Measuring performance of local governments<\/p>\n
Wolfgang Fengler, Rajiv Sondhi and Bambang Suharnoko, Bali<\/p>\n
Indonesia is one of the more decentralized nations in the
\nworld. Regions are responsible for one-third of all government
\nspending, and half of the development budget. Most spending on
\neducation, health and infrastructure is local, and the regions
\nemploy three-quarters of the civil service. The amount of local
\nresources is likely to increase further.<\/p>\n
The share of the main central government transfer (DAU) will
\nincrease to 26 percent in 2007. Revenues from natural resource
\nare likely to increase due to record high oil and gas prices. On
\ntop of this, international donor agencies are increasingly
\nchanneling their support through local governments and provinces.<\/p>\n
This degree of decentralization is higher than the average in
\ndeveloped countries, and all other East Asian nations, except
\nChina. Indonesia is now so decentralized that for government to
\nwork, decentralization must work. The stakes are high because if
\ndecentralization falters services such as education and health
\ncare would suffer, the gap between the rich and poor may widen,
\nand even the hard-won macroeconomic stability could be
\njeopardized.<\/p>\n
Indonesia's 440 local governments receive most of their
\nresources through the DAU, an unconditional grant from the
\ncentral governments. The DAU is based on needs. It aims to
\nequalize district funds using indicators such as poverty, the
\nsize of the region, population, cost of living and fiscal
\ncapacity.<\/p>\n
From an international perspective, the DAU has a good
\nallocation formula and the fact that poor regions receive
\ndisproportionate per-capita allocation demonstrates this. At the
\nsame time, the DAU still includes a large component for fully
\nfinancing the local civil service wage bill which reduces the
\nimpact of the formula.<\/p>\n
Local governments have received an enormous amount of new
\nresponsibilities in the last years. This increased responsibility
\nalso demands more accountability. So far it has been difficult to
\nmake informed judgments about the quality of local performance
\nand accountability. A credible performance measurement system
\ncould help establish an allocation system that captures needs and
\nperformance. In most high-income countries, financial performance
\nof local governments is measured by rating agencies and these
\nperformance measurement mechanisms create important performance
\npressures.<\/p>\n
Indonesia already has a large number of institutions that
\nprovide ratings and assessments. For instance, the Regional
\nAutonomy Watch (KPPOD) has been measuring the investment climate
\nin almost half of the local governments since 2001. Central
\nBureau of Statistics (BPS), together with UNDP, regularly
\nproduces a Human Development Index (HDI), which allows the public
\nto compare the quality of health and education achievements. In
\naddition, donors such as ADB, USAID and the World Bank have
\ndeveloped their own tools including an in-depth review of local
\ngovernments' Public Financial Management processes and outcomes.<\/p>\n
Still missing is a system of Core Performance Indicators that
\ncover every local government in the country beyond the existing
\nregional and sectoral snapshots. Now is the time to develop and
\nimplement a system that most importantly should be very simple
\nand easy to implement.<\/p>\n
Most mayors and local parliaments have just been elected and
\nafter fours years into decentralization their responsibilities
\nare broadly established -- despite some lack of clarity in the
\nassignment of tasks. Standardized performance measurement would
\nalso allow central and local governments as well as the general
\npublic to monitor the decentralization process, to create peer
\npressure among local government and to make local governments
\neven more responsive to the needs of their citizens.<\/p>\n
The writers are members of World Bank team that facilitated
\nthe workshop \"Strengthening Public Services in Decentralizing
\nIndonesia: Approaches for Measuring Performance of Local
\nGovernments\" which was held at The Patra Bali on August 28-29,
\n2005.<\/p>",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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