fostering public participation in budget-making: case studies from

Public Participation Budget-making

FosteringPublic Participationin Budget-making

Case Studies from Indonesia, the Marshall Islands, and Pakistan

Edited by

Raza AhmadErin Thébault Weiser

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©2006 Asian Development Bank, The Asia Foundation

All rights reserved. Published 2006Printed in the Philippines.

Publication Stock No. 101306

The views expressed in this book are those of the authors and do notnecessarily reflect the views and policies of the Asian Development Bank(ADB) or its Board of Governors, or the governments they represent, or TheAsia Foundation.

ADB and The Asia Foundation do not guarantee the accuracy of the dataincluded in this publication and accept no responsibility for any consequenceof their use.

Use of the term “country” does not imply any judgment by the authors orADB or The Asia Foundation as to the legal or other status of any territorialentity.

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Table of Contents

Foreword vAcknowledgements viiAbbreviations viiiExecutive Summary 111111 Introduction 522222 Methodology and Design Considerations 733333 Indonesia Case Study 11

3.1 Political and Economic Background 113.2 Local Budgeting Process 133.3 Facilitating Civil Society Participation in Local Budgeting 173.4 Country-specific Recommendations 23

44444 Marshall Islands Case Study 274.1 Political and Economic Background 274.2 Local Budgeting Process 294.3 Facilitating Civil Society Participation in Local Budgeting 304.4 Country-specific Recommendations 32

55555 Pakistan Case Study 375.1 Political and Economic Background 375.2 Local Budgeting Process 395.3 Facilitating Civil Society Participation in Local Budgeting 415.4 Country-specific Recommendations 45

66666 Conclusion and Recommendations 516.1 General Lessons Learned 516.2 Lessons for Replication Outside the Pilot Countries 546.3 Conclusion 55

Appendix 1: Summary Budgets, Indonesia 57Appendix 2: Summary Budgets, Pakistan 59Endnotes 61References 63

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Improving the responsiveness, accountability, andtransparency of governance is now accepted asvital to the achievement of improved standards

of living and opportunities in developing countries.The heightened attention in recent years to goodgovernance has logically led to a greater focus onthe way in which budgets are formulated,implemented, and monitored. Consultativebudgeting initiatives can directly contribute toimproved governance outcomes by opening a keyplanning and management tool to publicparticipation and oversight. Regardless of whetherefforts are focused on public involvement in planning,drafting, or implementing the budget, internationalexperience is demonstrating positive outcomesrelated to efficiency and responsiveness ofgovernment services. In particular, as governmentsimplement decentralization programs, opportunitiesare created for citizens to understand and relate tothe budget as an instrument for monitoring andinfluencing performance and service delivery.

Best practices in applied budgeting have beendeveloped in countries, including South Africa, Brazil,and India. Given the increasing interest in thismethodology, the Asian Development Bank (ADB)designed and implemented a regional technicalassistance to pilot an applied budgeting project inIndonesia, the Marshall Islands, and Pakistan. Theproject engaged government officials, legislators, andcivil society representatives in two sites in eachcountry over an 8-month span to initiate budgetforums where the annual budget is discussed openlyand subjected to suggestions from the public.Activities resulted in an increased awareness of thebudget process by the public. Government officialshave committed to disseminate budget information

Foreword

and hold future consultation forums. Legislators havespurred renewed commitment to fulfill their oversightand monitoring functions. These promising resultssuggest that there is broad scope to expandbudgeting initiatives in the region.

This publication is intended as a reference forlocal governments, civil society groups, andnongovernment organizations seeking to applyconsultative budgeting methods. ADB is committedto support its developing member countries inreducing poverty through improved governance, andhopes that these case studies will contribute to anincreased integration of public consultation ingovernment programs to improve outcomes for theircitizens.

To support ADB’s commitments on knowledgedissemination, we are also translating this publicationin Urdu and Bahasa to be distributed among the localgovernment leaders and officials and members ofcivil society at the grassroots level. We hope thisendeavor will result in generating a greater demandfor transparency and showcase some stories forothers to follow. We also hope that officials of otherdevelopment partners including ADB staff will benefitfrom the lessons documented here to mainstreamparticipatory approaches and civil society partnershipsin their projects and programs.

Kathleen MoktanDirectorCapacity Development and Governance DivisionRegional and Sustainable Development Department

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This report is based on the field work by theproject team led by Erin Thébault-Weiser(project team leader), Hetifah Sjaifudian

(Indonesia), Benjamin Graham and Charles Paul(Marshall Islands), and Shahnawaz Mahmood andMukhtar Ali (Pakistan). Special thanks are due to M.Kathleen Moktan, Director Capacity Development andGovernance Division, Regional and SustainableDevelopment Department (RSDD), Asian Develop-ment Bank (ADB) HQ; Edgar A. Cua, Country Direc-tor, Indonesia Resident Mission-ADB; Sandra Nicoll,Senior Governance Specialist, Pakistan ResidentMission-ADB; and Stephan Pollard, Principal Econo-mist, Poverty Reduction, ADB, for their support duringthe implementation of this project. We wish toacknowledge the guidance provided by RameshSubramaniam, Principal Economist and A. BarendFrielink, Principal Programs Coordinator at the Indo-nesia Resident Mission for their guidance and supportin implementing the Indonesia pilot projects.

Clay Wescott, Principal Regional CooperationSpecialist, ADB, was instrumental in launching thisRETA and seeing through its implementation untilApril 2006 along with Raza Ahmad, Governance andCapacity Development Specialist, RSDD. The initialfact-finding and research for the project was carriedout by Jorn Brommlehoster, Public Resource Man-agement Specialist, ADB.

This project could not have succeeded with-out the invaluable commitment and engagement ofthe local stakeholders involved in the three coun-tries. In Indonesia, special thanks are due to the Mayorof Makassar and Regent of Kebumen for agreeing toparticipate in the pilot project; the local governmentstaff who made budget data available to the projectand participated in the activities; the council mem-

Acknowledgements

bers of Kebumen; the members of Kupas and Formasifor their participation in the project activities, Mr.Nandang Suherman of P3ML in Sumedang for hishelp in co-facilitating the trainings and final confer-ence; and to the central government representativesand donor agencies that participated in the finalconference.

In the Marshall Islands, special thanks are dueto the Office of the President (Chief Minister andEPPSO), the Ministry of Finance, Women United To-gether in the Marshall Islands, Marie Maddison, andthe many civil society representatives who took timeaway from work and family to support the project.In particular, recognition should go to civil societyrepresentatives from Ebeye who agreed to fly toMajuro to represent their colleagues during the bud-get forum and final conference.

In Pakistan, many thanks to the Nazim and NaibNazims of Jehlum and Kasur who agreed to parti-cipate in the pilot project and were active in theirsupport. Thanks also to members of the national,provincial, and local governments and councils whoparticipated; and to the many civil society organiza-tions who took part in this project.

We also wish to thank the comments providedby Johannes Albert van Ommen, Poverty ReductionFund, RSDD, and Dr. Joel Mangahas, Director, Centerfor Policy and Executive Development, Universityof the Philippines on the several drafts of thispublication. Finally, we wish to acknowledge thesupport provided by Knowledge Management Center,RSDD especially Aldwin Sutarez in managing thispublication.

Editors

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ADB Asian Development BankAKA Aeloon Klein Ad Party, Marshall IslandsAPBD annual budget, IndonesiaBIGS Bandung Institute for Governance StudiesCCB citizen community boardCIDA Canadian International Development

AgencyCSO civil society organizationDAK dana alokasi khusus—Funds earmarked for

central government projects at the local levelin Indonesia

DAU dana alokasi umum—General funds fromcentral to local government in Indonesia

DFID Department for International Development,United Kingdom

DISHA Developing Initiatives for Social and HumanAction

DPRD local parliament, IndonesiaEDO executive development officer, PakistanESN Ebeye Special Needs, Marshall IslandsFITRA Indonesian Forum for Budget TransparencyGDP gross domestic productKUA kebijakan umum anggaran—General

Budget PolicyLGO Pakistan Local Governance Ordinances

(2001)LPJ laporan pertanggung jawaban—final

accountability report, Indonesia

Abbreviations

MTBIF medium-term budget investment frameworkNGO nongovernment organizationPAC Public Accounts Committee, Marshall

IslandsPAD pendapatan asli daerah—Indonesian local

government’s locally-generated revenuesP3ML Center for Local Community Study and

EmpowermentPR rupee, PakistanRAPBD draft annual budget, IndonesiaRASK department work plans, IndonesiaRETA regional technical assistanceRKA rencana kerja dan anggaran—work and

budget planRMI Republic of the Marshall IslandsRKPD Rencana Kerja Pemerintah Daerah—Local

Government Work PlanRp rupiah, IndonesiaSKPD Satuan Kerja Perangkat Daerah—Local

Government Technical DepartmentTMA Tehsil municipal administrationTMO Tehsil municipal officerTOR terms of referenceUC Union Council, PakistanUDP United Democratic Party, Marshall IslandsUS United States of AmericaWUTMI Women United Together in the Marshall

Islands

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FREQUENTLY-USED FOREIGN TERMSMusrenbang bottom-up planning process in

IndonesiaNaib Nazim head of subdistrict council in

PakistanNazim head of subdistrict in PakistanNitijela Marshall Islands ParliamentTehsil Subdistrict in Pakistan

FIGURESFigure 3.1 Local Government Structure,

IndonesiaFigure 3.2 Annual Budget Preparation Cycle,

IndonesiaFigure 5.1 Local Government Structure,

Pakistan

TABLESTable 3.1 Areas Under the Authority of

Indonesian Local GovernmentsTable 3.2 Annual Budget Preparation Cycle,

IndonesiaTable 4.1 Annual Budget Cycle for the

National Government, the Republicof the Marshall Islands

Table 5.1 Annual Budget Cycle for LocalGovernments, Pakistan

NOTE: In this report, “$” refers to US dollars.

BOXESBox 1 What part of the budget cycle to

focus on?Box 2 When does participatory budgeting

work?Box 3 Spreading Local Best PracticeBox 4 Promising Signs of SustainabilityBox 5 Importance of a Legal FrameworkBox 6 Reforms of Institutional

Arrangements Must Buttress LegalProvisions

Box 7 Transparency Supports BudgetingReforms

Box 8 Addressing Gender Concerns

11111EXECUTIVE SUMMARY

Executive Summary

Summary of Basic Country Information1

IndonesiaIndonesiaIndonesiaIndonesiaIndonesia Marshall IslandsMarshall IslandsMarshall IslandsMarshall IslandsMarshall Islands PPPPPakistanakistanakistanakistanakistan

Population 217.4 m 57,000 151.8 mYear of independence 1945 1986 1947Human Development 110 121 135 Index rankingGDP per capita ($) 3,361 2,340* 2,097Adult literacy rate (%) 87.9 93.7 48.7Transparency 140 – 146 International rankingGender Development 87 – 107 Index ranking

* as of 2003GDP = gross domestic product; m = millions; and – = not available.Source: see endnote 1

This publication documents experiences underthe Asian Development Bank (ADB) regionaltechnical assistance (RETA) 6170, an eight-

month project to increase participation in localbudgeting in Indonesia, Marshall Islands, andPakistan. The project was launched in October 2005and was completed in July 2006. The technicalassistance was specifically intended to pilot appliedbudgeting in different country contexts and sharelessons learned to other organizations andstakeholders seeking to increase participation andtransparency in budgeting. Specifically, thispublication is intended for use by country stake-holders, practitioners, and development workers toprovide examples of considerations that should betaken into account when implementing appliedbudgeting approaches in Asia.

The purpose of the RETA was to “enhance civilsociety’s awareness of resource allocation and thebudgeting process and their actual involvement inthe budget decision-making process. Through civic,informed, and constructive engagement, publicservice delivery will be more responsive to the poor.”The outputs of the project, as outlined in the termsof reference, included:(i) an agreed participatory budgeting strategy;(ii) training materials on budget literacy and

practical budget work;(iii) 12 regional capacity development workshops;(iv) local budget forums operational to develop the

principles and practices of budget work in localgovernments; and

(v) action plan on how to replicate participatorybudgeting approaches.

The pilot sites in Indonesia were KebumenRegency in Central Java and Makassar City in SouthSulawesi. In Pakistan, the sites were Kasur and Jehlumsubdistricts (tehsils) located in Punjab Province.Indonesia and Pakistan are both large, predominantlyMuslim countries that have recently undergonesignificant decentralization policies. They are the mostdirectly comparable of the three countries. TheMarshall Islands would be more comparable, in termsof budget and population, to one of the localgovernments involved in the other two countries.Thus, for the Marshall Islands, it was decided that itwas more appropriate to focus on the nationalbudget rather than a local budget and involve civilsociety organizations (CSOs) from Majuro and Ebeye,the two main population centers, which togetherconstitute over 75% of the population.

Despite their different contexts—as shown inthe table below—many of the findings of the project

22222 FOSTERING PUBLIC PARTICIPATION IN BUDGET-MAKING

are surprisingly similar. Activities, while tailored forindividual contexts, were broadly the same in eachcountry.

The budgeting strategy agreed upon was toconcentrate on introducing public dissemination ofand consultation on the draft annual budget. Sincethe draft annual budget is the document that dictatesthe actual work plan of the government for the up-coming year, it was felt that generating publicoversight of the annual budget would have maximumimpact in terms of governance outcomes.

In each country, the project began bydeveloping budget manuals for use in capacity-building workshops. The manuals provide infor-mation on international best practice in budgeting,the budget cycle and actors in the respectivegovernments, guides to analyzing revenue and ex-penditure, and information on how CSOs can getinvolved in the budget process. English and locallanguage versions of the manual are beingdisseminated widely.

The manuals were used in a series of trainingsto transfer knowledge of the budget process, analysis,and advocacy techniques to the public in each site.A broad range of CSOs was involved, including notonly nongovernment organizations (NGOs), but alsograssroots CSOs (for example, churches and parent-teacher associations, as well as private sectorassociations and the media). Five CSO trainings wereheld in the Marshall Islands and a total of 68 CSOswere trained. Two trainings in Indonesia involved 55CSOs, while two trainings in Pakistan had a total of72 CSOs. Trainings were likewise extended tomembers of the local parliaments of Indonesia andPakistan, upon their request. One training was heldin Kebumen for 22 local legislators and 7 membersof the secretariat. Trainings were also held for tehsilcouncilors in both Jehlum and Kasur.

The trainings highlighted a number ofimportant issues. First, with the varied compositionof CSOs, budget materials and trainings had to begreatly simplified for people to follow the materialsand remain engaged in the training. Indeed, in somecases, CSOs felt they should not monitor the budgetor, more accurately, that their actions have no impacton the functioning of the government. Second, itbecame clear that in some cases, governments werenot following legal provisions in the planning andmonitoring of the budget. For example, in the

Marshall Islands, the Public Accounts Committee ofthe Parliament, which is the primary source ofoversight of the annual budget, had not met forseveral years. In Pakistan, councilors were notconsulted on the draft budget or on draft taxationproposals despite provisions in the budget rulesrequiring both these steps. These findings and dis-cussions led to recommendations and action planslater in the project.

Next, public-private budget forums were heldto demonstrate to officials and the public what aconsultation process during the planning stages ofthe budget entails for future replication. Civil societyparticipants who had already participated in thebudget literacy trainings were invited to attend andgovernment officials were asked to present theannual budget. Although the original intention ofthe workshops was to hold a discussion on the draftbudget for the next fiscal year, delays in the budgetcycle meant that discussion focused instead on theenacted budget. In Indonesia, the fiscal year runsfrom January to December, which meant that thedraft Fiscal Year (FY) 2007 budget was not yetavailable at the time of the workshop. In the MarshallIslands and Pakistan, the draft budget should havebeen presented to the Cabinet/local council,respectively, but preparation was behind schedule.The program was, therefore, modified to disseminatethe FY2006 budget. Citizens demonstrated that thedemand for budget information clearly exists. Forexample, in Indonesia, over 100 people attended thebudget forum in each site.

Citizens’ concerns raised during the budgetconsultations included:

questions regarding specific allocations andlevels of service provision. Areas of concern tocitizens (for example, the state of particularpublic works or funding levels for school) wereoften addressed immediately or noted byofficials.in Indonesia and Pakistan, mechanismsintended to channel citizens’ needs into thedevelopment budget for the upcoming yearwere criticized. Although the details obvious-ly differed in both countries, the public feltthat these mechanisms were not beingimplemented in good faith by the localgovernments.


in the Marshall Islands, access to informationwas emphasized, particularly for people livingoff of the main atoll. This encompassed notonly budget information, but also a perceivedineffectiveness of the government to com-municate with CSOs.

The final activity of the project was a national-level conference to disseminate the case studies, anddiscuss how the activities could be institutionalizedand replicated. Government and civil societycounterparts in the pilot sites were asked, prior tothe conference, to draft action plans on how theywould envisage institutionalizing budget work in thefuture. While the action plans differed in eachcountry, CSOs centered on budget literacy andadvocacy efforts of their members. Governmentofficials in the executive branch focused on ways theycould make the budget available to a broader public,often using existing media, such as, government radioand the internet. In cases where the technicalassistance had highlighted discrepancies between thebudget rules and the actual implementation of thebudget (particularly in Pakistan), the heads of localgovernments pledged to ensure that the budget ruleswould be followed. Legislators were particularlyinterested in ways they could fulfill their oversightresponsibilities and be in broader consultation withtheir constituents.

A number of important advances were madeduring the final conference. For example, in theMarshall Islands, the Senate Public AccountsCommittee agreed to meet for the first time in nearly6 years. In Indonesia, the local parliament of Kebumenis drafting a regulation on local budgeting whichwill explicitly include provisions for publicconsultation. These outcomes are particularlyencouraging considering the very limited scope ofthe pilot project and bode well for future replication.

In terms of sustainability, it was found thatIndonesia’s pilot projects are most likely to receivefurther support to continue these efforts and havethe most capacity—on the part of both governmentand CSOs—to implement continued budgetdialogues. In Pakistan, efforts to implement thebudget rules will likely require technical assistanceto both the executive and the legislative; ongoingdonor support for devolution could align activitiesto the lessons from this project. Efforts to strengthen

CSOs’ capacity to engage in independent analysisand advocacy will require long-term support. In theMarshall Islands, the high-level commitment madeat the final conference makes it likely that—at least,in terms of access to information—reforms will becarried out. However, technical support to theParliament would be very useful in sustaining themonitoring function of the legislative branch. CSOsin the Marshall Islands have high levels of interestand motivation to continue this work, but will beseverely constrained in pursuing budget literacy andoutreach efforts in the absence of future donorsupport.

Consistent with lessons learned from relatedgovernance programs,2 the experience in the threecountries highlighted the following:

Conflict between executive and legislativebranches of government reduces the likelihoodthat meaningful public consultation will takeplace.Budget efforts often focus on planning, butmonitoring may be even more useful in somecontexts.Donor fund supporting budget reforms hasprimarily focused on the executive arm of gov-ernment to the neglect of the legislativebranch.Successful institutionalization of appliedbudget work requires sustained support (fin-ancial and technical) to CSOs.Even in a democratizing context, many govern-ment officials continue to resist the notion thatbudgets should be shared with the public.Reform-minded heads of local governmentscan serve as models in this regard.Bottom-up processes intended to allow citizensto directly impact the annual budget planningwere found to be ineffective in both Indonesiaand Pakistan due to political resistance, fiscalconstraints, and low capacity. Legal mechanismssuch as Freedom of Information Act, whichempowers citizens to analyze the budget, maybe more useful than mechanisms for consultationwithin the annual planning process that can beblocked by political resistance.

The experiences of the three countries in thispilot project highlight that the challenges to opening


budget processes to public oversight are primarilypolitical. In general, the willingness of the head ofgovernment to involve the public in the budgetprocess sets the tone for the success of the activities.Resistance at lower levels of the bureaucracy will onlygive way in the face of an overarching environmentsupportive of these efforts. In addition, a number oftechnical issues have to be overcome, particularly instrengthening the capacity of civil societycounterparts and the legislators to play theirrespective roles in budget oversight. In replicatingthese activities, practitioners are advised to:

Focus efforts on countries/local governmentswith a legal framework supportive of publicconsultation and where heads of localgovernments are willing to take a leadershiprole.Extend technical assistance to both theexecutive and the legislative branches simul-taneously to ensure that the budget rules arefollowed and that there is agreement on howpublic consultation should be conducted.

Work with CSOs to develop budget literacycampaigns and to support long-term net-working and capacity building for a successfuladvocacy.

The success of the pilot initiatives indicates thatthere are significant opportunities for replicatingapplied budgeting work in Asia. Benefits seen underthe pilot project include increased commitment bythe executive and the legislative branches to followbudget rules, improve internal processes, and solicitcivil society inputs. On the part of CSOs, theseactivities provide increased understanding of thegovernment’s role and function, and ultimately—byenhancing dialogue and accountability—canstrengthen democratic institutions. Increasedengagement by civil society in the budgeting processalso results in better policy and planning byencouraging more efficient use of resources andprojects that respond to the genuine needs of thecommunity. Consistent with international experience,applied budgeting is recommended as a useful toolin supporting improved governance outcomes.


