planning and budgeting

THE THEORY OF PUBLIC THE THEORY OF PUBLIC ADMINISTRATION

Linkage Master Programmesg gDouble Degree FIA-UNIBRAW and Japanese Universities

Universitas Brawijaya

Lecturer : Prof. Dr. Ir. Ginandjar [email protected] j

Assistant Professor : Dr.Ir. Deddy S. Bratakusumah, BE, MURP, [email protected]

PLANNING AND BUDGETINGPLANNING AND BUDGETING

DEVELOPMENT THEORIES

1. THE LINEAR-STAGES THEORY2 STRUCTURAL CHANE MODELS2. STRUCTURAL-CHANE MODELS3. THE INTERNATIONAL-DEPENDENCE

REVOLUTIONREVOLUTION4. THE NEOCLASSICAL

COUNTERREVOLUTIONCOUNTERREVOLUTION5. THE NEW GROWTH THEORY

(TODARO 2000)(TODARO, 2000)

3

THE LINEAR-STAGES THEORYTHE LINEAR STAGES THEORY

1. ROSTOW’S STAGES OF GROWTH1 THE TRADITIONAL SOCIETY1. THE TRADITIONAL SOCIETY2. THE PRE-CONDITION FOR TAKE OFF INTO SELF-

SUSTAINING GROWTHSUS G G O3. THE TAKE OFF4. THE DRIVE TO MATURITY5. THE AGE OF HIGH MASS CONSUMPTION

2. THE HARROD-DOMAR GROWTH MODEL

Y/Y = s/k

4

STRUCTURAL-CHANGE MODELS

1. THE LEWIS THEORY OF DEVELOPMENTDEVELOPMENTLEWIS TWO SECTOR MODEL (TRADITIONAL AND MODERN)

2. STRUCTURAL CHANGE AND S O OPATTERNS OF DEVELOPMENT

AGRICULTURE – INDUSTRY – CONSTRUCTION & SERVICES

5

THE INTERNATIONAL-DEPENDENCE REVOLUTIONDEPENDENCE REVOLUTION

1. THE NEOCOLONIAL DEPENDENCE MODELUNDERDEVELOPMENT IS SEEN AS AN EXTERNALLY INDUCED PHENOMENON

2 THE FALSE-PARADIGM MODEL2. THE FALSE PARADIGM MODELUNDERDEVELOPMENT IS CAUSED BY FAULTY AND INAPPROPRIATE ADVICE FROM INTERNATIONAL “EXPERT”

3. THE DUALISTIC-DEVELOPMENT THESISTHE EXISTENCE AND PERSISTENCE OF INCREASING DIVERGENCES BETWEEN RICH AND POOR NATIONS AND RICH AND POOR PEOPLES ON VARIOUS LEVEL

6

THE NEOCLASSICAL COUNTERREVOLUTION

1. FREE MARKETS, PUBLIC CHOICE, & MARKET FRIENDLY APPROACHESMARKET FRIENDLY APPROACHESPRIVATIZATIONS, GOVERNMENTS CAN DO NOTHING RIGHT, “NONSELECTIVE” INTERVENTIONS,

2. TRADITIONAL NEOCLASSICAL GROWTH THEORYOUTPUT GROWTH RESULTS FROM ONE OR MORE OF THREE FACTORS: INCREASES IN LABOR QUANTITY AND QUALITY INCREASES IN CAPITAL AND AND QUALITY, INCREASES IN CAPITAL, AND IMPROVEMENTS IN TECHNOLOGY

Y = AeµtKαL1-α

7

Y Ae K L

THE NEW GROWTH THEORY

ENDOGENOUS GROWTHSEEK TO EXPLAIN THE FACTORS THAT SEEK TO EXPLAIN THE FACTORS THAT DETERMINE THE SIZE OF µ (THE RATE OF GROWTH OF GDP) THAT IS LEFT GROWTH OF GDP), THAT IS LEFT UNEXPLAINED AND EXOGENOUSLY DETERMINED IN THE SOLOW NEOCLASSICAL GROWTH EQUATION

Y = AeµtKαL1-α Y = AeµtK

8

DEVELOPMENT AS DEVELOPMENT AS TRANSFORMATION OF SOCIETY

A MOVEMENMT FROM TRADITIONAL A MOVEMENMT FROM TRADITIONAL RELATIONS, TRADITIONAL WAYS OF THINKING, TRADITIONAL WAYS OF ,DEALING WITH HEALTH AND EDUCATION, TRADITIONAL METHODS OF PRODUCTION TO MORE METHODS OF PRODUCTION TO MORE “MODERN” WAYS

(STIGLITZ,1998)

9

THE SUCCESSFUL TRANSFORMATION OF SOCIETY

1. RAISE THE GDP PER CAPITA1. RAISE THE GDP PER CAPITA2. RAISE STANDARD OF HEALTH AND

LITERACYLITERACY3. REDUCE POVERTY4 SUSTAINING THE ENVIRONMENT4. SUSTAINING THE ENVIRONMENT

(STIGLITZ,1998)

10

THE STRATEGY INCLUDING

1. PRIVATE SECTOR DEVELOPMENT1. PRIVATE SECTOR DEVELOPMENT2. PUBLIC SECTOR DEVELOPMENT3 COMMUNITY DEVELOPMENT3. COMMUNITY DEVELOPMENT4. FAMILY DEVELOPMENT5. INDIVIDUAL DEVELOPMENT

(STIGLITZ,1998)

