Local Economic Governance

1. Promoting and Sustaining Multi-stakeholders’ Process
To Make Local Governance Works for Poverty Reduction
In Less Developed Region
Case of Nusa Tenggara Barat1
Dr. Astia Dendi2
Following the 1997’s financial crisis, Indonesia embarked on implementing “big
bang decentralization policy” devolving massive functions and responsibilities
to local governments. Some previous studies revealed that the impacts of
decentralization to local governance and development vary considerably
among regions. In contrast to numerous recent studies emphasizing the
central government’s perspective, this study examined local perspectives and
processes to shape a dynamic local governance as an attempt to promote
pro-poor and sustainable regional development. We analyzed empirical
evidence from Nusa Tenggara Barat province focusing on concept and
prospects of Multistakeholders Fora as a local governance instrument to
pursue pro-poor local-regional economic development (LRED) policies and
programmes. Within this focus we explored following questions: How did the
concept of Multi-stakeholder’s Fora evolve in the region?; How did the Fora
define priorities for collaborative actions and allocate responsibility sharing?;
What roles did the Fora play in making local governance and markets work for
the poor?; and What factors are critical to sustaining the Fora? This study
uncovered that the Multi-Stakeholder Forum, as it was developed in Nusa
Tenggara Barat, was a prospective role model to pursue pro-poor LRED
objectives. Furthermore, the study identified factors critical to sustaining the
multi-stakeholders’ process and suggested ways to address them applying
political economy perspective.
Key Words: Local economic development, local governance, multi-stakeholder
process, political economy, regional development.
1
A paper accepted for oral presentation at the International Conference on “Political Economy of
Regional Development, organized by Indonesian Regional Science Association (IRSA) and
Agricultural University of Bogor, held in Bogor, 21-23 July, 2009. www.irsa.or.id
2
Correspondence: Dr. Astia Dendi, GTZ Senior Advisor for Regional Development, Good Local
Governance/ Decentralization Programme in Nusa Tenggara Barat. Email dendi@gtz.or.id. Fax:
+62370626049. Internet www.gtz-decentralization.or.id
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2. Contextual Issues and Regional Overview
The Indonesian economic development before the 1997’s Asian financial crisis
had not only brought about some notable improvements but also some undesirable
outcomes. For more than two decades, the strong and persistent focus of development
policy in Indonesia on high economic growth had resulted in substantial improvement of
quality of life along with increasing income per capita, reducing poverty and
unemployment. However, there had been little attention to build the capacity of local
government and private as well as civil society institutions in the past. This led to
inefficient and ineffective resource allocation, uncompetitive private sector and
natural resource degradation. Prominent scholars and politicians believed these were
underlying factors, among others, of the recent financial crisis faced by Asian countries
including Indonesia.
Following the 1997’s financial crisis, Indonesia embarked on implementing “big bang
decentralization policy” devolving massive functions and responsibilities to local
governments. The decentralization policy, which began in 2001, has led to the
devolution of authorities to local governments. Thus, theoretically these sub-national
governments have more opportunities and responsibilities to develop their regions
according to local needs and aspirations and in cooperation with civil society
organizations. Within the framework of decentralization, the Indonesian government has
implemented many efforts toward better service delivery, sustainable growth and poverty
reduction. Local governments, being at the front line of service delivery, are the
proponents of the democratic process by involving citizens into the local governance
process. Indeed, a multi-level-approach and cooperation between governmental
representatives, the private economic sector and of civil society are necessary.
However, the implementation of decentralization and governance policies has not
always been a smooth process and significant challenges remain. Some previous
observations (KPPOD and the Asia Foundation 2007; Kerstan et al., 2004; Dendi and
Zaini, 2007) revealed that the impacts of decentralization to local governance and
development vary considerably among regions.
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3. To address the above mentioned challenges, the degree of coverage and
the quality of selected public services, particularly health, education and local
economic development, should be increased. These call for institutional and
capacity development at all levels, but more insistent at local and regional levels.
The islands of West Nusa Tenggara (NTB) mark the natural point of transition
between the flora and fauna of Western and Eastern Indonesia. The two largest islands
in the province, namely Lombok and Sumbawa, earmark the difference of the northern
part of the province, which is mountainous and lush with trees, with the southern and
eastern parts are arid and covered by savannas.
The province of NTB is home to about 4.2 million people. The majority of the
population is Islamic and originates from the Sasak tribe, predominantly situated on
Lombok island, while the tribes of Bima and Sumbawa are the largest ethenic group on
the island of Sumbawa. The socio-cultural pluralism is also obvious in the use of
language: Sasak, Mbojo,, Samawa, Balinese, Bugis and Javanese languages are used
respectively in daily communication. The plural society can be considered as an
invaluable asset as well as a challenge towards the region’s development.
West Nusa Tenggara’s economic performance is significantly weaker than those of
its neighbouring provinces. Despite its predominantly arid climate, agriculture remains
the backbone of people’s livelihood and of local economic development. Agriculture
contributes nearly one third of the Gross Regional Domestic Product (GRDP). The
regional economy of NTB has been growing moderately with an increase of 5% (BPS,
2007) in recent years.
