Indonesia: Better Spending by Local Governments Leads to Better Public Services

Bojonegoro, Indonesia, 27 April 2016 – A sprawling district of 1.2 million people, Bojonegoro is traditionally among the poorest districts of East Java province. But the discovery in 2001 of a huge oil block – the biggest oil discovery in 30 years and possibly the country’s largest oil reserves – is changing Bojonegoro.  By the end of 2016 when production peaks, Bojonegoro may account for 20% of national oil production.

“After our revenues started to increase in recent years, I started to worry that the money would not benefit our citizens,” said Suyoto, Chief of Bojonegoro District and affectionately referred to by residents as Big Brother.  “So I looked for ways to ensure that our spending was on target.  That is how I came to know about the World Bank.”

To spend their revenues better, in November 2014 the Bojonegoro local government began working with the Bank and a number of development partners to try a new approach for improving service delivery. Called RAAP-ID, or Rapid Assessment and Action Plan to Improve Service Delivery, the approach had previously been successful in Latin American countries, such as Colombia and Mexico. The Government of Canada, the European Union, and the Government of Switzerland were involved in the program. 

“Having money is just part of the solution. We should also analyze how we spend the money,” said I Nyoman Sudjana, Head of the Bojonegoro Planning Agency during a recent workshop to evaluate the district’s implementation of RAAP-ID.

Starting with an assessment of conditions in the district, RAAP-ID then analyzes development indicators to determine areas that need improvement. In Bojonegoro, the assessment identified three challenges to public services: the need to improve high school enrollment, high rates of maternal mortality, and the cumbersome processes for business licensing. Having almost universal access to primary and junior high school, Bojonegoro now wants to focus on increasing high school enrollment from the current rate of 70.4%. The maternal mortality rate in the district has dropped below the MDG target, but in 2015 it rose again.

Officials from the district government then worked with specialists, including those from the Bank, on identifying how money should be spent for these three priority public services needs. 

“The most common misuse of revenues by local governments is through corrupt activities and spending it on something not effective,” said Suyoto, who is always enthused when discussing proper spending of the district’s budget. “Sometimes the latter is just as bad because it is legal but the money spent does not improve people’s lives.”

Action plans were developed to map the steps needed to achieve the target, along with an estimated budget and time frame. Early results in health include: a standard operation procedure for emergency and high-risk deliveries, which has saved lives; wider coverage of maternal health care; more trained midwives, leading to better care. A new procedure of business licensing has improved service delivery, cutting processing time to two days from four days.

The central government certainly thinks that similar efforts can be undertaken across Indonesia.

“Bojonegoro’s approach in planning how to spend their money is a good example for other districts. Often local governments use most of their budget for routine spending,” said Gunawan from the Directorate General of Regional Autonomy of the Ministry of Home Affairs. “The evaluation from their district can be used by the ministry to help guide others,” he explained.

Indeed, other districts are showing interest in following suit.

“Bojonegoro has taken action to ensure that their money is well spent” said M. Nur Arifin, Deputy Head of nearby Trenggalek district. “I would be interested to implement the approach in my district.”

Decentralization has allowed districts in Indonesia to have more control over their own resources, but prudent and effective spending has been elusive. For instance, many districts heavily rely on funds from the central government but there are no effective system to monitor and evaluate the accountability its expenditures.

In taking practical steps to improve spending and delivery of services, Bojonegoro is leading by example in ensuring that public services are delivered and that they improve the welfare of communities. 

For more information, please read our blog and press release.