LOMBOK TENGAH IN DECENTRALIZATION: INITIAL EXPERIENCES AND EMERGING CHALLENGES *

Transcription

1 INTERNATIONAL SYMPOSIUM ON INDONESIA S DECENTRALIZATION POLICY: PROBLEMS AND POLICY DIRECTIONS LOMBOK TENGAH IN DECENTRALIZATION: INITIAL EXPERIENCES AND EMERGING CHALLENGES * SEPTEMBER 4-5, 2003 SHANGRI-LA HOTEL, JAKARTA, INDONESIA NORIO USUI a AND CATUR SUGIANTO b I. INTRODUCTION 1. This report focuses on the Central Lombok district (Kabupaten Lombok Tengah) in West Nusa Tenggara (Nusa Tenggara Barat: NTB) province. The team comprising the authors and a district surveyor 1 conducted two field surveys in 2002 and The first field survey, which was conducted from 18 to 28 August 2002, started with a focus group meeting led by an Assistant for local government s secretary (Sekwilda) and attended by heads of key local government bureaus (Dinas, Bagian, Kantor), following which the team conducted a series of interviews with government officials, local parliament staff, community leaders, university researchers, NGOs, and staffs of NTB provincial government. Preliminary results of the survey were discussed in the Tokyo Symposium held on 31 January and 1 February 2003, and the Socialization Workshop held in Malang on 31 March Second field survey was conducted from 27 July to 2 August 2003, to update developments and clarify remaining topics and emerging challenges after the first field survey. 2. Before fielding Lombok Tengah, the team prepared a concept paper to establish a clear consensus within the team on topics to be covered in the study. (Usui, N., 2002). Further, based on the concept paper, detailed questionnaires were prepared for the both field surveys (Catur Sugiyanto and Awaluddin, 2002 and 2003). Major topics to be covered in this study are: 1) development planning; 2) budgeting; 3) organizational structure; and 4) service deliveries in health, education, and agriculture. In the second field survey, the team focused on: a) roles of sub-districts (Kacamatan) and villages (Desa) in local planning and budgeting processes; b) local responses to the Circular Letter (Surat Edaran) MOHA No.050/987/SJ on participatory planning; c) readiness to adopt the new local financial management system stipulated in the Ministerial Decree (Kepmen) MOHA No.29/2002; d) local revenue mobilizing efforts and nuisance tax; e) local perspective on the matching grant (DAK) projects; f) possible impacts of the Government Regulation (PP) No.8/2003 on local government organizational structure; and g) innovations and challenges in education, health, and agricultural sectors. 3. Lombok Tengah is one of the poorest local governments (Kabupaten/Kota) in Indonesia with limited human and natural resources. Its territory is dominated by rural area with 745,433 people. Lombok Tengah consists of 12 sub-districts (Kacamatan) 2, 131 * The authors greatly appreciate the government officials and social leaders of Lombok Tengah and staffs of Development Planning Board (BAPPEDA) of NTB province for their strong supports to this study. The views, interpretations, and conclusions expressed in this paper, however, are solely those of the authors, and should not be attributed to Lombok Tengah and NTB provincial governments, other team members of this project, the Government of Japan, and the Government of Indonesia. Preliminary results of the first field survey were presented at Tokyo Symposium, which was held on 31 January and 1 February, 2003, under the title of Development Planning, Budgeting, and Service Deliveries: A Case of Lombok Tengah. a Norio Usui: Associate Professor, Faculty of Economics, Kansai University: nusui@ipcku.kansai-u.ac.jp b Catur Sugiyanto: Director, Center for Economic and Public Policy Studies, Gadjah Mada University: catur@paue.ugm.ac.id 1 The authors thank Mr. Awaluddin L. (Gadjah Mada University), research assistant for the field surveys, for his firm commitment to this study. 2 Before the decentralization, there existed nine sub-districts (Kacamatan) in Lombok Tengah. However, after the decentralization, the government established three new sub-districts to improve its service deliveries.

2 villages (Desa), and 991 sub-villages (Dusun/Lingkungan). The economy heavily depends on agricultural sector, which takes up 37.5 percent of regional GDP in 2000 (Figure 1). About 48 percent of labor forces belong to tree crop sector, which followed by 8 percent to plantation and 5 percent to service sector. After experiencing negative 2.0 percent growth in 1998, the economy showed gradual recovery with 1.2 percent and 2.0 percent growths in 1999 and 2000, respectively. Although impacts of the 1997 economic crisis were limited, Lombok Tengah is still facing many difficulties in its human resource development. Lombok Tengah was ranked 288 th of total 294 local governments in its Human Development Index (HDI) in Further, its HDI remained at the lowest level within NTB province (Table 1). More than 30 percent of total population lives below the poverty line. Among the target local governments covered in this project, Lombok Tengah is the poorest local government (Annex 1). Figure 1 Sectoral GDP (%, 2000) Agriculture (37.5%) Others (25.9%) Mining (3.1%) Manufacturing (6.0%) Construction (10.3%) Trade, Restaurants & Hotels (17.2%) Source: BPS and BAPPEDA NTB (2001) Life Expectancy (years) Table 1 Human Development Index (HDI) Adult Literacy Rate (%) Mean Year of Schooling (years) Real Per Capita Expenditures ( 000 Rp.) HDI HDI Rank Poverty Rate (%) Lombok Tengah / NTB Province / Indonesia Source: BPS, BAPPENAS and UNDP, Major purposes of this report are to: 1) show some innovative moves made by Lombok Tengah with its own initiatives; and 2) clarify remaining and emerging challenges for Lombok Tengah. The report covers major findings of the second field survey. The paper is organized as follows: section 2 discusses development planning process; section 3 analyzes budgeting practices and budget structures; section 4 describes organizational structure and the transfer of personnel; section 5 outlines services deliveries in health, education, and agriculture; and final section summarizes key findings and recommendations. 2

