HABITATINTL. Vol. 15.No.4.p~. 3-26,1991. 0197-3975/91$5.00 + 0.00
Printed in Great Britain. Pergamon Press Ltd
Urban Infrastructure Development
1in Indonesia
FLORIAN STEINBERG’
Institute for Housing Studies, Rotterdam, The Netherlands
BACKGROUND
Indonesia presently has an estimated population of around 179 million inhabitants, of whom approximately 28% (50 million) reside in urban areas.
With an expected annual urban growth rate of 4%, this figure is expected to become 76 million or 36% of the total population by the year 2000. Such population growth will put heavy pressures on the urban infrastructure. The present provisions for water supply, solid waste management, drainage, roads, flood control, housing, kampung improvement, etc. are not sufficient any more (see Fig. 1).
Government activity in the provision of infrastructure in Indonesia has for a long time been a sectoral one: different government agencies providing different (sometimes overlapping) components of infrastructure services. However, gradually the need for a more integrated approach to urban infrastructure has grown.
The constraints and challenges of the present stage of urban development, particularly of the large and metropolitan cities in Indonesia, can be character- ised as follows:
l rapid urbanisation;
l lack of appropriate services;
l separation of services provision into sectoral, non-integrated projects;
l limited national as well as local resources;
80
0 1979 1984 1989 1994 1999
0 Urban population m Below poverty line
Without safe drinking water m Without adequate sanitation
Fig. I. Urban growth and urban services in Indonesia. Source: UN Development Programme (1989).
’ Adviser to the Ministry of Public Works’ IUIDP Training Programme in Jakarta.
3
4 Florian Steinberg l weak local government administrations;
l centralised system of bureaucracy:
l inappropriate system of ‘static’ urban planning, based on models developed for industrial, more tightly administered societies.
The recently completed study - National Urban Development Strategy (NUDS) - focused particularly on the efficiency of current urban growth patterns and on the cost-effectiveness of public sector urban development expenditures. While it recognised that no radical departures from past growth patterns are required in the future. it concluded that the effectiveness of Government of Indonesia programmes in support of urban development programmes could be increased.
The study suggested that the government should concentrate on 508 identified strategic urban areas. This led to conclusions that:
l urban migration should be motivated by expanding economic opportunities in cities and towns, thus a policy for balanced addition of population and economic activities to existing centres, supported through income-generation programmes and provision of basic amenities is required;
l physical development techniques should be improved through incremental approaches to services provision and guided land development, through a sensitive matching of needs and resources;
o economic development should be promoted through infrastructure develop- ment, in addition to the basic needs provisions, with the possibility of creating additional resources for cross-subsidisation of costly services.
The implication of this policy for an integrated approach of urban services delivery recognised (particularly) private households’ efforts in provision of urban services, particularly water supply, solid waste management. human waste management and kampung improvement, as effective delivery channels com- plementary to government programmes in these sectors.
THE INTEGRATED URBAN INFRASTRUCTURE DEVELOPMENT PROGRAMME (IUIDP)
Since the beginning of Indonesia’s fourth Five-Year Plan (Repelita IV) there has been a growing awareness of the relatively low utilisation of local government resources in the development of urban infrastructure. while with declining revenues from oil production, the central government will barely be able to meet the total costs of future infrastructure expenditures. Rapid urban growth makes it not only necessary to satisfy present levels of infrastructure needs and those of the annual addition of 2.2 million persons per year. but also to improve the quality of infrastructure to attain the necessary level for the period of development ‘take off’ planned for the sixth Five-Year Plan (Repelita VI, 1994- 1999).
In the World Bank’s Urban Services Sector Report of 1984, it was esti- mated that the total government expenditures for all basic infrastructure services should be about Rp 1.5 trillion per album (in 1988 prices) to meet the assumed growth needs and backlogs at minimal levels of servicing. This amount is more than double the investment level achieved during Repelita IV (1984- 1989).
Having these perspectives in mind, the Government of Indonesia has initiated since 1985 the Integrated Urban Infrastructure Development Programme (IUIDP) which aims at overcoming the following problems:
l centrally administered/planned infrastructure provision did not always suf- ficiently reflect local needs and was often inadequately operated and maintained by local governments (and local communities);
Urban Infrastructure Development in Indonesia 5
l infrastructure programmes of central, provincial and local government showed many duplications of efforts, hence resulting in an inefficient use of limited resources;
l overdependence on central government grant funding for many elements of urban infrastructure which could be largely self-financing (see Padmopranoto, 1987; Suselo, 1987).
