A Decade of Development Aid and the Role of Non-State Actors in Indonesia

A Decade of Development Aid and the Role of Non-State Actors in Indonesia

Authors Herryadi Adun, Jim Toar Matuli, Mickael B. Hoelman, Sugeng Bahagijo Editors Mickael B. Hoelman, Sugeng Bahagijo

A Decade Of Development Aid and The Role of Non-state Actors in Indonesia

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A Decade Of Development Aid and The Role of Non-state Actors in Indonesia

Authors

Herryadi Adun, Jim Toar Matuli Mickael Bobby Hoelman, Sugeng Bahagijo

Editors

Mickael Bobby Hoelman, Sugeng Bahagijo

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National Library of Indonesia : Cataloguing in Publication (CiP) A Decade of Development Aid and The Role of Non-State Actors in Indonesia / Editors: Mickael B. Hoelman, Sugeng Bahagijo --- Jakarta : Tifa Foundation, 2012 41 pages +viii ; 25,5x17,5 cm2

ISBN 978-602-7590-02-1

First Published, July 2012

Also available in Bahasa Version : Perpustakaan Nasional: Katalog Dalam Terbitan (KDT) Satu Dekade Bantuan Pembangunan dan Peran Kelompok–kelompok Masyarakat Sipil Di Indonesia Penyunting: Mickael B. Hoelman, Sugeng Bahagijo — Jakarta : Yayasan Tifa, 2012, 41 halaman+xi ; 25,5x17,5 cm2 ISBN 978-602-7590-01-4

Published by : Tifa Foundation Jln. Jaya Mandala II / 14E Menteng Dalam Jakarta Selatan 12870 - INDONESIA Telp. (021) 829-2776, Fax (021) 837-83648 e-mail : public@tifafoundation.org Layout and cover design : Ayoenk

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Contents Contents Preface Executive Summary

1 2 3 4 5 6

v vi vii

Introduction

1

Indonesia According to the Perspective of Development Aid Agencies

7

Priority Issues Identified by Development Aid Agencies

13

Development Aid Agency Strategies

19

Implications for Non-State Actors in Indonesia

29

Recommendations and Path Ahead

35

References About the Authors and Editors

39 41

List of Tables and Illustrations Table 1 Analysis Matrix of Development Agencies Table 2 Strategy Matrix Table 3 Two Strategy Options

9 25 32

Illustration 1 Focus Areas and Priority Issues of Development Agencies Illustration 2 Funding Scale Illustration 3 Method of Aid Distribution

16 20 21

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Preface

T

he initiative to perform this review arose from a stocktaking study conducted from April to June 2011 with the intention to inform the formulation process of Tifa Foundation Strategy for 2011-2014. The stocktaking study was carried out through a literature review mainly of strategic planning documents, program documents, as well as project and evaluation outcomes from different development aid agencies. In addition, a series of interviews were also conducted with the leaders and staff of development aid agencies based in Jakarta.

The stocktaking study was built on the premise that new opportunities and possibilities are open for development aid cooperation in Indonesia. Keeping this in mind, a stocktaking study is therefore crucial to glean information on past and present efforts implemented by various relevant parties. Furthermore, it is also aimed at gaining insight on how development support and assistance works to engender more beneficial impact primarily for the people. It is meant to draw valuable lessons that can systematically be applied as new institutional strategies for the coming years.

During the course of time, the stocktaking study has developed into a more in-depth assessment, mainly in relation to its findings on the role of non-state actors in Indonesia in the years to come. In line with this, an advanced study was conducted from March to May 2012 through in-depth interviews with several leaders and staff representing development aid agencies, especially bilateral development institutions. Every piece of the selected literature is reexamined to ensure updated information of stocktaking study outcomes.

The authors are indebted to Imam Cahyono for his unstinting assistance in ensuring the implementation of this study in the early stages. Sincere appreciation also to those who have been willing to be interviewed and offer comments and feedback throughout the stocktaking study for the enrichment of this publication.

Head of Research Team, Michael Bobby Hoelman

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Executive Summary

F

or more than a decade since the “Reformasi� movement in Indonesia, international development aid has flowed incessantly into the country under varied circumstances and intentions. Unlike the situation that unfolded during the 1998 crisis and earlier, the significance and amount of foreign development aid (ODA) on average was relatively negligible compared to the national budget at less than 1 percent of Gross Domestic Product.

Nonetheless, development assistance has played a pivotal, catalytic role in initiating, hastening and spurring reform and changes across public sectors and governance systems in Indonesia.

The current key strategy of foreign development aid is to foster closer cooperation with the government, rather than with civil society as non-state actors. International development aid needs to conform to national priorities, or its workings must depend on cooperation with the government, including therein the channeling of funds into state coffers. This approach can be considered as the Governance Strategy.

This strategy has become one of the contributing factors that has instigated the gradual process of marginalizing the role of non-state actors in Indonesia. An obvious indication is waning support for civil society elements and organizations, primarily those dedicated to human rights and democratization. Nevertheless, this marginalization process is not purely influenced by external factors. It is also induced by internal processes with regard to a rightsbased relationship between the state and civil society, and even within the inner circle pertaining to leadership and organizational structure.

It is now time for development aid strategy to shift to a Democratic Strategy. The core assumption of a democratic strategy is that civil society is a movement in its own right with its own dynamics that embraces diverse actors, initiatives and institutions, all of which contribute to the creation of a good, democratic government and society based on the rule of law that respects human rights.

------Keywords: development aid; non-state actors; development cooperation; Indonesia; quality of democracy; quality of governance.

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Introduction

I. Introduction Introduction

Development assistance can be distinguished into three different forms: international development aid from which funds are derived from foreign governments (Official Development Assistance/ODA), humanitarian relief from which funds are drawn directly from communities in advanced countries, and funds sourced from private foundations (e.g.

Ford Foundation, Bill & Melinda Gates Foundation).

Development aid originally emerged when the Marshall Plan economic assistance package was introduced in 1947 by the United States to help the people and cities of Europe ravaged by the Second World War. Development aid came not only in the form of monetary assistance but also technical support and human resource expertise. In 1961, the Marshall Plan office later transformed into the Organization for Economic Cooperation and Development (OECD). Do not be mistaken; development aid does not only appear in the form of grants, but also as loans that must be repaid.

In terms of political economy, development aid, specifically ODA, is a double-edged sword that not only extends a helping hand seen as a manifestation of humanitarian solidarity, but also embraces both political allies and rivals within the realm of international relations.

Over time, development aid is not only driven by humanitarian purposes and international politics, but also oriented to economic development (market expansion) and the national security of a region. Regardless of motive, these practices have been observed for more than 60 years.

Throughout that time period, development aid has earned both accolades and sparked denunciations. Concerns and criticisms over development aid were thrown by proponents and opponents, particularly in developed countries. One such criticism noteworthy of consideration emerged in 2006 through a book entitled The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good authored by former World Bank executive and professor of economics at New York University, William Easterly.

The book puts forward evidence on reservations against the benefits and outcomes of development aid.

Three years later another book was published titled Doing Good or Doing Better, Development Policies in a Globalizing World that seeks to counterbalance and offer answers to Easterly's concerns on development aid. The book was edited by Monique Kremer, Peter Van Lieshout and Robert Went, and published by the Scientific Council for Government Policy (WRR) in the Netherlands. It examines the paradigms and strategies of development aid adopted by different continents in a span of six decades, including the constraints and challenges, and the need for a new approach to better achieve development aid goals and objectives.

In reality, development aid is inextricably linked to shifts in development policies. According to Kremer (2009), this six decade of shifts in development policies can be examined from TIFA Foundation, July 2012

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Introduction

different time intervals. From the 1950s to 1960s, the main approach was the financial push paradigm. Based on this paradigm, external financial aid is considered as the key solution for development. As a consequence, core issues confronting poor countries are viewed simply as the result of funding constraints or lack of financial capital. Loan from the World Bank, International Monetary Fund (IMF) and advanced countries was the main option for infrastructure development, industrialization and educational advancement required by the national economy and to build a prosperous society.

Over the course of time, the paradigm was eventually abandoned among others because of the swelling debt burden of poor countries. Between the 1970s and 1980s, the financial push paradigm was swept aside to usher in the market paradigm with slight involvement or intervention from the state and later became the favored approach across continents.

Nevertheless, this approach also failed to generate satisfactory development results and in many places has even led to economic turmoil and stagnation.