3 II. DEVELOPMENT PLANNING 5. Indonesia s local development planning system has been a mixture of top-down and bottom-up approaches. The top down approach started with national policy guideline (GBHN) and followed by five-year development plan (REPELITA, currently known as PROPENAS), strategic development plans (RENSTRA), and annual development plan (REPETA). Regional governments, both at provincial and local levels, were also required to produce corresponding planning documents: POLDA; PROPEDA; RENSTRA; and REPETADA, based on the central planning documents. 6. It was expected that people s needs and aspirations could be identified through a series of development coordination meetings. The process started from development coordination meeting at sub-village level (Musbangdus), followed by similar coordinating meeting at village level (Musbangdes), sub-district level (UDKP), district level (Rakorbang Kabupaten/Kota), provincial level (Rakorbang Propinsi), and finally national level (Rakorbangnas). It was also assumed that synchronization of development activities and budgets at all government levels can be guaranteed through the bottom-up and top-down processes. 7. However, in reality, local development activities were dominated by center inspired projects, and did not necessarily meet people s needs and aspirations. Many bottom-up projects were filtered out at coordinating meetings at higher levels. This accentuation of top-down planning could not be avoided since, before the decentralization, a major part of development funds for regions came from the central government through central line ministries development budgets (DIP) and regional development funds (INPRES). 8. After the decentralization, local governments are required to shift from the old development planning practice to a new planning system which can effectively absorb people s needs by fostering active civil society participation. This is a key challenge for all local governments. At the same time, decentralization requires local governments to make a good coordination with both higher levels of government and neighboring governments. Even after the decentralization, local planning and budgeting requires both vertical (with higher levels of government) and horizontal (with neighboring same level governments) linkages. Development Planning in Lombok Tengah 9. After decentralization, development planning process in Lombok Tengah has experienced some changes. It still follows the old practice consisting of Musbangdus, Musbangdes, UDKP, and Rakorbang, however, compared with before the decentralization, stakeholders participation became more active. A new participatory planning model (MPP) has pilot tested in three sub-districts in FY2002, and expanded to all districts in FY2003. Further, the newly released guideline for participatory planning (SE MOHA No.050/987/SJ) provides a new planning procedure at local level Musbangdes (Village Level): Programs or activities proposed by villages were dominated by those decided by village head (Kepala Desa) before the decentralization. However, after the decentralization, programs can be selected based on real local needs. Stakeholder participation at village level becomes very active. Participatory planning brings about the development program closer to the people. This is mainly due to reorganization of village governments. After decentralization, village representative council (Badan Perwakilan Desa/BPD), which replaced former village assembly (LMD) and its members are elected by local people, has strengthened its power to control and supervise decisions made by village head. At present, all decision-makings should go through discussion with BPD and other village institutions such as LKMD (village 3 Usui, N., and Armida Alisjahbana (2003b). 3

4 community resilience board). Further, selection system of LKMD members has been changed. Although they were dominated by relatives of village head in the past, all members need to be selected by people s opinion. This change also strengthened the supervising function of LKMD on village government performance. 11. However, we received an impression that fragmented views of the participants may result in a smaller size of project, minimum (low) scale and less beneficial programs because externalities in some sectors can not be exploited at village level. Technical bureaus at district level (Dinas) need to make some adjustments to resolve the issue. Desa Mujur Kepala Desa was elected in Before the decentralization, village assembly (LMD) consisted of 13 members (one each from 13 sub-villages (Desun)). However, after the decentralization LMD was replaced by village representative council (BPD) and its 15 members were elected by local people (17 years old and more) in FY2001. In the election process, each Desun selected two candidates (total candidates were twenty six). Elected BPD members include: community leaders, religious leaders, and youth leaders. BPD members elected do not include former LMD members. Head of LKMD is still Kepala Desa. Kepala Desa selected candidates of LKMD members and discussed at BPD. LKMD members selected are: school teachers, a Kacamatan staff, community leaders, religious leaders, retired military staff, and house wife. BPD becomes powerful and Kepala Desa needs to be accountable to BPD. In Musbangdes, which was held in the early June 2003, intensive discussion was made to set priority for proposal to UDKP. Discussion continued to reach a consensus among participants without utilizing voting. 12. UDKP (Sub-district Level): All proposals from village level are discussed at subdistrict (Kacamatan) level to select priority projects for the discussion at district level. However, roles of UDKP are not necessarily clear. At all levels of government except Kacamatan, there exists separation of powers between the executives and legislative. However, there is no legislative body at this level, and all staffs, including its head (Camat), are local government employees. Echelon position of Camat (III/B) is below that of head of technical bureau (Kepala Dinas) at district level (III/A), which makes it difficult for Camat to convey the proposals to district government if they contradict with Dinas ideas. Bupati (head of local government) fully realizes the difficult position of Camat and trys to resolve the problem by inviting all Camat at regular meetings as the same status with Kepala Dinas. Further, Bupati considers delegating some of Bupati s functions to Camat to strengthen its position. Kacamatan Praya Timur Camat is a former staff of finance bureau (Bagian Keuangan) and got the current post in FY2003. There are 22 staffs including Camat, which does not include KCD (sub-district branches of local technical bureaus) staff. UDKP was held on 24 June Desas joined the meeting. Priority was set based on number of Desa proposed the similar type of project (if five Desa proposed road project, road project became a priority sector). In this system, Kacamatan can not pick up a certain project which is really needed for a certain Desa. However, Camat mentioned that, despite the limitation, this system is the best system in this stage. Position of Camat is not clear. He is a staff of Kabupaten, but he needs to hear local opinions. Camat mentioned that he always see people, not Dinas. Even his Echelon position is below Kepala Dinas, he needed to fight with Kepala Dinas at Rakorbang Meeting. However, he also mentioned that other Camats are not necessarily like him. There are some old type Camats. 4