Based on the earlier experiences gained in the well-known Kampung Improve- ment Programme (KIP), which was the first large-scale integrated infrastructure provision programme at neighbourhood level, IUIDP expands this approach into a city-wide urban improvement and urban (infrastructure) development programme. The new IUIDP hence changes past practices and an administration which centralised power and funds unduly. The introduction of an integrated approach to planning, management and allocation of available resources - as outlined in the Policies for Urban Development in Indonesia of 1987 and in the subsequent action plan - focuses on the following principles:
l development of (low-cost) urban infrastructure; its operation and mainten- ance is, in principle, within the authority and responsibility of the local governments (TK II), with assistance and guidance from provincial (TK I) as well as central government levels;
l planning, programming and identification of investment priorities for urban (infrastructure) development activities will continue to be improved through a decentralised, ‘bottom-up’ procedure, in which local (TK II) government has major responsibilities in formulation, implementation, and operation and maintenance (O&M) of programmes that reflect the local needs as well as local constraints;
l in order to develop government responsibilities in the IUIDP process, there needs to be further strengthening of the local government’s capability to assess and mobilise local resources and to optimise the use of available funds;
l in accordance with the principles of decentralisation of urban infrastructure responsibilities, the central government needs to improve (and reform) the financing systems for the urban infrastructure financing;
l the capability of provincial (TK I) and local (TK II) government’s staff and institutions to execute urban development activities more effectively, in the context of strengthened roles and responsibilities, will be enhanced by institutional development and by training activities through a coordinated programme of local government manpower development;
l coordination and consultation between the various agencies and levels of government (central, provincial, local) involved in the development of urban infrastructure and services need to be strengthened to provide the facilitating conditions for programme preparation (including technical assistance from higher government levels), programme appraisal, negotiations on budgetary contributions (e.g., central government grants vs loans) and programme implementation and for review and formulation of future sector policy recommendations (see Tim Koordinasi Pembangunan Perkotaan, 1987).
The integration of planning and programming for IUIDP (Fig. 2) is presented in a multi-year (5-7 years), ‘medium-term’ IUIDP investment plan (Programme Jungka Menengah, PJM). which relates population trends, strategic urban planning decisions, infrastructure needs and prioritised infrastructure develop- ment projects to:
(1) available/mobiliseable local resources (as preconditions for ‘matching’
grant finance of central government to local government);
(2) programme-specific grants and local borrowings with resources from central and provincial governments through proceeds of tax sharing arrange- ments with higher government levels;
(3) block grants from central government;
6 Norian Steinberg
I
t I Rehmmary delv@l t+
Feawblhty stGd4es
+ Fmel mult+year trwesmwnt pcgramme
(PJMI
F1g. 2. The process of medium-term IUIDP invesrmenr planning (KIM formulation). Notes:
LIDA P = Local lnstiturional Developmenl Action Plan; RIAP = Rn’erzue Improremenr Action Plan. Source: Sutmuller 11989).
(4) the institutional capacity to implement and later operate and maintain the integrated programme.
The IUIDP process is structured in the following principal steps:
(1) local governments (TK II) start with the preparation of a so-called IUIDP Development Assessment Plan (IDAP) as a spatial reference for the subsequent multi-year infrastructure investment plan (PJM); the spatial analysis of the respective urban areas (Kubupaten, counties; Kotamadya, municipalities) identifies urban growth trends and directions, existing infrastructural deficien- cies and medium-term needs, rough cost estimates and suggestions for a financial plan;
Urban Infrastructure Development in Indonesia 7
(2) the (draft) final multi-year investment plan (PJM) includes technical and financial feasibility studies and financial and economic justifications - based on the principle of affordability - of the sub-projects. as well as of the overall programme; this (draft) final PJM estimates the resource requirements. draws up a municipal finance development action plan (RIAP) and an institutional development action plan (LIDAP) for the implementation of the infrastructural development programme (this programme formulation process is in many cases - such as IUIDP - still a new programming and implementation approach, supported by technical assistance (TA) consultants or by the offices of the next highest provincial government level);
(3) through the ‘bottom-up’ process, the proposed PJM is forwarded to the provincial government level for appraisal and approval of its technical, financial and economic, and institutional aspects; on the basis of its PJM the local government also prepares annual programme slices which become the basis for the annual budget requests from the various sources of funding (Inpres and DIP central government grants, APBD I provincial budget allocation, and national or international loans), which are supplemented by the local revenue budget (APBD II consisting mainly of local and property taxes);
(4) the local governments’ budget requests are compiled at provincial government level for provincial budget packages and appraised at the provincial (and national) government levels. In a further step, the provincial programme proposals are forwarded to the Directorate General for Human Settlements (Ciptu Karya), Ministry of Public Works, for technical screening, and passed on for review to the National Development Planning Board (Buppenas), to the Ministry of Home Affairs and the Ministry of Finance to arrange the inclusion in central government budgets and foreign assistance and/or loan financing packages.
In general central government plays a supervisory, technical advisory and monitoring role; it assists provincial governments in obtaining foreign (loan) financing and later monitors the progress of programme execution.
The IUIDP (Figs 3 and 4) has covered (up until now) eight’ major Ciptu Kuryu services components:
drinking water;
sewerage/human waste;
solid waste;
drainage/flood control;
urban roads;
housing A: KIP (Kumpung Improvement Programme), MIIP (Market Infrastructure Improvement Programme), urban home improvement, core housing/sites-and-services schemes;
housing B: urban renewal, urban land provision/guided land development (GLD), public housing, rental housing;
spatial urban planning.
