementation of DAK monitoring and evaluation systems - as set out by the ‗joint circular letter‘ in the province of D.I. Yogyakarta - was completed in November 2010.

However, due to the Mt. Merapi eruption, facilitator training sessions had to be postponed to the beginning of January 2011. With a view to undertaking more strategic and cost-effective activities related to the management of DAK, the implementation of similar activities in the provinces of Jambi, Central Kalimantan, West Sulawesi and North Maluku is currently on hold. Further discussions between the DSF and the National Development Planning Agency (BAPPENAS) on the possibility of reducing activity coverage and/or starting a new activity related to the DAK are to take place in January 2011.

15. Policy framework (grand design) for fiscal decentralization (GDFD). An external review of the current draft of GDFD calls, among other things, for the document to incorporate important societal trends that are now occurring and/or that are likely to occur within the next 20 years. Such trends include: accelerated urbanisation, which will create a significant need for more and better infrastructure to support service delivery; and the continued growth of the working age population, which will require substantial job creation and economic growth (at national and local levels). The intergovernmental fiscal system will clearly need to be designed with such developments in mind.

Moreover, the review indicated the need for discussing the trade-offs between growth and equity in the design and implementation of an intergovernmental fiscal system. The Assistance Team will revise the GDFD accordingly. The DSF is lobbying for the elevation of the significance of GDFD discussions among, first, various DGs within MoF and, second, among related Deputies in BAPPENAS and DGs in MoHA. This is designed to prepare the ground for serious consideration of a revised GDFD at the national level.

16. During the reporting period, revisions were made to the draft analysis of the general allocation funds (DAU), the special allocation funds, and the revenue sharing instrument (DBH) (see September 2010 Quarterly Report). The revisions give particular attention to the refinement of an alternative DAU formula.

17. Evaluation of ‘proliferated autonomous regions’. DSF has enabled the socialisation of MoHA Regulation 21/2010 on Guidelines to Evaluate Local Government Performance (in support of Law 22/1999 on Regional Autonomy) in Jakarta; and has financed five workshops whose purpose was to ‗clean‘ and validate evaluation data supplied by local governments. During the reporting period, a technical evaluation team comprising experts from universities, Indonesian Institute of Sciences, Indonesia Chamber of Commerce and Industry, NGOs and the mass media – was established by the Directorate for Capacity Development and Evaluation of Regional Performance, MoHA. The job of the team was to review critically the evaluation work done to date, and the resulting report, and to suggest improvements. DSF staff also provided substantive inputs, particularly on methodological issues (such as the use of improved composite indices and proper classification of results). The Director General of Regional Autonomy, MoHA, has indicated that the revised report will inform discussions concerning the revision of Law 32/2004 and, in particular, those parts of the law that deal with the proliferation regions.

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18. Costing and implementation of minimum service standards (MSS)1. Testing results for an electronic costing system for health in Kota Yogyakarta were presented to the Ministry of Health (MoH) on 13th December 2010. The meeting recommended improvements to methods of data entry and other adjustments to the system. A follow-up workshop was held on 29-30th December 2010 in Kota Yogyakarta, which finalised the costings. These will be presented to MoH and MoHA soon and later will be disseminated to other pilot regions in the province of D.I. Yogyakarta, probably by the end of January 2010. DSF is also helping the Ministry of Environment to develop an electronic costing system for environment MSS based on a draft costing manual developed by the ministry.

Important parts of the system (those that apply at the provincial level) should be completed in January 2011. Other ministries that have developed their costing manuals are the National Family Planning Coordinating Board (BKKBN), the Ministry of Women‘s Empowerment, and the Ministry of Public Housing.

19. Formulation of norms, standards, procedures and criteria (NSPK)2. Inception and mid-term reports for this activity – the latter incorporating changes recommended by government and the DSF Executive on the basis of the inception report – were submitted on time (in November and December, 2010 respectively). The mid-term report is being evaluated. A manual for helping MoHA to assess NSPK formulated by sectoral ministries is being drafted. Preparations (under recipient execution) are underway for NSPK implementation impact assessments.

20. Spatial planning. Work continues on improving the relationship between regional spatial and development planning and the alignment of regional and national spatial plans. In the last quarter of 2010, training was provided to officials from three provincial governments and officials from two local governments in each province – West Sumatra, Gorontalo and East Java. Structured planning formats have been developed that are designed to improve horizontal integration between regional planning documents as well as between spatial planning documents at regional and national levels. Training was provided on how to use the formats by applying them to current plans in each province.

BAPPENAS will disseminate the final planning document formats to other regional documents in 2011. In the next quarter, training will be provided to staff from the National Agency for the Coordination of Spatial Planning (BKPRN). This agency is tasked with reviewing all draft regional spatial planning documents before they can be passed into law. Also in the next quarter, two local governments will receive intensive support to revise their spatial pans following BKPRN‘s review.

21. Border area development. In December 2010, a draft master plan for the development of border areas was presented to the National Agency for Border Management (BNPP). BNPP has officially endorsed the plan, which constitutes a significant achievement in a relatively short time. The plan covers the period 2011-2014 1

Minimum service standards specify the minimum type and quality of basic services to which citizens have entitlement by law (Ministry of Home Affairs Regulation No. 79/2007). To date, MSS have been issued in 13 sectors, namely: health, education, social, family planning, environment, public works, public housing, women‘s empowerment, culture, food security, manpower, population and civil registration, and communication and information.

2 These are formulated by sectoral ministries as guidance to provincial and district/city governments in the implementation of their functions.

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and includes the vision, mission, basic principles, policy direction, strategies, and programs for BNPP. A monitoring and evaluation framework will be developed during the next quarter to support the implementation of the master plan. A national action plan for 2012 will then be developed, which will focus on border area development priorities for the 12 border provinces. At the same time, in a parallel and related activity led by BNPP, guidelines for the preparation of action plans by local governments in border areas have been drawn up. The guidelines promote a new approach to border area planning and budgeting, including the use of kecamatan as loci of development; better participation in plan preparation; and provincial forums for discussing programs and projects proposed for border area development. Draft action plans based on the guidelines are expected by the first quarter of 2011.

22. Inter-regional cooperation. In the fourth quarter of 2010, with support from the DSF, an analysis was conducted of inter-regional cooperation in Indonesia. The resulting report pays particular attention to the roles and functions of the 12 Regional Management Forums (RMF) located across Indonesia. In the next quarter, work will begin in four RMF to provide capacity building support - by helping with the development of annual and medium-term planning documents. This is a joint venture between BAPPENAS and the Ministry for the Development of Disadvantaged Regions. At the same time, a parallel activity led by the Directorate De-concentration and Cooperation of MoHA will begin to develop road map of inter-regional cooperation; strengthen inter-ministerial coordination for inter-regional cooperation; provide guidelines and good practice models to regional governments; and help MoHA with policy and regulation development.

23. Sub-national investment climate reform. The activity builds on the achievements of the original program, which was to institutionalize capacity within local governments (LGs) to implement effective, efficient and accountable regulations and processes for business licensing. The program: (i) supports MoHA in monitoring the performance of ‗one stop shops‘ (OSS) for business licensing across the country; (ii) helps three provincial governments (PGs) to establish district-level OSS and improve the performance of existing ones; and (iii) supports BAPPENAS and three PGs in disseminating and utilising regulatory impact assessment methods.

24. The follow-on activity was proposed for execution through a grant agreement. The grant agreement was signed by the World Bank and The Asia Foundation in November 2010. Subsequently, meetings were held with government counterparts to update the implementation timeframe. Implementation of project activities will start early in the first quarter of 2011.

25. DPRD orientation. This activity was proposed by the Government Education and Training Center (Diklat) of MoHA. It provides general introduction to DPRD roles and responsibilities for all DPRD members in targeted provinces and kabupaten/kota based on the Ministry of Home Affairs Circular Letter No.161/3229/SJ regarding Orientation/Introduction to Duties of DPRD Members at the Provincial, Kabupaten, and Kota level. The activity also addresses fundamental issues related to nationalism and state responsibilities.

26. The program is managed by Diklat through an amendment to an existing grant agreement (signed in January 2010 and effective in March 2010). Diklat registered the

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grant, and obtained budget implementation entry list (DIPA) approval from MoF in November 2010.

27. Following DIPA approval, Diklat conducted two training courses for DPRD members in November-December 2010. The training addressed basic concepts, values, and relevant regulations and laws governing aspects of state affairs, local government, and basic duties and functions of DPRD members. Sixty-eight DPRD members attended the training courses.