However, a relatively high percentage of the population, approximately 27.17% in
2006 are living below the poverty line. A more recent official report (BPS, and
BAPPEDA, 2008) revealed a considerable decreasing trend of poverty incidence in
Nusa Tenggara Barat to 24.99% and 23.81% in 2007 and 2008 respectively. Moreover,
unemployment rates in the region remain considerable although sligthly decreasing.
Furthermore, it turns out that, although the Human Development Index (HDI) of NTB
has shown a slight increase during recent years, it remains among the lowest in
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4. Indonesia. A high level of poverty, unemployment and social inequality coincides with a
high rate of school drop-outs and a high illeteracy rate (16% for men and 29% for
women) which is higher than the national average. Furthermore, more than two thirds of
the illeterate people live in rural areas. In line with poverty rates, malnutrition and infant
mortality levels are rising.
While decentralization in theory offers a vast potential to cope with these problems, in
order to stimulate local and regional economic development and reduce poverty, a
cohesive and operational strategy for local governments and private sector stakeholders
is required. Toward these objectives, the Good Local Governance (GLG) project
supported by GTZ (German Technical Cooperation) and its counterparts at national and
regional level develop a number of governance instruments including the Good
Governance Award, Pro-poor Value Chain Analysis (VCA) and Local Economic
Governance Forum (LEG Forum). More specific objectives and scope of the paper is
explained in the following section.
Objective and Scope of the paper
The paper explores empirical experience on stakeholder’s initiative from Nusa
Tenggara Barat province in designing and fostering pro-poor local and regional
economic development (LRED) approach. The study aimed at understanding concept
and prospects of Multi-stakeholders’ Forum as a local governance instrument to pursue
pro-poor LRED strategy and governance services. Within this focus, following
questions were addressed: How did the concept of Multi-stakeholder’s Fora evolve in
the region?; How did the Fora define priorities for collaborative actions and allocate
responsibility sharing?; What roles did the Fora play in making local governance and
markets work for the poor?; What factors are critical to sustaining the LEG Forum, or in
a broader perspective and What lessons can be learned to promote the approach to
other regions with similar characteristics?
Evolving Perspective on Good Governance
In the framework of decentralization, the notion of good governance has been
continuously debated. However, scholars and policy makers increasingly accept that
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5. good governance is essential instrument to achieving decentralization objectives. Many
proponents of pro-poor local/ regional economic development approach also share such
perspective. Recently, however, there is a growing number of literatures that adopt or
promote the UNDP’s notion of governance and good governance criteria. UNDP (1997)
describes governance as the exercise of economic, political and administrative authority
to manage a country’s affairs at all levels; it comprises the mechanisms, processes and
institutions through which citizens and groups articulate their interests, exercise their
legal rights, meet their obligations and mediate their difference. Governance, thus, has
three legs (UNDP, 1997), namely economic, political and administrative. Economic
governance includes decision making processes that affect a country’s economic
activities and its relation with other economies. Economic governance would,
therefore, have far reaching implications to equity, poverty and quality of life. Political
governance is the process of decision making to formulate policy. Administrative
governance is the system of policy implementation. Furthermore, the UNDP’s notion of
governance maintains that governance encompasses not only the state but also the
private sector and civil society organizations3.
Along with the concept of governance, UNDP (1997) emphasizes that core principles
of good governance are participation, transparency and accountability. In addition, good
governance is also effective and equitable and it promotes rule of law. Furthermore,
good governance ensures that priorities setting in political, social and economic
activities are based on broad consensus in society and that the poorest and the most
vulnerable people are heard in decision-making over the allocation of development
resources.
3
UNDP (1997), defines that the state includes political and public sector institutions along with
argument that this definition consistent with its primary interest to focus on how effectively the
state serves the needs of its people. Meanwhile, it defines that private sector covers private
enterprises (manufacturing, trade, banking, cooperatives and so on) and the informal sector in
the marketplace. Civil society encompasses individual and groups (organized or unorganized)
interacting socially, politically and economically regulated by formal and informal rules and
laws.
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6. Theoretical and Conceptual Framework to Understand Local Economic
Governance Forum
Local Economic Development (LED) and Governance Perspective
Local economic development should not be seen as exclusive, but as an integral part
of regional development. GTZ (Rücker and Trah, 2006) characterized direction and
criteria of local economic development initiative, namely:
- Stimulate growth of local economies and create new job markets,
- Make the best use of available local resources,
- Create space and opportunities to balance supply and demand, and
- Develop new business opportunities.
More recently, however, a group of experts on behalf of GTZ (Grossmann, and
Ellwein et al., 2006:1) defines local and regional economic development as:
“…is a process to mobilize stakeholders from the public and private
sectors as well as from civil society, to become partners in a joint effort to
improve the economy of a defined subnational territory and thus increase
its competitiveness”.
The GTZ’s notion of LRED clearly departs from conventional “stand-alone private
sector development interventions” and pursues multi-stakeholder process. This means,
as these scholars argue, that it is not what we are doing that makes LRED different from
other conventional and blue-print interventions, but how we are doing it.