From the 1990s to 2000s, the development paradigm experienced a gradual shift. Failure of the market paradigm was mainly attributed to the poor quality of governance in developing and poor countries. In short, the paradigm presumes that the absence of an appropriate governance structure to enforce policies renders development aid futile. Governance becomes a key variable in predicting the effectiveness of development aid. Funding shortfall or constricted market freedom is now no longer a key problem as weak legal systems, unbridled corruption and an authoritarian government have become the main cause of concern. In other words, if the development paradigm in the previous decade was dominated more by market significance and bureaucratic pruning, the current approach has shifted to the importance of state involvement particularly in combating corruption, applying the principle of transparency and building democracy. Governance becomes essential for both developing and poor countries in order to bolster institutional weaknesses and move towards a democratic state.

Development Aid in Indonesia In Indonesia, international development aid and philanthropy has made its entrance since President Soekarno's administration. Private philanthropic organizations such as the Ford Foundation and various bilateral institutions have made their presence felt by setting up operations. Through such development aid, a considerable number of socio-economic institutions have emerged in Indonesia. Furthermore, the many improvements and innovations in different lines of business, government and civil society in Indonesia have also been extensive due to the availability of technical and financial support from a wide range of institutions, mainly bilateral agencies, private foundations and international bodies that derive their funds from communities in developed countries.

Entering the era of the New Order, development aid became increasingly essential. The transition from Soekarno's rule to the Soeharto regime has left behind an economy in ruins primarily due to the Dutch military aggression and uprisings in a number of regions. Political instability has led to economic decline, soaring inflation and budget deficit upsurge. The newly established government on the other hand, is in dire need of development funds to stabilize and rehabilitate the economy. To overcome this situation, early on in his administration, Soeharto entered into a debt commitment with the United States and rejoined the World Bank as a member state (Toussaint, 2004). In addition, Soeharto pushed

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| A Decade of Development Aid and the Role of Non-State Actors in Indonesia

Introduction

for the establishment of the Intergovernmental Group on Indonesia or IGGI, an international cooperation group chaired by the Netherlands to coordinate multilateral development aid to Indonesia. IGGI's initial assistance was intended for the formulation of the first program of the country's five-year development plan (REPELITA I).

The New Order administration also introduced the Development Trilogy concept of stability, growth and equitable development. Alas, in reality, the New Order regime showed a twofaced personality. On one hand, it has treated the people with an iron fist in return for the provision of low-cost basic necessities including housing and food, while on the other hand to the international world, Soeharto projected a friendly countenance through promises of investment protection against legal uncertainty and political instability. With regard to development aid, Soeharto had provided more opportunities, even for the growth and fragmentation of different forms of new development aid, either for economic reasons or political imperatives.

For more than two decades, this two-faced approach continued simultaneously until it led to contention in the early 1990s, particularly with the emergence of issues related to democratization and the inability to uphold human rights. This was also a turning point for development assistance as Soeharto halted Dutch aid in objection against the criticism leveled by the Dutch Prime Minister also IGGI Chairman, Jan Pronk, concerning human rights abuse in Dili, East Timor in 1991. However, it was purely Soeharto's political tactic. Instead of rejecting international aid, Indonesia had continued to forge development aid cooperation and requested the World Bank to act as coordinator for the international aid coordination forum known as CGI (Consultative Group on Indonesia), a consortium of aid-giving (grants and loans) countries and institutions for Indonesia established in 1992 to replace IGGI. It is not surprising when non-governmental organizations and civil society actors in Indonesia later hurled a fusillade of criticisms at CGI for its continued support for Soeharto and not being critical of the New Order regime. The World Bank for example, had turned a blind eye to the country's rampant corruption by justifying that such unscrupulous practices are the internal affairs of Indonesia and has nothing to do with the World Bank. In a classified report prior to Soeharto's downfall, the World Bank had estimated that at least 20% - 30% of Indonesia's development budget has been misappropriated (World Bank, 1997). This leakage was also evident in loans from the World Bank itself. The World Bank then also paid attention to human rights violations in projects that it funds. An attitude that later changed after Indonesia embarks on its “Reformasi� movement.

The combination of an authoritarian regime and development aid has contributed to the consolidation of reform initiatives. Legal aid and human rights, the consumer and environmental movement and, and other social movements are local initiatives and seeds sown and cultivated as a result of an authoritarian political system. Spearheaded by middle class representatives concerned over the situation and yearning for change, these movements found firm support from development aid agencies. Both parties aspire for a democratic Indonesia based on the rule of law that respects human rights.

Despite the restricted movement of civil society groups during this particular period due to the imposition of financial limits and political control within the country, these repressive measures have failed to curtail the barrage of protests among intellectuals and the urban middle class particularly amid skyrocketing prices of basic goods following the economic crisis in Asia. The student's movement and the demand for reform in 1998 had succeeded in

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Introduction

toppling Soeharto's authoritarian regime. The embryo for these movements was in part implanted and nurtured through the initiatives of leading non-state actors.

Ironically, the aftermath of the demise of Soeharto's authoritarian regime has instead resulted in deterioration of cooperation between development agencies and non-state actors, mainly during the 2000s (post-reformasi). Humanitarian aid and private foundations continue to play a significant role, while ODA support to civil society elements tend to decline in line with the shift in attention from development agencies to restore relations and collaborative ties with the government of Indonesia. In addition, Indonesia is increasingly seen as a democratic state, demonstrating relatively swift economic improvements.

During the post-reformasi era, civil society in Indonesia resembles a kite on a broken string, confused and virtually without any direction, either in terms of funding or orientation of its movement. The earlier tradition of having to confront an authoritarian regime is practically no longer necessary. Political parties and representative bodies are now functioning and beginning to exert formidable influence in shaping development policies. It is also within this era that the relevance of non-state actors is being seriously questioned.

Furthermore, the revamp and restructuring of the earlier system (New Order) to a new system (Reform) has failed to deliver the expected democratic dividends, except for freedom of the press, freedom of speech and freedom of association. These outcomes indeed deserve their fair share of appreciation but still insufficient to promote a more robust and democratic role for civil society. For certain dimensions, no significant progress is evident in the relationship between the state and civil society. Although non-state actors are no longer being controlled, funding support from development agencies has recently become increasingly restricted. The government of Indonesia has yet to initiate domestic financing policies aimed at expanding the role of non-state actors. Political patronage (where political elites are selective in allocating resources) and statist policies (the state dictates and owns all) are still the norm. Cooperation and coalition among civil society elements meanwhile appears to be tenuous as they compete with each other, thus the inability to deliver more extensive impact of change (Antlov et. al., 2008). Solidarity and concern over issues related to deficits, disparities and major weaknesses of political and economic systems have previously been the collective concern of civil society elements, but have lately failed to bring about a healthy exchange of reform actions and cooperation initiatives.

This paper shall delve into the issue of development assistance and non-state actors in Indonesia. Development aid agencies under analysis cover the following: (i) multilateral institutions, such as the World Bank, United Nations Development Programme (UNDP), Asian Development Bank (ADB), and the European Union; (ii) bilateral institutions, such as USAID, Ausaid, CIDA, DFID, GTZ, etc.; (iii) international non-governmental organizations and/or grant-making institutions, such as Hivos, Oxfam, The Asia Foundation, etc.; (iv) international private philanthropic organizations, such as Ford Foundation, etc.; and (v) national grant-making institutions, such as Kemitraan, KEHATI, Tifa Foundation, etc.. Nonstate actors in Indonesia cover non-governmental organizations, community-based organizations, universities, the mass media and business groups. This study places specific emphasis on non-governmental organizations.

The main issue of this study concerns on how the pattern of development aid in the past ten years has affected non-state actors in Indonesia. Will reform instigate stagnation or instead

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Introduction

prompt resurgence? Development aid pattern in this context not only refers to funding trend, but also initiatives and approaches, as well as operational strategies and tendencies.

Based on these different aspects, a conclusion shall be drawn on implications toward the existence and role of non-state actors in Indonesia.

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Indonesia according to the Perspective of Development Aid Agencies

II. Indonesia according to the Perspective of Development Aid Agencies

The Perspective

In a span of more than ten years since Indonesia shifted from an authoritarian political regime to a democratic system, the rest of the world has also experienced considerable changes. Among others include the economic crisis in 2008 that crippled the world's economic powers, mainly the United States and European countries; political turbulence and demands for democratization in Egypt and North African countries; and a string of natural disasters across the globe including Japan and the United States.

After thirteen post-reform years or following the 1998 crisis, Indonesia also went through numerous changes. These transformations, as noted and analyzed by various development agencies, not only cover the political system, but also economic and governance systems.

Several key characteristics identified by these development aid institutions can be summarized into the following three fundamental changes: First, Indonesia is classified as a lower middle-income country at 3,000 dollars per capita each year (2010). As part of the middle-income group, Indonesia now ranks among other countries with a per capita income of 5,000 dollars, such as Malaysia, Brazil and South Africa.

