Papua public expenditure analysis

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized 71552 Papua Public Expenditure Analysis THE WORLD BANK OFFICE JAKARTA Indonesia Stock Exchange Building, Tower II/12-13th Fl. Jl. Jend. Sudirman Kav. 52-53 Jakarta 12910 Tel: (6221) 5299-3000 Fax: (6221) 5299-3111 THE WORLD BANK 1818 H Street N.W. Washington, D.C. 20433 USA Tel: (202) 458-1876 Fax: (202) 522-1557/1560 Email : feedback@worldbank.org Website : www.worldbank.org Printed in October 2011 Papua Public Expenditure Analysis (PEA): Infrastructure for Sustainable Development is a product of staff of the World Bank. The findings, interpretation and conclusion expressed herein do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the government they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denomination and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement of acceptance of such boundaries. Photos by: Papua Public Expenditure Analysis Acknowledgements This 2009 Papua Public Expenditure Analysis was prepared by a joint research team from Cendrawasih University and STIE Ottow-Geisler. The research team was led by Drs. Agustinus Salle, MEc. together with Aaron Simanjuntak, M.Si, Ester Saranga, M.Si, Ida Ayu Purbariani, M.Si, Dr. Yundy Hafiziandra, M.Si, Meiske Sihombing, M.S.E, Transna Putra, M.Si, Paulus Allolayuk, M.Si, Siti Rofingatun, M.M, Robert Marbun, M.A, Charley Michael Bisai, MS, Marsi Adi Purwadi, SE, and Anthonius Citra, SE. This study was part of Stage 2 of the Papua PEACH program led by Wolfgang Fengler, Petrarca Karetji, Amin Subekti, and Caroline Tupamahu. Technical and operational support for the research team was provided by the World Bank’s Adrianus Hendrawan, Erryl Davy, M. Ryan Sanjaya, Bastian Zaini and Cut Dian Agustina. And communications and publication support was provided by the SOfEI (Support Office for Eastern Indonesia) / BaKTI (Eastern Indonesia Knowledge Exchange) team comprising Zusanna Gosal, Sylvia Roselani Samber, Victoria Ngantung and Ichsan Junaed. The team would like to convey its gratitude particularly to the Government of Papua Province for the support, advice and guidance provided during the preparation of this report. The team would like to thank especially Mr. Syafruddin Daerlan, Mr. Max Boekorsjom, Mr. Eddy WP Utomo, and all members of the program management committee (PMC) who coordinated and directed this study. On this occasion, the team would also like to convey its great appreciation for the support and direction from the National Development Planning Agency represented by Dr. Ir. Max H. Pohan, CES, MA, Dr. Ir. Himawan Hariyoga and Dr. Ir. Suprayoga Hadi, MSP. Last but not least, the team would like to convey its gratitude for the financial, intellectual and technical support provided by the Australian Agency for International Development (AusAID) represented by Jeremy Stringer and Patricia Bachtiar. ii Papua Public Expenditure Analysis December 2011 Foreword We warmly welcome the launch of the 2009 Papua Public Expenditure Analysis report (2009 Papua PEA). This report is an update to the first report, which was prepared in 2005. Many of the recommendations from the first report have been implemented and progress has been made in various aspects of sub-national public financial management and basic public services. Nevertheless, reform is still needed in some areas to continue to improve public financial management and basic public service provision. The PEA is a part of the PEACH (Public Expenditure Analysis and Capacity Harmonization) program. This program is an initiative of the Government of Papua to continuously improve its public financial management performance. Consequently, the analysis contained in this report addresses issues that are the region’s main focus. Today, the Government of Papua is trying actively to achieve a “NEW PAPUA” through implementing the following agenda: 1. 2. 3. 4. Restructuring the local government; Developing a prosperous Papua; Developing a safe and peaceful Papua; and Improving and accelerating the development of basic infrastructure and facilities. Through this agenda, the Government of Papua hopes to realize the mandate of special autonomy: 1) to improve Papuans’ welfare; 2) to implement good governance at all levels of government; and 3) to ensure a safe and peaceful environment for the people of Papua. This report is the result of hard work and good collaboration from a number of parties. First, we would like to thank the Center for Economic Studies and Regional Finance (Pusat KEUDA) at Cendrawasih University together with the Papua University Network Group (JPTP) for conducting the study and preparing the report. We also express our appreciation to the PMC, which served as the Government of Papua province’s representative throughout the program, and to the World Bank’s PEACH team and SOfEI / BaKTI for providing technical support for the preparation of the 2009 Papua PEA. We would also like to thank AusAID for funding of the study. Finally, we hope this report will serve as a reference for all government officials in Papua and other parties interested in helping to address the issues faced by the Government of Papua province. In line with the recommendations given in this report, we invite all parties to play a role in the follow-up activities related to public financial management and basic public service provision. It is expected that through this scheme Papua can become an example of effective, efficient, accountable and transparent public financial management to other regions. Jayapura, December 2009 Jayapura, December 2009 Barnabus Suebu, SH Governor, Papua Province Joachim Von Amsberg Director, World Bank Office Jakarta iii Table of Contents Acknowledgements Foreword Table of Contents Executive Summary CHAPTER 1 SOCIO-ECONOMIC PROFILE OF PAPUA PROVINCE 1.1. History of Papua Province 1.2. Geography, Terrain and Demography 1.3. Economic Structure 1.4. Community Welfare CHAPTER 2 REGIONAL REVENUE AND FINANCING 2.1. Overview of Regional Revenue 2.2. Balancing Funds and Special Autonomy Funds 2.3. Own-Source Revenue 2.4. Financing 2.5. Recommendations CHAPTER 3 REGIONAL EXPENDITURE 3.1. Overview of Expenditure 3.2. Expenditure Composition by Sector 3.3. Expenditure Composition by Economic Classification 3.4. Budget Surplus and Deficit 3.5. Expenditure Effectiveness in Papua Province 3.6. Deconcentration and Assistance Task Funds 3.7. Recommendations CHAPTER 4 SECTORAL ANALYSIS 4.1. Education Sector 4.2 Health Sector 4.3. Infrastructure Sector 4.4. Agriculture Sector CHAPTER 5 PUBLIC FINANCIAL MANAGEMENT 5.1. Overview of Public Financial Management in Papua Province 5.2. Planning and Budgeting 5.3. Budget Implementation 5.4. Accounting, Reporting, Internal Oversight and Asset Management 5.5. Recommendations CHAPTER 6 PAPUA PROVINCE SPECIAL AUTONOMY FUNDS 6.1 Special Autonomy of Papua Province 6.2 Developments in Special Autonomy Funds in Papua Province 6.3 Management of the Papua Province Special Autonomy Funds 6.4 Recommendations CHAPTER 7 GOVERNMENTAL INSTITUTIONS AND HUMAN RESOURCES 7.1 Analysis of Organizational Structure 7.2 Civil Service 7.3 Governmental Reform 7.4 Recommendations ANNEXES REFERENCES iv Papua Public Expenditure Analysis December 2011 ii iii iv 9 21 21 22 23 29 33 33 35 37 39 39 41 41 42 43 45 45 47 48 51 51 56 66 74 81 81 81 86 87 89 93 93 94 98 101 103 103 105 109 111 113 121 Table of Contents List of Figures Figure 0.1 Figure 0.2 Figure 0.3 Figure 0.4 Per Capita Regional Expenditure of Districts in Papua Province, 2007 Government of Papua Province Expenditure (APBN and APBD), 2004-2008 Literacy Rate by Age Group in Papua, 2003 and 2007 Per Capita Expenditure Trends for Education (a) and Health (b) in Papua, 2004-2008 Figure 0.5 Comparison of Health Indicators in Papua Province with Several Other Regions in Indonesia, 2000 and 2005 Figure 0.6 Access to Fresh Water and Sanitation Facilities by Income Group Figure 0.7 Per Capita Expenditure on Infrastructure (a) and Agriculture (b) in Papua Figure 0.8 Productivity of Food Crops in Papua, 2004-2007 (in ton/ha) Figure 0.9 Sectoral Allocations of Special Autonomy Funds by the Provincial (a) and District/Municipality (b) Governments in Papua, 2008 Figure 0.10 Number of Civil Servants in Papua Province (a) and Gender Composition (b), 2004- 2007 Figure 1.1 Topographic Map of Papua Figure 1.2 Papua GRDP Structure Based on the 2000 Constant Price, 2000-2007 Figure 1.3 Papua and Indonesia GDP Growth Based on the 2000 Constant Price, 2001-2007 (%) Figure 1.4 Structure of the Labor Force in Papua, 2005-2007 (%) Figure 1.5 Papua’s International and Inter-island Trade Performance, 2003-2007 (in trillion rupiah) Figure 1.6 Structure of Foreign and Domestic Capital Investment in Papua, 2004-2007 (%) Figure 1.7 Inflation in Jayapura Municipality and Indonesia, 2003-2007 (%) Figure 1.8 Growth of Per Capita GRDP Based on 2000 Constant Prices in Papua, 2004-2007 Figure 1.9 Disparity in Per Capita Incomes between Coastal Areas and Remote/Mountainous Areas in Papua, 2003-2007 (million Rupiah) Figure 1.10 Five Largest Poor Populations in Indonesia, 2005-2008 (%) Figure 1.11 Distribution of Poorest Districts in Papua, 2007 Figure 2.1 Figure 2.2 Figure 2.3 Figure 2.4 Figure 2.5 Figure 3.1 Figure 3.2 Figure 3.3 Figure 3.4 Figure 3.5 Figure 3.6 Figure 4.1 Figure 4.2 Figure 4.3 Figure 4.4 10 10 12 12 13 15 15 16 19 19 23 24 24 24 26 26 27 29 31 31 32 Per Capita Fiscal Capacities of All Provinces in Indonesia, 2008 34 Papuan Provincial and District Government Revenues, 2004 – 2008 34 Papuan Provincial and District Balancing Funds, 2004 – 2008 36 Per Capita Regional Revenue of District/Municipality Governments in Papua,2007 36 Papuan Provincial and District Governments PAD, 2004–2008 38 Government Expenditure in Papua (APBD and APBN), 2004–2008 42 Proportion of Spending on Strategic Sectors at the Provincial and District/ Municipality Government Levels in Papua, 2004–2008 44 Proportion of Regional Expenditure by Economic Classification at the Provincial and District/Municipality Levels in Papua, 2004 – 2008 44 Regional Revenue and Expenditure at the Provincial and District Government Level in Papua, 2004–2008 46 Relationship between Expenditure and per Capita Expenditure in Papua, 2004–2008 46 Allocation of Assistance Task Funds in Papua Province, 2005 – 2008 (%) 49 Ratio of Teachers/Classrooms to Students in Papua, 2004-2007 52 Literacy rate by age group in Papua, 2003 and 2007 55 Net Enrolment Rate by Income Group 55 Per Capita Education Expenditure in Papua Province, 2004-2008 55 v Figure 4.5 Education Expenditure by Economic Classification at Provincial and District Levels in Papua Province, 2004-2008 57 Figure 4.6 Health indicators by income group 58 Figure 4.7 Comparison of Health Indicators in Papua Province and Several Other Regions in Indonesia, 2000 and 2005 58 Figure 4.8 Community Health Center, Auxiliary Health Center, Doctor, Midwife and Nurse Ratios in Papua Province, 2005-2007 60 Figure 4.9 Doctor to Population Ratio by District in Papua Province, 2007 (per person) 60 Figure 4.10 Ratio of Community Health Centers to Population by District in Papua Province, 2007 (per 10,000 people) 61 Figure 4.11 Five Most Serious Diseases in Papua, 2006 and 2007 (% of population) 61 Figure 4.12 Malaria Cases in Papua, 2004-2007 (persons) 62 Figure 4.13 Trend in the Number of HIV and AIDS Cases in Papua Province in 1992-2007 Period 62 Figure 4.14 Provincial and District/Municipality Health Expenditure in Papua, 2004-2008 64 Figure 4.15 Per Capita Health Expenditure in Papua Province, 2004-2008 64 Figure 4.16 Health Expenditure by Economic Classification at Provincial and District/ Municipality Levels in Papua Province, 2004-2008 65 Figure 4.17 Seven Strategic Roads and Four Additional Roads in Papua Province 67 Figure 4.18 Road Development by Surface Type, 2005-2007 (%) 69 Figure 4.19 Access to Clean Water and Sanitation Facilities by Income Group 71 Figure 4.20 Infrastructure Expenditure at Provincial and District/Municipality Level in Papua Province, 2004-2008 71 Figure 4.21 Per Capita Infrastructure Expenditure in Papua Province, 2004-2008 73 Figure 4.22 Infrastructure Expenditures by Economic Classification at Provincial and District Municipality Levels in Papua Province, 2004-2008 73 Figure 4.23 Agriculture Sector Growth and Proportion of GRDP by 2000 Constant Price Excluding Mining in Papua Province, 2000-2007 75 Figure 4.24 Structure of Agriculture Sector GRDP in Papua Province, based on 2000 Constant Prices, 2000-2007 75 Figure 4.25 Agricultural land control per Agricultural Household by District in Papua Province, 2003 (hectares) 76 Figure 4.26 Productivity of Papua’s Food Crops, 2004-2007 (ton/ha) 76 Figure 4.27 Agricultural Sector Expenditure at Provincial and District/Municipality Levels in Papua Province, 2004-2008 78 Figure 4.28 Per Capita Agricultural Expenditure in Papua Province, 2004-2008 78 Figure 4.29 Agricultural Expenditure by Economic Classification at Provincial and District Municipality Level in Papua Province, 2004-2008 79 Figure 5.1 Results of Public Financial Management Capacity Survey in Papua Province and Districts/Municipalities, 2009 82 Figure 5.2 Development of Budget Format 83 Figure 5.3 Provincial and District/Municipality Planning Process Mechanisms in Papua 84 Figure 5.4 Cash Management and Financial Administration Performance of Provincial and District/Municipality Governments in Papua 86 Figure 5.5 Percentage of Attention Paid by Provincial and District/Municipality Governments to Accounting and Reporting Issues 88 Figure 5.6 Comparison of Internal Control Systems at Provincial and District/Municipality Level 88 Figure 5.7 Comparison of Asset Management at Provincial and District/Municipality Level 88 Figure 5.8 Audit Opinions at Provincial and District/Municipality Level in Papua 89 Figure 6.1 Papua Province Revenue from Special Autonomy, 2002-2009 95 Figure 6.2 Sectoral Allocation in Papua Province, 2008 96 vi Papua Public Expenditure Analysis December 2011 Table of Contents Figure 6.3 Figure 6.4 Figure 6.5 Figure 6.6 Sectoral Allocation at District/Municipality Level, 2006 and 2008 96 Per Capita Special Autonomy Fund Allocations, 2007 97 Realized/Unrealized Funds by Region as of December 2008 (%) 100 District/Municipality Reporting of the Utilization of the Special Autonomy Funds in Papua 100 Figure 6.7 Control Mechanism for Special Autonomy Funds Management, 2008 100 Figure 7.1 Implementation of Organizational Structure and Work Procedures based on Government Regulation No. 41/2007 in Districts/Municipalities in Papua Province 104 Figure 7.2 Comparison between Provincial and Selected District/Municipality Government Organizational Structures and Personnel Expenditure Budgets in Papua, 2007-2009 104 Figure 7.3 Number of Civil Servants in Papua Province, 2004-2007 106 Figure 7.4 Number of Civil Servants in Papua Provincial and District/Municipality Governments and Number of Civil Servants per 1,000 People, 2007 106 Figure 7.5 Composition of Civil Service in Papua Province, 2004-2007 107 Figure 7.6 Gender Composition of Civil Service throughout Papua Province, 2004-2007 108 Figure 7.7 Gender Composition of Civil Service by Regional Government in Papua Province, 2007 108 Figure 7.8 Composition of Civil Service in Districts/Municipalities, 2007 108 Figure 7.9 Employee Expenditure per Civil Servant (left) and Per Capita Civil Servant Expenditure (right) of Papua Province and Districts/Municipalities, 2007 109 Figure ANNEXES Public Perception of Transparency in Fairness of Distribution of Special Autonomy Funds 120 vii List of Table Table 1.1 Table 1.2 Table 1.3 Table 1.4 Table 2.1 Table 2.2 Table 3.1 Table 3.2. Table 4.1. Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 5.1. Table 5.2. Table 6.1. Table 6.2 Table 7.1 Table A.1 Table A.2 Table A.3 Table A.4 Table A.5 Table A.6 Inflation by Component in Jayapura, 2001-2007 (%) 28 Per Capita GRDP in Papua and Indonesia, 2003-2007 (Rupiah) 29 Percentage Distribution of Total Income Per Capita in Papua, 1996-2003 30 Indonesia’s Provincial HDI Rankings, 2004-2007 30 Papua Province Revenue Composition, 2004 – 2008 (billion Rp.) 35 Composition of Financing - Papua Province, 2007–2008 (million Rp.) 39 Composition of Expenditure by Sector in Papua, 2007 43 Papua Province Deconcentration Funds Allocation by Sector, 2005 – 2008 (%) 47 Number of Students per Teacher in Papua Province, 2004-2007 52 Average Years of Schooling, Literacy and Number of Teachers By District/Municipality in Papua Province, 2007 53 Road Length by Status and District in Papua Province, 2007 68 Seaport Conditions of Jayapura, Merauke and Biak, 2005 68 Contribution of Districts/Municipalities to Food Crop Production in Papua Province, 2007 77 Schedule and Process of Regional Government Budgeting 85 Status of the Resolution of the Audit Board’s Recommendations 90 Changes in the Allocation of Special Autonomy Funds to Districts/Municipalities, 2002-2009 95 RESPEK Fund for Sub-districts and Villages, 2008-2009Source: RESPEK Monitoring and Evaluation Report, 2009 (processed) 99 Government Bureaucracy Reform Agenda in Papua Province 110 Per Capita Revenue by District/Municipality in Papua Province, 2007 113 Composition of APBD Real Expenditure in Papua Province by Sector, 2004-2008114 Government of Papua Province by Sector, 2004-2008 (%) 115 District/Municipality Government Expenditure by Sector in Papua Province, 2004-2008 (%) 116 Development of Financial Management Regulations in Papua Province 117 Special Autonomy Fund Allocation to Districts/Municipalities, 2004-2009 (billion Rupiah) 119 List of Box Box 2.1 Box 3.1 Box 3.2 Box 5.1 Box 6.1 Box A.1 viii General Mining Revenue-Sharing Funds Measuring the effect of regional expenditure on economic growth Deconcentration and Assistance Task Funds Assessment of Sub-National PFM Capacity Control mechanism for special autonomy funds management Respondent Opinions on the Transparency of Special Autonomy Funds Papua Public Expenditure Analysis December 2011 37 47 48 82 99 120 Executive Summary is strategically one of the most important regions in Indonesia. It is “ Papua located at the easternmost point of Indonesia and borders Papua New Guinea and Australia. This strategic location is one of the main reasons that Papua province was granted special autonomy status. In 2002, Papua was divided into two provinces: Papua and West Papua. ” Introduction Papua has abundant natural and fiscal resources but also faces great development challenges. On the one hand, Papua currently has the largest per capita fiscal capacity after West Papua. Papua is rich in natural resources such as non-oil-and-gas minerals and forest products. On the other hand, development challenges in Papua are significant, including geography, terrain and demography. In general, Papua is still underdeveloped both socially and in economic terms compared to other regions in Indonesia. This underdevelopment is evident in most poverty, education, health and infrastructure indicators. The economy and investment in Papua are dominated by the mining sector and, in a distant second place, the agricultural sector. Between 2004 and 2007, the mining sector accounted for more than 50 percent of the Papua’s gross regional domestic product (GRDP). As a consequence, economic growth was determined by fluctuations in mineral commodity prices. The second largest sector is agriculture, which accounts for about 14-18 percent of GRDP. This sector absorbed the most workers in Papua province until 2008. Meanwhile, industry continues to lag and contributed less than 10 percent to GRDP. Revenues and Expenditures Papua’s revenues continue to increase and are persistently dominated by transfers from the central government. Until 2008, more than 90 percent of provincial and district/municipality government revenues were derived from balancing funds or special autonomy funds transferred from the central government. A similar trend is likely over the next few years due to Papua’s limited sources of own-source revenues. 9 Figure 0.1 Per Capita Regional Expenditure of Districts in Papua Province, 2007 Kab. Jayawijaya Kota Jayapura Kab. Nabire Kab. Biak Numfor Kab. Puncak Jaya Kab. Paniai Kab. Merauke Kab. Yapen Waropen Kab. Pegunungan Bintang Kab. Asmat Kab. Jayapura Kab. Mimika Kab. Mappi Kab. Tolikara Kab. Keerom Kab. Supiori Kab. Boven Digoel Kab. Waropen Kab. Sarmi 2.4 2.5 3.4 4.4 4.8 5.2 5.6 5.8 6.1 6.8 6.9 7.2 8.1 9.5 11.1 12.5 17.9 18.2 18.9 -5 10 15 20 million Rp Source: APBD of the Provincial and District Governments, 2007 billion Rp Figure 0.2 Government of Papua Province Expenditure (APBN and APBD), 2004-2008 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - 10,150 12,201 7,357 4,461 4,674 1,447 1,103 1,806 1,249 2,269 1,519 2004 2005 2006 3,823 3,606 2,137 2,149 2007 2008 APBN (Deconcentrated and Task Assistance Fund) Provincial Government APBD Districts/Municipalities APBD Total Real Expenditure APBN+APBD Source: 2004-2008 APBD (processed), Ministry of Finance Note: Figures for 2004-007 are realized; 2008 figures are budgeted; real figures are based on 2007 prices. The large disparities in per capita fiscal capacity between districts/municipalities has been widened by the creation of new districts/municipalities, or pemekaran. The per capita fiscal capacity of Sarmi district is nearly eight times higher than that of Jayawijaya district (Figure 0.1). The creation of ten new districts in 2002 caused this disparity to widen and the new districts generally have greater fiscal capacity that the older districts. Public expenditure in Papua has increased rapidly, illustrated by the increasing dominance of district budgets. Between 2004 and 2008, this real increase in expenditure occurred across all components including the national budget (APBN), provincial budget (APBD Propinsi), and 10 Papua Public Expenditure Analysis December 2011 Executive Summary district/municipality budget (APBD Kabupaten/Kota). As a proportion of overall expenditure, the contribution of district governments to public spending in Papua tended to increase due to the increasing number of districts/municipalities; greater general allocation funds; and the increasing proportion of special autonomy funds transferred to the district/municipality APBD. In the next several years, the contribution from districts will continue to increase due to the establishment of nine new districts between 2007 and 2009. Meanwhile, the contribution of the APBN has decreased, mainly because some Deconcentration and Assistance Task Funds (Dana Dekonsentrasi dan Tugas Pembantuan) are now captured in the special allocation funds (DAK). The sectoral composition of expenditure in Papua has improved, although general government administration expenses continue to dominate. At the provincial and district/ municipality level, budget allocations have increased for sectors prioritized under special autonomy, such as education, health, and infrastructure. However, the proportion of expenditure allocated to these priority sectors is not yet optimal. Unfortunately, the agricultural sector, which absorbs most of Papua’s labor and is the second largest contributor to GRDP, receives only 2-3 percent of total APBD allocations. There has also been improvement in the type of expenditure, which capital expenditure currently dominates. Until 2005, the largest type of expenditure was personnel expenditure. This trend began to change in 2006 when capital expenditure became the largest component, stimulated by special autonomy funds for infrastructure (at provincial level) and the increasing amount of general allocation funds (for districts/municipalities). Provincial and district/municipality governments continue to incur unspent APBD balances. Between 2004 and 2007, unspent budget balances amounted to 5-10 percent per year. Most of these unspent balances became reserve funds and co-financing for regional companies. The accumulated unspent balances of the provincial and district/municipal governments is estimated to exceed Rp. 7 trillion. If consolidated, this unspent balance could become a significant source of funding for development in Papua. Sectoral Analysis Outcomes have improved in strategic sectors following budget allocation increases, although outcomes remain less than optimal. Between 2004 and 2007, education, health and infrastructure outcomes improved. Performance in these sectors is still poorer than the national average, however. There have also been improvements in public facilities and infrastructure, such as community health centers, schools, roads, and ports. The main issue in these strategic sectors is the broad disparity between the outcomes observed in urban and remote areas as well as among income levels. Education Education outputs and outcome improved significantly between 2004 and 2007. These improvements were reflected in the literacy rate (Figure 0.3), net enrollment ratio, the teacherstudent ratio and classroom-student ratio. However, as of 2007, Papua’s performance still lagged behind the national average. 11 63% 61% 64% 76% 80% 70% 89% 60% 53% 77% 51% 70% 67% 71% 80% 67% 88% 90% 78% 100% 78% Figure 0.3 Literacy Rate by Age Group in Papua, 2003 and 2007 50% 40% 30% 20% 10% 0% Male Female Male 2003 Female 2007 15-29 30-44 45-59 >60 Source: extracted from 2007 National Socioeconomic Survey (Susenas) Figure 0.4 Per Capita Expenditure Trends for Education (a) and Health (b) in Papua, 2004-2008 [a]. Per Capita Education Expenditure 1,200,000 1,000,000 800,000 600,000 400,000 200,000 2004 2005 2006 Per Capita Nominal Expenditure 2007 2008 Per Capita Real Expenditure [b]. Per Capita Health Expenditure 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 2004 2005 2006 Per Capita Nominal Expenditure Source: 2004-2008 APBD, realized (processed) 12 Papua Public Expenditure Analysis December 2011 2007 2008 Per Capita Real Expenditure Executive Summary The main challenge in the education sector is to equalize outcomes across all socioeconomic groups. Currently, large gaps persist as follows:  District/Municipality: remote districts fare worse than accessible districts.  Income groups: higher income groups achieve better outcomes than lower income groups.  