28. Diklat has revised the implementation plan to take account of the fact that newlyelected local legislatures have been working for almost a year. This will allow Diklat through an orientation course - to obtain input from DPRD members regarding their first year of operation and issues they have been dealing with while performing their duties.

Based on the input received, Diklat will update the training program and conduct training of trainers early in the first quarter of 2011, which will be followed by the remaining set of orientation courses for DPRD members.

29. Government training and education centre development: introducing competency-based standards for public service delivery. This activity supports government‘s provision of competency-based education and training for improved public service delivery to MoHA and local government officials. The activity is aligned with the President's national bureaucracy reform agenda, which among other things aims to create a competency and performance-based human resource management system. The following outputs have been produced so far: (1) a draft ministerial regulation on the strategic framework for local government competency standards; (2) a draft strategic framework that includes an overview of the background and issues related to local government competencies, policy directions, steps for developing standards, operationalisation of standards, and a road map for rolling out competency-based standards in various sectors with local governments; (3) a draft plan for the standardisation of competency-based standards for population administration and civil registration (the pilot sector included in the DSF support for development of competencybased training); (4) a draft competency certification scheme on population administration and civil registration; and (5) draft competency testing materials for 10 competency units.

Diklat has also implemented 10 training workshops, of 25 participants each, covering assessment, verification, and certification of competency-based standards for various units within MoHA (including the Directorate General for Population Administration, Directorate General for Regional Autonomy, Personnel Bureau, Organizational Bureau, Legal Bureau, and Training and Education Centre), the National Civil Service Agency (BKN-Badan Kepegawaian Nasional), the National Agency for Professional Certification (BNSP-Badan Nasional Sertifikasi Profesi), the Ministry of State Apparatus Empowerment and Bureaucracy Reform (Kemenpan-Kementerian Pendayagunaan Aparatur Negera & Birokrasi Reformasi), the State Ministry for Administrative Reform, and a number of local governments (East Java, West Kalimantan, West Nusa Tenggara) - with equal representation from central and local governments.

Quality Assurance 30. Several problems have arisen in relation to the activity ‗Strengthening Local Government Natural Resource Management Capability‘. These include late submission

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and unsatisfactory quality of the inception report. Formal 30-day notice of rectification requirements has been given to the implementing agent.

31. In addition to normal quality control and reporting requirements, where recipient and/or Bank-executed activities are extremely complex or are deemed to pose significant quality and/or speed of implementation challenges, implementing agents will be invited to make workshop presentations of plans and progress to government and/or to the DSF Executive.

32. The following activities are among those that will be making such presentations early in the New Year: (1) Institution Building for the Integration of National-Regional Development and Spatial Planning; (2) Capacity Development for Minimum Service Standards Costing and Implementation; (3) Formulation of Norms, Standards, Procedures and Criteria for Local Government Service Delivery; and (4) Management Strengthening and Institution Building for Local Public Service Providers.

The Future of the DSF 33. This matter was raised at the government DSF technical team retreat held in Bandung on the 18th and 19th of November 2010 and a proposed results-based programme was considered. It was determined that the questions involved merited further discussion by government. To consider these and related matters, it is likely that a retreat involving government and members of the DSF Executive will be held early in the first quarter of 2011.

34. If there is to be a smooth transition, decisions will need to be taken soon so that a new programme can be designed, and detailed proposals can be made concerning, funding and institutional and transition arrangements for the DSF.

Monitoring Framework 35. Annex A summarises progress made to date according to the agreed monitoring framework.

Financial Status Snapshot 36.

A detailed financial report is set out in Annex B.

37. Table 1 below sets out the cash position of the DSF as of 31st December 2010 and total projected disbursements (programme and operations) to March 2012, the final date for programme payments.

38. It is evident from Table 1 that the DSF will have sufficient funds to cover its projected disbursements through to the confirmed closing date for activities of 30th September 2011 and the final date for programme payments of March 2012.

Table 1: Snapshot of Financial Status Funds pledged Funds received Investment income Other receipts

(USD) 44,775,547 29,000,052 1,465,262 24,753

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DSF Quarterly Report December 2010

(USD) 30,490,067 22,986,171

Total income Disbursements and commitments Total cash available

7,503,896

Additional funds to be transferred

1,000,000

Funding ceiling

8,503,896

Total projected disbursements (to March 2012)3 Balance

8,439,634 64,262

39. An historical account of disbursements and commitments is set out in Table 2 and depicted graphically in Figure 1. Table 2 also contains a breakdown of disbursements and commitments against projections for the months of October and November 2010, and disbursement and commitments projections through to the end of September 2011.

Table 2: DSF Program Disbursements & Commitments (USD) - to 30th November 2010 Actual Disbursements and Commitments (average per month)

Feb. - March 2009

338,082

Apr. - May 2009

388,176

Jun. – Jul. 2009

397,448

Aug. – Sept. 2009

240,525

Oct. – Nov. 2009

413,357

Dec. 2009 – Jan. 2010

386,456

Feb. - March 2010

857,933

Apr. - May 2010

792,132

Jun. – Jul. 2010

867,337

Aug. – Sept. 2010

925,786

Oct. – Nov. 2010

1,030,010

Dec. 2010 – Jan. 2011

Projections (average per month)

% Actual vs Projections

857,000

120%

1,714,000

574,250

1,148,500

Feb. – Mar. 2011

1,066,750

2,133,500

Apr. – May. 2011

619,500

1,239,000

Jun. – Jul. 2011

912,500

1,825,000

Aug. – Sept. 2011

556,888

1,113,775

Total Disbursement Projections Oct 2010 - Sept 2011

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Total Projections

9,173,775

Includes all programming and overhead costs (DSF Executive staff and office, and some operations costs). Activities must end by 30th September 2011, but a certain amount of overhead will be required during the (financial) wind-up period, October 2011 – March 2012.

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DSF Quarterly Report December 2010

Figure 1: Disbursements & Commitments

DSF Executive 40. In relation to staffing, the following developments took place during the reporting period: first, the Deputy Programme Manager resigned and her responsibilities were absorbed by other professional staff. Handover and transition arrangements were managed smoothly and with minimum disruption to activities. Second, two project or activity support positions were created and filled by well-qualified internal staff (nationals who are Master degree holders). These positions will help with day-to-day aspects of project implementation and quality control.

41. Subject to natural attrition, it has been determined that staffing levels will be maintained at full strength through to 31st December 2011. Thereafter there will be significant reductions through to the closing date for disbursements of 31st March 2012.

Risk Management 42. The main risk associated with closure of the facility remains that outlined in the September 2010 quarterly report, namely, the maintenance of implementation quality control. In order to mitigate this risk, and in addition to normal quality control measures, during the reporting period detailed work and disbursement plans formed the basis of DSF Executive bi-weekly internal portfolio review meetings and the basis of regular discussion with relevant stakeholders(government, Bank, and principal financial donor).

This will continue through to the closure of the facility. In addition, as mentioned above, two (national) programme support positions have been created for this purpose (through the re-design and upgrading of existing positions).

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DSF Quarterly Report December 2010

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DSF Quarterly Report December 2010

Annex A: Monitoring Framework Project Name

Decentralization Support Facility (DSF) Phase 2

Goals

Indicators

Improved socio-economic development and reduced poverty

Indonesia's Human Development Index (HDI)

Purpose Equitable, accountable and high quality public services provided by national and local governments

Progress

Rating

Comment

Indicators

Progress

Rating

Comment

Local government expenditure and local government performance in basic public service delivery

Further contributions to the development and dissemination and implementation of legislation and procedures governing functional assignments; minimum service standards including costing; institution and capacity building of service providers; and identification and diffusion of good practices.

2*

* Target 1 – Likely to be completely achieved. The outputs/ purpose are well on the away to completion (or completed).

2 – Likely to be largely achieved. There is good progress towards purpose completion and most outputs are likely to be achieved, particularly the most important ones.

3 – Likely to be partly achieved. Only partial achievement of the purpose is likely and/or achievement of some outputs.

4 – Only likely to be achieved to a very limited extent. Purpose unlikely to be achieved with only a few outputs likely to be achieved.

5 – Unlikely to be achieved. No progress on outputs or purpose.

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DSF Quarterly Report December 2010

Output 1: Public Service Delivery Objectives

Indicators

Progress

Rating

1.1. Guidelines (norms, standards, procedures and criteria-NSPK) for service delivery in selected sectors formulated

Number of new guidelines (norms, standards, procedures and criteria) for service delivery completed/issued

Phase 1: Consultations held with regions in July 2009 for formulation 1 of 26 norms, standards, procedures and criteria (NSPK) in health. This resulted in confirmation that 10 out of 26 NSPK were defined as eligible for further action. 5 out of the 10 NSPK have been issued by the Minister of Health as regulations including: hospital licensing; foreign health workers in Indonesia; and hospital classification.

