A Decade of Development Aid and the Role of Non-State Actors in Indonesia

A Decade of Development Aid

Herryadi Adun, Jim Toar Matuli, Mickael B. Hoelman, Sugeng Bahagijo

Mickael B. Hoelman, Sugeng Bahagijo

Authors

Editors

and the Role of Non-State Actors

in Indonesia

A Decade Of Development Aid and

The Role of Non-state Actors in Indonesia

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A Decade Of Development Aid and

The Role of Non-state Actors in Indonesia

Authors Herryadi Adun, Jim Toar Matuli

Mickael Bobby Hoelman, Sugeng Bahagijo

Mickael Bobby Hoelman, Sugeng BahagijoEditors

iv

National Library of Indonesia : Cataloguing in Publication (CiP)

A Decade of Development Aid and The Role of Non-State Actorsin Indonesia / Editors: Mickael B. Hoelman, Sugeng Bahagijo

--- Jakarta : Tifa Foundation, 2012

41 pages +viii ; 25,5x17,5 cm2

ISBN

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First Published, July 2012

Also available in Bahasa Version :

Perpustakaan Nasional: Katalog Dalam Terbitan (KDT)

Penyunting: Mickael B. Hoelman, Sugeng Bahagijo

— Jakarta : Yayasan Tifa, 2012, 41 halaman+xi ; 25,5x17,5 cm2

ISBN 978-602-7590-01-4

Satu Dekade Bantuan Pembangunan danPeran Kelompok–kelompok Masyarakat Sipil Di Indonesia

Contents

Preface

Executive Summary

v

vi

vii

Introduction

Indonesia According to the Perspective of

Development Aid Agencies

1

7

Priority Issues Identified by Development

Aid Agencies

Development Aid Agency Strategies

Implications for Non-State Actors in Indonesia

Recommendations and Path Ahead

13

19

29

35

References

About the Authors and Editors

39

41

1

Table 1

Table 2

Table 3

Illustration 1

9

Strategy Matrix 25

Two Strategy Options 32

Analysis Matrix of Development Agencies

Focus Areas and Priority Issues of Development Agencies 16

Funding Scale 20

Method of Aid Distribution 21

Illustration 2

Illustration 3

2

3

4

5

6

Contents

List of Tables and Illustrations

v

T he initiative to perform this review arose from a stocktaking study conducted from

April to June 2011 with the intention to inform the formulation process of Tifa

Foundation Strategy for 2011-2014. The stocktaking study was carried out through a

literature review mainly of strategic planning documents, program documents, as well as

project and evaluation outcomes from different development aid agencies. In addition, a

series of interviews were also conducted with the leaders and staff of development aid

agencies based in Jakarta.

The stocktaking study was built on the premise that new opportunities and possibilities are

open for development aid cooperation in Indonesia. Keeping this in mind, a stocktaking

study is therefore crucial to glean information on past and present efforts implemented by

various relevant parties. Furthermore, it is also aimed at gaining insight on how

development support and assistance works to engender more beneficial impact primarily

for the people. It is meant to draw valuable lessons that can systematically be applied as new

institutional strategies for the coming years.

During the course of time, the stocktaking study has developed into a more in-depth

assessment, mainly in relation to its findings on the role of non-state actors in Indonesia in

the years to come. In line with this, an advanced study was conducted from March to May

2012 through in-depth interviews with several leaders and staff representing development

aid agencies, especially bilateral development institutions. Every piece of the selected

literature is reexamined to ensure updated information of stocktaking study outcomes.

The authors are indebted to Imam Cahyono for his unstinting assistance in ensuring the

implementation of this study in the early stages. Sincere appreciation also to those who have

been willing to be interviewed and offer comments and feedback throughout the stocktaking

study for the enrichment of this publication.

Head of Research Team,

Michael Bobby Hoelman

Preface

vi

F or more than a decade since the “Reformasi” movement in Indonesia, international

development aid has flowed incessantly into the country under varied circumstances

and intentions. Unlike the situation that unfolded during the 1998 crisis and earlier, the

significance and amount of foreign development aid (ODA) on average was relatively

negligible compared to the national budget at less than 1 percent of Gross Domestic Product.

Nonetheless, development assistance has played a pivotal, catalytic role in initiating,

hastening and spurring reform and changes across public sectors and governance systems in

Indonesia.

The current key strategy of foreign development aid is to foster closer cooperation with the

government, rather than with civil society as non-state actors. International development

aid needs to conform to national priorities, or its workings must depend on cooperation with

the government, including therein the channeling of funds into state coffers. This approach

can be considered as the Governance Strategy.

This strategy has become one of the contributing factors that has instigated the gradual

process of marginalizing the role of non-state actors in Indonesia. An obvious indication is

waning support for civil society elements and organizations, primarily those dedicated to

human rights and democratization. Nevertheless, this marginalization process is not purely

influenced by external factors. It is also induced by internal processes with regard to a rights-

based relationship between the state and civil society, and even within the inner circle

pertaining to leadership and organizational structure.

It is now time for development aid strategy to shift to a Democratic Strategy. The core

assumption of a democratic strategy is that civil society is a movement in its own right with

its own dynamics that embraces diverse actors, initiatives and institutions, all of which

contribute to the creation of a good, democratic government and society based on the rule of

law that respects human rights.

development aid; non-state actors; development cooperation; Indonesia; quality of

democracy; quality of governance.

-------

Keywords:

vii

Executive Summary

Introduction

Development assistance can be distinguished into three different forms: international

development aid from which funds are derived from foreign governments (Official

Development Assistance/ODA), humanitarian relief from which funds are drawn directly

from communities in advanced countries, and funds sourced from private foundations (e.g.

Ford Foundation, Bill & Melinda Gates Foundation).

Development aid originally emerged when the Marshall Plan economic assistance package

was introduced in 1947 by the United States to help the people and cities of Europe ravaged

by the Second World War. Development aid came not only in the form of monetary

assistance but also technical support and human resource expertise. In 1961, the Marshall

Plan office later transformed into the Organization for Economic Cooperation and

Development (OECD). Do not be mistaken; development aid does not only appear in the

form of grants, but also as loans that must be repaid.

In terms of political economy, development aid, specifically ODA, is a double-edged sword

that not only extends a helping hand seen as a manifestation of humanitarian solidarity, but

also embraces both political allies and rivals within the realm of international relations.

Over time, development aid is not only driven by humanitarian purposes and international

politics, but also oriented to economic development (market expansion) and the national

security of a region. Regardless of motive, these practices have been observed for more than

60 years.

Throughout that time period, development aid has earned both accolades and sparked

denunciations. Concerns and criticisms over development aid were thrown by proponents

and opponents, particularly in developed countries. One such criticism noteworthy of

consideration emerged in 2006 through a book entitled

authored by former

World Bank executive and professor of economics at New York University, William Easterly.

The book puts forward evidence on reservations against the benefits and outcomes of

development aid.

Three years later another book was published titled

that seeks to counterbalance and offer answers

to Easterly's concerns on development aid. The book was edited by Monique Kremer, Peter

Van Lieshout and Robert Went, and published by the

in the Netherlands. It examines the paradigms and strategies of development aid

adopted by different continents in a span of six decades, including the constraints and

challenges, and the need for a new approach to better achieve development aid goals and

objectives.

In reality, development aid is inextricably linked to shifts in development policies. According

to Kremer (2009), this six decade of shifts in development policies can be examined from

The White Man's Burden: Why the

West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good

Doing Good or Doing Better,

Development Policies in a Globalizing World

Scientific Council for Government Policy

(WRR)

1

I. Introduction

TIFA Foundation, July 2012 |

Intro

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different time intervals. From the 1950s to 1960s, the main approach was the financial push

paradigm. Based on this paradigm, external financial aid is considered as the key solution

for development. As a consequence, core issues confronting poor countries are viewed

simply as the result of funding constraints or lack of financial capital. Loan from the World

Bank, International Monetary Fund (IMF) and advanced countries was the main option for

infrastructure development, industrialization and educational advancement required by

the national economy and to build a prosperous society.

Over the course of time, the paradigm was eventually abandoned among others because of

the swelling debt burden of poor countries. Between the 1970s and 1980s, the financial push

paradigm was swept aside to usher in the market paradigm with slight involvement or

intervention from the state and later became the favored approach across continents.

Nevertheless, this approach also failed to generate satisfactory development results and in

many places has even led to economic turmoil and stagnation.

From the 1990s to 2000s, the development paradigm experienced a gradual shift. Failure of

the market paradigm was mainly attributed to the poor quality of governance in developing

and poor countries. In short, the paradigm presumes that the absence of an appropriate

governance structure to enforce policies renders development aid futile. Governance

becomes a key variable in predicting the effectiveness of development aid. Funding shortfall

or constricted market freedom is now no longer a key problem as weak legal systems,

unbridled corruption and an authoritarian government have become the main cause of

concern. In other words, if the development paradigm in the previous decade was

dominated more by market significance and bureaucratic pruning, the current approach has

shifted to the importance of state involvement particularly in combating corruption,

applying the principle of transparency and building democracy. Governance becomes

essential for both developing and poor countries in order to bolster institutional

weaknesses and move towards a democratic state.