Meanwhile, UN-Habitat (2005:8) defines local economic development (LED),
“…is a participatory process in which local people from all sectors work
together to stimulate local commercial activity resulting in a resilient and
sustainable economy. It is a way to help create decent jobs and improve
the quality of life for everyone, including the poor and marginalized”.
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7. The UN-Habitat’s notion of LED is coherence with the pro-poor LED perspective
introduced by GTZ in Nusa Tenggara regions (Kerstan, and Dendi et al., 2004). These
scholars emphasized that pro-poor local economic development (LED) should focus on
achieving three inter-connected goals: (i) creation of economic growth and job markets;
(ii) reduction in the number of poor people, and in turn (iii) realization of sustainable
livelihoods. To achieve these goals, focus is on three strategic dimensions:
attractiveness, resilience and competitiveness of the local economy. These three
dimensions do not exist in isolation, but form an interdependent chain. Thus, all factors
that generate attractiveness and resilience are fundamental to creating competitiveness.
These emerging definitions and strategic frameworks of local and regional economic
development led to the identification of three essential elements of LRED, namely: (i)
Participatory process; (ii) Capacity building at all levels; and (iii) Sustainable utilization of
local potential (resources). In addition, LRED approach emphasizes local control and
ownership. Thus, local and regional economic development partnerships integrate
efforts to stimulate actors, organizations and resources, while developing new
institutions through dialogue and strategic activities.
Local economic development and good governance
In the framework of local economic development, the United Nations Human
Settlements Programme (UN-Habitat, 2005: 19) defines governance as:
“…is the sum of many ways individuals and institutions, public and
private, plan and manage the common affairs of a city or other local area.
It is a continuing process through which conflicting or diverse interests
may be accommodated and cooperative action can be taken. It includes
formal institutions as well as informal arrangements and the social capital
of citizens”.
The UN-Habitat’s notion of governance emphasizes process, meaning that it focuses
on how these diverse actors with different priorities make decisions, given their
complex relationship. Adequate understanding of formal and informal decision making
process at local/ regional level is critical for promoting multi-stakeholders’ initiative to
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8. pursue pro-poor local/ regional economic development objectives. In this line of
perspective UN-Habitat (2005) argues that a critical link between good governance
concept and local economic development is the need to establish a business enabling
environment.
Furthermore, UN-Habitat argues that democratic system is necessary but does not
always guarantee a successful local economic development. The foundation for success
is capable institutions at local level. Along these lines of arguments, UN-Habitat (2005:
page 20-21) suggests that strong and appropriate institutions should be established
along with support for institutions and strategies which combines governance and
culture. In addition, a successful LED needs clear decision rules and procedures such as
effective business codes, land-use zones that promote long-term plans rather than
politically expedient, short-term decisions. Moreover, UN-Habitat (2005) suggests that
the political environment must be safe; poor or corrupt economic policies and weak
government systems can negatively affect local economic development by raising risks
and increasing production costs. Without a safe investment environment, local human
and financial capital will migrate away from the local area, and it would be difficult for
the area to attract outside investors. Furthermore, enabling environment should have a
high ease of business entry and efficient regulation-enforcement (Un-Habitat, 2005).
Public choice and new Institutional economic
Since the days of classical political economy, economists have been interested in
issues of individual choice of actors in given institutional settings, namely in decisions
on allocation of resources in markets (Kirchner, 2007). Issues of the institutional setting
as such institutional issues have been touched but have not been analyzed in full detail
(Kirchner, 2007). It has been understood that private property, freedom of contract and a
stable currency have been necessary prerequisites for functioning markets (Kirchner,
2007). Thus, this line of economic perspective emphasizes decision making by
market participants as the main topic of economic. Economic could, therefore, be
understood as a branch of general theory of individual choice (Kirchner, 2007).
Furthermore, the notion of individualism has been supported by two fundamental
assumptions namely scarcity of resources and self-interested rational behavior
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9. (Kirchner, 2007). The notion of methodological individualism combined with these two
fundamental assumptions establish ‘economic paradigm’.
The concept of public choice expands the application of economic paradigm to non-
market institutions, e.g. the state with its voting mechanism and its bureaucratic system
(Kirchner, 2007). Thus, the public choice approach in the analysis of politic and the
state considers voters, political decision makers, bureaucrats and legislators as self-
interested rational decision makers.
Figure 1 presents a conceptual framework to explore and understand a multi-
stakeholders’ interaction in the framework of promotion of pro-poor local and regional
economic development (LRED), and guided by three core principles of good
governance. The framework hypothesizes that self-interested rational actors voluntarily
engage themselves in a multi-stakeholders’ platform for collective learning, collaborative
decision making and responsibility sharing to pursue their shared interest, namely pro-
poor local/ regional economic development (pro-poor LRED) objectives. There has no
consensus been reached on the definition of pro-poor strategy. Nevertheless, in this
paper, the pro-poor concept emphasizes several key principles (Kerstan, and Dendi et
al., 2004): (i) investment in improving the human and social capital of poor people; (ii)
policies and services that result in the widespread and sustainable availability of people's
basic needs (access to food, clean water, housing, health and education); (iii) policies
and services that reduce transaction costs, so giving poor people more opportunities to
obtain employment and/or greater value added from their own enterprises; (iv)
increasing poor people's access to economic resources (capital, land/space, tools of
production, market information, and so on); and (5) environment-friendly development
that conserves or improves ecological function and the capacity of natural resources to
produce.
