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PLANNING AND BUDGETING REFORMS IN INDONESIA: Past Achievements and Future Challenges Wismana Adi Suryabrata Wismana Adi Suryabrata Director for Allocation.

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Presentation on theme: "PLANNING AND BUDGETING REFORMS IN INDONESIA: Past Achievements and Future Challenges Wismana Adi Suryabrata Wismana Adi Suryabrata Director for Allocation."— Presentation transcript:

1 PLANNING AND BUDGETING REFORMS IN INDONESIA: Past Achievements and Future Challenges Wismana Adi Suryabrata Wismana Adi Suryabrata Director for Allocation of Development Funding, BAPPENAS

2 2 OUTLINE OF THE PRESENTATION PLANNING AND BUDGETING FRAMEWORK PLANNING AND BUDGETING FRAMEWORK RULES AND REGULATION RULES AND REGULATION THE FRAMEWORK THE FRAMEWORK AGGREGATE FISCAL DISCIPLINE AGGREGATE FISCAL DISCIPLINE ALLOCATIVE EFFICIENCY ALLOCATIVE EFFICIENCY OPERATIONAL EFFICIENCY OPERATIONAL EFFICIENCY PAST ACHIEVEMENTS PAST ACHIEVEMENTS MEDIUM-TERM PLAN (RPJMN ) MEDIUM-TERM PLAN (RPJMN ) ANNUAL WORK PLAN (RKP ) ANNUAL WORK PLAN (RKP ) FUTURE CHALLENGES FUTURE CHALLENGES SHORT-TERM ( ): PREPARATION OF MEDIUM-TERM PLAN (RPJMN) SHORT-TERM ( ): PREPARATION OF MEDIUM-TERM PLAN (RPJMN) BEYOND (2010 – ONWARD) BEYOND (2010 – ONWARD)

3 3 PLANNING AND BUDGETING FRAMEWORKS

4 4 RULES AND REGULATIONS LAW 25 : NATIONAL DEV’T PLANNING LAW 25 : NATIONAL DEV’T PLANNING SYSTEM SYSTEM REGULATORY INTERVENTION REGULATORY INTERVENTION BUDGET INTERVENTION (app. 20% of GDP) BUDGET INTERVENTION (app. 20% of GDP) LAW 32 : DIV. OF RESPONSIBILITIES LAW 32 : DIV. OF RESPONSIBILITIES BETW. CENTRAL & LOCAL GOV’T LAW 17 : BUDGET INTERVENTION LAW 17 : BUDGET INTERVENTION LAW 33 : BALANCED FUND LAW 33 : BALANCED FUND

5 5 Aggregate Fiscal Discipline -Tax/GDP Ratio -Deficit/GDP Ratio -Debt/GDP Ratio Allocative Efficiency Allocation to Priorities -Program  outcome -Activity  output Operational Efficiency - External Control - Internal Control - Management Accountability MTFF: Medium Term Fiscal Framework MTEF: Medium Term Expenditure Framework Performance Culture (Performance Based Budgeting) Good Governance : - Bidding - Official Travel (at cost) PLANNING AND BUDGETING FRAMEWORK PBB: Performance Based Budgeting Unified Budget Forward Estimates *) RPJMN (5 YEAR DEV’T PLAN, WITH 3 YEARS ROLLING PLAN THROUGH RKP AND APBN)

6 6 Source : Taken from presentation by Dr Kay Brown, National Treasury, Government of South Africa *) Credible 5 year Baseline (realistic government programs with assured financing availability). **) Reviewed every year through the 3 year rolling Government Work Plan and Budget – APBN – for new initiatives ( drawdown savings and contingency reserve). ***) Challenge : credible resource envelope -- the size of contingency reserves

7 7 ALLOCATIVE EFFICIENCY Type Link between performance information and funding Planned or actual performance Main purpose in budget process Presentational No link Performance targets and/or performance results Accountability Performance informed budgeting Loose/indirect link Performance targets and/or performance results Planning and/or accountability Direct/formula performance budgeting Tight/direct link Performance results Resource allocation and accountability Performance budgeting categories (OECD) OECD definition : A form of budgeting that relates funds to measurable results Source : Taken from presentation by Leslie Fischer, National Treasury, Gov’t of South Africa

8 8 LOGIC MODEL THEORY Source: Framework for Managing Programme Performance Information, National Treasury, Republic of South Africa, May 2007