In Indonesia, international development aid and philanthropy has made its entrance since

President Soekarno's administration. Private philanthropic organizations such as the Ford

Foundation and various bilateral institutions have made their presence felt by setting up

operations. Through such development aid, a considerable number of socio-economic

institutions have emerged in Indonesia. Furthermore, the many improvements and

innovations in different lines of business, government and civil society in Indonesia have

also been extensive due to the availability of technical and financial support from a wide

range of institutions, mainly bilateral agencies, private foundations and international bodies

that derive their funds from communities in developed countries.

Entering the era of the New Order, development aid became increasingly essential. The

transition from Soekarno's rule to the Soeharto regime has left behind an economy in ruins

primarily due to the Dutch military aggression and uprisings in a number of regions. Political

instability has led to economic decline, soaring inflation and budget deficit upsurge. The

newly established government on the other hand, is in dire need of development funds to

stabilize and rehabilitate the economy. To overcome this situation, early on in his

administration, Soeharto entered into a debt commitment with the United States and

rejoined the World Bank as a member state (Toussaint, 2004). In addition, Soeharto pushed

Development Aid in Indonesia

2 | A Decade of Development Aid and the Role of Non-State Actors in Indonesia

Intr

oduction

for the establishment of the Intergovernmental Group on Indonesia or IGGI, an international

cooperation group chaired by the Netherlands to coordinate multilateral development aid to

Indonesia. IGGI's initial assistance was intended for the formulation of the first program of

the country's five-year development plan (REPELITA I).

The New Order administration also introduced the Development Trilogy concept of stability,

growth and equitable development. Alas, in reality, the New Order regime showed a two-

faced personality. On one hand, it has treated the people with an iron fist in return for the

provision of low-cost basic necessities including housing and food, while on the other hand

to the international world, Soeharto projected a friendly countenance through promises of

investment protection against legal uncertainty and political instability. With regard to

development aid, Soeharto had provided more opportunities, even for the growth and

fragmentation of different forms of new development aid, either for economic reasons or

political imperatives.

For more than two decades, this two-faced approach continued simultaneously until it led to

contention in the early 1990s, particularly with the emergence of issues related to

democratization and the inability to uphold human rights. This was also a turning point for

development assistance as Soeharto halted Dutch aid in objection against the criticism

leveled by the Dutch Prime Minister also IGGI Chairman, Jan Pronk, concerning human rights

abuse in Dili, East Timor in 1991. However, it was purely Soeharto's political tactic. Instead of

rejecting international aid, Indonesia had continued to forge development aid cooperation

and requested the World Bank to act as coordinator for the international aid coordination

forum known as CGI (Consultative Group on Indonesia), a consortium of aid-giving (grants

and loans) countries and institutions for Indonesia established in 1992 to replace IGGI.

It is not surprising when non-governmental organizations and civil society actors in

Indonesia later hurled a fusillade of criticisms at CGI for its continued support for Soeharto

and not being critical of the New Order regime. The World Bank for example, had turned a

blind eye to the country's rampant corruption by justifying that such unscrupulous practices

are the internal affairs of Indonesia and has nothing to do with the World Bank. In a classified

report prior to Soeharto's downfall, the World Bank had estimated that at least 20% - 30% of

Indonesia's development budget has been misappropriated (World Bank, 1997). This

leakage was also evident in loans from the World Bank itself. The World Bank then also paid

attention to human rights violations in projects that it funds. An attitude that later changed

after Indonesia embarks on its “Reformasi” movement.

The combination of an authoritarian regime and development aid has contributed to the

consolidation of reform initiatives. Legal aid and human rights, the consumer and

environmental movement and, and other social movements are local initiatives and seeds

sown and cultivated as a result of an authoritarian political system. Spearheaded by middle

class representatives concerned over the situation and yearning for change, these

movements found firm support from development aid agencies. Both parties aspire for a

democratic Indonesia based on the rule of law that respects human rights.

Despite the restricted movement of civil society groups during this particular period due to

the imposition of financial limits and political control within the country, these repressive

measures have failed to curtail the barrage of protests among intellectuals and the urban

middle class particularly amid skyrocketing prices of basic goods following the economic

crisis in Asia. The student's movement and the demand for reform in 1998 had succeeded in

3TIFA Foundation, July 2012 |

Intro

ductio

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toppling Soeharto's authoritarian regime. The embryo for these movements was in part

implanted and nurtured through the initiatives of leading non-state actors.

Ironically, the aftermath of the demise of Soeharto's authoritarian regime has instead

resulted in deterioration of cooperation between development agencies and non-state

actors, mainly during the 2000s (post-reformasi). Humanitarian aid and private

foundations continue to play a significant role, while ODA support to civil society elements

tend to decline in line with the shift in attention from development agencies to restore

relations and collaborative ties with the government of Indonesia. In addition, Indonesia

is increasingly seen as a democratic state, demonstrating relatively swift economic

improvements.

During the post-reformasi era, civil society in Indonesia resembles a kite on a broken string,

confused and virtually without any direction, either in terms of funding or orientation of its

movement. The earlier tradition of having to confront an authoritarian regime is practically

no longer necessary. Political parties and representative bodies are now functioning and

beginning to exert formidable influence in shaping development policies. It is also within

this era that the relevance of non-state actors is being seriously questioned.

The main issue of this study concerns on how the pattern of development aid in the past ten

years has affected non-state actors in Indonesia. Will reform instigate stagnation or instead

Furthermore, the revamp and restructuring of the earlier system (New Order) to a new

system (Reform) has failed to deliver the expected democratic dividends, except for freedom

of the press, freedom of speech and freedom of association. These outcomes indeed deserve

their fair share of appreciation but still insufficient to promote a more robust and

democratic role for civil society. For certain dimensions, no significant progress is evident in

the relationship between the state and civil society. Although non-state actors are no longer

being controlled, funding support from development agencies has recently become

increasingly restricted. The government of Indonesia has yet to initiate domestic financing

policies aimed at expanding the role of non-state actors. Political patronage (where political

elites are selective in allocating resources) and statist policies (the state dictates and owns

all) are still the norm. Cooperation and coalition among civil society elements meanwhile

appears to be tenuous as they compete with each other, thus the inability to deliver more

extensive impact of change (Antlov et. al., 2008). Solidarity and concern over issues related

to deficits, disparities and major weaknesses of political and economic systems have

previously been the collective concern of civil society elements, but have lately failed to bring

about a healthy exchange of reform actions and cooperation initiatives.

This paper shall delve into the issue of development assistance and non-state actors in

Indonesia. Development aid agencies under analysis cover the following: (i) multilateral

institutions, such as the World Bank, United Nations Development Programme (UNDP),

Asian Development Bank (ADB), and the European Union; (ii) bilateral institutions, such as

USAID, Ausaid, CIDA, DFID, GTZ, etc.; (iii) international non-governmental organizations

and/or grant-making institutions, such as Hivos, Oxfam, The Asia Foundation, etc.; (iv)

international private philanthropic organizations, such as Ford Foundation, etc.; and (v)

national grant-making institutions, such as Kemitraan, KEHATI, Tifa Foundation, etc.. Non-

state actors in Indonesia cover non-governmental organizations, community-based

organizations, universities, the mass media and business groups. This study places specific

emphasis on non-governmental organizations.

4

Intr

oduction

| A Decade of Development Aid and the Role of Non-State Actors in Indonesia

prompt resurgence? Development aid pattern in this context not only refers to funding

trend, but also initiatives and approaches, as well as operational strategies and tendencies.

Based on these different aspects, a conclusion shall be drawn on implications toward the

existence and role of non-state actors in Indonesia.


Intro

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Indonesia according

to the Perspective of


In a span of more than ten years since Indonesia shifted from an authoritarian political

regime to a democratic system, the rest of the world has also experienced considerable

changes. Among others include the economic crisis in 2008 that crippled the world's

economic powers, mainly the United States and European countries; political turbulence

and demands for democratization in Egypt and North African countries; and a string of

natural disasters across the globe including Japan and the United States.

After thirteen post-reform years or following the 1998 crisis, Indonesia also went through

numerous changes. These transformations, as noted and analyzed by various development

agencies, not only cover the political system, but also economic and governance systems.

Several key characteristics identified by these development aid institutions can be

summarized into the following three fundamental changes:

, Indonesia is classified as a lower middle-income country at 3,000 dollars per capita

each year (2010). As part of the middle-income group, Indonesia now ranks among other

countries with a per capita income of 5,000 dollars, such as Malaysia, Brazil and South Africa.

Due to its economic growth and the size of its economic cake (GDP), Indonesia has joined the

G20 membership that consists of countries ranked among the twenty largest economies

worldwide. Being part of G20 means that Indonesia's economic cake is proportionate to that

of Sweden, Belgium and other members. Aside from membership at the International

Monetary Fund (IMF), World Bank and Asian Development Bank (ADB), Indonesia is now

also an observer at OECD, a club for the world's rich countries. The OECD office periodically

publishes a report on Indonesia. This implies that Indonesia shall soon be considered as a

driving force for global economic growth on par with the United States and Europe and

countries under BRICS (Brazil, Russia, India, China and South Africa).

