Adaptation of MTEF and Performance- Based Budgeting in DJ BinaMarga (DGH)<br />William D. Paterson and Ir. Gandhi Harahap<...
Outline of Presentation<br /><ul><li>Scope and purpose of study
MTEF and PBB – international & Indonesia
Adopting MTEF in DGH program cycle
DGH Performance 2005-2009
Evaluation of RPJM2 2010-2014
PBB proposals for DGH
Recommendations on future steps</li></li></ul><li>Study Outline and Context<br />“Capacity Building Support to strengthen ...
MTEF and PBB – International Success Factors<br /><ul><li>Integrate MTEF with budget in single unified process
Improve public expenditure management at sector level first
Develop a performance-oriented budgeting system
Comprehensive - all budget resources available to sector
Detail in sector activities to encourage budget reallocation
Key stakeholders should participate in MTEF process – MOF, Planning, sector & beneficiaries, civil society
Accountability requires transparency  - political & managerial
Monitor execution against planned outputs at activity level
Efficiency and effectiveness of resource use in implementation</li></li></ul><li>MTEF & PBB in Indonesia – MOF and Bappena...
Medium-Term Expenditure Framework (MTEF) Guide, February 2005
Implementation of Performance-Based Budgeting and Medium-Term Expenditure Framework, June 2009
Pilot implementation for 2010-2014 now extended to all LMs
Sector reform (“ReformasiBurakrasi”) added for 2010</li></li></ul><li>Performance-Based Budgeting (PBB)<br />Current Issue...
Medium-Term Expenditure Framework (MTEF)<br />Concepts:<br />Connectivity of planning and budgeting <br />Basis for resour...
DGH PROGRAM CYCLE – ADAPTATION TO MTEF<br />
Performance of BinaMarga/DGH –Business results 2004-2009<br />Traffic Demand doubled<br />Resources nearly 4-fold higher a...
DGH RPJM1 Performance:  Resource Allocation and Output<br />Preservation<br /><ul><li>Output increased only slightly
Preservation 1,400 km/yr    = 4% of network
Development 3,000 km/yr    = 9% of network
The Budget rose steeply 2007-08
Development expenditures up 80% 2008
Preservation expenditures up 75% 2009</li></li></ul><li>RPJM1 2005-2009 Program and Resource Use <br />But - Activity Aver...
DGH Effectiveness: Distribution of Condition Improvements <br />Change in extent Stable condition: by Island Group – 2005-...
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Ghandi p bill paterson ppt v 3

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Ghandi p bill paterson ppt v 3

  1. 1. Adaptation of MTEF and Performance- Based Budgeting in DJ BinaMarga (DGH)<br />William D. Paterson and Ir. Gandhi Harahap<br />November 2009<br />
  2. 2. Outline of Presentation<br /><ul><li>Scope and purpose of study
  3. 3. MTEF and PBB – international & Indonesia
  4. 4. Adopting MTEF in DGH program cycle
  5. 5. DGH Performance 2005-2009
  6. 6. Evaluation of RPJM2 2010-2014
  7. 7. PBB proposals for DGH
  8. 8. Recommendations on future steps</li></li></ul><li>Study Outline and Context<br />“Capacity Building Support to strengthen medium-term planning, programming, budgeting and performance management in BinaMarga, through the preparation of an MTEF” – 3 phases<br />Assist finalization of 2010 RPJM and MPW RENSTRA<br />Capacity-building to implement budget reforms<br />Assist preparation of 2011-2013 budget and program<br />AusAID assistance to GoI under Indonesia Infrastructure Initiative (IndII) (managed by SMEC International Ltd.)<br />
  9. 9.
