NATIONAL PROGRAM FOR COMMUNITY EMPOWERMENT (PNPM MANDIRI) Indonesia’s CDD Response to Rural Poverty

Indonesia

Background Objectives To Reduce Poverty, by: Modeled on 2 former government programs: Kecamatan Development Program (KDP/PPK) & Urban Poverty Planning (UPP/P2KP). Objectives To Reduce Poverty, by: Providing cost-effective socio-economic infrastructure and access to basic services Improving local governance & capacity Strengthening local institutions Increasing local employment opportunities Empowering communities

Indonesia’s population The biggest poor population are living in Java-Bali (57%). 25% in the Western regions, and 17% in the Eastern regions (the most lagging regions). In total there are ~ 36 million poor population Source: CPS Change Team

Indonesia’s economy Source: CPS Change Team. Provincial’s size shows the proportion of provincial GDP relative to national GDP

CDD in Indonesia Villagers plan and decide on investments, control funds, implement the projects themselves, account for funds, and maintain facilities/ infrastructure built. With facilitation and technical backstopping

Poverty Program ‘Clusters’ Programs: Rice for the Poor (Raskin), School Operations Support (BOS), Health Security for the Poor, Cash Transfers & other social programs (post-disaster). Cluster I: Social Safety and Protection. Cluster II: Community-based programs; now known as PNPM Mandiri. Cluster III: Strengthening small and micro enterprises: Kredit Usaha Rakyat (KUR), Pengembangan Usaha Agribisnis Perdesaan (PUAP), micro-finance services. Source:pnpm-mandiri website

Key Principles Decentralized Pro-poor Participatory Transparent and Accountable Sustainable “Simple” Open Menu (with allocations based on prioritization of proposals decided on by village representatives)

From Village Proposals to Funding Decisions Village Meeting To agree on 3 proposals (2 from women ) to be brought to the inter-village forum To agree on 6 village reps (3 females), proposal writing team & candidate for UPK etc Inter-Village Prioritization Village Proposals discussed and ranked Forum officers elected UPK staff (re)elected Designs & Budgets Using standard templates, detailed (engineering ) designs and cost estimates prepared (villagers involved in the process, consulted) Inter-Village Funding Decisions Final decision made on funding for subprojects Reps elected for Kabupaten Planning (Musrenbang) deliberations

Approx. Funding (in US$ million, approx.) PROGRAM LOAN GRANT KDP I $273.2 KDP II $344.3 $70.8 PNPM 2007 $381.9 $121.7 PNPM 2008 $226.1 PNPM 2009 $300 PNPM 2010 $785

How Funds are Channeled and Disbursed Transferred by KPPN (Govt Treasury Office) to village collective accounts at the kecamatan level. Villagers then use these grant funds for productive infrastructure, loans to existing women’s groups for working capital, or for social investments in education and health.

Replenishement Withdrawal request & financial statement 3 stages: 40%-40%-20% UPK Expenditure & progress report Work plan & progress based

MANAGEMENT STRUCTURE OF PNPM MANDIRI RURAL Coord. Ministry of People’s Welfare Bappenas MoHA, DG-PMD Project Management (Satker) TKPK TK-PNPM Mandiri National Management Consultant CENTRAL Governor TKPKD Propinsi TK-PNPM Prov. Provincial Oversight Consultant PROVINCE Bupati/ Mayor Kabupaten Facilitators TKPKD Kab. TK-PNPM Kab. REGENCY/ MUNCIPAL CAMAT Inter Village Meeting (MAD) KECAMATAN (Govt Admin Unit) Ops Staff Kecamatan Fasilitator Facilitator Local (PL) Unit Pengelola Kegiatan (UPK) Village Head Village Meeting Village Cadres Monitoring teams Village Impl Unit VILLAGE Community (Groups) Supervision/ Oversight Reporting Lines Coordination Supervision and Tech Assistance Facilitation

Program Staffing of PNPM Rural National National Management Consultants – 75 specialists Regional Mgt Consultants Province Provincial Oversight Coordinators (32) Team of 10 specialists/province, on average Kabupaten 3 Kabupaten Facilitators (Social, Technical and Financial) Plus assistants and computer operators Kecamatan At least 2 Kecamatan Facilitators (Social and Technical) A Financial Mgt Unit (UPK) and Local Asst Facilitator(s) Village At least two Village Cadres (one of the two must be female) Elected Village Implementation Committee

Results Between 1999 – 2007, villagers built or rehabilitated over: 65,500 km of roads 9,000 bridges 11,000 irrigations systems 28,300 drinking water systems and almost 17,500 sanitation facilities (MCK) 6,950 schools (and provided almost 120,000 scholarships to poor students) 5,700 health posts

Impacts of PNPM Rural have been positive Household welfare Increase in consumption per capita 5% greater in PNPM locations compared with control. The same impact is 5% impact among poorest 20% households. Impact increases to 19% in the poorest 20% of kecamatan. Households moved out of poverty (2.3% more likely than control areas) and reduction in risk of households falling into poverty.