Indonesia has developed into the largest democratic system trailing behind India

and the United States. It is also a Moslem-majority nation that applies democratic values.

Democracy is implemented through a multiparty system whereby three fairly democratic

general elections have been held. Indonesia is now a decentralized state that confers

considerable power and resources to cities and districts. With the exception of foreign

politics, defense, security, judiciary, monetary and fiscal, and religion, Indonesia is currently

more in the control of sub-national leaders rather than those at the capital city of Jakarta.

despite the potential for positive and encouraging changes, Indonesia as viewed by

development aid agencies remains fettered by numerous impediments. At least seven issues

hamper progress in Indonesia today and in the future: (i) poverty and unemployment; (ii)

unsustainable economic growth; (iii) government's lack of effectiveness and capacity,

including constraints in decentralization; (iv)widespread and systemic corruption; (v) lack

of respect for human rights and democratic values; (vi) climate change and environmental

degradation; and (vii) unequal treatment between men and women (gender).

First

Second,

Third,

II. Indonesia according to the Perspective

of Development Aid Agencies

7

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Another issue that appears to have become a characteristic of Indonesia is its alarming

poverty rate. Indonesia still needs to seriously deal with the major challenge of alleviating

poverty. As many as 49 percent of the population still subsists below the daily income of 2

dollars. Based on 2007 government data on the country's poverty line, at least 17 percent of

the population lives below the poverty line. Poverty rates across regions also vary. For

example, on the island of Java the poverty rate is lower (5 percent) than figures in Papua and

West Papua (40 percent).

Despite an increasingly buoyant economic growth, it is not optimal enough to absorb

manpower (jobless growth). From a workforce of 20 million young-aged entrants into the

labor market, only 3 million are absorbed by the formal sector. The employment rate

normally ranges between 9 to 10 percent. A multilateral development agency for example

asserted that although Indonesia has made significant progress in maintaining its macro-

economic performance, it is still viewed to be a 'glass half full', mainly because Indonesia has

yet to translate such achievements into improvements for the well-being of the people.

Indonesia faces two scenarios for the future: Indonesia can either become a 'dynamic middle

class country' or a 'country in an uncertain situation with only half of its glass full’.

In the economic sector, Indonesia needs to ensure sustainable economic growth in order to

absorb a workforce of dozens of millions. In view of this, efforts to improve the investment

climate become a core concern. Several key issues related to the investment climate are as

follows: (i) complicated investment procedure at the central and local levels;(ii) weak law

enforcement; (iii) poor governance, specifically with regard to customs and excise and

taxation that have not been able to accumulate income for the government, and fair

treatment of investors; and (iv) unattractive labor market conditions.

Another prominent weakness directly affecting the daily existence of the people is

government effectiveness influenced either by its lack of capacity or weak accountability of

civil servants. Inadequate capacity is evident in many regions, particularly at the local

administration level. With regard to the accountability of government employees or

bureaucrats, despite the upbeat momentum for curbing and eradicating corruption through

the presence of the Corruption Eradication Commission (KPK) and the Anti-Corruption

Court (TIPIKOR), it is still very much hampered by weak law enforcement due to resistance

from law enforcement agencies themselves, particularly the police force, attorney's office,

judiciary and Supreme Court. The main weakness of the governance system lies in the lack of

coordination among different state bodies. This has led to delayed and even ineffective

drafting and implementation of policies.

Although decentralization has brought the decision-making process closer to the people,

during the course of time it also revealed technical and administrative flaws at the local

government level. A less than effective and democratic local government in public service

delivery and failure of the legal sector to root endemic corruption out and even inciting

public distrust has become a serious challenge for the consolidation of the democratic and

governance processes. Various threats of conflict in regions across Indonesia as well as

resistance from political elites and bureaucrats toward reform measures have made the

challenge even heavier.

Furthermore, corruption has also become a major obstacle in promoting economic policies

favorable to the poor, and that improves the investment climate and legal system. Corruption

profoundly impinges on Indonesia's effort to reform the police force and the Indonesian


The P

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Armed Forces (TNI), and natural resource management. Efforts to eradicate corruption are

hindered by a patronage system deeply entrenched for 50 years in the country's political

mechanism.

Several bilateral development agencies have also noticed drawbacks in efforts to uphold

human rights. Impunity for past human rights violations remains to be a serious issue as

judicial bodies and law enforcement agencies are institutionally weak.

Climate change has seized the attention of development agencies, chiefly multilateral

institutions such as the United Nations, as it can impede Indonesia's ability to meet its MDG

(Millennium Development Goal) targets. Indonesia is particularly vulnerable to rising sea

levels and flooding. Climate and seasonal changes can also destroy the production process of

small farmers and fishermen. In addition, the troubling rate of forest conversion and

environmental destruction has turned Indonesia into the third largest contributor of

greenhouse gas emissions.

Another major problem concerns unequal treatment between men and women (gender).

Women's access to health and education services has become a persistent problem. The

maternal mortality rate in Indonesia is still alarmingly high. Furthermore, women are under

represented in various public offices. Although the government has proclaimed its

commitment to deal with these pressing issues, more tangible and genuine efforts are crucial

specifically at the implementation level. Failure to do so will cause women to increasingly

bear the brunt as the result of discrimination, power abuse and corruption. Coupled with

weak democratic institutions, democratic consolidation requires more extensive efforts to

promote participation. Although the reform movement has paved the way for decentralized

governance, general elections and legislative improvements, many state policies and reform

programs have yet to completely address deep-seated problems such as poverty and

discrimination endured by marginalized social groups.

9

Table 1. Analysis Matrix of Development Agencies

INSTITUTION

Multilateral

development aid

agencies

ANALYSIS WITHIN THE INDONESIAN CONTEXT

?

?

?

?

?

?

Successful political transition in modern history

Emerges as a lower middle income country with the fastest HDI

improvement

High poverty rates as well as unbalanced and inequitable growth or has

failed to ensure inclusive and sustainable growth

Institutional capacity and accountability is the main obstacle.

Decentralization is not accompanied with adequate local government

capacity while corruption remains to be a serious issue.

Impunity for past human rights abusers

Climate change is a major problem as it profoundly affects the agricultural

and fisheries sector, and others


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Table 1. Analysis Matrix of Development Agencies ( )cont.

INSTITUTION ANALYSIS WITHIN THE INDONESIAN CONTEXT

International

bilateral

development

agencies

?

?

?

?

?

?

?

?

Political shifts and decentralization

Poverty still a major challenge for Indonesia

Democracy and economic growth has yet to result in improvements in

bilateral prosperity (jobless growth)

Governance and corruption is a serious problem. RAN–PK (

or National Action Plan for Corruption

Eradication) has been drawn up but has not been effectively implemented

Investment shortfall in the national budget

Weaknesses of the local government in the delivery of public services

Gender inequality

Failure of the legal sector

Rencana AksiNasional Pemberantasan Korupsi

International non-

governmental

organizations and

/or grant-making

institutions

?

?

?

?

Decentralization still marked by weak local government capacity

Negligible women's participation in the political as well as socio-

economic realm

Deep-seated gender inequality

Environmental destruction and disaster mitigation

International

private

philanthropic

organizations

?

?

?

Indonesia has succeeded in going through its transition from a military

government to a democratic state

State policies have not been reformed; discrimination and exclusion is still

faced by marginalized groups

Support for marginalized groups is necessary in order to shape public

policies

National grant-

making agencies

?

?

?

?

Democracy has yet to promote diversity and equality for citizens

Impunity is still a major obstacle and challenge in post-reform Indonesia

Decentralization remains mired in unscrupulous practices such as

corruption and lack of citizens' participation in policy-making

Discrimination is still prevalent among minority groups, women, children

and the disabled

10

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Priority Issues

Identified by Development

Aid Agencies

For three decades prior to the “Reformasi” movement, data from the Development

Assistance Committee (DAC) of OECD shows that Indonesia is consistently ranked first

(1999/ 2000) and second (1989/1990; 2009/ 2010) among ODA recipient countries. If

Indonesia has now become a middle-income country with an annual national budget

(APBN) exceeding Rp1,000 trillion and a G20 member country, why does aid from

development agencies remain necessary? To rephrase the question: if Indonesia is no

longer troubled by the scarcity or absence of funding, what are the reasons for Indonesia's

continued receipt of development aid?

According to Jonathan Gleenie (2011), a middle-class country such as Indonesia still

deserves to receive external development aid (ODA) because of the following reasons: (a)

funding facilitates the transition process of low-income countries (LICs) into becoming

middle-class countries through a gradual process and not in an abrupt manner; (b) aid

functions as a catalyst for promoting and/or consolidating ongoing or previous

improvements; and (c) the value of aid lies not in its amount or size, but in its role in creating

incentives (positive) for improvements or change. In light of this, according to development

agencies, aid is prioritized for efforts aimed at building a democratic, stable and more

prosperous Indonesia based on the rule of law and human rights.

