Technical Assistance Consultant s Report

Transcription

1 Technical Assistance Consultant s Report Project Number: December 2005 REG: Pilot Project on Institutionalizing Civil Society Participation to Create Local Pro-Poor Budgets (Financed by the Poverty Reduction Cooperation Fund) Prepared by San Francisco, California, USA For the Asian Development Bank This consultant s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project s design.

2 Abbreviations ADB Asian Development Bank CCB Citizen Community Board CIDA Canadian International Development Agency CSO Civil Society Organization DFID Department for International Development DPRD Deawan Perwakilan Rakyat Daerah (Indonesian local government) DSP Decentralization Support Program EDO Executive Development Officer EU European Union FITRA Indonesian Forum for Budget Transparency F&P Finance and Planning GRB Gender Responsive Budgeting GTZ Gesellschaft für Technische Zusammenarbeit ILGR Initiatives for Local Governance Reform LGO Pakistan Local Governance Ordinance, 2001 LOE Level of Effort NDI National Democratic Institute NGO Non-governmental organization PIF Punjab Initiative Fund RETA Regional Technical Assistance RMI Republic of the Marshall Islands RTI Research Triangle International TA Technical Assistance TMO Tehsil Municipal Officer TOR Terms of Reference UNDP United Nations Development Program USAID United States Agency for International Development

3 TABLE OF CONTENTS Chapter 1- Introduction Background and Objectives of the Project Background Objectives Progress of the Work Proposed Modifications to the TOR Modifications to Pilot Sites Scope of this Report...4 Chapter 2- Initial Findings INDONESIA Budget Cycle and Fiscal Considerations Capacity of Potential Partners External Agency Coordination MARSHALL ISLANDS Budget Cycle and Fiscal Considerations Capacity of Potential Partners External Agency Coordination PAKISTAN Budget Cycle and Fiscal Considerations Capacity of Potential Partners External Agency Coordination...12 Chapter 3- Methodology and Key Activities Overview of Best Practices Approach Key Activities Develop Budget Literacy Training Materials Conduct Training Workshops for Civil Society Groups Develop Participatory Budgeting Strategies Institutionalization of participatory budgeting Outreach seminars...16 Appendix I: Project Timeline, December 2005-June i Appendix II: Donor Coordination Matrix...ii Appendix III: Inception Trip Meetings...xvii

4 Chapter 1: Introduction 1.1 Background and Objectives of the Project Background Budgets provide a tangible tool for measuring the effectiveness of government in responding to citizens concerns. As governments increasingly institute decentralization and devolution to lower branches of government, it becomes easier for citizens to understand and relate to the budget as an instrument for monitoring and influencing performance and service delivery. Internationally, local budgets are being approached as a tool for improving outcomes, particularly for the poor, who are most reliant on public goods. Participatory budgeting approaches have been notably pioneered in Brazil and South Africa, and are increasingly being explored in Asia. In this context, the ADB has designed a technical assistance (TA) intended to pilot participatory budgeting in Asia and share lessons learned with other organizations and stakeholders seeking to increase participation and transparency in budgeting. The TA seeks to broaden understanding and debate of local budgets so that citizens are more engaged in formulation and oversight of budgets. Countries selected for the TA are Indonesia, the Marshall Islands and Pakistan. Despite the very different sizes, histories, economies and governance structures of the project countries, the need to improve the responsiveness, accountability, and transparency of governance is common to all three. Local budgeting initiatives can directly contribute to improved governance outcomes by opening a key planning tool to public participation. This work will primarily be conducted at the municipal level where government is most easily accessible to citizens Objectives As stated in the terms of reference (TOR), the TA s purpose is to enhance civil society s awareness of resource allocation and the budgeting process and their actual involvement in the budget decision making process. Through civic, informed and constructive engagement, public service delivery will be more responsive to the poor. The outputs of the TA, as outlined in the TOR, include: (i) An agreed participatory budgeting strategy; (ii) Training materials on budget literacy and practical budget work; (iii) Twelve (12) regional capacity development workshops; 1