  10. 10. MTEF and PBB – International Success Factors<br /><ul><li>Integrate MTEF with budget in single unified process
  11. 11. Improve public expenditure management at sector level first
  12. 12. Develop a performance-oriented budgeting system
  13. 13. Comprehensive - all budget resources available to sector
  14. 14. Detail in sector activities to encourage budget reallocation
  15. 15. Key stakeholders should participate in MTEF process – MOF, Planning, sector & beneficiaries, civil society
  16. 16. Accountability requires transparency - political & managerial
  17. 17. Monitor execution against planned outputs at activity level
  18. 18. Efficiency and effectiveness of resource use in implementation</li></li></ul><li>MTEF & PBB in Indonesia – MOF and Bappenas Guidelines<br /><ul><li>Authorization in Budget Law 17/2003
  19. 19. Medium-Term Expenditure Framework (MTEF) Guide, February 2005
  20. 20. Implementation of Performance-Based Budgeting and Medium-Term Expenditure Framework, June 2009
  21. 21. Pilot implementation for 2010-2014 now extended to all LMs
  22. 22. Sector reform (“ReformasiBurakrasi”) added for 2010</li></li></ul><li>Performance-Based Budgeting (PBB)<br />Current Issues:<br />Formulation of long-term plan and strategies do not include the resource envelope<br />Need to measure ‘achievement effectiveness’ and ‘expenditure efficiency’ of national development targets<br />Performance accountability of work units<br />Need to connect planning and budget at operational level<br />Concepts – Logical framework<br />Money follows function, function follows structure<br />Let the manager manage<br />Accountability<br />Top-down and bottom-up views both important<br />
  23. 23. Medium-Term Expenditure Framework (MTEF)<br />Concepts:<br />Connectivity of planning and budgeting <br />Basis for resource allocation & predictability of future budgets; <br />Impact of alternative policies on budget and outcomes<br />Baseline budget: Entire cost of implementing current policies in current year and in subsequent years<br />current prices, full costing, inputs, price parameters<br />Y0 (current), Y1 (budget), Y2-Y4 (Forward estimates)<br />Indicate Activity budgets and outputs by year<br />New Work Plan and Budget Document (RKA-KL): Output details, Outcome Achievement Strategy; Revenue Plan; Detail of Output Costs<br />
  24. 24. DGH PROGRAM CYCLE – ADAPTATION TO MTEF<br />
  25. 25. Performance of BinaMarga/DGH –Business results 2004-2009<br />Traffic Demand doubled<br />Resources nearly 4-fold higher after mid-term<br />National network extended 36% by reclassification and upgrading<br />Maintained 90% paved and 89% stable condition<br />
  26. 26. DGH RPJM1 Performance: Resource Allocation and Output<br />Preservation<br /><ul><li>Output increased only slightly
  27. 27. Preservation 1,400 km/yr = 4% of network
  28. 28. Development 3,000 km/yr = 9% of network
  29. 29. The Budget rose steeply 2007-08
  30. 30. Development expenditures up 80% 2008
  31. 31. Preservation expenditures up 75% 2009</li></li></ul><li>RPJM1 2005-2009 Program and Resource Use <br />But - Activity Average Cost increased by 2-3 times<br />Reasons? could be due to increased design standard, inflation, weaker competition or other factors<br />Average cost high:Preservation: IDR 2-3.5b/km = 2-3 x benchmarkDevelopment: IDR 3-6b/km = 1-2 x benchmark<br />Total coverage 12% network = 8 yr effective life<br />
  32. 32. DGH Effectiveness: Distribution of Condition Improvements <br />Change in extent Stable condition: by Island Group – 2005-2008<br />Network length, condition by Province<br />
  33. 33. Effectiveness of Preservation Program: Improvement of Poor Conditions by Province<br />Improved<br /><ul><li>Only minor improvements in extent of Unstable condition in most provinces
  34. 34. Targeted program eliminated Bad condition in many provinces
  35. 35. Overall Preservation program barely sufficient to counter deterioration</li></li></ul><li>DGH Performance Managing Expressway Network<br />Past development rate 20 km/y<br />Planned rate 80-150 km/y<br />Planned expressway density 100 km/million pop. < MY, CN, PH<br />Corridor travel demand increasing rapidly and speeds slow - needs analysis to show impacts and adequacy<br />Requires IDR 7-15 T/yr<br />Average cost IDR 70-85 billion/km = 15 x cost of 2-lane highway<br />APBN 12% of costs 2010-2014, rest PPP<br />Expressways largest user of PPP funds 2009-2011<br />What is optimal use of APBN, public funds to achieve the targets?<br />Expressway Length km<br />Age (decades)<br />
  36. 36. National Arterial and Strategic Road Networks<br />Issues<br />3 parts for planning purposes,4 functional parts (trunk route,trans-route, arterial, metro)<br />Road program costs appear high – avg. IDR 3 billion/effective-km ($300k/eff-km) – development content?<br />Road work activity costs seem high v benchmarks<br />Incremental approach to geometric improvement is costly in long-run<br />Short design life norm for preservation results in patchwork<br />Quality: how much life actually achieved?<br />Package size small (1000 @ 3 km avg)<br />Project management & procurement delivery fragmented, remote<br />