Identifying policy and institutional issues that development agencies give priority to is the

marriage of two key aspects: the interest of Indonesia and development agencies. In other

words, Indonesia in the eyes of development agencies is considered as: (a) a client and

member that must and need to be served (this perspective is particularly held by the World

Bank, UNDP and ADB); and (b) a friendly country or partner state that must be respected as

appropriate for a mutually beneficial relationship within the international political order

and interaction, and also with regard to economic and trade ties.

As such, development aid agencies now generally make reference to the Indonesian

government's medium-term development plan (RPJM). In addition, they draw from

different priorities proposed by experts, private groups and citizens through consultation,

assessment and other procedures. Determining focus areas and priority issues by

development agencies is also guided by or adjusted to various international arrangements

on aid effectiveness that govern on cooperative ties between the giver and receiver of aid.

Several of these international policies include the Paris Declaration on Aid Effectiveness

(2005) and the Jakarta Commitment (2009).

Multilateral development agencies place emphasis on economic growth, although fully

aware of other issues that influence the outcomes of economic progress. One such issue

concerns the institutional dimension. The World Bank for example focuses its attention on

this dimension through five core activities and two cross-cutting programs. The five core

activities are: (i) development of the private sector; (ii) infrastructure; (iii) community

III. Priority Issues Identified by


13

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development and social protection; (iv) education; and (v) environment/disaster

mitigation. The two cross-cutting activities are: (a) system and institutional strengthening

of the central government; and (b) system and institutional strengthening of the local

government.

The United Nations on the other hand, assumes a powerful position as a neutral

development agency that concentrates on four key aspects in Indonesia: (i) MDG

achievement and poverty reduction; (ii) the environment, energy and climate change; (iii)

democratic governance; and (iv) crisis prevention and recovery, including disaster

mitigation. Other multilateral development agencies focus on certain main sectors, such as:

(i) education, including the quality of primary, secondary and higher education; (ii) trade

and investment, including the investment climate; (iii) law enforcement and justice,

including corruption eradication, legal reform and implementation of the National Action

Plan on Human Rights; and (iv) cross-sectoral issues, including the environment,

governance and human rights, conflict prevention, social dimension of globalization and

gender justice.

On the other hand, bilateral international development agencies typically place priority in

supporting democratic consolidation and economic development. A bilateral institution for

example has identified five priority areas for support in the subsequent period for the

primary purpose of reducing poverty and global environmental threats. The following five

areas of concern were also selected by taking into account the bilateral relations of both

countries concerned: (i) education; (ii) natural resource management; (iii) democratic

governance; (iv) health; and (v) employment opportunities. Other international bilateral

development agencies award greater attention to what is known as the four pillars of

development aid: (i) economic development; (ii) pro-people investment; (iii) democracy,

justice and good governance; and (iv) peace and security.

Slightly different from multilateral and bilateral development agencies, certain private

philanthropic organizations normally focus on core issues that serve the overarching

purpose of advancing social justice. These priority issues include: planning and budgeting;

reproductive rights and women's participation; social protection for the poor; media that

serves public interest and active citizenship; and sustainable natural resource management.

Several other private charitable institutions concentrate on efforts to promote good

governance, democracy, the upholding of human rights, law enforcement and the

development of a market economy. Such support is normally provided through the capacity

building of key actors such as state officials (including local leaders), politicians (members of

parliament) and civil society. Apart from democracy, attention and support also highlights

on dealing with environmental issues and law enforcement among others through

cooperation for institutional strengthening.

International non governmental organizations and national grant-making institutions are

concerned over priority issues similar to those of private philanthropic agencies that

essentially seek to promote a better Indonesia in terms of the quality of governance and

democracy rather than on the democratic procedure. These institutions see the need to focus

improvements on the following aspects: (a) an increasingly citizen-oriented democracy and

governance in order to curb corruption in the public sector to the maximum extent possible

and bring an immediate end to the impunity of human rights abusers; (b) ensure

participatory governance and decentralization by involving citizens and improving public


Priority

Issues

services; (c) urge the state to firmly enforce the law in a more vigorous manner to protect

diversity and social cohesion in Indonesia; and (d) strengthen the government and citizens

in preventing environmental destruction and natural resource depletion, including the

conservation of forests and clean water sources .

From the foregoing explanation it is evident that the solution and focus of attention for

various institutions differ with distinct characteristics. Thematically, bilateral and

multilateral development agencies as well as international and national grant-making

organizations and private philanthropic entities generally work on the following priority

issues or program focuses :

, on how Indonesia as a middle-income country can sustain and boost its economic

growth to become more sustainable and inclusive. Sustainable refers to: (a) strong

competitiveness; (b) healthy investment climate; and (c) adequate investment for

infrastructure. Inclusive means an economic growth that can become the engine for

reducing poverty and absorbing manpower.

on how Indonesia's governance, legal and political systems can gain integrity, be

free from corruption and fairer for all. The government's lack of capacity and high corruption

rates slow down efforts to push Indonesia forward and detrimental to investors and the

people of Indonesia. Unfavorable investment climate and corruptible courts are among the

concerns of almost all development aid agencies.

, on how Indonesia's policies and institutions can be further strengthened to overcome

environmental issues, climate change and natural disasters. A well-conserved environment

in Indonesia offers tremendous benefit and impact for the global ecosystem. Such

improvements are crucial given the fact that Indonesia is the third largest contributor of

greenhouse gas emissions in the world.

, on how Indonesia can bolster its social investment for citizens (investing in people),

both as highly competitive economic investment and to generate economic benefits and

outcomes for improving welfare and alleviating poverty. Indonesia's investment in

education, health and social protection has become an emerging issue that has drawn the

attention of multilateral and bilateral development agencies and private charitable

organizations.

A priority issue that development aid institutions have yet to address more seriously is

discrimination. Only a handful of private philanthropic organizations have definitively

incorporated the issue of pluralism and citizenship into their focus area or priority issue.

This situation has been highly contextual for Indonesia in the past five years where religious

fundamentalism has further intensified, culturally and politically. Although religious

fundamentalism is not politically threatening, within the cultural context and inter-citizen

relationships, pluralism shall greatly influence the cohesiveness of the nation in years to

come. Lack of government capacity and accountability play a part in exacerbating the

situation. Anti-pluralism and diminishing civic awareness appears to be a tangible trend

that can pose a threat to Indonesia's democracy and stability.

First

Second,

Third

Fourth


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Multilateral

development agencies

International bilateral

development agencies

International

non- govt. organizations

and/or grant-making agencies

National grant-making

agencies

Governance, Legal Systemand Democracy

Social Investmentand Policies

Climate Change andthe Environment

EconomicGrowth

International private

philanthropic agencies

Illustration 1. Focus Areas and Priority Issues of Development Agencies

16

Priority

Issues



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Development Aid Agency

Strategies

What changes do development aid agencies envision for Indonesia in order to become a

more democratic and accountable state based on the rule of law and human rights? How do

they implement such strategies and how much of their resources are invested? These two

elements shall be examined in this section. Explanations on these strategies shall revolve

around a particular priority issue – democratic governance. This emphasis is purposefully

selected as it has virtually become the focus or priority of all development aid agencies, be

they multilateral, bilateral, international or national. Nearly all of these entities for example

mention corruption as an impediment while law enforcement is considered as a challenge

for Indonesia.

Furthermore, several new studies on the trend and coordination of donor institutions in

Indonesia also revealed that these agencies focus more on governance programs, mainly

bureaucratic or personnel reform and anti-corruption (see Edi and Setianingtyas, 2007).

The strategies of multilateral, bilateral, international and national development institutions

and private charitable organizations may be expressed differently with diverse

formulations, but they can best be represented by the following phrase embodied in a

document from a multilateral development agency: “that Indonesia's problem lies not in the

lack of funding, but rather on how institutions primarily in the public sector can work

towards harnessing these resources and turning them into concrete improvements that

affect the people's lives, such as with regard to public service delivery.”

For instance, the United Nations Development Programme has outlined governance into five

core areas: (i) integrity of political institutions, bureaucracy and the law; (ii) accountability

and representation of political institutions; (iii) public engagement in policy-making in a

transparent and inclusive manner; (iv) legal empowerment to protect ownership rights and

deal with power abuse; and (v) public service standard and bureaucratic reform. The World

Bank on the other hand, has set forth two core issues: (i) institutional capacity; and (ii)

institutional accountability for bureaucratic, legal and political bodies.

Although institutional change or improvement is the objective, this does not mean that

transformations are insubstantial. The process involves three levels of targeted change:

policy change (first order of change), institutional change (second order of change) and

operational change (third order of change). In other words, the intended change should

essentially encompass three types of innovation: product innovation, process innovation

and mindset innovation.

