1. Adaptation of MTEF and Performance- Based Budgeting in DJ BinaMarga (DGH) William D. Paterson and Ir. Gandhi Harahap November 2009

3. MTEF and PBB – international & Indonesia

4. Adopting MTEF in DGH program cycle

5. DGH Performance 2005-2009

6. Evaluation of RPJM2 2010-2014

7. PBB proposals for DGH

11. Improve public expenditure management at sector level first

12. Develop a performance-oriented budgeting system

13. Comprehensive - all budget resources available to sector

14. Detail in sector activities to encourage budget reallocation

15. Key stakeholders should participate in MTEF process – MOF, Planning, sector & beneficiaries, civil society

16. Accountability requires transparency - political & managerial

17. Monitor execution against planned outputs at activity level

19. Medium-Term Expenditure Framework (MTEF) Guide, February 2005

20. Implementation of Performance-Based Budgeting and Medium-Term Expenditure Framework, June 2009

21. Pilot implementation for 2010-2014 now extended to all LMs

23. Medium-Term Expenditure Framework (MTEF) Concepts: Connectivity of planning and budgeting Basis for resource allocation & predictability of future budgets; Impact of alternative policies on budget and outcomes Baseline budget: Entire cost of implementing current policies in current year and in subsequent years current prices, full costing, inputs, price parameters Y0 (current), Y1 (budget), Y2-Y4 (Forward estimates) Indicate Activity budgets and outputs by year New Work Plan and Budget Document (RKA-KL): Output details, Outcome Achievement Strategy; Revenue Plan; Detail of Output Costs

24. DGH PROGRAM CYCLE – ADAPTATION TO MTEF

25. Performance of BinaMarga/DGH –Business results 2004-2009 Traffic Demand doubled Resources nearly 4-fold higher after mid-term National network extended 36% by reclassification and upgrading Maintained 90% paved and 89% stable condition

27. Preservation 1,400 km/yr = 4% of network

28. Development 3,000 km/yr = 9% of network

29. The Budget rose steeply 2007-08

30. Development expenditures up 80% 2008

32. DGH Effectiveness: Distribution of Condition Improvements Change in extent Stable condition: by Island Group – 2005-2008 Network length, condition by Province

34. Targeted program eliminated Bad condition in many provinces

36. National Arterial and Strategic Road Networks Issues 3 parts for planning purposes,4 functional parts (trunk route,trans-route, arterial, metro) Road program costs appear high – avg. IDR 3 billion/effective-km ($300k/eff-km) – development content? Road work activity costs seem high v benchmarks Incremental approach to geometric improvement is costly in long-run Short design life norm for preservation results in patchwork Quality: how much life actually achieved? Package size small (1000 @ 3 km avg) Project management & procurement delivery fragmented, remote

37. Evaluation of Draft RPJM2 & RENSTRA 2010-2014 Evaluated on basis of Output v. Needs, Average Activity Cost, and Allocation to Activities Baseline Coverage: Preservation & Development 5% each just adequate v. RPJM1 Bridges – 33% of unstable, 5.5% overall – OK if prioritized well Alternative fiscal envelopes: Review prefers more priority to Development, more efficiency in Preservation

38. DGH Performance Evaluation – Review Findings

39. DGH Core Business and Performance Measures – Proposed PBB Focus

40. DGH - Key Performance Indicators – E1

42. Connectivity - % LTDP

43. Extent open (by route) km, %

44. Travel time (hr per 100 km direct)

45. Vehicle travel – veh-km by route

46. Safety – fatality/10k veh, star-rating

47. Condition – congestion, structural, %

48. Cost – constr. cost/km by route

50. Improving Performance:(2) Enhancing Effectiveness, Value for Money Condition % Effectiveness – improving performance with same funds (a) Extend Design Life:Annualized Whole Life Cost = Routine maint/yr + periodic maint/life + rehab/reconstruction/life Short design life (5, 10 yrs) was good policy in 1980s-90s – but Full design life (10, 20 yr) saves 30% in long-term average cost, despite 40% higher initial cost Report “Expected Life” of asset – similar to residual life Age, yr

51. Improving Performance:(2) Enhancing Effectiveness, Value (c) (b) Improve Quality and Performance: Quality is complex – simple measure is actual life of work e.g., 30% lost life due to poor quality causes 42% increase in budget requirements Historical Life: life since previous surfacing to new work or to ‘unstable’ condition Record the spending history and work activities on asset Monitor the actual life achieved at asset level Historical Pavement Life Historical Pavement Age Historical Surfacing Life Road SLD – Work History 9+00 28+00

52. Improving Performance: (3) Efficiency in Work Program Delivery

53. Project Cycle Timeline and Linkages PROJECT CYCLE TIMELINE FORWARD ESTIMATE FUNDS SCHEDULE FP Bond SK-PPK RAPBN SAT 3 DIPA AP IPC ……….. PFD BD ITB PROJECT MILESTONES CAR CS NTP PI PA PHO FHO EV PROJECT PHASE PREPARATION PROCUREMENT IMPLEMENTATION EVALUATION

54. Improving Performance: (3) Efficiency in Work Program Delivery (cont)

55. Improving Performance: (4) Institutional Implications

56. Arterial and Metro – Areas for Consideration For multi-year optimization (5-yr, 3-yr and life-cycle), resource requirements and allocation at national level – use existing IRMS planning system For asset-specific project identification and life-cycle design within allocated resource envelope - new “Asset Program Optimization Tool” Simple linear and map views for managing design and consultation Develop 3-5-yr periodic, reconstruction & renewal program for each route, minimizing costs within allocation For integrated delivery of work activity implementation – Assess options to consolidate and focus competencies and staff Procurement process Engineering design and supervision

57. Facilitation of Road Management in Local Government Road Agencies Existing role – technical standards and guides, and professional training New leading role - To fulfil vision & accountability for an “integrated road system”, DGH would need: Providing tools for program preparation and project design Improving budget allocation and network performance Advise on institutional options, eg. Road Board & Fund for managing user revenues and road management Monitoring & Evaluation – sustain effectiveness Propose Outcome Indicator: “Condition of local road network” (Prov, Kota, Kab) - % stable, % paved

59. Capacity-building in applying MTEF, PBB