5 (iv) (v) Operational local budget forums (LBFs) that can develop the principles and practices of budget work in local governments; 1 and Action plan on how to replicate participatory budgeting approaches. 1.2 Progress of the Work ADB RETA 6170 is an eight-month project that began on October 15, 2005 and is scheduled for completion on June 15, The contract to implement the TA has been awarded to. During the inception phase, specific tasks included the following: (i) Development of a detailed work plan (ii) External agency coordination (iii) Benchmarking of local governments (iv) Best practices overview. The inception visit to Indonesia took place October 17-30, All five sites named in the TOR (Pontianak, Sanggau, Kebumen, Makassar, and Watampone) were visited by the Team Leader and Indonesian Budget Expert. In each location, meetings were held with both executive and legislative branches of local government, including the mayor, the head of the Planning Department and other technical departments, and the Speaker and Budget Committees of the local parliaments (DPRDs). Focus group discussions were also held with a wide variety of civil society stakeholders, including small business association representatives, women s NGOs, NGOs focused on transparency and good governance, and representatives of farmers groups, street vendors and other underrepresented groups. The Team Leader proceeded directly to RMI and was in country from November 1-7, 2005, accompanied by the ADB Program Manager. The Team Leader met with government officials from the national government, as well as representatives of the local governments of Majuro and Ebeye. Citizen representatives from NGOs, schools, churches, the private sector and the media were also consulted. The inception trip to Pakistan took place from December 8-15, The Team Leader and the ADB Program Manager visited the municipalities of Jehlum, Faisalabad, and Kasur in Punjab province. As in the other countries, meetings were held with the executive (Nazim and Executive Development Officers of Finance & Planning, Tehsil Municipal Officers and Tehsil Officers) and legislative branches (Tehsil Councilors), as well as NGO and private sector representatives. 1 The TOR explicitly mentioned the expectation that this project would involve the development of LBFs. However, after undertaking field visits in the three project countries, the team feels that institutionalization is better achieved by using existing mechanisms. See fuller discussion of activities designed to help institutionalize participatory processes in Chapter on pages

6 In all three countries, donor organizations programming in the area of decentralization and local budget initiatives were also consulted to inform them of the project and ensure coordination. An overview of related donor activities in each country is presented in Appendix II. A list of meetings in each country is provided in Appendix III. 1.3 Proposed Modifications to the TOR Modifications to Pilot Sites The TOR for this TA was prepared in There have been a number of significant changes since then (e.g., new heads of local governments, the development of new donor programs) that will affect program implementation. In addition, the number of sites given in the TOR now appears overly ambitious given the resources (time and budgetary) available, particularly given the considerable distances between some of the original sites. Reducing the number of sites will allow for more intensive engagement and increase the effectiveness of the pilot projects. In particular, building capacity of civil society partners is likely to require multiple visits and ongoing TA. For this reason, the sites listed in the TOR were re-evaluated during the inception visits. In proposing a final list of sites, the team used the following criteria:! Willingness of the local government to share budget documents and participate in public hearings;! Presence of civil society stakeholders with a capacity and/or interest in budget literacy and constructive advocacy towards government;! Presence of other donor programs that could support the continuation of these efforts past the timeframe of the TA to encourage sustainability. In addition, an effort was made to select sites in Indonesia and Pakistan that had commonalities to allow a comparative analysis in the final report. Towards this end, it was decided that in each country one site should be selected in which the local government was receiving significant donor assistance on the supply-side of improved budget formulation and one site without such support. In all cases, civil society partners have not yet received concentrated training in budget analysis and advocacy issues. Based upon the evaluation of sites conducted during the inception visits using these criteria, the TA team recommends the following modifications:! Indonesia: It is recommended that the program engage in Kebumen, where there is both USAID and World Bank TA being provided to strengthen the budget process, and in Makassar, where there has not been such support. Makassar was selected instead of Pontianak given its local government s expressed interest in participating. Sanggau is not recommended as a program site, as there are no civil society organizations with existing capacity to engage in budget advocacy work and no ongoing donor programs that would allow for a continuation of activities past the life of this project. In Watampone, civil society groups are already receiving support for related activities. 3

7 ! Marshall Islands: No sites were specified in the TOR. It is recommended that the project focus on Majuro and Ebeye, the two cities that account for over 75% of the total population.! Pakistan: It is recommended that the program engage in Jehlum, which is not receiving budget support to the local government, and Kasur, which is receiving TA to strengthen financial and budget systems from CIDA. In addition, it is recommended that the work in both locations be concentrated at the tehsil level (subdistrict). Discussions with citizen groups indicate that water and sanitation and other services provided by the tehsil government are priority concerns. 1.4 Scope of this Report The report presents the findings of the inception trips to each country in Chapter 2. Issues related to methodology and key activities are described in Chapter 3. Chapter 3 includes discussions of some proposed changes in the methodology vis-à-vis the TOR. The timeline for activities is provided in Appendix I. A matrix showing related donor activities in all three countries is provided in Appendix II. A list of meetings held during the inception visits is provided in Appendix III. 4