It has been accepted that the quality and natureof governance plays a fundamental role in theachievement of desirable development outcomes.

Across Asia, reforms are being made to improvegovernance by introducing new systems—insti-tutional and technical—intended to increase thetransparency and accountability of government.Spurred by concerns for regime survival, threats toterritorial integrity, or encouraged by internationalbest practice, governments are undertaking(sometimes radical) changes to governance structuresthat often reshape the relationship between citizensand the state. Most evident in efforts to decentralizegovernment functions to lower tiers of government,these reforms require governments to reexamine howcitizens can influence service delivery and policydecisions.

As the primary management tool ofgovernment, the annual budget is a logical place tofocus efforts on to improve development outcomes.The budget intersects with all aspects of governancereform—fiscal policy, administrative reform, anti-corruption efforts, service delivery, and social policy,among others. The budget, therefore, provides atangible focal point for discussions of communitypriorities and government effectiveness. Appliedbudgeting efforts have consequently blossomedinternationally. Great innovation is being applied toinfluence budget allocations to respond better tocommunity needs. While these efforts are relativelynew and few quantitative evaluations have yet beenconducted, preliminary evidence indicates thatincreased community involvement in the budgetprocess leads to improved service delivery outcomesand increased investment in traditionally underservedcommunities.3

In many countries, and particularly those in theprocess of democratizing, asserting citizen influenceover budget planning and implementation hasfocused initially on institutionalizing the role of thelegislators (as elected representatives of the public)in the budget process. This takes the form ofenactment and monitoring responsibilities of thelegislative branch over the budget and also in therole of legislators in influencing the allocation ofdevelopment funds. While obvious, this issue is raisedbecause, in many cases, this form of oversight is notbeing implemented or is ineffective. In some cases,problems affecting the executive branch (e.g.,political interference, corruption) may so permeatethe legislature that the oversight role is leftmeaningless or poses additional challenges.Conversely, in places where legislators can besupported to play their role effectively, they repre-sent a potentially powerful ally to civil societyorganizations (CSOs) in the budget process.

Civil society commonly refers to citizens outsideof government service, drawn directly fromcommunities, and organized in nongovernmentorganizations (NGOs), grassroots organizations, andprivate sector associations. In relation to localgovernments in particular, civil society can influenceplanning and implementation of government projectsto ensure that policy aligns with the needs of thecommunity. Civil society can also play an importantrole in monitoring the use of resources for impact,thus, increasing accountability of local governments.

In Asia, CSOs’ bottom-up initiatives have beenmost successful in achieving these goals. Regionalefforts to increase public consultation and monitoringof budgets have been spearheaded by NGOs engagedin budget literacy, analysis, and advocacy. Such

Chapter 1

Introduction


programs are advanced furthest in countries with avibrant civil society and free press. In India, forexample, numerous organizations work to analyzestate budgets, create budget briefs, and work withlocal legislators to increase allocations for poor andunderserved communities. To cite only one well-known example, the Gujurat-based NGO, DevelopingInitiatives for Social and Human Action (DISHA),prepares 30 budget briefs annually analyzing statedepartmental budgets. DISHA is a member of anationwide network of NGOs that engages in ap-plied budget analysis in 12 Indian states. Workingwith media and its own network of activists,DISHA has been able to effect a sharp increase infunds dedicated to improve the welfare of tribalpopulations.4 In Indonesia, NGOs—such as, theIndonesian Forum for Budget Transparency (FITRA)and the Bandung Institute for Governance Studies(BIGS)—are engaged in budget analysis and advocacywhich, in some cases, has led to the uncovering ofsignificant misuse of funds. BIGS, for example, isparticipating in a litigation involving 45 members ofthe Bandung city council for misappropriation ofpublic funds.5 In Bangladesh, several NGOs arepiloting work with local government officials to holdpublic budget presentations by the Union’schairpersons, efforts which have been well-receivedby both local governments and the public.6

Participatory budgeting initiatives—or directcommunity consultations in allocating developmentresources—are also being implemented in Asia, butgenerally in a top-down manner that has been lesssuccessful. The technical assistance included twocountries—Indonesia and Pakistan—wherecommunity consultation in the planning of thedevelopment budget is explicitly required in thebudget rules. Similar to the well-known effort in PortoAllegre, Brazil, these programs are intended tomobilize citizens to identify and propose their ownprojects for inclusion in the local budget. In bothcountries, these were top-down initiatives that hadfaced significant challenges in implementation due,in large part, to political resistance and budgetaryconstraints in the lower tiers of government. InPakistan, 25% of development funds must be setaside for projects proposed by citizen communityboards (CCBs). Despite the registration of over 25,000CCBs across Pakistan, these set-aside funds areuniformly underdisbursed. In Indonesia, the budgetplanning process calls for an elaborate set of publicconsultation meetings, starting at the village level

and moving up to the district level, to solicit localneeds. However, no budget allocation is given forproposed projects during this consultation process.The result is that few, if any, of these locally-generatedrequests are ultimately funded.

Given the growing interest in budget work onthe part of both governments and civil society, theAsian Development Bank (ADB) supported a regionaltechnical assistance in a diverse set of countries—Indonesia, Marshall Islands, and Pakistan—to pilotconsultative budget planning. The technicalassistance was conducted from October 2005 to June2006 with the broad objective of “enhancing civilsociety’s awareness of resource allocation and thebudgeting process and their actual involvement inthe budget decision-making process. Through civic,informed, and constructive engagement, publicservice delivery will be more responsive to the poor.”It was designed to focus on direct involvement ofcitizens in the budget process (i.e., formulation andreview) rather than monitoring with the intentionthat citizens would improve their understanding ofallocation possibilities and revenue options.

This publication is intended for developmentpractitioners, local governments, and CSOs interestedin how applied budgeting initiatives have beenimplemented in the region. General discussion ofinternational best practice and preconditions forsuccessful application of applied budgeting are notcovered here as a wealth of information already existson these subjects.7 This publication instead providescase studies of the pilot projects in the three countriesand shares lessons learned from them for otherorganizations and stakeholders seeking to increaseparticipation and transparency in budgeting. TheIndonesian case study is presented in Chapter Three,the Marshall Islands case study in Chapter Four, andthe Pakistan case study in Chapter Five. Each of thecase studies provides a contextual background forreaders new to the country, an overview of howactivities unrolled in that country, and country-specificrecommendations and action plans. While the pilotcountries were disparate in terms of size, govern-ance systems, and political/cultural background,there are significant overlaps in findings andrecommendations arising from the technical as-sistance experience. This suggests that such initi-atives could usefully be replicated in other parts ofAsia. Lessons learned and recommendations forreplication outside of the pilot countries are presentedin Chapter Six.

77777 CHAPTER 3 INDONESIA CASE STUDY

In designing the activities, the project team care-fully considered how to best initiate meaningfulpilot activities within the time and resource

constraints of the project. In particular, because theproject’s timeframe was only 8 months—less than afull budget cycle—results were framed in terms ofincreased capacity and sustainable mechanisms forengagement rather than any changes in budgetallocations. Comparability between countries wasfurther complicated by differences in scale.Nonetheless, the project was able to apply similarapproaches and activities in all three countries.Perhaps even more surprisingly, findings andrecommendations are similar for the three countriesas well. This indicates that the type of activitiesdiscussed in this study offer an excellent chance ofbeing replicated even in very different contexts acrossthe region.

Two sites were selected for projectimplementation in each country, although the focusof the pilot project in the Marshall Islands was onthe national budget. In proposing a final list of sites,the team used a set of criteria including: (i) willingnessof the local government to share budget documentsand participate in public hearings; (ii) presence ofcivil society stakeholders with a capacity and/orinterest in budget literacy and constructive advocacytoward government; and (iii) presence of other donorprograms that could support the continuation ofthese efforts past the timeframe of the technicalassistance to encourage sustainability. In addition,an effort was made to select sites in Indonesia andPakistan that showed sufficient commonalities to

allow a comparative analysis. Toward this end, it wasdecided that in both countries one site should beselected in which the local government was receivingdonor assistance on the supply-side of improvedbudget formulation and one site without suchsupport. In all three countries, civil society partnershad not yet received concentrated training in budgetanalysis and advocacy issues.

In considering the budgeting strategy to befollowed in the technical assistance, four possibleapproaches were considered:

Systems analysis—advocacy/recommend-ations for improvement to the budget formu-lation and implementation process. It wasdecided that this should not be the primaryfocus of the pilot project as any recom-mendations would require administrative oreven legislative reforms that could notrealistically be affected in the period of thistechnical assistance.Participatory budgeting—in which a portionof the budget is allocated through aconsultative process involving the public. Whilesuch systems existed in Indonesia and Pakistan,they did not exist in the Marshall Islands.Concentrating on this process, therefore,would limit the comparability betweencountries. In addition, it was felt thatparticipatory budgeting requires high levels oftransparency and government commitment,8

conditions which do not exist in all the pilotsites.

Chapter 2

Methodology and DesignConsiderations


Analysis and consultation in the drafting of theannual budget—in which the proposed orenacted annual budget can be debated uponand analyzed for its impact on various sectors(e.g., health, education, and environment),impact on particular populations (e.g., women,indigenous, and low-income), or congruencebetween policy priorities and budgetallocations. Budget implementation can alsobe monitored in terms of whetherdisbursements meet targets, whether funds arebeing spent transparently, and whetherprojects meet quality standards. This was themethodology selected.Gender budgeting—a subset of annual budgetanalysis, in which budget analysis focuses onwhether public funds are being equitablydistributed to both men and women.Stakeholders in all three countries had moreexposure to this kind of applied budgetingthrough various donor programs than any ofthe other approaches considered. However,given the intended innovative nature of thetechnical assistance, and the broader focus oncivic engagement in the budget process, thisapproach was considered too narrow.

It was decided that increasing participation inthe finalization of the annual budget had the mostimmediate relevance to stakeholders. Activities,therefore, sought to assist CSOs and localgovernments to engage in dialogue duringconsideration of the draft budget for the upcomingfiscal year.

Public consultations already taking place in thepilot countries focus on two parts of the budgetpreparation cycle. In Indonesia and Pakistan, thereare requirements to solicit the public’s views fordevelopment projects to be included in the annualbudget. As discussed above, these processes do notwork effectively and were not selected as the focusof the pilot project because of entrenched politicaland system challenges unlikely to be addressed duringthe lifetime of the project. The other existingconsultation is at the end of the budget preparationprocess: in the Marshall Islands and, to a lesser extent,Indonesia, parliament holds public hearings duringthe enactment of the budget. However, this was

deemed to be so late in the process as to be ineffectiveat incorporating public comments.

Because of these perceived weaknesses in thecurrent consultation processes, the project insteadchose to foster discussion of the draft budgetdocument after it is compiled by the BudgetCommittee, but prior to its submission to parliament.This was deemed more relevant as the draft budgetincludes those projects which line departments inthe executive branch have already proposed, but isearly enough in the process to allow revisions.

The project team approached the activities witha number of design elements that were intentionallydifferent from some of the applied budget workalready being implemented in the region. First, theconcentration was on opening up the budget processto citizens with the objective of increasingtransparency and efficacy in budget revenue/expenditures as opposed to changing allocations orgenerating new demand for services. To this end,materials and discussions emphasized the fiscalconstraints facing government (including equal

Box 1: What part of the budget cycle tofocus on?

The technical assistance was designed to focus onthe budget planning phase. However, work tomonitor the implementation of the budget—forexample, by examining procurement processes orevaluating the quality of public works—have alsobeen successfully implemented in Asia and in otherparts of the world. For example, in Uganda, effortsto monitor expenditures to schools resulted inmarked improvements in service delivery. “Scorecards” implemented in Bangalore, India, and thePhilippines have also been useful in trackingwhether budget allocations are resulting inimproved services.

Donors and NGOs should consider both typesof programming as they seek to improve servicesfor the poor. Particularly in contexts suffering fromhigh levels of corruption, monitoring may be evenmore important than the planning phases of thebudget.

99999CHAPTER 2 METHODOLOGY AND DESIGN CONSIDERATIONS

discussion of the revenue and expenditure sides ofthe budget) and the need to choose between lineitems as opposed to solely seeking additional services.This reflects the very real fiscal constraints that thelocal governments in all three countries face, as wellas the need to balance revenue for service deliverywith a fiscal policy conducive for private sectorgrowth.

Second, the interests of a majority of stake-holders in better outcomes was acknowledged andsolicited, as opposed to focusing solely on a parti-cular disenfranchised group. Toward this end,constituencies such as the private sector, mediaoutlets, and grassroots organizations (e.g., schoolboards, religious organizations) were included in theactivities in addition to established NGOs. Thesedesign elements were intended to help informparticipants from all sides of the discussion, with theexpectation that a better understanding of theresources available, the institutional constraints thatbind public sector actors, and the competing prioritiesfrom many segments of society will lead to a bettergovernance process that will ultimately benefit localcommunities, including the poor.

The type and sequence of activities were thesame across the three countries. Work began withthe development of training materials on budgetliteracy and practical budget work. This was followedby capacity development workshops to transfer theskills needed for various stakeholders to engage inbudget discussions. While the initial intention of theproject was to train CSOs, it became evident duringthe inception visits that local legislators would alsowelcome capacity building in this area. They were,therefore, offered separate trainings that focused ontheir oversight and/or enactment role. The thirdactivity was the conduct of local budget forums inwhich the executive branch presented the annualbudget in a public hearing. The project concludedwith national conferences in each country wherestakeholders were invited to present action plans onhow to institutionalize budget consultations in thefuture. Sustainability of the pilot projects has beensupported by facilitating meetings betweenstakeholders and donors active in this field to discuss

The Asia Foundation Pakistan’s publication, 2006.

future programming opportunities. To furthersupport sustainability and replication, a national NGOwas selected in each country to co-facilitate activities,thus, gaining capacity in this area.

A number of actions have been taken todisseminate the knowledge gained during thistechnical assistance and support future efforts byothers. The budget manuals created for each countryhave been translated into local language and arebeing distributed widely to CSOs in both hard andelectronic copies to foster their budget literacy efforts.The manuals are also being made available online atvarious websites, including the International BudgetProject.9 In each country, these manuals are the firstof their kind. In addition, this publication is beingdisseminated in English and summary versions arebeing prepared in local languages for distribution togovernment, donors, and CSOs.


3.1 POLITICAL AND ECONOMICBACKGROUND

Indonesia is the world’s fourth most populous na-tion, with a total population of over 200 millionspread over thousands of islands. It is nearly a

middle-income country with GDP per capita in 2003of $3,361. The vast majority of the population isemployed in agriculture (46.1%) or micro or smallenterprises (90% of off-farm employment). Whileabsolute poverty is relatively low at 15.1%, thepercentage of the population vulnerable to economicshocks is high, with 48.8% of the population livingon $2 a day as of 2003.

Indonesia continues to implement significantpolitical and governance changes following the fallof the New Order regime in 1998. For approximately30 years under President Soeharto, the New Orderhad institutionalized the role of the military in thegovernment, playing dual roles as security anddevelopment actor. The economic growth achievedunder the New Order served to legitimize thisarrangement in some quarters, but when the Asianfinancial crisis hit Indonesia hardest of all of the “AsianTigers,” resulting in a contraction of GDP by 13.5%,the rationale for this arrangement collapsed. Since1998, when Soeharto stepped down, electoralaspects of the democratic process have beenintroduced and have been adopted with relative ease.But institutions of checks and balances, in whichgovernment officials are held accountable to thepublic for performance, are still being nurtured.Related to this, genuine participation by citizens in

decision-making and monitoring processes remainsvery limited. In general, the executive branch ofgovernment remains stronger than the legislative.10

A significant feature of Indonesia’s governancereforms is the country’s regional autonomy policy,outlined in Laws 22/25 of 1999 and 32/33 of 2004,which devolves significant responsibilities and powersto the kota/kabupaten level of government,equivalent to cities and districts (called regencies inIndonesia). Civil servants now are directly responsibleto the heads of local government, as opposed tonational Ministries. In the initial DecentralizationLaw 22/25 of 1999, provinces were given very littlepowers with devolution going directly to the lowerbranches of government. Under the Revised Law No. 32/33 of 2004, provinces have increased powers ofoversight and coordination over local governments.

Indonesia has a highly-structured governmentand quasi-government institutions that reach to thevillage level. Each village has a village council and avillage head. Figure 3.1 shows the structure ofgovernment in Indonesia, from central governmentto the smallest units in the village, for rural areas, orneighborhood, for urban areas. Since 2004, theelection of city/regency legislatures (DPRDs) has beenusing a restricted open-list proportionalrepresentation voting system. Under this system,citizens have an opportunity to choose not only theparty but also a particular candidate from a certainpolitical party. This means a lower-ranked candidatecan win a seat when he/she has reached a certainquota. In practice, however, very few candidates indistrict/city election succeeded in meeting the quota.

Chapter 3

Indonesia Case Study


Beginning in 2005, mayors/regents are being directlyelected for the first time in an electoral process thatis still rolling out as heads of government come tothe end of their respective terms.

Indonesia consistently ranks as one of the mostcorrupt countries in the world (140 out of a total159 countries in the 2005 Transparency InternationalIndex).11 Corruption takes many forms and the impactof decentralization on corruption has not yet beenmeasured. What appears clear is that practices athigher levels of government are also present at localgovernment level, to whatever degree. With regardto the annual budget, common corrupt practicesinclude markups of line items, duplication of lineitems under different parts of the budget, and theexistence of “ghost” positions under salaries. Theseare in addition to the actual implementation of thebudget where corruption affects tax revenues andthe awarding of contracts, to note only two high-profile problems. Corruption at the local level is notlimited to the executive branch; entire localparliaments have been investigated and charged withmisuse of funds since decentralization began, oftenas the result of applied budgeting work.12

Service Delivery Responsibilities of LocalGovernment

Under Law No. 32/2004 on Regional Administration(Article 10), the local governments (province and city/regency) execute nearly all powers, except for thefollowing six components that remain under theauthority of the central government: (1) foreignpolicy, (2) defense, (3) security, (4) administration ofjustice, (5) national monetary and fiscal policy, and(6) religion.

All other essential governance matters fallunder the authority of the local governments atthe city and regency level. Table 3.1 provides a listof these responsibilities, which includes most servicedelivery issues pertinent to the poor. There areguidelines for involvement of even lower levelsof government (subdistricts, villages, and neigh-borhoods) from the central government. In addition,the local parliament can issue its own regulationsfor devolving some responsibilities to these levels ofgovernment.

Despite the general emphasis on the role ofthe local government and its new powers, in practice,

Table 3.1 Areas Under the Authority of IndonesianLocal Governments

• Planning and control of development;• Planning, utilization, and oversight of land use/

zoning;• The conduct of public order and security;• Provision of public facilities and infrastructure;• Public health;• Education;• Handling social problems;• Services in the labor sector;• Facilitating the development of cooperatives and

small- and medium-scale enterprises;• Environmental management;• Agrarian services;• Population and civil registry services;• General government administrative services;• Investment administration services;• Conduct of other basic services; and• Other essential matters, as mandated by laws and

regulations.

Source: Law No. 32 of 2004, Article 14

Figure 3.1: Local Government Structure,Indonesia

there is still considerable uncertainty and overlap ofauthority between central and local government. Forexample, in the education sector, the centralgovernment not only prepares the curricula, but it isalso involved in school repairs and maintenance projects.

Civil Society Capacity

CSOs were highly constrained under the New Order,with any form of institution requiring government


approval and support. Sanctioned organizations—closely aligned with the ruling Golkar Party—wereextensive at this time and, along with mass-basedMuslim organizations, provided services down to thevillage level. Many of these organizations continueto play an important role in Indonesia. In addition,the NGO sector has blossomed since democraticreforms were instituted with large numbers oforganizations working in all spheres of development.However, government officials transitioning to thenew context continue to be highly suspicious of theseorganizations. NGOs, in turn, are still learning toengage constructively with government, rather thanpursue the sometimes confrontational politics of thepast.

Indonesia has a large number of NGOs active inthe area of local governance and budget advocacy. Itis almost impossible to get exact data on the numberof NGOs working in the country because new onesappear and old ones become inactive all the time. Thelatest NGO directory published by Japan InternationalCooperation Agency (JICA) (2005) identified 516 NGOsworking on education, environment, poverty, gender,democracy, and human rights issues. Certainly, thereare more NGOs than these.

Capacity in budget advocacy is generally muchhigher than in the other two pilot countries. Anassessment made by the Institute of Developmentand Economic Analysis (IDEA), a Yogyakarta-basedNGO working on budget advocacy, identified 127NGOs and 14 people’s organizations across Indonesiaas being involved in budget advocacy work. Uniqueto the project countries are local NGOs whose missionand full-time work are based on applied budgetingactivities. These organizations have differentstructures. For example, FITRA and BIGS focus onresearch and, when necessary, litigation when fundsare used improperly; whereas, the Center for LocalCommunity Study and Empowerment (P3ML), a localNGO in Sumedang, West Java, works in partnershipwith DPRD to publish the annual budget (APBD) inthe form of posters and assisted DPRD to initiate theissuance of a new local regulation on the budgetingprocess. P3ML also works with the local governmentto provide advice and consultation.

