Shifting from Transactions to Investing in Institutions

Transcription

1 Shifting from Transactions to Investing in Institutions Indonesia s Governance and Anti Corruption Strategy September

2 Overview A. Indonesia s Governance Environment B. Country Office Agenda and Guiding Principles C. The GAC Challenge and our Program D. GAC Pillars E. Ideas to make a difference F. Feedback session 2

3 A Indonesia s Governance Environment Stronger Foundations are Established The Asian Crisis triggered a break with Indonesia s authoritarian past Constitutional reforms were introduced to address failed checks and balances: The power of the presidency was limited through direct elections, and term limits, Parliament and the Supreme Audit Agency were strengthened, a Constitutional Court was introduced, and the judicial system was moved under the Supreme court the role of the military in political affairs was reduced and separated from the police, Regional frustrations were addressed through a big bang decentralization, Massive transfers of resources were put in place with responsibilities for most public services moved to the regional level. Direct elections were introduced at province and district levels and local parliaments were strengthened Powerful accountability agencies were set up to address corruption The KPK, a Financial Intelligence Unit, and a Judicial Commission were put in place Indonesia s fiscal foundations were reformed to prevent recurring crises A new State Finance, Treasury and Audit Laws were enacted with the Ministry of Finance reorganized Press Freedoms were expanded to improve accountability The taking away of press licenses was prohibited, the subversion law was repealed and oversight was moved to an independent organization. 3

4 A Indonesia s Governance Environment Reform progress has been consolidated A full Electoral Cycle has been completed Two direct presidential elections and a full cycle of elections at the regional level have been relatively free of violence with frequent losses for incumbents, Successes at accountability agencies are changing mindsets The KPK has gained a solid reputation With other agencies (AGO) now feeling pressure for reform with all of this now reinforced by a Freedom of Information Law, Key reforms are now moving beyond legal regulatory phases New, more transparent, budget, treasury and tax processes are rolling out The press and social media are playing an increasing role Press freedom, social media and an empowered civil society are reinforcing democratic trends and playing an increasing role on hot button issues And a new generation of social programs is improving governance 4

5 A Indonesia s Governance Environment But old problems remain Indonesia is a large, ethnically and geographically diverse country, making governance reforms difficult and long term Lagging bureaucracy reforms are affecting Indonesia s ability to deliver services and improve governance: Poorly designed institutions (from the Soeharto era) do not provide effective coordination Misaligned incentives for government workers provide little or no consequences for success or failure (even to show up), while entrenched interests perpetuate rent seeking through purchases of positions and patronage, Capacity problems persist leaving the government dangerously susceptible to a culture of personal enrichment. Existing players retain market power and use it to influence political processes Resource driven growth and high commodity prices compound governance challenges with profits feeding rent seeking. Inequality is rising and social pressures increasing. Economic success in high rent sectors, coupled with poor job creation and weak service provision is increasing inequality 5

6 A Indonesia s Governance Environment And new Challenges are Rising Money politics is on the increase New parties and political competition have increased the role of money politics leading to budget capture and risking gains on budget transparency. Political parties lack clear sources of financing making them susceptible to capture for those seeking access to power or money. Decentralization and poor organizational design are fragmenting decision making Political reforms, poor organizational design and regional autonomy have created a fragmented, decentralized decision making process at the central and regional levels. Reforms to improve the Rule of Law and increase access to justice are lagging Improvement in the oversight of the Justice system reform is very slow and the average citizen mistrusts the Police. 6

7 A Indonesia s Governance Environment Bottom line -- broad based reform although less than desired

8 B Governance and Anti-Corruption Country Office Agenda and Principles Our Agenda Our Principles Investing in Institutions Leveraging Government Programs Focusing on Results Transparency in decisionmaking on use and oversight of funds Accountability clear and explicit mechanisms for oversight and consequences Participation a focus on stakeholders (women as well as men), in decision making and monitoring 8

