NTB ENG 310116

Regional Economic Development (RED) Programme 1

Regional Economic Development (RED) ProgrammeApproach, Achievements and Lessons Learnt in Nusa Tenggara Barat (NTB)

2 Approach, Achievements and Lessons Learnt in Nusa Tenggara Barat (NTB)


Table of Content1. Development Challenge and Programme Objective 5

2. Programme Approach and Focus of Interventions 7

3. Overview of Results and Achievements 11

4. Outlook and Lessons Learnt 15



5Regional Economic Development (RED) Programme

SiNCE 2004, ThE REgioNAL ECoNomiC DEvELoPmENT (RED) PRogRAmmE iS A cooperation between the Indonesian Ministry for National Development Planning (BAPPENAS) and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), working on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) with a co-financing of the Australian Department of Foreign Affairs and Trade (DFAT). RED complements the efforts of the Indonesian government in fostering sustainable economic growth. With a comprehensive approach using different instruments for the promotion of economic development involving the public and private sector, the programme aims to strengthen the competitiveness of selected sectors and regions and thus contribute to employment creation and income generation in Small and Medium Enterprises (SMEs).

As an emerging economy and member of the G20 countries, Indonesia is one of the most influential economies in the region. In previous years, the country has shown macro-economic stability and achieved robust yearly growth rates of around 6% which is however based to a large extent on an unsustainable use of natural resources. Furthermore, pronounced regional disparities, especially between the dynamic provinces in Java and remote parts of the country, continue to hamper a broad poverty-oriented

Development Challenge and Program objective1


and environmentally sustainable growth strategy. Up to now, only few public and private stakeholders at local and provincial level are able to develop and implement coherent measures of regional promotion of economic development independently. This is made more difficult by an insufficient degree of vertical and horizontal coordination between government institutions at national and regional level in planning, budgeting, and implementing strategic interventions.

In order to address these core problems, the main objective of RED is to improve the framework conditions, sector programmes as well as planning and implementation processes for regional economic development at the national and regional level, taking into account aspects of green economic development.

RED is working with a number of tools and instruments for economic promotion – both for sector support as well as for improving the business enabling environment – which are implemented in an integrated way according to the specific context of the different locations.

After starting in 2004 with the development and testing of RED instruments in Solo Raya, in the final programme phase RED works at the national level, in three project locations in Central Java, West Kalimantan and Nusa Tenggara Barat (NTB) as well as supporting the National LRED Coordination Team (TKPED) in facilitating LRED approaches in additional 9 pilot regions across Indonesia.


WiTh ThE RED PRogRAmmE ENTERiNg A NEW PhASE fRom 2011 To 2014, West Nusa Tenggara or Nusa Tenggara Barat (NTB) was selected together with as the third pilot region. At the same time NTB was also selected as pilot region for BAPPENAS approach under the National LRED Coordination Team – TKPED (Tim Koordinasi Pengembangan Ekonomi Daerah). The main rationale was to replicate RED Approach already developed and implemented in Central Java and West Kalimantan but now under the national coordination approach. The main thrust of the programme was on developing regional economic development of West Nusa Tenggara through promotion, marketing and branding of Lombok Island.

Under TKPED the two commodities of Jewelry in Mataram City and Pottery in West Lombok had been pre-selected in order to improve the coordination between support activities from different line ministries at the national level with programmes from the provincial and district government as well as with other stakeholders from the private sector and the civil society. RED as a joint programme of BAPPENAS and GIZ strongly supported the development of these clusters and facilitated the coordination under TKPED. In addition, under the objective and indicator framework of RED, other LRED Instruments for increasing the regional competitiveness were developed with

Program Approach and focus of interventions2


local partners. In 2013, with the integration of a Green Economy approach, Sustainable Tourism Development was chosen as a sector with strong linkages to the handicraft sectors as well as with other local suppliers.

As shown in the figure above, the cornerstone of the RED approach in NTB was the development of the Pottery and Jewelry Value Chain under TKPED. The starting point for both clusters was a Regional Strategizing process, based on a comprehensive value chain analysis a series of public private dialogue workshops as well as the use of COMPASS, an assessment and strategy development tool. The regional strategizing process helped to reflect on the current conditions, to create a common understanding among the stakeholders and to help identify relevant areas of intervention. The result was a value chain upgrading strategy or Master Plan outlining the strategic priorities as well as a joint operational and budget plan or Financial Matrix coordinating the support activities and budget contributions from all key stakeholders involved. A Public-Private-Dialogue Forum was established for coordinating the implementation of the Master Plan and to provide a platform for continuous exchange and learning. Apart from the facilitation through the RED team in NTB, BAPPENAS played a very active role in steering and monitoring the whole process through trainings and capacity building, regular field and monitoring visits as well as joint trainings and exchange meetings with the other 9 TKPED pilot regions.