Due to its economic growth and the size of its economic cake (GDP), Indonesia has joined the G20 membership that consists of countries ranked among the twenty largest economies worldwide. Being part of G20 means that Indonesia's economic cake is proportionate to that of Sweden, Belgium and other members. Aside from membership at the International Monetary Fund (IMF), World Bank and Asian Development Bank (ADB), Indonesia is now also an observer at OECD, a club for the world's rich countries. The OECD office periodically publishes a report on Indonesia. This implies that Indonesia shall soon be considered as a driving force for global economic growth on par with the United States and Europe and countries under BRICS (Brazil, Russia, India, China and South Africa).

Second, Indonesia has developed into the largest democratic system trailing behind India and the United States. It is also a Moslem-majority nation that applies democratic values.

Democracy is implemented through a multiparty system whereby three fairly democratic general elections have been held. Indonesia is now a decentralized state that confers considerable power and resources to cities and districts. With the exception of foreign politics, defense, security, judiciary, monetary and fiscal, and religion, Indonesia is currently more in the control of sub-national leaders rather than those at the capital city of Jakarta.

Third, despite the potential for positive and encouraging changes, Indonesia as viewed by development aid agencies remains fettered by numerous impediments. At least seven issues hamper progress in Indonesia today and in the future: (i) poverty and unemployment; (ii) unsustainable economic growth; (iii) government's lack of effectiveness and capacity, including constraints in decentralization; (iv)widespread and systemic corruption; (v) lack of respect for human rights and democratic values; (vi) climate change and environmental degradation; and (vii) unequal treatment between men and women (gender).

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The Perspective

Another issue that appears to have become a characteristic of Indonesia is its alarming poverty rate. Indonesia still needs to seriously deal with the major challenge of alleviating poverty. As many as 49 percent of the population still subsists below the daily income of 2 dollars. Based on 2007 government data on the country's poverty line, at least 17 percent of the population lives below the poverty line. Poverty rates across regions also vary. For example, on the island of Java the poverty rate is lower (5 percent) than figures in Papua and West Papua (40 percent).

Despite an increasingly buoyant economic growth, it is not optimal enough to absorb manpower (jobless growth). From a workforce of 20 million young-aged entrants into the labor market, only 3 million are absorbed by the formal sector. The employment rate normally ranges between 9 to 10 percent. A multilateral development agency for example asserted that although Indonesia has made significant progress in maintaining its macroeconomic performance, it is still viewed to be a 'glass half full', mainly because Indonesia has yet to translate such achievements into improvements for the well-being of the people.

Indonesia faces two scenarios for the future: Indonesia can either become a 'dynamic middle class country' or a 'country in an uncertain situation with only half of its glass full’.

In the economic sector, Indonesia needs to ensure sustainable economic growth in order to absorb a workforce of dozens of millions. In view of this, efforts to improve the investment climate become a core concern. Several key issues related to the investment climate are as follows: (i) complicated investment procedure at the central and local levels;(ii) weak law enforcement; (iii) poor governance, specifically with regard to customs and excise and taxation that have not been able to accumulate income for the government, and fair treatment of investors; and (iv) unattractive labor market conditions.

Another prominent weakness directly affecting the daily existence of the people is government effectiveness influenced either by its lack of capacity or weak accountability of civil servants. Inadequate capacity is evident in many regions, particularly at the local administration level. With regard to the accountability of government employees or bureaucrats, despite the upbeat momentum for curbing and eradicating corruption through the presence of the Corruption Eradication Commission (KPK) and the Anti-Corruption Court (TIPIKOR), it is still very much hampered by weak law enforcement due to resistance from law enforcement agencies themselves, particularly the police force, attorney's office, judiciary and Supreme Court. The main weakness of the governance system lies in the lack of coordination among different state bodies. This has led to delayed and even ineffective drafting and implementation of policies.

Although decentralization has brought the decision-making process closer to the people, during the course of time it also revealed technical and administrative flaws at the local government level. A less than effective and democratic local government in public service delivery and failure of the legal sector to root endemic corruption out and even inciting public distrust has become a serious challenge for the consolidation of the democratic and governance processes. Various threats of conflict in regions across Indonesia as well as resistance from political elites and bureaucrats toward reform measures have made the challenge even heavier.

Furthermore, corruption has also become a major obstacle in promoting economic policies favorable to the poor, and that improves the investment climate and legal system. Corruption profoundly impinges on Indonesia's effort to reform the police force and the Indonesian

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| A Decade of Development Aid and the Role of Non-State Actors in Indonesia

Armed Forces (TNI), and natural resource management. Efforts to eradicate corruption are hindered by a patronage system deeply entrenched for 50 years in the country's political mechanism.

Several bilateral development agencies have also noticed drawbacks in efforts to uphold human rights. Impunity for past human rights violations remains to be a serious issue as judicial bodies and law enforcement agencies are institutionally weak.

The Perspective

Climate change has seized the attention of development agencies, chiefly multilateral institutions such as the United Nations, as it can impede Indonesia's ability to meet its MDG (Millennium Development Goal) targets. Indonesia is particularly vulnerable to rising sea levels and flooding. Climate and seasonal changes can also destroy the production process of small farmers and fishermen. In addition, the troubling rate of forest conversion and environmental destruction has turned Indonesia into the third largest contributor of greenhouse gas emissions.

Another major problem concerns unequal treatment between men and women (gender).

Women's access to health and education services has become a persistent problem. The maternal mortality rate in Indonesia is still alarmingly high. Furthermore, women are under represented in various public offices. Although the government has proclaimed its commitment to deal with these pressing issues, more tangible and genuine efforts are crucial specifically at the implementation level. Failure to do so will cause women to increasingly bear the brunt as the result of discrimination, power abuse and corruption. Coupled with weak democratic institutions, democratic consolidation requires more extensive efforts to promote participation. Although the reform movement has paved the way for decentralized governance, general elections and legislative improvements, many state policies and reform programs have yet to completely address deep-seated problems such as poverty and discrimination endured by marginalized social groups.

Table 1. Analysis Matrix of Development Agencies

INSTITUTION

ANALYSIS WITHIN THE INDONESIAN CONTEXT

Multilateral development aid agencies

? Successful political transition in modern history ? Emerges as a lower middle income country with the fastest HDI

improvement ? High poverty rates as well as unbalanced and inequitable growth or has

failed to ensure inclusive and sustainable growth ? Institutional capacity and accountability is the main obstacle.

Decentralization is not accompanied with adequate local government capacity while corruption remains to be a serious issue. ? Impunity for past human rights abusers ? Climate change is a major problem as it profoundly affects the agricultural and fisheries sector, and others

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The Perspective

Table 1. Analysis Matrix of Development Agencies ( cont. )

INSTITUTION

ANALYSIS WITHIN THE INDONESIAN CONTEXT

International bilateral development agencies

? Political shifts and decentralization ? Poverty still a major challenge for Indonesia ? Democracy and economic growth has yet to result in improvements in

bilateral prosperity (jobless growth) ? Governance and corruption is a serious problem. RAN–PK (Rencana Aksi

? ? ? ?

Nasional Pemberantasan Korupsi or National Action Plan for Corruption Eradication) has been drawn up but has not been effectively implemented Investment shortfall in the national budget Weaknesses of the local government in the delivery of public services Gender inequality Failure of the legal sector

International nongovernmental organizations and /or grant-making institutions

? Decentralization still marked by weak local government capacity ? Negligible women's participation in the political as well as socio-

International private philanthropic organizations

? Indonesia has succeeded in going through its transition from a military

economic realm ? Deep-seated gender inequality ? Environmental destruction and disaster mitigation

government to a democratic state ? State policies have not been reformed; discrimination and exclusion is still

faced by marginalized groups ? Support for marginalized groups is necessary in order to shape public

policies

National grantmaking agencies

? Democracy has yet to promote diversity and equality for citizens ? Impunity is still a major obstacle and challenge in post-reform Indonesia ? Decentralization remains mired in unscrupulous practices such as

corruption and lack of citizens' participation in policy-making ? Discrimination is still prevalent among minority groups, women, children

and the disabled

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The Perspective

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Priority Issues Identified by Development Aid Agencies

III. Priority Issues Identified by Development Aid Agencies

Priority Issues

For three decades prior to the “Reformasi� movement, data from the Development Assistance Committee (DAC) of OECD shows that Indonesia is consistently ranked first (1999/ 2000) and second (1989/1990; 2009/ 2010) among ODA recipient countries. If Indonesia has now become a middle-income country with an annual national budget (APBN) exceeding Rp1,000 trillion and a G20 member country, why does aid from development agencies remain necessary? To rephrase the question: if Indonesia is no longer troubled by the scarcity or absence of funding, what are the reasons for Indonesia's continued receipt of development aid?