Assessment on the conformity of the 26 draft NSPK in health with Government Regulation 38/2007 resulted in prioritisation of at least 5 health functions for NSPK formulation. Brief assessments were also made of NSPK in other fields i.e. agriculture, trade, land management, energy and mineral resources.

A key product of this activity is a paper on ―Exploring Reform Options in Functional Assignments,‖ which was completed in March 2008.

The final report on the NSPK assessment was submitted in August 2009.

Phase 2: The Grant Agreement for ACN 11/2009 on Formulation of 2 Norms, Standards, Procedures and Criteria (NSPK) has been countersigned. The special account has been issued and the adjusted budget implementation document (DIPA) for 2011 is being finalized.

The procurement plan and annual plan were updated.

8 sectors were proposed for NSPK formulation and presented to sectoral ministries for confirmation (expected in the 1st quarter of 2011).

Comment

The Local Government Affairs directorate within the Directorate General of Regional Autonomy has been restructured resulting in NSPK being managed by two directorates: UPD 1 and UPD 2.

UPD 1 is responsible for project management. The officer in charge remains the same.

For the Bank executed component, a contract for assessment of NSPK status with University of Gadjah Mada-Centre for Economic and Public Policy Study (UGM-CEPPS) has been signed.

An Inception Report was submitted to MoHA; recommendations were accommodated in the Mid Term Report of December 2010. Collection of NSPK status has begun.

A manual to assist MoHA with the assessment of NSPK formulated by sectoral ministries, has been drafted and is expected to be finalized in the 1st quarter of 2011.

Milestone 1.

NSPK status collected, mapped for all sectors, and database developed in the 1st quarter of 2011 1.2. Minimum Service Standards (MSS), in targeted sectors budgeted and implemented in

Implementation of MSS in selected sectors in selected districts and municipalities

Phase 1: A Manual for Minimum Service Standards (MSS) Costing 2 based on field testing of regional data was prepared by the Ministry of Health (MoH) in cooperation with MoHA and DSF. The manual was formalised by Minister of Health Decree 317/2009. DSF supported

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DSF Quarterly Report December 2010

Output 1: Public Service Delivery Objectives selected district governments

Indicators

Progress

Rating

the printing of 1000 copies of the manual which was distributed to the regions by MoHA and MoH. An electronic instrument for MSS costing in health has been developed with assistance from DSF. After first testing the costing instrument Yogyakarta is now uploading MSS related data.

MoHA, in cooperation with DSF, organised a seminar in commemoration of Regional Autonomy Day titled ―Creativity of Regions in Improving Public Services‖, which was opened by the Minister of Home Affairs. A television dialogue on the same theme was also organised. These events recognised regions and heads of regions for their creativity and innovative ideas as well as actions for improving public services. Regions were encouraged to be more creative and innovative in implementing their functions, and to more effectively document and disseminate experiences from service delivery and community improvements. It was also suggested that a revision of Law 32/2004 would encourage innovation by regions.

Phase 2: ACN 14/2009 on Capacity Development for Minimum 2 Service Standards Costing and Implementation has changed method of execution from Recipient executied to Bank executedConsultants have been contracted to implement the activities.

A national seminar on ―Implementation of Minimum Service Standards Towards Achievement of Millennium Development Goals (MDGs)‖ was conducted in June 2010. The objectives of this seminar were: (a) disseminate the issued MSS to regions to increase commitment of regions in MSS achievement; (b) launching of the capacity building programme on MSS costing and implementation; and (c) announcement of MSS as a national priority and effort in MDG achievement. The seminar was followed by discussions with pilot regions in preparation for Capacity Development for Minimum Service Standards Costing and Implementation activity. 5 provinces, 8 kabupatens and 5 kotas of pilot regions confirmed their participation.

Uploading data for MSS of Health costing using local budget (APBD) 2011 was presented by Dinas Kesehatan Kota Yogyakarta and discussed with the Ministry of Health.

Improvement of the electronic system and the uploading of data was completed in December 2010. The costing for MSS Health Kota Yogyakarta is available. The electronic system for costing MSS for the environment sector was developed based on the draft Environment MSS Costing Manual. It includes provincial and district level MSS. The provincial component has been discussed with the Ministry of Environment.

Comment

Due to the complex nature of this activity and limited timeframe, GoI has reduced the scope of work.

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DSF Quarterly Report December 2010

Output 1: Public Service Delivery Objectives

Indicators

Progress

Rating

Milestone 1 MSS implementation in Health in 5 selected districts is expected to be underway by the 1st quarter of 2011. MSS implementation for Environment is expected in the 2nd quarter of 2011.

1.3. Alternative service delivery schemes established in selected sectors and districts and municipalities with better access for women (ACN title: Management Strengthening and Institution Building for Local Public Service Providers (MSIB-LPSP))

Number of selected district governments developed pilot alternative schemes in service delivery and number of women reached by these pilot schemes

Phase 1: Assessment of Legal and Regulatory Framework report 1 completed in October 2009.

Regional Workshop was conducted in August 2009. The progress reports of each selected pilot region (district Serang, Lebak and city Cilegon) were presented at the workshop.

National Workshop on Alternative Mechanisms for Service Delivery (AMSD) was held in November 2009. Representatives from 3 regions in Province Banten presented preparation for the pilot implementation of: Management Strengthening and Institution Building for Local Public Service Providers.

The ‗Alternative Mechanisms for Service Delivery‘ (AMSD) activity was successfully completed in December 2009. A final report containing a blueprint for promoting AMSD was prepared and submitted to DSF. 2 Phase 2: The Final Report for SMS-AMSD pilot Implementation in target local governments in West Java completed Progress in the 4th quarter of 2010 was constrained by the change in management structure and counterpart staff in MoHA. This resulted in the need to obtain approval from the new PUM/MoHA counterparts to continue the MSIB-LPSP) project.

A workshop was held in mid-December to present the project content and objectives to the new PUM management while also seeking renewed commitment from provincial and local government representatives. The discussion resulted in joint approval of reduced project scope and revised time schedule.

Consequently, implementation of the pilot alternative schemes has been delayed.

An action plan for improved service delivery in the areas of population administration, regional hospital services and water supply services for six local government service providers is expected to be finalized in the second quarter of 2011

Comment

Women‘s empowerment was replaced by the Environment sector 1 province has withdrawn.from the activity.

Activity to be fully Bank executed Due to the complex nature of this activity, change in management structure and limited timeframe, GOI has reduced the scope of work.

Milestone 1 The Final Report on development of baseline data: Women‘s Access to Selected Public Services (Population Administration, Regional

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DSF Quarterly Report December 2010

Output 1: Public Service Delivery Objectives

Indicators

Progress

Rating

Comment

hospital and water provision services) has been completed.

Milestone 2 As a result of the management changes and reduced project scope milestone 2 and the target will need to be adjusted accordingly in the 1st quarter of 2011.

1.4. Improved public service delivery by selected local governments in border areas

Action plans for improved public service delivery completed by selected local governments in border areas

Development of standard operating procedure for newly established 2 National Agency for Border Management (BNPP); drafting implementing regulations of Law 43/2008 on state jurisdiction; and formal determination of border areas are largely finalized.

Progress in the 4th quarter of 2010 was constrained by the change in management structure, counterpart staff and counterpart institution from PUM to BNPP. This resulted in the need to obtain approval from PUM to continue the ―Institution Building for Accelerated Border Area Development‖ project under BNPP management A workshop was conducted to present the project content and objectives to the BNPP management. The discussion resulted in joint approval of reduced project scope and a revised time schedule.

A socialization meeting was held with representatives from regional governments to discuss the preparation of an action plan based on the master plan for State Border Management and Border Area Development 2011-2014.

Guidelines for Border Area Action Plan Preparation to be used by sectoral Ministries and Provinces/Kabupaten/Kota have been drafted and submitted to BNPP.

MoHA and Bappenas are seeking to strengthen cross-ministerial support for border area development. Activity 4.3 provides support to Bappenas for the production of a master plan for border area development.

Activity to be fully Bank executed.

Due to the complex nature of this activity and limited timeframe, GoI has reduced the scope of work.

Milestone 1 Public Service assessment in selected border areas expected to be completed by 1st quarter of 2011.

Milestone 2 Draft Action Plan for public service delivery is expected to be completed in the 2nd quarter of 2011.

The Final National Action Plan is expected to be produced and integrated into the Government Annual Work Plan (Rencana Kerja Pemerintah Kementrian/Lembaga) by the 3rd quarter of 2011.