Gender (Figure 0.3): males fare better than females. Expenditure on education has tended to increase but continued to be dominated by personnel expenses during 2005-2008. Although in real terms education expenditure has not reached 2004 levels, per capita expenditure did follow a positive trend between 2005 and 2008 (Figure 0.4a). However, expenditure on personnel continued to dominate. It is expected that per capita expenditure and expenditure composition will continue to improve over the next several years with the availability of free education for Papua’s indigenous peoples. Figure 0.5 Comparison of Health Indicators in Papua Province with Several Other Regions in Indonesia, 2000 and 2005 [a]. Infant Mortality Rate in Indonesia (per 10,000 infants) 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 2004 2005 2006 Per Capita Nominal Expenditure 2007 2008 Per Capita Real Expenditure [b]. Life Expectancy Rate in Indonesia (years) 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 2004 2005 2006 Per Capita Nominal Expenditure 2007 2008 Per Capita Real Expenditure Source: Central Bureau of Statistics (BPS) Booklet, 2008 (processed) 13 Health Progress has been made in the health sector but serious challenges remain, including HIV/AIDS. Similar to the education sector, several health outcomes have shown improvement, such as life expectancy (Figure 0.5a), infant mortality rate (Figure 0.5b), the ratio of medical staff to population and of community health centers to population. However, challenges are expected over the next several years, including improving Papua’s health outcomes to equal the national average, providing sufficient medical staff and health facilities in remote areas and combating HIV/ AIDS and malaria. Health expenditure in Papua continues to increase every year, but remains less than 10 percent of total spending. Between 2004 and 2008, there was a significant increase in per capita health expenditure (Figure 0.4b). However, total health expenditure remained below 10 percent of total spending. In terms of expenditure composition, goods and services expenditure and capital expenditure were the largest components. Infrastructure Infrastructure development in Papua has not been well coordinated. As discussed at length by the World Bank (2009), Papua does not have a coordinated master plan for infrastructure development, which ideally would be jointly drafted by the central, provincial and district/ municipality governments. Existing plans have been created unilaterally and coordination is mostly performed on an impromptu basis. Comprehensive and well-planned coordination and a master plan are essential, especially because the infrastructure sector in Papua requires a significant amount of funding. The road network has improved unevenly during the past few years and lacks adequate maintenance. Between 2004 and 2007, the reach of the road network increased fivefold. Despite this expansion, the road network continues to focus on urban areas, particularly in the case of asphalt roads. The expansion of the road network was not accompanied by the necessary maintenance and repairs. In 2007, 8,681 kilometers of road were in a heavily damaged condition, constituting 54.64 percent of the total road length of 15,327 km. Only 33.27 percent of the road network was in good condition. Limited transportation infrastructure in Papua causes the cost of basic needs in hinterlands and mountainous areas to be very expensive. Air transportation is the only solution in many parts of Papua, in which the terrain make land transportation impossible. Limited access to land, sea and water transportation in the hinterlands and mountainous areas causes the cost of basic needs to be very expensive. Currently, goods in districts in Papua’s interior, especially Puncak Jaya, are the most expensive in Indonesia. Households’ access to basic infrastructure in Papua province is still far below the national average and unequally distributed. This condition extends to access to fresh water, electricity and proper sanitation. Similar to education and health, access to these facilities is disparate among geographic and income groups (Figure 0.6). Provincial and district/municipality infrastructure expenditure has increased significantly every year and is consistently dominated by capital expenditure. Between 2004 and 2007, the real increase in annual infrastructure expenditure was 36 percent. Real per capita infrastructure 14 Papua Public Expenditure Analysis December 2011 Executive Summary Figure 0.6 Access to Fresh Water and Sanitation Facilities by Income Group 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 80% 74% 70% 59% 56% 60% 50% 35% 40% 30% 20% 10% 0% Access to clean water Access to sanitary facilities Access to clean water Indonesia Papua Q1 Access to sanitary facilities Q2 Q3 Q5 Q4 Source: 2007 National Socioeconomic Survey (processed) Figure 0.7 Per Capita Expenditure on Infrastructure (a) and Agriculture (b) in Papua [a]. Per Capita Infrastructure Expenditure 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 2004 2005 2006 2007 2008 2007 2008 Per Capita Nominal Expenditure [b]. Per Capita Agriculture Expenditure 300,000 250,000 200,000 150,000 100,000 50,000 2004 2005 2006 Per Capita Nominal Expenditure Source: 2004-2008 APBD, realized (processed) 15 expenditure grew by 24 percent (Figure 0.7a). This increase was triggered largely by additional special autonomy funds for infrastructure. Infrastructure expenditure was dominated by capital expenditure because infrastructure is a capital-intensive sector. Agriculture The agricultural sector has not received the level of attention afforded to other sectors. Until 2009, the provincial government did not have a plan for the agricultural sector, which is one of the elements of the people’s economy (ekonomi kerakyatan) under special autonomy. The allocation of APBD and special autonomy funds for this sector remains low, even though this sector could provide the basis for quality economic growth in Papua. Developing this sector is a more complex challenge than for other sectors, admittedly, because of several preconditions including access to markets, irrigation channels, intensive information campaigns and the procurement of heavy equipment. Trends in the productivity of food crops are cause for serious concern. Between 2004 and 2008, there was a drastic decrease in the productivity of vegetable and fruit crops. Meanwhile, the increase in productivity of rice, corn and bean crops was minimal (Figure 0.8). The provincial and district governments need to address this worrisome trend. Although the allocation for agricultural expenditure has increased, the total amount remains low and is dominated by expenditure on personnel. The increased allocation of APBD funds for agriculture was reflected in an increase in per capita agricultural expenditure during 2004-2008 (Figure 0.7b). This increase has not resolved two key problems, however. First, the allocation remains minimal, accounting for only 2-3 percent of total APBD spending. Second, expenditure in the agricultural sector is dominated by expenditure on personnel, whereas it should focus on goods and services expenditure, such as procurement of seeds and fertilizer, and capital expenditure, such as construction of rice mills or food packaging factories and the procurement of heavy agricultural equipment. Figure 0.8 Productivity of Food Crops in Papua, 2004-2007 (in ton/ha) 14.0 12.9 12.3 12.8 12.5 12.0 10.0 10.0 9.9 10.0 10.0 8.0 6.0 4.0 2.0 4.9 1.5 1.7 4.5 3.6 3.3 3.2 2.1 1.9 4.1 3.6 1.7 1.7 2.0 1.0 0.0 2004 Paddy rice 2005 Corn Peanuts Source: Central Bureau of Statistics (BPS) of Papua (2004-2008) 16 Papua Public Expenditure Analysis December 2011 2006 Vegetables 2007 Fruits Tubers 2.3 Executive Summary Public Financial Management Public financial management (PFM) in Papua has shown improvement but further improvement is needed. Public financial management is vital to improving social welfare in Papua, given the province’s significant fiscal capacity. Currently, cash management and accounting and reporting have been operating reasonably well. However, several key issues surrounding planning and budgeting, internal monitoring and asset management are yet to be resolved. The quality of regional government financial reports across Papua remains poor, despite improvements in the past year. Planning and budgeting remains poor, due to poor coordination between the central, provincial and district/municipality governments and poor quality of planning and budgeting documents. Planning and budgeting are the most important aspects of public financial management in Papua because they determine the implementation of medium-term and annual development. Over the past several years, planning and budgeting have not been optimal because of poor coordination between the various levels of government. Some development programs overlap and are not complementary. Another planning and budgeting problem is the poor quality of planning and budgeting documents. Almost all regional medium-term development plans, strategic plans, regional government work plans, and APBD do not contain any measurable indicators. Furthermore, inconsistencies persist between medium-term planning and annual planning as well as between multi-sectoral and sectoral planning. There is inadequate human resources capacity to plan the budget effectively, especially at district/municipality level. Fiscal decentralization rapidly increased the responsibility of regional governments for public financial management. However, the quality and quantity of public financial management human resources remain far from adequate. The assignment of a range of public financial management functions to government work units has exacerbated this problem. In most newly formed districts, the government work units are staffed by civil servants who do not possess adequate skills for their role. Special Autonomy Funds of Papua Special autonomy funds have significantly increased Papua’s fiscal capacity. Special autonomy aims to improve the welfare of the Papuan people and accelerate development to bring Papua into line with other provinces across Indonesia. Special autonomy funds, which equal 2 percent of national general allocation funds, accounted for 21.6 percent of Papua’s fiscal capacity between 2004 and 2008. Moreover, since 2006 the central government has provided additional special autonomy funds for the infrastructure sector. Using special autonomy funds, the Government of Papua Province implements the RESPEK program and provides free-of-cost education and healthcare services for Papua’s indigenous peoples. In early 2007, the provincial government initiated the Strategic Plan for Village Development (RESPEK) program, which aims to empower local economies. Under this program, each village receives a block grant of Rp. 100 million from the provincial government, as well as a varying amount of top-up funds from their district/municipality government. In May 2009, the provincial government announced free-of-cost education and health programs for Papua’s indigenous peoples. These programs are funded jointly by the provincial and district/ municipality governments. 17 The management of special autonomy funds remains less than ideal, especially in terms of the transparency of allocations to districts/municipalities. Thus far, the method of allocating special autonomy funds to districts has not been transparent. The variables included in the allocation formula are included in a special regional regulation, but information concerning the weighting of these variables is unavailable. The impact of this lack of transparency is difficulty explaining the imbalance in per capita allocation of special allocation funds among districts, especially given that the formula tends to “benefit” newly created districts. Special autonomy funds management is also hampered by weaknesses in monitoring, evaluation and accountability mechanisms. Although there is a special regional regulation governing the management of special autonomy funds, districts/municipalities often fail to comply with the reporting and accountability requirements. In 2008, less than half of all district/municipality governments reported the use of their special autonomy funds. This creates difficulties in annual monitoring and evaluation of special autonomy by the provincial and central governments. Special autonomy funds allocations for the education and health sectors have been below the percentages mandated by the special autonomy law. In 2008, allocations of special autonomy funds fell short of the required 15 percent for the health sector and 30 percent for education (Figure 0.9), both at the provincial and district/municipality government level. This shortfall resulted primarily from a lack of coordination between the provincial and district/ municipality governments in the annual planning and budgeting process. Government Institutions and Human Resources Bureaucratic reform has commenced in several regional governments with varying degrees of impact. Government Regulation No. 41/2007 regarding Regional Government Organization requires all regional governments to review their organizational structures. In Papua, the provincial government and some district/municipality governments have adjusted their organizational structures based on this regulation. The provincial government’s new streamlined organizational structure has resulted in a decrease in expenditure on personnel. By contrast, the two district-level case studies showed that the Jayapura and Pegunungan Bintang district governments have streamlined their organizational structures but have not yet decreased their expenditure on personnel as a result. The number of civil servants in Papua increased significantly between 2004 and 2007 due to recruitment in newly created districts. The number of civil servants in Papua increased by 31 percent between 2004 and 2007 (Figure 0.10a), spurred by a 35.1 percent increase at district/municipality government level. The district/municipality level increase resulted because the recruitment of civil servants in the new districts formed in 2002 was not matched by a significant decrease in the number of civil servants employed by the corresponding rump districts. Civil servant numbers will continue to increase for several years, as the nine new districts established between 2007 and 2009 recruit civil servants to staff their bureaucracies. The gender composition and educational background of the civil service have improved significantly. Between 2004 and 2007, the gender balance of the civil service workforce increased, with the proportion of female civil servants reaching 41 percent in 2007 (Figure 0.10b). During the same period, the proportion of civil servants holding a diploma, bachelor’s or master’s degree increased significantly. 18 Papua Public Expenditure Analysis December 2011 Executive Summary Human resources management for civil servants is not optimal. Two examples illustrate the problems. First, there is no integrated personnel management system in place for civil servants, with the result that participation in internal and external civil servant training is determined ad hoc. Second, the promotion and rotation of civil servants does not appear to reflect individuals’ capacity. In various instances, civil servants trained for certain positions have been rotated or promoted to other positions that do not match their skill set. Figure 0.9 Sectoral Allocations of Special Autonomy Funds by the Provincial (a) and District/Municipality (b) Governments in Papua, 2008 Education 6% Education 24% Supporting sector 34% Health 11% Infrastructure 15% Health 14% Local economy empowerment 2% Others 66% [a]. Provincial Government Local economy empowerment 16% Infrastructure 12% [b]. District/Municipality Governments Source: Audit Report on Special Autonomy Funds Management, State Audit Board, 2009. Figure 0.10 Number of Civil Servants in Papua Province (a) and Gender Composition (b), Ribuan 2004-2007 70 31 60 30 6000 0 42.0% 5000 0 40.0% 29 50 28 4000 0 38.0% 40 27 3000 0 36.0% 30 26 25 2000 0 34.0% 24 1000 0 32.0% 20 10 23 0 22 2004 Total districts 2005 2006 2007 District/Municipality Governments of Papua 0 30.0% 2004 Male 2005 Female 2006 2007 % Female Ratio per 1,000 people (a) Number of Civil Servants in Papua Province (b) Gender Composition Source: Central Statistics Bureau (BPS) of Papua (2009) 19 Chapter 1 Socio-Economic Profile of Papua Province has abundant natural and fiscal resources and, geographically, is one of the largest “ Papua provinces in Indonesia. Nevertheless, the province also faces serious challenges of geography, terrain and demographics. The natural environment, regional location and socio-economic conditions of the Papuan people are challenges that must be tackled by all stakeholders. Despite clear improvements since the introduction of special autonomy, there are still many problems that need to be solved. ” 1.1. History of Papua Province Papua Island has been known by several names since the fifteenth century. Historically, the name “Papua” was used for the first time in 1545 on an expedition map of Inigo Ortiz de Retez, who sought spices in the Moluccas. On March 17, 1824, through the Treaty of London, the United Kingdom and the Kingdom of Netherlands agreed to divide control of the island in two, whereby the Netherlands acquired the western part. Dutch-controlled Papua was known as Nederlandsch Nieuw Guinea until October 1962, when the territory was placed under the temporary authority of the United Nations Temporary Executive Authority (UNTEA). It was then renamed West Irian, changed in 1973 to Irian Jaya. In line with this change, the Government of Indonesia accelerated development activities. Progress was very slow, however, and was concentrated only in northern coastal areas. The name Papua was re-introduced following the enactment of the Law on Special Autonomy of Papua Province in 2001. Papua has been a part of Indonesia since 1963, a position that was strengthened through the Act of Free Choice (Penentuan Pendapat Rakyat – Pepera) in 1969. On May 1, 1963, West Irian was returned to Indonesia. In November 1963, the UN Agency for West Irian (UN Fund for West Irian – FUNDWI) was established to assist the Government of Indonesia to accelerate development progress in the region. In 1969, resistance against the Indonesian authorities and pressure from the international community compelled Indonesia to hold a referendum for the people of Papua to choose between establishing their own country or remaining integrated with Indonesia. In the referendum, known as the Act of Free Choice, the representatives of Papua chose to remain integrated with Indonesia. Following the referendum, the region of West Irian officially became part of the Republic of Indonesia. 21 In 2001, Papua province was granted special autonomy status. The regional autonomy reforms introduced throughout Indonesia in the reform era did not completely resolve latent conflicts and disintegrative tendencies in Papua. Due to political pressures and demands from the Papuan people, the Papuan People’s Assembly (Majelis Rakyat Papua - MRP) urged the government to grant special autonomy status to Papua. A group of Papuan politicians and academics prepared a draft Law on Special Autonomy. The Law on Special Autonomy for Papua granted Papua greater authority over financial, political and social matters. This law granted greater authority to the provincial government, in contrast with nation-wide regional autonomy legislation (Law No. 22/1999), which emphasized district governments. The implementation of the Special Autonomy Law was slow and patchy. Papua was split into Papua and West Irian Jaya in 2004. Initially, West Irian Jaya province was established under Law No. 45/1999 regarding the Establishment of West Irian Jaya Province, Central Irian Jaya Province, Mimika District, Paniai District, Puncak Jaya District and Sorong Municipality. The creation of West Irian Jaya province was reinforced by Presidential Instruction No. 1/2003, issued by President Megawati Soekarnoputri. Over time, West Irian Jaya Province acquired its own bureaucracy and governmental system, clear territorial borders, a constituency, a budget, and its own Regional General Election Commission (Komisi Pemilihan Umum Daerah – KPUD) in time for the April 2004 legislative election. West Irian Jaya’s full status as a province and its separation from Papua province was signaled by the installation of the governor and vice governor on July 24, 2006. In 2007, West Irian Jaya changed its name to West Papua province based on Government Regulation No. 24/2007. Papua province is currently divided into 29 districts and municipalities, the majority of which were established during the past decade by means of pemekaran. At the end of the New Order regime (1998), there were eight districts and two municipalities in West Irian Jaya province, of which five districts and one municipality comprised present day Papua province. Over the following decade, these five districts separated into 28 districts of diverse geographic and population size1. Establishing the governmental structures required for this proliferation of new districts has entailed a very high financial cost, but has done little to improve people’s welfare. 1.2. Geography, Terrain and Demography Papua is an expansive region with varied terrain. The province consists of a single vast land area and several clusters of islands. Together, the Greater Papua Archipelago (Papua and West Papua provinces) form the third largest land area in Indonesia, stretching to 414,000km2 or 22 percent of the total area of Indonesia (see Annex 1.1). The archipelago stretches 1,200 kilometers from west to east (Sorong-Jayapura) and 736 kilometers from north to south (Jayapura–Merauke). A 650 kilometer long mountain range runs through the center of Papua province. Several great river systems flow to the north and to the south. Papua also has a ring of smaller islands along its coastline. Compared to its vast land area, the population of Papua is very small. Papua has the lowest population density of any province in Indonesia. The 1995 Inter-census Population Survey (Survei Penduduk Antar Sensus – SUPAS) found the population of Papua to be 1,942,627 people with an average annual growth rate of 3.03 percent. Population projections suggest that by 2007 this 1 22 As an example, the 1998 territory of Jayawijaya District has since been divided into seven districts. Papua Public Expenditure Analysis December 2011 Chapter 1 Socio-Economic Profile of Papua Province Figure 1.1 Topographic Map of Papua number had grown to 2,015,616 people. As its land area is 317,062 km2 (excluding West Papua), Papua’s population density is only 6.36 people/km2, which was the lowest in Indonesia in 2007.2 Indigenous Papuans constitute a majority of the province’s population, although the number of migrants has increased over time. Based on the 2000 Population Census, 65 percent of Papuan people were indigenous.3 However, in line with decentralization and better access to transportation, the number of migrants has increased since the census. Approximately 86.54 percent of the total indigenous population lives in rural areas, whereas the remaining 13.46 percent are spread throughout urban areas. With 312 different ethnic groups speaking more than 250 languages, Papua is one of the most culturally and linguistically diverse regions in the world. 1.3. Economic Structure Mining is the largest economic sector in Papua. With substantial mineral resources, Papua’s non-oil and gas mining sector, driven by copper mines, contributed 62.04 percent of Papua’s GRDP between 2000 and 2007. During the same period, mining and agriculture (another natural resource-based economic sector) together on average contributed 77 percent of GRDP. The remaining 23 percent was distributed among other economic sectors, among which the service sector was a significant contributor. Led by the sub-sectors of government, defense and security, the service sector on average contributed 6 percent of GRDP (Figure 1.2). 2 The population density of Indonesia is 121 people/km2. 3 The definition of Papuan indigenous people is based on Law No. 21/2001. 23 Figure 1.2 Papua GRDP Structure Based on the 2000 Constant Price, 2000-2007 100% 5.5 7.4 5.5 7.2 7.6 66.2 54.5 64.6 53.6 51.6 80% 60% 40% 20% 14.0 17.9 13.8 17.5 16.9 2003 2004 2005 2006 2007 0% Agriculture, Livestock, Forestry & Fishery Mining & Quarrying Manufacturing Industry Electricity, Gas & Water Supply Construction Trade, Hotel & Restaurant Transportation & Communication Finance, Real Estate and Business Services Services Source: Central Statistics Bureau (BPS) of Papua (2008) Figure 1.3 Papua and Indonesia GDP Growth Based on the 2000 Constant Price, 20012007 (%) 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2001 2002 2003 2004 Papua 2005 2006 2007 Indonesia Source: BPS and BPS of Papua (2008) Figure 1.4 Structure of the Labor Force in Papua, 2005-2007 (%) 100% 22.5 22.8 21.3 75.8 75.2 75.1 2005 2006 2007 80% 60% 40% 20% 0% Source: BPS of Papua (2008) 24 Papua Public Expenditure Analysis December 2011 Agriculture, Livestock, Forestry & Fishery Mining & Quarrying Manufacturing Industry Services and Others Chapter 1 Socio-Economic Profile of Papua Province This dependency on natural resource-based sectors has caused the industrial sector in Papua province to remain underdeveloped. During 2000-2007, the average annual contribution of the industrial sector to GRDP was only 2 percent. Papua is thus categorized as a non-industrial region, because the contribution of its industrial sector to GRDP is less than 10 percent.4 Papua’s economic growth rate is strongly influenced by the mining sector. If one includes the non-oil and gas mining sector (copper mining) in calculations, Papua’s economy grew very slowly from 2001-2007, with an average of only 0.15 percent per annum. If the non-oil and gas mining sector is excluded, however, Papua’s average economic growth rate for the same period is a much more rapid 6.82 percent a year. The significant disparity between these results indicates that the non-oil and gas mining sector dominates the economic structure of Papua. Fluctuations in this sector thus strongly impact Papua’s growth rate. If one excludes the mining sector, Papua’s annual economic growth rate from 2001-2007 exceeded the national average of approximately 5.06 percent per annum (Figure 1.3). Although the mining sector dominated GRDP, agricultural absorbed the most labor. Agriculture’s average contribution to labor force absorption between 2005 and 2007 exceeded 75 percent. Over the same period, the non-oil and gas mining sector absorbed only slightly more than 1 percent. Even the industrial sector, a very small contributor to GRDP, absorbed more labor than non-oil and gas mining, with an average contribution of 1.32 percent of labor (Figure 1.4). The rate of open unemployment in Papua is generally lower than the national average. In 1999, the total labor force in Papua was recorded to be 988,588 people, 93.58 percent of whom were recorded to be employed. By 2007, the labor force had grown slightly to 990,774 people, 95 percent of whom were employed and 5 percent of whom were seeking jobs. Based on August 2007 figures, the rate of open unemployment in Papua was the lowest in Indonesia at 5.10 percent. The national average was 9.11 percent, with the highest figure of 16.11 percent in Banten province in west Java. Most of Papua’s population worked either in trade-oriented or subsistence-based agriculture. Papua’s international trade is dominated by the mining sector. The overall value of Papua’s exports and imports has tended to increase over the past few years and the balance of trade has been consistently in surplus. The non-oil and gas mining sector was responsible for almost 100% of Papua’s exports. Papua’s trade surplus ranged from a minimum of Rp. 2.41 trillion in 2007 to a maximum of Rp. 8.19 trillion in 2003. On average, the international trade surplus between 2003 and 2007 was Rp. 4.79 trillion per year (Figure 1.5[a]). Papua still depends economically on other regions, as evident in the fact that its domestic balance of trade was consistently in deficit over the same period. Domestic imports were dominated by consumption goods and raw materials for production. During 2003-2007, the domestic trade deficit increased every year. By 2007 the deficit had reached Rp. 3.24 trillion, with an average deficit over the total period of Rp. 1.66 trillion (Figure 1.5[b]). Capital flows were dominated by foreign capital investment (PMA), mostly in mining, and domestic capital investment (PMDN), mostly in agriculture. The total realized value of capital investment during the period 2000-2007 reached approximately Rp. 480.67 trillion, of which PMA 4 The United Nations Industrial Development Organization (UNIDO) classifies a country as non-industrial if its industrial sector contributes less than 10 percent of GDP. 25 Figure 1.5 Papua’s International and Inter-island Trade Performance, 2003-2007 (in trillion rupiah) [a]. International Trade 14.0 12.0 12.7 10.0 10.8 10.1 10.0 8.2 8.0 7.8 7.6 6.0 6.5 5.4 4.0 3.7 4.5 4.2 4.7 4.1 2.4 2.0 0.0 2003 2004 2005 Exports 2006 Imports 2007 Trade Balance [b]. Inter-Island Trade 10.0 8.3 7.5 8.0 6.0 6.7 5.5 6.0 5.7 5.1 4.7 5.1 5.0 4.0 2.0 0.0 -0.7 -2.0 -1.6 -0.3 -2.4 -3.2 -4.0 2003 2004 2005 Exports Imports 2006 2007 Trade Balance Source: BPS of Papua (2008) Figure 1.6 Structure of Foreign and Domestic Capital Investment in Papua, 2004-2007 (%) [a]. Domestic Investment 100% 80% 2.5 9.1 24.0 2.7 31.8 0.4 16.4 4.4 19.4 2.2 23.0 16.5 60% 40% 9.2 2.4 15.6 14.9 9.3 7.5 2.8 17.3 16.4 20% 25.3 0.0 11.1 37.2 24.0 22.1 2005 2006 32.7 0% 2004 Fisheries Agriculture/Livestock Forestry Lumber Industry Services Others 26 Papua Public Expenditure Analysis December 2011 2007 Plantation Chapter 1 Socio-Economic Profile of Papua Province [b]. Foreign Investment 100% 80% 2.6 6.6 10.0 17.2 20.4 72.9 73.0 5.6 1.2 19.0 60% 93.2 40% 78.4 20% 0% 2004 2005 Mining 2006 2007 Services Others Source: BPS of Papua, 2008 (processed) Figure 1.7 Inflation in Jayapura Municipality and Indonesia, 2003-2007 (%) Tahun Papua Nasional 2003 8,39 5,06 2004 9,45 6,40 2005 14,15 17,11 2006 9,52 6,60 2007 10,35 6,59 Rata2 10,37 8,35 Source: BPS and BPS of Papua (2008) 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2003 2004 2005 Papua 2006 2007 National Source: BPS and BPS of Papua (2008) 27 comprised 94 percent and PMDN 6 percent. To provide one example, the domestic private sector invested more capital in agriculture than in the industrial and service sectors between 2004 and 2007 (Figure 1.6[a]). Most realized PMDN in Papua flows to agriculture-based sectors (plantation, fishery, livestock, forestry and wood industry). Agriculture on average comprised 63.92 percent of annual domestic capital investment in Papua over the period surveyed, with this investment concentrated in the plantation and timber industry sub-sectors. Foreign private parties preferred to invest in the mining and service sectors. Between 2004 and 2007, on average 14.45 percent of PMA annually was directed to the services sector, whereas 79.37 percent was directed to the mining sector (Figure 1.6[b]). A range of obstacles hinders investment expansion in Papua. These include (1) very limited infrastructure, (2) Papua’s distance from markets, (3) lack of skilled and ready-to-use labor, and (4) inefficient bureaucratic procedures in several technical agencies. Investors also face very high transaction costs, in particular the cost of negotiating local customs and communal rights claims. The inflation rate in Papua province has tended to be rather unstable and above the national average during the past several years. Inflation in Jayapura municipality in 2005 and 2007 was 14.15 percent and 10.37 percent respectively (Figure 1.7), high enough level to potentially disrupt the stability of the local economy. To date, the government has not been entirely capable of depressing food price rises and restraining inflation. Increases in general prices during the same period were relatively high at approximately 10.37 percent annually on average. This rate of inflation differed from the national average over the same period of 8.35 percent per annum (Figure 1.7). In the most recent years, foodstuffs have been the greatest contributor to inflation in Papua. However, in 2001 to 2004, education, sports and recreation was the greatest contributor to inflation, because education was expensive in Papua and its cost tended to increase every year. Meanwhile, in 2002 and 2005, the transport and communication category contributed the most to inflation, reflecting increases in fuel prices. In 2006 and 2007, foodstuff price raises were the majority cause of inflation. Table 1.1 Inflation by Component in Jayapura, 2001-2007 (%) Inflation Component 2002 2003 2004 2005 2006 2007 Foodstuffs 10.85 18.13 10.02 5.96 2.66 5.15 7.37 Food, Beverages, Cigarettes, etc. 11.55 8.56 9.48 10.38 6.69 2.86 0.87 Housing 18.85 9.34 12.53 13.85 3.39 1.25 1.48 Clothes 8.46 5.07 2.38 1.73 2.53 0.29 0.38 Health 9.62 4.68 2.31 3.19 3.89 0.08 0.05 Education and Sports 23.08 12.67 3.18 37.36 4.15 0.42 0.17 Transportation and Communication 18.19 25.5 1.44 8.01 18.56 -0.25 0.03 General 14.00 13.91 8.39 9.45 5.48 9.52 10.35 Source: BPS of Papua (2008) 28 2001 Papua Public Expenditure Analysis December 2011 Chapter 1 Socio-Economic Profile of Papua Province 1.4. Community Welfare If the mining sector is included, per capita income in Papua is very high. Average per capita income during the period 2003-2007 was Rp. 10.1 million per year, compared to a national per capita average of Rp. 8 million per year for the same period. If mining is excluded from the calculation, Papua’s per capita income drops to only Rp. 4.2 million per year during the same period. Per capita GRDP of the non-mining sector increased during the past several years. Average per capita income growth in Papua during 2003-2007, excluding mining, was 4.33 percent per annum. The highest growth occurred in 2006 and 2007, reaching 6.50 percent and 6.47 percent respectively (Figure 1.8). High-income groups dominated this increase in per capita GRDP, however. The highestearning 20 percent of households on average accounted for approximately 43.38 percent of overall Table 1.2 Per Capita GRDP in Papua and Indonesia, 2003-2007 (Rupiah) Papua Province Year Including Mining Indonesia Excluding Mining 2003 11,524,613 3,931,309 7,330,498 2004 8,768,148 4,030,483 7,655,520 2005 