8 Chapter 2: Initial Findings 2.1 INDONESIA Budget Cycle and Fiscal Considerations A significant feature of Indonesia s governance reforms since the transition to democracy in 1998 is the country s regional autonomy policy, outlined in Laws 22/1999 and 25/1999, which devolves very significant responsibilities and powers to the kota/kabupaten level of government, equivalent to cities and districts or counties. Cities/counties are responsible for most service delivery at the local level under these provisions and have broad authority over local regulations and policy. However, while expenditure functions are decentralized, revenue functions are much less so. Local governments face quite significant restrictions on what kind of taxation they can levy and are prohibited from collecting sales tax or issuing municipal bonds. Local governments, therefore, remain heavily reliant on block grants from the central government, which constitute approximately percent of most local government budgets. These funds are generally sufficient to cover salaries and operating costs, but leave little for development projects and service delivery. The fiscal year in Indonesia runs January 1 to December 31. Budget formulation has two components: a bottom-up project planning process called musrenbang and a top-down budget preparation process executed through government departments. These processes are laid out in Laws 17/2003 and 25/2004. In theory, these two processes complement each other as follows: The musrenbang is the responsibility of the planning department and is intended to allow citizens to express their priorities for input into the budget process. Community meetings begin in January at the village level and project ideas are filtered up to public meetings at higher levels of local government in a process that is usually completed by the end of April. Because the musrenbang process is not tied to any allocation, the process in practice results in a wish list, with perhaps only 1 percent of project ideas actually being funded in that year s budget. Government departments begin drafting their work plans and budget requests in May. The Budget Committee of the local government uses these requests to prepare a full draft budget. The mayor submits the draft budget to the local parliament in October. Final negotiations between the executive and legislative occur in November. There are generally public hearings held by parliament (DPRD) at this time although these generally involve only invited community 5

9 leaders. The local regulation enacting the budget for the new fiscal year is passed by the parliament by the end of December. The timing of the project was a concern for many in the executive branch, as the 2006 budget will be finalized by the end of December 2005 (i.e., the budget process in Indonesia will essentially be ending just as the project period is beginning). It is therefore recommended that the pilot project should focus either on planning for 2007 or monitoring of 2006 expenditures to avoid disrupting the enactment of the 2006 budget. Most of the DPRD members met with acknowledged that public consultation was extremely limited in the current process, and that the DPRD itself has limited capacity and resources to understand the budget or solicit the views of their constituents on allocations for projects. At the same time, a commonly held view among local parliaments that the team leader met with on the inception visit is that as they are elected and represent the public, no further public consultation is required Capacity of Potential Partners Meetings were held with the Mayor, the Head of the Planning Department and other technical departments in each location. As a basic gauge of interest, the consultants requested a copy of last year s budget (2005) and planning documents for next year (2006). Of the five locations, four of the local governments were interested in participating in the project. Of those, two, Kebumen and Watampone, shared budget documents immediately. Only the Mayor of Pontianak refused to participate in the project, saying that they do not require technical assistance. They were further unwilling to share any budget documents. Members of the local parliament in Pontianak likewise felt that the public should not see the full budget, but only general proportions for allocations on the development budget. With the exception of Pontianak, the other four local governments expressed willingness to engage with the pilot project. However, the consultants caution that the project may still encounter resistance as activities roll out. In two of the four sites, budget documents have not yet been provided to the team. And in a number of the sites, notably Makassar and Watampone, civil society actors expressed doubts regarding the actual willingness of the local government to engage in genuine discussion about transparency, procurement, or allocations for government expenditures. A number of recent high profile graft cases implicating government officials have made officials reluctant to open budgets to scrutiny by the public. It can be expected that the greatest level of resistance will be met in discussions regarding the recurring budget, which includes items related to compensation for officials. Indonesia has a large number of NGOs active in the area of local governance and budget advocacy. Capacity in this area is generally much higher than in the other two countries. Of the proposed sites, Makassar and Watampone both have NGOs already trained in budget literacy that can be involved in this work. In Makassar, the local branch of 6