A clear picture of the fund allocation by urban sub-sectors cannot be given for the national scale, because local situations and needs create some variations, but preliminary estimates suggest that funding might, on a national scale, be allocated between sub-sectors as shown in Table 1. With further development and consolidation of the IUIDP, the gross amounts of provincial (and national) allocations and their appropriate distribution among sub-sectors will be possible.
‘Other compilations of the IUIDP components may list: (1) urban planning; (2) drinking water; (3) drainage; (4) sewerage/human waste; (5) solid waste; (6) flood control; (7) housing; (8) KIP; (9) MIIP; (10) rental housing; (11) urban renewal; (12) new town development; (13) urban roads (Tkn Koordinasi Pembangunan Perkotaan, 1989).
8 Florian Steinberg
l~ntifi~tion of cities for
IUIDP
Review of city master
Lj
plansc
Drinking water Review of
water resources
Review of network conditions
Review of management
Estimate of needs
Estimate of financial
needs
+
Rain water
Review of network conditions
Review of nanagement
EstLr?te
needs
Estimate of financial
needs
flooding
Review of flooding conditions
Estion;ate
needs
Estimate of financial
needs
t
Solid waste
Review of solid waste conditions
Review of nanagement
Estimate of needs
Estimate of financial
needs
Sewerage
Review of sewerage conditions
Review of management
EstiTte
needs
EstF
financial needs
Urban roads Review of
traffic system
Review of network conditions
Review of compietenes
Estimate of needs
Estimate of financial
needs
t
Hwsing
Review of infmstfuctun conditions in Kampungs
Retiew of market infrastructure
conditions
Esdz?te
needs
Estimate of finenciai
ftSW&
,
c
.APfogfamme/projects for improvements and
network extensions
Fig. 3. The process of medium-term IWDP investment planning. Source: Sutmuller (1988).
(Continued opposite. )
Table I. Fund a~locai~on between sub-sectors Water supply
Human waste
Drainage and flood control Solid waste
KIP/MIIP Urban roads Total
31%
6%
17%
9%
7%
30%
100%
Source: Asian Development Bank (1988).
Urban Infrastructure Development in Indonesia 9
Programme/projects for improvement and
network expansion
Estimates of available
l-t
from central resources ovemmentFinancing
Review of local government
financial situation Review of
local government
enterprises Review of xal revenue
and land/
building tax collection Review of
financial potentials of
private sector/
community sector Estimate of
resource needs
Institutional support Review of
traffic system
Review of government institutions
Review of non- governmental
institutions
Review of potentials
for community participations
Estimate of resource
needs
Fig. 3. (Continued.)
Nevertheless, appropriate flexibility in budget allocations is desirable, not only because of difficulty in needs estimates, but also because, through the ‘bottom- up’ planning process, changes in the budget structures would be common and would make specific, prescribed budget allocations by urban area and by sub- sector ineffective.
DECENTRALISATION AND INSTITUTIONAL DEVELOPMENT FOR IUIDP PROGRAMMING AND IMPLEMENTATION
At central government level
In April 1985, the Director-Genera1 of Cipta Karya issued a directive which required all local and provincial governments wishing to participate in any Cipta Karya programme sector to formulate project requests as IUIDP proposals. This
10 Florian Sreinberg
Process Institution involved Time
Fig. 4. Procedure of IUIDP formulation.
requirement was effective for the preparation of projects to be funded during Repelita V (1989-1994).
Other line agencies of the Ministry of Public Works - such as the Directorate Generals for Highways and for Water Resources Development - have also taken steps to decentralise their operations.
For all but the largest cities/metropolitan areas, the primary responsibility for
Urban Infrasducture Developmenr in Indonesia 11
project preparation assistance to local governments is vested in the provincial Ciptu Kuryu offices, which form part of the provincial government structure.
Within the framework provided by the Urban Policy Statement. ail relevant agencies, such as Ministry of Public Works (MPW), Ministry of Home Affairs (MHA), Ministry of Finance (MOF), and the National Development Planning Board (Buppenas), have agreed to work together in an Urban Development Coordination Team (Tim Koordinusi Pembangunun Perkoruun. TKPP) which serves as a forum for policy formulation, for monitoring and review of policy implementation, as a communicator between different ministries concerned with the urban sector and as entry point for donor assistance and respective negotiations.
Among the above mentioned members of TKPP the Ministry of Public Works (MPW) has taken so far the most active, supportive role for IUIDP develop- ments, as IUIDP is typically representing its traditional areas of sectoral infrastructure works.
Within the Ministry of Public Works it is the Directorate-General for Human Settlements (Ciptu Kuryu) who is responsible for major infrastructure components such as low-income shelter and housing projects. KIP, urban services, and urban/regional planning. The Directorate-General for Human Settlements has prime responsibility for local and provincial governments’
activities of IUIDP programme preparation and implementation.