CRoSS-SECToRAL/BEE

Income Generation and Poverty Reduction for the Population

Gender Sensitivity & Environmental Friendliness

Territorial & Sectoral Competitiveness

investment Promotion

oSS (mataram City+ forum)

Regional marketing /iDC RiA

RED VISION

SECToRAL APPRoACh

value Chain Pottery value Chain Jewelry

green Tourism

Entrepreneurship

Link farmers to Tourism industry

Directiona

l/ O

rientation PPD (Coodination)

figure: RED Approach in NTB, 2011-2014


A number of agreed activities under the Master Plan have been directly supported by RED or mostly through cost sharing arrangements with other partners. These include e.g. trainings on new designs and product diversification, development of entrepreneurship skills like bookkeeping, quality control and marketing, introduction of new technologies and resource-efficiency measures, support for linking the local producers to international buyers.

To complement the TKPED support for clusters a set of LRED Instruments targeting the improvement of the Business Enabling Environment have been jointly developed in close collaboration with the local partners. For improving the service quality in business and licensing and Investment Promotion, the Provincial Investment Coordination Board (BPMD) established a One-Stop Service (OSS) Forum involving all regional offices which was formalized by Governor’s Decree. The main objective is to provide a joint vision and operational framework and to enhance the coordination and consultation among the OSS offices. A joint work plan on key topics like harmonization of regulations, the institutional set up and authority delegation, technical and operational capacities and standardization of procedures, quality of information and services was agreed and implemented through the 9 OSS districts. Together with the University of Mataram, the methodology and use of Regulatory Impact Assessment (RIA) was promoted through the Forum. For supporting and facilitating the OSS Forum, RED worked in close collaboration with GIZ Programme on Good Governance (DeCGG).

OSS Impact – Integration of Investment Services in the OSS office

Apart from local regulations, licensing procedures and investment services, the perception of a region by external parties through Regional Marketing and Branding is very important. Despite receiving a lot of attention as one of the most potential tourism destinations in Indonesia, Lombok is still often perceived as ‘the sister of Bali’ or in a positive sense ‘like Bali twenty years ago’. Obviously, it makes still a lot of sense to tap the vast tourism potential next door, but in order to step out of the shadow of Bali it is crucial for Lombok to develop – and to communicate – its own, unique profile and brand. For tourism development, but also beyond, from a broader perspective of Investment Promotion. Based on the positive experience in Solo Raya and Central Java, stakeholders like the Provincial Investment Board (BPMD), the Lombok Hotel Association, the new Tourism Development Board and other partners including local media agreed to join forces and to set up a Regional Marketing Team for Lombok. The main objective was to create a common vision and understanding within and beyond the working team and support the implementation of a joint action plan through the development of brand proposals for Lombok as a sustainable tourism destination or to support the creation and development of the National Geopark Rinjani, Lombok as core sustainability brand, to be recognized by the Global Geopark Network, under the umbrella of UNESCO.


With additional funding for the integration of Green Economy into the RED Approach, Green or Sustainable Tourism Development was identified in late 2012 as a sector with high relevance for the local economy as well as a good opportunity for a more environmental friendly growth. As part of the overall RED approach in NTB, a number of activities have been initiated with the long-term goal to develop Lombok as a sustainable tourism destination model that can be replicated and adapted elsewhere in Indonesia under a partnership of local partners, BAPPENAS and the Ministry of Tourism.

After initial awareness raising and improving the public-private-dialogue through a Tourism Forum, RED supported the Tourism Board in integrating a green tourism perspective into the Long-Term Tourism Development Plan (RIPPARDA) 2015-2019 for the NTB Province. In order to translate this public policy framework into a pragmatic action plan, RED is currently facilitating the development of the Sustainable Tourism Master Plan for Lombok supported by a 5-year work plan owned by local partners from both the public and the private sector. The Master Plan will also take into account international sustainability standards such as the Global Sustainable Tourism Council (GSTC) standards for hotels, tour operators and tourism destinations.

In order to prove that sustainability measures also make sense from a business perspective, a Resource-efficiency Programme for small and medium-sized hotels has been introduced in collaboration with the Mataram University (UNRAM) and the Lombok Hotel and Restaurant Association (PHRI). Based on individual assessments, a pragmatic action plan was drafted addressing easy to implement measures for cost saving and sustainability improvement. The measures like reducing energy consumption and waste generation are implemented and monitored by a ‘green team’ in each hotel and supported by periodic coaching.