10 FITRA, a national umbrella organization for budget advocacy and transparency work, is active in this field. In Watampone, a women s NGO is receiving a grant from The Asia Foundation to engage in gender budget advocacy under an unrelated program. In Sanggau, civil society groups have expressed interest in participating in this project, but do not have experience in budget analysis. In Kebumen, as well, civil society stakeholders have not yet been exposed to budget work. There is also an active small business association in Makassar and local media outlets in both Makassar and Kebumen that have interest in following the conduct of local governance External Agency Coordination Given the enormous changes being made in democratic governance and decentralization in Indonesia, almost every donor currently present in Indonesia is implementing programs focused on capacity building of local governments. Among these programs are a number focused explicitly on budgeting and municipal finance, as outlined in Appendix II. Many of these have an explicitly pro-poor or gender focus. Coordination with other donor programs is important for two reasons. First, the team is taking into account in the design of activities those programs recently or currently being implemented in the locations in the TOR to ensure that there is no duplication of effort. Second, the team is seeking to link this eight-month effort to a longer-term effort on participatory budgeting to increase sustainability of the pilot activities. Ideally, this would include having activities launched during the pilot receive ongoing support from another program so that they are able to continue their activities. Of the five project sites listed in the TOR, there are currently donor-funded budgeting projects in Kebumen and Watampone. Kebumen is one of 100 municipalities participating in a USAID-funded program on local governance that will include assistance on strategic planning and municipal finance. Kebumen is also collaborating with the World Bank on a participatory planning and local governance project. In Watampone, is supporting gender budget advocacy as part of a larger Sulawesi-based project. Sanggau was the site of a GTZ program to introduce participatory planning at the district and village level, which closed in 2005, and does not appear to be continuing without the external support. 2.2 MARSHALL ISLANDS Budget Cycle and Fiscal Considerations Compared to the other two countries in this TA, the RMI s governance structure is less stratified, a reflection of its much smaller size and budgetary resources. Local governments are able to raise some revenues through the sales tax, and are only responsible for providing limited services. These include local police services, solid waste collection, and community activities. Education (which accounts for half of the civil service), health, and public works (roads, sewers, utilities) remain the responsibility 7

11 of the national government. For this reason, the TA will focus not only on the local budgets, as in the other two countries, but will also break out the central government allocations for each of the sites. A critical challenge facing RMI is the size of the civil service, which now absorbs most available budget revenue. The Office of the President calculates that salaries reach as high as percent of departmental budgets within the national budget. This leaves little funding for development purposes. The fiscal year runs from October 1 to September 31, and planning begins in January of each year. Although there is no legal provision requiring public consultation in the budget process, the Appropriation Committee usually holds hearings with individual ministries and publicizes these over the radio at the end of the planning cycle in late August of each year. Public attendance remains very limited in these meetings and civil society groups that have attended the consultation question whether the dialogue is genuine, as comments are deflected or ignored rather than actively encouraged and considered. One factor that may diminish the usefulness of these meetings is that they are held at the end of the budget preparation process, when government officials would find it extremely difficult to change planned allocations. For this reason, pilot activities will focus on trying to enhance public consultation much earlier in the cycle when ministries first receive notification of their overall allocation and begin consideration of programs. Public dialogue at this stage would assist policymakers in ensuring that proposed programs and the use of funds reflect the priority needs of the community Capacity of Potential Partners The RMI has a small number of NGOs, all based on Majuro, that provide an assortment of services from education to vocational training to advocacy on women s issues. A number of members of the NGO consortium have been trained in budget analysis/literacy under a prior ADB TA on gender budgeting. The NGOs are increasingly asserting themselves in advocacy and many now attend the public budget hearing held in Majuro in August and September. However, as many of the NGOs rely on public funds, they sometimes are reluctant to openly criticize the government. The private sector is represented by the Chamber of Commerce, also located in Majuro. There are no other business associations in the country. The private sector to date has not been involved in budget trainings, but has been vocal in the budget hearings and has experience advocating policy positions to the government. RMI has a relatively open and active media community that will be brought into the project. The primary media source for most Marshallese is radio, particularly the government-controlled AM station, which reaches the outer islands. There is also an independent newspaper in Majuro that has a circulation of roughly 20,000 (print and electronic versions) and several privately run FM radio stations in Majuro. 8

12 An important aspect of the TA activities will be the involvement of broader local community organizations, including Parent Teacher Associations, sports clubs, women s clubs, and churches. These organizations have the broadest membership of Marshallese citizens and provide a structured way of involving users of public services. These organizations were not involved in prior budget TAs and will require significant support on budget literacy. It should also be noted that average educational attainment levels are quite low, perhaps 5 th grade on Ebeye, and training materials will need to take this into account. There is an organized, interested, and capable set of stakeholders on Majuro and Ebeye that have expressed interest in engaging with this project. However, these groups have not engaged previously in joint advocacy. One of the primary challenges of this TA, therefore, is to attempt to build a broader coalition of stakeholders that would include reform-minded members of the indigenous power bases (landowners and religious leaders), as well as those excluded from the current decision-making processes External Agency Coordination The Marshall Islands receives assistance from the United States (through the Department of Interior), Taiwan, the European Union (EU), and the ADB. Related specifically to budgeting, programs have focused on performance-based budgeting (funded by the US), gender-based budgeting (the ADB), and community decision-making (the EU). The ADB is currently developing a civil service reform TA focused on rationalizing the size of the pubic sector. To the extent possible, this TA will therefore seek to support the ADB s proposed civil service reform TA by encouraging public debate regarding the allocations for salaries at the expense of development programs and operating expenses. The TA will also pursue with the EU whether there is any possibility that they could fund CSO advocacy in the future, as they already have a grant mechanism. 2.3 PAKISTAN Budget Cycle and Fiscal Considerations Decentralization in Pakistan was initiated in 2001, as enshrined in the Local Governance Ordinance (LGO). The LGO creates three levels of local government, district, tehsil, and union, and clarifies service responsibilities and fiscal authorities. District governments are responsible for health, education and roads. Tehsil governments are primarily responsible for local infrastructure, including water and sanitation, sewerage, street lighting, and road maintenance. Union governments are responsible for very small-scale public works (e.g., village wells) and cultural and community events. Decentralization in Pakistan differs significantly from that in Indonesia, in that civil servants at the lower levels of government continue to report primarily to the provincial 9