1.5. Local governments adopt effective, efficient and accountable regulations and processes for business licensing

Local government Phase 1: The project has successfully delivered all outputs stipulated 1 performance in implementing in the contract, with regard to both One Stop Shops (OSS) for business OSS for business licensing licensing and use of Regulatory Impact Assessments (RIA).

A presentation of project achievements to all key stakeholders, including the DSF Management Committee, was held in January, 2010. This meeting reflected on lessons learnt and discussed national

15

DSF Quarterly Report December 2010

Output 1: Public Service Delivery Objectives

Indicators

Progress

Rating

Comment

strategies to scale up the pace and performance of sub-national business licensing reforms in order to improve the overall business and investment climate in the regions.

The Sub-National Business climate Reform activity was successfully completed in January 2010. Final report was submitted.

Phase 2: To ensure the momentum of this work, a follow-on project 2 was approved by the DSF Management Committee in late 2009.

The project will: (i) support MoHA in monitoring the performance of the OSS for business licensing across the country; (ii) support three selected provincial governments (PGs) to facilitate establishment of district-level OSS and improve the performance of the existing ones; and (iii) support the National Development Planning Agency (Bappenas) and three selected PGs in disseminating and utilising the RIA method.

The project is being implemented by the Asia Foundation (TAF) who signed a Grant Agreement with the World Bank in November 2010.

Milestone 1 (i) 10% increase in OSS operating under revised guidelines is expected to be met in January 2011. (ii) Target provinces and districts apply RIA to evaluate draft local regulations in target provinces and districts are expected to be achieved in April 2011.

Output 2: Fiscal Decentralization and Capacity Development Objectives

Indicators

Progress

Rate

2.1. The Ministry of Finance Regional Financial Information System recording local government budgets is upgraded

Number and process of data entry of local government budgets recorded in the Ministry of Finance Regional Financial Information System

Phase 1: DSF supported data entry of MoF‘s Regional Financial 1 Information System (SIKD) for Fiscal Year 2007 Support duration: May-August 2009.

Data entered and verified in Phase 1: Budget data (APBD, 2009): 481 districts and municipalities (94 percent of total) Realisation data (LRA, 2007): 351 districts and municipalities (75 percent of total).

Two user manuals were prepared: data entry procedure intended for data entry operators; and a guide for users to access the data.

Phase 2: ACN 12/2009 on Strengthening Data Provision to the 1 Regional Financial Information System by Sub-National Governments with Stand-Alone Electronic Data Bases, approved by DSF MC in October 2009.

Comment

16

DSF Quarterly Report December 2010

Output 2: Fiscal Decentralization and Capacity Development Objectives

Indicators

Progress Scoping mission to 4 local governments in North Sulawesi and 2 in East Java to review regional financial information systems carried out in December 2009, January and June 2010. Electronic data from the regions has been available for 8 districts as of June 2010.

The development of computer application/software intended for transferring electronic data from the regions to the MoF SIKD systems was completed in June 2010. In addition to transferring the data, the software is also designed for data entry purpose; the latter is an additional request from Directorate for Funding Evaluation and Regional Finance Information (EPIKD). After some revisions, the application was handed over to the Directorate of EPIKD, and installed in the Directorate‘s server in August 2010.

A video manual was developed to provide guidance to regions on the procedures to submit the electronic data to the Directorate of EPIKD. The video manual was distributed to the districts in a workshop held in Semarang in September 2010. At the workshop a total of 18 districts submitted their electronic data. The workshop was also intended to socialise a new Government Regulation on sanctions for districts that fail to submit financial reports in a timely manner.

In November 2010, a mini application (‗patch‘) that enables local governments to present data in accordance with the standard requirements of the SIKD database was disseminated to 200+ local governments that utilize the Regional Management Information System (SIMDA). During the event, the electronic data transfer mechanisms were also tested using data from 9 local governments.

A second group of local governments is using a system known as Regional Finance Management Information System (SIPKD) and discussions have been held with the DG Regional Finance (DJKD), MoHA about obtaining electronic data from these local governments as well, and incorporating the data into SIKD. A contract for manual data entry is being drafted. Data to be entered manually comprises Budget Data (APBD) and Realisation Data (LRA) for FY 2008-2010.

Capacity development in conducting regional financial analysis for Directorate of EPIKD staff completed. Short term training was held for 20 staff members in Bandung in July 2010. Participants completed a group paper on regional finance analysis. Eight short papers were produced and the four best presentations were presented to an audience including staff from other Directorates within DG Fiscal Balance. The top four working papers have been finalized and published on the DG Fiscal Balance website (http://www.djpk.depkeu.go.id/information/all/)

Rate

Comment

Local governments have proposed that the request for the submission of regional financial data to the SIKD be instituted through a regulation that stipulates the level and type of data required. A Minister of Finance Decree (PMK) is therefore being drafted that specifies the format and requirements of data to be submitted to SIKD by local governments using the ‗patch‘.

17

DSF Quarterly Report December 2010

Output 2: Fiscal Decentralization and Capacity Development Objectives

Indicators

Progress

Rate

Comment

Milestones 1 and 2   

2.2. Improved fiscal decentralization policy

Implementation of ‗Grand Design of Fiscal Decentralization‘ across government ministries and local governments

Data entry for LRA 2007 was suspended by the government to focus on LRA 2008 instead. The current LRA 2007 data is thus, in effect, 100 percent complete Data entry for 2008 will be conducted starting January 2011 The goal of having 5 percent, or 25 districts, submit data electronically to the EPIKD by December 2010 has been surpassed. By the end of this reporting period, a total of 35 districts had submitted financial data electronically.

ACN 13/2009 ACN on Improving the Policy Framework for Fiscal 2 Decentralization (‗Grand Design of Fiscal Decentralization‘ - GDFD) approved by DSF MC in November 2009.

Project implementation plan completed in January 2010 Three workshops/public consultations were conducted in Pontianak (West Kalimantan), Makassar (South Sulawesi) and Surabaya (East Java) to gain insights from a wide range of stakeholders, regarding the appropriate strategy to improve the current GDFD. Inputs to the revision of Law 33/2004 are being provided through implementation of studies related to intergovernmental transfers, in particular on the general allocation funds (DAU), special allocation funds (DAK) and revenue sharing (DBH). Initial draft has been submitted for MoF review. Revisions, in particular, the refinement of an alternative DAU formula, were completed in December 2010.

Efforts to harmonize the GDFD (and respected inputs to the revision of Law 33/2004) with the revision of Law 32/2004 and, therefore, Grand Design for Regional Autonomy (GDRA) are currently underway.

Draft for the revision of fiscal decentralization policy framework was submitted for MoF approval in July 2010. An external review recommends incorporation of current and future social trends Preparation for workshop on legal status for GDFD is underway

The DSF will provide support to MoF team in charge for the revision of Law 33/2004.

In the absence of a finalized draft of the Grand Design for Regional Autonomy (GDRA) as well as MoF and MoHA immediate need to synchronise an array of substantive issues related to the revision of Law 32/2004 and 33/2004, efforts should be redirected to the harmonisation between the revision of Law 33/2004 (which is based on GDFD) and that of Law 32/2004.

The DSF promotes discussion of the GDFD among various MoF DGs and among relevant Bappenas and MoHA officials.

Milestone 1 Expected to be achieved in August 2011.

2.3. National policy on local government borrowing, including issuance of municipal bonds, adopted

Municipal bond issuance, including credit worthiness assessments

Phase 1: Review of Indonesian Civil Code on issues relating to debtor, creditor, and bankruptcy/insolvency completed May 2009.

Review of Regulatory Framework and Best Practices Study on Local Government Financial Emergency Procedures completed in December 2009.

Support for revision of Government Regulations GR 54/2005: Local

2

18

DSF Quarterly Report December 2010

Output 2: Fiscal Decentralization and Capacity Development Objectives

Indicators

Progress

Rate

Government Borrowing and GR 57/2005: Local Government Granting, is complete. Draft revisions have been signed by the Ministry of Finance and are currently being discussed with the Ministry of Law and Human Rights (MLHR).