All levels of local and provincial government, including their enterprises (e.g..
local water authorities), are administratively responsible to the Ministry of Home Affairs (MHA), which issues operational instructions and gives guidance for institutional development and local resource mobilisation. Within MHA. the Directorate-General of Regional Development (DG Bungdu) is responsible for support and guidance to local development programmes including the important administration of the Presidential development grants (Inpres) to local govern- ment - a responsibility shared with Buppenus - while on the other hand the Directorate-General for Public Administration and Local Autonomy (DG Poud) has the overall responsibility for local government’s institutional development. The MHA has a major role to play for such a national initiative as decentralisation and an increase in local government responsibilities in the urban sector, while - it has to be stated - MHA’s involvement in the IUIDP process shows a rather slow start due to its own institutional limitations.
The Ministry of Finance (MOF) guides and regulates all forms of taxation at all government levels, and is assigned to review budgets and disbursement thereof nationwide. The Directorate-General of Monetary Affairs (in collabor- ation with Buppenus) influences both domestic and foreign resource flows and financing policies, including grants and loans, which are of particular importance for governmental decentralisation and IUIDP implementation.
The National Development Planning Board (Buppenus) prepares national Five-Year Development Plans (Repelitas), provides policy coordination, re- views the resource allocation for the entire national development programme and prepares annual development budget overviews. In line with these functions, Buppenus is also concerned about urban development matters including IUIDP.
At provincial and local government levels
The most important local government (level II) units in Indonesia are the Kubuputen (counties/regencies) and Kotumudyu (cities), of which exist 247 and 54, respectively. Many Kubuputens consist of several urban areas, and 35 such areas within Kubuputen have been declared ‘administrative cities’ (Kotips) with low institutional status. (The metropolitan city of Jakarta, on the other hand,
12 Florian Steinberg
even contains five Kotamadya areas and represents one of the 27 provinces of Indonesia, i.e., has the status of provincial government.)
With the Presidential Order 14 of 1987 (PP14/87), the roles and responsibilities of the local and provincial governments. with regard to provision and operation and maintenance of urban infrastructure, have been outlined. These roles and responsibilities follow the principle of responsibility-sharing for public works functions among the local, provincial and central government institutions. The basic principle is that local governments should be (or become) fully responsible and accountable for provision of local services. This relationship of local responsibility with guidance, assistance and supervision by higher government is also known as the ‘bottom-up’ and ‘top-down’ planning principle. (Act No.
50974 defines three forms of authority delegation: ‘deconcentration’. ‘decentral- isation’, ‘coadministration’.)
For the planning and programming of IUIDP. interdepartmental teams have been created by governors’ decrees and by Bupati’slWalikota’s (reagents’/
mayors’) decrees. For the upcoming physical tmplementation phase of IUIDP, project management units (PMU’s) and Project Implementation Units (PIUS) are to be established at respective provincial and local government levels.
In many provinces, the provincial IUIDP teams work on a part-time basis with double responsibilities - to their institutional superiors and to the leaders of their IUIDP teams - which have made full-time participation of many local and provincial government staff difficult. particularly for non-public works officials.
This has resulted in an over-representation of public works staff in the programme preparation, despite the inter-sectoral composition of IUIDP teams.
Expertise and experience of provincial staff (other than public works staff) with urban infrastructure development is rather limited. Nevertheless the provincial staff are to assist local governments in the strengthening of their resource mobilisation, in financial management and institutional development. Hence, to overcome these deficiencies at both provincial and local government levels technical assistance consultants have been used widely in the planning and detailed programme formulation of IUIDP multi-year investment plans (PJMs), as well as the local institutional development action plans (LIDAPs) and revenue improvement action plans (RIAPs). The general development of the IUIDP system is described in Figs S-9.
Although urban infrastructure is now. with IUIDP, becoming a solely local government responsibility, nevertheless the central government’s resource contributions (‘matching funds’) are still very dominant. Also, in the field of physical project implementation. local governments. at least the large majority of them. have only the capacity to implement small-scale projects. Larger or more complicated projects, for which they need to attract or hire skilled staff, depend largely on the ability to mobilise or control the necessary financial resources. This situation illustrates, so far. limited control of resources and limited local capabilities and represents present local governments’ dependency on assistance from higher government levels (see McAndrews 1986; Morfit, 1986).
Local governments’ commitment to IUIDP. and its operation and mainten- ance, depend largely on the degree of their responsible participation in the design and physical implementation of the IUIDP programmes and projects.
Strengthening local governments to fulfill their roles in the IUIDP, and the government’s decentralisation strategy, will require stronger local resource mobilisation and institutional development. Hence, a relatively high degree of interim support by central and provincial agencies (especially the Ministry of Public Works) seems unavoidable in order to achieve the longer-term goal of local autonomy. For central agencies, on the other hand, it will be necessary to adopt a less project-implementation-oriented approach, focusing more on
Urban Infrastructure Development in Indonesia 13
PRESIDENT
_._____._
e tMTER DEPAFRMI I._ w-1 _‘I
I
KANWILI
KANDEP
I
KANDEP
I PI
.