Closely related to the TKPED support for the clusters in Banyumulek and Sekarbela, local producer groups have been assisted to develop into Green Tourism Villages based on their handicraft products. This initiative was developed under a Public-Private-Partnership including Panorama Tour and Travel helping to develop and market an attractive tourism package and the Ministry of Cooperatives and SMEs (MoCSME) providing funding for the necessary development of basic tourism infrastructure.

Last but not least, as part of a delegated cooperation between DFAT (formerly AusAID) and GIZ, RED helped to link local vegetable producers with hotels and restaurants of the Lombok based tourism industry. After a brief assessment of the demand and supply side, a first meeting between the Lombok Hotel Association (LHA) and local producers in the first half of 2014 encouraged all parties to jointly work on this initiative which will continue beyond the end of current RED programme. GIZ RED also completed a study in NTT and Sumbawa to portray the constraints and opportunities in sea and land transportation for value chain development.


ThRough ThE CooPERATioN WiTh ouR PARTNERS iN imPLEmENTiNg ThE different LRED instruments under the TKPED and the Green RED approach outlined above, the programme was able to significantly contribute to the following results, even in a relatively short time period from 2011 to 2014.

TKPED - better coordination resulted in better services and better results • Betterneeds-orientation,transparencyandresponsiveness,leverageofresources,etc. • Linkstointernationalbuyers Business enabling environment Greening the tourism value chain – some foundations laid RAD-GRK Lessons learnt • TKPEDbeyondplanningandcoordination,clearobjectivesanddon’tforgetthe

focus on business perspective and provide room for BDS • Importanceofclosenetworksandcommonobjectives(studytrip) • Synergies through complementing resources and innovative cost sharing

arrangements demand-orientation • PPPagoodexampletocombinethestrengthandweaknessesofthepublicand

private sector

overview of Results and Achievements3


1. Governor or District Heads Decrees have been issued for the establishment of the Regional Tourism Stakeholder Forum to strengthen the tourism sector in NTB. This achievement was the foundation to building the guidelines for the sectoral and territorial coordination in initiating the Sustainable Tourism Master Plan (STMP) for Lombok as the pilot project. The plan has enabled improved regional branding and marketing material.

2. Implementation of a pilot project between farmers and hotels for several vegetable products in 2014 has improved the relationships between farmer groups, suppliers and hotels and created a multi-stakeholder forum.

This has resulted in contract agreement between hotel-suppliers and farmers to provide daily hotel-market information to farmers. The contract has brought 100 Lombok farmers from Mataram City and West Lombok and 4 well known hotels in the vegetable value chain.

3. Operational savings in electrical and water consumption in hotels and restaurants reached up to 5% – 10% with 20 hotels committed to the resource efficiency implementation for their daily operations.

4. Value chain, linked to international buyers. For pottery cluster, the project has received orders from foreign buyers, such as Sara Home, reflecting its success.

5. For Jewelry, RED brought in John Hardy, an international Indonesian-based jewelry brand, who is lending supporting in terms of marketing, design and developing a Lombok brand. This is a good example of bringing in private sector players to play a role in RED initiatives.


6. RED developed other instruments to support these clusters which go beyond the individual clusters. These include OSS and regional marketing which is a mix between product development and tourism and investment promotion.

7. In tourism, RED supported the local district in developing a long-term government strategy, by starting a private-public dialogue between government and local tourism stakeholders. RED also established a resource efficiency program with six hotels as participants. Since 2014, RED has partnered with the Ministry of Tourism to promote Lombok as a destination for sustainable tourism development. One of the main outcomes of this initiative will be the development of a Sustainable Tourism Master Plan for Lombok where the private sector will also be involved in the implementation. The action plan will be finalized towards the end of the year.

8. In the sector study, the sea and inland transportations studies in NTT and Sumbawa have provided recommendations on how to tackle constraints and opportunities for DFAT to take necessary actions with the stakeholders in short, medium and long term period.

The box below are several testimonies as concrete examples on how the support of the RED Programme benefitted local SMEs as the key target group and important actor for LRED in Nusa Tenggara Barat.

Pak Ismail (sitting, in white shirt) is a pottery designer at Pasar Seni, Banyumulek, Lombok. After receiving technical supports from RED in financial management, entrepreneurship, and product development, he is able to manage the cash flow better, make and sell new products. “This is a few examples that I received from RED support which is applicable to my pottery business”, said pak Ismail. “My sales and income have increased by 10%. I’m also able to manage time better and increase business networking”. He still needs the support on market information. A few challenges: competing with cheaper products from other regions, their different designs and attractive packaging, which he will follow.