  37. 37. Evaluation of Draft RPJM2 & RENSTRA 2010-2014<br />Evaluated on basis of Output v. Needs, Average Activity Cost, and Allocation to Activities<br />Baseline Coverage:<br />Preservation & Development 5% each just adequate v. RPJM1<br />Bridges – 33% of unstable, 5.5% overall – OK if prioritized well<br />Alternative fiscal envelopes: Review prefers more priority to Development, more efficiency in Preservation<br />
  38. 38. DGH Performance Evaluation – Review Findings<br />
  39. 39. DGH Core Business and Performance Measures – Proposed PBB Focus<br />
  40. 40. DGH - Key Performance Indicators – E1 <br />
  41. 41. Improving Performance:(1) Trans-Regional Travel<br />Trans-regional Road Systems: Asian Hwy; ASEAN hwy; GoIUniform standard along route<br />Trunk routes (lintas): width, condition; existing alignment, friction, Vdes 60 km/h<br />Main trunk routes(lintasutama): improve width, condition, friction; minor realignment Vdes 80 km/h?<br />Expressways (Jl. bebashambatan): Vdes 100 km/h, new alignment, limited access, staged; finance PPP, some direct toll<br /><ul><li>Long-term development plan (25+ yr)
  42. 42. Connectivity - % LTDP
  43. 43. Extent open (by route) km, %
  44. 44. Travel time (hr per 100 km direct)
  45. 45. Vehicle travel – veh-km by route
  46. 46. Safety – fatality/10k veh, star-rating
  47. 47. Condition – congestion, structural, %
  48. 48. Cost – constr. cost/km by route
  49. 49. Finance – budget plan, by P-P source</li></li></ul><li>Trans-regional networks – program delivery<br />
  50. 50. Improving Performance:(2) Enhancing Effectiveness, Value for Money<br />Condition %<br />Effectiveness – improving performance with same funds<br />(a) Extend Design Life:Annualized Whole Life Cost = <br /> Routine maint/yr + periodic maint/life + rehab/reconstruction/life<br />Short design life (5, 10 yrs) was good policy in 1980s-90s – but<br />Full design life (10, 20 yr) saves 30% in long-term average cost, despite 40% higher initial cost<br />Report “Expected Life” of asset – similar to residual life<br />Age, yr<br />
  51. 51. Improving Performance:(2) Enhancing Effectiveness, Value (c)<br />(b) Improve Quality and Performance:<br />Quality is complex – simple measure is actual life of work<br />e.g., 30% lost life due to poor quality causes 42% increase in budget requirements<br />Historical Life: life since previous surfacing to new work or to ‘unstable’ condition<br />Record the spending history and work activities on asset<br />Monitor the actual life achieved at asset level<br />Historical Pavement Life<br />Historical Pavement Age<br />Historical Surfacing Life<br />Road SLD – Work History<br />9+00<br />28+00<br />
  52. 52. Improving Performance: (3) Efficiency in Work Program Delivery<br />
  53. 53. Project Cycle Timeline and Linkages<br />PROJECT CYCLE TIMELINE<br />FORWARD ESTIMATE<br />FUNDS SCHEDULE<br />FP Bond<br />SK-PPK<br />RAPBN <br />SAT 3<br />DIPA AP IPC ………..<br /> PFD BD ITB<br />PROJECT MILESTONES<br />CAR CS NTP<br />PI PA<br />PHO FHO EV<br />PROJECT PHASE<br />PREPARATION<br />PROCUREMENT IMPLEMENTATION EVALUATION<br />
  54. 54. Improving Performance: (3) Efficiency in Work Program Delivery (cont)<br />
  55. 55. Improving Performance: (4) Institutional Implications <br />
  56. 56. Arterial and Metro – Areas for Consideration <br />For multi-year optimization (5-yr, 3-yr and life-cycle), resource requirements and allocation at national level – use existing IRMS planning system <br />For asset-specific project identification and life-cycle design within allocated resource envelope - new “Asset Program Optimization Tool”<br />Simple linear and map views for managing design and consultation<br />Develop 3-5-yr periodic, reconstruction & renewal program for each route, minimizing costs within allocation<br />For integrated delivery of work activity implementation – Assess options to consolidate and focus competencies and staff<br />Procurement process <br />Engineering design and supervision<br />
  57. 57. Facilitation of Road Management in Local Government Road Agencies<br />Existing role – technical standards and guides, and professional training<br />New leading role - To fulfil vision & accountability for an “integrated road system”, DGH would need:<br />Providing tools for program preparation and project design<br />Improving budget allocation and network performance<br />Advise on institutional options, eg. Road Board & Fund for managing user revenues and road management<br />Monitoring & Evaluation – sustain effectiveness<br />Propose Outcome Indicator: “Condition of local road network” (Prov, Kota, Kab) - % stable, % paved<br />
  58. 58. Implications for Next Steps<br /><ul><li>Finalization of new PBB-structure for DGH program
  59. 59. Capacity-building in applying MTEF, PBB
  60. 60. Analysis and scoping of potential reform options:</li></ul>Expressway administration and integration<br />Streamlining or consolidation of program implementation function – PAN, Bintek, Wilaya, Balai, Satker, PPK<br />Appraisal for potential new tool for life-cycle design and performance monitoring<br /><ul><li>Preparation of 2010 and 2011-2013 program – what support, timing?</li></li></ul><li>Terimakasih<br />Thank you<br />

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