11

THE PRIORITY

1. EDUCATION1. EDUCATION2. INFRASTRUCTURE3 HEALTH3. HEALTH4. KNOWLEDGE5. CAPACITY BUILDING

(STIGLITZ,1998)

12

THE UN MILLENNIUM DEVELOPMENT GOALS

1. ERADICATE EXTREME POVERTY AND HUNGER2. ACHIEVE UNIVERSAL PRIMARY EDUCATION3. PROMOTE GENDER EQUALITY AND EMPOWER

WOMAN4 REDUCE CHILD MORTALITY4. REDUCE CHILD MORTALITY5. IMPROVE MATERNAL HEALTH6. COMBAT HIV/AIDS, MALARIA AND OTHER 6. COMBAT HIV/AIDS, MALARIA AND OTHER

DISEASES7. ENSURE ENVIRONMENTAL SUSTAINABILITY8 DEVELOP A GLOBAL PARTNERSHIP FOR 8. DEVELOP A GLOBAL PARTNERSHIP FOR

DEVELOPMENT

13

SOME DEFINITIONS OF PLANNING

PLANNING IS THE APPLICATION OF SCIENTIFIC METHODS TO POLICY MAKING

(FALUDI, 1983)

PLANNING IS A PROCESS FOR DETERMINING APPROPRIATE FUTURE ACTION THROUGH A SEQUENCE OF ACTION THROUGH A SEQUENCE OF CHOICES

(DAVIDOFF AND REINER, 1983)( O , 983)

14

PLANNING

A DELIBERATE AND CONCIOUS ATTEMPT TO FORMULATE DECISIONS FROM SOME ALTERNATIVES TO ACHIEVE THE GOALSALTERNATIVES TO ACHIEVE THE GOALS

THE ELEMENTS OF PLANNING:1. GOALS2. PRIORITY AND TARGETS3. TIME FRAME3. TIME FRAME4. CONSTRAINTS5. CAPITAL AND RESOURCES, AND ITS ALLOCATIONS6 IMPLEMENTATION POLICIES AND STRATEGIES 6. IMPLEMENTATION POLICIES AND STRATEGIES 7. IMPLEMENTING AGENCIES AND HUMAN RESOURCES8. MONITORING, EVALUATION AND CONTROL MECHANISM

15

,

PLANNING CRITERIA

1.COMPREHENSIVE AND INDICATIVE2.CONTROL AND DIRECTING GOVERNMENT

SPENDING IN ORDER TO STIMULATE THE PRIVATE INVESTMENTPRIVATE INVESTMENT

3.STIMULATE MARKET MECHANISM4.PEOPLE PARTICIPATION PROCESS5.AFFIRMATIVE ACTION TO WHOM CAN’T

SUIT THE MARKET MECHANISM

16

THE SHIFT OF DEVELOPMNET THE SHIFT OF DEVELOPMNET PLANNING

IN USA AND UK THE DEVELOPMENT PLANNING BEEN ABANDONEDPLANNING BEEN ABANDONED,

THE NEW FOCUS ON:1. DEREGULATION1. DEREGULATION2. PRIVATISATION3 URBAN ECONOMIC ZONE 3. URBAN ECONOMIC ZONE

17

OTHER REASON

DEVELOPMENT PLANNING AND PUBLIC DEVELOPMENT PLANNING AND PUBLIC REGULATION, NO MORE APPROPRIATE, BECAUSE IT HINDERS CREATIVITY, ,PRIVATE INITIATIVE, BURDEN TO INOVATION, AND CREATE A HIGH COST ECONOMY

CLASSICAL LIBERAL

18

THE ROLE OF GOVERNMENT THE ROLE OF GOVERNMENT THROUGH PLANNING

IRVING SVERDLOW (1963):

OPERATION (PROVIDING PUBLIC GOODS)

DIRECT CONTROL (TARIFF)

INDIRECT CONTROL (STANDARDIZATION)INDIRECT CONTROL (STANDARDIZATION)

DIRECT INFLUENCE (INCENTIVE)

INDIRECT INFLUENCE INDIRECT INFLUENCE (EXPORT MARKET INFORMATION)

19

WHY WE DO PLANNING?

DECREASING UNCERTAINTYDECREASING UNCERTAINTYINTEGRATING SOME RATIONAL METHODS AND TECHNOLOGIES INTO METHODS AND TECHNOLOGIES INTO PROBLEM SOLVING PROCESS AND DECISION MAKING PROCESSDECISION MAKING PROCESS

20

WHY WE DO PLANNING ?

PROVIDING THE CHANCE ANG BLUE PROVIDING THE CHANCE ANG BLUE PRINT TO CONTROL AND MONITOR THE PUBLIC EFFORTS FROM TIME TO TIMEPUBLIC EFFORTS FROM TIME TO TIMEINCREASING PARTICIPATION FROM THE PEOPLE ON DECISION MAKING AT LEAST PEOPLE ON DECISION MAKING, AT LEAST WIDENING THE HORIZON OF THE PUBLIC EXPONENTEXPONENT

21

OTHER REASONSIF WE COULD FIRST KNOW WHERE WE ARE, AND WHITHER WE ARE TENDING, WE COULD BETTER JUDGE WHAT TO DO AND HOW TO BETTER JUDGE WHAT TO DO, AND HOW TO DO IT

(ABRAHAM LINCOLN)

THE ROLE OF THE STATE IN THE ECONOMIC LIFE OF DEVELOPING COUNTRIES NEEDS TO LIFE OF DEVELOPING COUNTRIES NEEDS TO BE REAPPRAISED…. NOT BY STRONG IDEOLOGICAL OVERTURES, BUT BY PRAGMATIC CONSIDERATIONS OF FEASIBLE PRAGMATIC CONSIDERATIONS OF FEASIBLE ALTERNATIVES

(M. SINGH)

22

OTHER REASONS

MARKET FAILURERESOURCE MOBILIZATION AND RESOURCE MOBILIZATION AND ALLOCATIONATTITUDINAL OR PSYCHOLOGICAL ATTITUDINAL OR PSYCHOLOGICAL IMPACTFOREIGN AID ?FOREIGN AID ?