1.
-c a .I
ERKOT~N
Fig. 5. Reiat~onsh~p of central provincial and local government in the IUIDP process. Notes:
MPW: Ministry of Public Warks; MOF: Ministry of Finance; BAPPENAS: Natianaf Develop- ment Planning Board; MHA: Ministry of Home Affairs: DPOD: Dewan Pertimbangan Otonomi DaerahlCouncil of Regional Autonomy; IMG: IUIDP Management Group; KANWIL: Bureau of Ministry in the Province (deconcentrated government representation); KANDEP: Bureau of Ministry in the local government; DATI I: Daerah Tingkat IlPravincial Government (Tk. I);
DATI II: Daerah Tingkat IIILacal Government (Tk. II); -: structural connection; . .:
coordinationlfunctional connection; - . - . -: advisory connection. Source: IUIDP Implemen- tation Support Project. INS 881021.
institutional and technical support. Provincial agencies will have a continuous intermediary role between local and central government, reviewing, appraising and packaging local programmes for central grants, loans and donor support;
nevertheless, this role will require back-up and guidance from the central government itself.
MB 1514-n
14
PRESIDENT
I
I I I I I
BAPPENAS
JEL____._ME_-_______.__._-UL-, DPOD
I
I I I
TIM KOORDIN, _---_
KANWIL 1 1 KANWIL 1
!-j BAPPEDA ) Florian Steinberg
La!l
DINAS-DINAS. . . i
. . .
I
BUPATV. . WALIKOTA
.
.
.
i
-
Fig. 6. The institutional system of central, provincial and local government institutions participating in IUIDP. Notes: MPW: Ministry of Public Works; MOF: Ministry of Finance; BAPPENAS:
National Development Planning Board; MHA: Ministry of Home Affairs; DPOD: Dewan Pertimbangan Otonomi DaerahlCouncil of Regional Autonomy; IMG: IUIDP Managemenr Group; IUIDPTF: IUIDP Task Force: KANWIL: Bureau of Ministry in the Province (deconcentrated government represenrarion): KANDEP: Bureau of Minisrry in Ihe local government; BAPPEDA: Regional Development Planning Board; SEKWILDA: Regional Secretariat; DINAS-DINAS: service bureaus; BIRO-BIRO: bureaus; BUPATI: regent;
WALIKOTA: major; BAGIAN-BAGIAN: branch offices; -: structural connection;
. . .: coordinationlfunctional connection; - - - -: advisory connection. Source:
IUIDP Implementation Support Project. INS 88/021.
Urban Infrastructure Development in Indonesia 15
CENTRAL GOVERNMENT
URBAN DEVELOPMENT COODINATION TEAM FKPP)
i._.-.-._.-.-.-.-._.-.-.-._.-._.-i
I I
I
GOVERNORF’ROVlNClAL GOVERNMENTLOCAL GOVERNMENT ffK II) KOTAMADYA
I
WALIKOTA KDH TK II I’ - I;RG IMREMEWAnON UNIT IRUI
1
1
LOCAL GOVERNMENT (TK II) KABUPATEN
II
WALIKOTA KDH TK II ItFig. 7. Proposed organisational structure related to IUIDP project implementation. Source:
Secondary Cities Urban Development Project. West Javalhmatra, June 1989.
Strengthening local capabilities for the planning and management of integrated urban (infrastructure) developments will not only be oriented towards the functioning of government units, but will require additional orinetation towards the private commercial sector, the non-governmental organisations and
I mm- 1-e -3 I I’ DEKLOPMENT --- tilxATEeY RAN I I I I T I I f I I I I I I I I + I I I I I I I 1 I t + PROPEAlY LOCAL TAXES TAXES/CHARGES ROADS/DRAINAGE HOUSINWUPIMIIP SOLIDMUMAN WASTE WATER SUPPLY PERFORMANCE PERFORMANCE EXPENDITURE EXPENDITURE EXPENDITURE EXPENDITURE ACTION Puw ACTION PLAN ’ I PROGRAMME PROGRAMME PROGRAMME PROGRAMME I I I 1’ I I I 1 I 1 t II II I I I I I LOCAl RESOURCES FUNDS ALLOCATION INSTITUTIONAL
II I
4 INTEGRATED PROJECTION TO URBAN DMLOPMENT -w-M --- -1 EXPENDITURE I I 1NFRASTRUCT”RE ACTION RAN I I PROGRAMME I I I I f t I I I m-w I I I I I URBAN INFASTRUCTURE I INVESTMENT FfiOGR#&4E Ir ’
I I I I I I I I I --_ I I I I ANNUAL PROJECT PBoFoSALs ,OUR I I I I I I I I I I I I I PROGRAMME mm _1_1_ -_---__ IMREMENTATION r t f _1_1--- 4 I
I I
_- _-_---_
KANVAL KEUANGAN BUPAlbWALlKOTA KDM
Urban Infrastructure Development in Indonesia 17
I
GOVERNOR I4
__a--- ---m---e-
STEERING COMMlllEE
HEAD OF IUIDP
*
STEERING Head of Bappeda COMMITEE
L
Steering of Formulation t
I I
1 PROGRAMME 1 1 1 RIAP ] ( LIDAP 1
l PubliiWodcOff~
l Phyaiml lnfnstructun Sect&
TECHNICAL TEAM
TECHNICAL TEAM
m/-J-F1 Provincial Branch of MPW
LIDAP
Fig. 9. Organisational structure of the IUIDP teams: provincial and local government level. Note:
RIAP: Revenue Improvement Action Plan; LIDAP: Local Instutional Development Action Plan.