From various strategic documents and interviews with staff members implementing

programs funded by development agencies, several characteristics on the direction of

change can be encapsulated into the expression “the second generation of reform” or

“quality of democracy” in which the elements consist of the following :

IV. Development Aid Agency Strategies

19

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First,

Second

Third,

Fourth

on how Indonesia as a middle-income country can sustain and boost its economic

growth to become more sustainable and inclusive. Sustainable refers to: (a) strong

competitiveness; (b) healthy investment climate; and (c) adequate investment for

infrastructure. Inclusive means an economic growth that can become the engine for

reducing poverty and absorbing manpower.

, changes in governance are mainly concerned on reform in various bureaucratic,

legal and political institutions, including the Supreme Court, attorney's office, parliament,

state ministries, local governments and DPRD (Regional House of Representatives).

although multilateral and bilateral development institutions often combine reform

measures from the supply-side and demand-side by recognizing the role of civil society and

the mass media, there is a strong tendency for supply-side reform by working with

government partners for the purpose of ensuring that government, legal and political

institutions are well-functioning entities that work in an increasingly responsible and

responsive manner with unquestionable integrity.

, changes cover efforts to strengthen, improve and empower government, legal and

political institutions through different methods and programs, including legislative,

institutional and operational changes. With regard to partners as the agents of change, most

development agency strategies revolve around government, legal and political institutions.

Only a few multilateral and bilateral development agencies embrace civil society as their

principal partners.

To achieve these change objectives, funding clearly becomes a fundamental factor. In terms

of funding size, various development aid agencies can be classified into three types: large,

medium and small. Multilateral and bilateral development institutions normally operate

within the large-to-medium scale funding of between USD 50 million to more than USD 200

million for a one-year period. International non-governmental organizations and/or grant-

making organizations and private philanthropic institutions on the other hand can be

categorized as medium scale entities with funding size ranging from USD 50 million

annually. Small-scale funding amounts to less than USD 10 million per year.

Multilateral

Development

Aid Agencies

Small Scale( < US$ 10 Million )

Medium Scale( < US$ 50 Million )

International

Bilateral

Development Aid

Agencies

International

Non-governmental

Organizations and/or

Grant-making Agencies

International

Private

Philanthropic

Agencies

National

Grant-making

Agencies

Large Scale( > US$ 50 Million )

Illustration 2. Funding Scale


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Concerning implementation, programs conducted by development aid agencies can be

grouped into several models: (a) the provision of funding to support jointly agreed projects

under the management of state bodies as project or program implementing partner; (b) in

the form of policy advice based on study outcomes in accordance to the problem or issue at

hand; (c) through technical support, such as the placement of experts and consultants

through different recruitment procedures; and (d) in the form of grant funds offered to

governmental and non-governmental bodies within a specified period for the

implementation of a given activity or series of activities agreed in advance.

In terms of the technicalities of aid distribution, bilateral development agencies mainly

adopt the following methods. , aid is channeled to multilateral agencies such as UNDP,

the World Bank and ADB, either through a trust fund or sector-wide program (SWP).

Agencies such as DSF (Decentralization Support Facility) and MTF (Multilateral Trust Fund

for relief assistance in response to the tsunami disaster in Aceh) are examples of a

development trust fund consortium supported by various bilateral development agencies,

including DFID and the Dutch Embassy. An SWP example is support for the education sector

through the Ministry of National Education to meet educational targets, such as support for

the BOS (School Operational Aid) project.

, funding support is channeled to the state budget through project implementing

units under a particular state ministry or local state office. This approach is often known as

Direct Budget Support (DBS) lately seen as an effective way to enhance a sense of ownership

and ensure harmonization consistent with the principles of aid effectiveness (Action Aid,

2008).

, funding is funneled through private development contractors such as Research

Triangle Institute(RTI), Chemonics, Cowater International (Canada) and similar

institutions. Fourth, through other methods, such as direct grant giving to non-

governmental organizations, community organizations, universities and research institutes

as practiced by private philanthropic institutions, such as the Ford Foundation.

First

Second

Third

21

Multilateral

development aid

agencies

International

bilateral development

agencies

International

non-governmental

organizations and/or

grant-making agencies

International

private philanthropic

agencies

National

grant-making

agencies

OpenCall for Proposal

Semi OpenPro-Active

Tender Tender andCall for Proposal

Illustration 3. Method of Aid Distribution


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At present, the Australian Agency for International Development can be considered as the

largest bilateral development agency in Indonesia with a funding volume of up to AUD 1

billion. From this amount, a certain portion of funding support is channeled through

Australian private development contractors. Australia however is currently planning to

converge the management of funding support through Indonesia Strategic Partnership with

extremely broad discretion. This form of strategic partnership is a “temporary solution” for

expanding support and organizing Australian development agencies in the future.

It appears that Australia's line of approach shall shortly be emulated by the United States

Agency for International Development. The agency is in the process of drawing up a new

strategic blueprint that seems to follow the trail of the U.S.-Indonesia Strategic Partnership

mechanism. Apart from internal sources of funding, U.S. bilateral aid agencies also pool

funds from other U.S. departments to be drawn together and channeled through the United

States Agency for International Development (USAID). The awarding of financial aid is

normally ensured through open tenders and implementation oriented, for example, by

facilitating the establishment of one-stop service centers for permits and licenses in 10

districts/cities who have expressed interest in project support. Another project assists KPK

(Corruption Eradication Commission) in implementing a baseline perception survey on

public satisfaction with services rendered by local governments.

European bilateral aid agencies on the other hand mainly operate on a funding range of EUR

400-500 million through the Strategy Paper that extends over four to five years. The lion's

share of funds (up to 80%) is earmarked for government bodies, such as Bappenas (National

Development Planning Agency), and UNDP (United Nations Development Programme).

Roughly 10-15% from total funding is funneled to international development agencies

largely from European Union member states (e.g. Oxfam GB). Residual funds are distributed

as grants to civil society groups in Indonesia. Normally ranging between EUR 100 to EUR 500

thousand, these remaining funds are directed at predetermined thematic projects that in

general require six to eight months to finalize the administrative process. This lengthy

administrative procedure often hamper civil society groups in Indonesia from securing

funding support, in addition to a grant mechanism that requires co-sharing of funding at 5-

15% of total project value. As the entire grant decision-making process is centralized at the

EU headquarters in Brussels, country representatives mainly function as compliance offices.

Slightly distinct from bilateral development agencies, international organizations

commonly operate as the administrator of international grants with small- to medium-scale

funding. An international non-governmental organizations in Europe, for instance, works

with a funding range of EUR 3-4 million annually. Despite such limited scale, the agency

claims to have an advantage with its outstanding and tenacious human resource. Another

strong suit is the agency's highly efficient and well-organized database archiving system.

The manner in which international institutions work and manage funds is similar to that of

non-governmental organizations, even though they operate within a regional and global

scope. These institutions may not have a specific or periodic call for proposals mechanism in

place, but they are fairly open to initiatives from civil society groups. They place priority on

civil society groups as well as small- to medium-sized organizations for funding support that

varies from IDR 100 to 300 million each year. International development agencies also

adopt a proactive partnership grant-making mechanism despite a selection process that

prioritizes community-based civil society partnerships.


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These international non-governmental institutions also ensure that their programs focus on

reform measures from the demand-side rather than the supply-side, although certain

funding support is often directed at quasi-governmental bodies such as the National

Commission on Violence against Women. The identification of focus areas for funding

support is normally not based on a given intervention strategy, but driven more by the

tradition of institutional networks of the same country origin. Several focus areas shall

continue to be the priority of institutions, such as support for the capacity building of non-

state actors. They also generally believe that capacity building is the fastest way for the

transfer of knowledge.

The emergence of national grant-making institutions is indeed a noteworthy development

in itself. These agencies operate independently as national entities to support the

achievement of development goals. Examples are national grantors concerned with

environmental issues, governance reform and strengthening of civic democracy. They

typically operate on a modest funding scale of between IDR 40 and 50 billion each year for

supporting civil society elements in Indonesia. These entities have the advantage of being

adept in mobilizing funding sources.

One of these organizations for example is entrusted with the authority to manage

endowment funds derived from bilateral development agencies. These endowment funds

subsequently evolve into mutual funds on offer to the business world and the public at large

in order to expand the funding scale until a decade onwards. Apart from the development of

endowment funds, the mobilization of funding sources is also initiated through support for

investment-based programs, such as early childhood education. An intervention like this

builds a broad constituency expected to be part of the development of future funding

sources. On one hand, this experience shows the potency of consistently creating alternative

funding opportunities from various institutional interventions. The main asset is creativity.

On the other hand, grant distribution is instead carried out on a relatively small scale that

simultaneously shows the priority placed on raising funds instead of distributing them.

Nonetheless, not all initiatives from national grant-making agencies consistently end in

success stories. A recent case involving a national grantor has given an invaluable lesson on

how declining support for non-state actors has pushed the agency to function as a recipient

rather than a grant-giving entity. This institution was originally designed to become a grant-

making agency for civil society in which the main funding source comes from a bilateral

development institution. Diminishing support on one hand is seen as flagging commitment

from the bilateral development agency that has been a partner for more than a decade. On

the other hand, this declining support is also because the national grant-making institution

is assessed to have not developed as expected. This case illustrates the absence of any

agreement on measurement or benchmark that gauges on how a national development aid

agency should ideally grow and develop. For example, the extent to which cooperative

support has strengthened the capacity of organizational staff or increased the likelihood of

continuity in the coming years.

