Owen Podger, Jakarta
Regional government deposits in Bank Indonesia certificates (SBI) are back in the news after President Susilo Bambang Yudhoyono disclosed in his annual speech to the Regional Representatives Council (DPD) on Aug. 23 how the deposits continued to grow. He again urged regions to invest in physical and human capital rather than SBI. At a meeting between ministers and regional leaders following the speech, members of his Cabinet agreed to help them do that.
A Public Management International Institute (PMII) analysis has found plenty of reasons why regions invest in SBI.
The first reason, and a legitimate one, is cash flow. The General Allocation Fund (DAU) comes in on a monthly basis, but expenditures usually goes out less at the beginning of the year, until budgets are allocated in detail and works are prepared and tendered. Regions need a place to store funds till they are needed.
Resource-rich regions tend to delay spending their revenue share (BH) until they see how much is in hand, as the timing and amount has been unpredictable.
No district can spend on investments until its budget is approved first by the Regional Legislative Council (DPRD), then the provincial governor, and then until each work unit has documented how it will spend it. Although better than last year, most regions have only recently approved their budgets, and only now have their detailed allocations agreed on. Two thirds of the year has gone, and few have started their annual investment program. This not only ties up perhaps half of their budget, but it also puts serious strains on their capacity to complete any significant construction programs within the financial year.
Most government agencies believe they must both design capital works and build them within one year. They believe they should avoid multi-year contracts. They only tender works that they hope they can finish by the end of the fiscal year. So they avoid big works, the very type of works needed to use up those funds sitting in the SBI.
This practice of rushing to finish construction work within the fiscal year also impacts badly on quality. Not only is design rushed and construction pushed into the wet season, it leads to lack of supervision. All public works contracts by law must have a ""maintenance period"" of 6 to 12 months, at the end of which the contractor is supposed to make any needed repairs. But since districts do not carry funds over into the following year, they have no supervising engineers to inspect works at the end of the maintenance period, and no funds retained from contractors to enforce compliance.
The government's procurement policy should make multi-year procurement a standard policy for capital works to stop the quality-threatening rush, to assure that corrective action is taken at the end of proper maintenance periods and to enable a constant flow of investment work.
On a previous occasion, the President noted that SBI was a simple option for lazy local governments. SBI is one indicator that some regions show little sense of public obligation.
Another indicator is expenditure on official travel. For example, relatively poor Rokan Hulu regency in Riau spends 2 percent of its budget on official travel. But richer neighbor Rokan Hilir spends 13 percent of its budget on travel, 12 times the amount on a per capita basis.
Another option for those who care little for public service is to spend more on their personnel. The average region has a total budget of Rp 850,000 per capita, and spends 45 percent of it on its personnel expenditures.
For example, Bekasi regency, with a budget of only Rp 540,000 per capita, manages to spend only 35 percent on personnel. But Sabang town, which has a budget 17 times larger than Bekasi measured on a per capita basis, manages to spend 20 times more on its personnel, as much as the entire economy of North Maluku. But it has not yet managed to excel in any indicators of public services (though we hope the new mayor will make some breakthroughs in coming years).
Some regional governments, in their concern for their people, are aiming for a more efficient bureaucracy. Spending more money does not necessarily produce better government. And without better government and better planning, there is a tendency to waste resources.
Local governments in East Java are achieving continual improvement in services without enormous expense. Surabaya's Green and Clean program has had a remarkable impact on cleanliness and community attitudes, that is projected to yield a reduction in the costs of garbage services.
Surabaya also spends 20 percent of its budget on maintenance compared with the national average of only 5 percent. But it spends only 15 percent on investment compared to the national average of 26 percent. It would seem that most regions already have their priorities wrong, spending too much on works and not enough on maintenance. As long as they spend so little on maintenance, it is unwise to urge them to spend more on capital works.
We conclude that regency governments have homework to do before they spend their SBI savings on capital works. They should conclude their budgeting on time, prepare multi-year investment plans, amend procurement policies, reduce waste, seek greater efficiency and maintain the investments they have.
The writer is performance management director of the Public Management International Institute (PMII). He can be reached at micah68@centrin.net.id.