According to Jonathan Gleenie (2011), a middle-class country such as Indonesia still deserves to receive external development aid (ODA) because of the following reasons: (a) funding facilitates the transition process of low-income countries (LICs) into becoming middle-class countries through a gradual process and not in an abrupt manner; (b) aid functions as a catalyst for promoting and/or consolidating ongoing or previous improvements; and (c) the value of aid lies not in its amount or size, but in its role in creating incentives (positive) for improvements or change. In light of this, according to development agencies, aid is prioritized for efforts aimed at building a democratic, stable and more prosperous Indonesia based on the rule of law and human rights.

Identifying policy and institutional issues that development agencies give priority to is the marriage of two key aspects: the interest of Indonesia and development agencies. In other words, Indonesia in the eyes of development agencies is considered as: (a) a client and member that must and need to be served (this perspective is particularly held by the World Bank, UNDP and ADB); and (b) a friendly country or partner state that must be respected as appropriate for a mutually beneficial relationship within the international political order and interaction, and also with regard to economic and trade ties.

As such, development aid agencies now generally make reference to the Indonesian government's medium-term development plan (RPJM). In addition, they draw from different priorities proposed by experts, private groups and citizens through consultation, assessment and other procedures. Determining focus areas and priority issues by development agencies is also guided by or adjusted to various international arrangements on aid effectiveness that govern on cooperative ties between the giver and receiver of aid.

Several of these international policies include the Paris Declaration on Aid Effectiveness (2005) and the Jakarta Commitment (2009).

Multilateral development agencies place emphasis on economic growth, although fully aware of other issues that influence the outcomes of economic progress. One such issue concerns the institutional dimension. The World Bank for example focuses its attention on this dimension through five core activities and two cross-cutting programs. The five core activities are: (i) development of the private sector; (ii) infrastructure; (iii) community

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development and social protection; (iv) education; and (v) environment/disaster mitigation. The two cross-cutting activities are: (a) system and institutional strengthening of the central government; and (b) system and institutional strengthening of the local government.

Priority Issues

The United Nations on the other hand, assumes a powerful position as a neutral development agency that concentrates on four key aspects in Indonesia: (i) MDG achievement and poverty reduction; (ii) the environment, energy and climate change; (iii) democratic governance; and (iv) crisis prevention and recovery, including disaster mitigation. Other multilateral development agencies focus on certain main sectors, such as: (i) education, including the quality of primary, secondary and higher education; (ii) trade and investment, including the investment climate; (iii) law enforcement and justice, including corruption eradication, legal reform and implementation of the National Action Plan on Human Rights; and (iv) cross-sectoral issues, including the environment, governance and human rights, conflict prevention, social dimension of globalization and gender justice.

On the other hand, bilateral international development agencies typically place priority in supporting democratic consolidation and economic development. A bilateral institution for example has identified five priority areas for support in the subsequent period for the primary purpose of reducing poverty and global environmental threats. The following five areas of concern were also selected by taking into account the bilateral relations of both countries concerned: (i) education; (ii) natural resource management; (iii) democratic governance; (iv) health; and (v) employment opportunities. Other international bilateral development agencies award greater attention to what is known as the four pillars of development aid: (i) economic development; (ii) pro-people investment; (iii) democracy, justice and good governance; and (iv) peace and security.

Slightly different from multilateral and bilateral development agencies, certain private philanthropic organizations normally focus on core issues that serve the overarching purpose of advancing social justice. These priority issues include: planning and budgeting; reproductive rights and women's participation; social protection for the poor; media that serves public interest and active citizenship; and sustainable natural resource management.

Several other private charitable institutions concentrate on efforts to promote good governance, democracy, the upholding of human rights, law enforcement and the development of a market economy. Such support is normally provided through the capacity building of key actors such as state officials (including local leaders), politicians (members of parliament) and civil society. Apart from democracy, attention and support also highlights on dealing with environmental issues and law enforcement among others through cooperation for institutional strengthening.

International non governmental organizations and national grant-making institutions are concerned over priority issues similar to those of private philanthropic agencies that essentially seek to promote a better Indonesia in terms of the quality of governance and democracy rather than on the democratic procedure. These institutions see the need to focus improvements on the following aspects: (a) an increasingly citizen-oriented democracy and governance in order to curb corruption in the public sector to the maximum extent possible and bring an immediate end to the impunity of human rights abusers; (b) ensure participatory governance and decentralization by involving citizens and improving public

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services; (c) urge the state to firmly enforce the law in a more vigorous manner to protect diversity and social cohesion in Indonesia; and (d) strengthen the government and citizens in preventing environmental destruction and natural resource depletion, including the conservation of forests and clean water sources .

From the foregoing explanation it is evident that the solution and focus of attention for various institutions differ with distinct characteristics. Thematically, bilateral and multilateral development agencies as well as international and national grant-making organizations and private philanthropic entities generally work on the following priority issues or program focuses :

Priority Issues

First, on how Indonesia as a middle-income country can sustain and boost its economic growth to become more sustainable and inclusive. Sustainable refers to: (a) strong competitiveness; (b) healthy investment climate; and (c) adequate investment for infrastructure. Inclusive means an economic growth that can become the engine for reducing poverty and absorbing manpower.

Second, on how Indonesia's governance, legal and political systems can gain integrity, be free from corruption and fairer for all. The government's lack of capacity and high corruption rates slow down efforts to push Indonesia forward and detrimental to investors and the people of Indonesia. Unfavorable investment climate and corruptible courts are among the concerns of almost all development aid agencies.

Third, on how Indonesia's policies and institutions can be further strengthened to overcome environmental issues, climate change and natural disasters. A well-conserved environment in Indonesia offers tremendous benefit and impact for the global ecosystem. Such improvements are crucial given the fact that Indonesia is the third largest contributor of greenhouse gas emissions in the world.

Fourth, on how Indonesia can bolster its social investment for citizens (investing in people), both as highly competitive economic investment and to generate economic benefits and outcomes for improving welfare and alleviating poverty. Indonesia's investment in education, health and social protection has become an emerging issue that has drawn the attention of multilateral and bilateral development agencies and private charitable organizations.

A priority issue that development aid institutions have yet to address more seriously is discrimination. Only a handful of private philanthropic organizations have definitively incorporated the issue of pluralism and citizenship into their focus area or priority issue.

This situation has been highly contextual for Indonesia in the past five years where religious fundamentalism has further intensified, culturally and politically. Although religious fundamentalism is not politically threatening, within the cultural context and inter-citizen relationships, pluralism shall greatly influence the cohesiveness of the nation in years to come. Lack of government capacity and accountability play a part in exacerbating the situation. Anti-pluralism and diminishing civic awareness appears to be a tangible trend that can pose a threat to Indonesia's democracy and stability.

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Multilateral development agencies

International bilateral development agencies International non- govt. organizations and/or grant-making agencies

International private philanthropic agencies

Priority Issues

National grant-making agencies

Economic Growth

Governance, Legal System and Democracy

Social Investment and Policies

Climate Change and the Environment

Illustration 1. Focus Areas and Priority Issues of Development Agencies

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Priority Issues

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Development Aid Agency Strategies

IV. Development Aid Agency Strategies

What changes do development aid agencies envision for Indonesia in order to become a more democratic and accountable state based on the rule of law and human rights? How do they implement such strategies and how much of their resources are invested? These two elements shall be examined in this section. Explanations on these strategies shall revolve around a particular priority issue – democratic governance. This emphasis is purposefully selected as it has virtually become the focus or priority of all development aid agencies, be they multilateral, bilateral, international or national. Nearly all of these entities for example mention corruption as an impediment while law enforcement is considered as a challenge for Indonesia.

Furthermore, several new studies on the trend and coordination of donor institutions in Indonesia also revealed that these agencies focus more on governance programs, mainly bureaucratic or personnel reform and anti-corruption (see Edi and Setianingtyas, 2007).

Strategies

The strategies of multilateral, bilateral, international and national development institutions and private charitable organizations may be expressed differently with diverse formulations, but they can best be represented by the following phrase embodied in a document from a multilateral development agency: “that Indonesia's problem lies not in the lack of funding, but rather on how institutions primarily in the public sector can work towards harnessing these resources and turning them into concrete improvements that affect the people's lives, such as with regard to public service delivery.”

For instance, the United Nations Development Programme has outlined governance into five core areas: (i) integrity of political institutions, bureaucracy and the law; (ii) accountability and representation of political institutions; (iii) public engagement in policy-making in a transparent and inclusive manner; (iv) legal empowerment to protect ownership rights and deal with power abuse; and (v) public service standard and bureaucratic reform. The World Bank on the other hand, has set forth two core issues: (i) institutional capacity; and (ii) institutional accountability for bureaucratic, legal and political bodies.