From the foregoing discussion, several emerging trends in the past five to ten years should be

noted. , the dominant role of various private contractors increasingly taking over the

function of international non-governmental institutions. These private development

contractors are now commonly appointed as program implementing partners for

international development agencies, such as those from the United States, Australia and

Canada. Agencies such as Research Triangle Institute(RTI), Chemonics, Management

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Systems International (MSI) Inc., and similar organizations are indeed not a new

phenomenon, but with respect to large-scale project execution, they have lately become one

of the key actors. Funds drawn from bilateral development agencies are channeled through

a tender mechanism where they normally emerge as winners. Projects won are not only

restricted to governance-related projects, but also encompass projects associated with law

enforcement, such as the institutional strengthening of the Supreme Court and Attorney

General's Office and those related to the democratic process, including parliamentary

institutional capacity building.

, another growing trend sees specific efforts to strengthen coordination among

donor agencies and harmonization among development institutions into one to two priority

issues, such as through support facilities that are essentially a consortium of bilateral

development entities that seek to improve certain development agendas, including

decentralization, community empowerment and poverty reduction. Bilateral development

agencies would customarily deposit their funds and subsequently appoint an agency to act

as their custodian. An example is DSF (Decentralization Support Facility) under the

coordination of the World Bank for managing funds obtained from different sources.

Nevertheless, a recent study on DSF reveals that a coordination and harmonization

approach is not always effective due to barriers within the bureaucratic process of the

development agencies themselves and obstacles arising from government bureaucracy

(Winters, 2012).

This similarly applies to PSF (PNPM Support Facility), again coordinated by the World Bank,

for supporting the expansion of PNPM ( or

National Community Empowerment Program) Mandiri. In practice, the World Bank is in the

middle of managing trust funds originating from bilateral development agencies. An

approach and strategy like this has impinged on funding sources for international and

national development entities. Grants shall instead be funneled mainly to institutions such

as the World Bank even though such funds are sourced from governments where

international development agencies originate from.

, from their geographic approach or regional coverage, nearly all development aid

agencies operate across the entire regions of Indonesia and even at the national level.

Certain agencies however, distinctly award attention to a particular geographical and

operating area. The Canadian International Development Agency (CIDA) for instance

centralizes almost all of its development support in Sulawesi. The Australian Agency for

International Development (Ausaid) meanwhile specifically places priority on the eastern

part of Indonesia, such as NTT (East Nusa Tenggara), NTB (West Nusa Tenggara), Sulawesi,

Maluku and Papua.

, from the perspective of democracy, human rights and civil society, another

important point to note is the decreasing amount of support for civil society elements

committed to the upholding of democracy and human rights. An Edward Aspinal study in

2010 shows that the amount of funds channeled for the democracy and human rights sector

and support of non-state actors in Indonesia has gradually spiraled downwards. As an

illustration, nearly 80% of aid funds from European multilateral development agencies are

earmarked for state bodies with Bappenas as the principal recipient. Only five percent from

the remaining funds is allocated for civil society groups, either through grants managed by

international non-governmental institutions or directly fed to non-state actors in Indonesia.

Second

Third

Fourth

Program Nasional Pemberdayaan Masyarakat


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How do we perceive the strategies and implementation approach of development agencies?

Are the strategies suitable for the needs of civil society in Indonesia?

At the implementation level, by drawing on Rothstein's checklist (1998), the following three

elements need to be examined and an assessment conducted: (a) program design; (b)

organization for implementation; and (c) program legitimacy. Program design consists of

two sets of plan that need to be distinguished and are indeed dissimilar, i.e., regulatory plan

and intervention plan. These plans should be able to deal with both static and dynamic

conditions. In terms of the implementing organization, two types of approach can be

identified – organization as an incentive system and a norm system. In relation to this, the

term 'responsibility drift' may apply to an organization or a unit within the organization.

This is related to cases known as the democracy black hole where policy decisions are made

in the absence of accountability, either politically or administratively.

What about the legitimacy aspect? This can be examined from two angles: (i) outcomes of a

given policy; and (ii) financial ties that refer to funding sources being utilized. In other

words, the change strategy of development agencies appears to mainly gravitate around the

foregoing two core aspects, namely policy design and implementing organization, both in

terms of substance and process. To a certain degree, weaknesses or 'ailments' of the

program design and implementing organization have been identified and different remedies

prescribed. The level of success or impact even to this day remains to be a contentious issue

due to dissimilar measurements, attributes and criteria. Nevertheless, a key component

that has yet to gain serious attention concerns legitimacy.

In simplified terms, funds from development agencies are somewhat similar to funds from

the oil and gas sector; easily obtainable and no need for bottom-up accountability, compared

to for example the accumulation and management of tax funds from the public. Without the

appropriate mechanism, development aid can isolate the state from its citizens such as the

issue of oil rents where accountable and responsive institutions from top-down are difficult

to develop and consolidate.

MultilateralDevelopmentAid Agencies

InternationalBilateral

DevelopmentAid Agencies

InternationalNon-governmentalInstitutions and/or

grant-making agencies

InternationalPrivate

PhilanthropicAgencies

NationalGrant-making

Agencies

G

G C

G C

G C

G C

R

RR

RR

RR

R

G

C

Government, legaland political institutions

Civil Society Org.

R

R

Reform from Above

Reform from Below

Short-Term / less than 3 yrs

Medium-Term / 3 Tahun

Long-Term / more than 3 yrs

PARTNER APPROACH TIME SCALE DISTRIBUTION

Large-scalemore than USD 50 Million

Medium-scaleless than USD 50 Million

Small-sclaeless than USD 10 Million

Tender

Direct & Competitive

25

Table 2. Strategy Matrix


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The legitimacy of programs under development agencies can be strengthened in the

presence of strategies that promote bottom-up accountability of bureaucratic, legal and

political bodies. The shift in development funding sources from oil and gas (natural resource

rents) to tax funds is a strategy to make governments more dependent and accountable to

their citizens (Brautigam, Fjeldstad and More, 1998). Furthermore, legitimacy can be

reinforced at the availability of a strategy that exerts bottom-up pressure by building

beneficiary constituents, among others through the distribution of oil and gas rents in the

form of cash transfer to citizens (Moss, 2011).

In line with this analogy, a shortcoming of the approach adopted by development agencies

toward civil society organizations in Indonesia is the absence of a specific strategy that

encourages the establishment of a funding mechanism from the government of Indonesia

itself, mainly for civil society elements, either through a tender mechanism or a direct

competitive grant mechanism.

Not a single development agency has a specific plan or initiative to push for the

establishment of a funding mechanism for civil society groups in Indonesia, including

alternative funding sources from the national budget or private corporations. A trial project

that draws from the national budget as a funding option can initially be directed at efforts to

improve the environment, protect consumers and open up access to legal aid for vulnerable

groups. Given the substantial volume of national budgetary funds, the utilization of funds

ranging from IDR 100 to 500 billion each year for non-state actors distributed in a

competitive manner shall change and democratize relations between the state and civil

society from statist and political patronage to a rights-based relationship.

26

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Implications

for Non State Actors

in Indonesia

-

The improved political and economic standing of Indonesia and changes to rules and

regulations and mechanisms related to development aid by and large have given Indonesia a

voice that is increasingly as resonant as aid-giving countries. In other words, development

agencies will now make more effort to conform to or align with the priority agendas and

targets set by the government of Indonesia. Harmonization and adjustment should not be

seen as damaging or erroneous. Not only is it correct but can nurture a sense of ownership

and promote sustainability, and engender better results and benefits.

Nevertheless, at the operational and implementation level, it can also end in bureaucratic

capture, particularly in a situation where state bureaucracy remains far from public ethics,

integrity and accountability. Criticisms or corrections to development agency strategies and

operations have been fairly voluminous. A study by William Easterly (2002) for example,

puts out a word of caution to multilateral and bilateral development agencies, especially the

World Bank against what is known as the 'cartel of good intentions'.

The term 'cartel' is used because competition among actors is non-existent and consumers

face difficulty or are denied the opportunity to demand for accountability. 'Good intentions'

on the other hand implies the intent to improve conditions that run the gamut of agendas,

from poverty reduction to law enforcement and human rights protection. Despite such good

intentions however, their strategies and operations are caught in a capture situation by aid

bureaucracy itself.

'Cartel of good intentions' in Indonesia is largely apparent with regard to the democracy,

human rights and governance sector. In the past ten years, development aid to state bodies

such as the Supreme Court and Attorney General's Office as well as different state ministries,

institutions and political parties has failed to produce the desired outcomes, except for

changes to the Constitutional Court and Corruption Eradication Commission, and to a

certain degree, bureaucratic reform at the Ministry of Finance.