(TODARO, 2000)

23

THE ROLE OF PLANNERS

WHAT IS OR SHOULD BE THE TOPIC OR FOCUS OF PLANNING?OF PLANNING?WHO DOES THE PLANNER WORK FOR?WHAT IS THE GOAL OF PLANNING?WHAT IS THE GOAL OF PLANNING?(IS EQUITABLE DISTRIBUTION OF RESOURCES POSSIBLE?)

HOW DO WE ACHIEVE OUR GOALS? HOW DO WE ACHIEVE OUR GOALS? (IS RATIONAL DECISION MAKING POSSIBLE?)

WHAT IS PRACTICAL EXPECTATIONS?(LEW, 1996)

24

PLANNING APPROACH

(1) POLITICAL(2) TECNOCRATIC(3) PARTICIPATIVE(4) TOP-DOWN(5) BOTTOM-UP

25

THE PLANNING APPROACH

1. RATIONAL PLANNINGSYNOPTIC PLANNING, COMPREHENSIVE PLANNINGBASIS FOR MOST PUBLIC PLANNINGBASIS FOR MOST PUBLIC PLANNING

2. INCREMENTAL PLANNING3. ADVOCACY PLANNING3. ADVOCACY PLANNING4. TRANSACTIVE PLANNING

26

RATIONAL PLANNING

THE STEPS:

1. IDENTIFY A PROBLEM2. IDENTIFY A GOAL3. COLLECT BACKGROUND DATA4. IDENTIFY A MEANS OF ASSESSING 4. IDENTIFY A MEANS OF ASSESSING

ALTERNATIVE PLAN SCENARIOS5. IDENTIFY ALTERNATIVE PLAN SCENARIOS

CONSISTING OF POLICIES AND GUIDELINES TO ACHIEVE THE GOAL

27

RATIONAL PLANNING

6. ASSESS ALTERNATIVE PLAN SCENARIOS7. SELECT THE PREFERRED ALTERNATIVE8. IMPLEMENT THE PLAN9. MONITOR, EVALUATE AND REVISE THE

IMPLEMENTATION10. IDENTIFY NEW PROBLEMS AND BEGIN

THE PROCESS AGAIN

28

RATIONAL PLANNING PRACTICE

TYPICALLY MORE COMPLEX THAN THE STEPS

A. COMPLETE AGENCY PRE-PLANNING ACTIVITIESACTIVITIES

1 CLARIFY AGENCY MISSION ROLE 1. CLARIFY AGENCY MISSION, ROLE, RESPONSIBILITIES

2. DELINEATE INTENDED PURPOSE AND USE OF 2. DELINEATE INTENDED PURPOSE AND USE OF THE PLAN

3. DETERMINE PLAN FRAMEWORK AND FORMAT29


B. ESTABLISH GOALS, GUIDELINES, AND STANDARDS

4. DEVELOP A PLANNING PROCESS TO DO THIS:THIS:

- METHODOLOGIES DATA REQUIREMENTS- PARTICIPANTS ORIENTATION/EDUCATION- COORDINATION ORGANIZATIONAL STRUCTURECOORDINATION ORGANIZATIONAL STRUCTURE- EVALUATION PROCEDURE

5 DEVELOP A WORK PROGRAM TO DO THIS5. DEVELOP A WORK PROGRAM TO DO THIS6. ESTABLISH GOALS 7. ESTABLISH GUIDELINES AND STANDARDS

30


C. IDENTIFY NEEDS & PRIORITIES, ESTABLISH OBJECTIVES, AND DEVELOP PLAN IMPLEMENTATION STRATEGY

8 DEVELOP THE PLANNING PROCESS8. DEVELOP THE PLANNING PROCESS9. DEVELOP THE WORK PROGRAM AND TIME

SCHEDULESCHEDULE10. IDENTIFY NEEDS11. DETERMINE PRIORITIES12. ESTABLISH OBJECTIVES13. DEVELOP THE PLAN IMPLEMENTATION

STRATEGY31

STRATEGY


D. PUBLISH AND IMPLEMENT THE PLAN

E. EVALUATE RESULTS & REVIEW, REVISE AND UPDATE THE PLAN

32

CRITICS ON RATIONAL CRITICS ON RATIONAL PLANNING

RATIONAL PLANNING IS OFTEN CRITICIZED BUT RATIONAL PLANNING IS OFTEN CRITICIZED BUT IT STILL REMAINS THE MOST COMMON APPROACH TO PLANNING APPROACH TO PLANNING

BECAUSE IT IS: RATIONAL AND THEREFORE EASIER TO JUSTIFY

(LEW, 1996)

33

ASSUMPTIONS

1. ASSUMES THAT PEOPLE BEHAVE RATIONALLY- THAT RATIONALITY IS A PART OF EVERYDAY LIFE- THAT PEOPLE AND EVENTS ARE PREDICTABILITY