The term “platform” as I use in this context represents and combines two
fundamental concepts, namely institution and organization respectively. Institutions as
North (1990: 3) defines are the rules of the game in a society or, more formally, are the
humanly devised constraints that shape human interaction. In consequence, North
(1990) argues, institutions structure incentives in human exchange, whether political,
social or economic. Institutional change shapes the way societies evolve through time
and hence is the key to understanding historical change. Institutions include any form of
constraint that human beings devise to shape human interactions; it can be both formal
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10. constraints such as rules, and informal constraints such as conventions and codes of
behavior (North, 1990). Meanwhile, organizations are group of individuals bound by
some common purpose to achieve objectives (North, 1990: 5); they include political
bodies (political parties, the Senate, a city council, a regulatory agency), economic
bodies (firms, trade unions, family firms, cooperatives), and social bodies (churches,
clubs, athletic associations), and educational bodies (schools, universities, vocational
training centers). In view of these perspectives, a Local Economic Governance Forum
should be understood not only a process (regular events of stakeholders’ dialogues as
many people used to understand it but a systemic organization to pursue certain local/
regional economic development objectives through promoting dialogues and
collaborative actions at local and regional levels.
Figure 1: A conceptual framework of good local economic governance
The attractiveness and competitiveness dimension of a region (an economy) shaped by
many factors which, among others, include the economic structure and enabling
environment as discussed in the previous sections in line with the perspective of UN-
Habitat (2005). Meanwhile, the concept of resilience was adopted from a theory
pioneered by ecologists that see the economy as an ecosystem (ecological nation) that
is striving to maximise the long-term value of limited land resources by developing
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11. interdependent biological systems (Kerstan et al., 2004). In other words, diversity and
interdependence of species and environments is a key factor in building the long-term
productivity and resilience of a system. Resilience is a dynamic concept. Put simply, the
resilience of an economy refers to the ability of an economy to adapt and recover from
economic and non-economic pressures. In an ever-changing environment, in which
opportunities and risks may appear at any time, each economic unit, be it the household,
company or region, needs to be prepared. For enhancing resiliency of an economy,
therefore, it is necessary to establish cohesive interdependency and collaborative
actions among all stakeholders, foster capacity building at all levels, promote prudent
management and use of natural resources, develop scalable diversity of both products
and markets, and to establish policy that promote equity.
The Local Economic Governance Forum: Evolving concept and some evidence
from West Nusa Tenggara
While numerous traditional kind of community institutions have been existing,
establishment of converging institution at community, local and regional levels to
pursue shared objective to improve governance and the provision of public services
related to economic development could be considered as a recent innovative invention
in eastern Indonesia. Policy implementation in the past had not only resulted in
significant improvement in livelihood of the people but also some critical issues
including social inequity and environmental destruction. As well, the vulnerable groups in
society, both in rural and urban areas, failed to have full access to public services and
missed the intended benefits of the past and the ongoing development activities. While
decentralization contains a high potential to cope with these problems, a cohesive
and replicable strategy for local governments and development organizations remains
to be set up. Therefore, instruments and a platform for fostering stakeholders' dialogs,
collective learning and formulation of appropriate policies and programs that reduce
vulnerabilities and poverty are needed. These led some international development
organizations, e.g. the German Agency for Technical Cooperation (GTZ GmbH), local
scholars and civil society leaders to promote stakeholder forum as a means of
addressing these challenges.
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12. Figure 2: A generic model of LEG Forum membership elements
Figure 2: Typical Local Economic Governance Forum membership
Along with the perspective on role of Stakeholder’s Fora described in the early part of
this section, local stakeholders in some districts/ municipalities established LEG Forum
at district level. A LEG Forum consists of individual with strong interest in fostering pro-
poor local economic development, namely the member of civil society organization,
member of local parliament and non-government organizations, staff of local
governments, member of producer's association as well as local business association.
Theoretically, the Local Economic Governance Forum is an instrument that can be
used by local governments, small and medium-sized enterprises and civil society
organizations in order to improve structures and processes of public service provision. A
better business climate was devised as an immediate result of this concerted effort,
which should finally help alleviate poverty. Qualified intermediary organizations and
eligible local economic development consultants were involved to advise sub-national
governments, legislatives and other relevant stakeholders. This expectedly could result
in the establishment of improved LED stakeholder forums and to an improved quality of
LRED dialogs and networks.
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13. In practice, the LEG Fora were established through participatory processes.
Typically, it begins with the pioneers' approach to envision the local stakeholders
regarding the need for and possible benefits of a LEG Forum through peer-to-peer
learning or informal communication approach. This is a critical stage of the forum
establishment; but once the local people or community members share the vision, then
the next steps will be more workable. It turned out that the establishment of a LEG
forum was neither a linear process nor it was a blue-print approach; it involved
participatory processes in situation analysis to understand challenges and opportunities,
defining common issues to be addressed (missions and objectives) as well as to agree
on a realistic collaborative actions plan to be implemented toward achieving expected
objectives and impacts. Figure 3 illustrates typical process of LEG Forum
establishment as it was implemented in Bima and Dompu district respectively (Dendi et
al., 2007).