Dividing the budget cycle into the stages ofplanning, enactment, implementation, and auditing,most NGOs focus their advocacy work on promotingparticipation in the planning process. Some NGOs,

such as BIGS and Pusat Telaah dan Informasi Regional/Centre for Regional Information and Studies(PATTIRO), are trying to promote participation in theprocess of budget enactment (e.g., by conducting apublic hearing with the legislature before APBD isenacted by DPRD). There are some that work onmonitoring expenditures like Jaringan RelawanIndependen/Independent Volunteers Network (JARI),which monitors development projects (but mostlyon national-driven projects, such as, the Social SafetyNet program), while some donors work on moretransparent procurement processes. However, almostno NGOs have focused their activities on the auditingpart of the budget cycle.

3.2 LOCAL BUDGETING PROCESS

Sources of Revenue

While service responsibilities have been decentralized,the ability to collect and control revenues remainslargely centralized and local governments remainhighly dependent on block grants from the centralgovernment (dana alokasi umum [DAU] or generalfunds).13 For most local governments, DAU consti-tutes approximately 70–80% of their budget and issufficient to cover salaries and operating costs, butleaves little for development projects and servicedelivery. In addition, the central government allocatesfunds for central government-led initiatives im-plemented in the regions (dana alokasi khusus [DAK]or special funds). These are generally quite limited.Local governments are not notified of the amountof these central transfers until the end of the year,after planning has supposedly been completed. Inmost cases, therefore, revenue assumptions are basedon the prior year’s allocations.

Given the tight constraints on the block grantsfor non-resource endowed localities, localgovernments are highly motivated to increase locally-generated revenues, pendapatan asli daerah (PAD).The greatest source of locally-generated revenues isin the form of retribusi, which can be translated aslevies or user fees, but in practice have littleconnection to service delivery. Its primary source formost local governments is licensing fees. This hascreated a perverse incentive for local governmentsto increase regulation of the private sector throughthe issuance of new licenses, charging for licenses


that were formerly provided nominally free, orrequiring more frequent renewal of licenses. Localgovernments can also tax hotel and restaurantreceipts, vehicle registration, and receive back someportions of land tax. However, they are prohibited fromlevying property or sales tax and have not yet availedthe possibility of issuing municipal bonds. One aspectof the technical assistance’s approach was to avoidincreasing pressures to increase PAD and focus first onhow existing resources could be spent most efficiently.

Budget Preparation Cycle

Indonesia’s fiscal year runs from 1 January to 31December. Budget formulation has two components:a bottom-up project planning process calledmusrenbang, and a top-down budget preparationprocess executed through the local governmentdepartments. These processes are laid out in Laws17/2003 and 25/2004. Both processes are intendedto complement strategic plans developed by the localgovernments, which have replaced the 5-year plansthat were practiced under the New Order.

The musrenbang is the responsibility of thelocal government’s Planning Department and isintended to allow citizens to express their aspirations

and priorities. The process begins at the village orneighborhood level with identification of projects thevillage would like to have (usually very small-scaleinfrastructure). Consultations are held betweenJanuary and March, depending upon the localgovernment. In theory, these consultations are forall village members, although a number of sites visitedduring the inception trip said that, in practice,meetings are attended by community leaders ratherthan the general public. The village head presentsproject ideas at a subdistrict meeting held thefollowing month. This larger meeting is the first thatis attended by local government department headsand/or members of the local parliament. The variousproposals from the subdistrict meeting are compiledby the Planning Department and discussed at adistrict meeting (SKPD), usually held in the summer,along with the proposals of the TechnicalDepartments. The district level meeting is attendedby a large number of people, including localparliament, respected community leaders, academics,and sometimes local NGOs. This meeting is theoreticallyopen to the public, although a number of the localgovernments interviewed during the inception tripspecified that this meant people could come and listento the proceedings, but not to interrupt or to speak.

Because the musrenbang process is not tiedto any allocation, the process in practice results in awish list, with a very small percentage, if any, ofproject ideas eventually being funded in that year’sbudget. Some local governments are beginning toallocate funds that can be decided upon throughthis process. For example, Kebumen’s Parliament hasagreed to devolve 10% of the development budgetto the subdistrict and village-level government.14

Similarly, the Makassar government has devolved toabout 500 million rupiah (Rp) block grant funds toeach subdistrict. This remains an extremely rareoccurrence in Indonesia. For most village andsubdistrict governments, the musrenbang remainsprimarily a bureaucratic exercise, seemingly of limitedutility. One reason for this is the very real financialconstraints facing local governments. With up to 80%of available revenues covering recurring expenses, andeach department and parliament member havingprojects they would like to fund, very little is availablefor allocation to this bottom-up process. Figure 3.2illustrates the annual preparation cycle, including themusrenbang process.

Box 2: When does participatory budgetingwork?

As envisioned in the musrenbang, bottom-upprocesses that allow citizens to allocatedevelopment funds have been piloted in a numberof countries. Porto Allegre, Brazil, is considered amodel for this type of work and the process hasresulted in tangible increases in spending in poorneighborhoods. However, such work requires highdegrees of political commitment and a sophisticatedprocess to aggregate the high level of demand fordevelopment funds. Where these preconditions arenot met, the pilot found that similar efforts areunlikely to be effective, particularly when, like themusrenbang, they are dictated by centralgovernment without securing political supportamong local governments. Fiscal constraints onlocal governments also make it difficult to fulfill theproject requests that arise as a result of this system.


The budget preparation process within theexecutive branch of government begins whentechnical departments prepare their draft projectproposals. The department heads attend thesubdistrict musrenbang meetings and the districtmeetings to present their project proposals for theyear and to hear the ideas of the community. Intheory, this allows the technical departments toinclude the public’s ideas in their proposals. Allprojects coming from all departments are

coordinated and written out by the PlanningDepartment in the form of a document called theLocal Government Work Plan (Rencana KerjaPemerintah Daerah-RKPD). Based on this, the generalpolicy on the annual budget is formulated, includingpriorities and budget ceilings for each technicaldepartment. Each technical department thenprepares a budget estimate for their work program(RASK/RKA—SKPD) and submits this to the Planningand Finance Departments. The Budget Committee

APBD = annual budget; KUA = (kebijakan umum anggaran) General Budget Policy; RAPBD = draft annual budget; RKA = work and budget plan; RKPD =(Rencana Kerja Pemerintah Daerah) Local Government Work Plan; SKPD = (satuan kerja perangkat daerah) Local Government Technical Department; andmusrenbang = bottom-up planning process.

Figure 3.2: Annual Budget Preparation Cycle, Indonesia


then prepares the draft budget for the coming year(RAPBD). This is discussed with the Budget Committeeof the local parliament. RAPBD is formally submittedby the mayor to DPRD in October in a general meetingwhere each political party is invited to comment onthe budget. In theory, DPRD has one month to assessthe budget and provide comments to it before thebudget is enacted. The mayor issues a decree enactingthe Budget Implementation Document by the endof the year. In practice, delays in preparing the budgetare common, reducing DPRD’s ability to give properconsideration to the budget before passage. Theannual planning and enactment calendar is providedin more detail in Table 3.2.

The number of planning documents requiredof the local governments and an effort to simul-taneously introduce performance-based budgetingmeans that many local governments are over-whelmed by technical reforms. Participatory pro-cesses further challenge the resources of the linedepartments at local level.

Budget Implementation and MonitoringCycle

General Funds from the central government (DAU)for the annual budget are generally released to thelocal government in February of each year. Revisions

Table 3.2 Annual Budget Preparation Cycle, Indonesia

MonthMonthMonthMonthMonth ActivitiesActivitiesActivitiesActivitiesActivities

Jan •Fiscal year begins;•The Planning Department (Bapeda) formulates a document called the “Regional Economic Framework”

(Kerangka Ekonomi Daerah), comprising a projection of revenues and expenditures based on the previousyear’s budget, and a list of local government activities, referring to the Medium-Term Development Planand the Strategic Plans of the Local Government Technical Departments;

•All activities related to public services will be discussed in public meetings called the DevelopmentPlanning Deliberative Meeting Forums (Forum Musrenbang); and

•Musrenbang at the village level begins in January

Feb •Musrenbang at the subdistrict level

Mar •Musrenbang at the city/regency level

Apr-May •All activities coming from the various technical departments. SKPDs are coordinated and written out in theform of a document called RKPD.

Jun-Aug •Drafting of KUA of APBD, prepared on the basis of RKPD;•Formulation of provisional priorities and budget ceilings for each work unit; and•Drafting of the Local Government Technical Department Work Plans (Rencana Kerja Satuan Kerja

Perangkat Daerah, Renja SKPD).•Based on the priorities and ceilings that have been set, the technical departments prepare budget

estimates for their work programs (RKA-SKPD) and submit these to the local government.

Sep •Compilation of RKAs submitted by the various technical departments.

Oct •Finalization of the draft budget (RAPBD), done by the Executive Budget Committee comprised of thePlanning Department (for activity budget) and BPKD (for the personnel budget), coordinated by theregional secretary (sekda);

•Local government prepares draft local regulation on the draft budget (RAPBD) to seek approval fromDPRD;

•Discussion meetings between the legislature and the executive branch; and•Drafting of the RAPBD note.

Nov •Discussion of the budget by the DPRD•Enactment of the budget by DPRD.

Dec •Drafting of Budget Implementation Document to be enacted through a decree by the regent/mayor.APBD = annual budget; BPKD = (badan pengelola keuangan daerah) Local Government Agency for Financial Management; DPRD = local parliament; KUA =(kebijakan umum anggaran) General Budget Policy; RAPBD = draft annual budget; RKA = work and budget plan; RKPD = (Rencana Kerja Pemerintah Daerah)Local Government Work Plan; and SKPD = (satuan kerja perangkat daerah) Local Government Technical Department.Sources: Law No. 17 of 2003, Laws No. 32 and 33 of 2004


to the APBD Report are made by the mayor/regent inJune to account for any extra funds or spending (theactual revisions must be finalized three months beforethe end of the fiscal year).

Internal monitoring and evaluation of planningand budgeting is carried out by each technicaldepartment. In other words, implementing agenciesmake the initial reports and evaluations themselves.The Planning Department head collects andanalyzes the monitoring and evaluation resultsmade by each agency. Internal audits are performedby a regional audit agency (Bawasda-BadanPengawasan Daerah) and a nondepartmentalnational and provincial agency (Financial andDevelopment Audit Agency [BPKP—Badan PengawasKeuangan dan Pembangunan]). An external audit isconducted by a supreme audit agency (BPK—BadanPemeriksa Keuangan).

Every year, the regent/mayor comes up with anannual accountability report based on these internalreports. This document lays out how programs wereimplemented and includes budget figures that showwhether spending/revenues were on target. Based onLaw 17/2004, this report must be made no later than6 months after the end of the fiscal year.

At the end of a regent/mayor’s term, the localparliament sends a notice and asks that person todeliver the final accountability report known asLaporan Pertanggung Jawaban (LPJ). LPJ, which ispresented as a progress report, has to mention:(i) local government activities, including performanceachievement, the utilization of economic resources,and consistency with the existing laws and regu-lations; (ii) comparison between projected and actualbudgets; and (iii) compliance with the financial reportformulation (Source: PP 108/2000). It is delivered anddiscussed in a plenary session of DPRD.

Legal Basis for Participation

Participation in the budgeting process is enshrinedin Ministerial Decree No. 29/2002 issued by theMinistry of Home Affairs. This lays out performance-based budgeting and the bottom-up planningprocess. The Ministerial Decree requires the legislatureto consult the public before the budget is enacted.The recently enacted Ministerial Regulation No. 13/2006 opens up new opportunities for citizenparticipation in the budgeting process as it requires

the executive branch to publish and disseminate thedraft budget before it is given to DPRD.

Nonetheless, budget documents have beenand still are considered confidential documents. Manygovernments are reluctant to share information,particularly those related to operating expenses. Evenmany members of the local Parliament may notreceive a copy of the full budget, as distributionamong committees is selective and influenced bypolitical party leadership.

3.3 FACILITATING CIVIL SOCIETYPARTICIPATION IN LOCALBUDGETING

Five sites were visited during the inception visit:Pontianak, Sanggau, Kebumen, Makassar, andWatampone. Of these, the local government inPontianak declined to participate. Sanggau was notselected due to a comparatively weak civil societysector and the absence of ongoing donor programsthat could support long-term institutionalization ofthe pilot project. Watampone was not selected asanother donor. The Asia Foundation was activelyimplementing a gender budgeting program there.Thus, the two sites selected were Kebumen Regencyin Central Java, and the city of Makassar in SouthSulawesi.

Kebumen

Kebumen is a rural community with a population of1,200,000. It is approximately three hours by roadfrom the closest city (Yogyakarta). The economy is

Rustriningsih, Lady Mayor of Kebumen

R. A

hmad


agriculture-based and—while the town andsurrounding communities look relativelyprosperous—31% of the population lives below thegovernment poverty rate. In 2000, Kebumen wasamong the third poorest districts in Central JavaProvince. The local government’s annual budget is$76 million, 93.4% of which comes from central andprovincial government transfers.15

Kebumen has gained a reputation as being areform-minded area, in large part because of a highprofile regent, one of only four women elected asheads of local government in the country. The regent,Ms. Rustriningsih, is from the same political partythat controls the local parliament and has closerelationships with local religious leaders, who havegreat influence in Kebumen society. This has madeher administration politically strong and she has beenable to use this to effectively implement anti-corruption measures as a centerpiece of heradministration. Efforts to increase transparency andoutreach to citizens have included a daily talk showon local TV and ongoing efforts to improveprocurement processes.

These initiatives have attracted a great deal ofdonor support. The World Bank, US Agency forInternational Development (USAID), and The AsiaFoundation have all supported various programs inKebumen. Several of these programs focused on

improving budget pro-cesses (for example, ins-titutionalizing performance-based budgeting, andpublishing a summary of theannual budget in thenewspaper and the citywebsite). Kebumen has alsoissued local regulations(perda ) that supportparticipation such as PerdaNo. 7/2004 on VillageFund Allocation, PerdaNo. 53/2004 on PublicParticipation on Policy and aRegent’s Decree on VillageCommunity Capacity Build-ing (2005). Article 2 ofPerda on Village Fund Allo-cation states that 10% of thecurrent annual budget

should be allocated to the subdistricts and villagesfor development purposes. Nonetheless, the veryactive civil society sector in Kebumen has faced someresistance from officials in accessing budget doc-uments and feels that more can be done.

Makassar

Makassar, with a comparable population of1,193,000, provides a very different context.A historically important port city, it is the largesturban center in South Sulawesi and also serves asthe provincial capital. Higher income generated bythe trade and services economy has resulted in asignificantly lower poverty rate, with only 7% ofthe population living below the government povertyline. Of the $89 million annual budget, 86%derives from central and provincial governmenttransfers.16

The mayor of Makassar, who was elected in2004, is from the same party that controls the localparliament. Like the regent of Kebumen, he hasinitiated a number of outreach programs, includingthe development of a Makassar City website, placinga column in the local newspapers discussing localissues, and holding monthly coffee morning meetingswhere he meets directly with civil societyrepresentatives to discuss issues facing the city. The

A view of Kebumen

R. A

hmad


Makassar government has allocated Rp7 billion as ablock grant to 14 Kecamatan (subdistrict) in the 2006annual budget to stimulate development at thegrassroots level.

Despite these efforts, Makassar has attractedless donor support than Kebumen and even the veryactive NGO sector in the city conducts most of theiractivities in the surrounding communities rather thanwith the city government. One reason may be thatin the opinion of some civil society actors, asexpressed during technical assistance activities,DPRD’s activities have come under scrutiny. Forexample, some in the media and local communityquestioned the propriety of a March 2006 visit toBerlin by DPRD members and their wives on a tourismdevelopment mission using the budget allocated forthe city museum.

Development of Budget Training Materials

The development of budget training materialsbegan with the collection of existing manuals/materials from well-respected national NGOsengaged in budget training. They were: BIGS, FITRA,PATTIRO, Civic Education and Budget TransparencyAdvocacy (CIBA), and Women Research Institute(WRI). All organizations graciously provided copies

of manuals, books, Power-Point presentations, casestudies, and other trainingmaterials. These materialsand meetings with otherlocal NGOs (includingInitiative Association andP3ML) were used to informthe manual developedspecifically for the project.The local governments ofKebumen and Makassarshared their annual budgetsfor FYs 2005 and 2006 andexercises based on thesedocuments are included inthe manual.

Despite the number ofNGOs working in appliedbudgeting in Indonesia, thisis one of the first manuals ofits kind in the country. Hard

copies in English and Indonesian were distributedthroughout the project.

Enhancing Local Capacity for AppliedBudgeting

Using the budget manuals as the primary trainingtool, budget literacy workshops were subsequentlyconducted in each site to transfer capacity to localCSOs that would later attend the budget forums.The agenda covered an introduction to internationalbest practice, the budget cycle in Indonesia, rolesand responsibilities of relevant government officers,revenue and expenditure analysis, and a discussionof entry points for budget advocacy. This agenda wasspread over 3 days and government officials wereinvited as guest speakers to convey their views of thebudget process.

In Kebumen, 30 persons participated, drawnfrom local NGOs, organizations of private en-trepreneurs, student and youth organizations,women’s organizations, education councils, massmedia, village-level activists, and a delegation fromthe district development planning conference(musrenbang). In Makassar, 25 participants fromsimilar organizations participated. Discussions in bothsites included bottlenecks in accessing information,

A view of Makassar CitySource: Makassar City Development Planning Board


problems in the current planningprocess, and the development ofinitial action plans for possiblefuture advocacy. Personalcontacts germinated in thesetrainings eventually led to theestablishment of coalitionsworking on applied budgetingthat would actively engage in therest of the project activities.

The budget literacy trainingfor DPRD members in Kebumenwas structured slightly differentlyto reflect the parliament’s directfiduciary role in the budgetprocess. For example, sessionsdealt explicitly with how tostrengthen the capacity of the legislature. Resourcepersons from the central government (Ministry ofFinance and the State Audit Agency) were broughtin to provide additional information on current fiscalpractices, audit procedures, and other aspects of thecentral/local government relationship. There were 29training participants: 22 members of the DPRDBudget Committee and 7 members of the LocalParliament Secretariat (Setwan). Like the CSOs, DPRDmembers were asked to prepare an action plan forfollow-up to the training.

Parliament members expressed their sense ofdisempowerment because of problems in the budgetprocess and perceptions by the executive branch thatimpedes DPRD in its budgeting role. In particular,members highlighted that:

The executive branch submits the draft budgetwithout supporting planning documents suchas the department work plans (RASK).There is no support from expert staff, makingit difficult for DPRD to argue for revisions.Many activities that are not in RKPD suddenlyappear in the annual budget.There is a discrepancy between the public’swishes as expressed in the musrenbang andwhat gets included in the draft budget.The executive feels that RKA-SKPDs aretechnical documents that can only beunderstood by the executive branch and tendsto dismiss concerns expressed by DPRD.

To improve the situation, many DPRD members’suggestions focused on strengthening internalcapacity (e.g., restructuring program managementby drafting more realistic annual work programs andincreasing the availability of staff in the Secretariatwho could assist with budget analysis) andformalizing public consultations. Specific initiativesdiscussed included:

Passing a local regulation on planning andbudgeting that allows the legislature, as wellas the executive branch, to introduce dev-elopment programs into the annual budgetand work plan.Including community delegations from themusrenbang in the discussions held by DPRDcommissions.Encouraging a commitment to increase thevillage allocation funds.Building networks and cooperating with NGOs,business associations, universities, and massmedia concerned about budget issues.Working with media to publicize budgetpolicies.

The same budget literacy training was offeredto Makassar’s local parliament members, but theydeclined to participate due to their tight schedule.The consultants note that Indonesia has a commonculture of providing honoraria, trips, and otherfinancial incentives to government officials for their

Budget Literacy Training for CSOs in Makassar

Het

ifah

Sj. S

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participation in trainings. The members of parliamentin both sites of this project requested such incentives,which the project did not provide. The participationof DPRD Kebumen was particularly promising giventhis context.

In evaluations conducted at the end of thesessions, participants considered the trainingssuccessful in generating debate about the budgetprocess and providing new information on aspectsof the local budget pertaining to service provision,composition of revenues, and size of the recurringbudget compared to the development budget.However, they felt alonger-term programwould, of course, needto provide sustainedtraining and support inbudget literacy ratherthan one session.

