Other Public Sector Study

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  • Publication
    The Need, Capacity and Willingness of Regional Governments to Finance Public Infrastructure from Long-Term Loans
    (Washington, DC, 2011-06) World Bank
    This report reviews the need for long-term loans for regional governments, assesses the capacity of regional governments to repay long-term loans, identifies existing constraints to long-term borrowing by the regions, and recommends options for removing or mitigating existing constraints. The Government of Indonesia issued a government regulation on regional borrowing and unlike its legal predecessor, the newer regulation allows regional governments to borrow long term for public infrastructure projects that are indirectly revenue-generating, such as roads and flood control systems. Until the late 1990s, a major portion of long-term loans to regional governments was financed by international financial institutions, mainly the Asian Development Bank and the World Bank. In view of the need to increase investments in public infrastructure, and the absence of a domestic market for long-term financing, Government of Indonesia is currently considering re-opening this window by establishing a Municipal Development Fund in the Ministry of Finance.
  • Publication
    Operationalizing the Central Government Transfer Intercept Mechanism
    (World Bank, Washington, DC, 2008-09) Oosterman, Andre
    In October 2004, the Government of Indonesia (GOI) issued law 33/2004 concerning the Fiscal Balance between the central government and the regional governments. Like its predecessor, law 25-1999, the law stipulates a series of administrative sanctions that the Government may impose on regional governments that do not comply with certain of its provisions. These sanctions will take the form of a deferment or cut, depending on the specific nature of the non-compliance, in the general allocation (Dana Alokasi Umum or DAU) or shared revenues (Dana Bagi Hasil or DBH) to which the region would otherwise be entitled. The Ministry of Finance (MoF) is currently preparing a decree to operationalize this so-called intercept mechanism, and has requested the Decentralization Support Facility (DSF) to provide advice on the development of an effective DAU and DBH intercept mechanism. This final report presents the findings of a consultant ("the Consultant") contracted by DSF to provide this advice. Chapter two discusses administrative requirements to decrees and regulations that govern the allocation of DAU and DBH to regional governments, to ensure that the intercept mechanism remains effective. Chapter three describes the key features of an accounting mechanism that directs intercepted funds to the treasury, and remits the balance of the transfer to the defaulting regional government. The annex to this report contains the results of simulations the consultant has performed at the request of DJPK since the publication of the interim report.
  • Publication
    Sub-National Performance Incentives in the Intergovernmental Framework: Current Practice and Options for Reform in Indonesia
    (World Bank, Washington, DC, 2008-06) Lewis, Blane D.; Smoke, Paul
    This paper provides background for the Government of Indonesia as it considers if and how to introduce more robust local government performance incentives into the intergovernmental fiscal framework. The next section briefly examines the forces that have driven the recent national wave of interest in improving local government performance. This is followed by a review of the relatively limited set of local government performance incentives currently in force in Indonesia. The fourth section provides a conceptual overview of how to think about the possible expansion of local government incentive programs, outlining the potential role(s) of such programs in general and the key issues involved in designing and implementing them. The fifth section tentatively considers a number of options for additional local government incentives in Indonesia that the central government may wish to consider pursuing. The paper concludes with an outline of next steps for moving forward with the possible development of more purposeful and meaningful performance incentives in Indonesia's intergovernmental fiscal framework.