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Wismana Adi Suryabrata Director for Allocation of Development Funding,

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Presentation on theme: "Wismana Adi Suryabrata Director for Allocation of Development Funding,"— Presentation transcript:

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

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

3 PLANNING AND BUDGETING FRAMEWORKS

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

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

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 ALLOCATIVE EFFICIENCY
Performance budgeting categories (OECD) 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 Planning and/or accountability Direct/formula performance budgeting Tight/direct link Performance results Resource allocation and accountability 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 LOGIC MODEL THEORY Source: Framework for Managing Programme Performance Information, National Treasury, Republic of South Africa, May 2007

9 Performance Information in the MTEF Guidelines
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 standards - express the minimum acceptable level of performance, or the level of performance that is generally expected. These should be informed by legislative requirements, departmental policies and service-level agreements. They can also be benchmarked against performance levels in other institutions, or according to accepted best practices. Cumulative measure – measure for which one quarter’s performance may be added to a previous quarter’s performance to obtain year-to-date performance; otherwise, a measure is noncumulative. Noncumulative measure – a measure that, in order to determine year-to-date performance, must be calculated for the entire reporting period and not on the basis of adding together the performance from separate reporting periods. Source : Government of South Africa

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

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

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 PAST ACHIEVEMENTS

14 MEDIUM-TERM DEVELOPMENT PLAN (RPJMN) 2004-2009
AGGREGATE FISCAL DISCIPLINE TARGET TO REDUCE DEBT/GDP RATIO TO 31.8% ALLOCATIVE EFFICIENCY STRATEGIC PRIORITIES AND TARGETS REGULATORY INTERVENTION BUDGET INTERVENTION NO RESOURCE CONSTRAINT ON STRATEGIC PRIORITIES OPERATIONAL EFFICIENCY WEAK COSTING OF POLICIES IT HAS BEEN REVIEWED (ADJUSTED AND DEVELOPED) AND IMPLEMENTED THROUGH THE ANNUAL GOVERNMENT WORK PLAN AND BUDGET

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 ALLOCATIVE EFFICIENCY
SUBSTANCE 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). 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. PROCESS Trilateral Meetings (Performance Contracts) Musrenbangnas (Coordination for Regional Government Work Plans) Cabinet decision : Presidential Decree on the Government Work Plan (RKP).

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

18 INTERNAL CONTROL CLASSES OF EXPEND. APBN 2006 (Realization) APBN 2007 Initial Estimation 2008 RAPBN 2008 APBN 2008 GOODS AND SERVICES 46.0 71.6 83.8 52.4 69.4 ASSETS 58.7 73.1 84.2 101.5 95.4 SOCIAL ASSISTANCE 40.7 49.4 59.2 64.4 63.2 *) 2006 – 2007 : spending for goods and services (especially the non-discretionary) increased to the levels of asset spending, and is predicted to continue in 2008. **) 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.

19 FUTURE CHALLENGES

20 FUTURE CHALLENGE: SUSTAINING REFORMS
SHORT-TERM (TAHUN 2008 – 2009): PREPARING THE RPJMN MTFF : CREDIBLE RESOURCE ENVELOPE MTEF : INDICATIVE BASELINE ALLOCATIONS BASED ON RESOURCE CONSTRAINTS ALLOCATIONS FOCUS ON ACHIEVEMENT OF RESULTS (OUTPUT, OUTCOME) – PROGRAM RESTRUCTURING IMPLEMENTATION OF FISCAL DECENTRALIZATION (DIVISION OF AUTHORITY/FUNCTIONS WITH FINANCING CAPABILITY) 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

21 AGGREGATE FISCAL DISICPLINE
BUDGET ITEMS BUDGET 2008 PROPOSED 1ST REVISION REVENUE 17.4 19.6 EXPENDITURE LINE MINISTRIES/AGENCIES SUBSIDIES, INTEREST, Etc o/w energy subsidy TRANSFER TO REGION 19.1 7.0 5.8 1.7 6.3 21.6 8.6 4.3 6.6 DEFICIT 2.0 *) 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 ALLOCATIVE EFFICIENCY: PROGRAM RESTRUCTURING
BASIC PRICIPLES Alignment Principle : Each program is aligned to a government objective 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 PROPOSED PROGRAM ARCHITECTURE
23

24 SME Example 24

25 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 25

26 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 26

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

28 Linking Presentational Performance Information to Spending (Agriculture)
28

29 Continued … BEYOND (2010 – ONWARD) ALLOCATIVE EFFICIENCY
FOCUS EFFORTS ON THE PILOT PROJECTS (6 MINISTRIES/AGENCIES: PUBLIC WORKS, AGRICULTURE, EDUCATION, HEALTH, FINANCE, AND BAPPENAS) 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) IMPROVING THE REGULATORY FRAMEWORK AND ANALYSIS OPERATIONAL EFFICIENCY IMPROVING COSTING MOVING GRADUALLY FROM INTERNAL CONTROL TO MANAGERIAL ACCOUNTABILITY

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

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

32 THANK YOU DISCUSSION


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