Kecamatan Development Program Brief Overview M a y 2002
Introduction The Kecamatan Development Program (KDP) is a Government of Indonesia effort to alleviate poverty in rural communities and improve local governance. KDP began as a three-year program in August 1998 through a USD 280 million World Bank loan (IBRD loan number 4330-IND) to finance village-level development projects. The Program is targeted towards the poorest kecamatans (sub-districts) in Indonesia. KDP aims to foster more democratic and participatory forms of local governance by strengthening kecamatan and village capacities and improving community participation in development. KDP provides block grants of approximately USD 43,000 to USD 125,000 per year directly to kecamatans and villages for small-scale infrastructure, social, and economic activities. The Program works with village councils (Lembaga Ketahanan Masyarakat Desa, LKMD) and kecamatan development fora (Unit Daerah Kerja Pembangunan, UDKP). Most importantly, KDP emphasizes the principles of community participation, especially for women and poor villagers, transparency, competition for funds, and sustainability. All KDP activities aim at allowing villagers to make their own choices about the kinds of projects that they need and want. KDP Background and Scope KDP began in 1998, at a time of enormous political and economic turmoil in Indonesia. While the country had made significant progress for decades on poverty reduction, the economic crisis reversed dramatically these gains as millions of rural poor fell below the poverty threshold and significant numbers of people -- as high as an additional 30 percent of the population -- increased their vulnerability and risk to poverty. It was during this uncertain period of political transition and economic crisis that KDP was born, partially as a response to the crisis and to the perceived increase in poverty levels especially in the rural areas. KDP involved a rapid scale-up, initially covering 20 provinces and 501 kecamatans across the country, 60 percent off of Java, and all with a high incidence of poverty. In its third year of implementation, KDP almost doubled its kecamatan coverage, working in 22 provinces, 984 kecamatans and over 15,000 villages, encompassing a population of some 35 million persons. KDP works in almost one out of every four villages in the country. Table 1: KDP coverage vs. Total in Indonesia Year Three of KDP Total in Indonesia 22 provinces 32 provinces 130 districts 341 districts 984 kecamatans 4,048 kecamatans 15,481 villages 69,168 villages approximately 35 million persons 210 million persons 1
KDP maintains a strong poverty focus. Kecamatans, sub-districts that contain an average of 20 to 25 villages and as many as 100,000 people, are selected from a master poverty register using national statistics (PODES and Susenas criteria). The provinces and districts then review these lists and refine the selection, ranking the kecamatans by local perceptions of poverty. Poverty in Indonesia is primarily a rural phenomenon and KDP coverage reflects this. About 85 percent of the population in KDP kecamatan live in rural areas, compared with 60 percent overall. Several of the smaller, poorer provinces have an especially high density of KDP investments. For example, over 64 percent of the Nusa Tenggara Timur (NTT) population live in kecamatans that are included in KDP. Southeast Sulawesi, Maluku, and Aceh all have 40 percent or more of their populations living in KDP kecamatan (See Table 2). By contrast, the larger and typically wealthier provinces of Java have only 12 to 20 percent of their populations living in KDP coverage areas. In terms of poverty levels, in 1999, the poverty rates were approximately 22 percent of the population for non-kdp kecamatan, compared to 30 percent for KDP areas. Table 2: Population Percentages in KDP Kecamatan by Province Province % Population KDP Province % Population KDP Kecamatan Kecamatan Nusa Tenggara Timur 64.2 South Sumatra 20.5 (NTT) Southeast Sulawesi 45.5 Central Java 19.6 Maluku 43.3 West Sumatra 19.1 Aceh 40.0 Riau 18.4 Central Sulawesi 35.9 Yogyakarta 18.2 Lampung 34.2 South Sulawesi 14.7 North Sulawesi 28.2 West Java 13.7 Irian Jaya 24.5 North Sumatra 13.0 South Kalimantan 24.2 East Java 12.8 Central Kalimantan 22.3 Source: Evaluating KDP Impacts on Community Organization and Household Welfare: Power and Sample Size Calculation for Feasibility Study, Demographic Institute, Faculty of Economics, University of Indonesia, Final Report May 2001. The Ministry of Home Affairs, Department of Community Development, manages KDP and teams of facilitators and consultants from village to national levels provide technical support and training. KDP is very much Indonesian-led. The Program has received minimal foreign technical assistance, compromising only 0.6 percent of the total program budget. Village facilitators are elected in a public forum by the community; local consultants are predominantly from the province where they work. Project decisions are made locally and village committees are responsible for procurement, financial management and project implementation and oversight. Infrastructure projects use local building materials, suppliers, and labor. Indonesian civil society organizations such as association of journalists and NGOs based in the provinces provide independent monitoring of the Program. 2