Toward Annual,Government-hosted BudgetForums

With basic budgetliteracy skills transferredto the CSOs, the nextstep was to conduct apublic hearing for thedraft budget. However,since Indonesia’s fiscalyear runs from January

to December, the draft FY2007 budget isstill in its earliest stages of planning. Andusually, a compiled draft budget will beready by August/September. Delays inenacting the prior year’s budget meantthat the FY2006 budget had only recentlybeen passed and it was, therefore, agreedupon that the government would presentthe FY2006 budget figures. This wasconsidered useful because even if theenacted budget is not normally dissemi-nated, it would still present a model forconsultation over a draft budget. However,CSOs in attendance emphasized that inthe future they would like to have

consultations on the draft budget rather than theenacted budget.

In both locations, the agenda included ageneral presentation of the government’s prioritiesfor the upcoming year (based on planningdocuments prepared as part of the annual budgetcycle) followed by a briefing on the overall budgetfigures. This was followed by individual presentationsby the Departments of Education, Health, and PublicWorks. These three departments were selected sincethey have direct impact on major public goods(including service provision for the poor) and their

Budget Forum, Makassar

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Budget Literacy Training for DPRD Kebumen

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budgets constitute the bulk of expenditures.17

Presentations were followed by questions andanswers from the civil society participants. Thediscussion was extremely lively, with both female andmale participants speaking up and bridging evensensitive issues. A sampling of the questions andconcerns raised includes:

Participants expressed concern over theproportion of allocations for operating (currentexpenditure) costs compared to direct servicecosts. For example, in Makassar, the office ofthe regional secretary (which directs theinternal bureaucracy) has a larger budget thanany of the technical departments that directlyprovide services to the public.Participants asked about plans or programsand, in particular, how they could access theseprograms. This demonstrates one of thepositive outcomes for local government—theycan use this forum to disseminate the benefitsthey are providing to the community. In fact,the Department of Education in Makassarreceived sustained applause when they showedpictures of schools in poor repair alongsidetheir respective capital improvement budgetfor this year.There was criticism of the musrenbang processdescribed above. In particular, people felt thatit was not fully representative (limited toleading members of the local community) andthat it was difficult to track whether anyprojects were included in the final budget.Comments covered revenueissues as well as expenditures.For example, focus was onhow low locally-generatedrevenue is, with concernexpressed about irregularitiesin collection (implyingcorruption, although thisterm was not used).Many people asked questionsrelated to particular line items(for example, the purpose,derivation, or utilization ofthose funds). Since thesectoral departments wererepresented, they were able

to answer most of these questions directly. Thishighlights another benefit of the process forlocal government—that is, an increasedunderstanding by the public of how the budgetis comprised.

Forum Organization and Ownership

The organization of the workshops differed in thetwo locations in the sense that in Kebumen, the localgovernment asked to serve as host rather than ADBor The Asia Foundation. This meant that the localgovernment used its own meeting space, created theagenda (in collaboration with the program team),and sent the invitations. Their agenda differed slightlyfrom Makassar as it involved three breakout sessions(one for each technical department) with an openingand closing plenary. In contrast, the Makassar eventwas held in plenary for its entirety. In retrospect,breakout sessions may be preferable because mostof the CSOs had particular interests that could bediscussed in more detail. For example, the sectoralmeetings in Kebumen were able to delve into qualityissues and coverage of programs as well as the budgetper se.

In both locations, the heads of localgovernment were not able to attend due to conflictsin schedules; members of the local parliament alsodid not attend. In Makassar, the department headswere also unable to attend; and instead, theyassigned staff to represent them. This was noted byCSO participants and led to concerns that thegovernment was not serious in its commitment to

Plenary Session at the Budget Forum, Kebumen

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budget transparency and consultation. However, theregional secretary of Makassar, who provided thekeynote address, was clearly impressed by the levelof interest from civil society. Over 100 civil societyparticipants attended the Makassar event (held on aweekday) and over 150 attended the Kebumen event(held on a Saturday). The events received high levelsof coverage in the local press.

Thus, the level of involvement in Kebumen (e.g.,request to host, attendance by the vice-mayor anddepartment heads) would seem to indicate higherlevels of local ownership, and hence, an increasedpossibility for institutionalization after the end of thisproject. Both local governments indicated at theconclusion of the workshops that they are interestedin pursuing these consultations in the future.

3.4 COUNTRY-SPECIFICRECOMMENDATIONS

The project concluded with a national conference inJakarta to foster discussions among government, localNGOs, and international donors on how localbudgeting initiatives could be taken forward. The finalconference was also an opportunity for thestakeholders from Kebumen and Makassar to presentaction plans of how they intend to build on the pilot

project and implement budgeting work in the future.The local action plans, prospects for sustainability ofthe pilot projects, and recommendations for broaderreplication in Indonesia were presented here.

Local Action Plans

Makassar Local Government Action Plan

Actions from the Makassar local government includednew initiatives (e.g., making the annual budgetavailable on the internet) as well as expanding existingdissemination campaigns to include budgetinformation. Specifically, the mayor pledged to:

Increase inclusiveness in the planning process.Like other localities, Makassar has implementedparticipatory planning processes throughmusrenbang from the neighborhood level upto the city level. However, during the budgetforum and the conference, there were strongcriticisms from NGOs and community groupsthat the musrenbang only involves oneorganization—the Lembaga PemberdayaanMasyarakat (LPM), or the Institution forCommunity Empowerment. Makassar localgovernment will involve broader groups in themusrenbang and SKPD Forums in the future.This will have to be monitored by the CSOs inMakassar, who should work directly with thePlanning Department to propose additionalorganizations for inclusion.Increase communication about budgets andother public policy issues with the broadercommunity through existing channels fordisseminating information including: public-private dialogues, SMS (text messaging),interactive radio sessions, the internet, andnewspaper columns. While this does notrequire external technical assistance, it isimportant that CSOs monitor the extent towhich this is done, and more importantly,engage with the government once theinformation is available so that the utility ofthis extra effort on the part of the localgovernment is clear to all concerned.Facilitate people’s participation in budgetimplementation. The Makassar local gov-

Box 3: Spreading Local Best Practice

During the training, the local parliament wasexposed to reforms being undertaken in Sumedang,another city near Kebumen in Central Java. TheKebumen parliament members were particularlyinspired by draft regulation by the Sumedang localparliament to ensure local participation in thebudget process. Kebumen members have decidedthat they would like to pass a similar regulationand parliament members from Kebumen plan tovisit Sumedang to meet with local legislators thereto discuss their experience. Cross learning of thiskind cannot be underestimated in the context ofdecentralization and participatory budgeting. Insome cases, local governments will feel that reformsalready implemented in their own country are easierto adopt than reforms from overseas.


ernment will continue its policy of allocating acertain amount of the annual budget directlyto the subdistrict level. This may require externalassistance because capacity to program thefunds may be weak. Donors engaging indecentralization programs in Makassar maywish to consider such support.Conduct an annual budget disseminationprocess similar to the budget forum held duringthe pilot project. This may require financial andtechnical support from donors to defray thecosts of the event and to act as a neutralfacilitator between the various governmentoffices (Regional Secretary, Finance, Planning,Technical Departments as well as the localparliament) that would be involved in such ameeting.

Kebumen Local Government Action Plan

The commitments from the Kebumen localgovernment build on ongoing reforms in the localgovernment. Future action includes:

Continue interactive dialogues between theregent and the local government of Kebumenwith the public and to continue publishing theAnnual Budget Summary in newspapers. Asthe local government is already engaged inthese activities, no further technical assistance

Box 4: Promising Signs of Sustainability

The initiative of Kebumen and Makassar local governments to devolve a certain percentage of developmentfunds to lower levels is an encouraging sign that the musrenbang (bottom-up planning) process can be mademore effective. However, the local governments face significant challenges in: (i) increasing the capacity oflower level officials to handle the management of these funds; (ii) aggregating the high level of demand forvery limited funds; and (iii) monitoring the use of these funds to ensure against improprieties. A new pilotproject could be designed to usefully explore ways to support this process so that success stories could beshared more broadly.

Since the close of the project, CSOs involved have continued to work independently with the localgovernments to support the strengthening of these initiatives. For example, in Kebumen, CSOs are collaboratingwith the local parliament to revise a number of local regulations on village governance that will contributetoward implementation of the Village Fiscal Devolution program. CSOs in Makassar are working with thePlanning Department of the local government to pilot budget activities at the subdistrict level and they arejointly meeting with donors for the funding of these ideas. Such collaboration is an excellent sign that theinitiatives begun under the technical assistance will be sustainable.

is required for implementation of these steps.Develop direct mails on the budget, which willbe distributed to the smallest neighborhoodunits, and to conduct annual budgetworkshops at the subdistrict level. These actionsare intended to support increased capacity ofsubdistrict local government to implement thevillage fiscal devolution policy. Based onfeedback from both the government and civilsociety counterparts, these steps will requiresignificant donor technical assistance. Kebumenis already discussing with USAID and the WorldBank as to whether such support could be madeavailable in the upcoming year.Develop a performance evaluation system forlocal services and develop a transparent andaccountable one-stop procurement system.Conduct public consultations in theformulation of local laws.

Kebumen Legislative Action Plan

DPRD members proposed an action plan including:

Conduct comparative studies on budgetingand other institutional matters. This will bedone with DPRD’s own funds.Increase dialogues with the public, includingconsultations on the draft annual budgetbefore it is enacted.


Publish the annual budget through leaflets andwebsites.Monitor the implementation of Local Law No.53/2004 about public participation in publicpolicy and implement it in the budgetingprocess.Revise its tata tertib (the internal mechanismfor decision-making processes), to give moreaccess to the public to participate in DPRD’sbudgeting process.Formulate a local law on budgeting that willexplicitly include people’s rights to have accessto budget information during the planning andmonitoring phases of the budget cycle. Thismay require some external technical assistance.

Civil Society Action Plans—Emerging Coalitions

In both localities, participating CSOs have formedthemselves into new coalitions focused on appliedbudgeting as a result of this technical assistance. InMakassar, the coalition is named Civil SocietyEmpowerment or KuPAS (Koalisi untuk PenguatanMasyarakat Sipil). In Kebumen, it is called Civil SocietyForum or Formasi (Forum Masyarakat Sipil). Thesetwo coalitions intend to implement similar programsas follows:

Their basic programs are to advocate morefavorable budget allocation and programimplementation through increased involve-ment of citizen and grassroot groups affectedby the activities of the development budget.They will demand more political openness andthe implementation of initiatives that havealready been made by local governments, suchas fiscal devolution, and increase their owninstitutional capacity to participate effectively.CSOs in Kebumen will direct their effortstoward implementation of the Local Regulation(Perda) on Participation and Village FiscalDevolution.CSOs in Makassar will emphasize a povertyalleviation strategy.Both groups will enhance citizen competenceon budget issues by conducting budget literacyand budget advocacy trainings for broadercommunity groups.

The sustainability of such efforts will requireconsiderable fund raising to expand ongoingadvocacy efforts to include these action points.Toward this end, during the technical assistanceimplementation, CSOs submitted concept papers toa number of donors such as Ford Foundation, TIFAFoundation, and Canadian International Develop-ment Agency (CIDA) for future activities.

Sustainability of the Pilot Projects

Given the proactive nature of the local governmentsinvolved, and the relatively large amount of fundsavailable for support to CSOs in Indonesia, there areexcellent prospects of these activities being continuedin these two sites. The most difficult issue willprobably relate to replicating the annual budgetforums in a way that allows genuine consultation asopposed to purely dissemination of the draft budget.This will require commitment from the executivebranch, support from the legislative arm ofgovernment, and active advocacy and engagementby CSOs. However, even should that objective notbe achieved, CSOs can still use the increasedavailability of data resulting from the action plansabove to monitor and advocate on budget issues.

Indonesia has already taken significant stepsin budget literacy and the formation of nationalnetworks of NGOs engaged in this work. The questionnow is how to deepen applied budgeting fromliteracy efforts to a meaningful engagement with localgovernments about funding priorities, efficient useof funds, broadening revenue bases, and relatedmatters. This will require a showcasing of models forpublic budget consultation that have beendemonstrated to work in Indonesia and the disse-mination of these models across the country. Finally,civil society capacities would need to be enhancedfor effective monitoring of the budgets and long-term involvement in influencing the budget process.

Recommendations for Replication

To foster the institutionalization of meaningful publicconsultation in the planning and monitoring of localbudgets in Indonesia, a number of concrete stepsare required. The major recommendations are:


Legal FLegal FLegal FLegal FLegal Framework:ramework:ramework:ramework:ramework: The central governmentshould provide certainty in the legal framework.Indonesian participatory planning andbudgeting process are facing an uncertainregulatory environment as the centralgovernment has made numerous and ongoingchanges to the budget rules. The Ministries ofFinance, Planning, and Home Affairs have allissued regulations requiring planningdocuments that need to be coordinated andmade less burdensome on local governments.It is important to complete and synchronizethe existing regulations to ensure clarity andto give overall guidance for citizenparticipation.Local Capacities:Local Capacities:Local Capacities:Local Capacities:Local Capacities: Government, NGOs, anddonors should intensify capacity-buildingefforts. It is clear from the Makassar andKebumen experiences that local governments,elected representatives, and civil societygroups are struggling with the need to increasetheir capacity to plan, formulate, and executetheir own proposals in promoting pro-poor andparticipatory budgeting. More concreteguidance and manuals should be produced tosupport this work. Budget literacy and budgetadvocacy trainings should be expanded andcontinued. Donors, who until now havefocused their support on CSOs engaging inapplied budgeting, should also considerproviding technical support directly to thePlanning and Finance Departments of localgovernments to assist them in the imple-mentation of more consultative processes. Thisshould be complemented by increasedattention and technical assistance on the roleof local parliaments in monitoring the budgetand conveying the concerns of constituentsto the executive branch.Access to Information:Access to Information:Access to Information:Access to Information:Access to Information: Local governmentsshould make budget information available andaccessible in an easy to understand format forboth legislators and civil society audiences.Different media can be utilized to discussbudgets, from formal dissemination workshopsto informal discussions on TV, radio, and

roundtable discussions. The budget disse-mination workshops sponsored under thistechnical assistance demonstrate that it ispossible to develop constructive discussionsabout budgets. Local governments should holdfuture workshops before the budget is enactedto encourage public feedback on the priorityand feasibility of plans proposed by technicaldepartments.Dissemination of Innovations:Dissemination of Innovations:Dissemination of Innovations:Dissemination of Innovations:Dissemination of Innovations: Centralgovernment should support increased pilotingof participatory budgeting systems. Regionswhere participatory budgeting takes place needto be supported to achieve more permanenttransformation. Regions that have not yetimplemented such programs should beexposed to the various models being developedaround the country. The Ministries of HomeAffairs and Finance can both play active rolesin supporting heads of local governments whoare committed leaders to these ideas tohighlight the gains to other regions which havenot yet tried these methodologies. The centralgovernment can also draft guidelines for theimplementation of both the musrenbangprocess and consultation on the draft annualbudget that would support adoption of bestpractice across the country. Donors and centralgovernment should also consider providingincentives for local government that implementbudget transparency measures and involvecitizens in the budgeting process.Donors should improve coordination:Donors should improve coordination:Donors should improve coordination:Donors should improve coordination:Donors should improve coordination: Thenumber of donor programs related tosupporting decentralization and the variousapproaches being implemented by donors areresulting in confusion and duplication of effort.Local governments in both locations involvedin this technical assistance requested assistancein holding coordination forums as theythemselves are hesitant to be seen to questionthe donors or appear uncooperative. As manydonors are decentralizing their own operations,it is recommended that donor coordinationforums take place both in Jakarta and on aregional basis.

2727272727CHAPTER 4 MARSHALL ISLANDS CASE STUDY

Chapter 4

Marshall Islands Case Study


The year 2006 marks the 20th anniversary ofindependence for the Republic of the MarshallIslands (RMI). A constitutional democracy, the

RMI runs a unicameral, parliamentary governmentwith a President serving as head of state. A US trustterritory from the end of World War II untilindependence in 1986, the RMI maintains strongpolitical and economic relations with the UnitedStates (US) under a Compact of Free Association(the “Compact”). Under this free associationrelationship, the US provides the RMI with economicassistance, defense, immigration privileges, and otherbenefits in exchange for the right of strategic denialas well as continued useof Kwajalein Atoll as aUS military facility.

Most of the 33members of parliament(including the Presidentand the cabinet min-isters) belong to two adhoc political parties thatwere formed in the late1990s: the UnitedDemocratic Party (UDP),which currently holdsthe majority (gaining thismajority in the 1999elections and holding itsposition again in 2003),

and the Ailoon Klein Ad (AKA) Party.Economic growth, in real aggregate and per

capita terms, has been fairly low since independence.Despite high injections of economic assistance, theRMI’s rapid population growth (at nearly 2% per yearwith a total population of about 57,000 in 2006)and weak overall internal economic performance hasmade per capita growth flat to minimal. Recentanalysis has estimated that real per capita income(in 2003 prices) grew at an annual average of 1%since 1986 and has actually contracted since 1995.18

As a result of this long-term economic malaise, theeconomy remains small, poorly diversified, and heavilyreliant on outside resources. With per capita GDPestimated at $2,340, the RMI is closer to Pakistanthan to Indonesia in terms of income. Heavy funding

A view of Marshall Islands

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flows channeled through the public sector and thecontinued stagnation in private sector growth andexpansion means that the public sector continues todominate in terms of share of GDP, employment, andpaid wages.

Long-term economic stagnation has been themajor underlying cause of a growing number ofsocial problems, including increasing poverty, incomeinequality, and unemployment. Social distresssymptoms are increasingly rising (which is a causefor concern), especially in the urban centers ofMajuro and Ebeye. Crime, domestic violence, mal-nourishment, and substance abuse are a few of theemerging issues affecting modern RMI society.

Poor and worsening economic and socialconditions at home—combined with free entryprivileges to the US—have created a high and steadyflow of out-migration. Recent estimates suggest thatover 13,000 Marshallese migrated to the US between1990 and 2004.19 Whereas large overseas migrantpopulations currently provide economic stimulus forsome Pacific Island economies via remittances, forRMI this has yet to materialize. Remittances fromMarshallese living abroad are estimated to contributevery little to nothing to RMI economy. This is mostlikely because of the poor economic status ofMarshallese living in the US: nearly 40% of theseMarshallese live at or below the US poverty line.20

Traditional Social Structure and ModernSociety

While many traditional practices and customs aretransforming, traditional Marshallese social andrelationship structures remain fairly intact. AllMarshallese are born into three broad social classes:the iroij or chiefs, the alap or lords (also sometimesreferred to as clan heads), and the ri-jerbal or thecommoners (literally translated as the “workers”).

Land is an extremely important resource in thetraditional social structure, not only in terms of itseconomic use, but also in terms of its socioculturalcharacteristics. Almost all land in the RMI is still heldcustomarily, with most land parcels (called wetos)having three title holders representing the threegeneral social classes. Access and rights to land arepassed down through the mother. Marshallese

society is also divided by extended family lineages orclans (called jowi) and, like land, clan membership ispassed down through the mother.

Marshallese society, therefore, centers on theextended family and places far greater emphasis ongroup consensus and community than onindividualism. Based on consultations amongpartners during the technical assistance, thequestioning or criticism of traditional superiors isdiscouraged. In the modern context, with theadoption of western forms of governance and withthe recent push for increased public demand foraccountability and good governance, thesetraditional norms often present principle conflicts.Public questioning and criticism of government(and its officials) is not a common phenomenon.Whereas, in recent years, the strengthening ofdifferent forms of media and the emergence of NGOshas led to an increase in the voicing of concerns overcertain public and political issues, the vast majorityof Marshallese today remains hesitant to openlyquestion authority.


Unlike the other two pilot countries, the RMI remainsrelatively centralized given its low population densityand limited budget resources. Local governments areable to raise some revenues through sales tax, andare only responsible for providing limited services.These include local police services, solid wastecollection, and local roads. Education (whichaccounts for half of the civil service), health, andpublic works (roads, sewers, and utilities) remain theresponsibility of the national government. For thisreason, the project focused on the national budgetin RMI, unlike the other two countries.


The most important CSOs in the Marshall Islands arelocal community organizations, including parents-teachers associations (PTAs), sports clubs, women’sclubs, and the very active churches (many of whichalso provide important school services). Theseorganizations have the broadest membership of


Marshallese citizens and provide a structured way ofinvolving users of public services in the pilot projectactivities.

The RMI has a small number of NGOs, all basedin Majuro, that provide an assortment of services fromeducation to vocational training, to advocacy onwomen’s issues. Some members of the NGOconsortium have been trained in budget analysis/literacy under a prior ADB project on genderbudgeting, but none are engaged in applied budgetwork. NGOs are increasingly asserting themselves inadvocacy and many now attend the public budgethearings that are usually held in Majuro in Augustand September. However, as many NGOs rely onpublic funds, they sometimes are reluctant to openlyquestion the government. At the same time, thereare some in government who view civil society ascompetition for resources and authority rather thanas partners. This attitude is felt by the NGOcommunity to impede the development of a vibrantcivil society sector.

The private sector is represented by theChamber of Commerce, also located in Majuro. Thereare no other business associations in the country.The private sector, to date, has not been involved inbudget trainings, but has been vocal in the budgethearings and has experience advocating on policypositions to the government.