5 13. Rakorbang Kabupaten (District Level): Before decentralization, the key task of Rakorbang (Kabupaten) meeting was to synchronize programs and projects amongst the different levels of government. However, it becomes an important meeting, because it helps: 1) to focus the mission statement of all stakeholders especially in setting the priorities, strategy and direction of the five year development plan; 2) to gather aspirations and solutions suggested by all parties outside the government, including businessmen, NGOs, associations and other public figures; 3) to share the development programs and projects between the province and the district. Table 2 Planning and Budgeting Calendar: Lombok Tengah FY2002 and FY2003 FY2002 FY2003 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Musbagdes (Desa) UDKP (Kacamatan) Rakorbang (Kabupaten) Rakorbang Province FY2002 (APBD FY2003) RAPBN Rakorbang National RAPBD Province APBN RAPBD Province RAPBD Kab. APBD Kab. FY2003 (APBD FY2004) Musbagdes (Desa) UDKP (Kacamatan) Pre-Rakorbang Kabupaten Rakorbang (Kabupaten) Rakorbang Province Rakorbang National RAPBN Targets APBN RAPBD Kabupaten APBD Kabupaten 14. Scoring Sheet: Following the guideline by the central government (SE MOHA No.050/987/SJ), Lombok Tengah has started utilizing a scoring sheet system for Rakorbang meeting since FY2003. Local planning board (BAPPEDA) prepared a scoring sheet taking account of: 1) consistency with development strategies of provincial and central governments; 2) consistency with local development strategy; 3) actions to negative impacts of projects; 4) benefits; 5) local needs and aspirations; and 6) technical evaluation by Dinas (Annex 2). Scoring sheets were prepared by sectors (for each Dinas) to set a priority list for each sector. All projects were discussed based on the scores at Rakorbang meeting. 15. SE MOHA No.050/987/SJ divides Rakorbang meeting into three sequent stages: 1) Pre-Rakorbang meeting; 2) Rakorbang meeting; and 3) Post-Rakorbang meeting. A 5

6 week before the Rakorbang meeting, Pre-Rakorbang Meeting was held. Kepala Dinas and Camat were invited. The steering committee consisting of Assistant, BAPPEDA, Bagian Keuangan (finance office), and Bagian AP (development administration office) briefed the newly introduced scoring system and overall process of Rakorbang. One day before the Rakorbang meeting, the steering committee finalized scores of all projects proposed both by all Kacamatan and Dinas. Rakorbang Kabupaten was held on 2 to 5 July 2003, where all stakeholders discussed to set priorities based on the scoring sheets prepared by the steering committee. Based on the discussion, scores for some projects were changed. In the original plan, before the Rakorbang Province, Post-Rakorbang Kabupaten was scheduled to finalize the priority list of Kabupaten. However, it was not possible, since Rakorbang Province was held just three days after the Rakorbang Kabupaten (8 to 9 July 2003), although Rakorbang Province was originally scheduled on 10 July Planning Schedule: SE MOHA No.050/987/SJ set an earlier local planning calendar: 1) Musbangdes (last two weeks of April); 2) UDKP (by the first week of May); and 3) Rakorbang (Pre-Rakorbang by third week of May; Rakorbang by the second week of June; and Post-Rakorbang sometime before finalizing local budget). This earlier planning schedule intends closer linkages between planning and budgeting at local level. However, as local officials mentioned, it become much more difficult to reflect financial conditions into the plan, since earlier planning calendar makes it more difficult to get budget information of higher levels of government. 17. Block Transfers to Kacamatan and Desa: To make public services more responsible to people s needs, Lombok Tengah government has started distributing a block grant to villages since FY2001. In the past two years (FY2001 and FY2002), the funds allocated to each village were Rp. 10 million and Rp. 12 million, respectively. In FY2003, the amount drastically increased to Rp. 50 million. In addition, the government introduced the similar grant to sub-districts to support development activities at village level. The transferred grant needs to be allocated to development activities (60 percent) and routine activities (40 percent) at both levels, however, allocation within the two categories can be determined at village and sub-district discretions. II. BUDGETING PROCESS AND BUDGETS 18. Decentralization has changed regional financial management practices including budgeting one. The vertical accountability was replaced by the horizontal accountability, which requires further stakeholder involvement. However, there are many regions which have not ready to implement the new budgeting practice (PP No. 105/2000 and Kepmen MOHA No.29/2002), which stipulates that regions need to adopt performance based budgeting (Annex 3). Budgeting Process in Lombok Tengah 19. Budgeting process in Lombok Tengah has not yet drastically changed: 1) in September, finance office (Bagian Keuangan) with revenue office (Dispenda), prepares revenue estimates for the coming fiscal year. Dispenda takes a responsibility to prepare local own revenue projections. All local offices (Dinas, Badan, Kantor) are requested to write down their budget proposals both for development and routine expenses; 2) in the early October, proposals from all spending units are assessed by Bagian Keuangan (routine expenses) and BAPPEDA (development expenses), based on fund availability and priorities set at Rakorbang meeting; 3) in the early November, local budget team (Komite Anggaran) reviews both revenue and expenditure programs to finalize budget proposal (RAPBD) for approval by Bupati; 4) in last half of November, the executive deliver RAPBD to local parliament (DPRD); and 5) by the end of December, DPRD 6

