Overview First introduced in 2001, decentralization in Indonesia involves all local government administration and a wide range of authorities and responsibilities. Taken together, these accounted for close to 40 percent of total government expenditure in 2006. The role of local governments in delivering services and realizing the country’s development goals is now larger than ever. How well are they performing six years after decentralization? In the absence of systematic monitoring, evaluation and performance-measurement systems, this crucial question cannot be answered accurately. Therefore, the broader policy implications of decentralization in Indonesia remain unclear. Stakeholders have come to realize the importance of local government performance monitoring and evaluation. Not only will such a tool encourage a healthy spirit of competition between district governments, but it will also provide citizens with the means to compare their local governments' performance with best practices in other districts. A broad index, measuring local government progress along core dimensions of public financial management, fiscal performance, service delivery, and investment climate could become a key indicator for local governments to evaluate and improve their performance. The overarching aim of the initiative is to achieve the goals of decentralization, namely to improve public service delivery and people’s welfare through good governance.
The Role of the World Bank, Objectives and Methodologies
The absence of a comprehensive local government performance measurement system has led to the formation of a joint initiative between the government and international organizations to develop and implement a comprehensive performance measurement system for all country’s local governments. Under the umbrella of the multi-donor Decentralization Support Facility (DSF), this initiative is being jointly led by a local government performance measurement sub-team from the Public Finance and Regional Development team at the World Bank and the economic program division at the Asia Foundation (TAF). A local government performance index has been built around the following four thematic pillars. Each of these four pillars can be broken down into several strategic areas of which each comprises a set of indicators. Public Financial Management
With decentralization, the broad extension of local government responsibilities has been matched by a dramatic increase in available financing at the local level. However, local government capacity to efficiently and transparently manage these funds has not improved in step with these increasing responsibilities. The Local Government Performance Measurement (LGPM) tool measures capacity levels in key PFM areas. | Fiscal Performance
To better monitor local government revenue raising efforts, as well as spending choices and sectoral allocations, budgetary data from local governments are used to measure district performance. | Service Delivery
Performance indicators for service delivery have been constructed using Susenas data. Special focus is placed on outcomes in health, education and infrastructure. | Investment Climate
The quality of the investment climate as it is affected by local government policies is measured annually by The Asia Foundation (TAF) and Regional Autonomy Watch (KPPOD) through their investment climate survey. The survey methodology has been revised and the scope of the survey extended to complement the World Bank’s initiative. |
Outputs and Outcomes | Making Decentralization Work for Development:
Methodology by the Local Government Performance Measurement (LGPM) Framework | | | The LGPM tool builds on a uniquely rich set of district-level budgetary data and survey results that are either already available or collected for the purpose of this exercise. Many methodological choices still need to be made, but the overarching ambition is clear: to provide both central and local policy-makers, development partners, and citizens with a simple and transparent tool for gauging LG performance across districts and within different domains of LG activity, as well as a set of best practices that can be replicated. Furthermore, the idea is to measure the performance of LGs against targets that are known to be achievable within a relatively short timeframe and within the Indonesian context. The aim is that the LGPM methods presented in this report will be of use to local governments across Indonesia, possibly in collaboration with service providers and other interested stakeholders, to establish how well provinces, districts and cities are carrying out these aspects of their work. The ultimate goal is to help local governments to improve the quality of services that they deliver to their communities.
| Public Financial Management in Aceh:
Measuring Financial Management Performance in Aceh’s Local Governments | | |
This report is based on a PFM framework designed specifically for local Indonesian governments. Research teams from leading Indonesian universities interviewed government officials to assess capacity across nine strategic areas. Local governments scored very differently. For example, North Aceh scored the highest, at 69percent overall, while Aceh Jaya scored only 15 percent. Scores also varied between strategic areas. Public debt and investment scored very low (28 percent) whereas procurement achieved the highest average score (60 percent). Even local governments with similar overall scores showed significant variation in capacity for different strategic areas. Newly formed districts tended to score lower than older ones.
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