11,479,648 4,104,444 7,999,375 2006 9,311,146 4,371,134 8,313,201 2007 9,513,757 4,653,807 8,721,325 10,119,462 4,218,236 8,003,983 Average Source: BPS of Papua (2008) and BPS (2009) Figure 1.8 Growth of Per Capita GRDP Based on 2000 Constant Prices in Papua, 2004-2007 40.0 30.0 20.0 10.0 0.0 2004 2005 2006 2007 -10.0 -20.0 -30.0 Tambang Tanpa tambang Source: BPS of Papua (2008) 29 income per year. The lowest-earning 40 percent households received only around 18 percent of overall income per year. The average income distribution ratio was 2.42, indicating that for every 1 percent of income distribution obtained by low-income households, high-income households obtained 2.42 percent (BPS of Papua, 2006). In addition, there was a large disparity in per capita GRDP between districts in Papua province. Economic enclaves have emerged which dominate Papua’s economy. Mimika, a district rich in non-oil and gas mining resources, had much higher per capita income than other districts, for example. Between 2003 and 2007, average per capita income in Mimika reached Rp. 91.59 million per annum, compared to an average of Rp. 4.45 million per annum across all other districts. Even excluding non-oil and gas mining from calculations, significant disparities remain between different regions of Papua, in particular between coastal areas and remote and mountainous areas. The coastal areas, such as Jayapura municipality, Jayapura district, Nabire and Biak Numfor had average per capita income of approximately Rp. 5.34 million per year (Figure 1.9). Meanwhile, in remote and mountainous districts such as Puncak Jaya, Tolikara, Pegunungan Bintang and Jayawijaya Mountains, per capita income was approximately Rp. 1.97 million a year. Table 1.3 Percentage Distribution of Total Income Per Capita in Papua, 1996-2003 Income Distribution 1996 Bottom 40% of income distribution (low-income) 1999 18.67 2003 17.5 17.6 Average 17.92 Middle 40% income distribution 35.79 37.4 42.9 38.70 Top 20% of income distribution (high-income) 45.54 45.1 39.5 43.38 2.44 2.58 2.25 2.42 Ratio of high-income distribution to low-income distribution Source: BPS of Papua (2006) Table 1.4 Indonesia’s Provincial HDI Rankings, 2004-2007 No. Province 2006 2007 75.8 76.1 76.3 76.6 DKI Jakarta 2 North Sulawesi 73.4 74.2 74.4 74.7 3 DI Yogyakarta 72.9 73.5 73.7 74.2 4 Riau 72.2 73.6 73.8 74.6 5 East Kalimantan 72.2 72.9 73.3 73.8 6 Central Kalimantan 71.7 73.2 73.4 73.5 7 North Sumatra 71.4 72.0 72.5 72.8 8 Riau Islands 70.8 72.2 72.8 73.7 9 West Sumatra 70.5 71.2 71.6 72.2 10 Jambi 70.1 71.0 71.3 71.5 Papua 60.9 62.1 62.8 63.4 Indonesia 68.7 69.6 70.1 70.6 Source: BPS (2009) Papua Public Expenditure Analysis December 2011 2005 1 33 30 2004 Chapter 1 Socio-Economic Profile of Papua Province Papua’s Human Development Index score increased, but remained the lowest of all provinces. Papua’s HDI score increased from 60.9 in 2004 to 63.4 in 2007 (Table 1.4). Nevertheless, Papua remained the lowest ranked of Indonesia’s 33 provinces. Despite improvements in 2008, the poverty rate in Papua remained the highest in Indonesia. Papua has the smallest population of any province in Indonesia, comprising hundreds of ethnic groups many of which continue to live in remote areas. Papua has abundant resources – the exploitation of its copper and gold reserves by large mining companies has produced millions of dollars and contributed an extremely large amount of tax income for the central government. Papua remains extremely poor, however, and consistently ranks among the five poorest provinces Figure 1.9 Disparity in Per Capita Incomes between Coastal Areas and Remote/ Mountainous Areas in Papua, 2003-2007 (million Rupiah) 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2003 2004 2005 Coastal 2006 2007 Remote/mountainous Source: BPS of Papua (2008) Figure 1.10 Five Largest Poor Populations in Indonesia, 2005-2008 (%) 45.0 41.5 40.8 40.8 40.0 35.0 30.0 37.1 33.0 32.3 25.0 17.8 16.7 29.7 27.5 25.0 22.2 22.8 21.4 20.0 31.1 29.3 27.2 28.2 25.9 25.7 23.8 21.0 16.6 15.4 15.0 10.0 5.0 0.0 2005 Papua 2006 Maluku NTT 2007 NTB Lampung 2008 Indonesia Source: BPS of Papua, 2008 (processed) 31 in Indonesia. Based on the headcount index, for example, Papua’s poverty rate from 2005 through 2007 was consistently the highest among Indonesia’s poorest regions (Figure 1.10). There are also clear disparities in poverty rates between different districts in Papua. Of the 793,400 poor people in Papua in 2007 (Figure 1.11), the highest proportion were in Jayawijaya district (13.83 percent), followed by Puncak Jaya district and Pegunungan Bintang district (13.22 percent combined), Nabire district with 9.57 percent, Yahukimo District with 8.75 percent and Paniai District with 7.68 percent. Figure 1.11 Distribution of Poorest Districts in Papua, 2007 Kota Jayapura 6.67% Puncak Jaya and Pegunungan Bintang 13.22% Merauke 6.50% Supiori 0.87% Keerom 1.39% Jayawijaya 13.83% Waropen 1.30% Jayapura 3.71% Sarmi 1.29% Nabire 9.57% Yahukimo 8.75% Tolikara 2.66% Asmat 2.71% Mappi 2.90% Boven Digoel 1.21% Source: BPS of Papua, 2008 (processed) 32 Papua Public Expenditure Analysis December 2011 Paniai 7.68% Mimika 5.56% Yapen Waropen 4.07% Biak Numfor 6.14% Chapter 2 Regional Revenue and Financing the implementation of regional autonomy and special autonomy in Papua, “ Since intergovernmental transfers to Papua – such as tax and non-tax revenue, general allocation funds (DAU), special allocation funds (DAK) and Papua special autonomy funds – have increased and consistently dominated regional revenue. The dominance of these intergovernmental transfers has actually decreased Papua’s fiscal autonomy. This issue has been exacerbated by the creation of many new districts in Papua. In addition, weaknesses in the planning and budgeting system surrounding the transfer of funds from the central government have resulted in unspent budget balances (SiLPA). The nominal amount of these unspent balances is relatively high compared to regional revenue and own-source revenue (PAD). ” 2.1. Overview of Regional Revenue Papua province has the second greatest per capita fiscal capacity in Indonesia. Currently, as shown in Figure 2.1, Papua’s per capita fiscal capacity is three times the national average, second only to West Papua province.5 This trend has emerged since the commencement of regional autonomy and special autonomy.6 Papua’s relatively small population contributes to this large fiscal capacity, but the figure nevertheless indicates that the provincial and district governments have sufficient fiscal resources to promote development. Papua’s regional revenue continues to increase. Although it fluctuates, Papua’s local revenue has generally increased, with the highest revenue of Rp. 15.8 trillion recorded in 2008. The district governments manage most of Papua’s revenues. In 2008, districts managed 75 percent of the total revenues in the region. Since 2006, nominal revenue has increased but real revenue has remained constant (Table 2.1). 5 If special autonomy funds are excluded, Papua province ranks third in Indonesia for per capita fiscal capacity. 6 See the 2005 Papua Public Expenditure Analysis Report (World Bank 2005]. 33 10 9 8 7 6 5 4 3 2 1 0 West Papua Papua East Kalimantan North Maluku Central Kalimantan Aceh Maluku Bangka Belitung Bengkulu South East Sulawesi Riau Riau Archipelago North Sulawesi Average Gorontalo West Sulawesi Central Sulawesi Jambi South Kalimantan West Sumatra West Kalimantan East Nusa Tenggara Bali South Sumatra South Sulawesi West Nusa Tenggara North Sumatra Special Region of Yogyakarta Lampung East Java Central Java Special Capital City Region of Jakarta Banten West Java million Rupiah Figure 2.1 Per Capita Fiscal Capacities of All Provinces in Indonesia, 2008 Source: World Bank Regional Finance Information System Figure 2.2 Papuan Provincial and District Government Revenues, 2004 – 2008 [a]. Provincial Government 4,500 billion Rp 4,000 3,500 3,000 2,500 1,578 1,691 2,044 1,951 345 312 2007 2008 1,839 2,000 1,500 1,000 760 500 590 166 0 2004 936 684 199 2005 1,192 215 2006 Other revenue Balancing fund [b]. District Government 14,000 billion Rp 12,000 1,513 10,000 1,085 1,671 8,000 6,000 4,000 434 681 2,000 3,906 4,269 204 2004 0 10,104 8,397 8,866 118 205 244 244 2005 2006 2007 2008 Other revenue Balancing fund Source: Regional Government Budget (APBD), 2004 – 2008 Note: 2004 – 2007 figures are realized, 2008 figures are budgeted; real figures calculated using a 2007 base year. 34 Papua Public Expenditure Analysis December 2011 Chapter 2 Regional Revenue and Financing 2.2. Balancing Funds and Special Autonomy Funds Balancing funds were the dominant contributor to provincial and district government revenue in Papua. From 2004-2008, balancing funds on average accounted for 74 percent of total provincial and district government revenues (Figure 2.3). In combination, moreover, balancing funds and special autonomy funds accounted for more than 95 percent of revenues. The largest component of balancing funds is general allocation funds (DAU), which account for 70 percent of total balancing funds. Special autonomy funds have significantly increased the fiscal capacity of the provincial and district governments. During 2004–2008, the contribution of special autonomy funds to Papua’s fiscal capacity ranged from 16 percent to 23 percent (Table 2.1). The contribution of special autonomy funds has increased each year, in particular since the introduction of special autonomy funds for infrastructure in 2006. The provincial and district governments in Papua are receiving increasing amounts of special allocation funds (DAK). At district level, DAK increased from 9 percent of balancing funds in 2004 to 12 percent in 2008, albeit remaining a much smaller component of balancing funds than is DAU. For the provincial government, DAK funds accounted for approximately 37 percent of balancing funds in 2007 and 2008, whereas DAU funds accounted for approximately 44 percent. Revenue sharing funds allocated to Papua are dominated by revenues from mining activities, particularly copper and gold. Papua’s revenue-sharing allocation increased by Rp. 1.77 trillion in 2006, almost doubling from the previous year, but was relatively stable in subsequent Table 2.1 Papua Province Revenue Composition, 2004 – 2008 (billion Rp.) Type of Revenue 2004 2005 2006 2007 2008 Own-Source Revenue Local Tax 224 192 215 241 231 Local Retribution 68 58 72 68 59 Proceeds from Separated Regional Property 42 47 44 72 79 177 85 132 208 124 816 1.170 1.954 1.925 1.810 4.882 4.370 7.701 7.324 7.121 504 446 926 1.661 1.780 1.350 1.512 2.991 3.432 3.274 317 105 81 273 6 8.380 7.985 14.116 15.204 14.483 Other Valid Own-Source Revenue Balancing Fund Tax and Non-Tax Share General Allocation Grant Special Allocation Grant Other Revenues Special Autonomy Fund Other Valid Revenue Total Source: APBD, 2004 – 2008 Note: 2004 – 2007 figures are realized, 2008 figures are budgeted, and all figures are nominal. 35 Figure 2.3 Papuan Provincial and District Balancing Funds, 2004 – 2008 [a]. Provincial Government Provincial Government 2,500 billion Rp 2,000 750 750 810 876 876 382 418 325 2006 2007 2008 1,500 - 1,000 500 0 3 379 207 419 265 2004 2005 Tax/non- tax revenue sharing Total real balancing fund Provincial Government Special allocation grant General allocation grant [b]. District Government Districts/Municipalities billion Rp 15,000 10,000 911 1,254 369 3,197 6,169 6,448 7,138 362 3,160 384 702 1,389 1,508 1,712 2004 2005 2006 2007 2008 5,000 0 839 Tax/non- tax revenue sharing General allocation grant Special allocation grant Total real balancing fund Districts/Municipalities Source: APBD, 2004 – 2008 Note: 2004 – 2007 figures are realized, 2008 figures are budgeted; real figures are based on a2007 base year. Figure 2.4 Per Capita Regional Revenue of District/Municipality Governments in Papua, 2007 Kab. Jayawijaya Kota Jayapura Kab. Nabire Kab. Biak Numfor Kab. Puncak Jaya Kab. Paniai Kab. Merauke Kab. Yapen Waropen Kab. Pegunungan Bintang Kab. Asmat Kab. Jayapura Kab. Mimika Kab. Mappi Kab. Tolikara Kab. Keerom Kab. Supiori Kab. Boven Digoel Kab. Waropen Kab. Sarmi 2.4 2.5 3.4 4.4 4.8 5.2 5.6 5.8 6.1 6.8 6.9 7.2 8.1 9.5 11.1 12.5 17.9 18.2 18.9 -5 10 million Rp Source: Provincial and District Government APBD, 2007 36 Papua Public Expenditure Analysis December 2011 15 20 Chapter 2 Regional Revenue and Financing Box 2.1 General Mining Revenue-Sharing Funds According to Government Regulation No. 5/2005 regarding balancing funds, general mining revenue-sharing funds from districts are sourced from land rent and royalties in the following proportions: 1. Land rent (80 percent) a. For the relevant province: 16 percent b. For the mining district/municipality: 64 percent 2. Royalty (80 percent) a. For the relevant province: 16 percent b. For the mining district/municipality: 32 percent c. For other districts/municipalities in the relevant province 32: percent (evenly divided) years. Government Regulation No. 5/2005 stipulates that regional governments receive 80 percent of state revenues from royalties and land rent for general mining, including gold and copper mining. Accordingly, a major mining district such as Mimika received Rp. 599 billion in revenuesharing funds in 2007, far in excess of the allocations received by non-mining districts (such as Nabire, which received only Rp. 46 billion). The fiscal gap among districts in Papua is extremely wide. District per capita revenue ranges from Rp. 2.4 million in Jayawijaya district to Rp. 18.9 million in Sarmi district (Figure 2.4). The six districts with the highest per capita revenue were each newly formed in 2002. Their per capita revenue is the highest because these districts have relatively small populations whereas their APBD revenue exceeds the average for Papua province. Special autonomy funds have done little to reduce the disparity between districts. Since their introduction, the ratio of highest to lowest district revenue has narrowed only slightly, from 7.9 to 7.7.7 2.3. Own-Source Revenue The previous sections illustrate the reliance on central government transfers of both the provincial and district governments in Papua. The result is a low level of fiscal autonomy to finance development in Papua. Fiscal autonomy is defined as the ability of the region to finance its own expenditure, and can be illustrated by comparing own-source revenue (PAD) to total revenue. The trend of creating new districts has become a serious challenge given the low level of fiscal autonomy in Papua. The number of districts in Papua increased from only 20 in 2005 to 29 in 2008. This swift increase in the number of districts in Papua aims to improve public welfare, but actually exacerbates the challenge of limited fiscal independence. Illustrating this limited fiscal independence, the ratio of PAD to total revenues in Papua Province averaged only 5 percent from 2004 to 2008, and decreased over the course of this period from 6.1 percent in 2004 to 3.5 percent in 2008. PAD as a proportion of total revenues remains low. PAD, as one of the elements which contribute to fiscal autonomy, tended to fluctuate during 2004 – 2008 (Figure 2.5). 7 Overview of Per Capita Special Autonomy can be seen in Figure 6.3. 37 Figure 2.5 Papuan Provincial and District Governments PAD, 2004–2008 [a]. Provincial Government 400 350 billion Rp 300 108 250 200 150 24 12 15 16 11 9 32 16 14 129 136 2004 2005 100 50 23 21 163 60 23 18 194 212 2007 2008 0 2006 Other own- source revenue Profit from regional owned enterprises Local charges Local tax [b]. District/Municipality Governments 300 Other own- source revenue 250 billion Rp 200 150 100 96 112 49 100 38 19 50 0 40 80 23 66 28 50 48 49 47 48 2007 2008 Profit from regional owned enterprises Local charges Local tax 34 34 22 31 2004 2005 2006 Total real own- source revenue Districts/Municipalities Source: APBD, 2004 – 2008 Note: 2004 – 2007 figures are realized, 2008 figures are budgeted; real figures are based on 2007 prices. Local tax constitutes the largest component of Papua’s PAD at provincial level, contributing around 69 percent of total PAD between 2004 and 2008. Tax on motor vehicles is the largest contributor to provincial government local tax revenues. “Other own source revenue” is the largest contributor to Papua’s PAD at the district level. During 2004–2008, other own source revenue contributed 42 percent to total APBD for districts, for example from clearing service revenue (interest). The other primary source of district PAD in Papua is regional fees, with an average contribution of 23 percent. A number of districts in Papua do not possess a solid legal basis for their collection of local taxes and charges. As an example, the 2008 BPK Audit of the 2007 Local Government Financial Reports discovered that Asmat District had collected own source revenue by enforcing a regional regulation from its rump district of Merauke. 38 Papua Public Expenditure Analysis December 2011 Chapter 2 Regional Revenue and Financing 2.4. Financing Unspent budget balance (SiLPA) is the main contributor to regional financing revenue. In 2007, Papua province’s entire financing revenue was derived from SiLPA. The provincial government’s SiLPA totaled Rp. 673 billion: 11 percent of total revenue and twice as large as the provincial government’s PAD of Rp. 345 billion. The combined SiLPA of all districts decreased from Rp. 1.5 trillion in 2007 to Rp. 490 billion in 2008, which is equal to 5 percent of total consolidated district revenue in 2008. The large SiLPA is also caused by the delayed receipt of Special Autonomy funds. As an example, the 2008 phase III and IV disbursements of Special Autonomy funds to the provincial government were not received until November 2008. Delayed disbursement of Special Autonomy funds to the province then results in delayed transfer to the district governments. Most financing expenditures are allocated to reserve funds. At the provincial government level, approximately 90 percent of financing expenditure is allocated to reserve funds. At district level, most financing expenditure in 2008 was used to create reserve funds or to make debt principal payments. Together, these two usages comprised 78 percent of total district financing expenditure. 2.5. Recommendations Sub-national governments need to continue efforts to improve PAD in order to achieve fiscal autonomy. The role of PAD in Papua’s total regional revenue for 2004–2008 diminished in comparison with preceding years. The Papuan government needs to be more innovative in increasing PAD by resolving a range of problems in collecting tax and non-tax revenues. In Table 2.2 Composition of Financing - Papua Province, 2007–2008 (million Rp.) 2007 Financing Revenue SiLPA Disbursement fund of 2008 Province District/ Municipality 673,618 1,630,970 623,518 673,618 1,503631 490,285 reserve Province District/ Municipality 23,400 Receipt of regional loans 103,939 133,233 Financing Expenditure 188,692 97,734 339,808 Creation of reserve funds 164,000 88,849 140,652 5,000 8,885 70,679 Co-financing Payment of principal Grant of regional loans 19,692 124,301 4,176 Source: Ministry of Finance 39 addition, Papua’s low level of local economic development limits tax revenues and local charges. Physical and non-physical investments, as well as the creation of a favorable business climate, would contribute to increasing tax and non-tax revenues. Sub-national governments must issue the required regulations to support PAD collection and management. A number of districts in Papua lack a legal basis to collect local taxes or charges. If these governments were to collect local taxes and charges, they would be in contravention of the regulation which states that the collection of taxes and retributions must be based on a regional regulation. Similarly, any regional regulation concerning tax or non-tax collections should not distort the business climate. The relatively large unspent budget balance, especially in districts, indicates that better financial management is required, particularly through the preparation of cash budgets. Their accumulation of SiLPA negatively affects implementation of regional working unit (SKPD) programs and activities. A well-prepared cash budget would facilitate the management of receipt and payment schedules, particularly for programs funded by special autonomy funds. 40 Papua Public Expenditure Analysis December 2011 Chapter 3 Regional Expenditure line with increasing regional revenue, Papua’s expenditure has also increased over the past “ Inseveral years. General administration spending remains the dominant sector in expenditure allocation, although expenditure on the priority sectors of education, health and infrastructure is increasing. In another trend, capital expenditure has comprised the largest component of expenditure since 2006. Increased expenditure does not appear to have effectively increased local economic growth, however. Also, Deconcentration and co-administration expenditure has decreased as a proportion of total Papuan expenditure. ” 3.1. Overview of Expenditure Government expenditure in Papua continues to increase. Increasing fiscal capacity together with the government’s commitment to promote development has led to increasing government expenditure from national and sub-national budgets (APBN and APBD respectively). Increased expenditure aims to boost economic sectors and improve resource management by providing basic infrastructure such as roads, bridges and markets. As a result of these trends, government expenditure in Papua grew rapidly between 2004 and 2008, increasing 15 percent on average each year. The proportion of public expenditure derived from Deconcentration funds and coadministration spending in Papua decreased between 2004 and 2008. The 2004 figure of 16 percent had decreased to 12 percent by 2008, with an average of 14 percent of government spending in Papua sourced from the APBN over this time period. Each year, Papua receives approximately Rp. 1.63 trillion in Deconcentration and Assistance Task Funds. The combined spending of district/municipality governments in Papua greatly exceeds provincial government expenditure. From 2004–2008, district/municipality government expenditure constituted three quarters of total regional government expenditure in Papua. District/ municipality government expenditure grew by an average of 30 percent based on nominal figures, equating to 17 percent annual average real growth. The predominance of district/municipality government spending is fitting, because a greater share of responsibility for service provision falls to this level of government. The share of expenditure at district/municipality level underlines the importance for these governments to prioritize allocations to key sectors, however. 41 Figure 3.1 Government Expenditure in Papua (APBD and APBN), 2004–2008 20,000 billion Rp 15,000 10,150 10,000 12,201 7,357 4,674 5,000 4,461 1,806 1,249 2,269 - 1,447 1,103 2004 2005 2006 1,519 3,823 3,606 2,137 2,149 2007 2008 APBN (Deconcentrated and Task Assistance Fund) APBD Pemerintah Kabupaten/Kota APBD Pemerintah Provinsi Total Belanja Riil APBN+APBD Source: 2004–2008 APBD, realized (processed); Ministry of Finance Note: 2004–2007 figures are realized; 2008 figures are budgeted; real figures calculated based on 2007 constant prices. Expenditure growth in Papua increased significantly in 2006 and 2007. Compared to the previous year, expenditure (APBD and APBN) grew by 44 percent in 2006 and by 45 percent in 2007. A rise in general allocation fund transfers because of a higher assumed oil price accounts for these increases, which were experiences across Indonesia. 3.2. Expenditure Composition by Sector8 Allocations to general administration dominate overall regional expenditure. Papua’s total provincial and district government expenditure between 2004 and 2008 reached Rp. 51.8 trillion, or Rp. 10.4 trillion per year on average. Over this period, spending on general administration accounted for an average of 50 percent of total expenditure. The amount spent on general administration grew by 31 percent annually in nominal terms and 17 percent per year in real terms. Apart from expenditure on general administration, sub-national governments in Papua prioritized expenditure in the public works sector (14 percent), the education and culture sector (14 percent) and the health sector (8 percent). Agriculture receives a relatively small proportion of expenditure compared to other strategic sectors in Papua. The agricultural sector provides substantial support to the regional economy and absorbs a significant proportion of manpower but receives only 2-3 percent of the total annual expenditure allocation. Allocations for agriculture are increasing in real terms, however, with annual growth in agriculture spending averaging 29 percent. Expenditure on general government administration is still the largest expense at both the provincial and district government level. During 2004–2008, general administration expenditure at the provincial level accounted for 51 percent of total spending per year on average, while at the district level it accounted for 50 percent. At the provincial level, general administration comprises expenditure on social assistance, grants, revenue sharing, the Strategic Plan for Village Development (RESPEK) program, personnel, goods and services, capital expenditure and other 8 42 Detailed composition of sectoral expenditure can be seen in tables A.2, A.3 and A.4 of the attachment. Papua Public Expenditure Analysis December 2011 Chapter 3 Regional Expenditure Table 3.1 Composition of Expenditure by Sector in Papua, 2007 Sector Province General government administration 56% - Strategic Plan for Village Development (RESPEK) 11% - Other general administration 45% District/ Municipality 54% Education 5% 13% Health 6% 8% 17% 11% Transportation 7% 3% Agriculture 2% 3% Others 7% 8% 100% 100% Public works Total Source: APBD, 2007 Note: Special Autonomy funds are allocated to a number of sectors listed in the table above expenses. At the district level, general administration expenditure comprises the same expenditure categories, with the exception of the RESPEK program spending. Aside from substantial allocations for general administration, the expenditure priorities of the provincial and district/municipality governments differ. After general administration, education accounted for the second largest expenditure at district/municipality level from 20042008. Spending averaged 16 percent of overall expenditure, with average nominal growth of 20 percent per year (8 percent in real terms). Compared to the provincial government, districts allocate a greater proportion of the budget to development programs related to the community such as education, health and public works. As for the provincial government, public works attracted the second largest allocation, accounting for on average 14 percent of total expenditure. The proportion of expenditure on strategic sectors has increased.9 District/municipality and provincial governments allocated 43 percent and 42 percent of expenditure respectively to the strategic sectors (Figure 3.2). Growth in expenditure on strategic sectors has tended to increase at district/municipality level and to decrease for the provincial government. Growth in expenditure on the strategic sectors by districts increased by on average 34 percent per year (21 percent in real terms), while at the provincial level growth grew on average at 24 percent per year (12 percent in real terms). 3.3. Expenditure Composition by Economic Classification There have been structural changes in Papua’s regional expenditure, which since 2006 has been dominated by capital expenditure. In 2004 and 2005, personnel expenditure dominated province level expenditure, accounting for on average 33 percent per year (Figure 3.3). 9 The strategic sectors constitute education, health, infrastructure and people-oriented economy (Law No. 21/2001). The expenditure for the sectors of agriculture, fisheries, forestry, plantation, health, education, public work and transportation is included in such strategic sectors. 43 Figure 3.2 Proportion of Spending on Strategic Sectors at the Provincial and District/ Municipality Government Levels in Papua, 2004–2008 70% 60% 60% 50% 45% 40% 30% 38% 35% 32% 49% 44% 39% 42% 41% 20% 10% 0% 2004 2005 2006 Provincial Government Strategic Sectors 2007 2008 Districts/Municipalities Strategic Sectors Source: APBD 2004–2008, realized (processed) Note: 2004 – 2007 figures are realized, 2008 figures are budgeted Figure 3.3 Proportion of Regional Expenditure by Economic Classification at the Provincial and District/Municipality Levels in Papua, 2004 – 2008 [a]. Provincial Government 4,500 Others 4,000 billion Rp 3,500 1,332 3,000 942 Capital 2,500 2,000 1,500 1,000 500 0 676 133 584 579 424 305 448 380 2004 2005 398 1,215 525 603 653 1,179 Goods and Services 682 465 622 802 20062 007 2008 Personnel [b]. District/Municipality Governments 14,000 Others billion Rp 12,000 1,255 10,000 1,205 8,000 1,083 4,255 3,345 6,000 4,000 2,000 2,617 660 1,205 847 747 1,046 1,186 1,750 1,695 1,862 20042 0052 006 2,882 Goods and Services 3,178 3,809 Personnel 2007 2008 2,423 1,795 0 Source: 2004 – 2008 APBD, realized (managed) Note: figures in 2004 – 2007 are realized; 2008 figures are budgeted. 44 Papua Public Expenditure Analysis December 2011 Capital Chapter 3 Regional Expenditure This pattern has since shifted, with capital expenditure now accounting for the largest proportion of spending at 33 percent per year. Since 2006, Papua’s provincial government has been receiving additional special autonomy funds for infrastructure, which has lead to an increase in spending on construction and physical goods. Meanwhile, the proportion of goods and services and other expenditure remained relatively stable during 2006-2008, ranging between around 22-25 percent and 13-20 percent per year respectively. The structure of expenditure at district level has shifted. In 2004 – 2005, the largest component of expenditure was personnel, which accounted for 38 percent. However, capital expenditure dominated in subsequent years. The increase in capital expenditure may result from an increase in special allocation grants (DAK). DAK funds are intended for health and education expenditure, infrastructure as well as capacity building activities for government institutions involved in spending special autonomy funds (promoting effective spending on basic public services). At the provincial government level, expenditure patterns have been relatively stable with capital expenditure remaining relatively dominant. From 2004–2007, the proportion of expenditure allocated to personnel decreased but the amount of expenditure increased. Having realized that the composition of the APBD in Papua was an “inverted pyramid”,10 the governor of Papua province took immediate action to invert the pyramid so that the majority of expenditure would be enjoyed by the public rather than being allocated to the government bureaucracy. Moving forward, it will be important for the provincial government to continue to decrease the proportion of expenditure allocated to personnel in line with increased direct allocation of special autonomy funds to communities, and by rationalizing its government structure. 