7 finalizes local budget (APBD). Approved local budget is legalized by issuing local law (Perda). 20. However, Lombok Tengah could not finalize its budgets by the end of December due mainly to the delayed approvals of higher level governments budgets. FY2003 central and provincial budgets were approved by respective legislatives in December As a result, Lombok Tengah could not finalize its FY2003 budget before the fiscal year started: RAPBD was submitted to DPRD in the early March 2003, and it was approved by DPRD at the end of March One of difficulties Lombok Tengah has been facing is lack of information of deconcentration funds. Since deoncentration funds are allocated from central line ministries to respective Dinas via provincial Dinas, local planning board (BAPPNDA) can not get information on deconcentration funds, which is highly required for local budgeting processes. BAPPEDA contacted with local Dinas and also provincial BAPPEDA to get the information. However, due to slow information flow from higher levels of government, BAPPEDA could not receive information even after DPRD approved APBD. 21. Performance Budgeting: Lombok Tengah has shifted to the new budget format consisting of revenue, expenditure, and financing components since FY2003 budget, which is stipulated in Kepmen MOHA No.29/2002 (Annex 4). However, as local officials mentioned, the government is still facing difficulties in setting up clear performance targets. Although indicative targets have been set for infrastructure sector, those for social sectors have not yet been well prepared. Dinas and BAPPEDA utilize logical framework and try to produce performance indicators for social sectors. Local officials referred to the extreme difficulties to set quantitative, not qualitative, indicative targets for some social sectors to adopt performance based budgeting 4. Lombok Tengah Budgets Table 3 Summary of Lombok Tengah Budgets Before Decentralization After Decentralization (Rp. billion) FY99/00 FY2000 # Ave. Share (%) FY2001 FY2002 Ave. Share (%) Revenues Previous Year's Surplus Local Own Revenues Balanced Funds Tax Sharing Non-Tax Sharing DAU/(SDO until FY2000) DAK/(INPRES until FY2000) Local Gov. Borrowing Others Expenditures Routine Expenditure Personnel Expenditure Non-Personnel Expenditure Development Expenditure Note : # annualized. Source : APBDs Lombok Tengah Local officials mentioned that accounting system is still based on old practice, i.e., cash basis, due mainly to lack of local staff capacities and unclear central guideline. There are two different accounting systems proposed by MOHA and MOF. Local officials are still confusing which system they have to adopt. 7

8 22. Revenues: Table 3 summarizes budgets of Lombok Tengah before and after the decentralization. In FY2001, total revenues jumped up by 94 percent from FY2000, which means that its budget became about twice bigger than that before the decentralization. As many other regions, increased central transfer, in particular general purpose grant (DAU), is the driving factor explaining this drastic revenue increase. Although the government is recognized the importance of revenue mobilizing efforts, its local own revenues (PAD) is still limited to less than five percent of total revenues. As a result, its dependency on central transfers still remains as high as more than 90 percent. 23. DAU calculation data for FY2003 (PKPD, MOF) also shows the limited revenue mobilization capacity of Lombok Tengah. In the DAU calculation system, potential local revenue, which can be derived as a result of simple regression analysis, is taken into account as a part of local fiscal capacity. Lombok Tengah s actual local revenues remained about 60 percent of its potential revenues in FY2001 (Figure 2). Figure 2 Local Own Revenues and DAU allocations: Lombok Tengah FY2001 PAD PAD (Local Own Revenues) 1000 PAD= *GRDPS R= Rp. billion ) 50% of Potential PAD 2) PPh+PBB+BPHTB 3) 75% of SDA FY2003 DAU DAU Fiscal Gap: Lombok Tengah Actual: Rp billion Potential: Rp billion GRDPS (Service Sector GDP) 0 Fiscal Capacity Fiscal Needs Fiscal Capacity + DAU Source: PKPD, MOF. DAU FY2003 data. 24. Local Own Revenues (PAD): Local own revenues consists of four categories: 1) local taxes; 2) user charges and levies; 3) profits from local own enterprises; 4) other local revenues. In FY2002 budget, local taxes and user charges and levies take up 32 percent, and 23 percent of total local own revenues, respectively (Table 4). There are six local taxes (including newly created inter-island commodity trade tax), however, hotel and restaurant tax and street light tax take up about 75 percent of local tax revenues. There are as many as 16 user charges and levies (including newly introduced user charge on irrigation), however, about 80 percent of total revenues comes from health services, identification card, market and local products. Other 12 user charges and levies make minor contributions to local budget. User charges and levies are managed and collected by respective technical bureaus. In FY2002, health bureau (Dinas Kesehatan) raised the tariff for rural clinic (Puskesmas), a biggest component of user charge and levy revenues, from Rp. 2,000 to Rp. 5, As of the end July 2003, Lombok Tengah considers introducing the following new taxes or levies: 1) leges (administrative fees for obtaining licenses, such as business license and other services to people); 2) kartu ternak (livestock card); 3) diving activity; 8