2. ASSUMES UNLIMITED PROBLEM SOLVING CAPABILITIES AND PERFECT INFORMATION

COST OF INFORMATION COLLECTION IS - COST OF INFORMATION COLLECTION IS AFFORDABLE

- ABILITY TO IDENTIFY ALL ALTERNATIVES (‘SYNOPTIC’)

34

ASSUMPTIONS

3. ASSUMES THAT ONLY FACTS EXIST- NO VALUES (SUBJECTIVE BELIEF SYSTEMS)( )- ALL VARIABLES EXIST WITHIN AN

INTERCONNECTED AND CLOSED SYSTEM (NO UNFORESEEABLE VARIABLES)UNFORESEEABLE VARIABLES)

4. ASSUMES A RATIONAL-DEDUCTIVE SEQUENCE OF EVENTSOF EVENTS- IF ‘A’ HAPPENS, THE ‘B’ WILL FOLLOW- NO NEED FOR POLITICAL STRATEGIES- NOT SUITED FOR CRISIS OR UNFORESEEN EVENTS

35

INCREMENTAL PLANNING

AN ALTERNATIVE THEORY THAT ACCEPTS MOST OBVIOUS SHORTCOMINGS OF RATIONAL OBVIOUS SHORTCOMINGS OF RATIONAL PLANNING

DEVELOPED FROM THE PEACE CORPS IN THE 1960S

1.LIMITED TIME PERIODS/HORIZONS2.POLITICAL DECISION MAKING3.LIMITED AND IMPERFECT INFORMATION

36

INCREMENTAL PLANNING

4.LIMITED TIME AND MONEY FOR DATA 4.LIMITED TIME AND MONEY FOR DATA COLLECTION

5.SOCIETAL VALUES ARE AS IMPORTANT AS FACTS

6.OPEN, RAPIDLY CHANGING SYSTEM; UNFORESEEABLE EVENTSUNFORESEEABLE EVENTS

7.PLANNING IS DISJOINTED, INCREMENTAL AND SERIAL (SERIAL = ONE EVENT AND SERIAL (SERIAL ONE EVENT AFTER ANOTHER WITH NO GIANT STEPS)

37

ADVOCACY PLANNING

CAME OUT OF 1960S, CONSIDER AS AN ADVERSARIAL APPROACH IN THE LEGAL ADVERSARIAL APPROACH IN THE LEGAL PROFESSION

1. DEFENDING THE WEAK AGAINST THE STRONG

WEAK MEANS: THE POOR; DISENFRANCHISED; ENVIRONMENTAL CAUSES

2 SUCCESSFUL IN BLOCKING INSENSITIVE 2. SUCCESSFUL IN BLOCKING INSENSITIVE PLANNING

ESPECIALLY ‘URBAN RENEWAL’38

ESPECIALLY URBAN RENEWAL

ADVOCACY PLANNING

3. MAJOR TOOL: DEVELOPMENT OF ‘PLURAL PLANS’PLANS

DIFFERENT PLANS FOR DIFFERENT SECTORS OF THE COMMUNITY

4. CRITICIZED FOR BLOCKING EFFICIENT PLANNING

5. SOCIAL POLICY & ENVIRONMENTAL JUSTICE BECAME IMPORTANT PLANNING ISSUESISSUES

6. SUSTAINABLE DEVELOPMENT IS THE ‘MAINSTREAMING’ OF ADVOCACY ISSUES

39

IS THE MAINSTREAMING OF ADVOCACY ISSUES

TRANSACTIVE PLANNING

ALSO CALLED ‘POST RATIONAL PLANNING’

A RESPONSE TO THE FAILURES OF ADVOCACY PLANNINGADVOCACY PLANNING

BASED ON:BASED ON:1. SOCIAL LEARNING THEORY

HOW DO SOCIETIES LEARN (AND CHANGE)2. INTERPERSONAL INTERACTION

DIALOGUE AND MUTUAL LEARNING

40

TRANSACTIVE PLANNING

PLANNERS JOB:1 FACILITATE SHARED UNDERSTANDING 1. FACILITATE SHARED UNDERSTANDING

AMONG PEOPLE2 ENGAGE IN MUTUAL LEARNING WITH 2. ENGAGE IN MUTUAL LEARNING WITH

CLIENTS/PEOPLEBOTH REQUIRE ‘DIALOGUE’Q

MAJOR CRITICISMS:- VERY TIME CONSUMING AND DIFFICULT- VERY TIME CONSUMING AND DIFFICULT- VERY PERSONAL & SUBJECTIVE

41

MUTUAL LEARNING PROCESS

PLANNER CONTRIBUTES "PROCESS" KNOWLEDGE

1. THEORY AND SCIENTIFIC METHODOLOGY2. LARGER SOCIETAL PERSPECTIVE & CONCERNS

CLIENT CONTRIBUTES "PERSONAL" KNOWLEDGE

1. DIRECT PERSONAL EXPERIENCE2. KNOWLEDGE OF LOCAL CONDITIONS AND NEEDS

BOTH ARE OF EQUAL VALUE AND IMPORTANCE

42

KNOWLEDGE SHARED

PROCESS & PERSONAL KNOWLEDGE BECOME FUSED THRU:

1. PERSONAL AND VERBAL INTERACTION (DIALOGUE)(DIALOGUE)

PUBLIC GOOD IS ACHIEVED

2. EFFORTS TO CREATE INTELLIGENT INSTITUTIONS

INSTITUTIONS WHICH ARE SELF LEARNING / INSTITUTIONS WHICH ARE SELF-LEARNING / EDUCATING / ADAPTING

43

COMPARISON OF APPROACHES

Rational Planning Advocacy Planning Transactive Planning

Audiencedecision maker / power holder a community group society / "the people”

View held by clientgoal oriented / rational goal oriented / rational experiential

View of self (planner)View of self (planner)rational analyst & technician rational analyst catalyst / inventor & change

agent Methodologyscience science & politics dialogue & politics

Techniquesanalytical analytical process / synthesis

Dataobjective & processed objective & processed objective / processed &

subjective/personal Goalone best solution solution perceived best a working solution &

by client continuing process

44

by client continuing process

COMPARISON OF APPROACHES

View of change processcontrolled / stability controlled / stability guided / responsive to change

View of futurecomprehensive / time-driven partial / short term evolutionary / long-term

Worldview elitist / structural efficiency benevolent / functional participatory / structural &

efficiency functional efficiency Problem environmentisolated (closed system) isolated (closed system) open system

Implementationnot planner's problem not planner's problem part of solution process

Focusth bl th bl & t ti l t th bl & t ti l tthe problem the problem & potential actors the problem & potential actors

(LEW, 1996)

45

ECONOMIC DEVELOPMENT PLAN

A SPECIFIC SET OF QUANTITATIVE ECONOMIC TARGETS TO BE ECONOMIC TARGETS TO BE REACHED IN A GIVEN PERIOD OF TIME WITH A STATED STRATEGY TIME, WITH A STATED STRATEGY FOR ACHIEVING THOSE TARGETS

46

ECONOMIC DEVELOPMENT PLAN

A COMPREHENSIVE PLAN SET ITS TARGETS INCLUDING ALL ASPECTS OF TARGETS INCLUDING ALL ASPECTS OF THE NATIONAL ECONOMYA SECTORAL AND PARTIAL PLAN ELABORATING ONLY A SPECIFIC SECTOR, FOR EXAMPLE, AGRICULTURE, INDUSTRIAL OR TRADE SECTOR

47

MODELS FOR PLANNING1. AGGREGATE GROWTH MODELS:

INVOLVING MACROECONOMIC ESTIMATES OF PLANNED OR REQUIRED CHANGES IN PRINCIPAL ECONOMIC OR REQUIRED CHANGES IN PRINCIPAL ECONOMIC VARIABLES

2. MULTISECTOR INPUT-OUTPUT MODELS:WHICH ASCERTAIN THE PRODUCTION RESOURCES WHICH ASCERTAIN THE PRODUCTION, RESOURCES, EMPLOYMENT, AND FOREIGN-EXCHANGE IMPLICATIONS OF A GIVEN SET OF FINAL DEMAND TARGETS WITHIN INTERINDUSTRY PRODUCT FLOWS

3. DETAILED SELECTION OF SPECIFIC INVESTMENT WITHIN SECTOR:THROUGH THE TECHNIQUE OF PROJECT APPRAISAL THROUGH THE TECHNIQUE OF PROJECT APPRAISAL AND SOCIAL COST-BENEFIT ANALYSIS

48(TODARO, 2000)

PLANNING STAGING

1. AGGREGATE2. SECTORAL3. PROJECT3. PROJECT

49

THE PLAN

1. WARTIME PLANNING2 TOWN AND COUNTRY PLANNING2. TOWN AND COUNTRY PLANNING3. ANTICYCLICAL PLANNING4. DEVELOPMENT PLANNING

- NATIONAL- REGIONAL

(WATERSTON, 1982)

50

DECISION MAKING PROCESS

PLANNINGFROM

PLANNINGFROM

TECNOCRATIC POINT OF VIEW

POLITICPOINT OF VIEW

ACCORDANCEDISTORTION

PLAN

51

GOOD PLANGOOD PLAN

* ECONOMICALLY EFFICIENT* ECONOMICALLY EFFICIENT* POLITICALLY ACCEPTED* ADMINISTRATIVELY WORKABLE* ADMINISTRATIVELY WORKABLE* IN ACCORDANCE WITH SOCIO

CULTURAL AND ETHICSCULTURAL AND ETHICS

52

THE FAILURETHE FAILURE

AN EXAMINATION OF POSTWAR PLANNING HISTORY REVEALS THAT THERE HAVE HISTORY REVEALS THAT THERE HAVE BEEN MANY MORE FAILURES THAN SUCCESSES IN THE IMPLEMENTATION OF SUCCESSES IN THE IMPLEMENTATION OF DEVELOPMENT PLANS

(WATERSTON, 1989)

53

THE CAUSESTHE CAUSES

GAP BETWEEN THEORY AND PRACTICEPLANNING PROCESS FAILUREPLANNING PROCESS FAILURE- INSUFFICIENT AND UNRELIABLE DATA

UNANTICIPATED ECONOMIC TURMOIL- UNANTICIPATED ECONOMIC TURMOIL- INSTITUTIONAL WEAKNESSES

POLITICAL ASPECT- POLITICAL ASPECT- NO IMPLEMENTATION MANUAL

54

PUBLIC SECTOR MANAGEMENT

Decision making Policies forNat. Planning

Planning for programs

Budgetsg for programs

(Seek to achieve) (Defines) (Finance)

Implementation Outcomes Outputs Inputs

( ff ti )