I will refrain from giving explanation that is more detailed on LEG forum
establishment processes, and will proceed with the description of empirical
experience of existed LEG Forums in Nusa Tenggara Barat region.
Figure 3: Typical process of establishment and development of multi-
stakeholders’ LEG dialogues and collaborative action
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14. In Dompu district (West Nusa Tenggara province), the local stakeholders
established LEG Forum in 2003 within the framework of support to local governance
sponsored by the Deutsche Gesellschaft für Technische Zusammernabeit (GTZ)
GmbH- the German Agency for Technical Cooperation. The role of GTZ was on
conceptualizing the LEG Forum, facilitating the multi-stakeholder process toward
establishing LEG Forum, and developing technical and management capacity of the
forum members. Since then, the LEG forum has been active in local economic
development (LED) processes in the district, ranging from situation analysis, awareness
building among local stakeholders, organizing stakeholders' dialogs or policy debates,
being active in LED planning at district level. Being consistent with pro-poor
development, I recently observed evidence of significant role and contributions of the
LEG Forum in Dompu district to mobilize local resources as well as improve access of
the micro and small enterprises (MSEs) to LED services and to prospective regional
markets. To mention some of the results, the LEG forum in Dompu had made the
establishment of a cooperative unit, namely Koperasi Permata Bahari, for the deprived
sea weed producers in a remote island (Bajo island of Kwangko village) in Dompu a
success and then had helped link the cooperative to a buyer company (seaweed
exporter) in neighboring province (Bali). Access to such regional market allowed the
seaweed producers and small local traders to enjoy higher value-added and become
less vulnerable. Author’s recent interview with the head of Cooperative Union, namely
Syarifudin4, revealed that all cooperative members as well as village traders of
seaweed were able to reap benefits from direct marketing to Bali and from the
international market dynamics. In the early of 2006, the Cooperative Permata Bahari
was only able to supply 10 metric tons of seaweed per month out of 300 metric tons
demanded by a buyer company in Bali (PT. Indonusa Algaemas Prima) at a price
range between Rp. 5,000 to Rp. 6,000 per kilogram depending on quality and price at
international markets. More recently, the normal price of seaweed in Bali market
varied from Rp. 7,500 to Rp. 9,000 per kilogram. The Permata Bahari Cooperative
informed the author recently that during the second semester of 2008, it enjoyed extra
ordinary seaweed price, varied from Rp. 15,000 to Rp. 19,000 per kilogram, due to
4
Personal interview with Syarifuddin at Hotel Grand Legi, Mataram, on 25th of April, 2007. More
recent data regarding success story was derived from author’s recent correspondence with
Syarifuddin (6 November, 2008) as well as author’s observation and interview with a number
of key resource persons from LEG Forum in Dompu and a number of personnel of the district
government of Dompu.
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15. supply deficit in the international market resulting from harvest failure in several other
exporting countries such as Cambodia and the Philippines. Two years after its
establishment, Permata Bahari Cooperative doubled its capacity to supply the need of
Buyer Company in Bali, approximately 25 metric tons of seaweed per month. Even
more, during 2008, Permata Bahari could increase its ability to supply approximately
30 metric tons of seaweed to its buyer company in Bali, of which approximately 60-70
per cent of this quantity was produced by the cooperative members. In addition, it
turned out, that the number of households (of seaweed producers) that joint Permata
Bahari cooperative increased remarkably from 20 households (2004) to 45 households
(2008), out of approximately 200 seaweed producing households in the area. Nearly all
of these seaweed producers, however, had become customers of Permata Bahari
cooperative. In a few coming years, the ability of Permata Bahari cooperative to meet
the demand of the buyer company in Bali seems to increase considerably taking into
account the growing interest of middlemen traders from Dompu district as well as from
outside Dompu, e.g. Bima district and Bima city respectively, to sell seaweed to
Permata Bahari Cooperative.
Indeed, seaweed cultivation in Bajo islands, which administratively belong to
Kwangko village of Dompu district, began in the midst of 1990s, pioneered by a number
of fishermen who found some growing seaweed in the territory of Sumbawa district.
These fishermen took home some planting materials and grew it in their village territory.
Bajo islands shared about 50% of the total population of Kwangko village. Two years
after first seaweed planting in Bajo, nearly all 200 households leaving in these small
islands engaged themselves in growing seaweed and since then seaweed has become
primary income source of these households. However, lack of knowledge and capital
besides weak community’s organization and poor accessibility of the area constrained
them to creating a more economically viable and profitable seaweed production. Some
traders pioneered establishment of seaweed value chain to outside region, particularly
to Bali province. These traders, however, failed to maintain high quality and
economically profitable scale of seaweed supply to buyers in Bali.