9 and 4) fishing. Dispenda (revenue office) officials mentioned that, Dispenda fully considers revenue potential and expected tax administration costs including socialization ones for new taxes and levies. If expected cost is bigger that 50 percent of potential revenue, Dispanda will not create the tax or levy. A key constraint is lack of qualified officials. Head of Dispenda mentioned that the capacity of Dispenda officials is very limited: only five personnel have background in economics, nine in administration, two in agriculture, and two in laws. Local Own Revenue (PAD) Table 4 Local Own Revenues: FY2002 (Rp. million) (%) (Rp. million) (%) (Rp. million) (%) 12, , , Ref. PAD share to Total Revenue: 4.2 % 1 Hotels and Restaurants 1, Health Services 1, Street Light 1, Identfication Card Mining (Category C) Market Advertisement Local Products Entertainment Irrigation Source : APBD Lombok Tengah FY Inter Island Commodity Trade Local Taxes of which User Charges and Levies Other 11 Levies Sub-Total Sub-Total Inter-Island Commodity Trade Tax: New local tax and levy law (Law No.34/2000) allows regional governments to create new taxes as long as they do not violate some criteria subject to the central government s approval. Lombok Tengah government has introduced a tax on inter-island commodity trade (export) in coordination with neighboring local governments (Kab Lombok Barat, Kab Lombok Timur, Kota Mataram) in FY2001 (Perda No.5/2001). Main targets of the tax are law materials and agricultural commodities. Tax rate is set at five percent of basic prices of target commodities, which are determined together with the neighboring local governments, and are written as joint local laws (Perda No.11/2000, No.15/2001, No.317/2001, and No.434/2001). This joint decrees contained details of target commodities, basic prices, and types or units. There are six main categories: 1) forest products (11 commodities); 2) another forest products (37 commodities); 3) mining products (63 commodities); 4) cattle/animal products (23 commodities); 5) industrial products (20 commodities); and 6) other natural products (10 commodities). The basic prices can be adjusted continually based on their market prices. This tax is clearly against the local tax criteria. Local government officials acknowledged that the tax, which was once prohibited by Law No.18/1997, was re-introduced in FY Lombok Tengah government received letters from PKPD, MOF (18 December 2002) and MOHA (14 February 2003) requesting cancellation of the tax. In response to the letters, the government, with other three local governments, sent two letters to the central government (8 January 2003 and 14 March 2003) inquiring reasons of the central government s decision. Dispenda officials mentioned that the proposed tax is not against the local tax criteria, since its major target is law materials or agricultural commodities, which are not covered by value added tax (VAT). Further, the officials insisted that Dispenda has not received any complaint against the tax, and that it is not clear why the central government reached the decision after more than one year after Lombok Tengah submitted the proposal to the central government. Dispenda officials mentioned that the tax is still collected in FY2003 (since the Perda has not yet cancelled by DPRD), and that there still remains a possibility that the tax will be collected in FY

10 28. Transfers of Property-related Taxes: Currently, total 53 staff work in Dispenda, of which 17 staff for local tax, 14 staff for local levies, and 12 staff for central property tax (Land and Building Tax or PBB, and Transfer of Land and Building Tax or BPHTB), and 10 staff for others. Staffs for central property taxes works mainly to encourage local people to pay the taxes. As for possible transfers of PBB and BPHTB to local governments, Dispenda official mentioned that expected administration cost is too high to accept the transfers. Finance office (Bagian Keuangan) staffs also mentioned that they do not desire the transfers. If the taxes will be transferred, expected revenues Lombok Tengah can collect will be smaller than the amounts it enjoys under the current sharing systems. Under the current system, 65 percent of central share of PBB and all central share of BPHTB are equally allocated to all local governments irrespective of its derivations. Local governments with weak tax bases for PBB and BPHTB, like Lombok Tengah, enjoy larger revenues due to this arrangement. 29. Expenditures: Total expenditures also drastically jumped in FY2001. Routine budgets take up about 70 percent, in which personnel expenditures makes up more than 80 percent. It mainly comes from the transfers of former central government officials. A major part of DAU was allocated to personnel expenses. Moreover, in FY2001, specifically in June or July, the central government announced civil servant salary raise (retroactive to January 2001). This decision worsened the financial condition of Lombok Tengah where the local budget could not afford to pay the increase in salary. The measures taken by the government was to postpone a number of development projects which were budgeted in FY2001. In this way, the funds initially allocated to the projects were then diverted to expected increase of salary payments. However, since the government could receive contingent funds from the central government later, postponement of the projects was cancelled. Sector Figure 3 Sectoral Allocations of Development Expenditures (%) (%) FY2002 FY2001 FY2000 FY99/00 security & public order politics & information civil servants law science & technology religion dwelling health demograpghy & welfare education environment regional development tourism mining & energy transportation trade & cooperatives manpower water resource agriculture industry Source: APBDs Lombok Tengah. 10