9 B Governance and Anti-Corruption Engagements, Selectivity and Partnerships The Bank s GAC strategy is built on engagements: Long standing programs in CDD, PFM, Education and Infrastructure have developed deep relationships with partners in the Government and society more broadly. These programs leverage global best practices and learning, supported by staff with strong skills and an understanding of local context. Working with development partners complements our efforts and supports our work, On PFM, we are complemented by IMF work on tax policy, with our efforts supported by EU, Dutch and Swiss resources Service delivery in the health sector is supported by USAID, and our support is assisted by the Australian Government, the Dutch the EU, and US In the accountability area the Australian, US and UNODC work with the police, while the Dutch, Australian and US government are supporting reforms in the Supreme Court and Attorney General s Office, and our efforts are supported by the Dutch government Programs to improve competiveness are assisted by many donors while DFID and Norway work on climate change and our support is financed by the Dutch, the EU, and the Swiss. 9

10 B Governance and Anti-Corruption Integration with the Broader Bank GAC Agenda Indonesia s GAC work also draws on international best practice and knowledge sharing The regional GAC hub provides feedback and guidance to the country team including on the impact of GAC implementation. We participate in Regional GAC sharing as organized by the Governance Hub through workshops, video conferences and information exchanges. And on working with INT through cooperation on investigations and prevention With the Investigation unit to facilitate cooperation with Indonesian law enforcement agencies With the Prevention Service Unit to improve project designs, learning from experience and investigations And through knowledge sharing at GAC clinics. 10

11 C Governance and Anti-Corruption The GAC challenge and our Program The GAC environment, our program and principles suggest four GAC pillars The Budget Process An unreformed civil service and a resilient rent seeking culture, Institutions with inappropriate design, incentives and capacity Lead to poor budget allocation, limited implementation capacity and low absorption Public Service Delivery Shortfalls in public services, including critical infrastructure and Poor to non-existent public feedback mechanisms Prevent Indonesia from reaching development goals Accountable Institutions A political structure that fosters money politics and drives corruption and A lack of transparency Puts reforms and welfare gains at risk Competitiveness Ineffective mechanisms to deal with market power, Governance concerns around natural resources and Unsustainable extraction, Prevent Indonesia from achieving its growth potential while creating environmental and Climate Change risks Best addressed by 1 Increasing Transparency & Efficiency in PFM 2 Increasing the Efficiency of Public Service Delivery 3 Strengthening Checks and Balances 4 Promoting Open, Transparent Competition 11

12 D Pillar One Increasing Transparency and Efficiency in PFM Governance Aspects Professionalized, efficient civil service Improved sub national budgeting Clean and efficient tax administration Transparent, comprehensive and open budget Selected World Bank Interventions Support to GOI Bureaucracy Reform -- The Bank supports the VP office, the MOF and Ministry of Administration Reform on Bureaucracy Reform. Support for better and more transparent budgeting through Public Expenditure Reviews (PERs) and PEFA -- PERs provide empirically based analysis on spending and outcomes for central, local and sectoral budgets (including by gender) while the periodic PEFAs enable decision makers to understand system strengths and weaknesses. Support for PFM reforms Support for improved budgeting and treasury operations at the MoF, Planning Agency and Parliament is provided through GFMRAP, while PINTAR supports reform at the tax office on ICT, business processes and HR, and the DAK supports transparent financing of infrastructure by local governments. 12

13 D Pillar Two Increasing Efficiency of Public Service Delivery Governance Aspects Better public service delivery Strengthening fiduciary systems and oversight Civil society participation in monitoring public services and independent media Transparent and competitive procurement systems Selected World Bank Interventions A focus on service delivery through key Government programs in poverty reduction (PNPM), education (BOS), and infrastructure -- Bank supported projects are designed to mainstream governance and citizen participation (especially female citizens). PNPM empowers communities while delivering improved services to the poor. BOS is focused on improved school based management with grants designed to deliver better education through stakeholder engagement and improved governance. WINRIP encourages national road transparency through remote supervision of national roads. Support for enhanced procurement -- The Bank provides organizational support and capacity building (including at the Local level), assessments of E-Procurement systems and through regulatory assistance on decrees, SBDs and a new procurement law. Anti Corruption Action Plans (ACAP) In its project s the Bank works to improve corruption prevention including through complaint handling aimed at detecting irregularities in operations and service delivery. As the Bank supports key Government programs ACAP engagements will be better leveraged at program and ministry levels. Greater transparency on the web Bank projects are required to publish budget information on websites Feedback on governance and service delivery The Bank provides support to KPK s efforts to engage local governments in better measuring customer satisfaction 13

