ICMA Resource Cities City of Samarinda
International Resource Cities Diagnostic
March 21 - 22, 2001
14r0 ICMA
wr RESOURCE CITIES
Submitted by:
Deborah Kimble, Senior Municipal Governance Advisor
Tristanti Mitayani, Partnership Manager
USAID Cooperative Agreement
CITY OF SAMARINDA
International Resource Cities Diagnostic
Submitted by:
Deborah Kimble, Senior Municipal Governance Advisor
Tristanti Mitayani, Partnership Manager
Summary
Samarinda is the capital of East Kalimantan Province and has a population of
approximately 500,000 people. Geographically divided by the Mahakam River, ,
Samarinda may face difficulties in delivering services to its citizens. These difficulties
arise from the reliance on the bridge, which connects the two sides of the city.
More than 50% of the population of Samarinda earns their living from the service sector, —
while 30% work in industry and another 10% work as farmers. Like many cities in ,�
Indonesia, Samarinda must deal with the problems associated with transferring
employees from the provincial and national levels, to lower levels of government.
The annual budget for development in Samarinda comes from two sources. The first
source is regional revenue, which accounts for about 10% of the total budget. The
remaining 90% comes from shared finances provided by the national government.
Development decisions are made by the Secretary of the City, who heads the senior
management team, which builds the annual work plan for the city.
Samarinda officials identified two primary issues that should be considered through the
partnership:
1. Securing the revenues from the central government promised under Law No.25/1999
on Regional Autonomy and subsequent PP 104-108 (Government Regulation).
Staff explained that in order to secure funds from the Ministry of Finance, they were
required to travel to Jakarta to meet with finance officials. These meetings were
scheduled at the Ministry's convenience and cost valuable time and money.
Compounding the hardship of travel was the lack of trust in the reporting
mechanisms for determining the funds to which cities were entitled. While city
officials are guaranteed natural resource revenues, per the revenue sharing formula,
they question the revenue that industries report. Such industry reports are the basis
for the formula used to allocate national resource revenues and finance a large
percentage of the overall budget in Samarinda. Collecting the actual funds,
therefore, proves to be extremely problematic.
2. Defining the actual authority of central government versus the local government as it
relates to management and development of forest and mining sectors.
Staff raised concerns about decisions that were or could be made by the central
government, regarding sale or use of natural forests, by outside investors. All
officials felt that local approval was needed to ensure that the central
government/investors were in compliance with local plans. Furthermore, they felt that
new central government laws, being drafted for forestry and mining, should include
comments by and participation of the LGU staff.
City of Samarinda 1
THE RESOURCE CITIES PROJECT
On February 27, 2001 Kota Samarinda (city of Samarinda) signed a Memorandum of
Understanding indicating their interest in participating in the Building Institutions for
Good Governance (BIGG) Program of ICMA-USAID in Indonesia. Specifically, they
agreed to participate in the International Resource Cities Program (IRCP) component of
BIGG. Given this commitment, a municipal diagnostic was required to determine:
• The conditions of the city, as well as conditions that will influence the effectiveness of
the exchange.
• A profile of the city that can be used to select the most appropriate US city partner of
the program.
• The appropriate type of technical assistance or resources that should be exchanged
in the partnership.
• A framework for the partner's technical exchange work plan.
On March 21 and 22, 2001 Deborah Kimble, ICMA Municipal Governance Advisor and
Tristanti Mitayani, ICMA Partnership Manager for the IRCP of BIGG, met with members
of the executive and administrative staff of Samarinda.
This report provides an overview of the meetings and findings of the diagnostic trip, as
well as an analysis of the findings as they relate to meeting the current main objectives
of Samarinda. These objectives include developing and implementing a financial policy
that can be used as the performance measurement for all revenue sources and can flag
delinquent revenue payments. The diagnostic report also offers a list of potential
technical approaches that partners may want to pursue. The report is divided into four
sections:
• Section 1: Background on the process;
• Section 2: Summary of the meetings conducted;
• Section 3: Descriptions of the context that guided the analysis of the findings; and
• Section 4: Recommendations on the scope of technical exchange for the
partnership.
1. Background on the Diagnostic Process
The diagnostic in Samarinda is part of a province-wide process of tying four local
government units— Kabupaten Pasir, Kota Balikpapan, Kota Samarinda and Kabupaten
Kutai—through the budget and financial training program. As a result, many issues that
deal with financial practices in the city, were investigated earlier by ICMA Senior Budget
and Finance Advisor Philip Rosenberg and ICMA Budget and Finance Specialist,
Charles Poluan Jr.
Meetings in Samarinda were limited to one and half days due to the schedules of the
local officials. However, the cooperation of staff during the meetings proved to be
sufficient enough to meet the objectives of the diagnostic.