Phase 2: Analysis and preparatory work for issuance of DKI Jakarta 2 and City of Bandung bonds:  Prefeasibility studies and draft terms of reference (kerangka acuan kegiatan/KAK) documents for the four projects to be funded by the proposed municipal Jakarta bond were completed in June 2010.  These four projects are: o provision of improved sewage facilities in the central business district and jalan Casablanca areas; o construction of an inter-city bus terminal at Pulo Gebang; o low-cost housing rehabilitation at Tanah Pasir; and o addition of a trauma wing at Pasar Rebo hospital. (total estimated value of the four projects is Rp 1.7 trillion in 2011 prices)  Two draft Perda (local regulation) have been issued. The first defines procedures for issuing the bond, while the other is concerned with managing the bond during disbursement, interest payments, and principal redemption periods. The templates have been approved by DG Fiscal Balance and the Financial Institution Supervisory Agency (BAPEPAM)  Analysis on DKI Jakarta‘s ability to pay back municipal bonds was completed in June 2010.  A Nota Dinas (official memo) has been prepared which must be signed by the Governor of Jakarta to formally authorise municipal bonds preparation for DPRD approval in June 2010.  DSF consultants have provided technical assistance to the team responsible for preparing the issuance of DKI municipal bonds. The assistance, among other things, includes: preparation of a budget for bond issuance; socialization of municipal bond underlying principles and issues to the finance committees of local parliaments; drafting of local regulations required for the issuance and management of municipal bonds; liaising with underwriters and other agencies; and communicating with MoF on remaining requirements for bond issuance.  Capacity building was provided to the city government Bandung, but their project, a theme park, requires considerable technical definition and may be beyond the level of assistance which the DSF can reasonably provide. Do we know by now the status?

Two rounds of discussions on revision of GR 54/2005 on local borrowing between MoF and Ministry of law and Human Rights

Comment

Directorate of Regional Financing and Capacity-MoF submitted a request to expand the scope of activities to the Province of Riau Islands and City of Surabaya MoF and DSF have decided to focus their efforts on ensuring the issuance of DKI Jakarta municipal bonds.

Assistance for Surabaya city and province of Riau Islands has therefore been dropped at the request of the GoI.

19

DSF Quarterly Report December 2010

Output 2: Fiscal Decentralization and Capacity Development Objectives

Indicators

Progress

Rate

(MLHR) took place in February, May and August 2010.

During September-December 2010, additional meetings concerning revisions of the government regulation on local borrowing (PP54/2005) took place. The revision was completed in December 2010. All articles in the revised government regulation have been accepted by MoF, MoHA, Bappenas, Ministry of Law and Human Rights, and the Cabinet Secretary.

Milestone 1 Credit worthiness assessment of two pilot municipalities for issuance of municipal bonds will be completed by an independent credit rating company by 2nd quarter 2011.

Comment In January 2011, a draft of the revised regulation will be sent by the Minister of Finance to the Cabinet Secretary for final approval and signature by the President.

Contract to conduct credit worthiness assessment for Surabaya and Bandung have been signed. The assessment will be undertaken by S&P 500. [NOTE: the DSF will not fund the assessment]

Milestone 2 Dates for future discussions to finalise GR 54 will be determined by Ministry of Law and Human Rights (MLHR). It is expected that the revised GR will be signed by the President in the 1st quarter of 2011.

2.4. Improved public financial management of special allocation funds (Dana Otsus) by local governments

Public financial analysis of Dana Otsus completed by selected local governments as a basis for local government planning and budgeting

Phase 1: Empirical analysis of regional government surpluses based on 1 data from 27 provinces and 220 districts and municipalities resulting in report with recommendations completed in June 2008.

Empirical analysis on regional government investment in public infrastructure based on audited financial data for 2004-2007 completed in June 2009.

Phase 2: A scoping mission was conducted in August 2010. Main 2 issues and challenges related to the implementation of special autonomy fund in Aceh were identified.

Findings from the mission were discussed with DG Fiscal Balance counterpart. Agreement was reached to follow up the mission with a focus group discussion between central government and stakeholders in Aceh (provinces and districts) in the 1st quarter of 2011.

Milestone 1 The activity has been significantly reduced in scope (see note). It was also delayed as a consequence of other urgent MoF priorities and to avoid heightened political tensions during the process of revision of a local regulation pertaining to Otsus. Discussions between DSF and MoF concerning the status of this activity are ongoing.

Phase 2 was on hold until government approval was received in May 2010.

Due to time constraints, MoF and DSF have agreed to limit the coverage of the study to only one province, Aceh.

Implementation in the remaining 2 provinces, Papua and West Papua, as time permits. Consequently, milestone 1, which mandates the activity to be completed in 3 provinces, may not be achieved and may need to be modified.

The activity has been reduced in scope and now consists of a Focus Group Discussion (FGD) on the management of Dana Otsus followed by an expenditures tracking study

20

DSF Quarterly Report December 2010

Output 2: Fiscal Decentralization and Capacity Development Objectives

Indicators

Progress

2.5. Government pro-poor special allocation funds (DAK) monitored and evaluated

Monitoring and evaluation reports completed on expenditures of pro-poor government fund in selected local governments

ACN 3/2009 on Socialisation and Pilot Implementation of Joint 1 Circular Letter (SEB) on Monitoring of Technical Implementation and Evaluation of Use of Special Allocation Funds (DAK) approved by DSF MC in July 2009.

Project implementation plan for the entire activity completed in January 2010.

In order to obtain initial feedback on SEB-DAK focus group discussions and socialisation on SEB-DAK conducted for Bappeda, City of Bogor in January 2010.

Modules for field facilitators and data collecting activities completed by DAK Coordination, Planning, Monitoring and Evaluation Team (TKP2E-DAK) Secretariat, Bappenas, February 2010. These documents comprise (a) DAK general comprehension (pemahaman umum tentang DAK); (b) DAK monitoring (pemantauan DAK); (c) DAK evaluation (evaluasi DAK); (d) DAK reporting system (sistem pelaporan DAK); (e) organization of DAK monitoring and evaluation (organisasi pelaksanaan monitoring dan evaluasi DAK); and (f) guidelines on data and information collecting in the field (pengumpulan data dan informasi di lapangan).

SEB data forms tested and technical assistance to fill out these forms provided to officials in Karawang, West Java in March 2010.

Workshop conducted in September 2010 for representatives from 60+ local governments from Jambi, Central Kalimantan, West Sulawesi and North Maluku provinces.

A contract for the implementation of DAK monitoring and evaluation systems - as set out by the ‗joint circulator letter‘ in the province of D.I. Yogyakarta - was completed in November 2010.

Target i Government designed monitoring and evaluation system for DAK will be implemented in the district of the province of Yogyakarta by April 2011. Implementation in the other four provinces is under discussion (see note) Target ii Pending discussions with Bappenas target ii may not be achieved as planned

Rate

Comment Implementation was split into two phases: the first phase in the Yogyakarta Special Region, followed by a second phase consisting of 4 provinces (Jambi, Central Kalimantan, West Sulawesi and North Maluku).

The purpose of this separation is to obtain lessons learned on how to properly implement DAK monitoring and evaluation. These inputs will be utilized in the execution in the other four provinces.

A number of districts expressed their commitment to participate in the pilot project during the workshop.

Due to the Mt. Merapi eruption, facilitator training sessions had to be postponed to the beginning of January 2011.

With a view to undertaking more strategic and cost-effective activities related to the management of DAK, the implementation of similar activities in the provinces of Jambi, Central Kalimantan, West Sulawesi and North Maluku is currently on-hold until further discussion between the DSF and Bappenas have been held in January 2011.

21

DSF Quarterly Report December 2010

Output 3: Increasing Accountability Objectives

Indicators

Progress

Rate

Comment

3.1. Effective legislative processes, resource allocation and oversight functions demonstrated in selected local legislatures

Number of provincial and district MPs, including women MPs, trained in legislative processes, budgeting and oversight

Component 1: Capacity Strengthening of DPRD The DPRD Capacity Strengthening programme managed by the Local Government Affairs section of the Directorate General of Regional Autonomy in MoHA completed the technical evaluation of the six proposals pertaining to the delivery of the DPRD training.

The Road Show to present the program and secure participation from the provincial and district level DPRDs was also carried out in this quarter.

The contracting of the implementing agency for training delivery, as well as the singing of the MoUs with participating DPRDs is scheduled to be completed in February 2011.

1

Staff changes in MoHA have led to some delays in activity implementation

Component 2: Introducing Competency based Standards for Public Service Delivery The DPRD Orientation program managed by the MoHA Training and Education Center (Diklat) is moving forward..The Amendment to the Grant Agreement to accommodate this program has been signed and Diklat included it in the DIPA revisions in November 2010.

Two training courses were conducted in November-December for DPRD members to refresh and enhance their understanding of basic concepts, values, and relevant regulations and laws governing aspects of state affairs, local government, and basic duties and functions. Sixty eight local parliamentarians attended.

The remaining set of training courses are scheduled to be completed in the first quarter of 2011.