9 9 INDICATOR TITLE Identifies the title and whether it is an outcome or output indicator. SHORT DEFINITION Provides a brief explanation of what the indicator is, with enough detail to give a general understanding of the indicator. PURPOSE/IMPORTANCE Explains what the indicator is intended to show and why it is important. SOURCE/COLLECTION OF DATA Describes where the information comes from and how it is collected. METHOD OF CALCULATION Describes clearly how the indicator is calculated. DATA LIMITATIONS Identifies any limitations about the indicator data, including factors that may be beyond the department ’ s control. CALCULATION TYPE Identifies whether the information is cumulative or noncumulative. REPORTING SCHEDULE Identifies if an indicator is reported quarterly or annually NEW INDICATOR Identifies whether the indicator is new, has significantly changed, or continues without change from the previous year. DESIRED PERFORMANCE Identifies whether actual performance that is higher or lower than targeted performance is desirable (e.g., a disease rate lower than targeted is desirable). INDICATOR RESPONSIBILITY Identified the individual/organization responsible for the definition, data analysis, interpretation and reporting in connection with the indicator. INDICATOR DATA ADMINISTRATOR Identifies the individual/organization responsible for ensuring the data for the indicator is collected and assembled according to the schedule defined. INDICATOR ROLL-OUT DATE Expected date for start of data collection for the indicator. INDICATOR STANDARD Identifies the standard level of performance Performance Information in the MTEF Guidelines Source : Government of South Africa

10 10 CHALLENGES Difficult to link resource allocations to results Difficult to link resource allocations to results Refining outputs (focus on quantitative instead of qualitative results) Refining outputs (focus on quantitative instead of qualitative results) Difficulty in defining indicators Difficulty in defining indicators Concurrent functions (implemented by central, provinces and districts) Concurrent functions (implemented by central, provinces and districts) Standardised indicators for provinces and districts. Standardised indicators for provinces and districts.

11 11 Continued.. Capacity constraints Capacity constraints Monitoring and evaluation feedback into policy making and resource allocation Monitoring and evaluation feedback into policy making and resource allocation Aligning policy planning with organizational accountability Aligning policy planning with organizational accountability Streamlining documents for planning, budgeting and monitoring and evaluation. Streamlining documents for planning, budgeting and monitoring and evaluation.

12 12 OPERATIONAL EFFICIENCY Source : Allen Schick, A Contemporary approach of Public Expenditure Management, IBRD, 1998 *) Issues : moving gradually from external control to managerial accountability - Striking the balance between flexibility and accountability - Produce cost estimates of output and running cost

13 13 PAST ACHIEVEMENTS

14 14 MEDIUM-TERM DEVELOPMENT PLAN (RPJMN) AGGREGATE FISCAL DISCIPLINE AGGREGATE FISCAL DISCIPLINE TARGET TO REDUCE DEBT/GDP RATIO TO 31.8% TARGET TO REDUCE DEBT/GDP RATIO TO 31.8% ALLOCATIVE EFFICIENCY ALLOCATIVE EFFICIENCY STRATEGIC PRIORITIES AND TARGETS STRATEGIC PRIORITIES AND TARGETS REGULATORY INTERVENTION REGULATORY INTERVENTION BUDGET INTERVENTION BUDGET INTERVENTION NO RESOURCE CONSTRAINT ON STRATEGIC PRIORITIES NO RESOURCE CONSTRAINT ON STRATEGIC PRIORITIES OPERATIONAL EFFICIENCY OPERATIONAL EFFICIENCY WEAK COSTING OF POLICIES WEAK COSTING OF POLICIES IT HAS BEEN REVIEWED (ADJUSTED AND DEVELOPED) AND IMPLEMENTED THROUGH THE ANNUAL GOVERNMENT WORK PLAN AND BUDGET

15 15 AGGREGATE FISCAL DISCIPLINE ALLOCATION OF “TOP-DOWN” INDICATIVE CEILINGS BY MINISTRY/AGENCY AS CONSTRAINTS TO PROGRAM AND ACTIVITY PREPARATION (SINCE 2005) INTEGRATING NON-ENERGY SUBSIDIES SUCH AS RASKIN, FERTILIZER, SEEDLINGS, CREDIT, ETC. W/ MINISTRY/AGENCY’S BUDGET (SINCE 2008)

16 16 ALLOCATIVE EFFICIENCY SUBSTANCE SUBSTANCE Standardized Activities (Outputs, Costs) Standardized Activities (Outputs, Costs) Policy planning : Priorities (e.g. agricultural revitalization, Focus priorities (Coordination among Ministries/Agencies, e.g. food security), Priority Activities (seedling supply – MOA, Irrigation – MOPW, etc). Policy planning : Priorities (e.g. agricultural revitalization, Focus priorities (Coordination among Ministries/Agencies, e.g. food security), Priority Activities (seedling supply – MOA, Irrigation – MOPW, etc). Ministry/Agency Accountability : indicative ceilings for each line Ministry/agency w/ agreed performance output. Ministry/Agency Accountability : indicative ceilings for each line Ministry/agency w/ agreed performance output. Integration of Subsidy and Special Purpose Grants (Dana Alokasi Khusus or DAK) policies with line ministries/agencies budget. Integration of Subsidy and Special Purpose Grants (Dana Alokasi Khusus or DAK) policies with line ministries/agencies budget. PROCESS PROCESS Trilateral Meetings (Performance Contracts) Trilateral Meetings (Performance Contracts) Musrenbangnas (Coordination for Regional Government Work Plans) Musrenbangnas (Coordination for Regional Government Work Plans) Cabinet decision : Presidential Decree on the Government Work Plan (RKP). Cabinet decision : Presidential Decree on the Government Work Plan (RKP).