In the end of 1990s, before the concept of LEG Forum was developed, GTZ
identified Kwangko as a poor village and included it in pilot areas for poverty reduction
initiative adopting local economic development approach. The end of 1990s signified
the first phase of GTZ interventions in Kwangko during which GTZ recruited a young
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16. undergraduate scholar and assigned him to work in the village as Village Motivator or
Change Facilitator. In a later stage, GTZ and the district government of Dompu jointly
enhanced community’s commercial initiative by stimulating collaborative action to
establish self-help groups, collective fund and post-harvest handling infrastructure for
seaweed since 2001. In addition, GTZ and the district government of Dompu provided
relevant technical training as well as managerial training for community members in
Kwangko village. Figure 4 summarizes role of involved actors including the LEG
Forum in pursuing pro-poor local economic development (LED) objectives since the
end of 1990s.
Figure 4: An example of role sharing in a multi-stakeholder process to
pursue pro-poor LRED objectives
The success story in Kwangko village among others, arguably stimulated the LEG
forum and local policy makers to develop and launch mass program of seaweed
production and governance services, namely “Gerakan Darul Muttakin”. The
programme was launched in 2007 in which for its first phase (2007-208) the local
government together with local parliament approved a substantial amount of budget
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17. (approximately Rp. 1.5 billion or about 150,000 US dollar) for the provision of training,
inputs such as improved planting materials, infrastructure for post harvest handling,
support market promotion, etc. The Darul Muttakin initiative set a target to engage as
many as 1000 farm-households in producing seaweed toward the end of 2009. It
targeted to increase the production of seaweed by at least 8,000 metric tons in the end
of 2008. Toward the end of 2009, the total increase of production through Darul
Muttakin initiative was targeted to achieve at least 24,000 ton, assuming average
production of 32 ton per hectare per year year. Toward these goals, the district
government of Dompu targeted to extend seaweed cultivation by 250 and 500 hectares
in 2008 and 2009 respectively.
Meanwhile, a LEG Forum in district Bima (West Nusa Tenggara province)
established in 2003 had shown some prospective roles and contributions to pursue pro-
poor local economic development objective through strategic planning. Through a
further desk study (Jefris and Mahman, 2006) combined with selected key informants
interviews we found a pattern of LEG Forum’s role in Bima as presented in Figure 5.
Figure 5: Establishment and role of LEG Forum in Bima district
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18. Furthermore, this study identified that LED stakeholders in Bima district developed a
thematic Forum for small handicraft and home industry entrepreneurs, namely
FORMAT─Forum Bima Kreatif, in addition to the existed “broad-based LEG Forum”.
Local intermediary organizations, namely CeDES (Center for Development Studies) and
the Regional Council of Handicraft Promotion (DEKRANASDA) played active role in the
establishment of this Forum. In addition, GTZ and its district government counterpart
(the district government of Bima) also shared responsibility to support establishment of
the Forum through Good Local Governance and Decentralization Programme. This
newly established thematic Forum were already played substantial role in organizing
stakeholder’s dialogues and in stimulating collaborative resource allocation for collective
actions together with DEKRANASDA and CeDES. The Forum assisted the local
producers to explore and get access to new market opportunities, particularly for the
case of women-produced handicrafts and seaweed. To mention some examples, the
conceptual support and facilitative role of the LEG Forum (FORMAT), made the
promotion of women-produced small industry products including weaving products,
jewelry products and natural bees honey during the recent Jakarta’s 11th International
Handicraft Trade Fair. (INACRAFT from 22-26 April 2009) a greater success than it was
in the past with a total revenue more than one billion Indonesian rupiah mainly from
direct transaction during the event. In addition, participating producer’s groups in
INACRAFT event had help establish marketing links and even starter transaction
contracts between these producers and some buyer companies5. The LEG Forums
including the FORMAT have been playing active role and contributing substantially
to developing midterm development plan as well as the annual actions plan to
develop local economy and reduce poverty. Furthermore, Forum Bima Kreatif in
collaboration with the Center of Development Study in Bima (CeDES) was
conceptualizing and organizing stakeholders’ dialogues toward establishing inter-
district/ municipal cooperation among Bima city, Bima and Dompu district respectively.
As the Forum and CeDES envisaged, such inter-municipal cooperation should first
focused its attempts to creating a more conducive local/ regional business climate.
Therefore, the first and second round stakeholders’ dialogues set a focus on
5
Author’s interview with Arief Rachman (Executive Director of the Centre of Development
Studies-Bima) and H. Nurdin (Head of the Small Industry Forum, namely Forum Bima Kreatif) on
27 April in Mataram on their way home to Bima after their participation in the 11th INACRAFT in
Jakarta. See also www.kabarindonesia.com with an article uploaded in the website on 30th of
April 2009 entitled “Produk Kerajinan Bima Diminati”.
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19. developing common understanding on existing regulatory frameworks and their
impacts to local and regional competitiveness. The next stakeholders’ dialogues was
expected to accomplish a regional workshop to present the results of previous
roundtable discussions and explore workable solutions to creating more conducive
business climate and ultimately achieving more pro-poor LRED outcomes.
