1. RECENT TRENDS AND CHALLENGES OF LOCAL FINANCE MANAGEMENT
COUNTRY : INDONESIA, 2015
Dr Marcelino Pandin
Revenue side
Expenditure side
Other issues of LFM
(Local assets, external sources, measuring performance
and other issues)

2. REVENUE SIDE
Improve revenue forecasting capability and innovative revenue enhancement
Better collection of land and building taxes (PBB P2 urban and rural) and stamp duty
Preparation to manage 2nd round devolved land and building taxes:
mining, plantation, and forestry (PBB P3)
Significant increase in bottom-up earmarked special transfer
Combine formula-based and performance-based transfer
Improve access to external sources for infrastructure development:
Land-based financing (new asset management)
Pool funds (MIDF)
Municipal bonds

3. EXPENDITURE SIDE Plenty of OFI on CIP and Medium term Plan
Idle and undisbursed earmarked funds (only 22% LGUs performed well)
26% of total budget for capital spending but not for productive infrastructure
47% of total budget for remuneration expenses (benchmarked at avrg 27%)
Clarify revenue mobilization strategies (local parliament)
Expenditure increase for basic health services and education
poor procurement practices
needing new benchmark for performance (performance audit)

4. OTHER TRENDS & CHALLENGES
a new governance and fiscal arrangement:
- strengthen the coordinative and monev role of provincial goverment
- empower villages (fiscal transfer and local economic devt-BUM Desa)
Public finance management (PFM) will be fully applied incld PERA
Ensure LG fiscal sustainability (lessen dependence on general purpose transfers)
Avoid counterproductive revenue enhancement initiatives
(manufacturing sector and supply chains suffers)
Transparency shall be improved (improve quality of bottom up voice/musrenbang)
Leverage new accrual based accounting system (e.g. land based financing )
Improve capacity for strategic planning and effective implementation
Improve creditworthiness to access external source of funds (reliable data)
Optimise local assets (better enabling environment for PPP)
Need benchmark for performance audit
Link budget to public service and local economic growth
(output based transfer) or municipal contract

5. Thank you