Control indicators Impacts Production Costs

(effectiveness) (efficiency)

indicators

Monitoringtools

Evaluation Value-for-moneyAudits

Cost accounting& financial audits

LINKING POLICY, PLANNING AND BUDGETINGIN THE ANNUAL PLANNING AND RESOURCE MANAGEMENT

(1)REVIEW POLICY

R i h i l i d

CYCLE

Review the previous planning and implementation period

(2)(2)SET POLICY AND UNDERTAKE

PLANNING ACTIVITYEstablish resource frame work, set out

objectives, policies, strategies andexpenditure priorities

(6)EVALUATE AND AUDIT

Policy activities, effectiveness andfeed the results into future plans

expenditure priorities

(3)MOBILIZE AND ALLOCATE

(5)MOBILIZE AND ALLOCATE

RESOURCESPrepare Budget

(5)MONITOR activities and

ACCOUNT for expenditures

(4)IMPLEMENTATION PLANNED

ACTIVITIESCollect revenues, release funds,

deploy personnel undertakedeploy personnel, undertakeactivities

Source : World Bank, “Public Expenditure Management Handbook”, 1998

BUDGET AND BUDGETING

BUDGET IS AN ESTIMATION OF THE REVENUES AND EXPENSES OVER A SPECIFIED REVENUES AND EXPENSES OVER A SPECIFIED FUTURE PERIOD OF TIME

THE PURPOSE OF BUDGETING: TO CONTROL OVER PUBLIC MONEY AND ACCOUNTABILITY OVER PUBLIC MONEY AND ACCOUNTABILITY TO PUBLIC AUTHORITY

57

BUDGET’S ROLE

BUDGETS DIRECT EVERYTHING A GOVERNMENT DOES THEIR PROCESSES GOVERNMENT DOES. THEIR PROCESSES ARBITRATE OVER THE ALLOCATION OF SCARCE RESOURCES AMONG THE SCARCE RESOURCES AMONG THE COMPETING DEMANDS OF AGENCIES WHOSE BUSINESS IT IS TO SEE PUBLIC NEEDS FULFILLED

(XAVIER, 2001)

58

BUDGET

BUDGET IS A PLAN THAT SETS OUT:1 THE OBJECTIVES AND STRATEGIES OF THE 1. THE OBJECTIVES AND STRATEGIES OF THE

GOVERNMENT IN A BUDGET YEAR,2 THE PROGRAMMES AND ACTIVITIES THAT 2. THE PROGRAMMES AND ACTIVITIES THAT

WOULD BE CARRIED OUT TO EXECUTE THE STRATEGIES TO ACHIEVE THE OVERALL OBJECTIVES,

3. THE RESPECTIVE OBJECTIVES OF THESE PROGRAMMES AND ACTIVITIES THAT REFLECT THE DISAGGREGATION OF THE OVERALL OBJECTIVES OF GOVERNMENT

59

OVERALL OBJECTIVES OF GOVERNMENT

BUDGET

4. THE RESOURCES ALLOCATED ACROSS THESE PROGRAMMES AND ACTIVITIES,

5 THE REVENUES PROJECTED TO BE COLLECTED TO 5. THE REVENUES PROJECTED TO BE COLLECTED TO FINANCE THE EXPENDITURE IN CARRYING OUT THE PROGRAMMES AND ACTIVITIESTHE PROGRAMMES AND ACTIVITIES,

6. PERFORMANCE TARGETS – IN TERM OF THE DELIVERY OF SERVICES IN THE RIGHT QUANTITY, DELIVERY OF SERVICES IN THE RIGHT QUANTITY, QUALITY AND IN A TIMELY AND COST-EFFECTIVE FASHION – THAT WOULD NEED TO BE ACHIEVED TO MEETING THE SUB-OBJECTIVES AND, THEREBY, THE OVERALL OBJECTIVES OF THE GOVERNMENT

(XAVIER 2001)

60

(XAVIER, 2001)

BUDGETING PRINCIPLES

TRANSPARENCY AND ACCOUNTABILITYACCOUNTABILITYCOMPREHENSIVENESS OF BUDGETPREDICTABILITY OF RESOURCES & PREDICTABILITY OF RESOURCES & POLICIESFLEXIBILITYFLEXIBILITYCONTESTABILITYEXISTENCE AND SHARING OF INFORMATION

61

BUDGETING THEORIES

PPBSPLANNING PROGRAMMING AND PLANNING, PROGRAMMING, AND BUDGETING SYSTEMS

DEVELOPED IN 1960s BY US DEPT OF DEFENSEDEFENSEBUDGETING BASED ON LONG-TERM PLANNING NEEDSPLANNING NEEDS

62

BUDGETING THEORIES

MBOMANAGEMENT BY OBJECTIVEMANAGEMENT BY OBJECTIVE

DETERMINING OBJECTIVES BASED DETERMINING OBJECTIVES BASED ON OVERALL GOALS CLOSE COOPERATION BETWEEN A CLOSE COOPERATION BETWEEN A MANAGER AND HIS/HER SUBORDINATESSUBORDINATES

63

BUDGETING THEORIES

ZBBZERO BASED BUDGETINGZERO BASED BUDGETING

LARGER BUDGET BROKEN INTO LARGER BUDGET BROKEN INTO SMALLER “DECISION PACKAGES”MANAGERS OF EACH DECISION MANAGERS OF EACH DECISION PACKAGE JUSTIFIES ENTIRE BUDGET FROM SCRATCH EACH YEAR (ZERO-FROM SCRATCH EACH YEAR (ZEROBASE)