11 30. In FY2001, a share of development expenditures increased to 31 percent from 24 percent in FY2000. Allocated amount to development expenses was about 2.5 times bigger than that in the previous year. This means that, at least in the budgeting stage, there was an enough fund for development activities, even though government officials repeatedly complained the lack of revenues to finance increased personnel expenditures. Sectoral allocation of development expenditures was also drastically changed. In FY2001, allocations to trade, education, and health sectors, which are priority sectors of the government, became nine times, 2.8 times, and 6.7 times bigger than those in FY2000 (Figure 3). 31. DAK Projects: As of the end of July 2003, Lombok Tengah government has not yet initiated any DAK project. Major reasons are: 1) delayed approval of FY2003 Budget by DPRD; and 2) lack of understanding of DAK project management procedures by local officials. Since Dinas staffs had worked so long for DIP (central) projects, they need do understand details of DAK project management system. Bagian Keuagan is now preparing a new local law (Perda) regarding management of DAK projects for discussion at DPRD. Counterpart funds (10 percent of total project costs) for FY2003 DAK are budgeted in FY2003 budget. III. ORGANIZATIONAL STRUCTURE AND TRANSFER OF PERSONNEL 32. With the implementation of decentralization, about two million of central officials were transferred to regions in FY2001. Since the transfer was conducted without any needs assessments at local level, local governments faced difficulties both in staff allocation within the government organization, and also in financing additional salary payments for them. Since local governments were not allowed to lay them off, they were required to reorganize their organizational structure to accommodate the personnel. In many regions, local governments established new technical bureaus (Dinas and Badan) just to absorb the transferred staff. Lombok Tengah 33. Staff Transfer: Lombok Tengah received 7,530 former central staffs consisting of 6,630 school teachers and 1,170 non-school teachers (Figure 4). After the decentralization, education backgrounds of local officials becomes: 205 workers with primary background, 468 workers with junior high background, 2,792 with senior high background, 898 workers with three-year diploma background, 2,366 workers with twoyear diploma background, 78 workers with one-year diploma background, 2,094 with undergraduate degree, and 25 workers with graduate degree. 34. After the decentralization, total structural posts (Echelon) increased from 959 to 1,030: consisting of one post for Echelon II/A, 20 posts for Echelon II/B, 121 posts for Echelon III/A, 12 posts for Echelon III/B, 523 posts for Echelon IV/A, 339 posts for Echelon IV/B and 14 posts for Echelon V/B. In addition, most Echelon positions of local officials were upgraded, which resulted higher budget allocation to personnel expenses in the local budget (Table 5). 35. Reorganization: Lombok Tengah carried out reorganization based on the government regulations (PP) No.84/2000 concerning regional government organizations in FY2000 (Perda No.11/2000). The government currently consists of: 1) regional secretary (Sekda) which comprises local secretary, three assistants and 10 units (Bagian); while the secretary of local council (DPRD) includes secretary of council and three units; 2) 14 local agencies (housings and settlement, regional infrastructure (Prasarana), health, agriculture and livestock, forest and estate, industry and commerce, communications, lands, cooperative and small and medium enterprises, tourism, education and culture, social and labour, fisheries and sea, population migration and community empowerment, 11

12 and regional revenue); and 3) local technical institutions consist of monitoring board, regional planning board, office for capital investment and living environment control, office of nation unity and community protection, office for mining and energy, regional public hospital (RSUD), and organizations at sub-district (Kecamatan) and village (Kelurahan) levels Figure 4 Staff Transfers to Lombok Tengah Non-School Teachers Total Transfer: 7530 School Teachers Before Decentralization After Decentralization Source: BPD Lombok Tengah. Echelon Level II III IV V Table 5 Echelon Positions and Benefits Major Posts A Sekda ,000 2,500,000 B Kepala Dinas/Bagian ,000 1,500,000 A Kepala Kantor , ,000 B Camat , ,000 A Kepala KCD , ,000 B , ,000 A ,000 eliminated B ,000 eliminated Total 959 1,030 Source: BPD Lombok Tengah. Staff Numbers Before Decent. After Decent. Position Benefits Before Decent. After Decent. 36. To provide better public services to people, Lombok Tengah government created a new institution called KCD (sub-district office of technical bureaus). Lombok Tengah is spread out geographically that requires the government move closer to their people. While there were only one KCD in each sub-district in education and agricultural sectors before the decentralization, currently almost all technical bureaus (Dinas) have KCD in every Kecamatan (Annex 5). In general, heads of KCD are the transferred personnel, while local personnel are promoted as section heads (Kepala Seksi). This also intends to enable more effective absorption of local aspiration by putting local officials close to people. However, it is not clear that KCD can pick up local demands effectively, since KCD belong to Dinas. Kepala KCD and all other staffs are still Kabupaten officials. 12