3.4. Budget Surplus and Deficit Both the provincial and the district governments have maintained a budget surplus. The ratio of provincial government surplus to total revenues is somewhere below 10 percent. The government has mostly used this surplus to establish reserve funds and to invest in regional companies. At the district level, the ratio of surplus to total revenue is around 10 percent. This surplus results because governments are conservative in predicting potential revenues when formulating the budget. When the revenue is realized and exceeds the budgeted amount, a surplus results. 3.5. Expenditure Effectiveness in Papua Province Per capita expenditure in Papua continues to increase. The increase in per capita expenditure is in line with the increase in transfers to Papua through balancing funds (DAU, DAK, and revenuesharing), APBN (Deconcentration and Assistance Task Funds) and special autonomy funds. As transfers have increased, Papua’s population size has not changed significantly. In general, regional expenditure during 2005–2007 remained ineffective in improving economic development. The elasticity of Papua’s regional expenditure to gross regional domestic product (GRDP) was 0.10 in 2006 and 0.11 in 2007. These figures indicate that the increase in expenditure has only a minor effect on economic development. In 2007, a 1 percent increase in expenditure increased economic growth by only 0.11 percent, a little better than the 2006 figure of 0.10 percent. 10 PEA Report 2005 45 Figure 3.4 Regional Revenue and Expenditure at the Provincial and District Government Level in Papua, 2004–2008 [a]. Provincial Government 6,000 3,606 3,954 3,246 1,806 1,819 1,000 1,447 1,516 2,000 3,968 3,000 3,823 4,000 2,269 billion Rp 5,000 0 2004 2005 2006 2007 2008 Nominal Revenue Nominal Expenditure Provincial Government Real Revenue Provincial Government Real Expenditure [b]. District/Municipality Governments Districts 14,000 12,201 11,861 4,674 2,000 4,461 4,544 4,000 5,068 6,000 7,357 8,000 10,150 10,782 10,000 9,687 billion Rp 12,000 0 2004 2005 2006 2007 2008 Nominal revenue Nominal expenditure Districts/Municipalities Real Revenue Districts/Municipalities Real Expenditure Figure 3.5 Relationship between Expenditure and per Capita Expenditure in Papua, 2004–2008 8.00 6.93 14,000 billion Rp 12,000 5.19 10,000 8,000 6,000 3.15 5,908 13,973 10,387 4.00 3.00 4,000 2.00 2,000 1.00 0.00 2004 2005 Papua Province Expenditure (left) 2006 2007 Papua Province Per Capita Expenditure (right) Source: 2004–2007 APBD, realized (processed); Ministry of Finance Note: figures in 2004 – 2007 are realized; figures do not include special autonomy funds. Papua Public Expenditure Analysis December 2011 6.00 5.00 3.98 7,455 - 46 7.00 million Rp 16,000 Chapter 3 Regional Expenditure Box 3.1 Measuring the effect of regional expenditure on economic growth Elasticity is calculated as a ratio of the growth of GRDP to the growth of regional expenditure. The growth of GRDP is based on constant prices and excludes the mining sector. Regional expenditure is measured as the total real expenditure in Papua sourced from APBD and APBN (Deconcentration and Assistance Task Funds). Elasticity indicates by how many percent economic growth grows as a result of a 1 percent increase in regional expenditure. Regional expenditure is considered effective if elasticity is above 1 percent. Elasticity is not the only measure of regional expenditure effectiveness, however. Nor is regional expenditure the only factor to impact on economic growth. 3.6. Deconcentration and Assistance Task Funds Total Deconcentration and Assistance Task Funds disbursed by the central government amounted to Rp. 8.7 trillion and this amount as a proportion of regional expenditure tended to decrease. The growth in Deconcentration and Assistance Task Funds transfers was relatively small compared to the aggregate APBD of Papua. Trends in the allocation of Deconcentration funds varied from sector to sector. The security and order sector received the largest proportion of Deconcentration funds from 2005-2007, averaging 33.70 percent per year. In 2008, by contrast, allocations focused more heavily on the public services sector which received 53.71 percent. Over 2005-2008, the economic sector attracted the second largest allocation, receiving on average 25.22 percent per year. Considering Deconcentration and Assistance Task Funds together, the health sector attracted an insignificant proportion of allocations between 2004 and 2008, receiving on average only 2.61 percent per year. Over the same period, again calculated as a proportion of Deconcentration and Assistance Task Funds combined, the education sector received around 10.09 percent per year. Table 3.2 Papua Province Deconcentration Funds Allocation by Sector, 2005 – 2008 (%) Sector 2005 2006 2007 2008 22.02 22.46 14.51 53.71 3.49 1.66 16.82 0.26 Order and Security 34.47 36.57 30.07 7.55 Economy 16.48 22.27 23.75 25.27 0.94 0.89 0.96 1.11 Public Services Defense Environment Housing and Public Facilities 4.73 0.14 0.01 0.04 Health 1.03 2.49 2.15 0.97 Tourism and Culture 0.23 0.24 0.16 0.07 Religion Education Social Protection 1.15 1.22 1.19 0.43 14.55 11.72 10.30 10.52 0.91 0.33 0.07 0.10 Source: Ministry of Finance (Regional Finance Information System/SIKD) 47 Box 3.2 Deconcentration and Assistance Task Funds In accordance with Government Regulation No. 7/2008, Deconcentration funds are those originating from the APBN and utilized by a governor as the representative of the central government. This includes all revenues and expenditures for the purpose of Deconcentration implementation, but excludes funds allocated to regional offices of central government agencies. Meanwhile Assistance Task Funds are those originating from the APBN and utilized by the regions and villages, including all revenues and expenditures for the purpose of task assistance implementation. The Deconcentration and Assistance Task Funds serve as a tool for the central government to implement central government programs in the region. The financial statements for both types of funds are not included in the records of APBD; the provincial government is directly accountable to the central government for their usage. The proportional allocation of Deconcentration and Assistance Task Funds varies from year to year. The amount of Assistance Task Funds disbursed by the central government also fluctuates (Figure 3.6). From 2005-2008, overall disbursement of Assistance Task Funds amounted to Rp. 935 billion in real terms. The housing and public facilities sector received the largest allocation of Assistance Task Funds in 2005. By contrast, the economic sector received the largest allocation in 2008, attracting 53.03 percent of total Assistance Task Funds that year. 3.7. Recommendations Papua Province should direct its considerable fiscal resources to strategic sectors that will assist the provincial government to achieve its long-term development goals. Regional finances are likely to continue to increase over the next decade, with special autonomy funds providing certainty for these trends. In utilizing this increasing revenue, it is recommended that the provincial government adopt a pattern of regional expenditure more closely oriented towards basic services such as education, health and infrastructure. Sectors such as agricultural and peopleoriented economic institutions which relate directly to the income of the majority of the population should also receive attention. The provincial and district/municipality governments should focus expenditure allocation on sectors that promote the local economy. The low elasticity of expenditure to regional economic growth requires regional governments to spend more funds in sectors which promote economic growth, while remaining heedful of equality and justice for the large proportion of the indigenous Papuan population who are relatively poor. Efforts to “invert the pyramid” should continue, to make best use of the public budget. Capital expenditure has replaced personnel expenditure in the last few years (2006–2008) as the dominant target of APBD expenditure in Papua province. This shift in proportional allocation indicates a better expenditure policy, because regional governments can utilize increased capital expenditure to improve their capacity to provide services for the community. 48 Papua Public Expenditure Analysis December 2011 Chapter 3 Regional Expenditure Figure 3.6 Allocation of Assistance Task Funds in Papua Province, 2005 – 2008 (%) 2008 2007 2006 0% 10%2 Public Services 0% 30%4 Economy 0% 50%6 Environment 8.9 21.8 0.0 52.5 2.5 42.3 25.4 2.8 46.3 20.1 2005 2.7 18.6 3.8 39.1 13.0 0.2 36.4 3.5 53.0 6.9 0% 70%8 0% Housing and Public Facility 90% 100% Health Source: Ministry of Finance (SKID) 49 Chapter 4 Sectoral Analysis expenditures continue to increase. Nevertheless, this expenditure is yet to have a “ Sectoral maximal impact on the strategic sectors of education, health, infrastructure and agricultural sectors. There have been improvements in facilities and infrastructure, but these remain well short of expectations. ” 4.1. Education Sector In general, the performance of the education sector in Papua province has not been optimal. Disparities persist between different districts and municipalities, and the issues of access to and quality of education remain greatly influenced by geography and human resource capacity. Facilities and infrastructure are insufficient and achievements in the education sector remain below expectations. Expenditure has increased, but is yet to address sectoral issues. Education Condition in Papua Province Papua province adopts a policy of the provision of low-cost education services. This policy commenced in 2009 under Governor’s Regulation No. 5/ 2009 Concerning Exemption from Education Costs for Compulsory Primary Education and Reduction of Education Costs for Indigenous Papuan Participants in Intermediate-Level Education. This governor’s regulation provides for free-of-cost education for all primary school students and for indigenous Papuan and underprivileged intermediate school students. The free-of-cost education policy covers school fees (SPP), enrollment fees for new students (PSB), textbook fees, development fees, test and examination fees, graduation and farewell costs, cleaning and security. This policy aims to address underdevelopment of the education sector in Papua, particularly in terms of improving the quality of education. The availability of teachers and classrooms has started to show improvements. Teacherstudent ratios in junior high school (SLTP) and senior high school (SLTA) improved significantly from 2004-2007, whereas at primary school level the ratio remained relatively constant (Figure 4.1). Trends in the number of students per classroom varied at different levels, increasing for primary school, remaining relatively constant for junior high school, and decreasing for senior high school. If these figures are combined with net enrollment rate (NER), all three levels improved over this time period. Accordingly, we can conclude that the availability of education staff and education infrastructure in general has improved over the last four years. 51 Figure 4.1 Ratio of Teachers/Classrooms to Students in Papua, 2004-2007 [a]. Number of Students per Teacher 33 35 27 30 25 21 28 26 25 26 23 22 21 20 14 15 12 10 5 0 2004 2005 Elementary School 2006 Junior High School 2007 Senior High School [b]. Number of Students per Classroom 60 48 50 48 41 37 40 30 37 37 28 26 33 30 36 38 20 10 0 2004 Elementary School 2005 2006 Junior High School 2007 Senior High School Source: BPS Papua, 2008 (processed) Table 4.1 Number of Students per Teacher in Papua Province, 2004-2007 Year Primary School Buildings (unit) 2004 2005 Availability of Teachers Shortage Real (person) Ideal (person) (person) 2,407 17,984 21,663 3,679 2,428 16,079 21,852 5,773 2006 2,378 15,869 21,402 5,533 2007 2,330 15,572 20,970 5,398 Source: Papua BPS, 2008 (processed) Although student-teacher ratios are improving, Papua continues to lack teachers. The shortage is evident from trends in the need for teachers. Ideally, at least nine teachers are required to supervise one school building at primary school level.11 As there were 2,330 primary school buildings in Papua in 2007, the ideal number of teachers would have been 20,970 teachers. As the actual number of teachers was 15,572, there was a shortfall of 5,398 teachers (Table 4.1). 11 52 Papua Province 2007 Strategic Plan of Education and Learning Services Papua Public Expenditure Analysis December 2011 Sectoral Analysis Papua’s education indicators remain a significant concern. Papua continues to score well below the national average on every indicator. Papua’s education sector lacks facilities and infrastructure, and features education inequalities between different districts and municipalities. The net enrollment rate provides an indicator of the low access to education in 2008, particularly the primary school figure of 82.9 percent and the junior high school figure of 48.56 percent. Indonesia’s national net enrollment rates in the same year were 93.98 percent at primary school level and 66.75 percent for junior high school. The disparities between districts/municipalities in terms of teacher-student ratio, years of schooling and literacy are of serious concern. 1. In 2007, four districts/municipalities had teacher-student ratios above 30 at primary school level, nine districts/municipalities had a ratio between 20 and 30, and seven districts/ municipalities had a ratio below 20. The national ratio is 19 (Ministry of National Education, 2006). In general, teacher to student ratios at primary, junior high and senior high school levels decreased between 2005 and 2007 in all districts/municipalities. Table 4.2 Average Years of Schooling, Literacy and Number of Teachers By District/ Municipality in Papua Province, 2007 District Duration of School (year) Literacy (%) Teacher (person) Merauke 8.5 87.10 2,266 Jayawijaya 3.4 47.21 2,106 Jayapura 8.0 96.00 2,140 Nabire 6.5 83.20 2,232 Yapen Waropen 6.5 88.12 1,409 Biak Numfor 9.3 97.48 1,961 Paniai 6.2 62.90 1,483 Puncak Jaya 6.1 86.80 418 Mimika 6.7 86.90 1,637 Boven Digoel 3.0 31.70 728 Mappi 3.8 31.30 713 Asmat 3.9 31.00 613 Yahukimo 2.4 31.80 482 Pegunungan Bintang 2.2 31.60 547 Tolikara 2.4 32.86 605 Sarmi 6.4 87.10 628 Keerom 7.3 91.10 915 Waropen 6.3 76.50 443 Supiori 7.7 95.37 319 Jayapura Municipality 10.8 98.41 3,007 Papua 6.5 75.41 24,652 Indonesia 7.5 91.87 - Source: Papua BPS (2008) processed, www.bps.go.id 53 2. Of all districts/municipalities in Papua, only in Jayapura city (10.7 years) and Biak Numfor district (9.3 years) would the average citizen have completed nine years of basic education (Table 4.2). In eighteen other districts, the average years of schooling is fewer than the six years required to complete primary school. In general, these districts are difficult to access because they are located in rural hinterlands or mountainous areas, such as Jayawijaya, Yahukimo, Pegunungan Bintang, Tolikara, Mappi and Asmat districts. 3. The disparity between districts/municipalities is also readily apparent in the literacy rate. Accessible districts/municipalities have literacy rates above 90 percent, whereas the literacy rate in inaccessible districts/ municipalities is below 50 percent. Gender equality in Papua remains low compared to the national situation in Indonesia. On average, the population of Papua has only completed primary education, meaning the average citizen in Papua has not completed the nine compulsory years of education. On average, females have completed fewer years (5.7) than males (7.3) in Papua. The equivalent national averages are seven years for females and eight years for males. The literacy rate in Papua is 81.01 percent for males and 68.78 percent for females, each much lower than the national figures of 95.22 percent (males) and 88.62 percent (females). Hope for the future is embodied in the higher literacy rate of 15-44 year olds in Papua as compared with the older part of the population (Figure 4.2). There is a disparity in access to education between low- and high- income earners. Figure 4.3 reveals a significant difference in net enrolment rates between low- and high-income groups, particularly at junior and senior high school level. At junior high school level, the net enrolment rate of the richest quintile is approximately 2.5 times higher than the poorest quintile (74.9 percent compared with 29.7 percent). The equivalent disparity is greater at senior high school level, reaching five times (65.2 percent: 12.6 percent). The implication of these figures is that governments at all levels have so far succeeded in delivering equal access to education only at primary school level, at which the gap between the richest quintile (93.2 percent) and the poorest quintile (72.8 percent) is not too wide. Public Expenditure in the Education Sector Per capita expenditure in the education sector is increasing. Per capita education expenditure did decrease in 2006, but in general provincial and district-level APBD expenditure in Papua has increased in per capita terms. At district/municipality level this increase predominantly reflected increased spending on goods and services, much as expenditure on teachers’ salaries remained the dominant usage (approximately 60 percent of total education expenditure). In 2008, per capita expenditure on education was the second highest in Papua, exceeded only by per capita expenditure on infrastructure. The proportion of regional expenditure allocated to education does not comply with the stipulation of provisions, either at provincial or district level. From 2004-2008, the provincial government allocated an average of 7.43 percent of total regional expenditure annually to education. District/municipality governments in average allocated 16.27 percent. Education budget provisions stipulate that a minimum of 20 percent be allocated. Personnel expenditure is the largest item of education sector spending both at provincial and district government levels, exceeding expenditure on capital, goods and services, and other expenditures. From 2004-2008, the provincial government spent an average of 39.05 percent annually on personnel expenditure. District/municipality governments spent 66.28 percent annually, mostly on teachers’ salaries. 54 Papua Public Expenditure Analysis December 2011 Sectoral Analysis 63% 61% 64% 76% 80% 70% 78% 89% 60% 53% 67% 51% 70% 77% 80% 71% 90% 67% 100% 78% 88% Figure 4.2 Literacy rate by age group in Papua, 2003 and 2007 50% 40% 30% 20% 10% 0% Male Female Male Female 2003 2007 15-29 30-44 45-59 >60 Source: extracted from Susenas 2007 Figure 4.3 Net Enrolment Rate by Income Group 100 90 Nett School Enrollment Rate (%) 93 85 90 80 73 76 75 69 70 65 Q1 56 60 51 Q2 50 40 30 Q3 35 35 Q4 30 20 20 Q5 13 10 Elementary School Junior High School Senior High School Source: extracted from Susenas 2007 Figure 4.4 Per Capita Education Expenditure in Papua Province, 2004-2008 Per Capita Education Expenditure (Rp) 1,200,000 1,000,000 800,000 600,000 400,000 200,000 2004 2005 2006 2007 2008 Per Capita Nominal Expenditure Source: 2004-2008 APBD, realized (processed) 55 Recommendations Good coordination between the central, provincial and district/municipality governments is crucial to optimize development results in the education sector. The availability of considerable amounts of balancing funds, special autonomy funds and APBD funds presents an opportunity fit to be utilized to the maximum extent possible by regional governments and the people of Papua to increase participation in education among the school-age population, particularly at primary school and junior high school level. Implementation often features overlapping authority and coordination between the central, provincial and district/municipality governments, however. The Ministry of National Education, the Provincial Agency for Education and Sport and District Education Agencies need to sit down together to coordinate their respective activities and overcome this problem. This considerable budget could thereby be utilized effectively and efficiently to achieve the expected advancements. Improvements to the quantity and quality of teachers are required, particularly in hinterland and mountainous areas, in order to promote equality of education between regions. It is mostly in coastal and urban areas that the number of available teachers is close to the ideal ratio with students. Hinterland and mountainous areas are generally short of teachers, whereby the teacher to student ratio falls far below the ideal. This shortage in turn contributes to low average years of schooling and continuing high illiteracy rates in hinterland and mountainous areas. The disparity between regions thereby concerns not only the ratio of teachers, but also years of schooling and literacy. Efforts to increase access to education must focus on lagging groups within society. The preceding discussion revealed multi-dimensional inequalities in access to education, encompassing gender, geographical and income aspects. To address these inequalities, the provincial and district/ municipality governments need to work together to focus on groups whose access to education is of serious concern, such as girls, poor families and hinterland communities. Provincial and district/municipality governments in Papua needs to commit to allocate a minimum of 20 percent of the budget to education expenditure. The amount of funds available is one factor that can support improvements in the quality of education in Papua in particular and Indonesia in general. Therefore, it is greatly hoped that the provincial district/ municipality governments allocate a minimum of 20 percent of the overall APBD to education annually, as stipulated in Law No. 20/2003 concerning the National Education System. 4.2 Health Sector Health is a priority sector in Papua due to its underdeveloped condition compared to other regions. Papua faces serious challenges concerning certain diseases such as HIV/AIDS, malaria, and upper respiratory tract infections. Expenditure on health is low relative to other sectors, leading to ongoing difficulties in developing facilities and infrastructure, availability of medical personnel, and inequalities between different regions. Nevertheless, improvements are gradually becoming evident in health indicators. Health Conditions in Papua Province The Papua government prioritizes health services for indigenous Papuans. Through Governor of Papua’s Regulation No. 6/2009 concerning the Exemption of Health Costs for Indigenous Papuans, the provincial government provides free-of-cost healthcare to indigenous 56 Papua Public Expenditure Analysis December 2011 Sectoral Analysis Figure 4.5 Education Expenditure by Economic Classification at Provincial and District Levels in Papua Province, 2004-2008 [a]. Provincial Government billion Rp 300 250 200 150 52 90 100 32 56 34 50 100 25 22 37 108 73 49 47 64 45 2004 2005 2006 2007 - Personnel Capital Total real education expenditure 2008 Goods and Services Other expenditure [b]. District/Municipality Government Districts/Municipalities Education Expenditure billion Rp 2,000 515 1,500 260 1,000 141 75 118 106 500 725 209 139 562 636 2005 2006 254 181 1,122 857 2004 Personnel Capital Total real education expenditure 2007 2008 Goods and Services Other expenditure Source: 2004-2008 APBD, realized (processed) Papuans at regional public hospitals (RSUD), with the expense borne by the government in the 2009 budgetary year. The government will also waive medical expenses for indigenous Papuans at all community health centers (Puskesmas) and auxiliary health centers (pustu). Public health services play a greater role in Papua province than in Indonesia as a whole. The community in Papua has better access than the average in Indonesia to public health facilities, such as hospitals, community health centers and auxiliary health centers (12 percent as compared to 7 percent, see Figure 4.6). The same is true for free health services, which a higher proportion of the community in Papua (26 percent) access compared to the national average (14 percent). The two figures illustrate the greater dependence of the community in Papua on public health services, which results in part from limited availability of private health services. In general, the targeting of health services in Papua is already on the right track. Members of the lowest income group have the greatest access to public and free health facilities (Figure 4.6.) The difference in access to free health services between low and medium income groups is relatively small, however. The level of poverty in Papua may explain this pattern, as it indicates that some members of the medium income group remain poor. 57 Figure 4.6 Health indicators by income group 35% 32% 35% 31% 30% 30% 26% 25% 25% 20% 15% 14% 12% 20% Q1 15% Q2 Q3 10% 10% 7% 5% 5% 0% 0% Morbidity rate Access to public health facilities Access to free health services Morbidity rate Access to public health facilities Papua Q4 Q5 Average Access to free health services Indonesia Source: SUSENAS 2007 (processed) Figure 4.7 Comparison of Health Indicators in Papua Province and Several Other Regions in Indonesia, 2000 and 2005 [a]. Infant Mortality Rate (per 10,000 infants) 80 70 67 56 60 53 51 50 43 51 41 50 41 40 48 44 39 38 44 35 44 35 43 35 41 34 32 30 20 10 2000 Indonesia Sulsel Papua Kalbar NTT Maluku Banten Sulteng NTB Malut Kalsel 0 2005 [b]. Life Expectancy (years) 69 69 70 68 66 64 62 6566 65 64 67 66 65 6464 6768 6869 66 65 6262 6161 60 58 2000 Source: BPS Booklet (2008) (processed) 58 Papua Public Expenditure Analysis December 2011 2005 Indonesia Sulsel Papua Kalbar NTT Maluku Banten Sulteng Kalsel Malut NTB 56 Sectoral Analysis The quality of health of Papua’s population has improved in the past several years. Trends between 2000 and 2005 illustrate such improvement. The infant mortality rate in Papua decreased from 44 per 10,000 infants in 2000 to 35 per 10,000 infants in 2005 (Figure 4.7). Life expectancy improved over the same period from 67 years in 2000 to 68 years in 2005. Papua’s achievement in these two main health indicators was better than West Nusa Tenggara (NTB) North Maluku, South Kalimantan, Central Sulawesi, Banten, Maluku, East Nusa Tenggara (NTT), and West Kalimantan (Figure 4.7). Although the quality of health has improved, the availability of health service facilities in Papua has not changed. The ratio of population per community health center remained unchanged between 2005 and 2007 (Figure 4.8a).The ratio of population per auxiliary health center showed more significant progress. On average, each auxiliary health center catered to 2742 people in 2007 as compared to 3184 people in 2005. The availability of medical personnel has improved, although it remains far from ideal. The number of people per doctor decreased significantly between 2005 and 2007. In 2007, this ratio reached 5,646 people per doctor, still well above the ideal ratio of 2,500 people per doctor. A similar trend was evident for midwives, who on average catered to a population of 1169 people in 2007. The opposite trend occurred for the availability of nurses, however. In 2007, a nurse on average catered to a population of 827 people per year, a slight increase from the 2005 figure of 796 people. Figure 4.8 outlines these trends. The disparity in the number of doctors between districts/municipalities in Papua is the most fundamental issue. There are very few doctors in geographically inaccessible regions with poor transportation links to the capital city, Jayapura. In mountainous and hinterland districts such as Yahukimo, Jayawijaya, Puncak Jaya and Paniai, each doctor caters to a population of between 17,000 to nearly 50,000 (Yahukimo) people on average (Figure 4.9). In coastal areas such as Jayapura municipality, Merauke and Biak Numfor districts, by contrast, the ratio of people per doctor is relatively close to the ideal. There are also disparities between districts/municipalities in the number of community health centers. In Jayapura municipality, Yapen Waropen and Merauke districts, there are 1.5 – 2.4 community health centers per 10,000 people (Figure 4.10). In most districts/municipalities, by contrast, there are fewer than one community health center per 10,000 people. In seven districts, there are fewer than one community health center per 20,000 people. Clinical malaria is the most common malaria variant in Papua. Between 2004 and 2007, there were 69,000 clinical malaria cases each year (Figure 4.12). The number of clinical malaria cases in 2005 was pushed down to 26,597 cases, but the number of cases then increased by close to 90 percent annually for the following two years. Malaria in Papua has attracted serious attention, both within Indonesia and worldwide. On the occasion of World Malaria Day on April 25, 2009, the IPM-5GF project organized an international seminar in Jayapura municipality. The seminar coined the slogan, Papua Free from Malaria, with the target that by 2020 Papua’s territory will be malaria-free. In the medium term, the provincial government will strive to decrease malaria cases in Papua by 50 percent annually as of this year. The threat of HIV/AIDS has risen since early 2000. The first HIV case in Papua was diagnosed in 1992. The number of HIV/AIDS cases has increased rapidly since 2000 (Figure 4.13). The current 59 Figure 4.8 Community Health Center, Auxiliary Health Center, Doctor, Midwife and Nurse Ratios in Papua Province, 2005-2007 [ [a]. Community and Auxiliary Health Center (people/unit) 9000 8267 8154 8227 8000 7000 6000 5000 4000 3397 3184 2742 3000 2000 1000 0 2005 2006 Community health centers 2007 Sub- community health centers [b]. Ratio of Doctor, Midwife, and Nurse (people/medical staff) 8000 7158 6971 7000 5646 6000 5000 4000 3000 2000 1504 1480 1000 1169 843 796 827 0 2005 2006 Doctor Midwife 2007 Nurse Source: Papua BPS, 2008 (processed) Figure 4.9 Doctor to Population Ratio by District in Papua Province, 2007 (per person) 30000 25389 24489 25000 21134 20000 17275 15000 12031 9478 10000 5436 6349 4667 3921 5000 7187 5756 5336 3871 3121 2104 6320 5548 3896 2833 Source: Papua BPS, 2008 (processed) 60 Papua Public Expenditure Analysis December 2011 Supiori Kota Jayapura Keerom Waropen Sarmi Tolikara Peg. Bintang Asmat Yahukimo Mappi Boven Digoel Biak Numfor Mimika Yapen Waropen Nabire Puncak Jaya Paniai Jayapura Jayawijaya Merauke 0 Sectoral Analysis Figure 4.10 Ratio of Community Health Centers to Population by District in Papua Province, 2007 (per 10,000 people) 3.00 2.40 2.50 2.00 1.72 1.53 1.50 0.70 0.70 1.11 1.14 1.01 0.95 1.00 0.48 0.50 0.93 0.43 0.86 0.42 0.71 0.58 0.48 0.43 0.33 0.25 Kota Jayapura Supiori Waropen Sarmi Keerom Tolikara Peg. Bintang Asmat Yahukimo Mappi Boven Digoel Biak Numfor Mimika Yapen Waropen Nabire Puncak Jaya Paniai Jayapura Jayawijaya Merauke 0.00 Source: Papua BPS, 2008 (processed) Figure 4.11 Five Most Serious Diseases in Papua, 2006 and 2007 (% of population) 1.6 2.3 2.4 2.0 0.1 2.5 9.8 8.9 27.2 56.9 Malaria Pneumonia Diarrhea+Cholera Bacillary Dysentery ISPA (acute respiratory tract infectious disease) Others [a]. 