64

BUDGETING THEORIES

BUDGETING FOR PERFORMANCE

LINKING:

INPUTS,OUTPUTS, AND

OUTCOMES

65

BUDGETING THEORIES


INPUTCASH/ACCRUALCASH/ACCRUAL

OUTPUTPERFORMANCE DATA/INDICATORS/STANDARDSAUTHORITYACCOUNTABILITYACCOUNTABILITY

OUTCOMECLEAR OBJECTIVESINDICATORSEVALUATION

66

EVALUATION

BUDGETING THEORIES


CLASSIFICATIONFUNCTIONALPROGRAMPROGRAMORGANIZATIONAL

MULTI-YEAR

67

BUDGETING THEORIES

MTEF MEDIUM TERM EXPENDITURE FRAMEWORKMEDIUM TERM EXPENDITURE FRAMEWORK

FISCAL TARGETS (WHAT IS AFFORDABLE)FISCAL TARGETS (WHAT IS AFFORDABLE)FORWARD ESTIMATES OF EXISTING POLICY INSTITUTIONAL MECHANISMS FOR MAKING THE INSTITUTIONAL MECHANISMS FOR MAKING THE TRADE-OFFSA FOCUS ON PERFORMANCEENHANCED PREDICTABILITY

68

STAGES OF A MTEFT D

Stage 1

Macroeconomicf k

Detaileddit

Approval f

Review of ti t i

Top-DownStage 4 Stage 5 Stage 7

frameworkavailability of

resourcesexpenditureframework &

sector/ministryceiling for 3 yrs

ofceilings by

Cabinet

estimates in MOF and

presentationto Cabinet

andParliament

Stage 2

St 1

Stage 3 Stage 6

Step 1

Sector reviewof ministryobjectives, outputs &

i i i

Costing (recurrent &capital) of programs/

Step 3

Hearings toagree on

objectives &priority

Preparation of 3-yearestimates by

ministries withinCabinet approved

ilip

activities

Agreement on

Step 2

programs/sub-programs

for 3 years

p yprograms

ppceilings

Agreement onsectoral/ministryprograms & sub-

programs

Bottom-up(ADAPTED FROM GERVAIS, 1999)

BUDGET CYCLE AND FISCAL POLICYPOLICY

BUDGET CYCLE

THE BUDGET CYCLE IS MADE UP OF THE MAJOR EVENTS OR STAGES IN MAKING DECISIONS ABOUT THE BUDGET AND DECISIONS ABOUT THE BUDGET, AND IMPLEMENTING AND ASSESSING THOSE DECISIONS DECISIONS.

THE SPECIFIC CHARACTERISTICS OF THE THE SPECIFIC CHARACTERISTICS OF THE BUDGET CYCLE DIFFER FROM COUNTRY TO COUNTRY. NONETHELESS, IN MOST ,COUNTRIES, THE BUDGET CYCLE IS LIKELY TO HAVE FOUR STAGES

71

BUDGET CYCLE

STAGE 1

BUDGET FORMULATIONBUDGET FORMULATION

THE BUDGET PLAN IS PUT TOGETHER BY THE EXECUTIVE BRANCH OF GOVERNMENTTHE EXECUTIVE BRANCH OF GOVERNMENT

STAGE 2

BUDGET ENACTMENTTHE BUDGET PLAN MAY BE DEBATED THE BUDGET PLAN MAY BE DEBATED, ALTERED, AND APPROVED BY THE LEGISLATIVE BRANCH OF GOVERNMENT

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BUDGET CYCLE

STAGE 3

BUDGET EXECUTIONBUDGET EXECUTION

THE POLICIES OF THE BUDGET ARE CARRIED OUT BY THE GOVERNMENT

STAGE 4

CARRIED OUT BY THE GOVERNMENT

BUDGET AUDITING AND ASSESSMENTTHE ACTUAL EXPENDITURES OF THE THE ACTUAL EXPENDITURES OF THE BUDGET ARE ACCOUNTED FOR AND ASSESSED FOR EFFECTIVENESS

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PUBLIC FINANCE

GOVERNMENTAL FINANCES TODAY ARE “IN THE PUBLIC EYE” AS NEVER BEFORE

(ROSENBLOOM AND KRAVCHUCK, 2005)

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FISCAL FUNCTIONS

THE MAJOR FUNCTION OF FISCAL FUNCTIONS ARE:

1. ALLOCATION 2. DISTRIBUTION3. STABILIZATION3. STABILIZATION

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ALLOCATION FUNCTION

THE PROVISION FOR SOCIAL GOODS, OR THE PROCESS BY WHICH TOTAL THE PROCESS BY WHICH TOTAL RESOURCE USE IS DIVIDED BETWEEN PRIVATE AND SOCIAL GOODS AND BY WHICH THE MIX OF SOCIAL GOODS IS CHOSEN

THIS PROVISION MAY BE TERMED THE ALLOCATION OF BUDGET POLICY

(MUSGRAVE AND MUSGRAVE 1989)

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(MUSGRAVE AND MUSGRAVE, 1989)

DISTRIBUTION FUNCTION

ADJUSTMENT OF THE DISTRIBUTION OF INCOME AND WEALTH TO ENSURE CONFORMANCE WITH WHAT SOCIETY CONSIDERS A “FAIR” OR “JUST” STATE OF DISTRIBUTION, HERE REFERRED TO AS THE DISTRIBUTION FUNCTIONAS THE DISTRIBUTION FUNCTION