Furthermore, development agencies shall be increasingly bound to the agendas and policies

of the government of Indonesia. Another implication is that development agencies shall be

more inclined towards partnering with and/or providing aid funds to the government rather

than for example civil society organizations or private and business groups. Multilateral and

bilateral development agencies deal with a considerable amount of funds and prefer to work

with the government rather than the people for a longer time period of between three and

five years. Development agency projects specifically operate through a tender mechanism

with private contractors or consultants as the executing agency. Most non-state actors are

relegated to the role of sub-implementer or typically as complementary actors for various

activities.

What are the implications of the development aid or funding trend specifically for civil

society in Indonesia? As mentioned earlier, when a middle-class country becomes

V. Implications for Non-State Actors

in INdonesia

29

Implic

atio

ns


increasingly prosperous, development issues are no longer about the lack of funds or

resources but more on barriers to the distribution of resources. Failure to respond swiftly to

this matter shall create a socio-economic chasm that can incite social friction and instability.

Hence, non-state actors must assume a more decisive role in (a) promoting the

accountability of the state towards the poor and marginal groups; and (b) ensuring the

upholding and respect of human rights. Failure to support civil society elements can strip

development agencies of their legitimacy (Glennie, 2011).

In Indonesia, this scenario is highly relevant. Instead of bridging chasms, progress achieved

by Indonesia's formal political system as reflected in the performance of political parties and

the parliament in reality has yet to narrow down socio-economic disparities in society. One

of the reasons for this is that political parties in Indonesia are not oriented to programs and

problem solving. In other words, Indonesia's political parties tend to be internally oriented

or self-serving with a transactional attitude that serves personal interests or that of their

leaders and group rather than for programs and policies that can strengthen fundamental

freedoms and elevate the well-being of each and every citizen, men and women, rich and

poor.

Similar to the larger purpose of development agencies, civil society also envisions a more

democratic and tolerant Indonesia based on the rule of law and human rights in which

growth is bolstered by a robust and capable society. As such, economic growth should be a

means to an end and not an end in itself. Economic growth shall be meaningless if the social

status of the Indonesian people do not change for the better as reflected in the Human

Development Index (HDI). Economic growth shall be rendered pointless if discrimination

against certain groups is not effectively dealt with by the state.

A fundamental and ongoing struggle of non-state actors Indonesia is working towards

concrete progress in the realization of human rights and democracy, including efforts to

bring an end to impunity for human rights abusers, promote the participation of women and

vulnerable and marginal groups, safeguard diversity and revolutionize government capacity

and accountability that covers initiatives to curb corruption and strengthen ecological

sustainability through the appropriate policies and curtailing of natural resource

exploitation. The slogan should no longer be 'liberty, equality and fraternity' but 'liberty,

equality and ecology'.

Buoyed by the spirit of an open society, civil society in Indonesia envisages a state and society

where the values of freedom and equality can be collectively brought to fruition. At the

institutional level, the government's optimal role is a requisite, with just the right dose of

intervention in economic matters and private affairs such as those related to religion and the

conception of a good life. At the same time however, the state must be adept in enforcing the

law, maintaining security and public order to ensure the creation of a cohesive and

harmonious society. Every individual deserves due respect and protection, and is entitled to

equal opportunity.

In relation to this, the priority issues of development agencies denote two fundamental

attempts: (a) to encourage bureaucratic, legal and political institutions to work effectively

and efficiently; and (b) to change or improve these institutions to be more accountable,

transparent and responsive. Both agendas reflect the characteristics of a good government.

In reality, only a few development agencies have pushed for the priority issue of (c)

reforming these institutions to work effectively, accountably and impartially. Impartiality


Implic

ations

means that bureaucratic and law enforcement agencies must equally serve the people,

ensure non-discriminatory treatment of citizens and fulfill their rights. The poor and rich

must be treated on equal terms. Women are awarded the same level of respect as shown to

men, children and the elderly. The priority issue should therefore no longer be good

government, but the quality of government.

Without the impartiality of policies and operations of bureaucratic, legal and political

institutions, the government's legitimacy shall be further undermined. Impartiality is

essential and reflects the problem of discrimination and exclusion faced daily by marginal

groups, the poor, women, minorities, senior citizens, the disabled and children. Impartiality

may well be a missing element in the behavior, mindset and motive of bureaucratic, legal and

political institutions. A good government bears the obligation to demonstrate adequate

capacity and accountability. Despite this however, a good government can still be overruled

by a discriminatory and exclusive attitude on the grounds of ethnicity, political patronage

and other reasons. Bearing this in mind, impartiality must therefore be an inherent element

and become the collective mindset of state bodies.

Schematically, based on ongoing operations of development agencies, two scenarios or

approaches can be outlined. , a governance model in which the distinct feature sees the

government and state agencies as the key ally, and both the target and engine of change.

, a democratic model that in contrast relies more on the energy and innovation of civil

society organizations, non-governmental organizations, universities, the mass media and

the business community.

The first scenario translates into narrower room for civil society to move, and only through

hard work can civil society continue to operate and contribute, albeit in the sidelines. The

second scenario on the contrary can allow greater space for the creative initiatives of civil

society in carrying out advocacy work and promoting change far and wide in terms of

geographic scope as well as policy and institutional dimensions. In other words, the first

scenario is a feasible option as it has been practiced for years and with its own proponents

among development agencies and the government. This scenario however may not be

desirable to non-state actors in Indonesia. On the other hand, the second scenario may be

highly desirable, although not entirely feasible because statist initiatives and traditions

among bureaucrats, and political patronage among politicians and policy-makers may be

resistant towards this second model.

The governance model that places complete trust on reformers from within bureaucratic,

legal and political institutions must be counterbalanced and supplemented with a

democratic approach to the intervention model where trust is bestowed upon reformers and

initiatives from outside of the bureaucracy, such as non-state actors, the business

community and the mass media. If not, this scenario shall be highly prone to bureaucratic

capture and even undermined by other state bodies, including legal and political institutions,

except when other methods are also undertaken where resources are not entirely placed in

their hands but dispersed to other actors outside of the bureaucracy and other state

agencies.

In addition, intervention from development agencies should also best be accompanied by

changes to the mindset of bureaucratic bodies (legitimacy, impartiality and integrity), and

not simply focus on operational changes (e.g. computerization) and institutional reform (e.g.

civil servants payroll system, freedom of information, etc.). Operational and institutional

First

Second


Implic

atio

ns

changes are indeed a necessity, but have yet to suffice and be sustainable. Several

development agencies have put such initiatives in motion with the key word 'knowledge

building'.

The democratic model on the other hand calls for change and diversification of funding

sources for non-state actors in Indonesia, for example from the state budget. It is certainly

not easy to reallocate the national and local budget for immediate distribution as

competitive grants to non-state actors in Indonesia. This requires the role and intervention

of reformers within government itself, without which the democratic model would not be

realized any time in the near future.

In terms of funding, Indonesia is not an impoverished country. Indonesia has adequate room

for funding. With an annual budget that exceeds IDR 1,000 trillion, Indonesia is

unquestionably capable of financing programs and activities executed directly by various

non-state actors for the purpose of creating public goods, such as improvements to the

quality of the environment, consumer protection, poverty alleviation and social protection

for all. Some of them can be carried out by increasing the reliability and contribution of the

national and local budget. It can take different forms and start from a competitive grant

mechanism as long practiced by OECD member countries. The reliability of such funds is not

only essential in terms of amount, but also as a form of legitimacy that seeks to find the most

viable principle and method to change a statist relation and political patronage approach

into a rights-based relationship between the state and its citizens.

DIMENSION

Main Obstacle

Assumption of Change

Drivers of change

Legitimacy

Partner

Intervention

Funding scale

Fund distribution

Funding source

Sustainability

Accountability

Actor / Agency

Adequacy of reformers within

state institutions

State ( )

Formal procedural

Government institutions:

bureaucratic, legal and political

Institutional innovation and

modernization

Large

Tender or offer

International

Co-finance from the national or

local budget

Technical

state building

Actor and initiative

Adequacy of initiatives and reformers

within society

Public and the state

Substantial and social

Non-governmentalentities: non-

governmental organizations,

universities, the mass media and citizens

Innovative initiatives and institutions

Medium

Direct and competitive

International and national

Competitive grant mechanism from the

national or local budget and CSR

(Corporate Social Responsibility) funds

Technical and Social

GOVERNANCE MODEL DEMOCRATIC MODEL

Tablel 3. Two Strategy Options

32

Implic

ations



Implic

atio

ns

Recommendations

and Path Ahead

Non-state actors in Indonesia constitute as a home-grown social force set in motion by the

educated urban middle class. Nonetheless, the country's non-state actors are not without

their share of shortcomings. They still need to address many internal weaknesses in terms of

their capacity and institutional models. Hans Antlov, et al. (2008) for example puts forward

several deficits in civil society actors in Indonesia: (i) rely heavily on confrontation; (ii) weak

institutional capacity due to over reliance on a leader-follower model that hampers

institutionalization and regeneration, and (ii) lack of cooperation among non-state actors

that result in the failure to achieve wider impact.