2006 28.3 57.7 Malaria Pneumonia ISPA (acute respiratory tract infectious disease) Bacillary Dysentery Diarrhea+Cholera Others [b]. 2007 Source: Papua BPS, 2008 (processed) 61 estimate of the aggregate number of HIV/AIDS sufferers in Papua is 3,479 people. The provincial government has taken preventive measures with support from the central government and donor countries. In an encouraging trend, the rate of annual growth in HIV/AIDS cases has been force down since 2005. Regional Expenditure in the Health Sector Average annual expenditure allocations to the health sector, designated a strategic sector under special autonomy, comprise less than 10 percent of the regional budget (APBD), at both provincial and district/municipality level. From 2004-2008, the provincial government allocated an average of 8.68 percent of total expenditure annually to health. At district/municipality level, the average proportion spent on health was 7.41 percent. This spending is well below the ideal proportion of around 15 percent of each year’s APBD. Figure 4.12 Malaria Cases in Papua, 2004-2007 (persons) 200,000 186,898 186,442 150,000 122,240 96,981 100,000 89,607 62,820 49,076 50,000 26,597 2004 2005 2006 Tropical Malaria Tertiana Malaria Clinical Malaria Malaria Disease 2007 Mix Malaria Source: Papua BPS, 2008 (processed) Figure 4.13 Trend in the Number of HIV and AIDS Cases in Papua Province in 1992-2007 Period 700 584 585 600 491 500 400 347 Total 291 300 186 200 AIDS 204 HIV 77 2007 2006 2005 2003 2004 2002 2001 2000 1996 34 1999 11 5 1997 13 1995 1993 1992 6 1994 50 6 1998 100 0 607 Source: Disease Prevention and Monitoring and Healthy Environment Section, Papua Province Health Agency (2008) 62 Papua Public Expenditure Analysis December 2011 Sectoral Analysis District/municipality governments play an increasingly large role in health expenditure. From 2004-2008, district/municipality health expenditure grew by an average of 42 percent per year (nominal), or 27.43 percent real growth annually. Over the same period, nominal annual growth in provincial government spending averaged 13.13 percent, or only 1.45 percent real growth per year. These trends reflect the increasing role of district/municipality governments in providing health services, in accordance with regional autonomy. Full details are presented in Figure 4.14. On average, per capita health expenditure in Papua has increased each year. From 20042008, per capita health expenditure increased on average by 28 percent per year (nominal), or 15 percent per year in real terms. As in the education sector, goods and services expenditure contributed the most to this increase. Goods and services expenditures and capital expenditure are the largest components of health expenditure. Goods and services expenditure was the largest component of provincial government health expenditure in Papua from 2004-2008, at 46 percent. Provincial government spending on employees exhibited an upward trend over this period. At district/municipality level, capital expenditure (38 percent) was the largest component, with spending typically used to build health facilities. The average proportion spent on goods and services was lower than at provincial level, namely 26 percent per year. Full details are presented in Figure 4.16. Recommendations A staged and evenly distributed increase in the number of health facilities is required, including community health centers, auxiliary health centers and regional hospitals. Access to health facilities is an important component in improving health levels. The number of health facilities and their distribution remain insufficient, however, particularly in hinterland areas, as discussed above. The provincial government and district/municipality governments need to work together to gradually increase the number of community health centers, auxiliary health centers, mobile health center (Pusling), and village maternity centers (Polindes) in remote areas. In addition, improvements are needed in regional hospitals located at transportation hubs such as Wamena, Merauke, Timika and Biak, so that these facilities can be more responsive to emergencies. An evenly distributed increase in the number of medical personnel (doctors, midwives and nurses) is also required. As with health facilities, access to professional medical personnel has a strong determining influence on health levels.12 The number of doctors in hinterland areas is of serious concern, as each doctor caters to a population in excess of 20,000 people. For more complex conditions, there are few specialist doctors even in major cities, including Jayapura. To address these shortages, the provincial and district/municipality governments need to ensure the availability of one general practitioner in each district and one midwife and nurse/paramedic in each village/ward. In addition, every public hospital located at a transport hub should have a full complement of specialist doctors. To achieve this target, the provincial government and district governments could put together an attractive remuneration package to aid recruitment of medical personnel. 12 The shortage of medical personnel is one contributor to the low proportion of childbirths in Papua assisted by a midwife or health worker (52.3 percent). In 2007. the proportion in Papua was lower than the national average (72.5 percent) and that of neighboring West Papua province (56 percent). 63 Figure 4.14 Provincial and District/Municipality Health Expenditure in Papua, 2004-2008 [a]. Current/Nominal Price 1,200 billion Rp 1,000 800 600 400 200 20042 005 2006 Provincial Government 2007 2008 Districts/Municipalities [b]. Constant 2007 Price 1,200 billion Rp 1,000 800 600 400 200 2004 2005 2006 Provincial Government 2007 2008 Districts/Municipalities Source: 2004-2008 APBD , realized (processed) Figure 4.15 Per Capita Health Expenditure in Papua Province, 2004-2008 Per Capita Health Expenditure (Rp) 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 2004 2005 2006 2007 Per Capita Nominal Expenditure Source: 2004-2008 APBD, realized (processed) 64 Papua Public Expenditure Analysis December 2011 2008 Sectoral Analysis Figure 4.16 Health Expenditure by Economic Classification at Provincial and District/ Municipality Levels in Papua Province, 2004-2008 [a]. Provincial Government 350 billion Rp 300 23 250 200 132 100 101 22 36 150 63 99 106 73 65 50 133 33 40 53 50 2004 2005 2006 2007 - Personnel Capital Total real health expenditure 2008 Goods and Services Other expenditure [b]. District/Municipality Governments billion Rp 1,200 1,000 414 800 283 600 259 164 400 200 - 51 79 94 84 140 143 147 201 2004 2005 2006 Personnel Capital Total real health expenditure 194 318 2007 423 2008 Goods and Services Other expenditure Source: 2004-2007 APBD, realized, and 2008 APBD (processed) Provincial and district/municipality governments need to engage in more intensive and effective prevention efforts and responses to malaria and AIDS, by involving all stakeholders, both domestic and international. Regional government cannot take on sole responsibility for the response to malaria and AIDS. They require assistance from other parties, both national and international. Moreover, malaria and AIDS in Papua have gained worldwide attention, opening broad possibilities for the provincial government to increase cooperation with external parties. Provincial and district/municipality governments need to increase health expenditure to a minimum of 15 percent of the APBD. Regional governments in Papua are more fortunate than other regions because of their large fiscal capacity. However, allocations to the health sector remain low, particularly considering the dependency of indigenous Papuans on public health services. The governor’s regulation providing free-of-cost health services for indigenous Papuans is one advancement. However, this measure will have a maximal impact only if the provincial and 65 district/municipality governments allocate a minimum of 15 percent of APBD to the health sector. Such resources could be utilized to implement the first two recommendations above and to make other breakthroughs, such as providing free health insurance for indigenous Papuans. 4.3. Infrastructure Sector Papua’s unique natural conditions pose a serious challenge to the provision of facilities and infrastructure. Existing facilities and infrastructure are yet to cover the entirety of Papua’s territory. Infrastructure development to date has not been well coordinated, resulting in inequalities between different regions, especially between hinterland/mountainous areas and coastal areas. Limited facilities and infrastructure contribute significantly to regional disparities. The regional government is attempting to address this problem by increasing public investment in the infrastructure sector through increased capital expenditure on infrastructure. Despite this continuous increase in government spending, existing infrastructure remains insufficient to respond to demand shortages, meaning that there is a financing gap between needs and financing. Infrastructure Conditions in Papua Province Infrastructure development in Papua has not been well coordinated. As detailed at length in World Bank (2009), there is not a well-founded master plan for infrastructure development in Papua, which ideally would be prepared jointly by the central, provincial, and district/municipality governments. Existing plans are unilateral in nature and most coordination takes place on an ad hoc basis. Coordination and a master plan are crucial requirements, considering that the infrastructure sector requires very significant funding, particularly in the context of Papua. Central government continues to play a substantial role in the development of infrastructure in Papua province. This role is evident in the construction of 11 main roads in Papua (Figure 4.17), which are being funded from the national budget (APBN). Regional governments deal more with district/municipality roads as well as maintenance and operational activities. The construction of asphalt roads in Papua increases every year. The amount of asphalt roads has been increasing since 2005, but by 2007 less than half of existing roads were asphalted. Dirt roads continue to comprise the largest proportion of roads in the province (Figure 4.18) Although the amount of asphalt road continues to increase, many roads in Papua province are in heavily damaged condition. In 2007, 8,681.79 kilometers of roads or 56.64 percent of the total road length of 15,327 km were in heavily damaged condition. Only around 33.27 percent of roads were in good condition. This situation increases user costs, hampers the mobility of the economy, increases the prices of goods and impedes efforts to improve community welfare. The distribution of road infrastructure in Papua province is very uneven. A number of hinterland districts have very low accessibility ratios of less than 5 meters of road per square kilometer, including Paniai, Boven Digul, Waropen, Mappi and Sarmi districts. In Waropen district, moreover there is less than one meter of road per square kilometer (all provincial roads, see Table 4.3). Nabire district has the highest road accessibility ratio of 0.57 km per square kilometer. 66 Papua Public Expenditure Analysis December 2011 Sectoral Analysis Figure 4.17 No Seven Strategic Roads and Four Additional Roads in Papua Province Roads Length (km) 7 Strategic Roads 1 Nabire-Wagete-Enarotali 2 Timika-Mapurujaya-Pomako 262 42 3 Serui-Menawi-Mulia 49 4 Jayapura-Wamena-Mulia 733 5 Jayapura-Sarmi 364 6 Jayapura-Hamadi-Holtekamp-PNG Border 7 Merauke-Waropko 8 Jayapura-Sentani Ring Road 41 9 Depapre-Bonggrang 23 10 Wamena-Habema-Nduga-Kenyam 147 11 Timika-Potowaiburu-Enarotali 150 53 557 4 Additional Roads Total 2,421 67 Sea, river and water-crossing transportation facilities play a dominant role in some areas. Sea transportation plays a very dominant role along Papua’s northern and southern coastal areas.13 In these areas, there are many seaports and wharfs, the three largest of which are Jayapura, Biak and Merauke (Table 4.4). On a smaller scale, river transportation is quite dominant in several districts along the course of Mamberamo and Digul rivers, namely Mappi, Mamberamo Raya and Boven Digoel. The provincial government has afforded special attention to river transportation by purchasing and operating six ships to open new routes. Table 4.3 Road Length by Status and District in Papua Province, 2007 National (Km) District Province (Km) District (Km) Total (Km) Area size (Km2) Ratio (km/ km2) Merauke 604.91 243.00 1,330.18 2,178.09 43,979 0.0495 Jayawijaya 268.70 61.50 1,693.00 2,023.20 12,680 0.1596 Jayapura 519.13 400.63 597.99 1,517.75 15,309 0.0991 Paniai - - 1,173.46 1,173.46 16,312 0.0719 Puncak Jaya - - 1,439.38 1,439.38 3,131 0.4597 Nabire 314.03 40.00 997.76 1,351.79 2,360 0.5728 38.75 632.58 671.33 14,215 0.0472 53.30 130.50 1,326.25 1,510.05 10,852 0.1391 Biak Numfor 34.88 200.29 737.80 972.97 20,040 0.0486 Boven Digoel - - 402.96 402.96 28,471 0.0142 Mappi - - 693.28 693.28 27,632 0.0251 Sarmi - 164.00 144.54 308.54 25,902 0.0119 Keerom - - 577.25 577.25 9,365 0.0616 Waropen - 31.00 - 31.00 24,628 0.0013 Supiori - 37.96 - 37.96 775 0.0490 Mimika - Yapen Waropen Jayapura Municipality Total 1,794.95 53.00 385.35 438.35 940 0.4663 1,400.63 12,131.78 15,327.36 317,062 0.0483 Source: Papua BPS, 2008 (processed) Table 4.4 Seaport Conditions of Jayapura, Merauke and Biak, 2005 Facility Jayapura Merauke Biak Wharf length (m) 132 74 142 Carrying Capacity (ton/m3) 2,5 2,5 2,5 19 800 19 800 12 900 Docking pool (m2) Floor Area (m2) 1 200 240 150 Container Stacking Field (m2) 8 000 2 450 3 600 Line I Warehouse 1 (one) unit (m2) 2 200 640 800 Source: Transportation Service (2008) 13 Districts/municipalities bordering the sea are Jayapura, Nabire, Biak-Numfor, Sarmi, Supiori, Yapen Islands, Waropen, Mimika, Asmat and Merauke. 68 Papua Public Expenditure Analysis December 2011 Sectoral Analysis Figure 4.18 Road Development by Surface Type, 2005-2007 (%) 100% 90% 80% 41.7 44.4 44.9 70% 60% 50% 40% 30% 16.7 32.3 38.4 41.6 20% 10% 23.3 16.7 0% 2005 2006 Asphalt Hardened 2007 Soil Source: BPS, 2008 (processed) The many hills, ravines, mountains and archipelagos that characterize the terrain makes air transportation the only solution to many of Papua’s regions. As discussed previously, only a small proportion of Papua’s territory is accessible by road and many hinterland areas can only be reached by air. There are more than 400 airports in Papua, the most of any region in Indonesia. Most airports are airstrips only suitable for pioneer aircraft, such as DHC-6 and C.208. Four airports are suitable for Boeing 737-400 aircraft, whereas two other airports are suitable for F-27. The absence of land, sea or river transport access causes very high prices for basic goods in hinterland and mountainous areas. The price of goods in districts in the central mountains, particularly Puncak Jaya, are the most expensive in Papua, and even in Indonesia. Prices are high in Puncak Jaya because goods must be delivered by air both to the district capital and to other parts of the district. The limited state of transportation infrastructure in Papua is matched by limited electricity coverage. Existing electricity infrastructure in Papua, particularly infrastructure constructed by the State Electricity Utility (PLN), is far from sufficient to meet community. The electrification ratio in Papua is only around 32 percent, far below the national coverage rate of 65 percent. This situation is regrettable in light of the potential for hydroelectricity power generation in the Mamberamo and Digoel watersheds. In addition to the overall shortage of PLN electricity facilities, uneven distribution of existing facilities contributes to electricity problems in Papua. PLN electricity is concentrated particularly on centers of economic growth such as Jayapura municipality and Merauke. Jayapura municipality has an installed PLN capacity of 57,997 kwh (38.38 percent of the total electricity capacity in Papua), whereas installed capacity in Merauke district is 25,444 kwh (16.84 percent). By contrast, some hinterland and mountainous areas have no installed PLN capacity and rely solely on generators and micro-hydro, including Yahukimo, Tolikara, Pegunungan Bintang, and Asmat districts. 69 Papua province remains underdeveloped in terms of access to clean water14 and sanitation. In 2007, only 35 percent of the population of Papua had access to clean water, compared to the national figure of 59 percent (Figure 4.19). Similarly, only 56 percent of Papua’s population have access to decent sanitation facilities, compared to a national figure of 74 percent. There is a very substantial disparity in access to clean water and sanitation facility between rich and poor segments of society. 71 percent of the richest population quintile has access to clean water, whereas only 12 percent of the poorest population quintile enjoys the same access (Figure 4.19). Similarly, nearly all (95 percent) of the richest quintile enjoys access to sanitation, compared to only 18 percent of the poorest quintile. These figures once again indicates the lack of attention to the poor in provision of public facilities. The special autonomy fund for infrastructure is an attempt to respond to the underdevelopment of the infrastructure sector in Papua. Since 2006, the Papua provincial government has received an additional fund allocation in the form of special autonomy funds for infrastructure. This allocation is intended to address underdevelopment in this sector. These funds are not earmarked as is the case for special allocation grant (DAK) funds, however, and their use has not been clearly regulated. It would be preferable for these funds to supplement the APBD allocation (excluding these additional funds) to the infrastructure sector. Regional Expenditure in the Infrastructure Sector There has been a very significant annual increase in infrastructure expenditure at provincial and district/municipality level. The average annual nominal increase in infrastructure expenditure at the provincial government level is 50.47 percent, or 35.71 percent annually in real terms. At the district/municipality level, the average annual nominal increase is 51.84 percent or 36.40 percent in real terms. Per capita infrastructure expenditure has increased rapidly. The average annual nominal increase in per capita infrastructure expenditure is 38 percent, or 24 percent annually in real terms. At Rp. 1.6 million/person/year in 2008 (nominal), per capita expenditure on infrastructure sector is the highest among the strategic sectors, exceeding per capita spending on education, health and agriculture. Infrastructure spending constitutes a greater proportion of regional expenditures at provincial government level than for districts/municipalities. From 2004-2008, the provincial government allocated around 20 percent of expenditure on average to infrastructure each year. Districts/municipalities allocated a slightly lower proportion (15 percent) of total annual regional expenditure to infrastructure. The provincial allocation is higher because the provincial government manages all special autonomy funds for infrastructure. Capital expenditure is the largest component of infrastructure expenditure. On average, capital expenditure comprised 86.18 percent of infrastructure spending annually at provincial level from 2004-2008, and 76.47 percent annually at district/municipality level over the same time period. Given that infrastructure is a capital-intensive sector, this high proportion is natural. 14 Clean water includes bottled water, tap water, pump water and protected well water with a distance of 10 meters or more from waste/feces storage 70 Papua Public Expenditure Analysis December 2011 Sectoral Analysis Figure 4.19 Access to Clean Water and Sanitation Facilities by Income Group 80% 100% 74% 90% 80% 56% 70% 70% 59% 60% 50% 60% 35% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Access to clean water Q1 Access to sanitary facilities Q2 Access to clean water Access to sanitary facilities Q5 Q4 Q3 Source: SUSENAS 2007 (processed) Figure 4.20 Infrastructure Expenditure at Provincial and District/Municipality Level in Papua Province, 2004-2008 3,000 billion Rp 2,500 2,000 1,500 1,000 500 2004 2005 20062 Provincial Government 007 2008 Districts/Municipalities 2,500 billion Rp 2,000 1,500 1,000 500 2004 2005 20062 007 2008 Provincial Government Source: 2004-2008 APBD, realized (processed) 71 Recommendations Central, provincial and district/municipality governments need immediately to jointly formulate a comprehensive master plan for infrastructure development in Papua province. This master plan must set a scale of priorities, given the limited source of funds and include the following matters:  Multimode transportation system integrating the construction of asphalt roads, dirt roads, river, sea and lake transportation and air transportation.  Development of renewable natural resource-based sources of electricity to end reliance on petroleum fuel-based energy generation, due to the high costs involved.  Development of clean water pipeline networks and sanitation facilities, particularly in hinterland areas.  The telecommunications network, in which the private sector can play an active role, connecting Papua to Palapa Ring and developing a backbone to each district. Provincial and district governments need to allocate more funds for maintenance and rehabilitation of the existing infrastructure. The preceding discussion has highlighted the worrisome condition of infrastructure, particularly its highways. Given the large amount of money required to develop new infrastructure, provincial and district/municipality governments need to allocate sufficient funds to maintenance and rehabilitation of existing infrastructure to ensure that it lasts for as long as possible. In addition to maintenance and rehabilitation, the provincial and district/municipality governments could also improve existing airports and seaports at several transportation hubs. One of the problems in the transportation sector is the limited number of airports and seaports which are suitable for wide-bodied aircraft or container ships. Pending the completion of the master plan, the provincial and district/municipality governments can provide temporary solution to transportation problems by upgrading airports and seaports that function as transportation hubs, such as Wamena and Nabire Airports and Pomako Port. Through the PNPM-RESPEK program, the provincial and district/municipality governments need to promote community-based infrastructure, such as micro-hydro and solar-powered electricity generators. The preceding discussion has emphasized the very minimal access of rural communities to public infrastructure. Pending advances in government programs, the community can develop basic infrastructures with facilitation from PNPM-RESPEK. With the assistance of local facilitators, communities can build simple micro-hydro and solar-powered electricity generators, paths, and simple bridges. Such basic infrastructures can contribute greatly to communities’ quality of life. 4.4. Agriculture Sector Agriculture is the second largest economic sector in Papua after mining, and certainly plays an important role in the economic development of society in Papua. Even though it has a large natural potential, the agricultural sector is not yet developed. Agricultural production capacity is relatively low and productivity improvements are stagnant. Regional governments have started to afford greater attention to this sector, as evident in the significant increases in expenditure in this sector. 72 Papua Public Expenditure Analysis December 2011 Sectoral Analysis Figure 4.21 Per Capita Infrastructure Expenditure in Papua Province, 2004-2008 Per Capita Infrastructure Expenditure (Rp) 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 2004 20052 0062 007 2008 Per Capita Nominal Expenditure Source: 2004-2008 APBD, realized (processed) Figure 4.22 Infrastructure Expenditures by Economic Classification at Provincial and District/Municipality Levels in Papua Province, 2004-2008 1,000 - 0 billion Rp 800 600 400 - 200 334 - 20 17 811 855 39 55 39 2004 186 18 9 15 23 29 75 20052 006 2007 233 2008 Personnel Capital Total real infrastructure expenditure Goods and Services Other expenditure billion Rp 3,000 2,500 2,000 1,500 1,916 1,000 1,074 500 - 1,139 439 52 44 375 169 38 155 57 151 127 332 145 2004 20052 006 2007 2008 Personnel Capital Total real infrastructure expenditure Goods and Services Other expenditure Source: APBD for 2004-2008, realized (processed) 73 The State of Agriculture in Papua Province The agriculture sector is one sector that plays a crucial role in the economic development of society in Papua province. Several factors underpin the crucial importance of agricultural development: (1) the sector encompasses approximately 80 percent of the rural population, (2) the sector absorbs more than 70 percent of the entire labor force, (3) its natural resources are evenly distributed to all regions, and (4) agricultural development can reduce poverty and decrease income disparities as well as promote economic growth. Consequently, agriculture is the economic sector with the largest multiplier effect. The agricultural sector remains a complementary sector in development of Papua. Although agricultural development is known to be pro-growth, pro-employment and pro-poor development, its growth within Papua’s economy has been very slow, slower than the mining, construction, trade and transportation sectors. Based on non-mining GRDP using 2000 constant prices from 2001-2007, these four sectors grew by more than 8 percent annually on average. Over the same time period, the agriculture sector grew by only 4.42 percent annually, below Papua’s economic growth of 6.82 percent per year (Figure 4.23a). Whereas, in Papua’s economic structure, agriculture plays the largest role compared to other sectors. From 2000-2007, the agriculture sector contributed approximately 39.58 percent per year, well in excess of construction, trade or other services sectors (Figure 5.23[b]). The food crop sub-sector has been the largest contributor to the agriculture sector in Papua. From 2000-2007, the contribution of the food crop sub-sector to agriculture sector GRDP averaged 48.12 percent per year. Over the same period, the contribution of the fisheries subsector increased, whereas the forestry sub-sector contribution decreased. The contribution of the plantation and livestock sub-sectors remained insignificant (Figure 4.24). Most farmer households in Papua are smallholders with less than one hectare of land. The overall average productive agricultural land holding of households in Papua is approximately 0.61 hectares (Figure 4.25). Only in four districts did households control more than 1 hectare of land on average, namely in Merauke, Keerom, Sarmin and Nabire districts. The productivity of food crop farming remains low. Productivity data between 2004 and 2007 illustrates this condition. The productivity of most main food crops commodities (rice, corn, pulses, various kinds of tubers, vegetables, and fruits) continues to decrease each year (Figure 4.26). Land clearing for rice cultivation in Papua constitutes a new source of growth for national food commodities in general, and for Papua province in particular. Edible tubers such as taro and yams rather than rice are the staple foods of indigenous Papuans, contributing to slow development of rice farming in the province. Recently, however, indigenous Papuans in Jayawijaya, Pegunungan Bintang and Merauke districts have started to cultivate rice as a cash crop, opening an opportunity for empowerment of indigenous Papuans through paddy cultivation. The largest rice-producing region is currently Merauke district. This region contributes approximately 89.93 percent of total rice production in Papua province (Table 4.5). Rice production centers in Merauke are generally transmigration areas established since the 1980s. Besides Merauke district, another potential rice-growing area is Jayapura municipality, which in 2007 contributed 5.16 percent of overall rice production in Papua. 