This program moved to a different section within Diklat: Management and Leadership of Local Government..

Initial coordination meetings indicate that the program will be well integrated into Diklat operations.

Milestone 1 150 local parliament representatives in 5 provinces with 30% women trained is expected to be met by the 3rd quarter of 2011 3.2. Effective and accountable public service delivery by local government officials and effective monitoring

by CSO leaders demonstrated in selected local governments

Number of national and local government officials and CSO leaders professionally trained in effective and accountable public service delivery

ACN No. 9/2009 on Capacity Building through Decentralized Education and Training has 3 components that aim to enhance the professional capacity of local and national officials to provide, and CSOs to monitor, improved public service delivery:  Short courses in Indonesia and the Region  Study tours  Scholarships for Master degree programs in decentralization related studies in the UK. Following a ‖no objection‖ by the Country Leadership Team of the grant justification and summary proposal, the grant agreement was signed in May 2010 by the Bank, and the British Council which will be the implementing party of the scholarship program.

2

ACN 9/2009 has been divided into 2 grants: 1) scholarships and 2) short courses and study tours.

In view of the tight timeline for the execution of the scholarships project, in March 2010 AKLN/MoHA asked that the Bank assume responsibility for the execution of the scholarship component of the project.

22

DSF Quarterly Report December 2010

Output 3: Increasing Accountability Objectives

Indicators

Progress

Rate

26 candidates achieved the required International English Language Testing System (IELTS) score necessary for scholarship award selection. Based on the positive result, the Selection Committee increased the number of scholarship awards from the initial 20 to 26 central and local government officials. 24 accepted the offer.

In September 2010 244 scholars departed for the UK to pursue their studies at the following universities: University of Birmingham, University of Bradford, University of Bristol, University of Leeds, University of Newcastle, University of Southampton, and Birkbeck College University of London.

The British Council will follow-up with the scholars on the development of action plans for the application of knowledge and skills acquired under the program, upon return to their jobs in Indonesia.

Discussions on the destination countries and program details pertaining to the study tours and short courses are underway.

Comment Implementation of study tours and short courses will be Bank executed.

Milestone 1 30 national, local government officials and CSO leaders are expected to be trained in the 2nd quarter of 2011.

3.3. Local training and education centres demonstrated improvement in conducting training programmes for local government officials

Competency-based training programmes on decentralized public service delivery developed by local government training centres

In the past quarter, Diklat mobilised 3 competency based standard/human resource management consultants (international and national) and 1 training/capacity building specialist to assist the core Diklat team with implementation of the activity. They also hired 2 support staff to help with administration and finance.

With a full team on board, Diklat commenced work on the development of a strategic framework for the formulation of national policies on local government competency standards. This involved MoHA, BKN (National Civil Service Agency), BNSP (National Professional Certification Agency), Kemenpan (Ministry of Administrative Reform), sectoral ministries, and local governments.

1

Although there has been restructuring within Diklat and the competency based training program has moved to a newly created unit within Diklatt on standardization of training and education for government officials, the technical management of the program has continued without delay and Diklat is preparing for a second withdrawal of funds for implementation of the next phase of the activity.

Under Government Regulation 38/2007, the substance of the competency standards strategic framework for local governments will? include: a. Mapping of the 31 integrated local government functions; b. Competency standardization framework for local governments; c. Roadmap for standardization of local governments‘ integrated competency; The strategic framework‘s initial concept was formulated through a series of intense, in depth workshops in August-September 2010 with 4

Two scholars withdrew from the program.

23

DSF Quarterly Report December 2010

Output 3: Increasing Accountability Objectives

Indicators

Progress

Rate

Comment

the aforementioned agencies. Three outputs have been produced so far: 1) draft ministerial regulation on the strategic framework for local government competency standards, 2) draft strategic framework including an overview of background and issues related to local government competencies, policy directions, steps for developing standards, issues regarding operationalisation of standards, and a road map for rolling out competency based standards in various sectors with local governments, 3) draft plan for the standardisation of competency based standards for population administration and civil registration (the pilot sector included in the DSF supported program for development of competency based training). Also in this quarter, Diklat implemented 8 training workshops of 25 participants each covering assessment, verification, and certification of competency-based standards for various units within MoHA (including the Directorate General for Population Administration, Directorate General for Regional Autonomy, Personnel Bureau, Organizational Bureau, Legal Bureau, Training and Education Centre), BKN, BNSP, Kemenpan, and local governments (East Java, West Kalimantan, West Nusa Tenggara) with equal representation from central and local governments.

Milestone 1 Capacity building needs assessments for local government competencybased training are expected to be completed by the 4th quarter of 2010.

Output 4: Planning and Performance Measurement Objectives 4.1. Provincial and district/municipal spatial plans produced which are in line with national spatial plan and integrated with provincial and district/municipal development plans

Indicators

Progress

Rate

Provincial and district/municipal spatial plans completed and approved by respective parliaments

ACN 5/2009 on Institution Building for the Integration of National1 Regional Development and Spatial Planning approved. Initial work was implemented by a consultant between December 2009 and March 2010.

Paper prepared on: ―Identifying the Connections between Regional Spatial Plans with Regional Development Plans.‖ This activity was designed to support three provincial and six district/ city governments to draft spatial plans. In line with evolving needs and at the government‘s request DSF will focus on the district/city level.

A firm is supporting the drafting of spatial plans as well as strengthening the National Agency for the Coordination of Spatial Planning (BKPRN). The firm is working in cities and districts in three provinces: West Sumatra, Gorontalo and East Java.

Comment Activities under ACN 5/2009 are designed to improve the consistency between regional government planning documents (spatial plans and development plans) and also the consistency between spatial plans at different levels of government. The implementing agency will focus on providing capacity building support to district and city governments.

Milestone 1 i) Three district/city plans are expected to be submitted to parliament during the 1st quarter of 2011. ii) Capacity building plans were developed for targeted districts/cities in September 2010.

24

DSF Quarterly Report December 2010

Output 4: Planning and Performance Measurement Objectives 4.2. Capacity building for Regional Development Policy Formulation

Indicators Regional development strategies created at island region level, endorsed by both the relevant provincial government and Bappenas

Progress

Rate

The ACN 2/2009 on capacity building for regional development policy 2 formulation is linked to objective 4.1. Part 1 was implemented by 5 consultants between September 2009 and July 2010. The main outputs are an input paper for the RPJMN 2010-2014 (for Book 3 on Development with a Regional Dimension) and the report: ―Study on Regional Development in Indonesia.‖ Part 2 of this activity will develop provincial level analytical papers focused on inter-regional connectivity and from these, island-based development strategies will be derived.

Contract award for part 2 of this activity is expected in January 2011.

Milestone 1 Data and policy assessment will be completed by March 2011.

Comment ACN2/2009 is an additional activity requested by Bappenas‘ Directorate of Regional Development. It is linked to activity 4.1 but not listed in the Log Frame.

The first part of the activity has produced a substantial review paper on regional development policy that draws on lessons learned from past experiences and builds upon the RPJMN for 20102014 to provide key input into government‘s approach to regional development policy. Bappenas is the client. The second part builds upon this work by formulating development strategies for the major island groups, with a focus on Eastern Indonesia.

4.3. Strengthening Capacity for Regional management Inter-Regional forums have medium term Cooperation plans and annual action plans approved by relevant local governments

An addendum to ACN 2/2009 covers inter-regional cooperation and addresses issues of concern to both Bappenas (Directorate of Special Regions and Less Developed Areas) and MoHA (Directorate for Deconcentration and Cooperation).

A detailed review of existing regional management forums across Indonesia is underway. A firm has been selected to provide capacity strengthening in four of the forums.

MoHA has approved the workplan for development of an action plan and guidelines for Inter-regional Cooperation.

Mapping /Needs Assessment was initiated this quarter and is expected to be completed in February 2011.

2

Activity to be fully Bank executed.

Due to the complex nature of this activity and limited timeframe, GoI has reduced the scope of work.

This activity highlights the importance of cross-ministerial cooperation in activity development and implementation, which is likely to yield positive results in terms of greater coordination between related interregional cooperation programs.

4.4. Natural resource planning and management policies developed by targeted local governments

ACN 10/2009 on Strengthening Local Government Natural Resource 2 Management Capability was approved.

A firm has been contracted to support local governments in Papua and South East Sulawesi to develop improved natural resource management systems.

This activity seeks to improve the way natural resources are managed by local governments. The capacity to do this type of work will be developed in local governments in 2 pilot target provinces and is intended to assist local governments to identify the potential for resource development in a sustainable manner. Lessons will be derived from these pilots and made available on a wider scale. Key resources within the scope of this activity include land for plantations, marine resources for fisheries, and resources with tourism development potential.