13 government. Although budget transfers from the province to the lower levels of government include funds for these staff, the heads (nazims) of tehsil and union governments are not able to effectively control the size or quality of the staff assigned to them. As in Indonesia and RMI, the share of salaries and other operating costs (called Current Expenditure in Pakistan) represents the large majority of the budget. This situation has recently been exacerbated by action taken by provincial governments to increase salaries for many staff (by as much as percent according to District Executive Development Officers) while only increasing the transfers to local governments by approximately 10 percent to cover the additional expense. This has significantly decreased the availability of development funds, defined in the budget rules as Non- Current Expenditures. Development funds, generally used for local infrastructure projects, are hotly contested as a source of patronage used to benefit particular tribal and social groups. One of the innovations under the LGO is that 25 percent of available development funds at each of the lower levels of government must be reserved for projects initiated by Citizen Community Boards (CCBs). CCBs consist of registered groups of citizens (not necessarily NGOs) who make project proposals through their local governments. The CCB allocation cannot be spent on other development projects and is carried forward if under-subscribed. This program has met with mixed results thus far, with many local governments having low disbursement rates for reasons that include the lack of political support, the poor quality of proposals, and the inability of CCBs to provide the required 20 percent cash contribution to the projects. The budget process is laid out in Punjab District Government and Tehsil Municipal Administration Budget Rules The fiscal year runs July 1 to June 30. Budget calls are issued by the Executive Development Officer (EDO) of Finance and Planning (F&P) in September. Allocations are based on the prior year s budget and department heads have until the end of December to submit the first draft of their department budget (including current and development expenditures). These are compiled by the EDO in January and any proposed development projects are referred to the Development Committee for consideration. At the same time, Citizen Community Boards develop proposals for development projects in their community. These proposals are submitted to the government through the councils and relevant Department Heads, which evaluate the technical feasibility of the proposal. In March, the EDO F&P revises the current year s budget so that the upcoming year will reflect any budget shortfalls or surpluses that will be carried forward. During this same time, the F&P compiles the full departmental budget, requests justifications for any increase in spending, and obtains approval from the Development Committee for proposed projects. The draft budget is submitted by the nazim to his/her respective council in June. The council is required to pass the budget bill by the end of June. The same budget cycle is also followed by the tehsil governments. In addition, some amount of the development budget is often informally allocated to council members for 10

14 projects in their areas. However, for city administrations, such as Faisalabad, there appears to have been a significant re-centralization of fiscal distributions and service responsibilities. Given the local elections that were held in June 2005, the budget was not passed as scheduled. New councilors will be seated shortly and the budget in most districts will be passed by the end of January. In addition, new councils must approve the Punjab Mid-term Plans that cover budget allocations. Until such time as the provincial plans are passed, local governments are only receiving pro rata monthly disbursements based on last year s budget. This leaves a much shortened time horizon to develop and pass the budget, which must be submitted to the councils in June Capacity of Potential Partners Pakistan s relatively low level of human development and its limited history of democratic governance present a particular challenge in relation to identifying civil society partners able to engage in this project. None of the district-based CSOs met with had any prior exposure to budget work, although they felt that they would be able to understand the accounting concepts involved. Materials and manuals will need to be provided in a simplified format and in local language in order to be effective. In addition, recommendations may need to be made to local governments on ways to improve the user-friendliness of budget documents. Private sector representation consists of local Chambers of Commerce and Industry, which represent larger businesses involved in manufacturing and import/export. Trade associations represent retailers. The private sector has relatively better access to government policy processes than NGOs, but there are currently no donor activities involving these associations at the local level. Trade associations consulted in both locations are concerned with local services and are interested in being involved in the project. Capacity of local government is generally high in the sites visited. There has been training provided through the ADB s Decentralization Support Program (DSP) in the new systems and Tehsil Municipal Officers (TMOs) responsible for oversight of the budget process were well-acquainted with the budget rules. The problematic area is more likely to be political willingness to increase public oversight of the budget process. It is still weakly understood why the general public, as opposed to the councilors as representatives of the public, should be involved in budget formulation. However, local government officials in all sites visited expressed their support and commitment for this project and made budget documents immediately available to the consultants. 11