Although institutional change or improvement is the objective, this does not mean that transformations are insubstantial. The process involves three levels of targeted change: policy change (first order of change), institutional change (second order of change) and operational change (third order of change). In other words, the intended change should essentially encompass three types of innovation: product innovation, process innovation and mindset innovation.

From various strategic documents and interviews with staff members implementing programs funded by development agencies, several characteristics on the direction of change can be encapsulated into the expression “the second generation of reform” or “quality of democracy” in which the elements consist of the following :

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First, on how Indonesia as a middle-income country can sustain and boost its economic growth to become more sustainable and inclusive. Sustainable refers to: (a) strong competitiveness; (b) healthy investment climate; and (c) adequate investment for infrastructure. Inclusive means an economic growth that can become the engine for reducing poverty and absorbing manpower.

Second, changes in governance are mainly concerned on reform in various bureaucratic, legal and political institutions, including the Supreme Court, attorney's office, parliament, state ministries, local governments and DPRD (Regional House of Representatives).

Third, although multilateral and bilateral development institutions often combine reform measures from the supply-side and demand-side by recognizing the role of civil society and the mass media, there is a strong tendency for supply-side reform by working with government partners for the purpose of ensuring that government, legal and political institutions are well-functioning entities that work in an increasingly responsible and responsive manner with unquestionable integrity.

Strategies

Fourth, changes cover efforts to strengthen, improve and empower government, legal and political institutions through different methods and programs, including legislative, institutional and operational changes. With regard to partners as the agents of change, most development agency strategies revolve around government, legal and political institutions.

Only a few multilateral and bilateral development agencies embrace civil society as their principal partners.

To achieve these change objectives, funding clearly becomes a fundamental factor. In terms of funding size, various development aid agencies can be classified into three types: large, medium and small. Multilateral and bilateral development institutions normally operate within the large-to-medium scale funding of between USD 50 million to more than USD 200 million for a one-year period. International non-governmental organizations and/or grantmaking organizations and private philanthropic institutions on the other hand can be categorized as medium scale entities with funding size ranging from USD 50 million annually. Small-scale funding amounts to less than USD 10 million per year.

Multilateral Development Aid Agencies International Bilateral Development Aid Agencies International Non-governmental Organizations and/or Grant-making Agencies International Private Philanthropic Agencies

Small Scale ( < US$ 10 Million )

Medium Scale ( < US$ 50 Million )

National Grant-making Agencies

Illustration 2. Funding Scale

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Large Scale ( > US$ 50 Million )

Concerning implementation, programs conducted by development aid agencies can be grouped into several models: (a) the provision of funding to support jointly agreed projects under the management of state bodies as project or program implementing partner; (b) in the form of policy advice based on study outcomes in accordance to the problem or issue at hand; (c) through technical support, such as the placement of experts and consultants through different recruitment procedures; and (d) in the form of grant funds offered to governmental and non-governmental bodies within a specified period for the implementation of a given activity or series of activities agreed in advance.

In terms of the technicalities of aid distribution, bilateral development agencies mainly adopt the following methods. First, aid is channeled to multilateral agencies such as UNDP, the World Bank and ADB, either through a trust fund or sector-wide program (SWP).

Agencies such as DSF (Decentralization Support Facility) and MTF (Multilateral Trust Fund for relief assistance in response to the tsunami disaster in Aceh) are examples of a development trust fund consortium supported by various bilateral development agencies, including DFID and the Dutch Embassy. An SWP example is support for the education sector through the Ministry of National Education to meet educational targets, such as support for the BOS (School Operational Aid) project.

Strategies

Second, funding support is channeled to the state budget through project implementing units under a particular state ministry or local state office. This approach is often known as Direct Budget Support (DBS) lately seen as an effective way to enhance a sense of ownership and ensure harmonization consistent with the principles of aid effectiveness (Action Aid, 2008).

Third, funding is funneled through private development contractors such as Research Triangle Institute(RTI), Chemonics, Cowater International (Canada) and similar institutions. Fourth, through other methods, such as direct grant giving to nongovernmental organizations, community organizations, universities and research institutes as practiced by private philanthropic institutions, such as the Ford Foundation.

Open Call for Proposal

Semi Open Pro-Active

Tender

Tender and Call for Proposal

Multilateral development aid agencies International bilateral development agencies International non-governmental organizations and/or grant-making agencies International private philanthropic agencies National grant-making agencies

Illustration 3. Method of Aid Distribution

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At present, the Australian Agency for International Development can be considered as the largest bilateral development agency in Indonesia with a funding volume of up to AUD 1 billion. From this amount, a certain portion of funding support is channeled through Australian private development contractors. Australia however is currently planning to converge the management of funding support through Indonesia Strategic Partnership with extremely broad discretion. This form of strategic partnership is a â&#x20AC;&#x153;temporary solutionâ&#x20AC;? for expanding support and organizing Australian development agencies in the future.

It appears that Australia's line of approach shall shortly be emulated by the United States Agency for International Development. The agency is in the process of drawing up a new strategic blueprint that seems to follow the trail of the U.S.-Indonesia Strategic Partnership mechanism. Apart from internal sources of funding, U.S. bilateral aid agencies also pool funds from other U.S. departments to be drawn together and channeled through the United States Agency for International Development (USAID). The awarding of financial aid is normally ensured through open tenders and implementation oriented, for example, by facilitating the establishment of one-stop service centers for permits and licenses in 10 districts/cities who have expressed interest in project support. Another project assists KPK (Corruption Eradication Commission) in implementing a baseline perception survey on public satisfaction with services rendered by local governments.

Strategies

European bilateral aid agencies on the other hand mainly operate on a funding range of EUR 400-500 million through the Strategy Paper that extends over four to five years. The lion's share of funds (up to 80%) is earmarked for government bodies, such as Bappenas (National Development Planning Agency), and UNDP (United Nations Development Programme).

Roughly 10-15% from total funding is funneled to international development agencies largely from European Union member states (e.g. Oxfam GB). Residual funds are distributed as grants to civil society groups in Indonesia. Normally ranging between EUR 100 to EUR 500 thousand, these remaining funds are directed at predetermined thematic projects that in general require six to eight months to finalize the administrative process. This lengthy administrative procedure often hamper civil society groups in Indonesia from securing funding support, in addition to a grant mechanism that requires co-sharing of funding at 515% of total project value. As the entire grant decision-making process is centralized at the EU headquarters in Brussels, country representatives mainly function as compliance offices.

Slightly distinct from bilateral development agencies, international organizations commonly operate as the administrator of international grants with small- to medium-scale funding. An international non-governmental organizations in Europe, for instance, works with a funding range of EUR 3-4 million annually. Despite such limited scale, the agency claims to have an advantage with its outstanding and tenacious human resource. Another strong suit is the agency's highly efficient and well-organized database archiving system.

The manner in which international institutions work and manage funds is similar to that of non-governmental organizations, even though they operate within a regional and global scope. These institutions may not have a specific or periodic call for proposals mechanism in place, but they are fairly open to initiatives from civil society groups. They place priority on civil society groups as well as small- to medium-sized organizations for funding support that varies from IDR 100 to 300 million each year. International development agencies also adopt a proactive partnership grant-making mechanism despite a selection process that prioritizes community-based civil society partnerships.

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These international non-governmental institutions also ensure that their programs focus on reform measures from the demand-side rather than the supply-side, although certain funding support is often directed at quasi-governmental bodies such as the National Commission on Violence against Women. The identification of focus areas for funding support is normally not based on a given intervention strategy, but driven more by the tradition of institutional networks of the same country origin. Several focus areas shall continue to be the priority of institutions, such as support for the capacity building of nonstate actors. They also generally believe that capacity building is the fastest way for the transfer of knowledge.

The emergence of national grant-making institutions is indeed a noteworthy development in itself. These agencies operate independently as national entities to support the achievement of development goals. Examples are national grantors concerned with environmental issues, governance reform and strengthening of civic democracy. They typically operate on a modest funding scale of between IDR 40 and 50 billion each year for supporting civil society elements in Indonesia. These entities have the advantage of being adept in mobilizing funding sources.

Strategies

One of these organizations for example is entrusted with the authority to manage endowment funds derived from bilateral development agencies. These endowment funds subsequently evolve into mutual funds on offer to the business world and the public at large in order to expand the funding scale until a decade onwards. Apart from the development of endowment funds, the mobilization of funding sources is also initiated through support for investment-based programs, such as early childhood education. An intervention like this builds a broad constituency expected to be part of the development of future funding sources. On one hand, this experience shows the potency of consistently creating alternative funding opportunities from various institutional interventions. The main asset is creativity.

On the other hand, grant distribution is instead carried out on a relatively small scale that simultaneously shows the priority placed on raising funds instead of distributing them.

