1. Local and Regional Governance: Experience of Capacity Building Program in Indonesia Presentation Document Yayasan Inovasi Pemerintahan Daerah / Center for Local Government Innovation Washington-DC, June 19, 2006

2. 2 Indonesia Entering Democratic Era

3. 3 The “Big Bang” in Autonomy and Decentralization After having had a highly centralized government system for more than 30 years, Indonesia – through Law No. 22 Year 1999 on Regional Government – chose a rather radical (BIG BANG) approach to decentralization. BIG BANG = No gradual transfer of responsibilities to sub-national levels of government, but acknowledgement of general competence on Regency (Kabupation) or Municipality (Kota) level; only functions of Central Government and Provinces are listed (Government Regulation (PP) No. 25 Year 2000), residual functions are with Regency/Municipality. Sub-national (Regency/Municipality) has full autonomy which include planning, budgeting, implementing, evaluating all of development at their levels.

4. 4 Chances and Risks of Decentralization Chances for more democracy and accountability, better services, more equitable development. Risks of dominant local elites, decentralized corruption, service failures, regionalism

5. 5 Institutional and Personnel Capacities: Problems Based on stipulation of Law 22/1999, all central government organizations in the regions (Kanwil, Kandep) and their personnel (altogether more than 2 million) were transferred to the authority of the regions in 2001. Law 22/1999 gave regions substantial authority for the management of their civil service, partly in contradiction to the civil service law (Law No. 43 Year 1999), which retained much control at the central level. Consequences: In aggregate, regions avail of the necessary institutional set-up and sufficient number of personnel to cope with their new duties, however: - some regions are overstaffed and others lack personnel - qualification of staff is often not in line with requirements

6. 6 However, decentralization and autonomy in Indonesia gave some prospect Decentralization and strong local governments have become irreversible assets of Indonesia’s government system Decentralization has broad support in Indonesia’s society Decentralization has good prospects to achieve its goals if requirements to reduce risks are more forcefully fulfilled, and if: - a comprehensive civil service reform is undertaken - more effective reforms of the judiciary are carried out to provide for more legal certainty and fight corruption - consistent efforts are undertaken to strengthen civil society and give it an appropriate role in the governance system

7. 7 In regard to oil, gas, and mining, decentralization and autonomy in Indonesia gave more chances….. Based on government regulation (PP) No. 75 Year 2001, there are clearly sifted of authority from central government to sub-national level, especially in regard to certification of authority to start oil, gas, and mining businesses. There are three different certification of authority, such as: - certification letter to make study or research; - certification letter given to the community to do small scale community mining; - certification letter given to qualified and professional oil, gas, and mining company

8. 8 Experiences in LG Capacity Building

9. 9 To conduct needs assessment, YIPD/CLGI categorized issues into three dimensions Dimension Competency Related Issues General management skills, e.g.: leadership, decision-making Financial management skills, e.g: performance budgeting, financial reporting Technical skills, e.g.: laboratory technology, legal drafting Non-Competency Related Issues Policies and procedures, e.g.: career development plan, incentives/sanctions mechanism Institutional infrastructure/equipment, e.g.: medical equipment, computer system Awareness & Commitment Awareness of capacity building issues Commitment/initial indicators of work on the capacity building issues Examples

10. 10 YIPD/CLGI believes that Local Government officials lack some key competencies required to achieve desired performance … Sources of Performance Gap Competency related: Technical skills gap, e.g.: timber inspection Non-technical skills gap e.g..: decision making, leadership, communication, financial reporting Non-Competency related: Unclear job expectation (performance goals) and performance indicators Insufficient performance feedback mechanism No incentive and sanction system to stimulate good job behavior Lengthy bureaucracy which reduces decision-making ability and courage One-way (top down) management approach weakens initiative and creativity needed to perform well in low- resources condition Inadequate facilities, equipment and supplies Non-motivating organizational system, e.g.: unclear selection & promotion mechanism Competency related: Technical skills gap, e.g.: timber inspection Non-technical skills gap e.g..: decision making, leadership, communication, financial reporting Non-Competency related: Unclear job expectation (performance goals) and performance indicators Insufficient performance feedback mechanism No incentive and sanction system to stimulate good job behavior Lengthy bureaucracy which reduces decision-making ability and courage One-way (top down) management approach weakens initiative and creativity needed to perform well in low- resources condition Inadequate facilities, equipment and supplies Non-motivating organizational system, e.g.: unclear selection & promotion mechanism Required Key Competencies Specialized technical competence, e.g.: biotechnology, mining lab. technology, timber inspection, medical analysis, hospital management General management skills, e.g.: leadership, decision- making, HR management, change management Financial management skills, e.g.: property asset management, performance budgeting, financial reporting Specialized technical competence, e.g.: biotechnology, mining lab. technology, timber inspection, medical analysis, hospital management General management skills, e.g.: leadership, decision- making, HR management, change management Financial management skills, e.g.: property asset management, performance budgeting, financial reporting Existing Competencies Basic technical skills for all levels at each of the 6 Dinas observed, except for Mining & Energy Unit, which lacks basic mining & energy knowledge Basic management knowledge and skills for middle and senior level officials Basic technical skills for all levels at each of the 6 Dinas observed, except for Mining & Energy Unit, which lacks basic mining & energy knowledge Basic management knowledge and skills for middle and senior level officials Competencies Gap

11. 11 … while non-competency related issues are also present Organizational Software Inadequate administrative and technical policies & procedures Career path/system is not clearly communicated Lack of meaningful incentive system Absence of monitoring & evaluation mechanism Insufficient sense of ownership and low motivation for achievement Weak organizational structure Inadequate administrative and technical policies & procedures Career path/system is not clearly communicated Lack of meaningful incentive system Absence of monitoring & evaluation mechanism Insufficient sense of ownership and low motivation for achievement Weak organizational structure Organizational Hardware Lack of technical facilities, e.g.: laboratory for tobacco, rice, cattle reproduction, and mining Very limited availability of information and communication technology system Lack of technical facilities, e.g.: laboratory for tobacco, rice, cattle reproduction, and mining Very limited availability of information and communication technology system

12. 12 YIPD/CLGI’s Role Local Government Role Tripartite partnership will leverage on each party’s resources to create a mutually beneficial result … Local Government Private Sector YIPD/CLGI Private Sector Role Involve in-house expertise in the technical assistance Cover YIPD/CLGI expenses incurred from Local Government-related activities Fund specific activities that would be of direct benefit to the Company Involve in-house expertise in the technical assistance Cover YIPD/CLGI expenses incurred from Local Government-related activities Fund specific activities that would be of direct benefit to the Company Provide guidance to Local Government in developing proposals for assistance Support private sector to ensure accountability of the assistance program delivery Provide guidance to Local Government in developing proposals for assistance Support private sector to ensure accountability of the assistance program delivery Write proposals for both training & non- training assistance Select staff for training assistance Fund local expenses for training Write proposals for both training & non- training assistance Select staff for training assistance Fund local expenses for training Roles Of Each Party In The Partnership