KDP Benefits Seventy-three percent of KDP funds went towards productive infrastructure activities such as roads, bridges, irrigation and drainage, clean water supply and other rural infrastructure. For Years One and Two, Rps. 656 billion or USD 73 million was spent on infrastructure activities across Indonesia. Poverty benefits from village investments have been large. In Years One and Two, an estimated 1.4 million and 2.3 million Type of Activities Funded in Years 1 & 2 of KDP Roads Bridges Water Irrigation/Drainage Sanitation Facilities Markets Other Infrastructure Trading Animal Husbandry Plantation Fishery Loan & Saving Other Economic Infrastructure Activities (73%) Roads 43.1% Other Economic 0.1% Irrigation/Drainage 7.3% Trading 5.0% villagers respectively earned short-term employment through the construction of KDP labor-intensive infrastructure. The majority of these workers (69 percent) were the poorer segments of the community as identified through village participatory wealth ranking. Over 15 million workdays were generated through KDP rural infrastructure. Technical evaluations have found that the general quality of KDP infrastructure is good to very good, especially for bridges and market structures. An August 2001 survey of 167 villages across 18 KDP provinces revealed that over 83 percent of community respondents were satisfied with their KDP infrastructure. Ninety-six percent of the respondents stated that the quality of the infrastructure was the same or better than infrastructure built through other government programs. Bridges 6.8% Loan & Saving 11.5% Water 8.2% Other Infrastructure 4.8% Plantation 2.9% Fishery 1.6% Sanitation Facilities 1.4% Markets 1.4% Economic Activities (27%) KDP INFRASTRUCTURE OUTPUTS YEARS 1-2 Over 7,000 roads (10,800 kms) built 2,130 bridges 2,370 water supply and sanitation units 3,200 irrigation schemes 15 million workdays generated Majority of laborers (68%) were poorer members of the community 3
KDP-Funded Bridge in Bonjol, West Sumatera KDP infrastructure is also more cost effective than other government programs. KDP infrastructure is less expensive by as much as 23 percent - compared to similar governmentfunded infrastructure. This was due to savings in the costs of labor, materials, equipment (using manual labor instead of heavy equipment), and technical assistance. Despite the poverty of the participating villages, community voluntary contributions in cash and kind are also significant, averaging about 17 percent of the total project costs; variance around this figure is very high and in some areas, community contributions match or exceed the total amounts received from the project. Field reports and the August 2001 technical study reveal that 86 percent of Year One infrastructure was being maintained, of which 94 percent was done by Operation and Maintenance teams (34 percent) or community members (60 percent), on a periodic or regular basis. Is KDP infrastructure a good investment? Generally, the nature of small scale rural infrastructure projects is such that the marginal productivity of capital can be very high and only relatively small injections of capital are needed to release large incremental benefits. The Economic Internal Rate of Return (EIRR) for the main infrastructure types range from 14.8 percent- 83.3 percent, with payback periods for roads and bridges ranging from one to three years: Table 3: Economic Internal Rate of Return for KDP Infrastructure Projects EIRR Water Supply 83.3% Bridges 58.7% Roads 32.8% Irrigation/Drainage 14.8% Weighted Average 60.1% 4
KDP Loan for Women s Cow Breeding Project in South Sumatera Virtually all the benefits have been captured by villagers who report the following direct benefits: improved access to neighboring villages, local markets, schools and other public facilities decrease in travel and transport costs especially for agricultural commodities time savings in travel particularly with roads and new bridge construction increase in agricultural production due to irrigation projects opening up of businesses and transport services due to new roads, bridges, and piers for water and sanitation projects, improved water quality, ease of access to clean water supply, decreased costs of buying water and improved health conditions. Time savings due to new water supply systems are particularly significant, representing potentially an estimated 50 million person days saved. For economic