Heading to the IDF 2018: Solutions for Optimizing Development Funding Source

Development funding in many regions haven’t been optimally spent. Regional administrations use big portion of the annual budget for paying employees’ wages and fixed cost, thus leaving a small part of funding for initiating development. Funding from state budget is oftentimes not flexible and isn’t well-coordinated with regional administration planning. Regional administrations don’t make use of their natural resources to yield additional revenue for development program. This exacerbates inter-region disparities.

In decentralized governance system, regional administrations have more responsibilities and authorities to manage their own financial resources. The central government provides funding for the regional administrations from the state budget for development programs. Regional administrations are also responsible for creating their income sources for supporting development.

To solve the problem, regional administrations must smartly manage their funding to maximize local development. They need to identify and utilize alternative funding sources for regional development. The step isn’t definitely impossible. Many regions successfully carry out good practices in optimizing development funding sources.

A sample of good practice regarding to funding source optimizing is summarized in a paper made by the planner of Drinking Water Sub-Directorate of the Urban, Housing and Settlement Directorate of the National Development and Planning Agency, Nur Aisyah Nasution. Through her paper titled “The Factors that Influence the Effectiveness of Urban Drinking Water Grant Execution”, Aisyah describes her finding that drinking water absorption performance is positively correlated with the performance of local state tap-water company but not positively correlated with fiscal capacity.

She analyzes that grant is more effective in adding urban drinking water scope compared to Special Allocation Fund. She suggests the government to reconsider requirements of Urban Drinking Water Grant executor and the implementation mechanism of Special Allocation Fund hence the two will maximally contribute for achieving drinking water service target.

Aside from funding from the government, other sources that can be used are Corporate Social Responsibility funding. Yet, poor management of the activity execution using the CSR funding may cause misused authority and lead to deviation. To solve the problem, doctoral candidate from University of Tasmania, Iskandar, provides a solution through his paper titled “CSR Funding Optimizing as Regional Development Funding Source: CSR Funding Budgeting Strategy into Regional Budget”.

Iskandar, who is also a state official from the Treasury General Directorate of the Finance Ministry, suggests CSR funding is in a form of good and or service when it is handed to the regional administration. This method will reduce potential deviation, either as seen from regional financial management or CSR funding usage goals. The method is divided into short-term, medium-term and long-term one in a hope this will be put into clear and measurable steps.

Short-term policy and CSR funding budgeting into regional budget are done by using currently valid regulation frame to make it easier for implementing ideas. Medium term policy can be applied by fixing existing regulation. This belongs to the regional authority. Long term policy requires improvement of existing law nationally that requires a relatively long duration.

While the aforementioned papers can be carried out in regions under all circumstances, this paper has different light. Marina Adel, Climate Change Program Manager of the United Nation Development Program, writes “Supporting Indonesia’s renewable energy development in remote and rural areas through innovative funding”. In that, she suggests funding innovation that involves UNDP, the Indonesian Government, regional banking institutions and National Alms Agency, in a form of microhydro power plant for remote areas.

She specifically takes Jambi as a sample. In this province, microhydro power plant will provide electricity for about 806 households. This electricity current will bring benefits in infrastructure and public service sectors for public and business players in four villages. The project shows innovative partnership between public and private sector. In addition, the program describes the importance of Islamic financial institution in supporting regional development in Indonesia.

Those interesting materials will be talked about in Indonesia Development Forum 2018 that carries “Pathways to Tackle Regional Discrepancies across the Archipelago” theme. The peak of the IDF 2018 will be held in 10-11 July 2018 in Ritz Charlton Hotel, Mega Kuningan, Jakarta.

The forum is held by the National Development and Planning Agency and is supported by the Australian Government through Knowledge Sector Initiative (KSI). IDF 2018 drives accelerated development in Indonesia to be more equal and more sustainable based on knowledge, experience and fact. The outcome of the forum will be used to formulate materials for Medium Term Development Plan 2020-2024.

A number of other reviewed materials are from the official of the Regional Autonomy Directorate of the National Development and Planning Ministry, Luthfi Muhamad Iqbal, that is titled “Disparity by Design: The Portrait of The House of Representatives (DPR)’ Intervention for Specific Allocation Funds - Regional Priority (DAK-PD) Fiscal Year 2017-2018”; student of the Urban and Regional Planning of the Sumatera Technology Institute, Alahmidi, who writes “The Role Development of village-owned enterprises (BUMDes) as Independence and Resilience Base Village Economic”, and the junior planner of the National Development and Planning Agency, Aldy Mardikanto, who writes “The Improvement of the Funding Source Synergy for Fulfilling Sanitation Construction Requirement in Regions.”

Other papers are from Ph. D candidate from Osaka University, Tengku Munawar Chalil, who writes “Spatial Approach for Estimating the Size of Flypaper Effect: Case in Decentralizing Indonesia”; Benny Gunawan Ardiansyah, lecturer and expert assistant of the State Financial Polytechnic of the State College of Accountancy, who composes “Fiscal Incentive Policy Analysis towards Regional Imbalance”; Rintar Agus Simatupang, lecturer of the Economy and Business Faculty of the University of Papua, who writes “Developing Village-based Entrepreneurship”; Eko Nur Surachman, lecturer of the State Financial Polytechnic of the State College of Accountancy, who composes “The Application of Availability Payment Scheme to the Village Funds Programme”; and Sunan Giri Mochamad Nizar Palefi Ma’ady, Department Head of Informatics Engineering Faculty of Nahdlatul Ulama University, who writes “Dynamic Programming Approach for Optimizing The Effectiveness of Fund Expenditure with The Advantage of Open Government Partnership”.**