Nonetheless, not all initiatives from national grant-making agencies consistently end in success stories. A recent case involving a national grantor has given an invaluable lesson on how declining support for non-state actors has pushed the agency to function as a recipient rather than a grant-giving entity. This institution was originally designed to become a grantmaking agency for civil society in which the main funding source comes from a bilateral development institution. Diminishing support on one hand is seen as flagging commitment from the bilateral development agency that has been a partner for more than a decade. On the other hand, this declining support is also because the national grant-making institution is assessed to have not developed as expected. This case illustrates the absence of any agreement on measurement or benchmark that gauges on how a national development aid agency should ideally grow and develop. For example, the extent to which cooperative support has strengthened the capacity of organizational staff or increased the likelihood of continuity in the coming years.

From the foregoing discussion, several emerging trends in the past five to ten years should be noted. First, the dominant role of various private contractors increasingly taking over the function of international non-governmental institutions. These private development contractors are now commonly appointed as program implementing partners for international development agencies, such as those from the United States, Australia and Canada. Agencies such as Research Triangle Institute(RTI), Chemonics, Management TIFA Foundation, July 2012

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Systems International (MSI) Inc., and similar organizations are indeed not a new phenomenon, but with respect to large-scale project execution, they have lately become one of the key actors. Funds drawn from bilateral development agencies are channeled through a tender mechanism where they normally emerge as winners. Projects won are not only restricted to governance-related projects, but also encompass projects associated with law enforcement, such as the institutional strengthening of the Supreme Court and Attorney General's Office and those related to the democratic process, including parliamentary institutional capacity building.

Second, another growing trend sees specific efforts to strengthen coordination among donor agencies and harmonization among development institutions into one to two priority issues, such as through support facilities that are essentially a consortium of bilateral development entities that seek to improve certain development agendas, including decentralization, community empowerment and poverty reduction. Bilateral development agencies would customarily deposit their funds and subsequently appoint an agency to act as their custodian. An example is DSF (Decentralization Support Facility) under the coordination of the World Bank for managing funds obtained from different sources.

Nevertheless, a recent study on DSF reveals that a coordination and harmonization approach is not always effective due to barriers within the bureaucratic process of the development agencies themselves and obstacles arising from government bureaucracy (Winters, 2012).

Strategies

This similarly applies to PSF (PNPM Support Facility), again coordinated by the World Bank, for supporting the expansion of PNPM (Program Nasional Pemberdayaan Masyarakat or National Community Empowerment Program) Mandiri. In practice, the World Bank is in the middle of managing trust funds originating from bilateral development agencies. An approach and strategy like this has impinged on funding sources for international and national development entities. Grants shall instead be funneled mainly to institutions such as the World Bank even though such funds are sourced from governments where international development agencies originate from.

Third, from their geographic approach or regional coverage, nearly all development aid agencies operate across the entire regions of Indonesia and even at the national level.

Certain agencies however, distinctly award attention to a particular geographical and operating area. The Canadian International Development Agency (CIDA) for instance centralizes almost all of its development support in Sulawesi. The Australian Agency for International Development (Ausaid) meanwhile specifically places priority on the eastern part of Indonesia, such as NTT (East Nusa Tenggara), NTB (West Nusa Tenggara), Sulawesi, Maluku and Papua.

Fourth, from the perspective of democracy, human rights and civil society, another important point to note is the decreasing amount of support for civil society elements committed to the upholding of democracy and human rights. An Edward Aspinal study in 2010 shows that the amount of funds channeled for the democracy and human rights sector and support of non-state actors in Indonesia has gradually spiraled downwards. As an illustration, nearly 80% of aid funds from European multilateral development agencies are earmarked for state bodies with Bappenas as the principal recipient. Only five percent from the remaining funds is allocated for civil society groups, either through grants managed by international non-governmental institutions or directly fed to non-state actors in Indonesia.

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Table 2. Strategy Matrix PARTNER

APPROACH

Multilateral Development Aid Agencies

G

International Bilateral Development Aid Agencies

G

C

R

R

International Non-governmental Institutions and/or grant-making agencies

G

C

R

R

International Private Philanthropic Agencies

G

C

R

R

National Grant-making Agencies

G

C

G C

TIME

SCALE

DISTRIBUTION

R

Government, legal and political institutions Civil Society Org.

R

R

Reform from Above

Long-Term / more than 3 yrs

Large-scale

R

Reform from Below

Medium-Term / 3 Tahun

Medium-scale

Short-Term / less than 3 yrs

Small-sclae

more than USD 50 Million less than USD 50 Million

Tender Direct & Competitive

less than USD 10 Million

How do we perceive the strategies and implementation approach of development agencies?

Are the strategies suitable for the needs of civil society in Indonesia?

Strategies

At the implementation level, by drawing on Rothstein's checklist (1998), the following three elements need to be examined and an assessment conducted: (a) program design; (b) organization for implementation; and (c) program legitimacy. Program design consists of two sets of plan that need to be distinguished and are indeed dissimilar, i.e., regulatory plan and intervention plan. These plans should be able to deal with both static and dynamic conditions. In terms of the implementing organization, two types of approach can be identified â&#x20AC;&#x201C; organization as an incentive system and a norm system. In relation to this, the term 'responsibility drift' may apply to an organization or a unit within the organization.

This is related to cases known as the democracy black hole where policy decisions are made in the absence of accountability, either politically or administratively.

What about the legitimacy aspect? This can be examined from two angles: (i) outcomes of a given policy; and (ii) financial ties that refer to funding sources being utilized. In other words, the change strategy of development agencies appears to mainly gravitate around the foregoing two core aspects, namely policy design and implementing organization, both in terms of substance and process. To a certain degree, weaknesses or 'ailments' of the program design and implementing organization have been identified and different remedies prescribed. The level of success or impact even to this day remains to be a contentious issue due to dissimilar measurements, attributes and criteria. Nevertheless, a key component that has yet to gain serious attention concerns legitimacy.

In simplified terms, funds from development agencies are somewhat similar to funds from the oil and gas sector; easily obtainable and no need for bottom-up accountability, compared to for example the accumulation and management of tax funds from the public. Without the appropriate mechanism, development aid can isolate the state from its citizens such as the issue of oil rents where accountable and responsive institutions from top-down are difficult to develop and consolidate.

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The legitimacy of programs under development agencies can be strengthened in the presence of strategies that promote bottom-up accountability of bureaucratic, legal and political bodies. The shift in development funding sources from oil and gas (natural resource rents) to tax funds is a strategy to make governments more dependent and accountable to their citizens (Brautigam, Fjeldstad and More, 1998). Furthermore, legitimacy can be reinforced at the availability of a strategy that exerts bottom-up pressure by building beneficiary constituents, among others through the distribution of oil and gas rents in the form of cash transfer to citizens (Moss, 2011).

In line with this analogy, a shortcoming of the approach adopted by development agencies toward civil society organizations in Indonesia is the absence of a specific strategy that encourages the establishment of a funding mechanism from the government of Indonesia itself, mainly for civil society elements, either through a tender mechanism or a direct competitive grant mechanism.

Strategies

Not a single development agency has a specific plan or initiative to push for the establishment of a funding mechanism for civil society groups in Indonesia, including alternative funding sources from the national budget or private corporations. A trial project that draws from the national budget as a funding option can initially be directed at efforts to improve the environment, protect consumers and open up access to legal aid for vulnerable groups. Given the substantial volume of national budgetary funds, the utilization of funds ranging from IDR 100 to 500 billion each year for non-state actors distributed in a competitive manner shall change and democratize relations between the state and civil society from statist and political patronage to a rights-based relationship.

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Strategies

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Implications for Non-State Actors in Indonesia

V.

Implications for Non-State Actors in INdonesia

The improved political and economic standing of Indonesia and changes to rules and regulations and mechanisms related to development aid by and large have given Indonesia a voice that is increasingly as resonant as aid-giving countries. In other words, development agencies will now make more effort to conform to or align with the priority agendas and targets set by the government of Indonesia. Harmonization and adjustment should not be seen as damaging or erroneous. Not only is it correct but can nurture a sense of ownership and promote sustainability, and engender better results and benefits.

Nevertheless, at the operational and implementation level, it can also end in bureaucratic capture, particularly in a situation where state bureaucracy remains far from public ethics, integrity and accountability. Criticisms or corrections to development agency strategies and operations have been fairly voluminous. A study by William Easterly (2002) for example, puts out a word of caution to multilateral and bilateral development agencies, especially the World Bank against what is known as the 'cartel of good intentions'.

The term 'cartel' is used because competition among actors is non-existent and consumers face difficulty or are denied the opportunity to demand for accountability. 'Good intentions' on the other hand implies the intent to improve conditions that run the gamut of agendas, from poverty reduction to law enforcement and human rights protection. Despite such good intentions however, their strategies and operations are caught in a capture situation by aid bureaucracy itself.