74 Papua Public Expenditure Analysis December 2011 Sectoral Analysis Figure 4.23 Agriculture Sector Growth and Proportion of GRDP by 2000 Constant Price Excluding Mining in Papua Province, 2000-2007 [a] Growth [b] Proportion 100% 90% 80% S1 70% S2 60% S3 50% S4 40% S5 30% S6 20% S7 10% 0% 2001 2002 2003 2004 2005 2006 2007 Remarks: S5: Trade, Hotel and Restaurant Sector S6: Transportation and Communication Sector S7: Other Services Sector S1: Agriculture Sector S2: Mining and Quarrying Sector S3: Industrial Sector S4: Construction Sector Source: Papua BPS (2008) processed Figure 4.24 Structure of Agriculture Sector GRDP in Papua Province, based on 2000 Constant Prices, 2000-2007 100% 90% 21.5 21.7 22.8 24.0 26.1 27.6 27.5 26.0 19.9 19.9 19.0 17.7 17.1 16.0 15.6 14.6 5.9 3.6 5.7 3.5 5.7 3.6 5.7 3.6 5.9 3.9 5.9 4.0 6.0 4.0 6.3 4.2 49.2 49.2 48.9 49.0 47.0 46.6 46.9 48.9 2000 20012 003 2004 2005 2006 2007 80% 70% 60% 50% 40% 30% 20% 10% 0% Foodcrops 0022 Plantation Livestock Forestry Fisheries Source: Papua BPS (2008) processed 75 Figure 4.25 Agricultural land control per Agricultural Household by District in Papua Province, 2003 (hectares) 1.80 1.53 1.60 1.52 1.40 1.18 1.20 0.95 1.00 1.02 0.92 0.77 0.80 0.65 0.60 0.61 0.55 0.50 0.47 0.39 0.40 0.43 0.48 0.40 0.26 0.13 0.20 0.14 0.06 Papua Kota Jayapura Waropen Sarmi Keerom Tolikara Peg Bintang Asmat Yahukimo Mappi Mimika Boven Digoel Puncak Jaya Paniai Biak Numfor Nabire Yapen Waropen Jayapura Jayawijaya Merauke 0.00 Source: Papua BPS, 2006 (processed) Figure 4.26 Productivity of Papua’s Food Crops, 2004-2007 (ton/ha) 14.0 12.9 12.3 12.8 12.5 12.0 10.0 10.0 9.9 10.0 10.0 8.0 6.0 4.0 2.0 4.9 2.11.9 1.51.7 4.5 3.6 3.3 3.2 4.1 3.6 1.72.0 1.7 1.0 2.3 0.0 2004 Paddy rice 2005 Corn Peanuts 20062 Vegetables 007 Fruits Tubers Source: Papua BPS (2004-2008) Rice is not Papua’s only promising agricultural commodity. Several other widespread food crops in Papua are quite promising, such as corn, various kinds of tubers, pulses, vegetables and fruits. For these commodities, Jayawijaya district is the most productive area in Papua, followed by Merauke, Yahukimo and Paniai districts (Table 4.5). Regional Expenditure in the Agriculture Sector Government expenditure in the agriculture sector is growing rapidly at both provincial and district/municipality level. Provincial government expenditure on agriculture grew on average by 27.70 percent (nominal) between 2004 and 2007, or 14.73 percent in real terms (Figure 4.27). Average annual expenditure growth was higher at district/municipality, reaching 50.46 percent in nominal terms or 35.32 percent real annual growth. 76 Papua Public Expenditure Analysis December 2011 Sectoral Analysis Table 4.5 Contribution of Districts/Municipalities to Food Crop Production in Papua Province, 2007 District/ Municipality Merauke Rice Corn Tubers Pulses Vegetables 89.93 3.08 0.93 12.48 1.22 Jayawijaya 0.36 13.75 37.87 12.76 Jayapura 1.94 8.19 1.65 9.07 Nabire 0.19 11.58 3.57 Yapen Waropen 0.00 5.53 Biak Numfor 0.00 5.50 Paniai 0.00 8.83 Fruits Food crops 10.48 15.06 40.50 4.59 27.63 13.05 26.93 6.03 12.94 1.16 1.38 2.85 1.84 4.57 0.44 0.46 1.38 1.74 1.21 4.68 11.45 3.04 21.11 3.29 9.79 3.64 14.63 Puncak Jaya 0.67 5.39 1.39 3.18 3.86 9.70 2.65 Mimika 0.00 0.95 0.97 8.59 1.55 6.18 1.66 Boven Digoel 0.00 0.00 0.72 0.00 0.16 1.73 0.70 Mappi 0.00 0.44 0.40 0.62 0.12 1.42 0.46 Asmat 0.00 0.00 0.07 0.00 0.02 0.11 0.06 Yahukimo 0.06 13.59 20.62 10.71 0.67 0.40 13.43 Pegunungan Bintang 0.00 0.61 1.10 1.29 2.69 0.34 0.94 Tolikara 0.08 5.78 4.00 5.66 6.06 0.51 3.16 Sarmi 0.08 3.81 0.66 6.32 1.61 4.97 1.33 Keerom 0.08 8.31 0.34 3.08 3.71 7.28 1.60 Warpen 1.45 0.58 0.55 2.28 1.91 3.80 1.22 Supiori 0.00 0.00 0.00 0.00 0.29 0.14 0.04 Jayapura Municipality 5.16 4.08 0.46 1.95 6.50 4.48 2.14 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Total Source: Papua BPS (2008) processed Per capita expenditure for the agriculture sector continues to increase, a slight decrease in 2005 notwithstanding. From 2004-2008, per capita expenditure in the agriculture sector on average grew by approximately 39 percent (nominal) per year or 25 percent annually in real terms. In 2008, nominal per capita expenditure in the agriculture sector was Rp. 250 thousand/person, much lower than per capita expenditure on education of Rp. 995 thousand/person. Although the agriculture sector is the backbone of the development of the peopleoriented economy in Papua, the sector receives only a very small allocation of funds each year. From 2004-2008, the provincial government allocated an average of 2.62 percent of expenditure annually to the agriculture sector, whereas district/municipality governments allocated an average of 2.43 percent of total regional expenditure per year.15 Of greater concern, the provincial and district/municipality governments allocated the highest proportion of agriculture expenditure to salaries. As presented in Figure 4.29, the 15 See Chapter 3, Expenditures 77 Figure 4.27 Agricultural Sector Expenditure at Provincial and District/Municipality Levels in Papua Province, 2004-2008 [a]. Current/Nominal Prices 450 400 billion Rp 350 300 250 200 150 100 50 2004 20052 006 Provincial Government 2007 2008 Districts/Municipalities [b]. Constant 2007 Prices 400 350 billion Rp 300 250 200 150 100 50 2004 2005 2006 Provincial Government Figure 4.28 2007 2008 Districts/Municipalities Per Capita Agricultural Expenditure in Papua Province, 2004-2008 Per Capita Agriculture Expenditure (Rp) 300,000 250,000 200,000 150,000 100,000 50,000 2004 20052 0062 Per Capita Nominal Expenditure Source: 2004-2008 APBD, realized (processed) 78 Papua Public Expenditure Analysis December 2011 0072 008 Sectoral Analysis Figure 4.29 Agricultural Expenditure by Economic Classification at Provincial and District/Municipality Level in Papua Province, 2004-2008 [a]. Provincial Government 120 20 100 billion Rp 80 34 15 60 40 20 14 10 9 22 23 14 16 - 15 2004 2005 Personnel 33 19 2006 59 33 2007 Goods and Services 2008 Capital [b]. District/Municipality Government 500 billion Rp 400 143 300 93 112 200 97 100 - 16 22 51 21 20 43 2004 20052 Personnel 48 35 57 006 Goods and Services 146 110 20072 008 Capital Source: 2004-2008 APBD, realized (processed) provincial government allocated 39.80 percent of agriculture expenditure annually to salaries, whereas district/municipality governments allocated 43.37 percent per year. This high expenditure on salaries is a concern, because for the agricultural sector to develop requires significant expenditure on the purchase of seeds, fertilizers and pesticides, as well as goods and service expenditure, and also capital expenditure to procure heavy equipment and build processing storage locations for agricultural products. Recommendations The development of agribusiness and agro-industry in smallholder farming needs to be improved. Market availability is a central problem in the development of the people-oriented economy, which is predominately based in the agriculture sector. Consequently, there is a great need to develop agribusiness and agro-industry at smallholder level to address marketing problems, and to increase the added value generated by people’s businesses in the agricultural sector. The provincial and district/municipality governments need to facilitate mutually beneficial partnership programs between farmers/fishermen on the one hand and investors and technology on the other. Limited capital and production technology reduces the productivity of 79 smallholder farming, despite the abundant and varied agricultural resource potential possessed by the people. Consequently, there is a great need for funding assistance to maximize the utilization of resources and to attain high productivity. Partnerships with regional and national state enterprises and private companies or other economic institutions are one possible source of such funding. There is an urgent need for increases in regional expenditures on agriculture sector, especially for goods and services and capital expenditure. As explained above, the relatively small overall amount of agriculture sector expenditure and the minimal proportion of this expenditure allocated to capital expenditure and goods and services are each problems. Addressing these two expenditure problems would contribute significantly to the development and strengthening of the people-oriented economy, as mandated under special autonomy. The provincial and district/municipality governments need to drastically increase agriculture expenditure and improve allocations within the sector to maximize people-oriented economic development in Papua. 80 Papua Public Expenditure Analysis December 2011 Chapter 5 Public Financial Management the past several years, public financial management (PFM) in Papua Province has “ During improved, but still needs to improve further. At present, the weakest aspects of public financial management in the province are planning and budgeting, followed by internal audit and asset management. Regarding reporting, the quality of Regional Government Financial Reports (LKPD) produced all sub-national governments in Papua remains poor, despite some improvement in the past year. ” 5.1. Overview of Public Financial Management in Papua Province The capacity of sub-national governments in Papua province in several aspects of public financial management generally remains weak. A survey of public financial management capacity covering the provincial government and fourteen districts/municipalities in Papua province indicates that provincial government capacity exceeds that of districts/municipalities in almost all aspects of public financial management. Within the provincial government, several aspects, such as cash management and accounting & reporting, have been quite good, while others require improvement, such as the regulatory framework, planning and budgeting, external audit, and asset management. At districts/municipality level, all aspects remain weak and comprehensive capacity-building action plans are required. 5.2. Planning and Budgeting The planning and budgeting process in Papua Province always refers to laws and regulations. The sub-national planning and budgeting process is currently regulated by Law No. 25/2004, Law No. 32/2004 and Law No. 33/2004 together with their derivative regulations. This regulatory framework has changed twice since the beginning of the regional autonomy era (see Figure 5.2). In 2001-2002, this process was regulated by the 1981 Regional Finance Manual. From 2003-2006, MoHA Decree No. 29/2002 was the reference point for the planning and budgeting process. Since 2007, the relevant regulation has been MoHA Regulation No. 13/2006, subsequently amended via MoHA Regulation No. 59/2007. Although these changes have essentially been for good purposes, they often create difficulties for sub-national governments. For example, the information system established based on MoHA Decree No. 29/2002 had to be totally overhauled, 81 because MoHA Regulation No. 13/2006 provided for a markedly different budgeting system. Moreover, several sub-national governments have experienced difficulties in issuing a regional regulation on regional financial management based on MoHA Regulation No. 13/2006. As of 2009, only 50 percent of surveyed districts/municipalities in Papua province had issued this regional regulation. At the same time, only 29 percent of districts/municipalities had issued a district head’s/ mayoral regulation governing the system and procedures for regional financial management. Figure 5.1 Results of Public Financial Management Capacity Survey in Papua Province and Districts/Municipalities, 2009 Source: Papua Province and District/Municipality Public Financial Management Capacity Survey, 2009 Box 5.1 Assessment of Sub-National PFM Capacity Which PFM components are measured? There are nine components: local regulatory framework, planning and budgeting; cash management, procurement; accounting and reporting; internal audit; debt, grant, and investment; asset management; and external audit What is the evaluation method? Each component consists of a number of binary indicators: “1”, if it satisfies the indicator, and “0”, if it does not satisfy the indicator or there is no data. The score of a component is the average score of each indicator and the aggregate score is the average score of each component. There are 134 indicators in total. How the data are collected and verified? Data is obtained through primary sources, such as interviews with key respondents, and secondary sources, such as the Regional Medium-Term Development Plan (RPJMD) and APBD. Key respondents comprise, among others, officials of Bappeda, the Regional Financial Management Agency (BPKD), Secretariat of the Local Parliament (DPRD) and the Legal and Information & Communication Bureaus. The primary data are verified by comparing them with supporting regional government documents. Does a low score always indicate low public financial management capacity? Not necessarily. The assessment score reflects the ratio of indicators satisfied. A regional government may have obtained a low score because it did not provide an opportunity to conduct an interview or to access the required secondary data. 82 Papua Public Expenditure Analysis December 2011 Public Financial Management A number of districts/municipalities in Papua province do not possess mandatory planning documents. Law No. 25/2004 on the National Development Planning System stipulates that each sub-national government must possess a Regional Long-Term Development Plan (RPJPD), a Regional Medium-Term Development Plan (RPJMD), and a Strategic Plan for Regional Government Work Units (Renstra-SKPD), which serve as the basis for regional planning each year. Unfortunately, some sub-national governments do not possess these documents. The public financial management capacity survey found that as of 2009, only around 57 percent of surveyed districts/municipalities in Papua province possessed an RPJMD. The survey also found there to be no regional government in Papua in which all SKPD possess a strategic plan. The quality of the planning documents remains a concern. Analysis of the RPJMD collected for the capacity survey found almost all of these multi-year planning documents to lack any measurable quantitative indicators. Additionally, very few medium and long-term planning documents adopt a multi-term expenditure framework (MTEF). Consequently, we conclude that development planning in several regional governments does not exhibit consistency between short and medium-term planning. Figure 5.2 Development of Budget Format Regional Finance Manual Revenue Ministerial Decree No. 29 Revenue Regulation of the Minister of Home Affairs No. 13 Revenue Own-Source Revenue Own-Source Revenue Own-Source Revenue Balancing funds Balancing funds Balancing funds Other revenues Other revenues Other revenues Financing Financing Expenditure Expenditure Expenditure Routine Expenditure Bureaucracy Expenditure Indirect Expenditure - General Administration - Personnel - Operation and Maintenance - Others (Interest, Aid, Subsidies, etc.) Carry-over Regional Loan - Capital Development Expenditure Public Expenditure Direct Expenditure - General Administration - Personnel - Operation and Maintenance - Goods and Services - Capital - Capital Source: Various laws and regulations 83 Figure 5.3 Provincial and District/Municipality Planning Process Mechanisms in Papua DISTRICT/MUNICIPALITY GOVERNMENTS DPRD PROVINCIAL GOVERNMENT Village Development Planning Forum (Musrenbang) District/Municipality Musrenbang Sub-district Musrenbang District/Municipality Musrenbang District/Municipality Government Work Plan - Village Visit Program - Republic of Indonesia Radio People’s Aspiration Network (JARING ASMARA) Musrenbang Provincial Government Work Plan - Village Visit Program - Talk Show Source: Interviews with heads of various district/municipality BAPPEDA and the head of Papua Province BAPPEDA The planning process employs both top-down and bottom-up channels, but they do not run smoothly and tend to be normative. The top-down process is designed to ensure consistency between planning at the regional and central levels. In other words, provincial planning must refer to national planning, and district/municipality planning must refer to both national and provincial planning. The bottom-up process comprises community planning conducted through development planning forums (Musrenbang) held from village right up to national level. However, field experience demonstrates that collaboration between these two channels is not proceeding smoothly. Bottom-up inputs are frequently not accommodated in the regional government annual planning and budgeting cycle. Implementation of the bottom-up planning process also appears to be normative and not fully effective. Planning mechanisms in Papua province are outlined in Figure 5.3. The village visit program (turkam) of the governor and district heads/mayors in Papua provides another opportunity for public participation in development planning. Almost every year, the governor and district heads/mayors visit a number of villages to see development conditions and listen to people’s aspirations regarding their most pressing development needs. Many parties acknowledge this program as a breakthrough in increasing public participation in the development process. Follow-up of the results of these village visits has not been optimal, however. Good coordination between various government agencies is required to follow-up effectively on the village visit program. Planning and budgeting processes in Papua province are often not completed in timely fashion, particularly at district/municipality level. The public financial management capacity survey found that only 28 percent of district/municipality governments completed the 2009 APBD before January 1, 2009.16 These delays generally result from the limited capability of planning personnel and the accessibility issues experienced in most regions in Papua. The intense planning and budgeting agenda of the regional autonomy era require human resources appropriate in quality and quantity. 16 84 Four out of 14 districts/municipalities Papua Public Expenditure Analysis December 2011 Public Financial Management There is no evident linkage in planning and budgeting between among different levels of government in Papua province. During the past several years, there have been strong indications of a lack of interconnection between five-year and annual planning and budgeting, both in the provincial and district/municipality governments. Poor coordination between the central, provincial, and district/municipality governments is another problem, as is coordination between work units at a single level of government. The Planning and Budgeting Consolidation Matrix (MKPP), designed as a control on consistency in planning and budgeting , is not functioning effectively. Since 2008, the Papua Provincial Government has made the breakthrough of implementing the Planning and Budgeting Consolidation Matrix (MKPP) to synchronize planning and budgeting. The main purposes of MKPP’s implementation are 1) to maintain consistency between long-term, medium-term and annual planning; 2) to maintain consistency between planning, budgeting, management, and accountability; and 3) to synchronize the programs and activities of different work units to avoid duplication. To date, the MKPP has been applied only to the planning of programs and activities, however, whereas it is yet to function for budgeting, management, and accountability processes. Table 5.1 Schedule and Process of Regional Government Budgeting Process Time Limit The regional government prepares a draft general budget policy At least five months prior to the (KUA) and temporary budget implementation line (PPAS) to be commencement of a fiscal year discussed with the DPRD Based on the KUA and PPAS agreed upon by the regional In September of the previous fiscal government and DPRD, the governor/district head/mayor issues a year circular to all work units to prepare their work unity activity and budget plans (RKA) Each work unit prepares a for program, activity, and budget proposal set out in its work unit activity and budget plan The work unit submits its activity and budget plan to the executive budget team for a feasibility evaluation of the proposed workload and activity costs The results of the executive budget team’s deliberations are set out in the draft APBD The executive budget team discusses the draft APBD with the DPRD budget committee The governor/district head/mayor submits the draft APBD to the At least 1 month prior to the DPRD for approval commencement of a fiscal year The governor/district head/mayor ratifies a Regional Regulation Within 1 month of concerning the APBD, embodying the APBD as approved by the commencement of a fiscal year DPRD the If the DPRD does not approve the draft APBD, the regional government must revise the draft The revised draft APBD must be resubmitted to the DPRD Within 1 month of the return date If the DPRD does not approve the revised draft APBD, the regional Within 15 work days government uses the APBD from the previous year as the basis for regional financial management Source: Regional Regulation No. 3/2004 85 The MKPP has encountered several obstacles during implementation. Some of the main obstacles include: a. Personnel lack sufficient capacity and skills in understanding and completing the MKPP worksheet, b. The worksheet required by the MKPP matrix is too long, and requires time to read and comprehend. c. Supporting planning-process documents (RPJMD and Renstra SKPD) for the MKPP lack measurable indicators. 5.3. Budget Implementation The cash management and financial administration capacity of the Papua provincial government are quite good. The public financial management capacity survey found the provincial government’s performance score to be above 50 percent. This score results, among other factors, from the implementation of policies, procedures, and controls to encourage efficient cash management, an efficient billing and collection system for own-source revenue, and improved revenue management. Remaining areas for improvement are management and control of cash income, cash payments, and temporary cash surpluses. By contrast, the cash management and financial administration of most district/ municipality governments remains poor. The public financial management capacity survey found the cash management and financial administration capacity of all surveyed district/ municipality governments to be below that of the provincial government (Figure 5.4). Several districts/municipalities had very poor capacity. Poor district/municipality capacity in this sphere results from inadequate finance sector staff capacity and the lack of a regional regulation to govern cash and local income management, as required by Government Regulation No. 58/2005 concerning local financial management. Delayed implementation of Government Regulation No. 41/2007 concerning Regional Government Organization has hindered the implementation of the 2009 budget in Papua Figure 5.4 Cash Management and Financial Administration Performance of Provincial and District/Municipality Governments in Papua 60% 50% 40% 30% 20% 10% Yahukimo Supiori Waropen Keerom Boven Asmat Puncak Jaya Jpr District Merauke Mappi Yapen Sarmi Biak Numfor Mimika Papua Province 0% Source: Papua Province and District/Municipality Public Financial Management Capacity Survey, 2009Source: Interviews with heads of various district/municipality BAPPEDA and the head of Papua Province BAPPEDA 86 Papua Public Expenditure Analysis December 2011 Public Financial Management province and several districts/municipalities. The provincial and most of district/municipality governments prepared the 2009 APBD based on the local government organizational structure set out in Government Regulation No. 41/2007. However, most regional governments in Papua did not implement Government Regulation No. 41/2007 until several months after the 2009 APBD had been ratified.17 Consequently, implementation of the APBD was delayed while consolidation and rationalization of the budget for new government work units was undertaken. Accountability is the most prominent issue in public financial administration in Papua, both at provincial and district/municipality level. Government work units typically do not prepare their accountability statements (SPJ) on time; drafting of the regional financial statement (LKPD) is consequently delayed. The main reason regional governments cite for this issue is the limited capacity of financial management staff. Several regions have endeavored to this limitation by engaging third party consultants to prepare their financial reports or to provide technical guidance for financial management staff in the form of on-the-job training. It is too early to judge the effectiveness of these initiatives. 5.4. Accounting, Reporting, Internal Oversight and Asset Management The accounting and reporting human resource capacity of district/municipality governments remains insufficient for the reforms set out in MoHA Regulation No. 13/2007. This regulation decentralizes accounting and reporting functions to each government work unit. The reform is for a good purpose, but does not consider the scarcity of capable financial management staff, in particular at the district/municipality government level. This problem requires prompt action, in light of the increasing attention afforded to the quality of regional government financial report and accounting information. All areas of Indonesia are experiencing the same issue, but it presents a particular problem in Papua because of the difficulties of obtaining capable accounting staff and the frequent creation of new districts. In response to this problem, regional governments have started to recruit employees with an accounting background, but current hires are sufficient only to meet needs at Regional Financial Management Official/Local Treasurer (PPKD/ BUD) level, and have not been able to meet the needs of all government work units. Internal Control Systems (SPI) require many improvements. The implementation of internal control systems within the provincial and district/municipality governments has not met expectations. This is regrettable, given the crucial role of these systems in ensuring the smooth and orderly operation of the regional government. The main issues are insufficient capacity of internal audit staff, the absence of regional regulations on internal control systems, and the limited budget allocation for internal audit. Political will on the part of regional governments to support the inspectorate or regional internal audit agency (Bawasda) in effectively and efficiently performing its internal control function is the most important factor to overcome this problem. Improvements are needed in asset management capacity both in the provincial and district/ municipality governments. The 2009 public financial management capacity survey found that only three of the fourteen surveyed districts/municipalities have issued a derivative regional regulation on local asset management based on MoHA Regulation no. 17/2007. The 17 Some regional governments have enacted a Regional Regulation on Regional Government Organization, but have yet to adopt the organizational structure stipulated in this regulation. Others are currently undertaking the adjustment process, including appointing government officials. 87 Figure 5.5 Percentage of Attention Paid by Provincial and District/Municipality Governments to Accounting and Reporting Issues 100% 35% Reliable Financial Report and Accounting Management Information 24% Accurate and On -Time Transaction and Financial Balance 26% Integrated Accounting Information System and Management 90% 30% 80% 70% 60% 30% 50% 40% 30% 30% 20% 10% Adequate Human Resources/Accounting and Financial Institution 16% 10% 0% Papua Province District/municipalities in Papua Source: Papua Province and District/Municipality Public Financial Management Capacity Survey, 2009 Figure 5.6 Comparison of Internal Control Systems at Provincial and District/ Municipality Level 120% 100% 100% 83% 80% 63% Papua Province 54% 60% 40% 29%2 District/municipalities in Papua 9% 20% 0% Acceptable standards and Effective, efficient and functioning internal audit procedures for internal audit Immediate follow up to the findings of Internal Audit Source: Papua Province and District/Municipality Public Financial Management Capacity Survey, 2009 Figure 5.7 Comparison of Asset Management at Provincial and District/Municipality Level Effective policies, recording systems and procedures, acquisition, evalua tion, assignment and writeoff and reporting of regional … 34% 45% Policies and procedures of asset are integrated with the regional planning process 39% 73% District/municipalities in Papua Papua Province 25% Long -term asset planning and management 33% 0% 20%4 0% 60%8 0% Source: Papua Province and District/Municipality Public Financial Management Capacity Survey, 2009 88 Papua Public Expenditure Analysis December 2011 Public Financial Management Figure 5.8 Audit Opinions at Provincial and District/Municipality Level in Papua 19 20 18 16 14 12 Districts/Municipalities/Province with Qualified Opinion 12 10 Districts/Municipalities/Province with Adverse Opinion 8 6 4 Districts/Municipalities/Province with Disclaimer Opinion 5 6 3 1 2 00 00 0 0 0 2004 2005 20062 007 Source: Papua Province and District/Municipality Public Financial Management Capacity Survey, 2009 Notes: WDP (Qualified Opinion), TW (Adverse Opinion), TMP (Disclaimer of Opinion) lack of such a regulation has impaired planning and asset management, as well as policies for recording, acquisition, evaluation, transfer and write-off of assets. Accountability for budget implementation is poor. Most regional government financial reports in Papua in 2007 received a disclaimer of opinion from auditors (Figure 5.7). Provincial/district/ municipality governments need to be more punctual in delivering their financial reports to external auditors. Provincial and district/municipality governments also need to afford greater attention to follow up of external auditors’ recommendations. The percentage of recommendations which have not been followed up exceeds that of those which have been followed up or are still in progress (Table 5.2). 