Local governments adopting policies and systems for natural resource planning and management policy

Milestone 1 Activity implementation is behind schedule.

25

DSF Quarterly Report December 2010

Output 4: Planning and Performance Measurement Objectives

Indicators

Progress

Rate

4.5. Local and Regional Economic Development Support Facility (LRED)

Strategic plan for the LRED completed and endorsed by the inter ministerial LRED coordination team

An addendum to ACN 10/2009 on the establishment of a facility to 2 support local economic development was approved in March 2010. The client is the Directorate of Urban and Rural Affairs (Bappenas).

Procurement of services is underway.

A contract will be awarded in February 2011.

This activity has been designed in collaboration with Bappenas, GTZ‘s Regional Economic Development program and CIDA.

4.6. Local governments in border regions have improved capacity in economic development planning

Action plans for improved economic development planning completed by selected local governments in border areas

ACN 8/2009 on Institution Building for the Accelerated Development of Border Areas approved. This ACN covers activities related to border area development, prioritized by both Bappenas and MoHA. This objective is linked to activity 1.4 on service delivery in border regions.

The activities are closely inter-related and both involve Bappenas, MoHA and the Ministry of Disadvantaged Regions.

A firm has been contracted to support Bappenas drafting a national master plan, as well as to support capacity building in several border areas. At the request of the client this activity has been reorganised and the first stage of the activity focused entirely on the development of the master plan.

Milestone 1 Profiles of 38 border regions are now expected to be completed by 2 nd quarter of 2011.

Through this activity, MoHA and Bappenas are seeking to strengthen cross-ministerial institutions and to improve the policy framework for the development of border regions. The implementing agency is also providing capacity support in 3 provinces: West Kalimantan, East Kalimantan and Riau.

2

Comment

Milestone 2 National master plan for border area development was completed in December 2010.

4.7. Evaluation of Proliferated Autonomous Regions

Map of newly-created regions capacity as set out by Minister of Home Affairs Regulation 21/2010 completed by March 2011

DSF has supported the socialization of MoHA Decree 21/2010 on Guidelines to Evaluate Local Government Performance created post Law 22/1999 (on Regional Autonomy) in Jakarta in February 2010.

Five workshops to, verify and validate data sent by the local governments and utilized in the evaluation during August-September 2010. Data analysis and report preparation is currently underway. The evaluation workshops were led by a Technical Evaluation Team— comprising experts from universities, Indonesian Institute of Sciences (LIPI), Indonesia Chamber of Commerce and Industry (KADIN Indonesia), NGOs as well as mass media—established by the Directorate for Capacity Development and Evaluation of Regional Performance (PKEKD), MoHA. During the last quarter of 2010 DSF facilitated three workshops to continue analysis of the above mentioned data. DSF staff also provided substantive inputs, including improvement of composite indices and classification of results.

1

The Director General of Regional Autonomy, MoHA, used the report to support the discussion of revision of Law 32/2004, on the proliferation of regions.

26

DSF Quarterly Report December 2010

Output 4: Planning and Performance Measurement Objectives

Indicators

Progress

Rate

4.8. Local Government Development of Criteria and Evaluation and Support for Index to administratively EPPD-EDOB assess EPPD-EDOBs

Discussions between DSF and MoHA regarding project continuation and mode of execution are on going

3

4.9. Provincial Governance Strengthening Programme (PGSP) under third party (UNDP Fiscal Agency Agreement)

Enhanced policy and regulatory framework and application of regional economic development and governance innovations

The Fiscal Agency Agreement became effective in May 2010 and the 3 initial allocation of US$1 million was deposited in July. The project was officially launched in August 2010 and the proposed work plan endorsed in September.

During the quarter the PGSP continued the work on finalizing provincial workplans.

The PGSP supported several workshops in support of the finalization of draft Law 32, including revisions to specific chapters: Chapter III, Article 18 of regional authority in maritime management; and Chapter II regarding Special Areas/Regions. Work has been initiated to support the planning and budgeting process and linkages to the Human Development Report /Human Development Index (HDR/HDI) including: draft policy papers on the Musrenbang Revitilization Process and Implementation for 2011of PP38/2007. In the provinces of Gorontalo and Bangka Belitung initial workshops on local economic development have been launched with the Pepper Export Association, universities and pepper farmers. In support of PUM MoHA three consultants have been hired for the implementation of MSS in selected provinces.

4.10.Formulation of Grand Design for Regional Autonomy

Implementation of GDRA The project objective is to support MoHA formulate the Grand Design across government ministries for Regional Autonomy (GDRA) by clarifying and improving: and sub national governments functional assignments between central, provincial, and district/city level governments, as well as to reform personnel policies at provincial and district/city level governments in West Java, Eastern Kalimantan and Nusa Tengara Barat.

Comment

Efforts will be undertaken to coordinate these provincial based activities with related DSF activities. Following initial slow start-up of activities, significant disbursement has been made as reported in the Financial Management Report (FMR)

1

Four consultants have been recruited and they have completed two draft concept papers on Functional Assignments and Personnel Management Reforms.

Stakeholder consultation missions to the three pilot provinces are underway and expected to be completed in March 2011.

27

DSF Quarterly Report December 2010

Output 4: Planning and Performance Measurement Objectives

Indicators

5. Knowledge Management for Aid Effectiveness

Publicly accessible data base on support to sub-national government developed.

Progress

Rate

In 2006, the Ministry of Home Affairs commissioned the DSF to create 1 a donor mapping database (DMD) The purpose of the DMD is to track, monitor, analyze and prioritize aid rendered to Indonesia by the international donor community, and thereby serve as a valuable DSF knowledge management planning and monitoring tool for the government and members of the strategy formulated donor community. For the government and donors alike, it is clearly desirable to maintain such an up-to-date map of donor-supported activities, one that provides comparable data on key dimensions: matters addressed; geographic location; tools and approaches used; nature of assistance - whether loan/grant/Technical Assistance; monitoring frameworks; expected results; and so on. The database is available in both English and Bahasa Indonesia on the DSF web-site at http://www.dsfindonesia.org/apps/dsf-dm/cgi-bin/dw.cgi.

The final phase of the activity is designed to institutionalise the database and its management in government.

A consultant has been hired to: upgrade design features, increase and refine data content, and provide technical maintenance support; transfer responsibility for updating information online to individual donor agencies; and identify and hand over administrator rights and responsibilities to the ―owner‖ entity in MoHA. A draft DSF knowledge management strategy has been formulated and the DSF web page has been upgraded.

Comment GoI is keen to incorporate the tool in a government system for monitoring and reporting on development assistance in decentralization.

DSF will support MoHA to update and administer the DMD.

28

DSF Quarterly Report December 2010

Annex B: Financial Report Summary  Donor Pledges: Three donors have pledged a total of USD 44.78 million (exchange rate December 31, 2010).  Receipts: USD 29 million or 64.76% of total pledges have been received.  Disbursements: USD 20.87 million or 72% of total pledges received.  Cash Held: USD 9.62 million, including USD 2.12 million of outstanding signed contracts/commitments. Cash available is therefore USD 7.5 million.

I. Donor Contributions DSF has 9 donor partners, 3 of whom are financial contributors: DFID, AusAID, and CIDA. Total pledges amount to USD 44.78 million (31 December 2010 exchange rate).

About 96.6% of the total amount (USD 43.28 million) has been pledged by DFID. As of 31 December 2010, DSF had received USD 29 million or 64.76% of total pledges (see Table 1): USD 27.50 million from DFID, USD 1 million from AusAID, and USD 500K from CIDA. Table 1: Pledges Received on the Basis of Signed Contribution Agreements Contributors DFID

Contribution Currency GBP

Contribution Amount 24.36

USD equivalent 43.28

Cash Received in USD million 27.5

AusAID

USD

1

1

1

CIDA

CAD

0.5

0.5

0.5

44.78

29

Total

II. Disbursement Status To date, DSF has received USD 30.49 million, consisting of USD 29 million of donor contributions and USD 1.47 million of investment income. As of December 31, 2010, USD 20.58 million had been disbursed to work streams and operations. In addition, a total of USD 290,001 has been charged as WB administration fee (see Table 3).