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STABILIZATION FUNCTION

THE USE OF BUDGET POLICY AS A MEANS OF MAINTAINING HIGH MEANS OF MAINTAINING HIGH EMPLOYMENT, A REASONABLE DEGREE OF PRICE LEVEL STABILITY, AND AN APPROPRIATE RATE OF ECONOMIC APPROPRIATE RATE OF ECONOMIC GROWTH, WITH ALLOWANCES FOR EFFECTS ON TRADE AND ON THE EFFECTS ON TRADE AND ON THE BALANCE OF PAYMENTS. WE REFER TO ALL THESE OBJECTIVES AS THE STABILIZATION FUNCTION


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INSTRUMENTS OF INSTRUMENTS OF STABILIZATION FUNCTION

1. MONETARY INSTRUMENTSCONTROL OVER MONEY- CONTROL OVER MONEY

- INTEREST RATECREDIT CONDITIONS- CREDIT CONDITIONS

2. FISCAL INSTRUMENTS- GOVERNMENT SPENDING- THE AMOUNT AND TYPE OF TAXES

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FISCAL-MONETARY MIX POLICY

TO INFLUENCE MACROECONOMIC ACTIVITY

1. TIGHT-MONETARY AND LOOSE-FISCAL POLICY WILL TEND TO ENCOURAGE POLICY WILL TEND TO ENCOURAGE CONSUMPTION AND RETARD INVESTMENT

2. EASY-MONETARY AND TIGH-FISCAL POLICY WILL TEND TO DISCOURAGE CONSUMPTION WILL TEND TO DISCOURAGE CONSUMPTION AND ACCELERATE INVESTMENT

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PUBLIC SECTOR IN ECONOMY

HOUSEHOLDS

INCOME

CAPITAL MARKETFACTOR MARKET

TAXES

SAVING

SPEND

INCOME

INCOME

FIRMSPRODUCTMARKET

MARKET

TRANSFER

PUBLIC SERVICEAND GOODS

BORROWING

TRANSFER

PURCHASE

GOVERNMENT BUDGET

(ADAPTED FROM MUSGRAVE AND MUSGRAVE, 1989)

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BUDGET DECISION MAKINGBUDGET DECISION MAKING

PLAYING THE BUDGET GAME

SOMETIMES BUDGETING TAKES ON THE AURA OF A GAME WITH THE THE AURA OF A GAME, WITH THE VARIOUS AGENCY PLAYERS TRYING TO INCREASE THEIR SHARES AND ELECTED OFFICIALS TRYING, AT LEAST OSTENSIBLY, TO KEEP TAXES DOWN AND PROMOTE ADMINISTRATIVE ECONOMY


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A RATIONAL COMPREHENSIVE A RATIONAL COMPREHENSIVE MODEL OF DECISION MAKING

1. VALUES OR OBJECTIVES ARE DETERMINED AND CLARIFIED SEPARATELY, USUALLY BEFORE CONSIDERING ALTERNATIVE POLICIESPOLICIES

2. POLICY FORMATION IS APPROACHED THROUGH ENDS-MEANS ANALYSIS WITH THROUGH ENDS-MEANS ANALYSIS, WITH AGREED-UPON ENDS GENERATING A SEARCH FOR WAYS OF ATTAINING THEM

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A RATIONAL COMPREHENSIVE MODEL OF DECISION MAKING

4. A “GOOD” POLICY IS, THEREFORE, ONE 4. A GOOD POLICY IS, THEREFORE, ONE THAT PROVIDES THE MOST APPROPRIATE MEANS TO SOME DESIRED END

5. EVERY IMPORTANT RELEVANT FACTOR IS TAKEN INTO ACCOUNT

6 THEORY OFTEN IS HEAVILY RELIED UPON6. THEORY OFTEN IS HEAVILY RELIED UPON

(MILLER 1991)(MILLER, 1991)

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OBSTACLE TO DECISIONS

1 LACK OF GOAL CLARITY1. LACK OF GOAL CLARITY2. CONFUSION OF THE PUBLIC INTEREST

WITH THAT OF A CUSTOMER CLIENTELE WITH THAT OF A CUSTOMER, CLIENTELE GROUP, OR CONSTITUENCY

3. RIGID CONSERVATISM (IN THE SENSE OF 3. RIGID CONSERVATISM (IN THE SENSE OF STRICT ADHERENCE TO RULES, PROCEDURES, AND PAST PRACTICES

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OBSTACLE TO DECISIONS

4. THE TENDENCY TO OVERSIMPLIFY REALITYREALITY

5. “OVERQUANTIFICATION” AND TENDENCY TO DEEMPHASIZE OR IGNORE QUALITATIVE FACTORS

6. RELUCTANCE TO ENGAGE IN POLICY AND PROGRAM EVALUATION


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BUDGET DECISION MAKING BUDGET DECISION MAKING PROCESS

BUDGETFROM

BUDGETFROM

TECNOCRATIC POINT OF VIEW

POLITICPOINT OF VIEW

ACCORDANCEDISTORTION

BUDGET

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INDONESIA NATIONAL BUDGET INDONESIA NATIONAL BUDGET SCHEME (SINCE 2005)

20 YEARLY 5 YEARLY YEARLY

PRESIDENT’S VISION

LTDP MTDP GWP

STRA-PLAN OF DEPT DEPT AP

DEPT ABP

89STATE BUDGET

THANK YOU

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planning and budgeting

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