Meanwhile, the government of Mataram has endorsed the establishment of an LEG
Forum at city level (so-called Tim PEL) with conceptual support from GTZ (through
Decentralization and Good Local Governance program) and the Indonesian National
Development Planning Board (BAPPENAS). The Forum played active role in organizing
dialogs to stimulate collective learning and allocation of resources for collaborative
actions to support pro-poor local economic development initiatives. Influenced by the
LEG Forum, the Municipal Development Planning Board (BAPPEDA) of Mataram in
collaboration with a local Foundation for Community Development (namely STIGMA)
and the Regional Council of Handicraft Promotion (DEKRANASDA) supported a joint
initiative to establish a Women Entrepreneurs Forum (namely Forum Putri
Sangkareang). Furthermore, Forum Putri Sangkareang accomplished an initiative to
establish a women cooperative union involving all forum members as the Board of
Founders. The author identified during 2008 and early 2009 that these initiatives had
considerably enhanced visibility and participation of the marginalized groups in policy
dialogs and access to economic-related local government’s services including
managerial and technical training courses, information on market opportunities and
provision of technical tools and startup capital to eligible micro and small entrepreneurs
among others6. By early 2009, at least 115 women who run micro or small-scale
industry had accomplished a 3-day training course in business planning and
cooperative management, of which approximately half of them were from Mataram
city. The enhanced visibility and participation of these groups in development planning
and policy dialogs, in turn, potentially broaden the opportunity of the poor to gain
benefits (value-added) from participation in LED initiatives.
Furthermore, a series of LED roundtables discussions (multi-stakeholders dialogues)
organized by these LEG Forums and intermediary organizations such as the P2KP
6
Personal communication with Drs. H. M. Ainul Asikin, Msi. (Head of Municipal Development
Planning Board of Mataram, Drs. Jana Hamdi (Head of Executive Committee of the Local
Economic Development Forum of Mataram city) and Dr. Zainuri (Director of Stigma Foundation)
during LED roundtable discussion at SMKN 5 Mataram on 10th of February 2009.
Page | 19

20. (Research Centre for Population and Development Study of Mataram University) and
STIGMA Foundation among others has led to establishing a Design Clinic─ a capacity
building and value chain promotion institution for pearl-based industry. The Design
Clinic brought together different actors (competent teachers from related vocational
schools, local entrepreneurs, designers, researchers, intermediary and governmental
organizations). As not-for-profit multi-stakeholders service providers, the Design Clinic
was integrated into a state-own vocational school (namely SMKN 5) in Matram city
considering its competency (human resources, training facilities, etc.) and commitment
among others. Such institutional setting showed a distinctive model , which would
enable government and non-government organizations to allocate resources and
responsibility sharing for enhancing pro-poor human resource and value chain
development in the pearl-based industry (pearl-gold-silver products).
Regional Level Initiatives
Pro-poor local/ regional economic development initiatives (LRED) evolved not only at
local but also regional level. Empirical experience involving multi-stakeholders in Dompu
and Bima district arguably induced the initiative to establish a regional forum, namely
FORMULA-Seaweed Governance Forum of Sumbawa Island, to foster more productive,
increased economy of scale, more competitive and fairer seaweed value chain.
The Seaweed Governance Forum prospectively improves the governance of seaweed
value chain and value-added to local producers, business doers along the value chain
and to the region. The recent dialogue held in Dompu district accomplished
establishment of Executive Committee of the Forum which then endorsed by the
Governor of Nusa Tenggara Barat. Furthermore, the stakeholder’s dialogue in Dompu
established the Forum’s priority agendas for 2009-20013. Furthermore, this initiative
stimulated the Board of Integrated Regional Economic Development for Bima region
(on behalf of the provincial government of Nusa Tenggara Barat) to establish a joint
Secretariat involving the Seaweed Governance Forum Committee for improving the
pro-poor governance of seaweed value chain (from production to marketing). It turned
out that the Joint Secretariat was established during early March 20097. Moreover,
along with its priority agenda of 2009-2013, the Executive Committee of Seaweed
7
Author’s interview with Dr. Syahruddin (Executive Director of Seaweed Forum) on 25 March
2009 in Mataram.
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21. Governance Forum was exploring partnership with a number of private companies as
well as state-own companies in the framework of Corporate Social Responsibility (CSR)
of the respective companies. A dynamic process to establish partnership between the
Seaweed Governance Forum and the American mining company operating in the region
(namely PT Newmont Nusa Tenggara Ltd.) was undergoing.
Challenges, Lessons Learned and Some Ways Forward
Although development efforts in Indonesia during the pre 1997's Asian financial
crisis had brought about significant economic development and social changes, it also
produced some undesirable inter-regional disparity, environmental and social impacts.
Nowadays, about 10 years after the financial crisis, poverty and vulnerabilities remains
pressing issues faced by Indonesia, particularly in the eastern region of the country.
The problems are complex, ranging from economic, knowledge and culture to
governance. While these problems call for a comprehensive approach, this paper
focuses on role of stakeholder’s forum as a multi-stakeholder’s platform as an
instrument to foster transparency, dynamic learning and dialogue, and responsibility
in the attempt to reducing vulnerability and poverty at local and regional level
respectively.