14 D Pillar Three Strengthening Checks and Balances Governance Aspects Selected World Bank Interventions Independent and effective oversight bodies Prudential regulation and supervision of banking sector to combat money laundering Independent, efficient, accessible justice systems Support to the Anti Corruption Commission (KPK) and Audit (BPK, BPKP) -- The Bank provides analytic and advisory support to the KPK, on pubic officials asset declarations and on the KPK s Parliament Institution Building program. The support includes TA to BPK on strategic planning, and TA to BPKP and Local Government Audit agencies to increase audit coverage and quality around the PNPM program. Support to Attorney General s Office and on asset recovery -- The Bank provides analytic and advisory support to the AGO on procurement and forensic accounting, and analysis on the implementation of anti corruption laws and regulations and efforts to expedite bureaucracy reform. The Bank, through the StAR Initiative, is providing analytic and advisory support to the AGO on corruption related asset recovery cases. Support for access to justice through J4P 14

15 D Pillar Four Promoting Open, Transparent Competition Governance Aspects Selected World Bank Interventions Transparent information on natural resources and related revenues Competitive markets and effective regulatory frameworks Prudential regulation and supervision of banking sector to combat money laundering Support for Indonesia s Climate Change and REDD+ and EITI initiatives -The Bank is supporting the development of a number of Forestry and Climate Change initiatives aimed at rewarding reduced deforestation, and transparency in the Resource Sector. Support for trade and investment competitiveness -- Support to the Ministry of Trade (and others) is aimed at improving the National Single Window for international trade, business licensing and competition in service sector competition The Bank supported the Financial Sector Assessment Program in Indonesia (FSAP) -- The Bank (with the Fund) supported the Indonesian FSAP to improve Banking supervision and reduce systemic risks in the aftermath of the Global Economic Crisis follow up is being developed to support insurance and capital market oversight. 15

16 E Governance and Anti-Corruption Ideas to Make a Difference A Core GAC Team A high level (CLT) cross sector GAC team will develop strategy and report on evolving developments to the CD The shift: From transactions to investing in institutions With GAC issues identified before project inception Improved GAC Analysis A GAC stock taking matrix is being instituted to make sure that GAC is integrated into projects effectively -- Education A Focus on Political Economy With engagements on key programs increased focus is on understanding Political Economy (AAA, diagnostics) Reinforced engagements with CSOs and the media Focusing on the Bank analysis and program, and especially on improved transparency Better Measuring What We Do From entry we are insisting on more clarity and candor about what we expect and what we deliver Staying on top of the GAC Agenda Periodic governance reviews and workshops where the country team addresses program weaknesses and anticipates challenges. And getting out in front on emerging issues For example, an increased focus on natural resources issues 16

17 B Governance and Anti-Corruption Conclusion In a complicated Governance environment Where reform momentum is Meeting entrenched resistance As an election approaches. The World Bank in Jakarta is building on a strong program Based around engagements, best practice and a strong staff Working together with partners and Integrated with the GAC Hub and INT To deliver assistance to Indonesia in four key areas Increasing Transparency and Efficiency in PFM Increasing Efficiency of Public Service Delivery Strengthening Checks and Balances Promoting Open, Transparent Competition Through an innovative GAC program designed to Integrate Political Economy concerns Better capture GAC concerns from the outset And get out in front on arising issues. 17

18 Summary In a complicated governance environment The World Bank has a strong, integrated program Focused around four pillars designed to address key GAC concerns in our areas of competency Increasing Transparency and Efficiency in PFM Increasing Efficiency of Public Service Delivery Strengthening Checks and Balances Promoting Open, Transparent Competition With innovative interventions that should improve our understanding of political economy, and engage earlier and more effectively around GAC issues. 18

19 F Feedback session Thank you 19