the community sectors whose capacities, according to national policy, shall be incorporated into the integrated approach in urban development.
EMERGING ISSUES OF IUIDP DEVELOPMENT
Urban management and training
Within the framework of the IUIDP, a new perception and practice of ‘urban management’ is presently evolving. It is a stronger concern than ever before for management as a process of intervention, involving negotiations and consensus- finding between institutions and representatives of different urban actors (private and public in general), between the local, provincial and central government levels and the affected public.
‘Urban management’ has been defined as the “activity of attempting to mobilise diverse resources to work in a cooperative manner in the fields of planning, programming and budgeting development and operation and mainten-
18 Florian Sreinberg
ante of a settlement in order to achieve the development objectives of [city]
government” (Forbes Davidson. September 1988).
Present efforts in ‘urban management’ in Indonesia can be seen in three, closely inter-related areas:
l innovative projects and urban development policies in the framework of decentralisation; action-oriented planning with political and participatory support (through community participation and public-private partnership);
l strengthening of institutional capacities and institutional change; reform of legal conditions and administrative procedures;
l supportive manpower development through training (and information/
communication) programmes.
In this context, the government’s new role is perceived as an ‘enabler’, rather than as a provider of all resources and services. With a limited resource or capacity, the followin strategic approaches to urban intervention are suggested:
l to concentrate on t a ose services which can have biggest strategic impact, and those which cannot be organised efficiently by the private sector, community organisations or individuals;
l to give the private sector and the community organisations the appropriate
‘enabling’ framework and structures to contribute on their own for services provision;
l to encourage the private sector - through deregulation, appropriate pricing and fiscal policies. through land management and guided land developments for instance, or through contracting of tasks such as construction, waste collection/disposal etc. - to contribute to the strengthening of services provision.
The importance of this new ‘urban management’ paradigm lies in its effort in building institutional frameworks for integrated urban development, based rather on the strengthening of existing local institutions than on building new institutions; in the decentralisation and encouragement of local control and responsibilities, through local resources and revenues mobilisation, particularly by the incentives for local control over certain revenues and the involvement in the mobilisation of national taxation systems which have positive trade-offs for the central/provincial governments’ support for local IUIDP programme proposals.
Conceptually, it implies that long bureaucratic chains and hierarchies need to be simpler, in order to generate more local discretion and local development autonomy. Rather than implementing centrally-formulated plans, central as well as local urban management needs to shift from ‘planning as control’ to ‘planning as a continuous interactive process’, particularly at the local level, incorporating public and private sectors, the community and non-governmental organisations.
(In a way, the IUIDP planning process might represent an illustration of what has been recently labelled as ‘integrated action planning (IAP)’ giving inputs for investment decisions, incorporating the key technical, resource and institutional implications of implementation, and providing a framework for realistic investment choices (UNCHS, 1989) .)
The formulation of this new face of ‘urban management’ implies, in particular, a new emphasis on training of urban managers and administrators. This training needs to be closely oriented to strengthening local institutions which perform the management roles in the new operational programmes and projects (see Domicelj, 1988; Batley and Devas, 1988, p. 1985; UP2L/P3KT, 1989, 1990).
The necessary institutional development needs and prospects should be drawn up in a Local Institutional Development Action Plan (LIDAP) which outlines the ways of upgrading local institutional and management capabilities. The technical assistance (from higher government levels or external consultants) required in support should be included in the programme to assist local government in implementation, management and operation.
Urban Infrastructure Development in Indonesia 19 Training must be considered as one of the most important long-term areas for the strengthening of urban management capacities, as it is always ‘people’ and professionals who will determine the course and speed of developments.
Without appropriate human resource development, innovative projects and (urban) development policies, as well as institutional changes will remain meaningless and lack the human resource basis necessary to transform innovations into sustainable, regular activities.
There is a serious shortage of skilled technical and management personnel at the local level (and to a certain extent also at the provincial and central level).
Training is necessary to upgrade the planning and other technical skills of staff of the Provincial Public WorkslDinas Cipta Karya and Bappeda TK I and II, where the first step in the intended ‘bottom-up planning’ process is supposed to take place. Necessary fields of training are, among others, (spatial) planning, engineering, finance, management, revenue administration, tax mapping, valuation, tariff setting, tax collection, etc.
