1. Sgoga@worldbank.org Decentralization: What do we do? The Response of the World Bank in Indonesia Presentation to Decentralization and Intergovernmental Fiscal Reform Course 24-26 March 2003 By Soraya E Goga – Urban Specialist, EASUR

2. Sgoga@worldbank.org The Context What was it about? –Transfer of ALL function except 5 –Explicit Transfer of 11 Obligatory Sectors –Design of new Intergovernmental Fiscal Transfer System Initial Issues –No Clarity of Functions –No fully developed frameworks –No M & E –Regional Capacity?

3. Sgoga@worldbank.org Bank Challenges & Response Questions –How do we respond to our new clients - local governments? –What do we need to support our ‘old’ clients – the central Ministries of Home Affairs and Finance? –What do we need to do to change the way we operate internally? –What information do we need? Response –4 AAA –1 Central TA –2 local government reform projects

4. Sgoga@worldbank.org Learning More: AAA and ESW Regional Public Expenditure Review – Decentralizing Indonesia –In depth analysis of 3 regions –Focus on institutional operations – planning, budgeting, accountability Urban Sector Review –In depth analysis of 6 kota’s –Focus on poverty, infrastructure, municipal management Urban Competitiveness Study –Analysis of 6 kota’s –Focus on economic development and investment climate Governance and Decentralization Survey –About 200 regions –Focus on impact of decentralization

5. Sgoga@worldbank.org Addressing the Center TA to Two Ministries –Ministry of Finance – Fiscal Decentralization –Ministry of Home Affairs – Administrative and Legal Decentralization Through a $7,2m Trust Fund, the World Bank Dutch Trust Fund for Indonesian Decentralization Policy Dialogue – Donor Group on Decentralization, Sub-Committee of CGI

6. Sgoga@worldbank.org Addressing the Center Ministry of Home Affairs –Functional Obligations – elections and politics! –Minimum Standards – re-inforcing control? –Financial Management – Kepmen 29 –M & E?? Ministry of Finance –DAU (Equalization Grant) –DAK (Special Grant) - Still too new –On-Lending, more like ongranting –SiKD Banks Role –TA, provision of ‘experts’ –Procurement of Computer Systems –Policy Dialogue

7. Sgoga@worldbank.org Addressing the Local ULGRP Primarily urban Competitive Selection Incentive Structure - Loan Minimum bar reform –Procurement –FM –PID –Participation, Forum, CDS Investments Address national issues –On-lending –CPRS KGRIP Primarily Rural Controlled Selection Incentive - Grant & Loan More Open Reform –Procurement –FM –Revenue Framework –Participation, Facilitator –Others Investments Objective: Assist LG in responding to decentralization, but with increasing accountability at local level

8. Sgoga@worldbank.org Issues for Bank Systems Most sense for budget support, but that would raise transparency issues Developing a Single Approach to SNP’s, as a joint effort between EASUR/EASRD/EASPR –One set of reforms –Common Reforms stipulated in each –Selection criteria standardised

9. Sgoga@worldbank.org What next? The Supervision Problem –How do we supervise these projects? –A question for the next workshop! http://wbln0023.worldbank.org/internal/eap/EAPInternal.nsf/Country Office/Indonesia/Sub-National?OpenDocument