The RMI has a relatively open and active mediacommunity. Radio is the primary media source formost Marshallese, particularly the government-controlled AM station, which reaches the outer islands.There is also an independent newspaper in Majuro thathas a weekly readership of roughly 20,00021 (print andelectronic versions) and several privately-run FM radiostations in Majuro.

External Agency Coordination

The RMI receives assistance from the US through theDepartment of Interior; Taipei,China; the EuropeanUnion (EU); various United Nations agencies, andADB. Related specifically to budgeting, programshave focused on performance-based budgeting(funded by the US), gender-based budgeting (ADB),and community decision-making (the EU).


Revenues and Expenditures

The national budget, totaling approximately $150million in FY2006 (including both recurrent and non-recurrent capital investments) continues to draw thebulk of its resources from external sources, againmostly from the US. The US and Taipei,China alonewill contribute 70–80% of the total budget in 2006in the form of grants. The balance is made up ofdomestic revenues (mostly through import, income,and gross receipts taxes). Funding from the USgovernment for the trust fund and land paymentsrelated to military reparations are not included in thenational budget.

Development in the RMI is heavily reliant onexternal sources and, since independence, the nationhas seen in excess of $500 million in economicassistance (this excludes other receipts such as leasepayments from the US for the use of Kwajalein Atolland compensation for damages stemming from theUS nuclear testing program in the 1940s and the1950s). The bulk of this assistance came from theUS via the Compact and the rest through bilateralrelationships with Japan, Taipei,China, Australia, andother donors. The RMI has also receivedapproximately $100 million in development loans,primarily from ADB, which the RMI joined in 1991.

A critical challenge facing the RMI is the sizeof its civil service, and its budget for salaries nowabsorbs most of the available budget revenue. TheOffice of the President calculates that salaries canreach as high as 90–95% of departmental budgets.While an oversized public sector is an issue commonto all three countries in this pilot project, the problemis even more pronounced in the RMI than in the othertwo countries.


The fiscal year in the Marshall Islands runs from 1October to 30 September. Planning begins in Januaryof each year and the budget cycle is shown in Table4.1.


Given that such a high percentage of the bud-get is concentrated on salaries and operating costs,allocations are quite static from year to year. Loweconomic growth and dependency on US gov-ernment’s transfers mean revenues are also highly static.


Budget implementation and monitoring are primarilythe responsibility of the Ministry of Finance, underthe guidance of the Secretary, Minister, ChiefSecretary and Cabinet. Additional oversight isprovided by the legislative branch’s three budget-related committees (Ways and Means, Appro-priations, and Public Accounts). The Ministry ofFinance currently does not issue any revision updatesor reports on the enacted budget during the year.


There is no specific act or law that explicitly defineswhat budget information is to be made public andwhat is to remain confidential. However, since thebudget is put into a public law format and passedby the Parliament (Nitijela), it is automatically availableto the public. Open debate and discussion about thelaw and other issues that affect the budget, however,are not mandated and are, therefore, not alwayscarried out.

While there is no legal basis for participationin the budget process, it is common practice for theParliament’s Appropriations Committee to hold

budget hearings for public debate and discussion,as described above. However, these hearings arelightly attended by civil society.


The project was launched by holding consultationsin Majuro and Ebeye, the two main atolls or groupsof islands that account for over 75% of the totalpopulation. Given the circumstances of RMI, theproject focused on the national budget. Nonetheless,activities took place in both Majuro and Ebeye toinvolve as large a number of CSOs as possible in theproject.22

Majuro, with a population of 26,000 or nearlyhalf of the total population, is the seat of the nationalgovernment and has access to the most extensive

Table 4.1 Annual Budget Cycle for the National Government, the Republic of the Marshall Islands

MonthMonthMonthMonthMonth ActivityActivityActivityActivityActivity

Jan The Economic Office of the President updates macroeconomic projections (revenue, inflation, etc.) inthe Medium-Term Budget Investment Framework.

Feb The updated framework is submitted to the Budget Office which notifies the Cabinet Ministers of theirallocations for the year.

Mar–Apr Line Ministries prepare department budgets and submit them to the Budget Office.

Apr–May The Budget Office prepares the draft budget using ministerial input.

Jun The draft budget is submitted to the Cabinet.

Aug Cabinet approves or revises the budget and submits to the Appropriations Committee in Parliament.

late Aug– The Appropriations Committee holds public meetings (broadcast on government radio) by departmentearly Sep in the capital, Majuro.

Sep The budget is submitted to the Parliament and then enacted.

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A view of Majuro


services in the country. As noted above, the publicsector is the largest employer with a small trade andservices sector. Ebeye, with a population of 10,000,is the second major population center and isapproximately 45 minutes by airplane from Majuro.Majority of the population—presently residents inEbeye—are from other atolls who are attracted bythe formal sector employment opportunities in theneighboring US military base at Kwajelein atoll. Sincethey are not native to the atoll, they hold no landrights which remain with the traditional landholders.While the RMI has no national definition of poverty,Economic Policy, Planning, and Statistics Office(EPPSO) estimates that approximately 20% of the totalpopulation lives on less than $1/day. Residents ofMajuro and Ebeye, with the best access to formalemployment in the country, presumably have lowerrates of income poverty than this national average.


There had never been a budget manual developedspecifically for the RMI. Thus, the project createdentirely original materials, based on budgets andplanning documents provided by the government.A summarized version was translated intoMarshallese. As the first and sole resource of its kindfor the Marshall Islands, the manual was distributedas widely as possible to provide a lasting resource toCSOs interested in engaging in applied budget workin the RMI. In addition to hard copies disseminatedthrough CSO networks, alocal organization hasplaced the manual in itswebsite,23 and a summary ofthe budget was published inthe main newspaper.

Enhancing Capacity forApplied Budgeting

A one-day training formatwas found to be mostsuitable to respond to theneeds of the Marshallesecommunity as almost allCSOs in RMI are staffedsolely by volunteers, whichseverely limits the levels of

realistic participation. Almost all participants tookunpaid leave from work to attend these trainings,reflecting a strong interest in the project-sponsoredactivities.

A total of five workshops were conducted(three on Majuro and two on Ebeye). A total of 68participants attended these trainings representingchurches, schools and school PTAs, NGOs, and anumber of concerned citizens who came in anindividual capacity. To contribute to the sustainabilityof such budget literacy efforts, the trainings wereco-facilitated by a representative of the local NGOWomen United Together in the Marshall Islands(WUTMI).

Most of the training schedule was devoted toa basic review of the budget calendar and process asthis was new material for the participants. Using thebudget manual as the main-source document, keyactors and their roles in the budget cycle werecovered. The training also taught CSOs how toconduct very simple micro- and macro-level analysesof the budget. Highlights of the discussions included:

Participants showed interest when the lecturefocused on the constitutional mandate of eachof the key RMI actor in the budget process. Itwas clear that key government bodiescontributed to the overall accountability andtransparency of the budget process that areinactive. For example, Public AccountsCommittee (PAC) in the Legislative Branch has

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Workshop with NGOs


not met in recent years. Many of theparticipants had not even heard of PAC, areflection of its ineffectiveness.In general, it was clear that basic civic issues(such as, government roles and functions) werenot known by most of the population,signaling a gap in the RMI’s education system.The Ebeye Special Needs (ESN) grantcommanded a large portion of the discussionsfor the Ebeye trainings, spurring manyquestions that were not addressed sufficientlyduring the outreach campaigns of the CompactNegotiations Office in late 2003. Discussionsincluded topics such as: how ESN grantconcept came about during the negotiations;what ESN grant could be used for; and howthe grant was used in FYs2004, 2005, and2006. It was clear from the discussion thatmost participants did not have this informationpreviously. Upon realizing how ESN could beutilized, people then started asking whodecides on how ESN will be used. Is it agovernment decision or should the people inEbeye be consulted on what needs ESN grantshould tackle?

Although this initial training provided a basisfor the CSOs to engage with the government, it wasthe first step to create real capacity for the financialanalysis needed to conduct applied budget work.Future efforts will be required to create broadercapacity for budget analysis and to support thecreation of an NGO specifically mandated toundertake budget work. In the RMI, WUTMI hasexpressed their interest in taking on such work and aseparate training was, therefore, conducted at theirannual meeting so that all their members, includingrepresentatives from the outer islands, could beexposed to the budget concepts covered in thetrainings.

Toward Annual, Government-hostedBudget Forums

The budget workshop in the RMI was held in April2006. The audience consisted of 14 civil societyrepresentatives, including three Ebeye residentswhose attendance was supported by the project.Gender representation among speakers and

participants was roughly equal. A journalist from theMarshall Islands Journal attended and subsequentlyprovided coverage in the local paper.

The government’s presentation provided anoverview of its priorities for the upcoming years andoffered a frank discussion of some of the politicaland capacity challenges it was facing that had madeit difficult to institutionalize budget reforms.Although the Ministry of Finance had indicated tothe project team prior to the meeting that they wouldpresent projected figures for FY2007, on the day ofthe event they were not able to share these figuresas the draft budget (which provides the ceilings foreach Ministry for the upcoming fiscal year) had notyet been submitted to Cabinet.24 However, theyexplained that overall figures (revenue/expenditure)were expected to be consistent with the FY2006budget.

Because no budget numbers were presented,CSO response to the presentation focused oninformation access rather than the budget per se.Issues raised in the discussion included:

How the government can improve access tobudget and other government documents,particularly for citizens who live off the mainatoll.A discrepancy between the RMI’s statedcommitment to gender equality and the lackof funds dedicated to women’s issues.Poor communication between the governmentand CSOs, particularly in areas of importantservice delivery such as education.

Following the budget forum, workshops wereconducted with CSOs on both Ebeye and Majuro todiscuss action plans and how to address the perceivedbottlenecks in accessing budget documents.


The final conference was held in June 2006 andattended by the Cabinet’s Chief Secretary, the highestranking civil servant in the government. Recom-mendations for increasing public participation andoversight in the budget were presented by civil societyrepresentatives from each atoll; and the ChiefSecretary was invited to respond to these ideas. The


recommendations and his response are given below.

Recommendations

Although a large number of suggestions for im-proving the budget process were discussed duringthe trainings and budget forum, the CSOs chose toconcentrate on a few high-priority recommendationsduring the final conference. Ebeye’s recom-mendations were presented separately as CSOs thereface slightly different challenges than CSOs onMajuro.

Ebeye CSO Recommendations

1. CSOs made various suggestions for ways todisseminate budget and other governmentinformation on Ebeye. These included makingpublications available through schools andvarious government/NGO offices, including theoffice of the Deputy Chief Secretary Repre-sentative for Ebeye and the Kwajalein AtollLocal Government.

2. RMI poses a unique funding environment forCSOs in that most international donor supportis facilitated through the central government.Ebeye’s distance from the capital complicates

their access to information on what programfunds are available, and they, therefore,requested that the government include inform-ation on foreign grants in their disseminationefforts.

3. Addressing the finding during the budgettrainings that most citizens are unaware ofbasic civics concepts and the model of the RMIgovernment, the Ebeye CSOs suggested thatthe government include these subjects in theprimary school curriculum.

Majuro CSO Recommendations

1. Increase public education on the budget andgovernance issues. CSOs encouraged thegovernment to support budget literacy efforts.

2. Improve information flows and access. Liketheir colleagues on Ebeye, CSOs stressed theneed to make information available more easilyand encouraged the creation of a website. Theyalso expressed support for the idea ofestablishing a Nitijela library where budget andother documents would be available to thepublic.

3. Improve information detail and quality.Requested that financial statistics and budgetfigures be disaggregated in such a way thatoperating expenses are detailed and easy tounderstand.

4. Continue and expand performance-orientedbudgeting to all Ministries. Currently, only theMinistry of Education is fully implementing thisreform.

5. Release the draft budget earlier to the generalpublic.

Box 5: Importance of a Legal Framework

Confusion during the budget forum over whetherthe Ministry of Finance had the authority to sharedraft budget figures exemplifies the challenges ofimplementing applied budget work in contextswhere there are no clear guidelines on whatinformation is considered public. While the absenceof a supportive legal framework does not meanbudgeting work is impossible, practitioners shouldbe aware of the potential complications presentedby such an environment. CSOs should begin bybuilding strong linkages to government figures withthe authority to authorize the sharing of budgetinformation. Advocacy on rights to information andpersistence in explaining to government officials thebenefits of more transparent budgeting methodscan also be helpful.

Budget Forum

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Action Plans

Executive Action Plan

The Chief Secretary expressed his support andwillingness to bring these suggestions to the Cabinetfor action. He also committed to the followingconcrete future steps:

The President’s office and the Nitijela aredeveloping websites that will host governmentdocuments, including the budget, for anyoneto access.The government envisions that roll-out ofperformance-based budgeting will becompleted in the next 3 years. The delay is dueto human resource constraints.As a sign of his commitment, the budgetcircular, showing FY2007 department ceilingsand the assumptions underlying the budget,was made available immediately at themeeting. This is the document that was notshared at the April conference.The Chief Secretary expressed his willingnessto hold public hearings on the draft budgetbefore the Nitijela convenes its hearings priorto the passage of the budget.Ebeye will be included in the distribution listof government documents and publications,and the Deputy Chief Secretary RepresentativeOffice (responsible for Ebeye matters) will betrained to assist in the dissemination of thesedocuments. The local government on Ebeyewill be included in this distribution list and amember of the Ebeye Mayor’s office inattendance expressed their readiness toparticipate in distribution of these documents.

Legislative Action Plan

Three members of the Nitijela participated in the finalconference and publicly committed to reinvigoratePAC. They announced that PAC, which is tasked withmonitoring government expenditure, will meet forthe first time in several years beginning on 28 June2006. The Chairperson of PAC also requested trainingfor Parliament members on budgeting.

Civil Society Action Plan

In addition to making the recommendations forgovernment action above, CSOs, on their part,pledged to further budget transparency efforts by:

Hosting documents on their websites.Hosting documents on their websites.Hosting documents on their websites.Hosting documents on their websites.Hosting documents on their websites. SeveralNGOs expressed willingness to dedicatespace on their internet websites for publicgovernment documents. This would com-plement the government’s efforts in upload-ing any public documents for its own dis-semination policies. As a first step, WUTMI hasalready placed the budget manual and budgetcircular on their website, www.wutmi.org.Assisting in disseminating information.Assisting in disseminating information.Assisting in disseminating information.Assisting in disseminating information.Assisting in disseminating information. CSOoffices are willing to set aside an area in theirrespective libraries, offices, and schools forgeneral government documents. These documentscan be viewed by anyone who cannot accessthe internet. For example, copies of the budgetmanual in Marshallese were distributed at thefinal conference and will be made available tothe networks of CSOs in attendance.Educating the public on budgets.Educating the public on budgets.Educating the public on budgets.Educating the public on budgets.Educating the public on budgets. WUTMI, theonly NGO in the country with nationaloutreach, has taken ownership of this projectand will continue to educate CSOs in the RMIon basic budgeting.

Sustainability

The very high level representation on the part of thePresident’s office signaled to the various ministriespresent, particularly the Ministry of Finance, that thegovernment is serious in making these commitments.This is extremely important to the implementationand sustainability of the action plans presented here.However, the RMI continues to face significant humanresource constraints on the part of the variousministries in pursuing better budgeting practices thatwill take time and resources to overcome. Nonethe-less, if the people’s access to information improves,particularly off Majuro, this will be a very tangibleand important step in enhancing transparency.

On the part of the Nitijela, public pressure,particularly through the media, helped motivate the


PAC to meet again. Following their first session, theyhave created a schedule to meet with variousministries to review their budgets and spending.These meetings should be monitored by the publicand the media, in particular, should play a centralrole in continuing to highlight budget issues to thepublic. Technical assistance may be important inensuring that such meetings are effective asParliament members do not receive any budgettraining or accounting support.

Civil society faces rather unique constraints inthe RMI given the very limited resources available forprogramming on governance reforms. Until recently,

most donor support for CSOs have focused on theirrole in service provision given the pressing needsfacing the population. Donors are encouraged torecognize the important role that CSOs can play indemonstrating demand for governance reforms. Interms of the sustainability of budget literacy effortsand forums, particularly off Majuro, WUTMI ispreparing proposals for dissemination to thosedonors present in the RMI. Absent donor assistance,they will continue to use forums, such as their annualmeetings, to increase the capacity of their membersin budget literacy and advocacy.

3737373737CHAPTER 5 PAKISTAN CASE STUDY

Chapter 5

Pakistan Case Study


The Government in Pakistan has been markedby alternating periods of rule by poorly func-tioning political parties interspersed with

military interventions. Despite the strong role of themilitary in politics, a broad political consensus thatPakistan must have a federal structure andparliamentary form of democratic governance exists.The challenge is how to deliver improved governmentservices and welfare outcomes in the face ofentrenched, patronage trends that have dominatedin the past.25

The military government in 2000 initiated anambitious decentralization program intended toaddress the issue of improved governance at the locallevel. These reforms were laid out in the LocalGovernment Ordinances (LGOs) of 2001, whichdevolved significant powers and service deliveryfunctions to local governments. Aspects intended toincrease citizen involvement and oversight areexplicitly included in the LGO, including directelections of councils at the lowest level of localgovernment that in turn indirectly elect councils atthe subdistrict and district levels. While certain actorsat the provincial level, among the bureaucracy, andin civil society have resisted the LGOs, it is unlikely tobe reversed in the future.

Pakistan experienced stagnant growth ratesduring the 1990s, but economic activity has increasedsignificantly since 2001. Growth has reached over6.5% during the last 4 years, with resulting reductions

in poverty. While investment and exports are up,foreign direct investment remains roughly equal toofficial donor assistance at approximately $1 billionper year. Attracting increased investment in a difficultsecurity environment and maintaining high levels ofgrowth to absorb the expanding workforce popu-lation are the primary challenges facing the govern-ment as it seeks to lift the population out of poverty.In the short-term, the government faces risinginflation, increasing current account and fiscaldeficits, and speculative activities in asset markets.26

One of the significant concerns facing Pakistanis its low achievement of human development relativeto GDP. Indicators for infant mortality, life expectancy,and literacy are significantly lower than comparablecountries. This has largely been blamed on structuralinequalities in rural areas which continue to act alongtraditional feudal lines as well as wide disparities inthe access of women to opportunities related toeducation, health, and income/employment. Thirty-three percent of the population lived below thepoverty line in 1999 (the most recently available data),but the poverty trends have shown improvement oflate in line with economic growth.


LGOs create three levels of local government—district,tehsil, and union—and clarify their service respon-sibilities and fiscal authorities. District governmentsare responsible for health, education, and roads.Tehsil governments are primarily responsible for local


infrastructure, including water and sanitation,sewerage, street lighting, and road maintenance.Union governments are responsible for very small-scale public works (e.g., village wells) and culturaland community events.

Decentralization in Pakistan differs significantlyfrom that in Indonesia where civil servants at thelower levels of government continue to reportprimarily to the provincial government. Althoughbudget transfers from the province to the lower levelsof government include funds for these staff, theheads (Nazims) of tehsil and union governments arenot yet able to effectively control the size or qualityof the staff assigned to them.

LGOs provide local governments with powersto raise their own revenues through taxes, fees, tolls,etc.27 Proposals for new taxes must be vetted at publichearings and require provincial government’sapproval. Other sources of revenue for localgovernments include rents from property and profitsfrom investment.

able to understand the accounting concepts involvedand were very enthusiastic about engaging in theactivities. As in the other countries, materials andmanuals were developed in a simple format and inlocal language to be effective.

Private sector representation consists of localChambers of Commerce and Industry, whichrepresent larger businesses involved in manufacturingand import/export. Trade associations representretailers and are quite active at the local level. Theprivate sector has relatively better access togovernment policy processes than NGOs.

The press clubs are an important componentof civil society at the local level. They are instrumentalin raising public opinion and influencing decisionsby public authorities. Both the executive andlegislature attach significant importance to media.However, the local media is not yet aware of itsincreased responsibility due to decentralization (e.g.,ensuring publication of tax proposals by localgovernment to get public opinion). Moreover, it hasnot yet played any role with regard to analysis oflocal budgets or generating public debate on budgetissues.

External Agency Coordination

By far, the largest donor-backed effort to supportdecentralization in Pakistan is a $300 million programloan—the 2002 approved Decentralization SupportProgram—assisted by ADB. This program includes a$30 million of technical assistance resources focusedon supporting capacity building, including financialmanagement support for local government, gendermainstreaming efforts, and support for fiscaldecentralization. There are also large-scale effortsbeing supported by The World Bank (to improvefinancial management systems), CIDA (to buildcapacity of local governments, increase communityparticipation, and mainstream gender), and UnitedKingdom’s Department for International Dev-elopment or DFID (focused on performance-basedbudgets). Most of the activities under these programsare directly focused on government officials as targetsof training and recipients of support. Comparativelylittle technical assistance has been extended toelected members of the councils.