To address the situation, Ciptu Kurya has embarked on a training programme for IUIDP to cover local staff from the provincial and local government agencies. This training programme is executed in cooperation with the Ministry of Home Affairs, and will gradually expand over the coming years.
Bottom-up planning for IUIDP
The mechanisms and time schedule for bottom-up planning have been defined by the Minister of Home Affairs Decree No. 4 of 1981 and the Minister of Home Affairs Regulation No. 9 of 1982. Essentially, programme and project formu- lation should be based on the bottom-up planning principle with the following stages:
(1) Musyawaruh Pembangunan Tingkat DesalKelurahan (village meetings), which should be organised by LKMD (Village Resilience Councils) (March- April), involving the Camat (sub-district head) and the Kepala Desa (village head) ;
(2) consultative meetings of Village Resilience Councils (LKMD), held at the sub-district development unit area project (UDKP), organised by Camat and attended also by Buppenda II and the village development division of the district (Kubupaten);
(3) Rupat Koordinasi Pembangunan Daeruh Tingkat II (meeting for develop- ment coordination at district level) organised by Bappeda of the district, involving local government offices and vertical line agencies;
(4) Rapat Koordinasi Pembangunan Daerah Tingkat I (meeting for develop- ment coordination at provincial level), organised by provincial Buppedu, involving all district Bappedu and provincial Dinas, vertical agencies and offices;
(5) Konsultasi Regional Pembangunan, involving all Bappeda TK I in the region, provincial development officers, Bappenas, Ministry of Home Affairs and some other ministries;
(6) Konsultasi Nusionaf Pembangunan (National Development Consultations), involving all Buppeda Tingkat I, provincial development officers, Bappenas, Ministry of Home Affairs and related ministries (see Haskoning/Lidesco, 1988).
In the context of urban policy statements, such as The National Urban Development Strategy (NUDS), The State Policy Guidelines (GBHN) and the Repelita V (1989-l 994)) there are many references to participation of the private sector and of the community in the urban development process. In fact the contribution of the community, the private sector and the non-governmental organisations are described as major inputs for the collaborative effort of human settlements development.
The IUIDP concept, much more than earlier centralised and sectoral
20 Florian Steinberg
development approaches, provides a basis for community participation in urban infrastructure development. But is this opportunity really made use of in IUIDP? The lowest level of decision-making, in the framework of the bottom-up planning approach of the Permendagri no. 9, 1982 (Fig. lo), is the Musbangdes.
as mentioned before. But in the IUIDP decentralisation terminology, the
‘bottom’ is often understood as being the TK II authorities and agencies. So, the
t
RAKORNAS
t
Regional Consultation Meeting
t
c RAKORBANG
Local II A
t t t t
Fig. 10. Development planning. programming and control according to Permendagri no. 9182
Urban infrastructure Development in Indonesia 21 first step down, for IUIDP to really involve the community in programming and planning, would be towards ~~s~~ngdes/villag~ level.
If community participation is to be integrated in the IUIDP approach, it must be integrated into the documents of IUIDP preparation (PJM? LIDAP, RIAP) to achieve a real ‘bottom-up’ participation. As the process of Rakorbang is obviously very long and complicated, it may be necessary to modify and straighten this process for closer integration of local, provincial and central government programme/project preparation.
Local resource mobilisation
Local resource mobilisation is predominantly an issue of municipal finance management. Potential resources exist, but must be collected more adequately.
This also relates to issues of municipal management in revenue administration, tariff setting, tax mapping and tax collection. Local governments’ capacities in the mobilisation of resources are being upgraded through a series of operational measures, including:
l implementation of the property tax (PBB);
l improvement of the local government revenue administration (DISPENDA);
and
o improvement of local water enterprises management and revenue per- formance; as well as
e proposed reforms of the Local Taxes and Charges Law.
Additional initiatives are oriented towards the introduction of more user- charge revenues for urban services (as they are also tried in the health, education and transport sectors). So far, cost-recovery elements have been rather limited (to water services, markets, etc.); cost recovery has been only considered in terms of the overall financial resources available.
Presently local government revenues provide only about 15% of the funding needed for all local development activities; central grants and transfers to local governments make up the remainder. Over the next three years local governments’ revenue improvement measures are expected to at least double local participation to 30%.
Since greater emphasis is laid today on local governments’ share in financing the programme, tariff setting and general revenue collection will play an increasingly important role. The TK II government should be capable of assessing whether the revenue collection system at TK II is efficient. If this is not the case, a Revenue Improvement Action Plan (RIAP) will have to be drawn up.
The RIAP will apply to revenue from local taxes/fees (PADS) and property taxes (PBB). Most important improvements are seen in the iocal tax base by focusing on land/property taxation as a major source of increased revenue.