15 2.3.3 External Agency Coordination By far the largest donor-supported effort to support decentralization in Pakistan is a $270 million program loan from the ADB. This regional TA (RETA) is being implemented along with an additional $38 million of TA focused on related issues, including financial management support for local government, gender mainstreaming efforts, and support for fiscal decentralization. There are also large-scale efforts being supported by The World Bank (to improve financial management systems), CIDA (to build capacity of local governments, increase community participation, and mainstream gender), and DFID (focused on performance-based budgets). Most of the activities under these programs are directly focused on government officials as the targets of training and recipients of support. Support to civil society partners includes support by a number of donors to the Devolution Trust for Community Empowerment (DTCE), a program under the National Reconstruction Bureau that helps establish Citizen Community Boards. There are also a number of efforts to disseminate gender responsive budgeting. However, support for the demand side of decentralization reforms has been limited in comparison to assistance directed at local governments. In addition, much of the budget-related work to date has focused at the district level, with comparatively fewer interventions at the tehsil and union levels. This TA, therefore, can complement ongoing efforts by building capacity of civil society partners and the private sector to engage on budgeting issues and also by focusing at the lower levels of local government. There are currently no donor-funded activities in Jehlum, although government officers from finance departments have been included in the DSP trainings. In terms of longer term sustainability of these activities, successful pilot initiatives may be able to attract support from a planned ADB mechanism that will provide support for civil society support for decentralization. Kasur is one of two districts receiving support through CIDA s Decentralization Support program. CIDA funds a Punjab Initiative Fund (PIF), which provides grants to local NGOs. CSOs in Kasur may be able to apply to the PIF for support of continued activities that were successfully launched under this TA. 12

16 Chapter 3: Methodology and Key Activities 3.1 Overview of Best Practices There are a number of international efforts to make local budgeting processes more responsive to the needs of citizens. Some of the approaches that are gaining currency at the moment include: Participatory budgeting. Efforts range from Freedom of Information approaches, in which budget information is made available to the public with an emphasis on transparency, to approaches in which funds are earmarked for public works that are decided through a public consultation process. Participatory budgeting efforts are generally implemented in a context of decentralization and tend to focus on the expenditure side of the budget (particularly related to expanding access for the poor to public services) rather than the revenue side. Examples of this approach can be studied in South America, South Africa, and India. Performance-based budgeting. This approach translates line items into expected outputs to improve monitoring and impact evaluation. Commonly practiced in OECD countries, performance-based budgeting is increasingly being introduced to developing countries, usually through donor programs. By translating the use of funds into expected outcomes (e.g., road improvements measured at $XX/kilometer of upgrade), performance-based budgeting makes it easier for citizens to track expenditures. Gender budgeting. Gender budget practitioners analyze the use of public funds in light of gender equity concerns. While approaches vary and in some cases emphasis is made on the direct benefit to women from budget allocations, the more common approach is to analyze the extent to which public goods, such as education and health, which directly impact women s roles as caregivers, are supported in the budget. Different approaches can be seen in South Africa and the Philippines, among other efforts. 3.2 Approach The budgeting strategy being taken in this TA combines elements of the approaches above. One component of the strategy clearly concentrates on opening up the budget process to citizens. By increasing transparency, the public will have a better understanding of how resources are used and who benefits. The interests of a wide set of stakeholders in better outcomes is acknowledged and solicited as opposed to focusing solely on a particular disenfranchised group. Similar to performance-based budgeting, emphasis is given to efficient use of available funds as opposed to creating demand for additional funds. This reflects the very real fiscal constraints that the local governments 13