A number of donors also support civil societypartners through the Devolution Trust for Community

Figure 5.1: Local Government Structure, Pakistan


Pakistan’s relatively low level of human developmentand its limited history of democratic governancepresent a particular challenge in relation to identifyingcivil society partners able to engage in appliedbudgeting. None of the district-based CSOs whoparticipated in the project had any prior exposure tobudget work, although they felt that they would be


Empowerment (DTCE),28 a program under theNational Reconstruction Bureau that helps establishcitizen community boards (CCBs). There are also anumber of efforts to disseminate gender responsivebudgeting. However, support for the demand sideof decentralization reforms has been limitedcompared to the assistance directed at localgovernments. In addition, much of the budget-related work to date has focused at the district level,with comparatively fewer interventions at the tehsiland union levels. This technical assistance, therefore,complemented ongoing efforts by building capacityof civil society partners and the private sector toengage on budgeting issues and also by focusing atthe lower levels of local government.


Revenues and Expenditures

As in Indonesia and the Marshall Islands, Pakistan’sshare of salaries and other operating costs (currentexpenditure) represent the large majority of thebudget. This situation has recently been exacerbatedby action taken by provincial governments to increasesalaries of their staff (by as much as 30–40%according to District Executive Development Officersinterviewed during the inception visit), while onlyincreasing the budget transfers to local governmentsby approximately 10% to cover the additionalexpense. This has significantly decreased theavailability of development funds, defined in theBudget Rules as noncurrent expenditures.

Development funds, generally used for localinfrastructure projects, are hotly contested as a sourceof patronage used to benefit particular tribal andsocial groups. One of the innovations under the LGOsis that 25% of available development funds at eachof the lower levels of government must be reservedfor projects that CCBs initiated. CCBs consist ofregistered groups of citizens, not necessarily NGOs,who make project proposals through their localgovernments. CCB allocation cannot be spent onother development projects and is carried forward ifundersubscribed. This program has met with mixedresults thus far, with many local governments havinglow disbursement rates for reasons that include lackof political support, poor quality of proposals, andthe inability of CCBs to provide a required 20% cash

contribution to the projects. In addition, it appearsthat in some cases politicians appear to be creatingtheir own CCBs to secure access to these funds,undermining the intention of genuine citizen-drivenallocations.


The budget process for the two pilot sites, Jehlumand Kasur in Punjab Province, involved in the projectis laid out in Punjab District Government and TehsilMunicipal Administration (TMA) Budget Rules 2003as shown in Table 5.1. The fiscal year runs 1 July to30 June. The EDO F&P issues budget calls inSeptember. Allocations are based on the prior year’sbudget and department heads have until the end ofDecember to submit the first draft of theirdepartment budgets (including current anddevelopment expenditures). EDO compiles these inJanuary and refers any proposed developmentprojects to the Development Committee forconsideration. At the same time, CCBs draft proposalsfor development projects in their communities. Theseproposals are submitted to the government throughthe councils and relevant department heads, whoevaluate the technical feasibility of each proposal. InMarch, EDO F&P revises the current year’s budget sothat the upcoming year will reflect any budgetshortfalls or surpluses that will be carried forward.During this same period, the F&P compiles thedepartmental budgets, requests justifications for anyincrease in spending, and obtains approval from theDevelopment Committee for proposed projects. Thehead of the local government, the Nazim, submitsthe draft budget to the council in June. The councilis required to enact the budget bill by the end ofJune.

All local government officials execute budgetsusing delegated powers of the council. In most cases,budgets are passed on time (although followingelections in late 2005, most councils were not ableto approve their budgets within the statutory timelimit). But the quality of the process varies widelyacross the local governments. The developmentportion of the budget is well contested, scrutinizedfor inter-constituency comparisons, and debatedupon in the council. At the same time, there arecomplaints that rather than seeking better services,the councilors prefer allocations for infrastructure in


their constituencies. The recurrent budget is notdiscussed and attracts little attention. This means thatmost of the budgetary outlay is not analyzed norsubject to debate. CCB allocation is also discussedand subjected to political compromises to ensure apositive vote, but it is not reviewed within anydevelopment policy context.


Through its monitoring committees, the council—intheory—exercises legislative oversight over thedepartments and their work, providing guidance,seeking information, and discussing issues. TheAccounts Committee of the council, withresponsibility for reading monthly accounts in publichearings, informs its members and the citizens ofthe status of local finances. Once a year it receivesthe independent audit report and takes up issuesbrought out before it, applying sanction, andordering corrective action.

However, the monitoring committees are notfully functional and only rarely do they actively workin their sectors. Lack of experience, precedence, andadministrative resources combine to make thembarely effective. District (Zila) accounts committeesalso do not perform in accordance with the spirit ofthe ordinances, failing to conduct public hearings ofthe local accounts or audit reports.


The LGOs and implementing Budget Rules providefor a number of mechanisms for the public (directlyand through elected councils) to exercise control overthe budget process. New systems have been createdunder the Punjab Local Government PlanningManual. These include public consultations at thebeginning of the budget cycle; the presentation ofthe Annual Development Plan; draft budget to thecouncil for consideration; hearings on proposed taxproposals; and the empowering of the council toenact the budget. These elements are intended to

Table 5.1 Annual Budget Cycle for Local Governments, Pakistan

MonthMonthMonthMonthMonth ActivityActivityActivityActivityActivity

Jul–Sep Consultation with stakeholders and priorities identified by the council

Sep Budget call letter issued, accompanied by forms for estimation of receipts and expenditures alsoissued with call letter

Oct Guidelines identifying priority areas for CCBs issued by Technical Municipal Administration

Sep–Feb Consolidation of estimates of revenue and expenditureIdentification of development projects and preparation of project outlines

Dec CCB project proposals submitted to councilors and department staff

1 Mar All estimates, development project outlines, and CCB proposals submitted to Budget andDevelopment Committee

Mar Finalization by Budget and Development Committee (including revised estimates for the current year)Approval of Annual Development Program by the Budget and Development Committee

1 Apr Draft budget submitted to council

Apr Review of draft budget by the council including taxation proposals

1 May Public opinion sought on taxation proposals

1 Jun Public opinion and government vetting received

May–Jun Revision by Head of Offices and finalization by the Budget and Development Committee

Jun Submission of final budget to the council

Before 30 Jun Approval of final budget by the council

Jul Communication of grants to concerned offices and accounts officesIntimation of project approval or nonapproval

Oct Final Accounts for previous yearCCB = citizen community boardSource: Consultations with local governments


ensure that funds are used appropriately and thatdevelopment projects respond to the priorities of thepopulation. In practice, however, these mechanismsare largely ignored.


The project staff visited the municipalities of Jehlum,Faisalabad, and Kasur in Punjab province in late 2005.As in the other countries, meetings were held withthe executive (Nazim and EDO F&P, tehsil municipalofficers and tehsil officers) and legislative branches(tehsil councilors), as well as NGO and private sectorrepresentatives. It was decided not to work inFaisalabad as DFID already has a large technicalassistance program ongoing in the municipality. Inaddition, it was decided to work at the tehsil level(subdistrict) rather than at the district level based ondiscussions with citizen groups indicating that waterand sanitation and other services that the tehsilgovernment provided priority concerns.

Jehlum tehsil is located in the north of PunjabProvince, approximately 2 hours south of the capitalIslamabad and several hours by road from theprovincial capital of Lahore. A relatively small townwith a population of 320,000, its economy relies onmilitary service, small industries, and agriculture asthe main sources of employment. Overseas

remittances are also an important source of income.With an annual budget of $2.2 million, income percapita is PRs185, more than double the per capitaincome generated in the other project site, Kasur.The Nazim is dynamic and interested in developmentwork. The Naib Nazim is also very active and, underhis leadership, the council plays a relatively assertiverole in holding the Nazim accountable. Perhapsbecause of its distance from Lahore where mostdonor-funded decentralization programs are based,Jehlum has not received significant donor assistancein implementing decentralization.

Kasur tehsil is located approximately 1 houroutside of the provincial capital, Lahore. It is a largetrading center with a population of 1,154,990.Agriculture, textile, leather tanneries, and retail arethe main sources of employment; the annual budgetis $4 million. Both the Nazim and Naib Nazim enjoygood relations with the council. The local governmenthas been receiving technical assistance to strengthenfinancial and budget systems from CIDA.


Unlike Indonesia, few extant training materials aretargeted at CSO audiences. The primary resourcesavailable were those developed under ADB’sDecentralization Support Project, which is tailoredtoward a civil service audience and district, ratherthan tehsil government. A gender budget manual

had been developedwith support from CIDA,but was found to be toospecific to meet thecurrent project’s ob-jectives. In Pakistan,therefore, as in the othertwo countries, theproject largely createdoriginal materials usingthe budgets fromJehlum and Kasur forFY2005 to shape theexercises. The manualwas translated into Urduto allow for a broaderaudience and is beingdisseminated broadlythrough NGO networks.A view of Jehlum

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Enhancing Capacity for Applied Budgeting

The workshops in Pakistan were organized incollaboration with local organizations to develop asense of local ownership and to facilitate localpartners in mainstreaming budget-related initiativesinto their programs. Local partners made all therequired arrangements including identification andreservation of venue. They also provided critical helpin identifying potential participants. In addition, TheAsia Foundation collaborated with the Centre forPeace and Development Initiatives, Pakistan (CPDI-Pakistan) to provide facilitation.29 CPDI has workedon a number of access to information issues inPakistan and is a national NGO with advisors basedin Punjab. Co-facilitating was intended to strengthenthe organization’s capacity to undertake this kind ofwork in the future.

The budget literacy training in Kasur wasattended by 39 members of NGOs, journalists,representatives of bar councils, and office-bearers ofCCBs. The training in Jehlum had 33 participants,including two persons who had served in the previoustehsil council and one serving councilor.

Similar to the Marshall Islands, the agenda wasfor a 1-day session covering the materials presentedin the budget manual. In addition, a documentarythat CPDI developed discussing access to informationand budget advocacy efforts in India was shown.The film generated a great deal of debate and adiscussion of provisions under LGOs for access toinformation. Suggestions were given to participantson how they could try to approach their localgovernment for documents that are supposed to bepublic under the law. Most participants said that theydid not know that they had any right to informationvis-à-vis the local government and were unaware ofthe legal provisions that mandate the localgovernments to consult citizens and seek their inputon various proposals. Even the former councilors inattendance expressed their lack of knowledge of thelegal provisions on right to information and pointedout that they too had faced problems in accessinginformation on budget and development projects.

There was also a great deal of discussion relatedto CCB allocations and how the process could bemade more efficient. CCB allotments are significantlyunderspent in Kasur, and participants discussedreasons for this including:

The district Nazim belongs to an oppositionpolitical party and, therefore, does not enjoygood relations with the provincial government.On the behest of the provincial government,the district coordination officer (DCO) does notcooperate with the Nazim, which causes arange of difficulties in the context of approvingprojects for CCBs.Some CCBs have deposited their share of funds,but projects have not been approved eventhough many months have passed.Many projects submitted by CCBs have beenrejected on vague grounds, for example, failingto show sufficient innovation.CCBs that have received approval tend to beaffiliated with senior officers or politicians.There is little transparency and a large numberof complaints regarding nepotism andfavoritism.

Box 6: Reforms of InstitutionalArrangements Must ButtressLegal Provisions

A film on consultative budgeting in India and theimplementation of India’s Freedom of InformationAct stirred a great deal of debate. Commentshighlighted the political dynamics in Pakistan andhow they act to limit participation, for example:

“It is great to see that people are activelychallenging corruption and abuse of powerin Rajastan (India). But if a similar initiativewere taken here, it would be crushed by thepowerful officers and politicians by usingpolice and other means.”

“India is different. There exists afunctioning democracy, and people can raisetheir voice.”

“The success of public initiatives dependson information but they do not give us anyinformation. We do not have any right toinformation.”

These cases in Pakistan highlight that thepassage of laws does not guarantee theirimplementation unless institutional arrangementsare clear and political buy-in is assured among thoseresponsible for implementing reforms.


Feedback from participants indicated that moretime was needed for absorption of the analyticalmethodologies. More time would have beenparticularly useful to organize group work byparticipants on specific assignments related toestimation of receipts and whether projections wererealistic in the light of past trends. In other words,participants needed some opportunity for hands-onexercises where they could apply the methodsexplained to them to analyze revenues.

Council Trainings

The training for tehsil councilors was modified totake into account the responsibilities of councilorsin enacting the local budget. The training in Jehlumwas organized with very active support of the head,or Naib Nazim, of the tehsil council and the head, orNazim, of the TMA. In total, 18 persons attendedthe workshop. In Kasur, the training was held on 13May and was attended by 38 councilors includingthe Naib Nazim.

The training included discussions on commonbudgeting problems, such as the predominant roleof bureaucracies in developing and executingbudgets; a culture of secrecy when it comes to sharingbudget-related information with citizens; lack offeedback from citizens in budget preparation; andthe limited time given to councilors to consider thebudget prior to enactment. Councilors largely agreedthat these problems were present in their area andparticularly expressed that the bureaucracy does notshare information with them, nor are they consultedin the budget-making process. Some of them notedthat the budget enactment process is only a formality

as it is often passed hurriedly and without anysignificant debate. As in the CSO trainings,participants were also unaware of the legal provisionsthat mandate the local governments to consultcitizens and seek their inputs on various proposals.

The discussion of the budget cycle raised thefollowing issues:

Councilors are not consulted in the budget-making process.The draft budget is not presented to thecouncil.Draft taxation proposals are not presented inthe council for discussion.Taxation proposals are also not published innewspapers for feedback and suggestions fromcitizens.

These issues demonstrate that the provisionsof LGOs (2001), which provides the legal basis fordecentralization in Pakistan, have yet to be fullyintegrated into the local government process as theordinance requires the actions above.

Toward Annual, Government-hostedBudget Forums

The agenda in both tehsils was the same: after thewelcome remarks, the tehsil municipal officer (TMO)presented the current budget, followed by an opendiscussion. There was also a session devoted todiscussion of ways to institutionalize publicparticipation in budget formulation in the future.Unlike the other two countries, there was a high levelof participation by local councilors, who made upnearly half the participants in Kasur (33 out of 69attendees) and about one third in Jehlum (17 out of54 attendees).

Kasur

In Kasur, the FY2006 budget was not yet preparedas the government had not received notification ofthe quantum of fiscal transfers from the province.However, the budget was expected to be consistentwith that of FY2005 with some upward revisions andthat development projects would be chosen fromthose submitted by the councilors. Concerns andissues raised in the discussion included:Training in Jehlum

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From the viewpoint of the executive, the lackof long-term development planning on the partof the council leads to ad hoc and inefficientprojects.Councilors were concerned that they are notinvolved in the budget process and not givensufficient time to consider the budget properlybefore enacting it. The TMO responded thatthe councilors suggested all developmentprojects, thus giving them a way of providinginput into the budget.30 As for other stake-holders, he suggested that they were welcometo approach the Nazim or councilors to expressinput. The Naib Nazim promised to convene ameeting of the council to discuss the draftbudget once it had been prepared.Concerns that local governments are notapproving CCB proposals, resulting inunderspent development funds. After initiallyresponding that there were few projectssubmitted, it was pointed out to the TMO thatover 400 CCBs were already registered in Kasur.He then clarified that theprojects were notconsidered technicallyviable and expressed sus-picions that CCBs werebeing created to benefitcertain groups or familiesrather than genuinecommunity needs.Questions were raisedabout allocations inparticular service areas,some of which were notthe responsibility of the

local government (e.g., dispensaries). Theworkshop, thus, allowed the tehsil authoritiesto clarify for the public which level ofgovernment provides which services. Areas ofconcern included water, sanitation, and repairof roads. TMO suggested that councilorsshould submit development plans for theseareas as no funds were available in other partsof the budget.Concerns were raised that most funds areallocated for urban parts of the tehsil,neglecting rural areas. Councilors alsosuggested that future technical assistanceextend such workshops to the Union level.

Jehlum

In Jehlum, the Nazim expressed his support for thepilot project and the Naib Nazim, who leads the tehsilcouncil, called upon councilors to take an active rolein the budget discussion and monitoring committees.The TMO presented preliminary figures for theFY2006 budget although it had not been circulatedto the council in April. He explained that the failureto disseminate the budget in April was due to theelections, which created time constraints. Points ofdiscussion included the following:

As in Kasur, the Jehlum local government citedthat lacking an overall plan for the tehsilhindered the achievement of developmentgoals and suggested that a technical assistanceis needed to create such a plan in the future.Councilors proposed the inclusion of specificdevelopment schemes which TMO noted and

Training in Kasur

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Participants of Jehlum training

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eventually included in the draft budget.The issue of development funds to oppositionparty members was raised. Opposition partymembers were not given allocations, but TMAdid note that funds were being spent in allUnion Councils (UCs), although not necessarilythrough the councilor.As in Kasur, the under-disbursement of CCBfunds was raised. From TMA’s perspective, fewCCBs were registered as the process can beconsidered lengthy and the cost sharerequirement was prohibitive to some groups.The low recovery rates for public utilities, suchas water, and the impact on services were alsodiscussed. TMA outlined the efforts it is makingto increase revenue generation, includingoutsourcing bill collection.

Suggestions for Institutionalization

In addition, the councilors held sessions to discussways in which public consultation on the budgetcould be institutionalized in the future. Thesuggestions in both Kasur and Jehlum were quitesimilar and included:

Local NGOs should organize budgetconsultation forums each year to discuss thebudget and provide feedback to the TMA.UC Nazims and Naib Nazims should holdconsultations with relevant communities beforesubmitting development schemes.The Asia Foundation should organizeworkshops on budget analysis for clusters ofUCs, so that people could be informed ofbudget issues at the grassroots level.TMA should establish a system of receiving andanalyzing public views before and during thebudget preparation.As per rules, a draft budget must be presentedand properly debated upon in the council inApril. Councilors must share the budgetinformation with their constituents and seektheir views before coming to the councilmeetings.The Nazim receives views and suggestions dailyfrom people who visit his office. However, itwould be better if he holds formal and specialmeetings on budget matters with larger groups

from diverse backgrounds. Hence, the inputsof these sectors, which do not get the chanceto interact with the Nazim normally, could alsobe received.Budget information should be provided to localmedia, including local cable networks. Thiswould allow people to learn about the budgetand give feedback, as appropriate.

It is interesting to note that in both Indonesiaand Pakistan, participants in the budget forums feltthat budget dissemination activities should be replicatedat even the lower levels of government (subdistrict).


The final conference in Pakistan was held on 18 July2006. The Chairperson of the National ReconstructionBureau, the central government agency spearheadingdecentralization efforts31 delivered the keynoteaddress; the Chairperson of the Standing Committeeon Local Government and Rural Development forPunjab also spoke. As in Indonesia, representativesfrom both local communities discussed theirexperiences of the project and their action plans. Thecommitments from the executive branch focus onimplementing provisions of the LGOs and budgetrules that are not yet operational.

Action Plans

Jehlum Local Government Action Plan

The tehsil Nazim represented Jehlum and spoke ofthe importance of public participation and budgettransparency in winning credibility and improvingpublic image. He expressed his belief that if peoplehave confidence that the budget is transparent andfunds are used properly, they become willing to paytaxes and cooperate with the government. He laudedLGO 2001 for including a number of provisions forbudget transparency and public participation andcommitted to ensuring that all the relevant provisionsin the LGO would be fully implemented during theyear. In particular:

The tehsil administration will take initiatives tocreate awareness about development projects,


the budget-making process, and how citizenscan give their suggestions.He pledged to hold public consultations beforedetermining priorities for the next year’sbudget. The timing and venue of theseconsultations will be announced in advance,and people from diverse backgrounds andpolitical affiliations will be welcome toparticipate and give feedback.He will ensure that the tehsil administrationwill implement Article 137 of LGO 2001 onaccess to information and will give citizens easyand cost-effective access to documents andrecords that the administration holds.As required by the budget rules, the draftbudget will be presented in the council nextyear. It could not be done this year in viewof limited time—considering that the admin-istration had to first prepare last year’s budget,which had been delayed due to the localgovernment elections in 2005.Similarly, as the budget rules require, taxationproposals will be published in May for feedbackfrom the public. The feedback will be properlydocumented to inform the finalization processof taxation proposals.The tehsil administration will regularly providereports to the council on the pace of projectimplementation, revenue collection, andbudget expenditures. Monthly revenue receiptstatements as well as monthly expenditurestatements will be submitted to the council fordiscussion and executive oversight.

In implementing these measures, he spoke ofthe constraints that his administration faces in viewof limited resources and capacity of staff andcouncilors. The needs he identified included stafftraining in budget making, technical and financialsupport to develop a master plan for the tehsil, aswell as technical support for developing andstrengthening monitoring mechanisms.

Jehlum Council Action Plan

Ms. Rizwana, a tehsil councilor, represented theJehlum council. She discussed the success of the pilotinitiative from her perspective, noting that varioussuggestions of councilors had been included in the

final budget document this year, thanks to the budgetforum. She accounted for this by the increasedawareness of the councilors of the budget process.An additional improvement in this context was thatthere was equal allocation of funds to both womenand men councilors in this year’s budget, unlike inprevious years.