Impacts of PNPM Rural (cont.) Employment Generation 1-2% greater chance of escaping unemployment. Unemployment already very low (<4%). Provides temporary jobs during slack season for agricultural laborers and the poor (>72 million person-days for >6.1 million villagers)

Impacts of PNPM Rural Physical Economic Infrastructure Creates greater access to markets and services (roads) and increases productivity (irrigation) Improves access to and quality of health and education services (health centers, schools) Strong impact on expansion of access to health services (5% more than control areas) Proven Track Record of Low Misuse of Funds (< 1%)

Impact Participation of women and poor is generally high (about 45%) Poverty targeting is successful (Alatas, 2005) Rural PNPM forums reduce conflict (Barron) Rated beneficial--as expected or better: 92% Satisfied with results: 96% Infrastructure fully functional (years after construction): 94% No serious environmental impact or safeguards issues Rural PNPM construction costs are 30% – 56% less than alternative means (ie. construction by contractors)

The Using KDP/PNPM Rural As “Vehicle” for Other Funds Aceh The Using KDP/PNPM Rural As “Vehicle” for Other Funds For example: KDP-IOM, IDR 50 million per village for 230 villages and 350 villages in conflict-affected areas in Aceh; KDP-BRA, to channel funds to conflict victims in 67 sub-districts (IDR 217.38 billion) KDP-BRR, to built infrastructure for community settlements in 72 sub-districts (IDR 116.274 billion)

The Using KDP/PNPM Rural As “vehicle” for Other Funds Aceh The Using KDP/PNPM Rural As “vehicle” for Other Funds For example: CARE, to built sanitation in Peukan Bada Sub-district, Aceh Besar AUSAid, development Meunasah & Village Halls in 108 villages in 8 sub-districts, Aceh Besar Village Surveys, 2005/2006, surveyed more than 5,900 villages to identify damages and changes post-tsunami and -conflict

PNPM-BKPG—integration of community development programs Aceh PNPM-BKPG—integration of community development programs In 2009 Aceh allocated > Rp. 962 billion for block grant investment funds to every village and linked its funds to PNPM Rural. Aceh’s BKPG also links musrenbang planning to more transparent & participatory BKPG + PNPM community planning, as shown below: January February March 2010 2009 June-Oct Nop Dec Implementation of PNPM-BKPG Period of Musrenbang until Kec (March) Each village produces a RPJM & RKG (annual work plan) and budget/APBG Base d on its RPJM, each village reviews & prepares an RKG (annual work plan) Musrenbang Kec and MAD II of BKPG + PNPM can be done together

Infrastructure Infrastructure Project: Bridge at Siwalubanua Village Suspension Bridges Pati-iron bridge

Subak Road, Tabanan, Bali Infrastructure Road in Central Java Subak Road, Tabanan, Bali

SCHOOL TK (Kindergaten ) in Magetan Exterior of a School (and KDP Notice Board) in Kairatu Irrigation channel at Lamatewelu , Kec. Adonara Timur, Kab. Flores Timur, NTT Clean Water Project at Pengotan, Kec. Bangli, Bali Women actively participating in building a road in Garut

SAVING & LOANS SPP beneficiary shows her fish crackers, Parit Baru, Selakau, Sambas, Kalbar First Loan Disbursement at Cikeusal New Polindes in Magetan Socialization in a kecamatan

Challenges/Issues The delay of DIPAs every year (mutli-year budgeting, carry-over, PMK 168 rules, etc.) Technical Assistance (too little training, too late and too many empty TA positions) Better inter-sectoral support & coordination needed going forward Intensive routine supervision required Better pro-poor targeting—more grant funds to poor, remote areas

Recommendations PNPM can serve as an effective “vehicle” to build village infrastructure, provide employment opportunities, reduce poverty and help provide a safety net in times of crisis: The architecture and program machinery in place & process familiar (facilitators trained and in place) Poverty-targeted (larger block grants for poor kecamatan) The funds provided proven to result in cost-efficient village infrastructure & local employment opportunities, reducing poverty in poor areas.