17 17 OPERATIONAL EFFICIENCY STANDARDS ARE BEING DEVELOPED STANDARDS ARE BEING DEVELOPED UNIT COST (GENERAL STANDARD UNIT COSTS AND SPECIFIC STANDARD UNIT COSTS) UNIT COST (GENERAL STANDARD UNIT COSTS AND SPECIFIC STANDARD UNIT COSTS) OFFICIAL TRAVEL AT COST OFFICIAL TRAVEL AT COST PROCUREMENT (BIDDING) PROCUREMENT (BIDDING) USE OF CLASSES OF EXPENDITURE (INTERNAL CONTROL) TO CONTROL SPENDING USE OF CLASSES OF EXPENDITURE (INTERNAL CONTROL) TO CONTROL SPENDING

18 18 INTERNAL CONTROL *) 2006 – 2007 : spending for goods and services (especially the non- discretionary) increased to the levels of asset spending, and is predicted to continue in **) In the RAPBN (proposed budget) 2008 spending for goods and services is constrained. In the APBN (budget) 2008 it increases but does not exceed the APBN 2007 levels. CLASSES OF EXPEND. APBN 2006 (Realization) APBN 2007 Initial Estimation 2008 RAPBN 2008 APBN 2008 GOODS AND SERVICES ASSETS SOCIAL ASSISTANCE

19 FUTURE CHALLENGES

20 20 FUTURE CHALLENGE: SUSTAINING REFORMS SHORT-TERM (TAHUN 2008 – 2009): SHORT-TERM (TAHUN 2008 – 2009): PREPARING THE RPJMN MTFF : CREDIBLE RESOURCE ENVELOPE MTFF : CREDIBLE RESOURCE ENVELOPE MTEF : INDICATIVE BASELINE MTEF : INDICATIVE BASELINE ALLOCATIONS BASED ON RESOURCE CONSTRAINTS ALLOCATIONS BASED ON RESOURCE CONSTRAINTS ALLOCATIONS FOCUS ON ACHIEVEMENT OF RESULTS (OUTPUT, OUTCOME) – PROGRAM RESTRUCTURING ALLOCATIONS FOCUS ON ACHIEVEMENT OF RESULTS (OUTPUT, OUTCOME) – PROGRAM RESTRUCTURING IMPLEMENTATION OF FISCAL DECENTRALIZATION (DIVISION OF AUTHORITY/FUNCTIONS WITH FINANCING CAPABILITY) IMPLEMENTATION OF FISCAL DECENTRALIZATION (DIVISION OF AUTHORITY/FUNCTIONS WITH FINANCING CAPABILITY) DEVELOP M & E TO LINK PROGRAM AND ACTIVITY PERFORMANCE TO ALLOCATION OF RESOURCES DEVELOP M & E TO LINK PROGRAM AND ACTIVITY PERFORMANCE TO ALLOCATION OF RESOURCES IMPLEMENTING THE RPJMN : THE FORTHCOMMING RKP 3 YEARS ROLLING PLAN, ADDING NEW INITIATIVES 3 YEARS ROLLING PLAN, ADDING NEW INITIATIVES

21 21 AGGREGATE FISCAL DISICPLINE BUDGET ITEMS BUDGET 2008 PROPOSED 1 ST REVISION REVENUE EXPENDITURE LINE MINISTRIES/AGENCIES LINE MINISTRIES/AGENCIES SUBSIDIES, INTEREST, Etc SUBSIDIES, INTEREST, Etc o/w energy subsidy o/w energy subsidy TRANSFER TO REGION TRANSFER TO REGION DEFICIT *) LG Budget is substantial, requiring a clear division of functions between central and regional governments. **) Challenge: credibility of resource envelope –> determining contingency reserves (on average in other countries it is at 2% of total spending – in Indonesia it is at approx. 0.4% of GDP, while the fluctuative energy subsidy is at 2.5% of GDP resulting in a cut of line ministries expenditure by 0.9% GDP).

