Background Adherence to public policy and promotion of efficiency and good governance continue to remain the focus of public financial management reform in countries around the world. In Indonesia too, public financial management reform remains at the center of attention of Indonesian policy makers. The enactment of laws such as Law 17/2003 on State Finance, Law 1/2004 on State Treasury, and Law 15/2004 on State Financial Audit only marked the beginning of what has become a far reaching reform that swept across the country’s public finance landscape, geared to change the way that public funds are raised, allocated, used, and accounted for. Also in the years to come, the strong commitment towards sustaining economic growth and poverty alleviation through better governance and service delivery, will keep public financial management reform on top of Indonesia’s development priority list.
Since the adoption of its new regulatory framework 2003/4, the Government of Indonesia (GOI) has been implementing public financial management reforms as legislated. It has applied a broad-based and comprehensive system approach guided by the principles of efficiency, transparency and accountability. In this context, particularly efforts to smooth budget implementation and execution through modernization of the treasury system have been of importance - and progress in this field has been substantial. It includes the successful restructuring of the Ministry of Finance; the staged implementation of a Treasury Single Account; the establishment of cash forecasting capacity in the Treasury; the development of accounting standards to provide for a “cash towards accrual” accounting framework; the streamlining of the treasury branches to process payment requests within one hour; improvements in budget disbursement and absorption; extensive capacity building of the Treasury staff to ensure efficiency in service and competency in accounting; implementation of standard financial application software packages across the treasury offices and the spending units; on-going inventory of government assets; and devolution of service delivery functions.
Building on these achievements, the Government of Indonesia is now poised to deepen and broaden the transformation process further. At the core of this set of second generation reform measures lies the implementation of an Integrated Financial Management Information System (IFMIS) to complement other planned budgetary reforms such as Performance Based Budgeting and the Medium Term Expenditure Framework. Recent reforms in the banking sector in Indonesia have opened up opportunities for improving the efficiency and transparency of handling government payments and revenue collection. The on-line availability of expenditure and revenue data (planned and actual) through IFMIS will facilitate modeling of cash forecasts, greatly improving the timeliness and accuracy of borrowing and lending decisions. Finally, the implementation of accrual accounting and performance budgeting will significantly change the modes, form and content of budgetary and financial monitoring and reporting.
Objective The objective of the international seminar was to bring together experiences from different countries on the challenges and risks of implementing second generation PFM reforms related to budget execution. Indonesian Ministry of Finance staff had recently completed Treasury benchmarking visits to selected developed and transition countries to learn from, and to discuss experiences with treasury reforms. GOI conducted this seminar to be able to expose a much wider domestic audience to the latest international developments in budget execution reform. This was to enhance the understanding and ownership of improved business processes and systems among stakeholders within and external to the Ministry of Finance. In addition to officials from directorates of the Ministry of Finance, the seminar targeted representatives from the Parliament, line ministries, audit and internal control agencies, regulatory bodies, and training institutions. During the seminar, presentations on the first day were followed by roundtable discussions and breakaway sessions on the second day to ensure interactive participation between participants and resource persons and among participants.
Resource Persons and Country Delegations Delegations from Vietnam, South Korea, Russia, the Philippines, Mongolia, India, and East Timor participated in the seminar and the peer to peer sharing of country experiences. The Governments of Australia and the US sent resource persons to participate in the discussion, and also speakers from France and the OECD joined the event.
Organizers The seminar was organized jointly by the Indonesian Directorate General of Treasury and the World Bank Jakarta. It was funded by the European Commission and the Dutch Government through the Public Financial Management Multi-Donor Trust Fund (PFM MDTF). Read more on program details
