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PublicationDelivering Together: Using Indonesia's Village Law to Optimize Frontline Service Delivery(World Bank, Washington, DC, 2021-08-19) World BankOver the past twenty years, Indonesia has pursued an ambitious policy agenda for decentralization. Indonesia's subnational governments play a key role in providing frontline services. In 2014, Indonesia's Village Law ushered in a new chapter in the country's decentralization agenda. The law establishes a legal and financial foundation for villages to contribute to Indonesia's rural development. In 2020, village transfers accounted for around ten percent of all subnational transfers, playing an important role in Indonesia's Coronavirus (COVID-19) response strategy. Despite these positive results, several frontier issues in the overall decentralization agenda hinder villages' contributing potential to improving frontline service delivery. This report categorizes these structural challenges into four broad categories of regulatory challenges, coordination gaps, limited capacity building systems, and fragmentation in accountability systems. The report aims to show how overcoming these structural challenges can enable the government to institutionalize systems of accountability and participation into its wider service delivery framework. PublicationSupport to Civil Service Reform in Indonesia : Report from a Programming Mission to Jakarta(Washington, DC, 2009-05-07) World BankCivil service reform in Indonesia is needed to sustain the important institutional reform results achieved over the last ten years in various sectors and policy areas and to further consolidate Indonesia as a progressing middle income country. This report summarizes a mission to Indonesia on February 2-13, 2009. The purpose of the mission was to i) map, describe and assess current approach and status of ongoing civil service reform initiatives in selected central government institutions; ii) make recommendations related to scope, focus and approach of continued reforms; and iii) propose to the Government of Indonesia (GOI) a World Bank program of assistance in support of the government's reform agenda. The report is intended to provide a basis for a decision within the Bank on whether and how to continue and scale up an engagement on civil service reform in Indonesia. Aligned with the three objectives, the mission report first provides an introduction to the political economy of civil service reform in Indonesia and an overview and profile of ongoing reform initiatives. It then analyses key civil service challenges, using the dimension in the draft framework for Actionable Governance Indicators as a point of departure. Finally, a possible program for donor support is presented in light of the analysis of key challenges and the political economy of reform. PublicationOperationalizing the Central Government Transfer Intercept Mechanism(World Bank, Washington, DC, 2008-09) Oosterman, AndreIn 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. PublicationIncreases in Surpluses of Regional Governments in Indonesia: An Empirical Analysis(Washington, DC, 2008-06) World BankThe overall objective of the study is to identify potential causes to the rapid increase in regional government surpluses. It will be shown that regional government surpluses have rapidly increased because of a confluence of three factors: (i) higher than expected revenue, (ii) lower than expected expenditure, and (iii) limited investments in financial assets. The study will identify potential causes for each factor by analyzing differences in actual and budgeted amounts of revenue. This report was presented to representatives of the Ministry of Finance and Decentralization Support Facility (DSF) in a meeting held on 30 May 2008. Comments and corrections of the attendants are reflected in this version of the report. PublicationSub-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, PaulThis 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. PublicationExploring Reform Options in Functional Assignment(World Bank, Washington, DC, 2008-03-28) Ferrazzi, GabrieleConsiderable challenges remain in functional assignment in Indonesia - some introduced by the recent revisions, during the second round of reform in the period 2004-2007. The Government of Indonesia (GoI) has accepted the offer from donors to undertake a study to delve more deeply into the progress made to date, the challenges that remain, and the opportunities to fashion a more robust, effective and stable assignment of functions. The study aims to help the GoI and donors in exploring new avenues for reform in this field. The term functional assignment in the study denotes a broad concept that captures the overall architecture of roles between levels of government and the specific construction of functions. The robustness of functional assignment is seen to derive from the judicious choice of elements suited to the local context, particularly how these elements come together to form a sound and consistent architecture. In assessing functional assignment, the study made use of academic and other stakeholder views on both substantive issues and the capacity development approach needed to develop a policy network in this field in the future. The possible supporting role of donors is also indicated, within the discussion of each issue in the main part of the report, and in condensed form at the end of this summary. PublicationA Note on the Indonesian Sub-National Government Surplus, 2001-2006(World Bank, Washington, DC, 2008-01) Lewis, Blane D.The Indonesian government has devolved significant expenditure authority to sub-national units since 2001. New sub-national government expenditure assignments have been paid for by a substantial increase in intergovernmental transfers to lower levels of government. The center has decided against devolving any significant new tax authority to the regions, at least for the time being. This note examines some fundamental issues related to these unspent funds. The paper has two particular objectives. First, the paper describes the basic features of sub-national government surplus and reserves since decentralization, including their size and spatial distribution. Second, it seeks to explain the observed variation in surplus across sub-national governments, according to some standard hypotheses. The paper proceeds as follows. First, some basic information regarding the buildup and geographic distribution of sub-national reserves is offered. Second, the methodological approach to the study of sub-national government surpluses is detailed. Third, the results of the econometric examination are presented and discussed. Finally, the note closes with a summary of the main findings and a proposal for some additional research that might be useful in the continuing development of central policy in this area. PublicationCombating Corruption in Indonesia : Enhancing Accountability for Development(Washington, DC, 2003-11-12) World BankGiven steady progress in the development of democracy - establishment of effective checks on arbitrary rulers, replacement of arbitrary rules with just and honest ones, and, participation of ordinary people in the making of rules - Indonesia could over time, emerge as a strong functioning democracy. Yet, continued progress towards a full-fledged democracy cannot be taken for granted, precisely because the transition to an elected government has been a largely peaceful one, indeed allowed the powerful interests that dominated the New Order-the former First Family, the military, and the conglomerates-to continue to operate, and indeed flourish in this new environment. It is in this context the problem of corruption in Indonesia must be viewed. This report is an initial outcome of an ongoing process of rethinking, and learning by the Bank, on issues of accountability, and corruption in Indonesia. In the aftermath of the financial crisis, and related political upheaval, the Bank revisited its entire strategy towards the country. The report builds on a comprehensive set of diagnostic assessments, and reviews on some of the main areas where corruption breeds: public expenditure and financial management systems, procurement, inter-governmental fiscal relations, the financial sector, forestry and infrastructure, the justice sector, and the civil service. It also attempts to distill from studies the key lessons learnt about corruption, and accountability, and, to better understand how corruption works in particular sectors, and processes. The central issue examined in this report is why public accountability fails so often, and, after analyzing the context in which anti-corruption efforts must operate in Indonesia, the report focuses first on three areas of corruption: the budget, local governments and the government's regulatory functions in selected sectors - banking, electricity and forestry. It then looks at the justice sector - the police, the prosecutors, the courts and the Indonesian civil service. Finally, it analyzes how donors are responding to the challenge of corruption, drawing primarily on the Bank's own experience.