13 37. PP No.8/2003: In FY2003, the central government replaced PP No.84/2000 with PP No.8/2003, which stipulates that organizational position of local government unit: Dinas, Badan, Kantor etc., needs to be determined based on the scoring system. Units with lower scores can not exist as separate institutions or need to be downgraded to lower positions. Lombok Tengah government is currently working on how to restructure its organization again in line with the new regulation. Local organization office (BPD) has already finished first scoring exercise for all units based on the criteria set by the regulation. However, there is a strong complaint at local level that the new regulation does not consider local priorities at all. For example, in Lombok Tengah, agriculture is the main sector where the people depend on their lives, but, under the new regulation, current farming and husbandry agency (Dinas Pertanian dan Prternakan) should be downgraded to Kantor. 38. Lombok Tengah government has 14 Dinas, three Badan, and three Kantor, which numbers are below the maximums set by PP No.8/2003. However, scoring results show that only three Dinas, whose scores are more than 750, can maintain its current position, and others should be downgraded to Kantor. Since Echelon position of Kepala (head) Kantor is III/A, below II/B of Kepala Dinas, reorganization based on the new regulation will require drastic adjustment of Echelon structure within the government. Staff level also can be affected by the reorganization. Local officials mentioned that the reorganization should be finished by the end of FY2004. Table 6 Local Government Organization Institution/ Office Sekretaris Daerah Dinas Badan Kantor Kecamatan Kelurahan Perda Lombok Tengah No.11/ Assistants to District Secretary 3-4 Parts (Bagian) 3-4 Sub-Parts (Sub-Bagian) 14 Dinas 1 Administration (Bagian Tata Usaha (TU) Max 5 Sub-Dinas Sub-Administration: each Max 4 Sub-Bagian Sub-Dinas Max 4 Sections 1 TU Max 4 Sub-Bagian Max 5 Bidang each Bidang Max 4 Sub-Bidang 1 Sub-Bagian TU Max 4 Seksi (Section) 1 Sekretaris Max 5 Seksi a group of functional position (kelompok jabatan fungsional) 1 Sekretaris Kelurahan Max 3 Seksi a group of functional position PP No.8/2003 Max 3 Assistants to District Secretary Max 4 Parts Max 3 Sub-Parts Max 14 Dinas 1 Administration (TU) 4 Bidang Sub-Administration: each Max 2 Sub-Bagian Each Bidang Max 2 Sub-Bidang 1 TU Max 2 Sub-Bagian Max 3 Bidang each Bidang Max 2 Sub-Bidang 1 Sub-Bagian TU Max 3 Seksi 1 Sekretaris Max 5 Seksi kelompok jabatan fungsional 1 Sekretaris Kelurahan Max 4 Seksi 39. Other problems the new regulation can create include: 1) lesser number of position (jabatan) will influence around 40 percent of the total position (1,064). For example, Dinas and Badan have currently four sections (Seksi), while the new regulation allows only two sections; 2) KCD (sub-district office of technical bureaus) is not mentioned in PP No.8/2003, so their status are not clear. Lombok Tengah seems to consider that KCD will 13

14 survive as technical unit in sub-districts (Unit Pelaksana Teknis or UPT) 5 ; 3) once KCD serve as UTP at sub-district level, structure and functions of Camat (head of sub-district) needs to be changed to enable better management of KCD; 4) a problem can arise at Echelon III and IV levels. For example, in the new system, Echelon position of Camat will be upgraded to III/A from the current III/B. In addition, while Echelon IV/B is allocated at KCD level (as head of section) under the current system, the new regulation stipulates that Echelon IV/B should be at village level; 5) coordination with neighboring local governments will become difficult if same functions will be managed by different level of Echelon (Dinas or Kantor); 6) downgrading of Dinas and Badan will make it difficult to select new heads of Kantor. There are more than 100 personnel in Echelon III and IV, while the maximum number of position will be less than 30. Health Sector V. SERVICE DELIVERIES 40. Improvement of local health condition is a key challenge for Lombok Tengah. After the decentralization, health sector becomes one of top priority areas in its development strategy. Health service programs get broader supports within the government and also local societies. Decentralization provided a very good opportunity to better serve the people because Dinas Kesehatan (health agency) knows exactly what kinds of program and service that should be delivered to people. 41. Coordination within health sector becomes better than before decentralization. Kepala Dinas (agency head) has regular monthly meeting with Ketua Puskesmas (head of rural clinic). In the meeting, Ketua Puskesmas can convey their concerns and requests directly to Kepala Dinas (there is not KCD in health sector). The Dinas develops a reliable mobile Puskesmas and increase facilities in Puskesmas Pembantu (sub-rural clinic) to enable them to provide first stage helps and beds for patients stay. However, coordination with neighboring Dinas has not yet well developed. A more active encouragement by provincial Dinas is required to this end. Table 7 Medical Staff Shortage: Medical Staff to Population Ratio 2002 Kacamatan Doctor Medical Specialist Dentist Total Ratios Praya Praya Tengah Praya Barat Praya Barat Daya Praya Timur Janapria Kopang Batukliang Batukliang Utara Pringgarata Jonggat Pujut Lombok Tengah NTB Province Indonesia Note : Ratio=medical staff/population*100,000. Source : Dinas Kesehatan Lombok Tengah. 5 PP No.8/2003 allows that lembaga teknis to establish UPT. 14