17 in all three countries face as well as the need to balance revenue for service delivery with a fiscal and taxation policy conducive to private sector growth, as both are necessary for sustainable poverty reduction. By combining these elements, the Foundation s strategy seeks to enhance pro-poor governance by building broad coalitions who share a common interest in good governance that reflects community priorities, rather than by pitting the narrow distributional interests of the poor against those of the rest of the community. The implementation of the following activities requires careful consideration to how best initiate meaningful pilot activities within the time and resource restraints of the project. In particular, because the project timeframe is less than a full budget cycle, results should be framed in terms of increased capacity and sustainable mechanisms for engagement rather than changes in budget allocations that would only occur after the completion of this TA. In all three countries, citizen s budget literacy remains nascent, and consultative processes, while present, have failed to fulfill their intended function of providing meaningful input into budget planning. The commitment of local governments to meaningful consultative processes, and the willingness of CSOs to commit their own resources to this process, should not be assumed or taken for granted. The immediate outcomes of the TA, therefore, are to increase citizen understanding of the budget and budget process on the one hand, and to secure commitment from government stakeholders to share budgets and participate in a genuine consultation process that will hopefully continue past the timeframe of this technical assistance. To address the issue of sustainability, efforts to link the pilot activities to longer-term assistance are added as discrete activities. 3.3 Key Activities Given the varied budget preparation processes, contexts, and stakeholders in the three countries, activities will necessarily be modified to make them appropriate for each country. However, activities will be broadly the same in each country, as follows (see Appendix I for the timeline of these activities): Develop Budget Literacy Training Materials Activity 1: The consultant team will compile budget manuals and other training materials used internationally, with particular focus on materials already tested in the three pilot countries. Common information will be included for all three countries (e.g., international best practice, how to work with the media), but much of the information will need to be modified to the individual country contexts (e.g., the budget cycle, fiscal responsibilities of local versus national government). Drafts of the country-specific manuals will be completed in early January. Depending upon availability of project funds, these will be translated into local languages for use in the budget trainings. 14

18 3.3.2 Conduct Training Workshops for Civil Society Groups Activity 2: The consultant team will conduct trainings on budget literacy that will demystify the budget and allow civil society stakeholders to understand how the budget is formed and how to analyze allocations. As the budgets in each country are relatively static year-on-year, the 2006 budget will be used to prepare groups for eventual discussion of the 2007 budget. In addition, analyses will focus on allocations for each city, with particular attention to the sectors (e.g., education, health, public works) that are identified by local participants as particularly important in terms of local governance. The trainings will be held from the end of January through mid-february. The first interim progress report will be submitted at this time. Performance indicators will include number of organizations and individuals capable of analyzing local budgets following the trainings. Note: In the case of Makassar, activities will focus on monitoring and analysis of the 2005 expenditures, rather than the planning for Training materials and workshops will be modified to reflect this. In Pakistan, trainings will be provided to the members of tehsil councils, as well as representatives of CSOs and trade associations Develop Participatory Budgeting Strategies Activity 3: The consultants in each country will work with civil society counterparts to prepare strategies for engaging in budget advocacy. This will include: how to sustain and increase understanding of the budget beyond those individuals who were included in the trainings; creating common platforms with like-minded organizations that could be advanced in advocacy for the 2007 budget cycle; working with the media; and developing political strategies for how to constructively engage members of parliament and the executive. This work will be an ongoing part of relationship-building with the civil society organization (CSO) counterparts, but will be concentrated in the month of February-March to prepare counterparts for the public dialogues. Performance indicators will include the number of CSOs engaging with their members on budget issues, preparing budget advocacy platforms, and the engagement of local officials in communicating with these organizations regarding the budget preparation process Institutionalization of participatory budgeting The TOR refers to the creation of local budget forums, originally envisaged as bodies staffed and financed by local governments that would be responsible for facilitating ongoing budget consultations. However, the creation of new organizations/institutions is probably unnecessary and, in any event, unworkable in the absence of public allocations for this purpose. In all three countries, there are already government officials responsible for soliciting public input, although they do not necessarily achieve the intended purpose. In addition, the financial sustainability of such forums could be an issue. Rather than focusing on the creation of forums, the TA will seek to institutionalize meaningful consultation through the following activities: 15

19 Activity 4: The consultant team will facilitate public workshops during the early planning stages of budget preparation. One of the primary weaknesses of current consultation is that draft budgets are not shared with the public until allocation decisions have already been formed. In other words, the budget is disseminated to citizens as a fait accompli. The TA, therefore, will facilitate a number of public/private workshops in the period from March to May. These will involve as broad a cross-section of the public as possible. Performance indicators will include: quality and level of participation by the local government; willingness of local government to make planning documents/budget allocations/records of expenditures available to the public; and the quality and constructiveness of input/advocacy by CSOs. The second interim progress report will be submitted at the beginning of May. Activity 5: Develop strategy for sustainability of activities. As the project period draws to a close, the TA team will work closely with counterparts to explore ways in which the budget work can continue. Efforts will include gaining commitment from the government to continue sharing the budget early in the cycle and attending the public workshops. From the citizen s side, it will involve identifying concerned organizations that are willing to continue analyzing the budget and building a network of like-minded CSOs. This work will be an ongoing activity, but will be concentrated in the month of May. Performance indicators will include: demonstrated commitment from local governments to plan future budget consultation meetings, expressed interest/demand from CSOs to continue engaging in the budget process, and commitments from donors to provide future TA/financial assistance to support these efforts Outreach seminars Activity 6: The project will close with national seminars in each country, bringing together parties working on local budgeting initiatives. These seminars will include local government associations/representatives, donor agencies, and CSOs. Lessons from all three countries will be shared and a discussion on how governments can institutionalize participatory budgeting will be facilitated. The outreach seminars will be conducted at the end of May. The final report, documenting the project and providing an action plan for local governments interested in using these methods, will be submitted in mid-june. 16