She committed to use the knowledge and skillsacquired through the training workshops to ensurethat the budget process is transparent and civil societygroups get opportunities to participate in the budget-making process. These commitments, while notconcrete, demonstrate that political will is presentto build future technical assistance through sustainedcooperation with the tehsil council.

Kasur Local Government Action Plan

The tehsil Nazim of Kasur pledged that all laws andrules related to civil society participation would befully implemented. He cited other reforms taken byhis administration including moving the funds of thetehsil administration from a current account to aninterest-bearing account and implementing atransparent auction procedure, which had resultedin increased local revenues.

Kasur Council Action Plan

The Kasur council will be involved in the budget-making process by doing the following:

Sufficient time will be allocated for discussionand debate in the council to ensure that thebudget statement is thoroughly scrutinized andviews of councilors, if appropriate, areincorporated in the approved budget.The council will insist upon the Administrationpresenting the draft budget in the council, asrequired by the budget rules. Similarly, thecouncil will require the administration topublish the taxation proposals in May for publiccomments.The council will establish monitoring commit-tees to keep an eye on expenditures and ensurethat there is no leakage or deviation from theapproved budget. There will, however, be aneed to train members of the monitoringcommittees in executive oversight.


The council will demand that the adminis-tration regularly submits to the council monthlyrevenue receipt and expenditure statements.

Civil Society Action Plan

The civil society representative from Jehlum pledgedthat civil society groups would play their role increating public awareness and would use the skillsacquired through the training workshops to holdlocal governments accountable. She suggested thatNGOs should be allowed to attend meetings of thecouncil and that their views should be invited andconsidered before taking final decisions. She alsorecommended the use of TV cable networks, whichexist in almost all towns, to create awareness on issuesrelated to the budget. Furthermore, she proposedthat monitoring committees in the council be formedand include civil society representation. The civilsociety representative from Kasur added that civilsociety groups would maintain regular contact withthe Nazim and Naib Nazim on budget matters andasked that special attention be paid to resolve theunderutilization of CCB budget.

Sustainability and Replication

The general nature of many commitments made inPakistan reflects the relatively new nature of thisexercise in the country context. Low levels of capacityon the part of local CSOs, councilors, and tehsiladministrators make institutionalizing these reformschallenging. Nonetheless, the stakeholders clearlyexpressed interest in continuing these activities. Thisrepresents an important opportunity to deepen thesepilots through continued assistance to develop acomplete model for Pakistan. First, technicalassistance is being provided to administrators, butclearly more have to be done specific to strengthenbudget preparation and development planning.Many donor efforts are concentrated at the districtlevel, but significant budget resources at the tehsillevel could be programmed more efficiently if civilservants had increased capacity.

Second, donor efforts should be extended tofocus more explicitly on strengthening the capacityof councilors. This will include direct measures tobuild up the council secretariat to provide technicalassistance on a daily basis to councilors, who are

volunteers. In addition, councils need support toestablish the sectoral and accounting committeesintended to monitor the budget. Without moreeffective demand from councils and the public atlarge, the executive will unlikely take seriously therequirements under the budget rules for engagingsubstantively with the council.

Significant efforts have to be made to buildup the capacity of local CSOs to engage in budgetwork. While the budget manual developed under thisproject is being distributed widely, it cannot replaceextensive training and grant support to organizationswilling to engage in budget advocacy andmonitoring. The creation of a national-level networkon budget advocacy would be helpful, but individualpilots at the tehsil level are still badly needed asbudget advocacy remains a new methodology in thecountry.

Although it was not the primary focus of thistechnical assistance, the functioning of CCB pro-visions in the budget received a great deal ofattention. Donor programs working to support theformation of CCBs and improve the quality of theirproposals may find that broader budget worksupports disbursement of these funds by addressingsome of the political and supply side capacity cons-traints currently impeding better implementation.

Lessons Learned and Recommendations

As in every local government, conflicts ofvarying degrees exist between the executiveand the legislative branches. In Pakistan, theseconflicts, which are generally on the issue ofresource distribution, appear to be managedby accommodating the demands of more vocaland stronger players. In the absence of trans-parent procedures and open debate in thecouncils, such compromises generally involvespecific individuals and do not necessarilycontribute to developing clear criteria or clari-fying the exact roles and responsibilities ofrelevant offices or branches. As a result, thefocus remains on personalities, rather thaninstitutions.Tehsil councils are vested with a large numberof powers and responsibilities under LGO 2001,but very few of these are actually being usedand performed. This is due to a variety of


reasons including lack of awareness, limitedcapacity, restricted opportunities for opendebate on relevant issues and concerns, and anoncooperative executive. It is possible tosignificantly increase opportunities for publicparticipation by strengthening the tehsilcouncils. At present, councilors generally be-lieve that their only responsibility is to ensurethat they get a fair share in the developmentprojects for the constituencies they represent.They have little understanding of their role indevelopment planning, monitoring of develop-ment projects, establishing transparent andparticipatory mechanisms for service delivery,and holding the executive accountable for anyperformance deficit. Even when they seek toperform such roles, the relevant initiatives aremostly verbal, rhetorical, and do not makegood use of authentic official information andlaid-down rules and procedures.Councilors frequently complained about theattitude of the executive, who does not consultthem in the planning and developmentprocess. However, when urged that they alsoneeded to consult constituents and civil societygroups before recommending developmentschemes or taking other initiatives in thecouncils, they were not completely convinced.They had the view that, once elected, theyrepresented the public and had the right tospeak on their behalf. It is, therefore, importantto engage them in a dialogue in such a mannerthat they realize the importance of regularconsultations with stakeholders both individ-ually and collectively through the forums thatthe council or its committees establish. It maybe particularly important to highlight that theexecutive would take the councilors (or thecouncil) far more seriously if their initiatives andrecommendations include the views of relevantstakeholders.Access to official information is a majorproblem for both councilors and members ofcivil society. This is despite the fact that theLGO 2001 clearly guarantees citizens’ right toaccess information held by all offices of TMA.Even more instructive is the fact that hardlyany councilor or civil society activist was aware

of this legal right and, therefore, no one haddemanded information by referring to therelevant section.There exists very limited capacity for appliedbudget analysis both among the councilors andcivil society groups. In the course of trainingworkshops, trainers had to significantly simplifyand modify the modules and training methods,as the base skills were below the expectedlevels. Participants lacked interest and aptitudefor statistics, and required a lot of motivationand skill to obtain their attention. Trainers alsoneeded to explain to them the very basicinformation and concepts used in the budgetdocuments. Explaining all concepts andprinciples by concrete examples and compa-rative statistical data from within the targettehsils were found to be extremely helpful.Participants, for instance, took special interestin comparative data about per capita revenueand per capita expenditures in the two tehsils.There is generally a dominant environment ofapathy, helplessness, and lack of initiative onthe part of civil society based on an assumptionthat any efforts are not going to make a dif-ference. Such attitudes are partly formed bystories of failed attempts from within the localand national political environment. On closeexamination, most of these failures involvedindividuals and groups who had establishedunrealistic targets, and who were driven bypassion and sentiments rather than a realisticassessment of the skills and advocacy tech-niques necessary to succeed. There is a needto provide training in establishing realistic andachievable advocacy targets and appropriateadvocacy techniques, and share success storiesfrom within the region wherein people tookinitiatives and made a significant difference.Many participants requested that more trainingworkshops on applied budget analysis shouldbe organized. This indicates a demand forlearning about relevant rules and acquiringappropriate skills, although it may not be verystrong and well-articulated. The very fact thatthe budget documents were frankly and openlydiscussed outside the councils was veryencouraging and motivating for many repre-


sentatives of civil society groups. More suchevents could create further interest and greatermomentum for public participation.One major success of the project was depend-ent upon obtaining the full cooperation of boththe council and the executive in terms ofagreeing to allow opportunities for open dis-cussions on the budget documents. This wasachieved partly because the relevant officialscould be persuaded that they could gainpolitical capital by offering opportunities forpublic participation. This demonstrates thatsignificant entry points exist or can be createdfor establishing partnerships and promotingthe project objectives. Such a possibility isgreater if simultaneous awareness andcapacity-building initiatives are taken on thedemand side as well.Almost all participants complained about lackof funds in the face of huge development andservice delivery challenges. Such complaintswere invariably followed by demands that theprovincial and federal governments musttransfer more funds to the tehsil levels.However, when their attention was drawn tothe fact that the tehsil administration couldalso take initiatives to increase local revenuecollection, the typical response was that peoplewere too poor to pay taxes. This reflects thatcouncilors may not sufficiently recognize theirrevenue collection potential, nor are theyadequately equipped to develop andimplement effective ways to increasing localrevenues. A major concern is that people wouldresist any imposition of taxes or increase in fees.It was realized that there was a need to initiatedialogue on the positive linkage between thewillingness to pay taxes and fees and the qualityof services to be delivered by TMA. But theobjective of increased local revenue generation

is unlikely to be achieved in the absence ofrobust mechanisms of information sharing,transparency, and public participation inrelevant planning and policy processes.Local government elections in Pakistan are heldon nonparty basis, but the fact is that politicalparties do play a significant role in local politics.Most councilors and Nazim are widely knownfor their political party affiliations. As a result,proceedings in the council or the nature ofrelationship between the council and theexecutive are significantly formed or influencedby party affiliations. Such factors need to befully understood in designing and implement-ing training programs.Under the rules, the executive must presentthe draft budget to the council in April fordiscussion and feedback. However, theexecutive branch never implemented this rulein the targeted tehsils; nor did the councils everdemand the executive branches do so. In fact,when the TMO in Kasur was asked to presentthe draft budget in May in the workshop, hisresponse was that it was difficult to preparethe draft budget until the auctions had beenmade and the provincial budget has beenpresented. This reflects limited technicalcapacity, as the TMO did not know that draftbudget could be developed based on forecastsfor next year.

The nature of these challenges indicates thedual political and technical nature of program designnecessary for success. Consultative budgeting inPakistan represents an area of great potential inrealizing the intentions of the LGOs. Developmentpartners are encouraged to replicate such efforts todemonstrate that local government can be responsiveto citizen needs in concrete ways.

5151515151CHAPTER 6 CONCLUSION AND RECOMMENDATIONS

Chapter 6

Conclusion and Recommendations

6.1 GENERAL LESSONS LEARNED

In sponsoring a pilot project, ADB explicitly soughtto examine what factors support or detract theinstitutionalization of consultative budget

processes. The range of countries involved in thisproject has provided contrasting contexts from whichto draw these lessons. Factors that strongly influencewhether or not budget participation is likely tosucceed can be considered in three areas:institutional, technical, and political/cultural. Theissues highlighted below were found in all threecountries to varying degrees and thus may be usefulin a broad range of Asian contexts.

Institutional Considerations

As democratizing countries create and empower locallegislatures, there is necessarily a period of transitionin which government officials and bureaucrats mustaccustom themselves to new sources of oversight.This period can be marked by high levels of conflictbetween executive and legislative branches ofgovernment over resources and authority. Suchconflict is exacerbated by a generally weak capacityof newly institutionalized legislatures correlating withpoor functioning of their role in budget monitoringand oversight mechanisms. While tensions betweenexecutive and legislative branches exist in alldemocracies, new democracies may be particularlyprone to this problem.

Legal mechanisms for public consultation and/or oversight of the budget under decentralization

programs generally focus on the role of legislatorsas representatives of the public. Indeed, many of thelegislators and government officials interviewedduring this project felt that direct public consultationwas redundant with the function of local legislatorsas representatives of the people. The focus onconsultation processes internal to government (forexample, hearings between the executive andlegislative, public hearings held by the localgovernment) means that resistance by governmentstakeholders can easily result in a failure to implementthese provisions. In this climate, CSOs andconstituents should express the value of directparticipation of citizens and proactively build bridgesto legislators. Governments seeking to increase publicparticipation may also wish to consider mechanismsthat rely on proactive citizens to involve themselvesin the budget process, for example, Freedom ofInformation legislation, which may be more usefulin guaranteeing budget consultation/oversight.

Perhaps due to the urgency of deliveringservices and ensuring that budgets are passed ontime, consultative activity during the budget cyclealmost exclusively focuses on budget preparation andenactment. Mechanisms to monitor the use of fundsor evaluate the impact of programs are weak orabsent. This can take the form of legislativemonitoring committees failing to meet or be trainedas in Pakistan, or failure of the executive to prepareand submit budget revisions during the fiscal year asin the Marshall Islands. In countries with weakaccountability and high levels of corruption, whereactual budget expenditures are at risk of being spent


on non-budgeted items, budget monitoring is at leastas useful an area for public involvement as budgetplanning.

Technical Considerations

Decentralization efforts in Indonesia and Pakistanhave attracted significant donor support in the formof both financial and technical assistance. The bulkof this support has been directed to aiding civilservants to learn and implement the new rules andstructure. Far less support has been provided to locallegislators. As a consequence, legislators are not fullyaware of their responsibilities to enact and monitorthe annual budget. Nor are they aware of provisionsin the law regarding public consultation. The failureof the budget schedule and budget rules to beimplemented in two of the pilot countries, whilepartly an institutional problem, as highlighted above,is also clearly related to limited capacity of bureaucratsto understand and implement budget rules, andparliaments/councils to engage meaningfully in theiroversight roles.

The clarity of budget formats significantlyimpacts whether civil society can evaluate andmonitor expenditures. This is particularly importantin relation to the current (administrative) expenditureportion of the budget, which receives almost noreview by the public or the legislative, but is likelyto include large amounts of funds subject toinappropriate use, particularly in countries withembedded corruption. Efforts to introduceperformance-based budgeting are useful in allowingthe public to examine costs in detail and to connectexpenditures to expected outcomes. However,governments often face significant human resourceconstraints in implementing this kind of accounting.Donors should be careful in advocating the adoptionof performance-based budgeting simultaneous withmore participatory forms of budgeting as the tworeforms may overwhelm local bureaucrats trying toadjust to the new systems.

For most citizens, undertaking financial analysisis off-putting and time-consuming. For civil societyactors to engage in analytical work, sustained externaltechnical assistance to create capacity to analyzebudgets and financial support to engage in advocacyare prerequisites for successful institutionalization.Donors should anticipate significant long-term

engagement with local counterparts to replicateapplied budgeting approaches.

Finally, during budget forums, general dis-cussions of the budget were considered to be lesseffective than presentations of the budget by sector.This allowed for more in-depth discussions of lineitems as well as the link between quality and outputin relation to resource inputs. This was seen mostclearly in Indonesia where the Makassar meeting, heldin plenary, resulted in a more general discussion ofthe budget than in Kebumen where breakout sessionsled by the heads of the departments, resulted in moreconcrete discussions of outputs and needs.

Political and Cultural Considerations

As in most democracies, legislators view securingdevelopment projects/funds for their constituents as

Box 7: Transparency Supports BudgetingSystem Reforms

Trainings and media coverage during the pilotproject brought attention to the failure by somegovernment bodies to follow the budget rules. Thishas resulted in renewed commitment by theMarshallese Senate PAC to begin meeting againafter a lapse of 6 years. The PAC monitorsexpenditure by the executive and is, thus, vital toholding line departments accountable for budgetimplementation.

In Pakistan, tehsil councils were unaware ofprovisions that allowed for public consultation overthe draft budget and tax proposals prior to thetechnical assistance. They are now energized toenforce these provisions. The Nazims of both localgovernments have agreed to work with the councilsto implement these parts of the budget rules forthe first time.

In Indonesia, public consultations on thebudget that were found to be attended by verysmall, select groups of citizens will now be openedto more general audiences so that the spirit of thelaw is being implemented. Thus, supportingenhanced participation can enhance, rather thancompete, with more technical support for budgetreforms.


an important part of their ability to be reelected.Given the scarce resources for development funds atthe local level, this often results in an informal systemof apportionment whereby each local legislator is“entitled” to a certain amount of the developmentbudget for their district. This can have the negativeresult of development expenditures that are ad hocand not strategic.

In some cases, there have been movementstoward more equitable distribution of funds: forexample, requiring that some funds be spent in allsubdistricts of the local government, or trying toprovide additional funds to low-income parts of themunicipality/district. The creation of annual or mid-term development plans, particularly if based onneeds assessments in the community, would facilitatemore efficient use of development funds, but requireachieving political consensus.

Related to the apportionment of developmentfunds among legislators, attempts to ensure politicalrepresentation by women through instruments suchas quotas have resulted in their relative marginal-ization in their own parties and legislatures. Oneconsequence of this is that many have unequal accessto budget information, seats on committees that dealwith budget review, and development funds for theirconstituencies. On a positive note, many womenbeing elected to these positions, exactly because theyare marginalized, appear to be more willing to make

budget documents available to the public and havea vested interest in gaining access to budgetinformation themselves to find out how much fundsother legislators are receiving.

On the part of the executive, the attitude ofsome officials who remain resistant to the idea ofsharing budgets as public information, particularlybefore enactment, can obstruct applied budgeting.This derives from traditional notions of whatconstitutes state’s secrets; a concern that budgetofficials will be reprimanded by those higher up inthe bureaucracy or by politicians who do not wantthis information shared; a sense that “workingdocuments” (i.e., a budget that will change and isnot yet finalized) are not fit for public consumptionor a failure to maintain the budget schedule (oftendue to behind–the-scenes political deal making inaddition to the technical constraints discussed above)resulting in budget documents not being compiledin any comprehensible format until enactment isurgent to maintain expenditures. Leadership by thehead of the government is important in signaling tobureaucrats responsible for preparing the budget thatincreased transparency will be rewarded rather thanpunished.

Ironically, as external budget monitoringbecomes more effective at uncovering misallocations/abuses, this may have the effect of reducing thewillingness of local governments (both legislative andexecutive branches) to cooperate. For instance, somelocal governments in Indonesia that were visitedduring the inception visit cited recent legal actionstaken against corrupt local parliaments as the reasonthey were hesitant to participate in the pilot project.Thus, the success of applied budgeting initiatives inincreasing transparency may actually hinderreplication.

It should also not be assumed that civil societyactors necessarily understand why they should beinvolved in the budget process or that they will feelcomfortable engaging in such consultation. Factorsleading to this include a sense that putting togetherthe budget is the job of government and can safelybe entrusted to them; cultural unease in somecommunities at questioning authority or disagreeingin public (particularly with people in positions ofpower), or a feeling of hopelessness that advocacycan lead to tangible reforms.

Box 8: Addressing Gender Concerns

In Pakistan, 33% of local council seats are reservedfor women. However, once elected, women areoften treated differently due to their perceived lackof political base. Activities under the technicalassistance highlighted that women councilors werenot receiving equal access to development fundsas their male counterparts.

The Jehlum local government agreed to addressthis inequity by giving women and men councilorsequal access to development funds as a result ofdiscussion at the budget forum. While this may bea stipulated requirement under the laws of the land,dialogue and exchange help clarify such issues andbring them into the public domain with possibilitiesof replication.


As discussed in Chapter Two, challenges toimplementing participatory budgeting initiatives, inwhich the public actually decides on the use ofdevelopment funds, are particularly steep. In bothIndonesia and Pakistan, decentralization laws haveprovisions for bottom-up planning processes relatedto the formation of the annual development budget.In both cases, these have not been very effectiveprimarily due to political resistance, but are also dueto fiscal constraints and the logistical difficulties ofaggregating high levels of demand.

Given the difficulties of increasing revenues,addressing limited development funds in the budgetwill necessarily require frank discussion of howcurrent expenditures are set. Historical and economiclegacies in many Asian countries have resulted inproportionally large public sector employment. Theresult is that the vast bulk of budgets are spent onsalaries, reducing the availability of funds for serviceprovision. As public consultation efforts proceed, adebate over efficient use of funds is sorely needed,but can only occur if current expenditures are clearlydecipherable. Rationalizing the size of the civil serviceis a politically difficult challenge facing manygovernments. Better understanding of the impact onthe size of the civil service on local developmentbudgets may assist in making civil sector reformsmore palatable.

6.2 LESSONS FOR REPLICATIONOUTSIDE THE PILOT COUNTRIES

Although the short duration of the project meansthat conclusions must be considered provisional, thefact that common experiences were seen in suchdifferent contexts leads us to make somerecommendations as to how such initiatives can bepursued in other municipalities/countries. As ageneral guideline, it is suggested that governments,donors, and CSOs wishing to replicate these activitiesconsider the following:

1.1.1.1.1. Clear regulatory frameworks help supportClear regulatory frameworks help supportClear regulatory frameworks help supportClear regulatory frameworks help supportClear regulatory frameworks help supportparticipatory budgetingparticipatory budgetingparticipatory budgetingparticipatory budgetingparticipatory budgeting

Efforts are most likely to meet success in countries/locations that have some legal/regulatory frameworksupportive of public involvement in governance

processes and where the head of government iswilling to show leadership on this issue. Governmentsthat do not yet have laws or regulations allowing forpublic consultation and monitoring of budgetsshould consider enacting such legislation.Governments that have already created such aframework should be encouraged to ensure thatother parts of the Budget Rules are consistent withpublic participation and may wish to consider issuingguidelines to local governments highlighting bestpractice in implementing public consultation.