Pottery Designer


Ibu Sriyanim is the Head of Women Cooperative in Banyumulek, NTB. After receiving technical support from RED program, she claimed that most beneficial assistance from GIZ RED is coaching on her cooperative business improvement. “The financial management training has now enable me to keep good and neat bookkeeping, cash flow and business administration”, she said. “My ability to manage, separate the revenue and expenses have resulted in an increase in my business profit (net income) from Rp. 134,000 in 2011 to Rp. 3,500,000 in 2012”. The significant increase is mainly due to large export orders in 2012. “Key success factors in sustaining the growth are ability to maintain members’ discipline and willingness to work together based on his/her tasks”. The increase in staff capabilities had also supported the increase in profits. Challenges: lack of capital and how to maintain staff (members) responsibilities in paying their financial contributions to the cooperative.

head of Woman Cooperative

Jewelry maker

Bapak H. Fauzi, jewelry maker and business owner in Sekarbela, Mataram. After receiving RED support in product promotions, business networking and buyers meeting, “I am able to increase relationship with clients and the local government. GIZ RED supports has also increased my production volume, sales and income by approximately 20%”, said Pak Fauzi. GIZ RED has applied good practices in: facilitating meeting with stakeholders, training, increasing trainees’ performance, and providing information to wider market. He said that: “GIZ RED is able to identify real problems and offer right solutions that the beneficiaries needed”. Challenges ahead: to compete with cheaper, low quality or fake products.


ThE RED APPRoACh iN NTB hAS ALREADy AChiEvED SigNifiCANT RESuLTS AND iS well placed to also sustain its impact after the end of the current RED Programme by the end of 2014. The partners will continue to implement the tools and instruments developed and fine-tuned by RED interventions.

Based on the ample experiences of the project, the main lessons learned include:

For the TKPED commodities, there are some good success stories. The challenge now is to replicate this approach to other areas and clusters without too much further investment. The programme must be upscaled and replicated effectively.

For the business enabling environment, RED undertook a lot of capacity building and facilitation activities between the various forums. But it did not touch the key issues affecting the business enabling environment. As such, our partners need to play a bigger role as one lesson learned is that there need to be continued push to ensure sustainability.

There also need to be more focus on the implementation on the value chain development rather than on just capacity building (supply side). The demand (buyers, traders) side

outlook and Lessons Learnt4


should also be included in the programme and linked to secure or balance the supply and demand.

On the capacity building to government officials, to overcome the problems from the frequent relocation of trainees, future GIZ RED training programme should include staffs from human resources training division to sustain the application or replications (training) of GIZ RED instruments or best practices to other trainees.

For tourism, there is a huge challenge to develop an overall vision for NTB. The government and tourism stakeholders must decide on their market, whether they want to attract international tourists or specifically target Islamic tourism from the Middle East.

Also in terms of developing the Tourism Masterplan, issues such as waste management, education and greater engagement with local communities need to be studied closely. These are long-term tasks that will continue beyond the RED programme but there are still some questions on the cost benefit ratio given the need for significant investments and support.

Recommendations

It is important that for the continued economic development of Lombok, with 3 million inhabitants, the programme should be expanded beyond just the two clusters. More sectors and business units must be incorporated into the programme for to have lasting impact and poverty reduction.

The RED approach must therefore be replicated in other sectors, such as corn, seaweed and cattle which have been targeted by the local and national governments. The tools designed and transportation studies prepared by RED can be used to boost growth in these sectors.

For the tourism value chain, the programme should continue with a stronger focus on the implementation of the instruments. RED’s target group is SMEs so our support for tourism development was not focused on the overall economy but on the green tourism side of the equation. Tourism development is important for this cluster because for the two clusters, most of their clients are tourists. From tourism development, came another link, which is helping local farmers supply to the local tourism industry.

RED has just begun enabling greater facilitation between the two sectors and the programme will continue in the next stage.


Last but not least, we would like to thank all our partners as well as the beneficiaries and other stakeholders for the excellent collaboration in the past 10 years. Without their efforts the achievements would not have been possible. We would also like to thank the partners from NTB for their openness and collaboration in sharing their very valuable experiences and lessons learnt with other regions across Indonesia, which was an important basis for the replication and upscaling of the LRED approach under the RED Programme. We hope that this fruitful exchange of experiences and joint learning will continue in the future – with GIZ – but even more important with all the other parties committed to local and regional economic development in in NTB and in the whole of Indonesia.

NTB ENG 310116

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