On the other hand, democracy and development in Indonesia and anywhere else is not a

linear process between input, process and output, but also involves a political process with

diverse actors and initiatives. For example, policy change in general requires three elements:

political occurrence (elections or economic crisis), recognition of issue, and policy

recommendation (Stone, 2007). Development aid should at least contribute to two key

aspects: push for policy recommendations from citizens and civil society actors, and

encourage political elites and the government to set an agenda for deliberations of proposed

policies. With regard to this, the functioning of the democratic process that should at least

occur every five years provides such narrow room for change.

At this particular point, the role of non-state actors in Indonesia becomes crucial in ensuring

that the political elites seize on the political momentum to improve the situation. Based on

the empirical experience of citizens, civil society actors can contribute in spurring political

will from the circle of elites through a broad range of actions, either by means of policy

advocacy or making available the necessary knowledge and effective innovative models.

In other words, many convergent points and spaces can be found between non-state actors,

development agencies and the government. This is also true for the quality of government

and democracy, and the optimal role of the state. The convergence of purpose can be

enhanced from an abstract theoretical proposition into tangible stance and joint actions.

Nevertheless, this convergence must continue to be tolerant towards differences in

approach and method for problem solving. There should be no domination or hegemony

between one and the other. A top-down reform approach is equally important as reform

from below, and vice versa. The principle of partnership and complementarity should

therefore be effectively applied. In relation to this, the following are several measures for

consideration by all parties, including the government, development agencies and non-state

actors in order to promote a broader and heightened role for Indonesia's non-state actors in

the next five to ten years.

VI. Recommendations and Path Ahead

35

Recom

mendatio

ns


For the Goverment :

For Development Agencies ::

1. A democratically elected government in every five years must make all efforts to build

trust with its citizens. Conversely, citizens are increasingly expected to fulfill their tax

obligations as an absolute obligation. There is also mounting pressure for the

government to build a rights-based relation, among others through the provision of

public goods financed from the people's taxes. With respect to this, the government

needs to explore and experiment such avenues in order to broaden the role of non-state

actors in the development process.

2. The government requires policies that govern on the relationship between the

government and non-state actors with regard to development and democracy. An initial

approach would be to develop a public goods scheme financed by the state budget. For

example, a legal aid initiative funded by the national budget and implemented by civil

society actors has been introduced, although it has yet to be properly organized and

institutionalized.

3. The government needs to conduct a systematic investigation and experiment to expand

the practice of public goods provision by non-state actors outside of the legal aid sector.

As a middle-class country with an annual national budget that exceeds IDR 1,000 trillion,

it is indeed time for public goods to also be financed by the state. Several local

governments, for example in Sinjai and Makassar (South Sulawesi) as well as Musi

Banyuasin and Ogan Komering Ulu (South Sumatera) have allocated funds from the local

budget for free legal aid for poor communities.

4. The government should take into account regulatory changes or revisions on the

procurement of government goods and services, particularly pertaining to public goods

such as poverty alleviation, consumer protection, education, human rights

environmental conservation, women's empowerment, disaster risk reduction and the

safeguarding of diversity in Indonesia. Amendments are necessary to allow civil society

actors with the appropriate expertise and unquestionable track record easy access to

state budgets as an alternative resource through competitive procedures and

mechanisms.

1. The need to revive the mechanism for demand-pull initiatives for competitive grants in

order to open up and broaden access and opportunities for non-state actors in Indonesia,

primarily those outside of Jakarta and Java. Development aid from multilateral and

bilateral development agencies should also ensure that aid outcomes are socially

acceptable to the people of Indonesia, in addition to being technically effective. Hence,

the role of civil society actors becomes crucial to ensure social acceptance.

2. The need to heighten the involvement of non-state actors in the country's development

strategy formulation process, including the formulation of programs or projects,

program monitoring and evaluation, and program accountability.

3. The need to experiment on mechanisms for strengthening the involvement of non-state

actors in the implementation of programs funded by grants from multiple donors, such as


Recom

mendations

the PNPM Peduli model. This mechanism is a significant breakthrough in terms of the

extended role of non-state actors in program and project implementation. In coming

years, such involvement is expected to increase and include participation in the policy

formulation of development aid strategies.

4. The need to foster cooperation with national grant-making agencies in program

formulation and execution. Several partnerships with national grantors have been

piloted, for example on issues related to environmental conservation and governance

strengthening. This approach however has not been widely applied nor has it been

broadened to other sectors.

1. It is crucial to pro-actively create ample space for consultation in order to shape

development aid policies and programs, mainly in multilateral and bilateral agencies, for

the purpose of ensuring accountability and social impacts from each international

development aid, including therein the creation of measurable and institutionalized

dialogue forums.

2. The need to take the initiative in the formulation and oversight of international

development aid strategies. Non-state actors in Indonesia may have gained the necessary

experience, but still need to put in more extensive and comprehensive efforts to ensure

aid effectiveness.

3. It is necessary to heighten cooperation and coordination, among others through a

consortium of non-state actors in Indonesia for the purpose of increasing the quality,

significance and impact of public policy advocacy. It is now time to reduce competition

among relevant actors or to manage it in a healthier manner. Leaders of non-state actors

need to think on a macro level about major obstacles and barriers in Indonesia and

combine approaches and expertise among non-state actors. Examples of key issues are

corruption, environmental destruction and intensified intolerance in Indonesia.

4. The need to improve governance and leadership among non-state actors in order to

ensure the institutionalization of accountability and regeneration mechanisms. Civil

society in Indonesia is increasingly in desperate need of visionary and highly competent

young recruits. Civil society leaders need to meticulously organize their institutions and

bring an end to gerontology (where power lies with the seniors) internally in order to

retain highly dedicated young people with outstanding technical skills.

For non-state actors :


Recom

mendatio

ns


Recom

mendations

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About The Authors And Editors

HERRYADI ADUN,

JIM TOAR MATULI,

MICKAEL BOBBY HOELMAN,

SUGENG BAHAGIJO,

since 2006 manages the Democracy program of Tifa

Foundation. He is in charge of developing initiatives and partnerships with civil

society organizations in Indonesia with the intention of building substantive

democracy, specifically with regard to accountable leadership among elements of

civil society and the political circle.Previously assigned to assist in a

humanitarian mission in Aceh together with the Canadian Red Cross and has

gained extensive experience from his lengthy stint in the tropical forests of East

Kalimantan in his capacity as the consultant of the sustainable forest

management project under Deutsche Gesellschaft für

TechnischeZusammenarbeit (GTZ/ SFMP).

has accumulated immense experience in the management of

development aid programs, compliance audit, finances and accounting,

administration and human resource management. He has spent more than 12

years as a specialist for various international agencies, such as Oxfam Great

Britain, Catholic Relief Services and Australian Red Cross in handling

humanitarian programs, emergency responses and development projects in

South Asia and Southeast Asia. In the past year, he joined the CIDA-funded

Support to Indonesia's Islands of Integrity Programfor Sulawesi (SIPS) in

collaboration with Cowater International Inc. Canada.

has previously carved out a career with ICW

(IndonesiaCorruption Watch) in the early stage of its inception, and acquired

invaluable working experience at the Department for InternationalDevelopment

of the United Kingdom (comparable to Bappenas, the Indonesian National

Development Planning Agency). He was formerly the advisor on advocacy and

governance for Oxfam GreatBritain's representative office in Indonesia and now

entrusted with the position to manage the Democracy and Governance program

of Tifa Foundation. An economics graduate with an advanced degree in political

science, Hoelman is keen in conducting studies and a frequent facilitator and

resource person in numerous discussions, primarily related to social

accountability.

actively conducts extensive studies on social policies in

which his work is documented in several of his publications, among others:

“

” (Jakarta: co–author, LP3ES, 2006) and “

” (Jakarta: editor, LP3ES, 2006). He has formerly assumed

the office of Deputy Director of INFID (International NGO Forum on Indonesian

Development) from 2002 to 2004, Associate Director of Perkumpulan Prakarsa

(2005–2009) and Executive Director of Komunitas Indonesia untuk

Demokrasi/KID (2010–2011). He hasacted as the technical advisor to the

Bappenas Deputy Minister for Regional Autonomy and Cooperation (2004–2005)

and policy advisor to the Coordinating Minister for People's Welfare

(2006–2007). In addition to being an avid writer, he also actively serves as

resource person and facilitator while regularly assisting studies for a broad range

of research institutes and think-tanks, including Tifa Foundation.

Mimpi Negara Kesejahteraan: Telaah Dinamika PeranNegara dalam Produksi dan

Alokasi Kesejahteraan Globalisasi

Menghempas Indonesia


TIFA FOUNDATION

Jl. Jaya Mandala II No. 14E, Menteng Dalam

Jakarta Pusat 12870 - INDONESIA

Ph. +62 (21) 829-2776 | Fax. +62 (21) 837-836-48

e-mail to : [email protected]

www.tifafoundation.org

A Decade of Development Aid and the Role of Non-State Actors in Indonesia

Documents

sugeng bahagijo jakarta

method of aid distribution

stocktaking study

strategy matrix

republic of indonesia

strategy options

yayasan tifa

tifa foundationjln