The concept of LEG Forum is in line with the decentralization objectives framework
and the notion of good governance; it brought different agents ─self-interested rational
actors ─into a joint platform of LRED. The empirical experience in a number of districts
in NTB region, has demonstrated notable LEG Forum’s contribution to accelerating the
process, broadening the outreach services for the poor and vulnerable groups. Even
more, as the case in Dompu and Bima district respectively, LEG Forum’s involvement
has led to establishment of not only a shorter but also a securer and more profitable
seaweed value chain. This noticeably enabled the vulnerable groups of micro and small
enterprise to enjoy value-added which in the past lay beyond their reach. Furthermore,
many local governments in Nusa Tenggara Barat demonstrated notable interest to
adopt and allocate resources to support such a multi-stakeholder process in fostering
pro-poor local and regional economic development initiative . The LEG Forum, thus,
has a good prospect of replication.
Page | 21

22. However, transition from government to governance paradigm challenges not only
local governments but also all stakeholders at regional and local level to adapt to and
learn from the new institutional setting and role models. Some policy makers and
business doers were indifferent toward establishing LEG Forum or were reluctant to
allocate resource to support LEG Forum due to their experience with non-performing
NGOs (Non-Governmental Organizations) among others. In addition, strong political
pressure toward implementing agencies at regional and local levels to accomplish their
programmes or to demonstrate changes (outcomes) quickly, frequently threatened
achievement of a broader goal of developing a resilient and sustainable local economy.
A recent case in Kwangko village of Dompu district, as an example, demonstrated that
the rush to reduce poverty incident through provision of quickly deliverable small grant
(financial capital) to the poor people or vulnerable groups of village people threatened
self-reliant activities and the cycle of revolving fund managed by Permata Bahari
cooperative. In contrast to the revolving-fund concept familiar to many people in the
village, receivers of grant need not to return the money to be pooled as collective fund at
group or village level. This was perceived as a “discriminative treatment” by the
cooperative members or customers, and accordingly most of them suspended
repayment of their outstanding loan to cooperative. This endangered continuity of
revolving-fund cycle and would have contra productive implications to economic
development and poverty reduction activities in the village. However, the case was not
unique to Dompu district, but widely shared by many other villages, including in the
urban areas.
Furthermore, this paper revealed evidence that in less developed regional context
an organized civil society (stakeholder's forum) could be an effective instrument that
help release ‘social energy’ of collective learning and actions to pursue pro-poor local or
regional economic development objectives. Based on success stories and obstacles
faced by a number of LEG Forum in the studied area, there are a number of factors
fundamental for establishing and sustaining the stakeholder's forum, namely:
• The experience in Nusa Tenggara Barat demonstrates that Pro-poor LED
initiative that emphasizes opportunity-based solutions rather than problem-
focused solutions works and produce notable pro-poor outputs or outcomes.
• Local initiator or pioneer, e.g. committed personnel of eligible intermediary
Page | 22

23. organization or local government, is needed to stimulate establishment of LEG
Forum;
• Pro-poor vision and shared interest are essential incentives for the multi-
stakeholders’ Forum for local and regional economic development;
• Good quality learning process among forum members is a good incentive for
sustaining dialogue and collaborative actions; this requires an interactive
learning approach. Experience in Nusa Tenggara revealed that University
lecturer who is familiar with participatory approach in development and local
cultural values or competent personnel of intermediary organizations were
helpful toward this objective;
• Integration of local wisdom (cultural values) and good governance principles
enhance the dynamic of decision making and allocation of responsibility
sharing among local economic development stakeholders;
• In less developed region, persistent commitment of budget support from
local governments or other eligible organizations to enhance outreach
strategy or governance support to the poor people as well as marginalized
groups of micro & small-scale enterprise (in the informal economy) is
needed.
In future, the provincial government agencies should play more active role and take
greater responsibility to enhancing such multi-stakeholder process in LRED. This calls
for political commitment to establish and promote pro-poor budget policy. Furthermore,
the provincial government should take a greater role in establishing horizontal and
vertical networking for LRED initiative, e.g. in the framework of promoting inter-
municipal cooperation. Moreover, local governments and the provincial government of
Nusa Tenggara Barat should help LEG Forums to explore and facilitate establishment
of pro-poor LRED partnership between LEG Forums and state-own and foreign
companies operating in the region through the framework of corporate social
responsibility.
To conclude, the LEG Forum’s role models as implemented in Nusa Tenggara Barat
region, have demonstrated notable outcomes that benefit the poor and vulnerable
Page | 23

24. groups of the people. There is ample evidence to say that these LEG Forums have help
reduce vulnerability and increase resilience of the poor and the micro-small scale
entrepreneurs along their value chains or in the marketplace. Even more, some
producers’ groups and small traders have enjoyed considerable value-added created
derived from their extended access to marketplaces. However, these Forums would
need longer period to demonstrate their contribution to a larger scale of economy and
higher-level development objectives, namely sustainable economic growth, better
livelihood and equity. In other words, it would be too early and too ambitious to
measure these impacts of the LEG Forums.
Page | 24

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