5.5. Recommendations The provincial and district/municipality governments in Papua need to improve the quality and consistency of planning, monitoring, and short-term, annual, and mediumterm evaluations. Planning documents do not include measurable performance indicators or a medium-term expenditure framework (MTEF). There are also inconsistencies between documents, which often causes confusion in development implementation, monitoring, and evaluation. To address this problem, the Papua provincial government could undertake the following short-term and long-term improvements: 89 90 Papua Public Expenditure Analysis December 2011 Table 5.2 Status of the Resolution of the Audit Board’s Recommendations Resolution Status Findings Amount Value (million) Recommendations Amount Value (million) Up to Semester I of 2008 Fiscal Year 611 13,361,146 855 13,361,146 Semester II of 2008 Fiscal Year 278 392 Total 859 18,143,118 4,781,972 Followed up Amount % In progress Value (million) Amount 114 14% 2,321,423 145 2,777,260 - - 1 1247 16,138,406 114 14% 2,321,423 146 Source: Processed from Semester II 2008 Fiscal Year Biannual Summary of Audit Results (IHPS) % Has not been followed up Value (million) Amount % Value (million) 7.949% 1,282,868 596 60% 9,756,856 0.005% 391 17% 2,776,474 786 1,283,654 987 12,533,330 Public Financial Management       Short Term (2010-2011) Formulate annual work plan (RKPD) and annual budget (APBD) for coming two years  Ensure that sound planning and budgeting processes are in place and that the executive budget committee (TAPD) actively lead the process Implement Planning and Budgeting Consolidation Matrix (MKPP) in planning, monitoring, and evaluation process at provincial government level Design and implement efficient and effective coordination systems between central-province-district/municipality governments   Long-term (2011-2016) Formulate medium-term development plan (RPJMD), strategic plan (RENSTRA) of each government work unit (SKPD), and other related documents at provincial level; ensure consistency between documents, employ measurable indicators and medium-term expenditure frameworks (MTEF) Implement Planning and Budgeting Consolidation Matrix (MKPP) in planning, monitoring, and evaluation process at government level Build the capacity of district/municipality governments in formulating consistent planning and budgeting documents with measurable performance indicators and MTEF Increase transparency and public participation in regional public financial management Establish efficient and effective internal auditing system The provincial government needs to plan and coordinate the implementation of a public financial management capacity building program for district/municipality governments in Papua. Although the public financial management capacity of the provincial government requires improvement, district/municipality capacity is poorer, as set out above. To address this complex challenges, the provincial government needs to design a comprehensive public financial management capacity building program at both provincial and district/municipality government level. The provincial government could then coordinate and work together with the central government, academics, and donor agencies to implement the public financial management capacity building plan. Regional governments in Papua should take steps to ensure: (i) establishment of an integrated public financial management organizational structure distinct from the current financial bureau (Biro Keuangan) under the regional secretary (SEKDA); (ii) enactment of a Regional Regulation on Principles of Regional Financial Management in accordance with Government Regulation no. 58/2005; (iii) enactment of a Regional Regulation on Accounting and Financial Reporting in accordance with Government Regulation no. 24/20005; and (iv) follow up of State Audit Board (BPK) findings and recommendations. 91 Chapter 6 Papua Province Special Autonomy Funds eight years of implementation, there remain a number of challenges to address in Papua’s “ After special autonomy. The management of autonomy funds to date raises many questions, covering legislation, allocation, transparency, monitoring, evaluation and accountability, amongst others. These issues are reflected in the Strategic Plan for Village Development (RESPEK) program, which is the main special autonomy program. ” 6.1 Special Autonomy of Papua Province Papua’s special autonomy is intended to address the underdevelopment of Papua. To the present, in general, development in Papua continues to lag behind other regions. To address this underdevelopment, the government issued Law No. 21/2001 on Special Autonomy for Papua Province. The law recognizes the need to accelerate improvements in the welfare and development of society in Papua, to achieve equality and balance with other provinces in Indonesia. The law was revised subsequently to accommodate the establishment of West Papua province. Papua’s special autonomy provides the province with additional funds. Article 34 of Law No. 21/2001 stipulates that Papua province is to receive two types of additional funds, namely special autonomy funds equal to 2 percent of total national general allocation funds (DAU), and special autonomy funds for infrastructure, of which the central government and national parliament determine the amount each fiscal year based on a proposal from the province. Starting in 2009, with the accommodation of West Papua province as a recipient of special autonomy funds, Papua province receives 70 percent of overall special autonomy funds.18 Implementation of special autonomy remains hampered because implementing regulations for Law No. 21/2001 have not been issued. Implementation of special autonomy requires a series of provincial regulations (Perdasi) and special regional regulations (Perdasus) to serve as implementing regulations for Law No. 21/2001. Only one special regional regulation has been ratified to date, whereas a number of key provincial regulations/special regional regulations are yet to be completed. These include a regulation to govern special authority for provinces and districts/municipalities in the context of the implementation of special autonomy, and regulations 18 “Special autonomy funds” generally refers to the two percent of DAU allocation, and does not include the additional special autonomy fund specifically allocated for infrastructure. 93 governing development in priority sectors.19 In general, regulations are yet to be issued because of the cumbersome legislative process and insufficient coordination between the provincial government, provincial parliament (DPRP) and the Papua People’s Assembly (MRP). In practice, special autonomy is commonly implemented by means of other laws and regulations, which may not be binding because they were not established with the agreement of the DPRP and the MRP. Poor coordination between the central, provincial and district/municipality government has also significantly impeded the implementation of special autonomy. There are a number of inconsistencies between Law No. 21/2001 on the one hand and Law No. 32/2004 on Regional Government and Law No. 33/2004 on Financial Balance on the other. To harmonize such laws requires a clear coordination mechanism between the central, provincial and district/municipality governments. To date, however, no effective solution to this coordination problem has been identified, resulting in frequent overlaps in authority and the implementation of development between the three levels of government. Presidential Instruction No. 5/2007 concerning the Acceleration of Development in Papua and West Papua Provinces was not implemented effectively, for example, because of weak coordination among the three government levels. 6.2 Developments in Special Autonomy Funds in Papua Province With the exception of 2009, the revenue Papua province receives from special autonomy funds has increased each year. In total, from 2002 to 2009, the revenue received by the provincial government from special autonomy funds has increased by 158 percent in nominal terms or 20 percent in real terms. The amount received increased every year until 2008,20 but decreased in 2009 because 30 percent of special autonomy funds were allocated to the West Papua provincial government. The special autonomy fund for infrastructure commenced in 2006. The amount received each year fluctuates. Special autonomy funds contribute significantly to provincial and district/municipality government revenue in Papua. From 2004-2008 period, special autonomy funds contributed 21.6 percent of the overall combined revenue of all regional governments in Papua province. After deducting allocations to district/municipality governments, special autonomy funds contributed nearly half (42 percent) of total provincial government revenue. Over the same period, special autonomy funds contributed 12 percent of total district/municipality government revenue. The creation of new regions has decrease the amount of special autonomy funds each district/municipality receives. In general, the allocation of special autonomy funds to each district/municipality has increased significantly since 2002. The same figure illustrates a significant decrease in the special autonomy fund allocation received by most districts/municipalities in 2009. Further analysis reveals that these regions were the “parent” or rump regions from which new regions were created in 2008. In other words, the division of these eight districts in 2008 reduced the allocation of special autonomy funds they received the following year. 19 Governor of Papua’s Opening Remarks on the occasion of Dissemination Event for Provincial Regulations/Special Regional Regulations on July 27, 2009, can be accessed at www.papua.go.id. 20 Data on special autonomy funds excludes allocations to districts/municipalities that have subsequently become part of West Papua province. 94 Papua Public Expenditure Analysis December 2011 Papua Province Special Autonomy Funds Figure 6.1 Papua Province Revenue from Special Autonomy, 2002-2009 Trillion Rp. 4 3 2 1 2002 2003 2004 20052 0062 Special Autonomy Funds (2% of National DAU) Special Autonomy Funds for Infrastructure 0072 0082 009 Total – 2007 constant prices Source: Government of Papua Province (2009) The provisions by which special autonomy funds are allocated to districts/municipalities have been amended several times. First, from 2002-2003, the provincial government received 60 percent of special autonomy funds, whereas 40 percent was allocated to district/municipality governments. Before districts/municipalities received this 40 percent amount, funds for strategic programs and activities determined by the provincial government were deducted. Second, from 2004-2006, this proportion was reversed, with the provincial government receiving 40 percent and district/municipality governments receiving 60 percent, again subject to deductions for strategic programs and activities. Third, from 2007-2009, some special autonomy funds have been allocated for specific special autonomy programs. Remaining funds have then been split between the provincial government (40 percent) and district/municipality governments (60 percent). From 2007-2008, the specific special autonomy program was RESPEK, after which free-of-cost education and health programs were added in 2009. Table 6.1 Changes in the Allocation of Special Autonomy Funds to Districts/Municipalities, 2002 2009 Period Province District/Municipality Priority Program 2002-2003 60 percent 40 percent* Elections for Heads of Regional Governments (Pilkada), development of the Medical Education Program 2004-2006 40 percent 60 percent* Strategic Programs and Activities 2007-2009 40 percent** 60 percent** RESPEK (since 2007) and Free-of-Cost Education and Health (since 2009) Source: Government of Papua Province (2009) *: District/municipality allocations subject to deductions for priority programs determined by the provincial government. **: Allocations to provincial government and district/municipality governments drawn from remaining funds pool after deductions for priority programs determined by the provincial government. 95 Figure 6.2 Sectoral Allocation in Papua Province, 2008 Education 6% Health 11% Infrastructure 15% Others 66% Local economy empowerment 2% Source: Audit Report on the Management of Special Autonomy Funds, State Audit Board (BPK), 2009. Figure 6.3 Sectoral Allocation at District/Municipality Level, 2006 and 2008 Education 20% Education 24% Supporting Sector 34% Supporting Sector 34% Health 12% Local economy empowerment 12% Infrastructure 25% [a]. 2006 Health 14% Local economy empowerment 16% Infrastructure 12% [b]. 2008 Source: Papua Province Regional Planning and Development Agency (BAPPEDA), 2007 and 2009 96 Papua Public Expenditure Analysis December 2011 Papua Province Special Autonomy Funds Figure 6.4 Per Capita Special Autonomy Fund Allocations, 2007 Thousand Rp 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 Ja ya ija w ya Ja ya pu ra M un ici pa li Na Di ty s bi t r M re ict er D a u ist r M k e D ict im Y a ik ist r hu a D ic t ki m ist r ic o Pu P a Di t nc nia str ic a i Bi k J Dis t ak a y tri a c Nu D t Pe m ist gu nu Jay for rict ap D i ng u r st r Y a an pe Bin a D ict n t a i s tr W ng ic t ar o p D is en tri M Di ct ap str A s p i D ic t m is T o a t t ri c lik Dis t a t K e ra D ric t er i s om tri c Bo D t S v e a r m ist r n i Di i D c t is g W o el t r i c t ar D o p i st r e Su n D i ct pi or istri i D ct ist ric t - Source: Government of Papua Province (2009) and Regions in Numbers in 2008 Data on special autonomy and population numbers reflects circumstances in 2007. Provincial government allocations of special autonomy funds to education and health do not comply with legislation. The BPK audit found that the provincial government allocated 10.96 percent of special autonomy funds to the health sector in 2008, and 6.2 percent to the education sector.21 Each allocation was below the proportion mandated by Law No. 21/2001, namely 15 percent for health and 30 percent for education. District/Municipality allocations of special autonomy funds to education and health are slightly below the levels required by legislation. Papua Province Bappeda data for 2008 indicates that 14.13 percent of special autonomy funds were allocated to health, whereas the educational sector received 23.56 percent. Each allocation is close to the proportions stipulated by Law No. 21/2001 of 15 percent for health and 30 percent for education. Allocations to these sectors between 2006 and 2008 also increased by 3.78 percent for education and 2.2 percent for health. This trend indicates that district/municipality governments are affording increasing attention to the development of these two priority sectors. Special autonomy funds contribute to fiscal disparities between districts/municipalities in Papua province. 2007 data on special autonomy and population numbers reveals wide inequalities in per capita special autonomy fund allocations to districts/municipalities in Papua. In 2007, 70 percent of districts/municipalities received special autonomy fund allocations of less than Rp. 1 million per capita. The other 30 percent of districts/municipalities, all of which were districts formed through the pemekaran process, received between Rp. 1.5 to 4.2 million (Supiori District) per capita. This pronounced per capita inequality contributed significantly to the overall fiscal disparity between districts/municipalities. 21 Audit Report on the Management of Papua’s Special Autonomy Funds in 2008. 97 6.3 Management of the Papua Province Special Autonomy Funds The special regional regulations concerning the management of special autonomy funds is yet to function optimally. Special Regional Regulation No. 1/2007 concerning Distribution and Management of Revenues in the Context of the Implementation of Special Autonomy of Papua does not have final legal force, because it has not been enacted into the regional government gazette. In addition, this special regional regulation covers only general issues. Derivative regulations are required to set out procedures for the allocation, supervision, control, reporting and accountability of special autonomy funds. The lack of clarity in the regulation of special autonomy fund allocations has triggered debates between the provincial government and district/municipality governments. District/ Municipality Governments are currently demanding a 70 share of the remaining balance of special autonomy funds after deductions for strategic programs. Their reasoning is that district/ municipality governments are responsible for providing the majority of public services in the sectors prioritized under special autonomy. Although the provincial government has disseminated information about the allocation process for special autonomy funds, transparency remains insufficient. Since 2007, the provincial government has promoted transparency in special autonomy fund allocations by disseminating information about the allocation criteria and the amounts allocated to districts/ municipalities. Special Regional Regulation No. 1/2007 establishes six criteria for allocation of special autonomy funds to districts/municipalities: a. b. c. d. e. f. geographic size of the region population size geographic conditions and accessibility difficulties own-source revenue revenue from land and building tax Gross regional domestic product District/municipality governments and other stakeholders have deemed these transparency efforts insufficient, however, because no governor’s regulation has been enacted regarding the allocation formula for transfer of special autonomy funds to districts/municipalities. To date, the calculations and data used have been treated as a confidential matter for the provincial government. The lack of openness on this process has given rise to a number of “negative” statements by district heads/ mayors that the provincial government is yet to be transparent and accountable in its distribution of funds. Districts/municipalities do not absorb most of the special autonomy funds allocated to them in the relevant fiscal year. Completion data for 2008 activities funded by special autonomy allocations indicates an absorption rate of only 41 percent. In other words, implementation of more than half of the activities needed to carry over to the 2009 fiscal year. Delayed disbursement of special autonomy funds to districts/municipalities is one factor that contributes to this low absorption rate. 98 Papua Public Expenditure Analysis December 2011 Papua Province Special Autonomy Funds The levels of reporting and accountability of special autonomy funds remain very low. Papua Province Bappeda data for 2008 indicates that only four regions (out of 21 districts/ municipalities, equivalent to 19 percent) reported on their use of special autonomy funds for all twelve months of the year. The rest only reported for several months, with some districts not making any reports. The 2005 Papua PEA identified this issue, but it has persisted. The persistence of this reporting issue results in part because the reporting system is rarely evaluated, there is ineffective enforcement of sanctions for negligence and delayed reporting, and because of a lack of appreciation for the utility of this information in decision-making. These reporting problems for special autonomy funds are one manifestation of insufficient attention to bureaucracy accountability, which results in low public accountability for special autonomy funds. Through the RESPEK program, the provincial government is endeavoring to distribute special autonomy funds directly to the community. The Government of Papua Province launched the Strategic Plan for Village Development (RESPEK) program in 2007 to enable the community to directly enjoy special autonomy funds. Through this program, every village receives Rp. 100 million per year from the provincial government, with top-up funds also added by district/ municipality governments. As the number of sub-districts and villages increases, expenditure on this program also increases. In its first two years of implementation, the RESPEK program has encountered several problems that have hampered the achievement of its goals. There have been at least five central problems in the implementation of RESPEK, namely: Box 6.1 Control mechanism for special autonomy funds management The Management of Special Autonomy Funds of Papua guidelines stipulated were first established in 2002 and have been updated each year. They establish the following mechanism for control of special autonomy funds management: (1) at provincial level, the budget user submits the report to the Governor with copies sent to Bappeda, the Regional Supervisory Agency (Bawasda) and the Regional Financial Management Agency (Badan Pengelola Keuangan Daerah – BPKAD), and (2) at district/municipality level, the budget user submits the report to the District Head/Mayor with copies sent to Bappeda, Bawasda and BPKD; the report is subsequently submitted to the Governor with copies to the provincial-level Bappeda, Bawasda and BPKD. This mechanism provides for the provincial-level Bappeda, Bawasda and BPKD to have the data and information to assess compliance with reporting on special autonomy funds. Table 6.2 RESPEK Fund for Sub-districts and Villages, 2008-2009 Year Number of Villages/Wards Total Funds (billion Rupiah) Number of Subdistricts Total Funds (billion Rupiah) 2007 2,593 259,3 186 18.6 2008 2,727 272,7 295 29.5 532,0 Total 48.1 Total Source: RESPEK Monitoring and Evaluation Report, 2009 (processed) 99 Figure 6.5 Realized/Unrealized Funds by Region as of December 2008 (%) Reported/realized 41% Not yet reported/realized 59% Source: interview results, processed, 2009 Figure 6.6 District/Municipality Reporting of the Utilization of the Special Autonomy Funds in Papua No report 3 region 14% Full report 4 region 19% Full report minus 5 month 2 region 9% Full report minus 4 month 1 region 5% Full report minus 2 month 5 region 24% Full report minus 3 month 6 region 29% Source: Papua Province Bappeda, 2008 Figure 6.7 Control Mechanism for Special Autonomy Funds Management, 2008 Provincial Government Work Units (Satuan Kerja Perangkat Daerah – SKPD) -B APPEDA -B AWASDA - Regional Financial and Asset Management Agency (Badan Pengelola Keuangan Aset Daerah – BPKAD) Governor District Head/Mayor District/Municipality Government Work Units (SKPD) -BAPPEDA -B AWASDA -B PKAD Source: Guidelines for the Special Revenue Funds Management in the Context of the Special Autonomy, 2008 100 Papua Public Expenditure Analysis December 2011 Papua Province Special Autonomy Funds a. In common with other aspects of special autonomy, there is not a clear regulatory framework for RESPEK implementation, including issues such as financial management. b. Coordination between the provincial and district/municipality governments has not been smooth. c. Programs and activities of different relevant regional government work units have not been optimally synchronized. d. There have not been complementary local economic development programs, resulting in many RESPEK program funds being spent outside the recipient areas. e. Inadequate human resource capacity at the village level has meant that the preparation of village budgets (APBK) and other planning and budgeting documents has not met expectations. 6.4 Recommendations New innovations are required to address the various problems in special autonomy implementation. The preceding discussion reveals that the core problems of special autonomy, such as the legal framework and coordination between different levels of government, are not new. Various attempts at resolution, such as Presidential Instruction No. 5/2007, have not produced satisfactory results. As we reach the half-way point of the implementation period for special autonomy, new innovations are required to resolve the aforementioned problems. One possible breakthrough might be an evaluation of special autonomy implementation jointly conducted by the central, provincial and district/municipality governments. Another possibility would be to form a ministerial-level agency to manage Papua’s special autonomy , as various parties have proposed.22 Reforms are needed in the management of special autonomy funds, covering planning, participation, reporting and transparency. The planning, implementation, administration, reporting and accountability processes for Papua’s special autonomy funds of Papua are based on the same regulation applies to funds from other regional revenue sources. We must observe four key aspects to ensure successful implementation of special autonomy-funded programs and activities, however, namely planning, participation, reporting and transparency. a. Planning. The finite amount of special autonomy funds requires regional government to be selective in referring to special autonomy priorities to plan programs and activities that will be financed out of special autonomy funds. Planning must also identify clear objectives and target beneficiaries, because special autonomy intends for a focus on the indigenous peoples of Papua. Discussion of the Definitive Plan (RD) during planning is an initial step which strongly determines the effectiveness of special autonomy funds. b. Participation. Village/ward and sub-district development planning forums (Musrenbang) must involve active community participation. Some Musrenbang proposals must also be accommodated in the Definitive Plan. To ensure these outcomes the provincial and district/ municipality governments need to prepare skilled Musrenbang facilitators. c. Reporting. The Government of Papua Province needs to review the reporting system for special autonomy implementation to achieve efficient and effective reporting. The provincial government must also require district/municipality governments and provincial government work units to submit timely reports on special autonomy implementation and enforce clear 22 See “Papua Minta Badan Khusus ke Presiden”, Cenderawasih Pos, November 2, 2009. 101 sanctions for those who do not do so. The provincial government must also evaluate these reports and provide clear feedback to the district/municipality governments and provincial government work units. d. Transparency. Increased transparency of policies, regulations, finance and activities is required to improve government accountability. Heads of government or work unit heads familiar with the issues must respond to various public issues and discourses on special autonomy funds which have affected public confidence in the government. All levels of management in regional governments must maintain this form of public accountability. 102 Papua Public Expenditure Analysis December 2011 Chapter 7 Governmental Institutions and Human Resources of the beginning of this year, most regional governments in Papua had implemented the “ Asorganizational structure for regional bureaucracies. Some regions have not implemented an integrated regional financial management institutional system. The creation of new regions has created increased needs for civil servants. The distribution of civil servants remains uneven, however. Districts have streamlined their bureaucracies but municipalities have undertaken expansion. These trends affect personnel expenditure, which in general is not yet satisfactory. Accounting human resources remain very lacking. ” 7.1 Analysis of Organizational Structure Government Regulation No. 41/2007 concerning Regional Government Organization requires all regional governments to review their organizational structures. As of 2008, many regional governments in Indonesia had “fat” structures, resulting in inefficient regional budgets.23 This government regulation, a derivative of Law No. 32/2004, intends to direct regional governments to establish efficient organizational structures in line with the circumstances of each government.24 This government regulation also regulated the nomenclature of each regional government work unit and the echelons of structural positions. The government regulation requires adjustments to regional organizational structures to be made within one year of its enactment. The Government of Papua Province and some districts/municipalities have established regional organizational structures that comply with Government Regulation No. 41/2007. To implement Government Regulation No. 41/2007, each regional government must prepare a derivative regional regulation concerning regional organizational structure. In Papua province, some regional governments enacted this regional regulation in 2008 (see Figure 7.1), but by early 2009 some of those regions were yet to implement their regional regulation. Some other regions have not completed the implementation of this regional regulation, in that they have established the organizational structure but are yet to put in place structural officials and staff, particularly in new regional government work units. For six regions information is not available, because they were not included in the survey conducted in 2009. 23 For example, the Government of Papua Province had more than 50 regional government work units in 2007. 24 Chapter V of Government Regulation No. 41/2007 set outs a formula for calculating the size of the regional government organizational structure. 103 Figure 7.1 Implementation of Organizational Structure and Work Procedures based on Government Regulation No. 41/2007 in Districts/Municipalities in Papua Province Not surveyed 6 Yes 8 No 6 Source: Papua Province and District/Municipality Public Financial Management Capacity Survey, 2009 Figure 7.2 Comparison between Provincial and Selected District/Municipality Government Organizational Structures and Personnel Expenditure Budgets in Papua, 2007-2009 [a]. Organizational Structure of Provincial Governments and Case Study Districts 60 57 50 47 47 38 37 43 40 30 28 27 23 20 10 0 20072 008 Papua Province 2009 Kab Jayapura Kab Peg Bintang [b]. Personnel Budget 700 596 592 600 500 400 341 300 196 207 233 151 200 156 67 100 0 Papua Province Kab Jayapura 2007 2008 Kab Peg Bintang 2009 Source: Papua province, Jayapura district and Pegunungan Bintang district APBD, 2009 (processed) 104 Papua Public Expenditure Analysis December 2011 Governmental Institutions and Human Resources The transition to Government Regulation No. 41/2007 has influenced the planning and budgeting process. The deadline to implement this regulation fell during the preparation of the 2009 budget, but by that point, some districts/municipalities in Papua were yet to adjust their organizational structures. As a result, the planning process for the 2009 Regional Budget was not optimal and budget absorption in each semester in 2009 was lower than in previous years. The implementation of Government Regulation No. 41/2007 has streamlined the organizational structure of the provincial government, but the regulation has had relatively little impact as yet on the structure of district/municipality governments. At provincial government level, the number of government work units decreased from 37 in 2008 to 23 in 2009. Similar impacts were not evident in the two district governments observed. It is too early to identify more detailed impacts such as the composition of structural officials, effects on organizational efficiency or decreases or increases in the number of civil servants, because implementation of this new organizational structure is not yet complete. The provincial government has decreased its budget for personnel expenditure by implementing this new regional government organizational structure, but the same effect was not evident in the two case study districts. The provincial government personnel expenditure budget decreased from Rp. 596,452 billion in 2008 to Rp. 591,910 billion in 2009. By contrast, the personnel expenditure budget increased in the case study districts. Jayapura district’s personnel expenditure budget increased from Rp. 207,169 billion in 2008 to Rp. 233,291 billion in 2009; in Pegunungan Bintang district the corresponding increase was from Rp. 151,320 billion in 2008 to Rp. 155,882 billion in 2009. 