20 Inception Report Appendix I: Project Timeline, December 2005-June 2006 Activity 1: Develop Budget Literacy Training Materials Compile budget manuals and training materials Dec Jan Feb Mar Apr May June Draft country-specific manuals Translate manual (if budget allows) Activity 2: Conduct Workshops on Budget Literacy Activity 3: Develop Participatory Budgeting Strategies Activity 4: Facilitate Public Workshops Activity 5: Develop strategy for sustainability Activity 6: Hold outreach seminars in each country Reporting: Interim and Final Reports Proposed dates for public workshops: Majuro April 13; Kebumen April 18; Makassar April 20; Jehlum April 25; Kasur April 27 i

21 Inception Report Appendix II: Donor Coordination Matrix Indonesia (Decentralization Only) No. Donor Name Program/Project Title 1. Asian Development Bank Sustainable Capacity (ADB)-Government of the Building for Netherlands Decentralization (SCBD) Timeframe 2003 (1 st batch of districts) (2 nd batch of districts) Implementing Agencies/Methods Indonesian Government counterparts: Ministry of Home Affairs, National Institute of Administration Implementing agency selects the service providers Geographical Coverage 37 districts in 10 ADB priority provinces: North Sumatera, Yogyakarta, South East Sulawesi, West Java, Central Java, East Java, South Sumatera, Lampung, West Nusa Tenggara, Banten Approach and Activities -- Supporting local governments to develop the Capacity Building Action Plan- CBAP : general administration, financial management, audit, legal drafting, organizational development, human resource management, development planning -- Development of an ICT based national coordination structure -- Development of curriculum training of trainers and training of training managers. ii

22 Inception Report 2. The World Bank Initiatives for Local Governance Reform (ILGR) Project (preparation phase) The World Bank appointed nationallevel consultant and local facilitators 15 Districts (in 9 provinces in Sumatera, Java and Sulawesi): Tanah datar, Solok, Bolaang Mongondow, Takalar, Bulukumba, Bandung, Majalengka, Lebak, Kebumen, Gowa, Bantul, Ngawi, Lamongan Provided capacity building & technical assistance to improve participation, transparency, and accountability in planning, budgeting and public service delivery. Facilitated district to formulate a participatory Poverty Reduction Strategy and Action Plan-PRSAP and to enact a Local Regulation on Participation, Transparency and Accountability-PTA. Providing loan to implement the PRSAP. iii

23 Inception Report 3. United Nations Development Programme (UNDP) Co-funded by the World Bank and ADB Partnership to Support Governance Reform (Partnership) 2001 up to now The Governing Board (consists of representatives of UNDP, the World Bank, Indonesian Government, corporate sector, and eminent members of civil society) Beneficiaries: various government institutions, legislatures and judiciary, NGOS/CSOs throughout Indonesia Generating and disseminating knowledge on good practice in governance from Indonesia and abroad; Coordinating the governance reform efforts of government, donors, and civil society; and Funding initiatives to promote reform of governance in Indonesia. Breakthrough Urban Initiatives for Local Development (BUILD) Urban Management Advisors (UMA) recruited by BUILD 9 districts: Kendari, Metro, Mataram, Gorontalo, Probolinggo, Surakarta, Bogor, Sukabumi, Sawahlunto Provided technical assistance to introduce the good governance practices in selected districts. A major part of BUILD agenda was a participatory formulation of a Local Development Agenda and the establishment of independent City Consultation Forums representing major stakeholders in local development. iv

24 Inception Report 4. United States Agency for International Development (USAID) Performance-Oriented Regional Management (PERFORM) Project Research Triangle International (RTI) in collaboration with the Ministry of Finance and Ministry of Home Affairs 80 districts in 7 provinces: West Sumatra, West Java, Central Java, East Java, South Sulawesi, West Papua, Papua. Provided technical assistance to assist local governments to develop their capacities to prepare mediumterm development plans that engage significant levels of stakeholders participation. Provided policy assistance at both the national and the local level in preparing and adopting new legal basis (legislation, regulations and technical guidelines) for more participation in planning and budgeting. Building Institutions for Good Governance (BIGG) International City/County Management Association (ICMA) 80 local governments throughout Indonesia Helped local governments improve their budget and financial management practices by providing training and technical experience. Introduced and encouraged local governments to adopt performance-based budgeting. v