15 42. Medical Staff Shortage: However, Lombok Tengah is still facing a serious shortage of medical staffs both in quantity and quality. Medical staff to population ratio is far below the provincial and national levels (Table 7). In FY2003, the central government provides seven additional staffs, and Lombok Tengah recruited five additional doctors with its own funds. Now, all Puskesmas have two doctors. Ideally, each Puskesmas should have three doctors: one to give medical services to patients, one for administrative jobs, and one for the mobile health service. In addition, Lombok Tengah needs dentists and special doctors. The Dinas promotes coordination with a university (in Denpasar, Bali) to recruit fresh graduate special doctors. The government also provides additional benefits such as house and vehicle to attract doctors. 43. Medicine Procurements: Procurement system of medicines becomes better than before decentralization. Prior to decentralization, medicine supply was managed by the central government, and, if the local government needs some specific medicines, they were required to prepare a list of what medicines they need. Medicines provided by the central government included some unneeded ones, and sometimes reached their expired dates. After the decentralization, Lombok Tengah government introduced tendering system in medicine procurement in FY2001. However, prices of medicine increased due to collusion by suppliers. Moreover, it took five months to procure medicines. In FY2003, the Dinas decided to make a contract with one supplier that can meet the requirement prices set by the central government. To reduce KKN (collusion, corruption, and nepotism) with the Dinas, the Dinas is not allowed to involve the selection process of the supplier. Bupati established a special committee consisting of Sekda, BAPPEDA, Kepala Dinas Kimpraswill (public service), manpower, transmigration, and family planning office (previously BKKBN) to evaluate suppliers. Based on the discussion at the committee, the government made a contract with one supplier. Since standard prices of medicine can be provided from the central ministry every year, the Dinas can check the offer prices from the contractor. 44. Tariff Hike: Rural clinic (Puskesmas) tariff was increased from Rp. 2,000 to Rp. 5,000 from April 2002, which includes necessary medicine costs. This tariff increase was intended to raise local revenues. In Lombok Tengah, 64 percent of population have JPS (social safety net) card and another six percent has ASKES (medical insurance for government employees), which implies that only 30 percent of population actually pay the tariff. Number of patient visited Puskesmas dropped by 30 percent just after the tariff hike, but now the number has returned to normal level. Further, the Dinas has not yet received any complaint from local people. 45. The Dinas is currently promoting merger of Polides (village midwife clinic) and Puskesmas Pembantu (sub-rural clinic). The former mainly targets pregnant women with financial supports from the central government (JPS fund), while the latter covers all other general patients. Sometimes, if pregnant women go to Puskesmas Pembantu, staff advises them to go to Polides. Based on the discussion at the regular monthly meeting, agency head proposed the merger to Bupati. 46. Buku KIA: On the initiative of Bupati, the government is currently encouraging all pregnant women to hold Buku KIA (Maternal and Child Health Handbook), with support by Japan International Cooperation Agency (JICA). A JICA resident expert has stayed for three years for this project. This project is well accepted by local people. 47. DAK: Dinas Kesehatan was informed total amount of FY2003 DAK to health sector in May Currently, agency staff is processing DAK projects. Staff has already checked procedure of DAK projects by reading a guideline from the central government. 15

16 48. SPM: So far, the Dinas still utilizes health service standard from the central ministry. Minimum service standards (SPMs) are still under processing and the Dinas sent its staff for training in Jakarta. Agricultural Sector 49. Reorganization: After decentralization, food farming agency, husbandry agency, and other two related institutions, were merged into farming and husbandry agency (Dinas Pertanian dan Prternakan). The similar reorganization was conducted at provincial level. Several new directorate general posts were created at central level which relate with local farming and husbandry agency. This makes it difficult for local government to coordinate with higher levels of government: coordination system becomes more complex and requires longer time. In addition, coordination with neighboring districts became not easy, since each district has its own structure. Kepala Dinas (agency head) proposed a regular meeting (once every three months) with his counterparts of neighboring local governments to foster inter-regional cooperation. However, Kepala Dinas doubts that such a regular meeting can be realized continuously due to limited supports from provincial Dinas. Coordination within the local government becomes much better, since Bupati (head of local government) initiates morning coffee meeting (once a week), where all heads of technical bureaus are invited, to facilitate inter-bureau coordination. 50. Extension Service: Reorganization after the decentralization created various problems in agricultural sector: 1) under the new organization system, each sub-agency is allowed to have maximum four sections, however, there are some sub-agencies that have heavier tasks compared with other sub-agencies; 2) although agricultural extension service was handled by farming information and guidance office before the reorganization, it was divided into sub-sectors (food, husbandry, farm and fishery). Divided extension service into sub-sectors lengthens service deliveries to farmers. Pooling extension information into one office increase effectiveness of extension service, and further, makes it easy to get budget allocations. 51. The Dinas is facing a serious problem in its funds for extension service. Funds allocated from the central government drastically dropped after the decentralization. The central government only provides the funds, if a local government has institutions such as farming information office or office for food defense. This central policy discriminates regions that do not have those institutions even though they have similar units for extension service. Kepala Dinas mentioned that the central fund transfer is based on the existence of institutions, and not on the functions. This policy is further against the local government initiative to streamline its organizational structure. 52. PP No.8/2003: Kepala Dinas feels that PP No.8/2003 is not consistent with regional autonomy. According to the PP, Dinas whose score is below the required figure should be downgraded to Kantor, even though the Dinas manages priority sector of local government. In Lombok Tengah, more than 60 percent labors work in agriculture, and also a majority of agricultural workers are poor. PP No.8/2003 does not consider local conditions. In addition, there is a possibility that all extension officers will be integrated into one office, separate from the Dinas. Unless a very close coordination with the Dinas is built, quality of extension service delivered to farmers may be worsened since the Dinas s program may not inline with extension office program. 53. People Empowering Program (SPSLT): The Dinas has initiated Sistem Penggaduhan Sapi Lombok Tengah (SPSLT) since FY2000. The program is designed to support farmers by giving them a ready for calving (pregnant) cow. The farmers have to found a group which consists of farmers. The farmer keeps the cow until it will calve and calve will become six months old. After the third month of the calf age, the cow will inseminate such that ready for calving again. At the third month of pregnancy, the cow will be given to the next farmer (member), while the calf is owned by the first farmer. The 16