Indonesia: North Sulawesi Public Expenditure Analysis Highlights Achievements

March 26, 2012

Manado, March 26, 2012 – The 2011 North Sulawesi Public Expenditure Analysis highlights some impressive achievements in economic performance, public financial management and public service delivery. Since decentralization began, North Sulawesi’ regional GDP has doubled and per capita spending has increased nearly ten-fold. This growth has supported a decrease in poverty from 28% to 9% –  the lowest poverty rate in Eastern Indonesia – and thanks also to excellent literacy rates, North Sulawesi boasts Indonesia’s second highest HDI.

The North Sulawesi Provincial Government and the World Bank today launched the 2011 North Sulawesi Public Expenditure Analysis during the North Sulawesi consultative development planning workshop – or Musrenbang – in Manado. The Public Expenditure Analysis is a North Sulawesi Provincial Government initiative funded by the Canadian International Development Agency and Australian Aid. It is the result of intensive collaboration between Sam Ratulangi University and the World Bank Indonesia team for Public Expenditure Analysis and Capacity Harmonization (PEACH).

During his opening remarks, World Bank Indonesia Country Director Stefan Koeberle noted that “this report highlights some positive developments. However, North Sulawesi’s growth and progress is not yet inclusive. In some districts, unemployment remains high, access to clean water is lagging behind electricity supply and sanitation, and the transportation system requires enhancement to improve access for archipelagic districts in particular.”

The report found that investment in infrastructure is needed to improve productivity and stimulate growth, as well as balance out disparities among the districts. Although North Sulawesi is moving in the right direction on infrastructure spending, with allocations for infrastructure increasing four-fold in the past five years, this is becoming increasingly important given growth in the trade and services sector and as a way of improving the productivity of the agriculture sector.

Although the allocation of public funds – or the spending mix – is improving overall, there remains room for improvement. Capital spending as a proportion of overall spending is increasing but expenditure on personnel still consumes the largest proportion of public spending. Sub-national governments need to work to improve the efficiency of spending on the bureaucracy in order to increase allocations for vital infrastructure and service delivery.

On this point, the Country Director highlighted that “we are particularly pleased to hear that the provincial government has committed to reducing staff travel costs by 20% this financial year and will allocate these funds to district governments in the form of financial assistance for specific health, education and infrastructure activities. This travel efficiency is an excellent step in the right direction.”

During the event, the Country Director congratulated the North Sulawesi Provincial Government for achieving unqualified audit reports in two consecutive years but noted that “there is more work to be done on asset management, reporting and the regional regulatory framework as we still see significant disparities among the districts in terms of public financial management capacity, especially planning and budgeting.”

To this end, the PEACH program is working with Gadjah Mada University to deliver a program of technical assistance to support North Sulawesi’s efforts to achieve even better standards of public financial management – this technical assistance focuses on evidence-based planning, budgeting and monitoring and evaluation; outcomes mapping; and asset management.

The World Bank’s Public Expenditure Analysis and Capacity Harmonization (PEACH) program supports committed local governments to increase the effectiveness of their development planning, budgeting and budget implementation. PEACH uses simple analytical tools to evaluate and identify ways to improve planning and budgeting processes. These findings are then translated into policy changes or capacity building activities.


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