2.2.2.2.2. External assistance can contribute to localExternal assistance can contribute to localExternal assistance can contribute to localExternal assistance can contribute to localExternal assistance can contribute to localreform effortsreform effortsreform effortsreform effortsreform efforts

The reforms required to facilitate successful appliedbudgeting efforts often need external assistance. Thiscan be both in facilitating dialogue between branchesof government and civil society or, more technical innature, focusing on the actual budget preparation andanalysis itself. Technical assistance to local governmentsshould be offered to ensure that budgets are beingproduced in a clear format and that the Budget rulesand calendar are being followed. Technical assistanceshould be extended to local parliamentarians at thesame time to the executive so that they betterunderstand their role in the budget process. CSOsrequire technical assistance to learn how to analyzebudgets and grant assistance to allow them to focusstaff time and resources on preparing budget briefs,trainings, and advocacy activities.

3.3.3.3.3. Civil society must start with simple andCivil society must start with simple andCivil society must start with simple andCivil society must start with simple andCivil society must start with simple andeffective methodseffective methodseffective methodseffective methodseffective methods

CSOs should initially concentrate on budget literacyefforts so that their constituents can usefully engagein budget dialogue. Budget literacy materials shouldassume no prior knowledge of budgets, accountingconcepts, or government functions and should be inlocal language. Repeated trainings over a sustainedperiod of time are needed to absorb the information.

4.4.4.4.4. Access to information is vitalAccess to information is vitalAccess to information is vitalAccess to information is vitalAccess to information is vital

Programs are recommended to focus first on accessto information as the initial and prerequisite step togreater public involvement in budget planning and


oversight. Local governments should be supportedto disseminate budget information broadly includingmass media such as radio, newspaper, television, andthe internet.

Forums to engage public feedback are a usefulnext step and can be sponsored by either theexecutive or legislative. However, it is important thatsuch forums should happen early enough in theannual budget cycle to allow for revisions of thebudget. In addition, to be legitimate, such forumsmust be as inclusive as possible.

6.3 CONCLUSION

Politics matters

The experiences of the three countries in this pilotproject highlight that the challenges to openingbudget processes to public oversight are primarilypolitical, not technical. In general, the willingness ofthe head of government to enable and considerpublic input into the budget process sets the tonefor how successful activities will be. Resistance at thelower levels of the bureaucracy will only give way inthe face of an overarching environment supportiveof these efforts. Reform-minded individuals shouldbe supported with technical assistance for their staffand should be engaged in disseminating theiractivities to other local governments. The activeparticipation of heads of government in this pilotproject demonstrates that there are counterparts whoare eager to institute more consultative practices.Donors are encouraged to focus programming onthese sites to develop viable models for consultationthat can be used to persuade other local governmentsof the benefits of opening the budget process to thepublic.

Because government documents are stillcommonly treated as state secrets in many developingcountries, a legal framework supporting enhancedtransparency is very useful in clarifying for bureaucratswhat information can be shared with the public. Thepresence of a supportive legal framework that canbe referred to in requesting access to budgetinformation greatly facilitates the likelihood that thiswork will be successful. While the existence of legalprovisions does not mean that they will beimplemented in the absence of demand, it is difficult

for officials to directly refuse to implement theseprovisions once discrepancies between law andpractice become the subject of public debate. Thecase of the RMI demonstrates that while reforms canbe made in an environment without legal provisionsfor public participation in budgeting, this wasdependent upon the personal commitment of highlevel officials. This makes such reforms vulnerable topersonnel changes.

Reform ownership

Where governments are pursuing reforms to allowthe community to have direct input into decisionmaking over development funds, the political andfiscal challenges of implementing such measuresmust be fully recognized. To overcome thesechallenges, fiscal transfers should take into accountthe overall levels of funding absorbed by currentexpenditures. Where development funds are toosmall to provide significant support for communityprojects, the solicitation of ideas from the communitymay just lead to frustration as projects go largelyunfunded. Where development funds are sufficientbut are being underspent for whatever reasons,central governments may consider providingincentives to local governments, for example, bymaking disbursements of block grants contingent onthe progress of the development fund pipeline.Donors should be aware that reforms along theselines require significant political buy-in at all levelsand should, therefore, consider working on budgettransparency and public consultation first beforeattempting such ambitious programs.

Understanding the local context isimportant

The interests of various government officials are notuniform and should be taken into account whenassessing the sustainability and replicability of appliedbudgeting initiatives. Indeed, the perceived conflictof interest between the executive and legislativebranches can facilitate more participatory budgetingas parliamentarians join with civil society actors indemanding better access to the budget process.Donors are encouraged to deepen engagement inone community to work with the executive, legis-


lative, and civil society as the three pillars of thisactivity. Most interventions tend to focus on capacitybuilding of one counterpart. A three-prong effort islikely to be more effective in addressing the complexbarriers to greater budget oversight.

Civil society coalitions are essential forsuccess

In designing applied budgeting initiatives, siteselection should be biased toward areas where civilsociety has capacity and interest to engage in appliedbudgeting. The willingness of CSOs to engage inapplied budgeting should not be assumed: manygroups either feel that the budget is the responsibilityof the government or that their inputs will be ignored.In addition, for many CSOs, particularly at thegrassroots level, the technical challenges involved inundertaking the financial analysis required areformidable. For this reason, many efforts havefocused primarily on budget literacy. Despite largeinvestments in some countries to create capacity,there is a surprising paucity of training manualsavailable. Furthermore, making the leap fromunderstanding the budget to advocating for budgetrevisions and engaging effectively with localgovernment requires another set of skills.Internationally, these efforts have had most successwhen undertaken by NGOs dedicated to appliedbudgeting. For this reason, donors may wish to focuson institutional strengthening of a core group ofNGOs by extending grants and technical support toorganizations wishing to engage in budget analysisas a primary activity of their organization.

Advocacy networks that are provincial ornational play an important role in supportingindividual efforts and contributing to replication.NGOs should form such networks to support broaderadvocacy efforts and support the dissemination ofinformation both domestically and internationally.

Media has a paramount role in promotingtransparency

The role of mass media in promoting increasedtransparency is well-accepted and has beendemonstrated in both industrial and developingcountries.32 Its role should be carefully considered indesigning applied budgeting activities to takeadvantage of the educational and advocacy roles thepress can play. For example, coverage of projectactivities and opinions-editorials in the Marshallesepress appear to have contributed to PAC agreeing tomeet again. In Makassar, local press highlighted theabsence of local councilors and certain high-levelofficials from the budget forums, questioning thegovernment’s commitment to participation. CSOs areencouraged to partner with the press, and budgetliteracy trainings should be extended to journaliststo encourage their active participation in appliedbudgeting efforts.

The success of the pilot initiatives indicates thatsignificant opportunities for broadening anddeepening applied budgeting work in Asia exist.Benefits seen under the pilot project include increasedcommitment by the executive and legislative branchesto follow the budget rules, improve internalprocesses, and solicit civil society inputs. On the partof CSOs, these activities provide increasedunderstanding of government’s role and function andultimately, by enhancing dialogue and accountability,can strengthen democratic institutions. Increasedengagement by civil society in the budgeting processalso results in better policy and planning byencouraging more efficient use of resources andprojects that respond to genuine needs of thecommunity. Consistent with international experience,therefore, applied budgeting can play an importantpart in supporting improved governance outcomesin Asia, particularly at the local level in a context ofdecentralization.

5757575757APPENDIX 1 SUMMARY BUDGETS, INDONESIA

Appendix 1

Summary Budgets, Indonesia

Kebumen 2006 Expenditures by Sector

No.No.No.No.No. DescriptionDescriptionDescriptionDescriptionDescription Amount (Rp)Amount (Rp)Amount (Rp)Amount (Rp)Amount (Rp) PPPPPercentageercentageercentageercentageercentage

1 General Administration 186,638,355,000.00 26.512 Agriculture 10,838,120,000.00 1.543 Fishery and Maritime 9,387,475,000.00 1.334 Forestry and Plantation 3,624,623,000.00 0.515 Industry, Trade, and Cooperatives 2,388,725,000.00 0.346 Manpower 4,038,475,000.00 0.577 Health 53,308,475,000.00 7.578 Education and Culture 274,676,321,000.00 39.029 Social 3,070,138,000.00 0.44

10 Public Work 135,753,901,000.00 19.2811 Transportation 2,607,847,000.00 0.3712 Demography 12,243,348,000.00 1.7413 Tourism 5,373,953,000.00 0.76

TTTTTotal expendituresotal expendituresotal expendituresotal expendituresotal expenditures 703,949,756,000.00 703,949,756,000.00 703,949,756,000.00 703,949,756,000.00 703,949,756,000.00 100.00100.00100.00100.00100.00Source: Local Government, Kebumen

Makassar 2006 Expenditures by Sector


1 General Administration 338,721,859,639.00 41.062 Fishery and Maritime 13,247,332,000.00 1.613 Industry, Trade, and Cooperatives 7,428,641,000.00 0.904 Manpower 2,914,351,000.00 0.355 Health 48,507,186,923.00 5.886 Education and Culture 279,974,960,500.00 33.947 Social 3,212,950,000.00 0.398 Spatial Planning 5,136,792,150.00 0.629 Housing 7,094,237,375.00 0.86

10 Public Work 64,517,563,500.00 7.8211 Transportation 7,328,609,720.00 0.8912 Environment 23,735,356,400.00 2.8813 Demography 16,542,332,500.00 2.0114 Tourism 6,531,214,250.00 0.79

TTTTTotal expendituresotal expendituresotal expendituresotal expendituresotal expenditures 824,893,386,957.00 824,893,386,957.00 824,893,386,957.00 824,893,386,957.00 824,893,386,957.00 100.00100.00100.00100.00100.00Source: Local Government, Makassar


Kebumen 2006 Revenues


1 LocallyLocallyLocallyLocallyLocally-generated Revenue (P-generated Revenue (P-generated Revenue (P-generated Revenue (P-generated Revenue (PAD)AD)AD)AD)AD) 35,410,075,000.0035,410,075,000.0035,410,075,000.0035,410,075,000.0035,410,075,000.00 5.545.545.545.545.54

– Local taxes 7,755,000,000.00 1.21 – Local services fees 16,357,576,000.00 2.56 – Proceed from local government-owned 1,058,750,000.00 0.17

enterprises and share of proceeds fromlocal government assets

– Other legitimate income 10,238,749,000.00 1.60

2 Balancing FBalancing FBalancing FBalancing FBalancing Fundundundundund 596,970,814,000.00 596,970,814,000.00 596,970,814,000.00 596,970,814,000.00 596,970,814,000.00 93.4493.4493.4493.4493.44

– Tax/nontax revenue sharing from the 15,222,638,000.00 2.38central government

– Block Grant (DAU) 536,689,000,000.00 84.00 – Special Grant (DAK) 29,060,000,000.00 4.55 – Tax/ Services revenue sharing and 15,999,176,000.00 2.50

financial assistance from theprovincial government

3 Other legitimate incomeOther legitimate incomeOther legitimate incomeOther legitimate incomeOther legitimate income 6,500,000,000.00 6,500,000,000.00 6,500,000,000.00 6,500,000,000.00 6,500,000,000.00 1.02

TTTTTotal revenuesotal revenuesotal revenuesotal revenuesotal revenues 638,880,889,000.00 638,880,889,000.00 638,880,889,000.00 638,880,889,000.00 638,880,889,000.00 100.00100.00100.00100.00100.00Source: Local Government Kebumen

Makassar 2006 Revenues


1 LocallyLocallyLocallyLocallyLocally-generated Revenue (P-generated Revenue (P-generated Revenue (P-generated Revenue (P-generated Revenue (PAD)AD)AD)AD)AD) 113,803,878,705.00113,803,878,705.00113,803,878,705.00113,803,878,705.00113,803,878,705.00 14.0814.0814.0814.0814.08Local taxes 68,744,343,215.00 8.50

Local services fees 40,607,097,440.00 5.02Proceeds from local government-owned 1,849,938,050.00 0.23enterprises and share of proceed fromlocal government assetsOther legitimate income 2,602,500,000.00 0.32

2 Balancing FBalancing FBalancing FBalancing FBalancing Fundundundundund 694,517,739,000.00 694,517,739,000.00 694,517,739,000.00 694,517,739,000.00 694,517,739,000.00 85.9285.9285.9285.9285.92

Tax/Nontax revenue sharing from the 93,133,739,000.00 11.52central governmentBlock Grant (DAU) 513,004,000,000.00 63.47Special Grant (DAK) 14,680,000,000.00 1.82Tax/ Services revenue sharing and financial 73,700,000,000.00 9.12assistance from the provincial government

3 Other legitimate incomeOther legitimate incomeOther legitimate incomeOther legitimate incomeOther legitimate income – 0.00

TTTTTotal revnuesotal revnuesotal revnuesotal revnuesotal revnues 808,321,617,705.00 808,321,617,705.00 808,321,617,705.00 808,321,617,705.00 808,321,617,705.00 100.00100.00100.00100.00100.00Source: Local Government, Makassar

5959595959APPENDIX 2 SUMMARY BUDGETS, PAKISTAN

Appendix 2

Summary Budgets, Pakistan

Budget Estimate of Revenues 2004–2005, Kasur

No.No.No.No.No. DescriptionDescriptionDescriptionDescriptionDescription Amount (PRs)Amount (PRs)Amount (PRs)Amount (PRs)Amount (PRs) PPPPPercentageercentageercentageercentageercentage

1 LocallyLocallyLocallyLocallyLocally-generated Revenue-generated Revenue-generated Revenue-generated Revenue-generated Revenue 95,610,000.0095,610,000.0095,610,000.0095,610,000.0095,610,000.00 42.2842.2842.2842.2842.28

– Local taxes 55,920,000.00 24.73 – Local services fees 14,790,000.00 6.54 – Service rates 10,000,000.00 4.42 – Rent 1,900,000.00 0.84 Miscellaneous 13,000,000.00 5.75

2 Capital IncomeCapital IncomeCapital IncomeCapital IncomeCapital Income 8,000,000.00 8,000,000.00 8,000,000.00 8,000,000.00 8,000,000.00 3.543.543.543.543.54

3 GrantsGrantsGrantsGrantsGrants 122,500,000.00 122,500,000.00 122,500,000.00 122,500,000.00 122,500,000.00 54.1854.1854.1854.1854.18

– Development Grants 12,500,000.00 5.53 – Nondevelopment Grants 110,000,000.00 48.65

TTTTTotal revenuesotal revenuesotal revenuesotal revenuesotal revenues 226,110,000.00 226,110,000.00 226,110,000.00 226,110,000.00 226,110,000.00 100.00100.00100.00100.00100.00Source: Local Government, Kasur

Expenditures 2004–2005, Kasur


1 General Administration 111,821,189.00 47.092 Development 125,666,000.00 52.91

TTTTTotal expendituresotal expendituresotal expendituresotal expendituresotal expenditures 237,487,189.00237,487,189.00237,487,189.00237,487,189.00237,487,189.00 100.00100.00100.00100.00100.00Source: Local Government, Kasur


Budget Estimate of Revenues 2004–2005, Jehlum


1 LocallyLocallyLocallyLocallyLocally-Generated Revenue-Generated Revenue-Generated Revenue-Generated Revenue-Generated Revenue 100,144,400.00100,144,400.00100,144,400.00100,144,400.00100,144,400.00 71.1571.1571.1571.1571.15

- Local taxes 22,906,000.00 16.27 - Local services fees 18,344,500.00 13.03 - Service rates 7,173,000.00 5.10 - Rent 9,650,000.00 6.86 Miscellaneous 1,402,000.00 1.00 Arrears 40,668,900.00 28.89

2 Capital IncomeCapital IncomeCapital IncomeCapital IncomeCapital Income 930,000.00 930,000.00 930,000.00 930,000.00 930,000.00 0.660.660.660.660.66

3 GrantsGrantsGrantsGrantsGrants 39,684,000.00 39,684,000.00 39,684,000.00 39,684,000.00 39,684,000.00 28.1928.1928.1928.1928.19

- Development Grants 16,176,000.00 11.49 - Nondevelopment Grants 23,508,000.00 16.70

TTTTTotal revenuesotal revenuesotal revenuesotal revenuesotal revenues 140,758,400.00 140,758,400.00 140,758,400.00 140,758,400.00 140,758,400.00 100.00100.00100.00100.00100.00 Source: Local Government, Jehlum

Expenditures 2004–2005, Jehlum


1 General Administration 84,791,500.00 54.572 Development 70,600,500.00 45.43

TTTTTotal expendituresotal expendituresotal expendituresotal expendituresotal expenditures 155,392,000.00 155,392,000.00 155,392,000.00 155,392,000.00 155,392,000.00 100.00100.00100.00100.00100.00Source: Local Government, Jehlum


Endnotes

1 Source: UNDP, Human Development Index (2003).Transparency International 2005 InternationalCorruption Perceptions Index (out of total 159countries). Gender Development Index (2001) (outof 144 countries). All data for RMI from EPPSO(statistical yearbook and population forecasts).

2 For discussions of lessons learned in consultativebudgeting, see Brillantes, A. & Sonco, J. inParticipatory Planning and Budgeting at theSubnational Level, and Wampler, B. A Guide toParticipatory Budgeting.

3 See Assessment of Participatory Budgeting in Brazil,Center for Urban Development Studies, HarvardUniversity and Inter-American Development Bank(2004).

4 See Social Development Notes, World Bank, CaseStudy 3—Gujarat, India: Participatory Approachesin Budgeting and Public Expenditure Management”and Malajovich and Robinson, Budget Analysis andSocial Activism: the Case of DISHA in Gujarat, India.

5 See Kuznezov, L. Making Services Work for the Poorin Indonesia.

6 See Rahman, Atiur, Effective Participation:Community Engagements in ParticipatoryBudgeting in Bangladesh.

7 See international budget.org and logolink.org forbroad guidelines on applied budgeting.

8 See Brian Wampler, A Guide to ParticipatoryBudgeting for discussion of necessary conditionsfor successful replication of participatory budgetingmodels.

9 The RMI manual is available at www.wutmi.org.All three manuals will be available at www.internationalbudget.org, www.asiafoundation.org,and www.adb.org.

10 For more on Indonesia’s political economy, seeSchwarz, Adam. 2000. A Nation in Waiting:Indonesia’s Search for Stability. Boulder, CO:Westview Press and O’Rourke, Kevin. 2002.Reformasi: The Struggle for Power in Post-SoehartoIndonesia. Crows Nest, NSW: Allen & Unwin.

11 Transparency International 2005 InternationalCorruption Perceptions Index.

12 See Kuznezov, L. Making Services Work for the Poorin Indonesia.

13 See http://djpkpd.go.id/berita/dau/panduan-dau.htm for details on the formula used to calculateDAU.

14 In Kebumen, the law on fiscal devolution has beenissued but not yet been implemented fully. Thisyear, about 5% of the budget was devolved to thevillage (not subdistrict) level. CSOs in Kebumen aretrying to advocate full implementation of thisregulation.

15 See Appendix for a summary of the Kebumen annualbudget.

16 See Appendix for a summary of the Makassar annualbudget.

17 For example, in the Kebumen Fiscal Year 2006budget, education received 42% of funds;infrastructure, 19.28% of funds; and health 7.75%of funds.


18 Asian Development Bank. 2005. Juumemmej: RMISocial and Economic Report 2005. Manila.

19 Ibid.20 US Census Bureau. 2005. We the People: Pacific

Islanders in the US. Washington, DC.21 Based on interviews with the Marshall Islands

Journal.22 The Team Leader met with government officials

from the national government, as well asrepresentatives of the local governments of Majuroand Ebeye. Citizen representatives from NGOs,schools, churches, the private sector, and mediawere also consulted. Since the primary socialservices (health, education, and infrastructure) areprovided directly by the central government, it wasdecided to focus on the national budget ratherthan local budgets.

23 See www.wutmi.org24 According to the budget calendar provided to the

Asian Development Bank’s consultants by theGovernment, the draft summary budget is usuallypresented to the Cabinet in early April.

25 See Bose, S., and Jalal, A. Modern South Asia:History, Culture, Political Economy; and Ziring,Lawrence. Pakistan at the Crosscurrent of Historyfor more on Pakistan’s political economy.

26 See http://devdata.worldbank.org/AAG/pak_aag.pdf for statistics on Pakistan economy.

27 Schedule Two gives details of taxes that can belevied by district, tehsil, town, and union councils.

28 See www.dtce.org.pk for more information on theDevolution Trust for Community Empowerment.

29 See www.cpdi-pakistan.org for more informationon CPDI.

30 This comment underlies the lack of awareness thatthe council also has the right to enact (and thusquestion) current expenditures.

31 See nrb.gov.pk for more information on theNational Reconstruction Bureau.

32 For information on the role of the media inpromoting transparency see Balkin, J.M. How MassMedia Simulate Political Transparency andJayaweera, W. How media pluralism advancesgovernment transparency.

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fostering public participation in budget-making: case studies from

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