In this interview, Scott Guggenheim, as a founding party of the Kecamatan Development Program (KDP), details the program’s background and the measures taken to initiate its implementation in Indonesia. He discusses how there was a need for a program in the country that created greater local accountability. Seen through the failure of the Inpres Desa Tertinggal (IDT) development program, Guggenheim explains how the Suharto government became so corrupt and disorganized that no money was going to make its way from the top down to the bottom. Thus, a solution to this problem of corruption would be the distribution of funds directly to the villages in order to eliminate the middlemen who often siphoned off the money. This solution served as the foundation of the Kecamatan Development Program. Guggenheim emphasizes the importance of having an effective and simple disbursement system, to assure that money would be dispersed directly to the communities. Therefore, he states how grateful the designing team was to the National Development Planning Agency (BAPPENAS) who worked out how to make the financing aspect of the project function. The simple design of the KDP that was developed is a facilitative planning system mapped against a disbursement system. There is a direct transfer that does not go through the government, but down to the sub-district. That sub-district allocation gets mapped against village level plans that are prioritized by the villagers. The money is given to the projects in the order that they are ranked in until the money runs out.

He discusses how in 1997, they launched the pilot program of KDP, applying their system to twelve sub-districts. He explains the trepidation in scaling up the program, which was due to the uncertainty as to whether the increase in size would make it vulnerable for corruption. Nevertheless, KDP scaled up to 250 villages in the following year, and Guggenheim talks about the components of the program that stayed constant and that needed to be altered in order for the program to thrive.  One of the components that led to KDP’s success was the microfinance, which allowed for the money to reach the poorest people of the villages. Furthermore, the fact that the KDP was a community run organization, and that each village was responsible for their individual funds, makes it so they felt local ownership over the money.  It was their responsibility if projects failed within their community.  

In this interview, Lieutenant General (Ret.) Agus Widjojo of the Indonesian National Armed Forces (TNI) discusses the process of military reform, the difficulties encountered in removing the military from the political process, and the progress still to be made. He discusses the ethos of reform embraced by the TNI as a process of drawing back in places where it had overstepped its constitutional mandate of national defense, and emphasizes the importance of the reform’s initiation within the military itself. He also notes the long and complicated process of developing a model for a functional civilian-military divide and how to designate responsibility within that split—something that he acknowledges still has room for improvement. In an interview simultaneously grounded in the country’s history and forward-looking, Widjojo reflects on his core involvement at the outset of reform, and on his perspective as an outside observer since his retirement in 2003.

In this interview, Marwanto Harjowiryano describes institutional reforms in the Ministry of Finance, most notably the introduction of Standard Operating Procedures (SOPs). Dr. Marwanto discusses the fiscal reforms and priorities throughout his career beginning in the early 1980s. The bulk of his interview details the structure and implementation of reforms in the ministry. He explains how the reformers distributed the power of the budget office by separating the Treasury, the Fiscal Balance Office and the Budget Office. Next the ministry introduced SOPs in every service that directly contacted the public, beginning with several quick wins or excellent services in every directorate-general. The ministry intended the SOPs to reduce and standardize service times, while also reducing corruption by establishing accountability regarding the cost and time of services. Within the ministry, evaluation teams ensured directorate-generals properly implemented their SOPs and made credible promises.  The ministry engaged with other government agencies to encompass various aspects of their reforms, and Dr. Marwanto describes these joint efforts. One challenge he describes is the difficulty of changing not only behavior but also culture, both within the directorate-general’s staff and among customers. A major element was human resources reform through the introduction of performance evaluations, and Dr. Marwanto details the steps of this initiative. He ends with comments on the sustainability and spirit of the reforms.

In this interview, Herman Haeruman of Indonesia discusses the origins and evolution of the Kecamatan Development Program in Indonesia. The KDP was a joint effort between the World Bank and the Indonesian Ministry of National Development Planning (BAPPENAS) with an overarching goal of poverty alleviation in Indonesia’s poorest and generally rural areas. Haeruman explains how decentralization of power from central to local governments played an important role in the success and inherent value of the KDP, and touches on topics such as the empowerment and autonomy that resulted from the program’s sub-national scale. Haeruman delves into the monetary and executive relationship between the World Bank and BAPPENAS, and describes how an independent monitoring system for money allocations was created to guarantee transparency and prevent corruption in allowing villages to choose how to spend their grant money. Haeruman concludes by discussing the difficulties in scaling up KDP from a local, pilot-based program to a nation-wide agenda, as well as other obstacles faced along the way.