activities, twenty-five percent of KDP funds have gone towards economic loan activities for small businesses, trade, agriculture, loan and savings groups (simpan pinjam), and home cottage industries. For Years One and Two, Rps 243 billion or USD 27.4 million was spent on economic loans. Over 318,000 persons (or 20,060 groups) in Year Two received economic loans with the majority (72 percent) being the poorer members of the community. Loan repayment however is a major problem and the program is currently reviewing ways to improve the loan portfolio. KDP is now redesigning the credit component for KDP Phase II. Community Participation and Empowerment One of the main principles of KDP is community participation. Field data over the last three years reveals significant progress. Village and hamlet meetings to socialize and plan KDP activities show strong attendance and participation of villagers, with women generally comprising 30 to 43 percent of all participants. The majority (some 55 to 61 percent) of participants in KDP sub-village and village level meetings are the poorer members of the community. There is also increasing evidence of improved local governance and community 5
empowerment practices in many KDP areas. For example, villagers are holding local government officials more accountable and demanding greater transparency within other government-sponsored programs. Villagers are transferring KDP procedures and financial management skills to other development projects. All these changes signal incremental progress in empowering communities and improving the interest and role of local government in responding to community needs. KDP Phase II (2002-2005) The second phase of KDP will run for four years, from January 2002 to December 2005 with an additional USD320.8 million loan from the World Bank. KDP-2 is very much consistent with the Government of Indonesia s current poverty strategy to empower the poor to help themselves; raise their incomes through job creation and higher productivity; and improve government basic services. In general the objectives of KDP-2 is to accelerate poverty alleviation based upon community self-independency by improving villagers capacity building and strengthen local formal and informal institutions, within villages and between villages and support a broad construction program of social and economic infrastructure in accordance to villagers development needs. Specifically, KDP-2 objectives are to: (1) improve community participation in development decisions making in the process of planning, implementation, monitoring and sustainability; (2) improve the role of women in development decisions making; (3) making efficient use of local resources and potential for development; (4) support participatory planning and development management in villages; and (5) support in economic, education and/or health infrastuctures based upon community selft-identified needs. The second phase adheres to the same fundamental principles found to be workable and effective under KDP-1, that is, taking side of the poors, transparency, participation, decentralization, competition and technical and social facilitation and assistance drawn from the Indonesian private sector and NGOs. KDP-2 builds upon the achievements and lessons learned from the first phase. It focuses more strongly on broad-based capacity building within villages and between villages and the local government. There will be much greater emphasis upon technical training and capacity building of local facilitators and villagers in the areas of development planning and management. Secondly, the village planning cycle will be extended to provide a broader, more long-term picture of village needs. District line agencies, NGOs and private investors will join in collective planning discussions to look at overall service provision and village priorities. An important aspect of KDP-2 will be the stronger involvement of the district level, in step with the Government s overall strategy to decentralize. Agencies at the district level will participate more actively in socialization work, monitoring of activities and providing technical assistance. For example, there will be joint monitoring exercises that involve district administration and district parliaments making on-site visits to KDP sites along with community leaders. KDP-2 will also offer a matching grant program for districts. KDP-2 will provide 100 percent funding for the technical assistance for districts which agree to follow KDP procedures and allocate the grant amount from their internal budgetary resources. GOI will also authorize a partial subsidy on the grant amount for the poorer districts. Some 250 to 300 kecamatans are expected to join this district matching grant program. KDP-2 will provide greater opportunities for local government to buy-in and provide cost-effective infrastructure and economic activities to millions of villagers. 6