Indonesia Gets Funding Boost to Improve Delivery of Public Services

September 30, 2014

US$$500 million in additional financing to improve local government accountability in infrastructure project implementation

WASHINGTON, September 30, 2014 – The World Bank's Board of Executive Directors approved  US$500 million in additional financing for Indonesia’s Local Government and Decentralization Project, which aims to improve local governments’ accountability in implementing infrastructure projects.

“Government accountability has a direct impact on the quality of services that communities receive: the more accountable, the better the services. This project aims to increase the efficiency and effectiveness of local government spending on vital infrastructure projects, such as roads, irrigation networks, clean water services and sanitation,” said World Bank Country Director for Indonesia, Rodrigo Chaves

When Indonesia began decentralization a decade ago, responsibility of delivering services shifted from the central to the local government. Some districts and cities have flourished, but others have suffered a decline in the quality of services.

The project responds to the government’s request to scale up the project to 30 of Indonesia's 34 provinces.  The four exceptions are provinces that have special autonomy status: Aceh, Papua, West Papua, and Indonesia’s capital, Jakarta. This additional financing is the second phase of a project that began in 2010

“The key to the Project is linking together performance-based incentives, strong monitoring and targeted capacity building to leverage improvements in the delivery of services at the local level. Making decentralization work in a complex country such as Indonesia needs this type of ‘nuts and bolts’ support to improve the quality of public spending,” said Taimur Samad, World Bank Senior Urban Specialist

The project will be carried out through improved financial and technical reporting, and verifications of services delivered as funded by the annual Special Allocation Funds (DAK) grant, as well as contributions from local government

The project also includes capacity building activities for financial management, procurement, investment planning and maintenance, safeguards management, and ensuring accountability

Transparency and accountability is a key characteristic of the project, which includes third party verification of local government performance through Indonesia’s national internal auditor (BPKP) and a web-based reporting system for eligible expenditures.

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