While it may be desirable to embark on innovative ways of funding, at the same time the conventional ways should be improved, because they still do not give maximum results. On the other hand, unprofitable taxes may be dropped.
New taxes that have a good potential are:
l building permits (IMB);
e entertainment tax;
m hotels and restaurant tax;
l advertisement tax;
l business registration fee;
l street lighting charges;
l betterment tax (pujak khusus).
Services charges that have a good potential are:
l market fees;
l bus and terminal fees;
22 Florian Sreinberg l solid waste disposal charges;
o parking fees.
Improvement of PDAM’s financial management and accounting system may also contribute to better financial management of this biggest type of publicly- owned enterprise.
But encouragement is also given to local revenue-generating projects. Further resource mobilisation comes through the involvement of the private sector.
especially in the further development or running of services. Responsibility for urban development costs is encouraged by making the majority of the projects in the urban areas obtain their funding through loans. At present, the use of loans for urban infrastructure development is still limited in Indonesia but will increase over the coming years.
Clear guidelines are needed with regard to the extent of grants and subsidies that will be applied to various local government public works programmes. Such guidelines will need pragmatically to address the potential of cost recovery within each of the various subsectors, as well as the actual and potential capability of the variously sized and located cities (and of their economic circumstances) to finance the programmes. These guidelines should recognise the greater interests of the government in the sector, over and above the principle of financial cost recovery: urban poverty alleviation, and the economic impact that various subsectoral programmes can generate regardless of financial viability. There are more questions now than answers.
If local governments are to fully mobilise the necessary local resource managements over time, grant policy and formulae will also have to be devised to provide the local governments with appropriate incentives. With such incentives, local governments should strive to improve revenue collection and efficiency of urban services.
Even if the intention of the government is to fully shift the cost of urban development to local governments, it will take a long time before local governments approach a level of financial self-reliance. In the meantime, the grant and loan programme will need to be rationalised (Fig. 11). At present. the government intends to consolidate the existing channels of loan funding for infrastructure investment into a single loan fund, known as the Regional Development Account (RDA), which is expected to be operational in 1990.
The present level (Table 2) of central government grant financing for IUIDP during Repelita V has been fixed through the Guidelines for IUIDP Preparation (TKPP, 1987, 1989).
PubIic-private partnership (PPP). The private sector can invest much more in urban services than it has done so far; it could play a role in low-income housing.
urban public transportation, water supply, urban sanitation, solid waste management and guided land development.
Public-private partnership projects (PPPs) may have different forms of government contributions:
o subsidisation without direct public participation in PPP;
a participation in a PPP with grants;
o participation in a PPP with venture capital;
o participation in the investment of real estate.
As requirements for successful PPPs one can outline the following aspects:
o mutual trust and good relations;
o convergence of interests - capital and profit sharing;
l risks of projects borne by all partners involved;
o commitment, decision-making according to clear procedures;
l a business-like, market-oriented approach of the local government;
0
0
Urban Infrastructure Development in Indonesia 23
CENlRAl GOMRNMENT
PROMNCE “!c
Fig. II. Financialflows for the urban sector. Key and abbreviations: A = donor loans on-let; B = government equity (PMP); C = government loans (RDI); D = inpres pasar loans; E = staff grant (SDO); F = inpres dati I; G = inpres dati II; H = inpres desa; I = sectoral inpres (SD, Kesehatan, Jalan, Penghijauan); J = province grants to lower levels; K = dati II grants to villages;
L = dep PU DIPS; M = dep Perhubungan DIPS; N = depdagri DIPS; PJM = multi-year investment plan; PDAM = regional water supply enterprise; UKP = development works unit TK II; APBN = national budget; APED I = regional expenditure budget at provincial level; APED II = regional budget at Kabupaten (regency) and (Kotamadya) town level. Note: thickness of lines indicates approximate degree of importance of funding source for urban sector (based on Devas,
N., Financing Local Government in Indonesia, p, 251. Athens, Ohio, 1989).
Table 2. Central government grant funding by city size
Assumed share of grant
City size during Repelita V
No. (according to projections for 1990) (1989-1994)
1 Small <1oo,ooo <-IO%
2 Medium 1Oo,ooo-500,ooa <50%
3 Metro-large >500,wo <30%
coordination of policy, actions of different government institutions and government levels;
continuity (see Ministry of Public Works/MVROM, 1988).
Community participation. The non-commercial private sector - the com- munity and non-governmental oranisation (NGO) - can participate more effectively than it has done so far; though the community cannot contribute much cash, it nevertheless can help the government to save large amounts of money; equally NGOs also do not contribute money, but they can assist local government in managing urban development as intermediaries between the community and local government.
Experience shows that, in order to get good results from community participation, the community and NGOs have to be involved in all stages of urban development: planning, programming, implementation, operation and maintenance, and not just in the last two stages, as has often been the case.
Community participation can consist of the following contributions:
(a) in kind:
l planning/ideas,
l labour contributions during project implementation and later operation and maintenance (O&M);