Table 2: Disbursement Status of the DSF as of December 30, 2010 Actual (USD)

Commitments (USD)

Receipts Paid in Contributions Investment Income Other Income Total Receipts

29,000,052 1,465,262 24,753 30,490,067

29

DSF Quarterly Report December 2010

Actual (USD) Disbursements Focal Area 1 Tax Assignment and Own-source Revenue(1)

2,312,008 -

155,987 -

90,754

-

Borrowing

596,853

-

Surplus and Reserves

183,105

-

Data for Monitoring and Evaluation

400,595

-

Assessing and Revising the System for Setting Territorial Boundaries

227,500

-

Fiscal Agency Intergovernmental Framework Fund

476,214

-

Exploring Future Reform Options in Functional Assignment

47,467

-

Supporting the Establishment of Financially Feasible Minimum Service Standards(4) Alternative Mechanism of Service Delivery(2) Focal Area 2 Local Government Performance Measurement

89,765

155,987

199,755 1,394,890 187,174

-

Identification and Replication of Good Practice

382,392

-

Appraisal : Sub national Investment Climate Reform

599,116

-

58,823

-

Transfer

Knowledge Management for Effective Local Government Support Programs Mapping and Analysis of Local Planning and Budgeting Processes

49,703

-

117,682 5,380,224 1,072,961

-

421,705

-

Policy Development for PNPM

58,666

-

Cost Accounting Review for CDD Programs

16,512

-

Improved Evidence Base of Good and Bad Local Perda Focal Area 3 National Program for Community Empowerment CDD Summit

Technical Assessment for CDD Programs

53,685

-

Information, Education and Communication for PNPM

484,739

-

User Fee Assessment for CDD Programs

391,280

-

MIS Improvement for PNPM

100,701

-

Short Term Monitoring and Evaluation

710,385

-

Medium / Long Term Monitoring and Evaluation

399,925

-

CCT Baseline Survey

1,669,665

-

Decentralization Support for Eastern Indonesia (SofEI)

2,972,226

-

97,908

-

DSF Project Operations Staff costs

5,989,718 3,644,865

108,365 8,800

Operation costs

2,344,853

99,565

Quick starts

30

Commitments (USD)

DSF Quarterly Report December 2010

Actual (USD) Approved Work Plan 2009 - 2011 (1st round) New projects approved and registered in FY09 (1st round) Support to Public Service Delivery(3)

Commitments (USD)

1,321,645 66,534

1,730,240 57,638

71,350

50,349

25,701

54,678

273,140

190,704

Building Capacity for the Development of Sub-National Government Capital Markets for Municipal Bonds Decentralization Support Facility II Capacity Strengthening Program for Local Government Legislatures Government Training and Education Center Development: Introducing Competency Based Standards for Improved Public Service Delivery Institutional Building for the Integration of National Regional Development and Spatial Planning Capacity Building for Regional Development Policy Formulation

184,340

222,397

75,000

-

100,000

-

183,381

222,242

85,680

-

Institution Building for the Accelerated Development of Border Areas Strengthening Local Government Natural Resource Management Capability Capacity Building through Decentralization Education and Training (DET) Scholarships for Public Service(5) Management Strengthening and Institution Building for Local Public Service Providers (MSIB-LPSP)(2) Capacity Development for Minimum Service Standards costing and Implementation(4) Decentralization Support Facility II Formulation of Norms, Standards, Procedures and Criteria (NSPK) for Local Government Service Delivery(3)

182,782

271,317

73,737

577,918

-

-

-

82,996

-

-

-

-

1,008,312 1,000,000

111,316 -

-

-

-

-

8,312

60,427

Strengthening Data Provision to the Regional Financial Information System by Sub-National Governments with Stand-Alone Electronic Data Bases Improving and Piloting the Implementation of Monitoring and Evaluation System of Special Allocation Funds Utilization Improving the Policy Framework for Fiscal Decentralization

Approved Work Plan 2009-2011 in process of registration (1st round) Approved DSF Work Plan 2009 - 2011 (2nd round) Approved DSF Work Plan 2009 - 2011 (2nd round) registered Provincial Government Support Program Regional & Local Economic Development (5)

DPRD Orientation

Capacity Building for Regional Development Policy Formulation (addendum) Sub-National Business Climate Reform(5) Regional Development Policy

-

-

-

50,889

Approved DSF Work Plan 2009 - 2011 (2nd round) in process of registration

31

DSF Quarterly Report December 2010

Approved additional DSF Executive Operations Work Plan 2009 - 2011 Knowledge Management for Aid Effectiveness Approved additional DSF Executive Operations Work Plan 2009 2011 in process of registration Total Project Disbursements Administration fee Total Disbursements Outstanding commitments Total Cash Available (= receipts - disbursements - commitments) ⁽¹⁾ The project was cancelled ⁽²⁾ Registered as the same Trust Fund (see listing in Focal Area 1) ⁽³⁾ Under Bank Executed TF, assessment of NSPK status is being conducted ⁽⁴⁾ Registered in the same TF (see listing in Focal Area 1) ⁽⁵⁾ Project activities had been on going, withdrawal application / invoicing had been received and still in process

32

Actual (USD) 98,169

Commitments (USD) 15,163

98,169

15,163

-

-

20,575,099 290,001 20,865,100 2,121,071 7,503,896

2,121,071

DSF Quarterly Report December 2010

Annex C: List of Abbreviations, Acronyms, and Translations ACN: AKLN: APBD: AusAID: BAPPENAS: BAPPEPAM-LK: BKKBN: BKN: BKPRN: BNPP: BPKP: CCT: CDD: CIDA: DAK: DAU: DBH: DFID: DG: Diklat: DIPA: DJKD: DKI: DPRD: DSF: EDOHP: FY: GBP: GDFD: GDRA: GR: KADIN: LIPI: LGs: LRA: MoF: MoH: MoHA: MSS: NGO: NSPK: OSS: PGs: PKEKD:

Activity Concept Note Administrasi Kerjasama Luar Negeri (Centre for Foreign Cooperation Administration) Anggaran Pendapatan Belanja Daerah (Regional State Budget) Australian Agency for International Development Badan Perencanaan Pembangunan Nasional (National Development Planning Agency) Badan Pengawas Pasar Modal dan Lembaga Keuangan (Capital Market and Financial Institution Supervisory Agency) Badan Koordinasi Keluarga Berencana Nasional (National Family Planning Coordinating Board) Badan Kepegawaian Negara (State Personnel Agency) Badan Koordinasi Penataan Ruang Nasional (National Agency for the Coordination of Spatial Planning) Badan Nasional Pengelola Perbatasan (National Agency for Border Management) Badan Pengawasan dan Keuangan Pembangunan (Audit and Development Supervising Agency) Conditional Cash Transfer Community Driven Development Canadian International Development Agency Dana Alokasi Khusus (Special Allocation Funds) Dana Alokasi Umum (General Allocation Funds) Dana Bagi Hasil (Revenue Sharing) Department for International Development Director General Pendidikan dan Pelatihan (Education and Training) Daftar Isian Pelaksanaan Anggaran (Budget Implementation Entry List) Direktorat Jenderal Keuangan Daerah (Directorate General of Regional Finance) Daerah Khusus Ibukota (Jakarta Special Capital Region) Dewan Perwakilan Rakyat Daerah (Provincial Legislative Council) Decentralization Support Facility Evaluasi Daerah Otonom Hasil Pemekaran (Evaluation of Proliferated Autonomous Regions) Financial Year Pound Sterling Grand Design of Fiscal Decentralization Grand Design of Regional Autonomy Government Regulation Kamar Dagang dan Industri (Chamber of Commerce and Industry) Lembaga Ilmu Pengetahuan Indonesia (Indonesian Institute of Sciences) Local Government Laporan Realisasi Anggaran (Budget Realisation Report) Ministry of Finance Ministry of Health Ministry of Home Affairs Minimum Service Standards Non-Governmental Organisation Norma, Standar, Prosedur, dan Kriteria (Norms, Standards, Procedures and Criteria) One Stop Shops Provincial Governments Direktorat Pengembangan Kapasitas dan Evaluasi Kinerja Daerah (Directorate for Capacity Development and Evaluation of Regional Performance)

33

DSF Quarterly Report December 2010

PMK: PNPM: PP: RMF: RIA: SIKD: SIMDA: SIPKD: SoFEI: ToT: USD:

34

Peraturan Menteri Keuangan (Minister of Finance‘s Regulation) Program Nasional Pemberdayaan Masyarakat Mandiri (National Program for Community Empowerment) Peraturan Pemerintah (Government Regulation) Regional Management Forums (RMF) Regulatory Impact Assessments Sistem Informasi Keuangan Daerah (Regional Financial Information System) Sistem Informasi Manajemen Daerah (Regional Management Information System) Sistem Informasi Pengelolaan Keuangan Daerah (Regional Financial Management System) Support Office for Eastern Indonesia Training of Trainers United States Dollar