Case Study:  Services for the People, by the People: Indonesia's Program for Community Empowerment, 1998-2006

Erwin Ariadharma talks through the history of civil service reform programs in Indonesia, focusing on recent reforms in the Director-General of Tax within the Ministry of Finance under Sri Mulyani, as well as reforms in the Supreme Audit Board and the Supreme Court.  These three institutions together make up three priority areas for the government of Indonesia in terms of state revenue, auditing of state revenue, and law enforcement.  Ariadharma talks briefly about the job-description exercise and rationalizing of job grades undertaken in these institutions.  He also talks about the streamlining of standard operating procedures and improvements in information systems.  He describes how salaries were raised within the three targeted institutions and how, once this had been done, there was a clearly articulated zero-tolerance policy on corruption.  Opportunities for corruption were also reduced through minimizing citizen-staff interactions.  Ariadharma talks about the role of the Ministry of Administrative Reform in sanctioning and approving reform.  He concludes the interview with some thoughts on effective donor engagement with partner countries.

Sri Mulyani Indrawati talks about the sweeping reforms she introduced in the Ministry of Finance in Indonesia.  She talks about how she took over the Ministry of Finance and built a team that was capable of pushing through challenging reforms. She reflects on the crucial support of Indonesia's president, who backed the tough decisions she needed to make in order to make the Ministry of Finance more effective.  She also talks about the complicated relationship between the Ministry of Finance and Parliament, whose members generally supported reform in the abstract but sometimes balked at the steps she felt needed to be taken, such as raising salaries.  She notes that the reforms maintained the support of the president and other high-level officials because she kept a close eye on costs and benefits; in fact, tax revenue increased sharply after the beginning of the reforms.  In some detail, Mulyani describes the steps she took to tackle corruption.  She made it clear that corruption would not be tolerated, and she fired whole departments where corruption occurred, to send the message that she was serious. She was able to contain patronage pressures by securing the president’s backing for decisions that were expected to draw a backlash from powerful people.  She also made the tough decision to go against cultural norms and the strong bureaucratic esprit de corps, removing poorly performing bureaucrats rather than relocating them or waiting for them to retire.  Throughout these changes, she built a strong and productive relationship with the media, encouraging them to hold her accountable and monitor the activities of her ministry.  She ends with reflections on the importance of building coalitions through consultations, and why authority should be exercised only as a last resort.

Case Study:  Instilling Order and Accountability: Standard Operating Procedures at Indonesia's Ministry of Finance, 2006-2007 

Muhammad A.S. Hikam describes constitutional and governance reforms and efforts to build a civil society in Indonesia since 1998. A member of the Hanura (People’s Conscience) political party, a former member of the Indonesian Parliament, and a former state minister for research and technology, he explains that prior to Indonesia’s financial crisis in 1988 and the collapse of the Suharto government, civil society in Indonesia was “corporatist”; that is, that except for the Nahdlatul Ulama (Islamic Scholars Awakening) Party, all civil society organizations and political parties were controlled by the state. In 1998, it was recognized that a strengthened civil society was the only avenue to challenge the overwhelming power of the state. The result was a flowering of as many as 100,000 civil society organizations and 38 political parties. However, nearly all came into being without the capacity or understanding to pursue their roles effectively. Many were based on ethnic or identity interests and did not know how to relate to the political life of the country. The challenge was to train civil and political society to find synergies between interests and needs. Without that, governmental reform has been, and will continue to be, a patchwork, he says. He discusses the successes and shortcomings of reforms in four principal areas: changing the constitution to reduce state domination, opening the political process to opposition parties, removing the military from politics and placing civilian control over the police and armed forces, and decentralizing government and ceding some autonomy to the regions. These efforts have proceeded without regard for capacity building, he says. As a result, poorer regions simply establish regional governments funded by the central government without developing their own capabilities. Hikam stresses that economic development is essential if regional autonomy is to work.    

Erry Firmansyah, former president of the Jakarta Stock Exchange, describes business and public responses to reforms in the Ministry of Finance, Tax Court, Securities and Exchange Commission, and Customs by the government of Indonesia. He says that, though it is not possible to eliminate all bribery or illegal payments, employees in the Ministry of Finance were acting professionally and focusing on making Indonesia’s markets more attractive and liquid for both local and foreign investors and surveillance of illegal financial activities. Taxpayers and businesses find that they are treated much more impartially and fairly as “customers,” he says. It is no longer assumed automatically that everyone is cheating on taxes. When there are disagreements, disputes can be taken to the Tax Court, which gained a reputation for being fair and impartial. He says these changes were the result of a new mindset brought about through a system of performance rewards, incentives and improved compensation of employees to more closely match the private sector. These reforms were reinforced by the Komisi Pemberantasan Korupsi, an agency that can arrest and prosecute both government officials and citizens for corrupt activities. In addition, he says, the budget process was reformed so that vendors and contractors found the system fairer and easier to work with. He says there still was room for improvement in the tax system because many small businesses were not registered and corrupt practices persisted. Some court procedures also needed to be improved, he says. Nonetheless, the country weathered the recent world economic recession fairly well because of these reforms and the increased trust of both local and foreign investors in the country’s improved financial integrity. He expects the reforms will be sustained for the foreseeable future.