7.2 Civil Service The capacity of the regional government bureaucracy greatly determines the quality of governmental services. Since most responsibility for public service provision has been delegated to district/municipality governments, the capacity of regional government bureaucracies is crucial to the achievement of minimum service standards. To date, however, there are no clear guidelines concerning the required bureaucratic capacity to provide public services in a given region. Every region is unique, meaning required capacity will differ. Capacity assessments at present are limited to general quantity and quality indicators, such as the number of civil servants per 1,000 people and changes from year to year in composition by pay grade and education. The number of civil servants in Papua province increased quite significantly between 2004 and 2007. The total number of civil servants across all regional governments in Papua province increased by 31 percent between 2004 and 2007. The average increase of 35.1 percent in the number of civil servants in district/municipality governments contributed significantly to the overall increase (Figure 7.3). The increase at provincial government level was a more routine 5.90 percent. This increase in civil servant numbers is also evident in the number of civil servants per 1,000 people, which rose from 25 in 2004 to 29.8 in 2007. The creation of new districts/municipalities prompted the increase in the number of civil servants in Papua between 2004 and 2007. More detailed analysis reveals districts created in 2002 and 2003 to be the key contributors to increased numbers of civil servants in Papua province. Between 2004 and 2007, the average increase in the number of civil servants in these districts reached 236 percent. Unfortunately, the number of civil servants in rump districts also increased, although by only 8.2 percent. 105 Figure 7.3 Number of Civil Servants in Papua Province, 2004-2007 31 Ribuan 70 30 60 29 50 28 40 27 30 26 25 20 24 10 23 22 0 2004 Total kab/kota 2005 2006 Pemprov Papua 2007 Rasio per 1000 Penduduk Source: BPS of Papua Province, 2009 Figure 7.4 Number of Civil Servants in Papua Provincial and District/Municipality Governments and Number of Civil Servants per 1,000 People, 2007 [a]. Number of Civil Servants [b]. Number of Civil Servants per 1000 people Source: Papua Province BPS, 2009 The number of civil servants varies markedly between districts/municipalities in Papua, both in absolute terms and per 1000 people. Out of 20 districts in Papua in 2007, Jayapura district had the most civil servants and Supiori district the fewest. Rump districts/municipalities had greater numbers of civil servants than newly created districts (Figure 7.4a). The ratio of civil servant numbers to population numbers also varied significantly. For instance, a civil servant in the Yahukimo District serves nine times as many people as a civil servant in Jayapura district (Figure 7.4b). 106 Papua Public Expenditure Analysis December 2011 Governmental Institutions and Human Resources Between 2004 and 2007, the educational attainment of provincial and district/municipality government civil servants increased in general terms. By 2007, the proportion of civil servants holdings diploma, undergraduate and postgraduate degrees had increased quite significantly from 2004 figures (Table 7.6b). The proportion of civil servants with education attainment of senior high school or below decreased. There were two main reasons for this improvement. First, during this period, regional governments in Papua encouraged civil servants to undertake studies. Second, during this period, as civil servants with educational attainment of senior high school level or below retired, they were replaced by civil servants holding at least a diploma. In general, these trends occurred at both provincial and district/municipality level. A change in civil service composition by pay grade also took place over the same period. In line with positive changes in educational attainment, the proportion of civil servants employed at higher pay grades also increased at both provincial and district/municipality level. In general, between 2004 and 2007, there was a decrease in the proportion of grade I and II civil servants, whereas the proportion of grade III and IV civil servants increased (Figure 7.5). The gender composition of the civil service in Papua province became increasingly balanced between 2004 and 2007 (Figure 7.6). If in 2004, only 32 percent of civil servants in Papua were female, this proportion had increased to almost 41 percent in 2007. This trend of increased balance in gender composition was evident both in the provincial government, where the proportion of female civil servants increased from 34 percent to 37 percent, and in district/ municipality governments considered in aggregate terms, where a higher increase from 32 percent to 41 Percent occurred. In 2007, in some districts/municipalities there were almost as many or more female civil servants than males. Yapen Waropen, Mimika, Biak-Numfor districts and Jayapura municipality each had more female civil servants than male civil servants (Figure 7.7). By contrast, Figure 7.5 Composition of Civil Service in Papua Province, 2004-2007 80% 70% 60% 50% 40% 30% 20% 10% 0% GRADE I GRADE II GRADE III GRADE IV 2004 2005 2006 2007 Translation of Figure 7.5: Elementary School Junior High School Senior High School Diploma Undergraduate Degree Postgraduate Degree Doctoral Degree Source: Papua Province BPS, 2009 107 Figure 7.6 Gender Composition of Civil Service throughout Papua Province, 2004-2007 6000 0 42.0% 5000 0 40.0% 4000 0 38.0% 3000 0 36.0% 2000 0 34.0% 1000 0 32.0% 30.0% 0 2004 2005 Males 2006 200 7 Females % of Females Source: BPS of Papua Province, 2009 Figure 7.7 Gender Composition of Civil Service by Regional Government in Papua Province, 2007 700 0 600 0 500 0 400 0 300 0 200 0 Males Females Biak Numfor Nabire Jayapura Municipality Merauke Jayapura District Government of Papua Province Mappi Keerom Boven Digoel Asmat Puncak Jaya Paniai Mimika Yapen Waropen Jayawijaya Yahukimo Pegunungan Bintang 0 Supiori Tolikara Sarmi Waropen 100 0 Source: BPS of Papua Province, 2009 Figure 7.8 Composition of Civil Service in Districts/Municipalities, 2007 7000 6000 Doctoral Degree 5000 Postgraduate Degree 4000 Undergraduate Degree 3000 Diploma 2000 108 Papua Public Expenditure Analysis December 2011 Yapen Waropen Waropen Yahukimo Tolikara Sarmi Supiori Puncak Jaya Paniai Pegunungan Bintang Nabire Mimika Merauke Mappi Keerom Source: Papua Province BPS, 2009. Jayapura Municipality Jayapura Jayawijaya Boven Digoel Junior High School Asmat Senior High School 0 Biak Numfor 1000 Elementary School Governmental Institutions and Human Resources Figure 7.9 180 160 140 120 100 80 60 40 20 - Million Rupiah 4 3 2 Supiori Yapen Waropen Jayapura District Keerom Tolikara Boven Digoel Waropen - Pegunungan Bintang Puncak Jaya Jayapura Municipality Merauke Jayawijaya Nabire Mimika Mappi Asmat Paniai Biak Numfor Sarmi 1 Merauke Biak Numfor Jayapura Municipality Nabire Jayapura District Yapen Waropen Jayawijaya Supiori Mimika Government of Papua Province Puncak Jaya Asmat Pegunungan Bintang Mappi Boven Digoel Keerom Sarmi Paniai Waropen Tolikara Million Rupiah Employee Expenditure per Civil Servant (left) and Per Capita Civil Servant Expenditure (right) of Papua Province and Districts/Municipalities, 2007 Source: BPS, APBD of Papua Province and Districts/Municipalities, 2007 the bureaucracies of some newly created districts/municipalities were heavily male-dominated. In Tolikara, Yahukimo, Pegunungan Bintang and Puncak Jaya districts, more than 75 percent of civil servants in 2007 were males. Civil servants possessing important professional capabilities are not evenly distributed. As discussed in Chapter 5, there are very few teachers and medical staff in hinterland areas, and their distribution is uneven overall. The provincial and some district governments have adopted special policies to recruit teachers and medical staff to work in hinterland areas, such as providing remote area allowance and performance allowance. These policies have not produced significant impacts, however and new, innovative and effective solutions are required, as explained in Chapter 5. 7.3 Governmental Reform Government bureaucracy reform is one of the main agendas of the Governor of Papua Province for the 2006-2011 term. Improving public service provision in the regions was one of the purposes of government decentralization. In the context of improving the image of the government bureaucracy, the Governor of Papua Province has established bureaucratic reform as one agenda under his leadership. This agenda consists of eight programs and several activities (Table 7.2). Bureaucracy reform in Papua encompasses system and human resource reforms. Human resource reforms are conducted at two levels, namely at the provincial/district/municipality level and at lower level (staff). At the upper level, efficiency gains are made through streamlining. At the lower level, the focus is capacity building and management building through streamlining structure and empowering service functions. Bureaucracy reform has not been systematic, for example in the capacity development of civil servants. The bureaucracy reform agenda (Table 7.2) does not include a more detailed 109 implementation plan, without which implementation of this reform often loses direction. Two areas of civil servant capacity building provide concrete examples. First, there is no integrated employee management system, meaning that civil servant participation in internal and external trainings is determined ad hoc manner without sufficient attention to equal distribution and regeneration. Second, the promotion and transfer of civil servants appears inconsistent with capacity building. In various instances, civil servants trained for certain positions have been rotated or promoted to other positions that do not match their skill set. In 2004-2007, personnel expenditure decreased as a proportion of total expenditures, although it increased in absolute terms. Having realized that the composition of the APBD in Papua was an “inverted pyramid”,25 the governor of Papua province took immediate action to invert the pyramid so that the majority of expenditure would be enjoyed by the public rather than being allocated to the government bureaucracy. One important step has been to decrease the proportion of total expenditure spent on personnel. As described in Chapter 3, this proportion has decreased significantly although the amount of personnel expenditure has increased. In coming years, personnel expenditure is expected to continue to decrease as direct allocations of special autonomy funds to the public increase and the government structure is streamlined. Table 7.1 Government Bureaucracy Reform Agenda in Papua Province Agenda Program Activity Good Governance: Re-arrange and Strengthen Governance at All Levels 1. Re-order Laws and Regulations 2. Re-order institutionalization and management 3. Re-order sub-district and village organizations 4. Implement good governance 5. Improve quality of service provision 6. Develop data and information 7. Development cooperation 8. Improve institutional capacity for development planning 1. Coordinate cooperation for Provincial Regulations (Perdasi) 2. Compile Provincial Regulations and Special Regional Regulations (Perdasus) 3. Review Law No. 21 /2001, Provincial Regulations and Special Regional Regulations with respect to all higher laws and regulations and their compatibility with other regional regulations 4. Capacity building for leadership and members of MRP and DPRP 1. Improve effective, efficient and flexible institutional system based on pyramid structure and good governance principles 2. Improve structural position chart and functional position mechanism 3. Improve management and work relations between regional government work units at provincial level and between levels from provincial to district/municipality, sub-district and village. 1. Synchronize laws and regulations concerning sub-district and village organizations and management 2. Consultancy and agreement with stakeholders 3. Re-order sub-district and village government organization and work procedures Source: Papua Province 2006-2011 Medium-term Development Plan (RPJM) 25 110 PEA Report 2005 Papua Public Expenditure Analysis December 2011 Governmental Institutions and Human Resources 7.4 Recommendations Rationalization (streamlining) of government organizational structures is required in line with needs for government services and in compliance with regulations. The emphasis in streamlining organizational structures should be on newly created regions, particularly those with small geographic areas and populations. Rump regions also need to streamline, because their general allocation grant will decrease because of their lesser area and population size. Human resource management of civil servants must consider concrete needs, competency and professionalism, in addition to the local condition of Papua. Law No. 21/2001 endeavors to promote the role of indigenous Papuans in various sectors, including the government.26 Human resource management of civil servants in Papua Province must nevertheless be based on concrete needs, competency and professionalism, as follows: 1. The provincial and district/municipality governments with the support of the State Ministry for Administrative Reforms need to develop a comprehensive system for human resources management of civil servants. 2. Systematic development of human resources management is required, both through career strata and capacity building, to resolve quality and quantity problems in the provincial and district/municipality civil service. 3. A competition-based promotion system is required to obtain officials with optimum competency in conducting their tasks. 26 This policy prioritizing indigenous Papuans is generally known as ‘affirmative action’. 111 Annexes Table A.1 Per Capita Revenue by District/Municipality in Papua Province, 2007 District Population (people) APBD Revenue (Rp.) Per Capita APBD Revenue (thousand rupiah/capita) Biak Numfor District 107,351 469,205,460,391 4,371 98,028 680,517,175,463 6,942 Jayawijaya District 224,572 549,623,092,709 2,443 Jayapura District Merauke District 168,513 940,651,566,827 5,582 Mimika District 139,036 998,269,938,948 7,180 Nabire District 171,422 582,263,378,755 3,397 Paniai District 120,622 631,155,810,094 5,233 Puncak Jaya District 120,307 576,459,350,915 4,792 Yapen Waropen District 76,168 441,490,935,783 5,796 215,609 547,378,487,459 2,539 Sarmi District 34,326 647,979,823,473 18,877 Keerom District 42,582 470,965,500,159 11,060 94,780 578,921,387,901 Jayapura Municipality Pegunungan Bintang District Yahukimo District 147,935 - 6,108 - Tolikara District 48,021 457,564,155,355 9,528 Asmat District 66,580 455,372,460,087 6,839 Boven Digoel District 33,995 609,315,284,127 17,924 Mappi District 70,123 569,904,481,652 8,127 Waropen District 23,022 417,918,260,688 18,153 Supiori District 12,624 158,326,434,246 12,542 Source: 2007 APBD (processed) 113 Table A.2 Composition of APBD Real Expenditure in Papua Province by Sector, 2004-2008 Sector 2004 2005 2006 2007 2008 43.6% 55.9% 52.8% 54.6% 44.4% Agriculture 2.4% 2.0% 2.1% 2.7% 3.3% Fisheries and Maritime 0.9% 0.8% 0.9% 1.1% 1.1% Mining and Energy 0.4% 0.4% 0.5% 0.8% 1.0% Forestry and Plantation 2.1% 1.1% 0.8% 0.6% 0.9% Industry and Trade 0.8% 0.8% 1.3% 0.8% 1.3% Cooperatives 0.5% 0.2% 0.2% 0.3% 0.4% Capital Investment 0.2% 0.1% 0.1% 0.1% 0.1% Manpower 0.5% 0.4% 0.7% 0.8% 0.6% Health 7.8% 7.7% 7.2% 7.3% 8.7% 19.8% 14.3% 12.5% 10.6% 12.9% Social 1.1% 1.3% 2.2% 1.2% 1.4% Spatial 0.0% 0.3% 0.1% 0.2% 0.2% Housing 1.2% 0.6% 0.3% 0.5% 0.8% 14.0% 11.4% 16.1% 12.8% 17.6% Transportation 1.5% 1.2% 1.1% 3.9% 3.5% Environment 0.8% 0.3% 0.3% 0.5% 0.4% Population 1.0% 0.3% 0.2% 0.4% 0.4% Sports 1.1% 0.6% 0.3% 0.4% 0.7% Tourism 0.4% 0.4% 0.3% 0.3% 0.3% Land 0.0% 0.0% 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0% 100.0% 100.0% General Government Administration Education and Culture Public Works Source: Realization of 2004-2008 APBD (processed) Notes: Figures for 2004-2007 are realized, figures for 2008 are budgeted; real figures based on 2007 constant prices. 114 Papua Public Expenditure Analysis December 2011 Annexes Table A.3 Government of Papua Province by Sector, 2004-2008 (%) Field General Government Administration 2004 2005 2006 2007 2008 31.0% 61.5% 58.0% 56.1% 49.3% Agriculture 3.2% 2.1% 2.5% 2.1% 3.1% Fisheries and Maritime 1.5% 0.9% 1.2% 0.8% 0.9% Mining and Energy 0.9% 0.7% 0.9% 1.4% 1.4% Forestry and Plantation 3.3% 1.3% 1.5% 0.6% 1.0% Industry and Trade 1.2% 0.6% 0.7% 0.4% 0.7% Cooperatives 1.0% 0.4% 0.5% 0.3% 0.4% Capital Investment 0.3% 0.2% 0.3% 0.2% 0.3% Manpower 0.9% 0.6% 0.8% 0.5% 0.8% Health 12.6% 9.3% 7.7% 5.9% 8.0% Education and Culture 13.5% 6.2% 8.3% 4.8% 4.3% Social 1.6% 1.5% 1.9% 0.6% 1.3% Spatial 0.0% 0.0% 0.0% 0.3% 0.0% Housing 0.0% 1.1% 1.0% 0.7% 0.8% 21.7% 9.7% 11.5% 16.7% 18.0% Public Works Transportation 3.9% 2.1% 2.1% 7.2% 8.1% Environment 0.8% 0.5% 0.4% 0.5% 0.5% Population 1.6% 0.1% 0.0% 0.3% 0.0% Sports 0.4% 0.8% 0.5% 0.5% 0.7% Tourism 0.3% 0.3% 0.4% 0.3% 0.4% Land 0.1% 0.1% 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0% 100.0% 100.0% Source: Realization of 2004-2008 APBD (processed) Notes: Figures for 2004-2007 are realized, figures for 2008 are budgeted 115 Table A.4 District/Municipality Government Expenditure by Sector in Papua Province, 2004-2008 (%) Field General Government Administration 2004 2005 2006 2007 2008 47.7% 53.8% 51.2% 54.0% 42.9% Agriculture 2.1% 1.9% 1.9% 3.0% 3.3% Fisheries and Maritime 0.7% 0.7% 0.8% 1.3% 1.1% Mining and Energy 0.3% 0.2% 0.4% 0.7% 0.9% Forestry and Plantation 1.6% 1.1% 0.6% 0.6% 0.9% Industry and Trade 0.7% 1.0% 1.4% 0.9% 1.5% Cooperatives 0.4% 0.2% 0.2% 0.3% 0.4% Capital Investment 0.2% 0.0% 0.1% 0.1% 0.1% Manpower 0.3% 0.3% 0.6% 0.9% 0.5% Health 6.2% 7.1% 7.0% 7.8% 9.0% Education and Culture 21.8% 17.4% 13.7% 12.8% 15.5% Social 0.9% 1.2% 2.4% 1.5% 1.4% Spatial 0.0% 0.4% 0.1% 0.1% 0.2% Housing 1.7% 0.4% 0.1% 0.4% 0.8% Public Works 11.5% 12.1% 17.6% 11.4% 17.5% Transportation 0.7% 0.9% 0.7% 2.6% 2.1% Environment 0.8% 0.2% 0.2% 0.5% 0.4% Population 0.8% 0.4% 0.3% 0.4% 0.5% Sports 1.3% 0.4% 0.3% 0.4% 0.7% Tourism 0.5% 0.5% 0.3% 0.3% 0.3% Land 0.0% 0.0% 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0% 100.0% 100.0% Source: Realization of 2004-2008 APBD (processed) Notes: Figures for 2004-2007 are realized, figures for 2008 are budgeted; figures exclude special autonomy funds. 116 Papua Public Expenditure Analysis December 2011 Table A.5 Development of Financial Management Regulations in Papua Province Regulation 2000 Law Law No. 38/ 2000 Government Regulation Government Regulation No. 104/2000 Government Regulation No. 105/2000 Government Regulation No. 108/2000 Government Regulation No. 109/2000 2001 Law No. 21/2001 2002 2003 2004 Law No. 17/2003 Law No. 1/2004 Law No. 15/2004 Law No. 25/2004 Law No. 32/2004 Law No. 33/2004 Government Regulation No. 23/2003 Government Regulation No. 20/2004 2005 2006 2007 Government Regulation No. 14/2005 Government Regulation No. 23/2004 Government Regulation No. 24/2005 Government Regulation No. 23/2005 Government Regulation No. 37/2005 Government Regulation No. 54/2005 Government Regulation No. 55/2005 Government Regulation No. 56/2005 Government Regulation No. 58/2005 Government Regulation No. 6/2006 Government Regulation No. 8/2006 Government Regulation No. 58/2007 Annexes 117 118 Papua Public Expenditure Analysis December 2011 Regulation 2000 2001 2002 2003 2004 2005 Presidential Regulation Ministerial Regulation 2007 Presidential Regulation No. 3/2006 Presidential Regulation No. 8/2006 Presidential Regulation No. 12/2006 Minister of Home Affairs Decree No. 29/2002 Regional Regulation Ministry of Home Affairs Regulation No. 12/2005 Ministry of Home Affairs Regulation No. 13/2006 2005 APBD 2006 APBD Regional Regulation No. 2/2004 2002 APBD Source: depdagri.go.id 2006 2003 APBD 2004 APBD 2007 APBD Annexes Table A.6 Special Autonomy Fund Allocation to Districts/Municipalities, 2004-2009 (billion Rupiah) No. District/ Municipality Fiscal Year 2004 2005 2006 2007 2008 2009 Average 1 Jayapura District 35.95 28.30 54.47 57.17 60.82 52.66 48.23 2 Yapen Waropen District 32.97 27.50 54.08 56.76 60.38 52.29 47.33 3 Biak Numfor District 35.19 28.50 55.77 58.53 62.27 53.92 49.03 4 Nabire District 35.67 29.00 53.11 55.74 59.30 51.35 47.36 5 Merauke District 33.93 28.50 55.31 58.05 61.76 53.48 48.51 6 Jayawijaya District 36.28 29.00 61.60 64.66 68.78 59.56 53.31 7 Paniai District 36.50 30.30 59.79 62.75 66.75 57.80 52.32 8 Puncak Jaya District 38.72 30.30 61.15 64.18 68.27 59.12 53.62 9 Mimika District 37.19 28.60 55.77 58.53 62.27 53.92 49.38 10 Jayapura Municipality 33.41 27.10 52.66 55.26 58.79 50.91 46.35 11 Waropen District 30.93 30.10 56.09 58.87 62.63 54.23 48.81 12 Asmat District 38.85 31.50 61.80 64.86 69.00 59.75 54.29 13 Boven Digoel District 32.97 30.10 59.98 62.95 66.97 57.99 51.83 14 Mappi District 32.97 30.10 59.72 62.68 66.68 57.74 51.65 15 Sarmi District 33.23 30.25 57.58 60.44 64.29 55.67 50.24 16 Keerom District 31.41 30.00 57.00 59.82 63.64 55.11 49.50 17 Tolikara District 34.05 31.00 61.80 64.86 69.00 59.75 53.41 18 Pegunungan Bintang District 34.05 31.00 61.80 64.86 69.00 59.75 53.41 19 Yahukimo District 38.62 31.50 61.80 64.86 69.00 59.75 54.25 20 Supiori District 29.29 29.50 50.71 53.22 56.62 49.03 44.73 21 Mamberamo Raya District 0.00 0.00 0.00 0.00 57.96 50.19 18.02 22 Mamberamo Tengah District 0.00 0.00 0.00 0.00 0.00 12.74 2.12 23 Yalimo District 0.00 0.00 0.00 0.00 0.00 12.74 2.12 24 Lanny Jaya District 0.00 0.00 0.00 0.00 0.00 12.74 2.12 25 Nduga District 0.00 0.00 0.00 0.00 0.00 12.74 2.12 26 Puncak District 0.00 0.00 0.00 0.00 0.00 12.74 2.12 27 Dogiyai District 0.00 0.00 0.00 0.00 0.00 12.74 2.12 28 Intan Jaya District 0.00 0.00 0.00 0.00 0.00 12.74 2.12 29 Deiyai District 0.00 0.00 0.00 0.00 0.00 12.74 2.12 592.15 1,152.01 1,209.07 1,344.18 1,265.88 1,042.58 Total 692.18 Source: Government of Papua Province 119 Box A.1 Respondent Opinions on the Transparency of Special Autonomy Funds Some respondents for the 2009 PEA update considered the indicators used to determine distribution of special autonomy funds to be transparent. In a questionnaire distributed to respondents in 20 districts and municipalities, 40 percent of respondents stated that the indicators used to determine distribution of special autonomy funds are transparent. Of the remainder, 38 percent stated the indicators determining distribution are not transparent whereas 22 percent stated that they do not know. Respondents judged distribution of funds to be sound. 49 percent of respondents stated that the indicators employed are fair, 32 percent stated that the indicators are unfair and 19 percent stated that they did not know. Figure ANNEXES Public Perception of Transparency in Fairness of Distribution of Special Autonomy Funds Indicators Determining Distribution of Special Autonomy Funds to Districts/Municipalities Are Transparent 22% 40% Agree Disagree Do Not Know 38% Source: interview results, processed, 2009 120 Papua Public Expenditure Analysis December 2011 References State Audit Board (2007), State Audit Board Regulation No. 2/ 2007 concerning State Audit Board Code of Ethics for Audits, Jakarta. _____________ (2007), State Audit Board Regulation No. 1/2007 concerning State Financial Audit Standards, Jakarta. _____________ (2009), State Audit Board Audit Report on Government of Papua Province Management of Special Autonomy Fund in 2007 and 2008Fiscal Years, www.bpk.go.id Papua Province Regional Development Planning Agency (2007), Evaluation of Five Years of Implementation of Special Autonomy in Papua, in cooperation with Universitas Cenderawasih, manuscript. Papua Central Statistics Bureau (2008), Papua Province in Numbers, Various Districts and Municipalities in Numbers (several years). ____________ (2008), Gross Regional Domestic Products of Papua Province, Districts and Municipalities, several years. Ministry of Finance of the Republic of Indonesia (2006), Finance Minister’s Regulation No. 46/2006 concerning Procedures for the Submission of Regional Financial Information, Jakarta. Government of Papua Province (2004), Papua Province Regional Regulation No. 2/2004 concerning Management of Papua Special Autonomy Funds, Jakarta. ______________ (2007), Papua Province Special Regional Regulation No. 3/2007 concerning Management of Papua Special Autonomy Funds, Jayapura. Government of Papua Province, Sofei, WB (2005), Analisis Pengeluaran Publik Papua, Sebuah Tinjauan Umum Keuangan Daerah dan Pelayanan Publik pada Wilayah Tertinggal di Indonesia (Analysis of Papua Public Expenditure Analysis: Regional Finance and Service Delivery in Indonesia’s Most Remote Region). State Secretary of the Republic of Indonesia (2001), Law No 21/2001 concerning Special Autonomy for Papua Province, State Secretary of the Republic of Indonesia, Jakarta. _____________ (2003), Law No 17/2003 concerning State Finance, State Secretariat of the Republic of Indonesia, Jakarta. _____________ (2004), Law No. 25/ 2004 concerning National Development Planning System, State Secretariat of the Republic of Indonesia, Jakarta. 121 _____________ (2004), Law No 1/2004 concerning State Treasury, State Secretariat of the Republic of Indonesia, Jakarta. _____________ (2004), Law No. 15/2004 concerning Audit of State Financial Management and Accountability, State Secretariat of the Republic of Indonesia, Jakarta. _____________ (2004), Law No. 32/2004 concerning Regional Government, State Secretariat of the Republic of Indonesia, Jakarta. _____________ (2004), Law No. 33/2004 concerning Financial Balance, State Secretariat of the Republic of Indonesia, Jakarta. _____________ (2005), Government Regulation No. 24/2005 concerning Government Accounting Standards, State Secretariat of the Republic of Indonesia, Jakarta. _____________ (2005), Government Regulation No. 56/2005 concerning Regional Financial Information System, State Secretariat of the Republic of Indonesia, Jakarta. _____________ (2005), Government Regulation No. 58/2005 concerning Regional Financial Management, State Secretariat of the Republic of Indonesia, Jakarta. _____________ (2006), Government Regulation No. 8/2006 concerning Financial Reporting and Performance of Government Institutions, State Secretariat of the Republic of Indonesia, Jakarta. _____________ (2007), Government Regulation No. 3/2007 concerning Report on Regional Government Governance to the Government, Head of Regional Government Accountability Statement Report to the Regional People’s Representative Council and Information about the Report on Regional Government Governance to the Public, State Secretariat of the Republic of Indonesia, Jakarta. _____________ (2008), Government Regulation No. 60/2008 concerning Government Internal Control System, State Secretariat of the Republic of Indonesia, Jakarta. _____________ (2004), Governor’s Decision concerning Guidance on the Management of Funds from Papua Special Autonomy Sources in 2004, Jayapura. _____________ (2005), Governor’s Decision concerning Guidance on the Management of Funds from Papua Special Autonomy Sources in 2005, Jayapura. _____________ (2006), Governor’s Decision concerning Guidance on the Management of Funds from Papua Special Autonomy Sources in 2006, Jayapura. _____________ (2007), Governor’s Decision concerning Guidance on the Management of Funds from Papua Special Autonomy Sources in 2007, Jayapura. _____________ (2008), Governor’s Decision concerning Guidance on the Management of Funds from Papua Special Autonomy Sources in 2008, Jayapura. 122 Papua Public Expenditure Analysis December 2011 References Solossa, Y. P. (2005), Otonomi Khusus Papua dalam Menghadapi Disintegrasi Bangsa (The Role of Papua’s Special Autonomy in Addressing National Disintegration), Doctoral Dissertation, Universitas Pajajaran, Bandung. Suebu, B (2007), Kami Menanam, Kami Menyiram, Tuhanlah yang Menumbuhkan (We Sow, We Water, God Provides Growth) , Government of Papua Province. Suebu, B (2009a), Pembangunan Kampung (Village Development), Government of Papua Province. Suebu, B (2009b), Mencapai Tata Kelola Pemerintahan yang Baik dan Mewujudkan Kapasitas Fiskal yang Tangguh di Provinsi Papua (Achieving Sound Government Administration and Strong Fiscal Capacity in Papua Province), Government of Papua Province. Suebu, B (2009c), Konsistensi Bekerja bagi Papua Baru (Consistently Working for a New Papua), Government of Papua Province. Sumule, Agus, ed. (2003), Mencari Jalan Tengah Otonomi Khusus Papua (Seeking the Middle Road for Papua’s Special Autonomy), PT Gramedia Pustaka Utama, Jakarta. World Bank (2009), Berinvestasi untuk Masa Depan Papua dan Papua Barat: Infrastruktur untuk Pembangunan Berkesinambungan (Investing in the Future of Papua and West Papua: Infrastructure for Sustainable Development), Jakarta. 123