Implications

'Cartel of good intentions' in Indonesia is largely apparent with regard to the democracy, human rights and governance sector. In the past ten years, development aid to state bodies such as the Supreme Court and Attorney General's Office as well as different state ministries, institutions and political parties has failed to produce the desired outcomes, except for changes to the Constitutional Court and Corruption Eradication Commission, and to a certain degree, bureaucratic reform at the Ministry of Finance.

Furthermore, development agencies shall be increasingly bound to the agendas and policies of the government of Indonesia. Another implication is that development agencies shall be more inclined towards partnering with and/or providing aid funds to the government rather than for example civil society organizations or private and business groups. Multilateral and bilateral development agencies deal with a considerable amount of funds and prefer to work with the government rather than the people for a longer time period of between three and five years. Development agency projects specifically operate through a tender mechanism with private contractors or consultants as the executing agency. Most non-state actors are relegated to the role of sub-implementer or typically as complementary actors for various activities.

What are the implications of the development aid or funding trend specifically for civil society in Indonesia? As mentioned earlier, when a middle-class country becomes TIFA Foundation, July 2012

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increasingly prosperous, development issues are no longer about the lack of funds or resources but more on barriers to the distribution of resources. Failure to respond swiftly to this matter shall create a socio-economic chasm that can incite social friction and instability.

Hence, non-state actors must assume a more decisive role in (a) promoting the accountability of the state towards the poor and marginal groups; and (b) ensuring the upholding and respect of human rights. Failure to support civil society elements can strip development agencies of their legitimacy (Glennie, 2011).

In Indonesia, this scenario is highly relevant. Instead of bridging chasms, progress achieved

by Indonesia's formal political system as reflected in the performance of political parties and the parliament in reality has yet to narrow down socio-economic disparities in society. One of the reasons for this is that political parties in Indonesia are not oriented to programs and problem solving. In other words, Indonesia's political parties tend to be internally oriented or self-serving with a transactional attitude that serves personal interests or that of their leaders and group rather than for programs and policies that can strengthen fundamental freedoms and elevate the well-being of each and every citizen, men and women, rich and poor.

Similar to the larger purpose of development agencies, civil society also envisions a more democratic and tolerant Indonesia based on the rule of law and human rights in which growth is bolstered by a robust and capable society. As such, economic growth should be a means to an end and not an end in itself. Economic growth shall be meaningless if the social status of the Indonesian people do not change for the better as reflected in the Human Development Index (HDI). Economic growth shall be rendered pointless if discrimination against certain groups is not effectively dealt with by the state.

Implications

A fundamental and ongoing struggle of non-state actors Indonesia is working towards concrete progress in the realization of human rights and democracy, including efforts to bring an end to impunity for human rights abusers, promote the participation of women and vulnerable and marginal groups, safeguard diversity and revolutionize government capacity and accountability that covers initiatives to curb corruption and strengthen ecological sustainability through the appropriate policies and curtailing of natural resource exploitation. The slogan should no longer be 'liberty, equality and fraternity' but 'liberty, equality and ecology'.

Buoyed by the spirit of an open society, civil society in Indonesia envisages a state and society where the values of freedom and equality can be collectively brought to fruition. At the institutional level, the government's optimal role is a requisite, with just the right dose of intervention in economic matters and private affairs such as those related to religion and the conception of a good life. At the same time however, the state must be adept in enforcing the law, maintaining security and public order to ensure the creation of a cohesive and harmonious society. Every individual deserves due respect and protection, and is entitled to equal opportunity.

In relation to this, the priority issues of development agencies denote two fundamental attempts: (a) to encourage bureaucratic, legal and political institutions to work effectively and efficiently; and (b) to change or improve these institutions to be more accountable, transparent and responsive. Both agendas reflect the characteristics of a good government.

In reality, only a few development agencies have pushed for the priority issue of (c) reforming these institutions to work effectively, accountably and impartially. Impartiality

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means that bureaucratic and law enforcement agencies must equally serve the people, ensure non-discriminatory treatment of citizens and fulfill their rights. The poor and rich must be treated on equal terms. Women are awarded the same level of respect as shown to men, children and the elderly. The priority issue should therefore no longer be good government, but the quality of government.

Without the impartiality of policies and operations of bureaucratic, legal and political institutions, the government's legitimacy shall be further undermined. Impartiality is essential and reflects the problem of discrimination and exclusion faced daily by marginal groups, the poor, women, minorities, senior citizens, the disabled and children. Impartiality may well be a missing element in the behavior, mindset and motive of bureaucratic, legal and political institutions. A good government bears the obligation to demonstrate adequate capacity and accountability. Despite this however, a good government can still be overruled by a discriminatory and exclusive attitude on the grounds of ethnicity, political patronage and other reasons. Bearing this in mind, impartiality must therefore be an inherent element and become the collective mindset of state bodies.

Schematically, based on ongoing operations of development agencies, two scenarios or approaches can be outlined. First, a governance model in which the distinct feature sees the government and state agencies as the key ally, and both the target and engine of change.

Second, a democratic model that in contrast relies more on the energy and innovation of civil society organizations, non-governmental organizations, universities, the mass media and the business community.

Implications

The first scenario translates into narrower room for civil society to move, and only through hard work can civil society continue to operate and contribute, albeit in the sidelines. The second scenario on the contrary can allow greater space for the creative initiatives of civil society in carrying out advocacy work and promoting change far and wide in terms of geographic scope as well as policy and institutional dimensions. In other words, the first scenario is a feasible option as it has been practiced for years and with its own proponents among development agencies and the government. This scenario however may not be desirable to non-state actors in Indonesia. On the other hand, the second scenario may be highly desirable, although not entirely feasible because statist initiatives and traditions among bureaucrats, and political patronage among politicians and policy-makers may be resistant towards this second model.

The governance model that places complete trust on reformers from within bureaucratic, legal and political institutions must be counterbalanced and supplemented with a democratic approach to the intervention model where trust is bestowed upon reformers and initiatives from outside of the bureaucracy, such as non-state actors, the business community and the mass media. If not, this scenario shall be highly prone to bureaucratic capture and even undermined by other state bodies, including legal and political institutions, except when other methods are also undertaken where resources are not entirely placed in their hands but dispersed to other actors outside of the bureaucracy and other state agencies.

In addition, intervention from development agencies should also best be accompanied by changes to the mindset of bureaucratic bodies (legitimacy, impartiality and integrity), and not simply focus on operational changes (e.g. computerization) and institutional reform (e.g. civil servants payroll system, freedom of information, etc.). Operational and institutional TIFA Foundation, July 2012

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changes are indeed a necessity, but have yet to suffice and be sustainable. Several development agencies have put such initiatives in motion with the key word 'knowledge building'.

The democratic model on the other hand calls for change and diversification of funding sources for non-state actors in Indonesia, for example from the state budget. It is certainly not easy to reallocate the national and local budget for immediate distribution as competitive grants to non-state actors in Indonesia. This requires the role and intervention of reformers within government itself, without which the democratic model would not be realized any time in the near future.

In terms of funding, Indonesia is not an impoverished country. Indonesia has adequate room for funding. With an annual budget that exceeds IDR 1,000 trillion, Indonesia is unquestionably capable of financing programs and activities executed directly by various non-state actors for the purpose of creating public goods, such as improvements to the quality of the environment, consumer protection, poverty alleviation and social protection for all. Some of them can be carried out by increasing the reliability and contribution of the national and local budget. It can take different forms and start from a competitive grant mechanism as long practiced by OECD member countries. The reliability of such funds is not only essential in terms of amount, but also as a form of legitimacy that seeks to find the most viable principle and method to change a statist relation and political patronage approach into a rights-based relationship between the state and its citizens.

Implications

Tablel 3. Two Strategy Options

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DIMENSION

GOVERNANCE MODEL

DEMOCRATIC MODEL

Main Obstacle

Actor / Agency

Actor and initiative

Assumption of Change

Adequacy of reformers within state institutions

Adequacy of initiatives and reformers within society

Drivers of change

State (state building)

Public and the state

Legitimacy

Formal procedural

Substantial and social

Partner

Government institutions: bureaucratic, legal and political

Non-governmentalentities: nongovernmental organizations, universities, the mass media and citizens

Intervention

Institutional innovation and modernization

Innovative initiatives and institutions

Funding scale

Large

Medium

Fund distribution

Tender or offer

Direct and competitive

Funding source

International

International and national

Sustainability

Co-finance from the national or local budget

Competitive grant mechanism from the national or local budget and CSR (Corporate Social Responsibility) funds

Accountability

Technical

Technical and Social

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Implications

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Recommendations and Path Ahead

VI. Recommendations and Path Ahead

Non-state actors in Indonesia constitute as a home-grown social force set in motion by the educated urban middle class. Nonetheless, the country's non-state actors are not without their share of shortcomings. They still need to address many internal weaknesses in terms of their capacity and institutional models. Hans Antlov, et al. (2008) for example puts forward several deficits in civil society actors in Indonesia: (i) rely heavily on confrontation; (ii) weak institutional capacity due to over reliance on a leader-follower model that hampers institutionalization and regeneration, and (ii) lack of cooperation among non-state actors that result in the failure to achieve wider impact.