22 22 ALLOCATIVE EFFICIENCY: PROGRAM RESTRUCTURING BASIC PRICIPLES BASIC PRICIPLES  Alignment Principle : Each program is aligned to a government objective Each program ‘collects’ spending which contributes to an objective, and Each program ‘collects’ spending which contributes to an objective, and  Relates spending to performance indicators  Congruence Principle : Each program is congruent with an organizational unit  This ensures accountability for improving levels of performance indicators and targets

23 2323 PROPOSED PROGRAM ARCHITECTURE

24 2424 SME Example

25 2525 Food Security Example (MOA) 04. Economy Agriculture, Forestry, Fishery and Marine Food Security Improvement DG. Land and Water Management Water Management Directorate Ministry Of Agriculture Agriculture, Forestry and Fishery Revitalization, and Rural Development Food Production and Improvement of Household Access to Food Facilitate and Improvement of Food Security to the Level of Household Development and Improvement of Agriculture Infrastructure to Support Food Security Secure Level of Rice Availability, a Minimum 90% of Total Domestic Need Provide Adequate Agriculture Infrastructure Achieve Food Security Trough Production Increase and Consumption Diversity Increase Food Distribution, Trough Institution Capacity Building and Rural Infrastructure Improvement and Development Irrigation Scheme for Ha Rice field

26 2626 Food Security Example (MPW) 04. Economy Agriculture, Forestry, Fishery and Marine Irrigation Scheme, Swamp and Other Irrigation Scheme Management and Development DG. Water Resources Directorate Irrigation Ministry Of Public Works Agriculture, Forestry and Fishery Revitalization, and Rural Development Food Production and Improvement of Household Access to Food Manage Irrigation Scheme, Swamp and Other Irrigation Scheme to Support Food Sustainability Irrigation Scheme Rehabilitation Secure Level of Rice Availability, a Minimum 90% of Total Domestic Need Provide Adequate Agriculture Infrastructure Water Supply for Household, Housing, Agriculture and Industry increased Irrigation Scheme for rice fields functioning Irrigation Scheme for Ha Rice field

27 2727 Linking Presentational Performance Information to Spending (Public Works)

28 2828 Linking Presentational Performance Information to Spending (Agriculture)

29 29 Continued … BEYOND (2010 – ONWARD) BEYOND (2010 – ONWARD) ALLOCATIVE EFFICIENCY ALLOCATIVE EFFICIENCY FOCUS EFFORTS ON THE PILOT PROJECTS (6 MINISTRIES/AGENCIES: PUBLIC WORKS, AGRICULTURE, EDUCATION, HEALTH, FINANCE, AND BAPPENAS) FOCUS EFFORTS ON THE PILOT PROJECTS (6 MINISTRIES/AGENCIES: PUBLIC WORKS, AGRICULTURE, EDUCATION, HEALTH, FINANCE, AND BAPPENAS) GRADUALLY INCLUDE OTHER MINISTRIES/AGENCIES GRADUALLY INCLUDE OTHER MINISTRIES/AGENCIES REVIEW M & E FOR LINKING PLANNING TO THE BUDGETING FRAMEWORK, (improve performance-informed budgeting, moving gradually to direct/formula performance budgeting) REVIEW M & E FOR LINKING PLANNING TO THE BUDGETING FRAMEWORK, (improve performance-informed budgeting, moving gradually to direct/formula performance budgeting) IMPROVING THE REGULATORY FRAMEWORK AND ANALYSIS IMPROVING THE REGULATORY FRAMEWORK AND ANALYSIS OPERATIONAL EFFICIENCY OPERATIONAL EFFICIENCY IMPROVING COSTING IMPROVING COSTING MOVING GRADUALLY FROM INTERNAL CONTROL TO MANAGERIAL ACCOUNTABILITY MOVING GRADUALLY FROM INTERNAL CONTROL TO MANAGERIAL ACCOUNTABILITY

30 30 Next Steps Strengthen and stabilize a compatible legal and regulatory framework Strengthen and stabilize a compatible legal and regulatory framework Focus on aggregate fiscal targets and strategic objectives in medium-term plan (RPJMN) Focus on aggregate fiscal targets and strategic objectives in medium-term plan (RPJMN) Medium term costs of existing policies Medium term costs of existing policies Roll over into Annual Work Plan and Budget Roll over into Annual Work Plan and Budget Update policy and parameter changes Update policy and parameter changes Strengthen internal control systems Strengthen internal control systems

31 31 Continued.. Develop performance evaluation, but simplify the documents (planning, budgeting, and reporting). Develop performance evaluation, but simplify the documents (planning, budgeting, and reporting). Greater application of IT but simplify the system Greater application of IT but simplify the system Improve processes (trilateral meetings, musrenbangnas, cabinet meetings) for contesting and coordinating policies. Improve processes (trilateral meetings, musrenbangnas, cabinet meetings) for contesting and coordinating policies. Keep participants focused on objectives Keep participants focused on objectives Strengthen consumer feedback Strengthen consumer feedback

32 32 THANK YOU DISCUSSION


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