On the other hand, democracy and development in Indonesia and anywhere else is not a linear process between input, process and output, but also involves a political process with diverse actors and initiatives. For example, policy change in general requires three elements: political occurrence (elections or economic crisis), recognition of issue, and policy recommendation (Stone, 2007). Development aid should at least contribute to two key aspects: push for policy recommendations from citizens and civil society actors, and encourage political elites and the government to set an agenda for deliberations of proposed policies. With regard to this, the functioning of the democratic process that should at least occur every five years provides such narrow room for change.

At this particular point, the role of non-state actors in Indonesia becomes crucial in ensuring that the political elites seize on the political momentum to improve the situation. Based on the empirical experience of citizens, civil society actors can contribute in spurring political will from the circle of elites through a broad range of actions, either by means of policy advocacy or making available the necessary knowledge and effective innovative models.

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In other words, many convergent points and spaces can be found between non-state actors, development agencies and the government. This is also true for the quality of government and democracy, and the optimal role of the state. The convergence of purpose can be enhanced from an abstract theoretical proposition into tangible stance and joint actions.

Nevertheless, this convergence must continue to be tolerant towards differences in approach and method for problem solving. There should be no domination or hegemony between one and the other. A top-down reform approach is equally important as reform from below, and vice versa. The principle of partnership and complementarity should therefore be effectively applied. In relation to this, the following are several measures for consideration by all parties, including the government, development agencies and non-state actors in order to promote a broader and heightened role for Indonesia's non-state actors in the next five to ten years.

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For the Goverment : 1. A democratically elected government in every five years must make all efforts to build trust with its citizens. Conversely, citizens are increasingly expected to fulfill their tax obligations as an absolute obligation. There is also mounting pressure for the government to build a rights-based relation, among others through the provision of public goods financed from the people's taxes. With respect to this, the government needs to explore and experiment such avenues in order to broaden the role of non-state actors in the development process.

2. The government requires policies that govern on the relationship between the government and non-state actors with regard to development and democracy. An initial approach would be to develop a public goods scheme financed by the state budget. For example, a legal aid initiative funded by the national budget and implemented by civil society actors has been introduced, although it has yet to be properly organized and institutionalized.

3. The government needs to conduct a systematic investigation and experiment to expand the practice of public goods provision by non-state actors outside of the legal aid sector.

As a middle-class country with an annual national budget that exceeds IDR 1,000 trillion, it is indeed time for public goods to also be financed by the state. Several local governments, for example in Sinjai and Makassar (South Sulawesi) as well as Musi Banyuasin and Ogan Komering Ulu (South Sumatera) have allocated funds from the local budget for free legal aid for poor communities.

4. The government should take into account regulatory changes or revisions on the procurement of government goods and services, particularly pertaining to public goods such as poverty alleviation, consumer protection, education, human rights environmental conservation, women's empowerment, disaster risk reduction and the safeguarding of diversity in Indonesia. Amendments are necessary to allow civil society actors with the appropriate expertise and unquestionable track record easy access to state budgets as an alternative resource through competitive procedures and mechanisms.

Recommendations

For Development Agencies :: 1. The need to revive the mechanism for demand-pull initiatives for competitive grants in order to open up and broaden access and opportunities for non-state actors in Indonesia, primarily those outside of Jakarta and Java. Development aid from multilateral and bilateral development agencies should also ensure that aid outcomes are socially acceptable to the people of Indonesia, in addition to being technically effective. Hence, the role of civil society actors becomes crucial to ensure social acceptance.

2. The need to heighten the involvement of non-state actors in the country's development strategy formulation process, including the formulation of programs or projects, program monitoring and evaluation, and program accountability.

3. The need to experiment on mechanisms for strengthening the involvement of non-state actors in the implementation of programs funded by grants from multiple donors, such as

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the PNPM Peduli model. This mechanism is a significant breakthrough in terms of the extended role of non-state actors in program and project implementation. In coming years, such involvement is expected to increase and include participation in the policy formulation of development aid strategies.

4. The need to foster cooperation with national grant-making agencies in program formulation and execution. Several partnerships with national grantors have been piloted, for example on issues related to environmental conservation and governance strengthening. This approach however has not been widely applied nor has it been broadened to other sectors.

For non-state actors : 1. It is crucial to pro-actively create ample space for consultation in order to shape development aid policies and programs, mainly in multilateral and bilateral agencies, for the purpose of ensuring accountability and social impacts from each international development aid, including therein the creation of measurable and institutionalized dialogue forums.

2. The need to take the initiative in the formulation and oversight of international development aid strategies. Non-state actors in Indonesia may have gained the necessary experience, but still need to put in more extensive and comprehensive efforts to ensure aid effectiveness.

3. It is necessary to heighten cooperation and coordination, among others through a consortium of non-state actors in Indonesia for the purpose of increasing the quality, significance and impact of public policy advocacy. It is now time to reduce competition among relevant actors or to manage it in a healthier manner. Leaders of non-state actors need to think on a macro level about major obstacles and barriers in Indonesia and combine approaches and expertise among non-state actors. Examples of key issues are corruption, environmental destruction and intensified intolerance in Indonesia.

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4. The need to improve governance and leadership among non-state actors in order to ensure the institutionalization of accountability and regeneration mechanisms. Civil society in Indonesia is increasingly in desperate need of visionary and highly competent young recruits. Civil society leaders need to meticulously organize their institutions and bring an end to gerontology (where power lies with the seniors) internally in order to retain highly dedicated young people with outstanding technical skills.

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Recommendations

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About The Authors And Editors

HERRYADI ADUN, since 2006 manages the Democracy program of Tifa Foundation. He is in charge of developing initiatives and partnerships with civil society organizations in Indonesia with the intention of building substantive democracy, specifically with regard to accountable leadership among elements of civil society and the political circle.Previously assigned to assist in a humanitarian mission in Aceh together with the Canadian Red Cross and has gained extensive experience from his lengthy stint in the tropical forests of East Kalimantan in his capacity as the consultant of the sustainable forest management project under Deutsche Gesellschaft für TechnischeZusammenarbeit (GTZ/ SFMP).

JIM TOAR MATULI, has accumulated immense experience in the management of development aid programs, compliance audit, finances and accounting, administration and human resource management. He has spent more than 12 years as a specialist for various international agencies, such as Oxfam Great Britain, Catholic Relief Services and Australian Red Cross in handling humanitarian programs, emergency responses and development projects in South Asia and Southeast Asia. In the past year, he joined the CIDA-funded Support to Indonesia's Islands of Integrity Programfor Sulawesi (SIPS) in collaboration with Cowater International Inc. Canada.

MICKAEL BOBBY HOELMAN, has previously carved out a career with ICW (IndonesiaCorruption Watch) in the early stage of its inception, and acquired invaluable working experience at the Department for InternationalDevelopment of the United Kingdom (comparable to Bappenas, the Indonesian National Development Planning Agency). He was formerly the advisor on advocacy and governance for Oxfam GreatBritain's representative office in Indonesia and now entrusted with the position to manage the Democracy and Governance program of Tifa Foundation. An economics graduate with an advanced degree in political science, Hoelman is keen in conducting studies and a frequent facilitator and resource person in numerous discussions, primarily related to social accountability.

SUGENG BAHAGIJO, actively conducts extensive studies on social policies in which his work is documented in several of his publications, among others: “Mimpi Negara Kesejahteraan: Telaah Dinamika PeranNegara dalam Produksi dan Alokasi Kesejahteraan” (Jakarta: co–author, LP3ES, 2006) and “Globalisasi Menghempas Indonesia” (Jakarta: editor, LP3ES, 2006). He has formerly assumed the office of Deputy Director of INFID (International NGO Forum on Indonesian Development) from 2002 to 2004, Associate Director of Perkumpulan Prakarsa (2005–2009) and Executive Director of Komunitas Indonesia untuk Demokrasi/KID (2010–2011). He hasacted as the technical advisor to the Bappenas Deputy Minister for Regional Autonomy and Cooperation (2004–2005) and policy advisor to the Coordinating Minister for People's Welfare (2006–2007). In addition to being an avid writer, he also actively serves as resource person and facilitator while regularly assisting studies for a broad range of research institutes and think-tanks, including Tifa Foundation.

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