On Wednesday, March 21, 2001 Deborah Kimble and Tristanti Mitayani met with
Walikota Samarinda (the Mayor of Samarinda) Drs. H. Ahmad Admins, Sekretaris Kota
(Secretary to the city), Ketua BAPPEDA (Chairman of Regional Planning Agency) H.
Mochdar Hasan, and Kepala Bagian Keuangan (Finance Director) H.M. Saili. The issues
that were laid out during this meeting focused on the relationship between the central
government and the city. Two issues in particular were raised as concerns:
City of Samarinda 3
• Securing the revenues from the central government promised under Law No.25/1999
on Regional Autonomy and subsequent PP 104-108 (Government Regulation).
Several issues were identified. Staff explained the importance of having to go to
Jakarta and meet with Ministry of Finance officials (at the ministry official's
convenience), in order to secure funds. This is something that takes time and money.
Furthermore, city officials indicated that, while they were guaranteed natural
resource revenues per the sharing of revenue formula, they did not feel they could
trust the reported revenue from the industries; the base on which the formula was
applied. A large percentage of the overall budget for Samarinda is financed by the
shared revenues; problems in collecting the actual funds (for either of the reasons
stated)will prove extremely problematic.
• Defining the actual authority of central government versus the local government as it
relates to management and development of forest and mining sectors.
Staff raised concerns about decision that were or could be made by the central
government regarding sale or use of natural forest by outside investors. All officials
felt that local approval was needed in order to ensure that they were in compliance
with local plans. Furthermore, they felt that new central government laws drafted for
forestry and mining should include comments by and participation of the LGU staff.
Finally, when asked what the biggest challenge was for the city to achieve a random list
of development activities' for Samarinda, they stated that lack of funds (real/actual funds
not only as promised) and human resources (both staff and citizen)were inhibitors. They
characterized the human resource problem as "no action/talk only." Individual meetings,
as summarized next, provided more insight into these two concerns.
2. Summary of the Meetings
Three individual meetings were convened. Staff that was interviewed included: the
Secretary to the city-H. Mardiansyah, Chairman of Planning Agency-H. Mochdar Hasan,
and Director of Finance-H.M. Saili.
Interview Findings
Secretary to the city: H. Mardiansvah
As Secretary to the City, Mardiansyah provided information related to the general
conditions of Samarinda's human resources and identified challenges that needed to be
addressed to develop better skills. He strongly believes in skill development, for both
staff and citizens. The Secretary understands that, given the natural resource base of
Samarinda and the subsequent international investor interest, there is opportunity for
both gain by and abuse of the citizens. In particular, Mardiansyah felt that citizens and
staff needed to have a better understanding of how international firms conducted
business so that local entrepreneurs might be able to secure contracts for projects.
Examples of the types of training he felt people needed (staff and citizens) include:
English language training, international business management, and contract
'List of activities included traffic,market,housing,cleaning of river,harbor,airport,bridges and general infrastructure
City of Samarinda 4
negotiations. If entrepreneurs had training in these areas, he felt the city could act as an
intermediary, bringing entrepreneurs and investors together.
Finance Department: H.M. Saili
The meeting with Sail and his staff was extremely detailed. Saili elaborated on the
relationship between how things used to be done and the changes that needed to be
implemented for the new autonomy to be successful. In particular, he emphasized the
need for the local government to follow the "reinventing government model" and to 'p
ensure that the "real" needs of the citizens were addressed. He felt that currently, "the l
city had adopted the spirit [but not the intent] of open and transparent government."
The Director of Finance indicated that in the past, performance was measured by the
portion of the budget financed by local revenues only. The measurement that was used
was simply the collection of revenues. He indicated that now performance budgeting had
to link expenditures with outcomes, to show how specific revenues sources are linked to
specific development expenditures. This new measurement improved the lives of
citizens and helped to show the community how the local government was responding to
their needs.
Some of the challenges in accomplishing this were provided by his staff. They include:
understanding and adopting double-entry accounting system standards, using the
performance based budgeting as a decision-making tool and merging the routine and
development budgets so that a comprehensive financial assessment could be made.
Practical solutions offered by the Finance Department included:
• Upgrading the computer systems
• Training for staff on how to implement responsibilities under new autonomy
• Producing good and appropriate financial reports.
The final area of discussion focused on the overall organizational structure, as it related
to implementing transparent financial management. Basically, the finance department
described two organizational structures: one that facilitated administrative actions and
one that facilitated financial decision-making actions. Assuming that the latter is
confirmed by the Mayor, it provides a workable structure for the promotion of new
financial management.
3. Analysis of the Findings
For purposes of analysis, ICMA/USAID developed a four-point structure to determine the
most useful technical inform—alibi for each of the local government units in Indonesia, as
they implement Laws 22 and 25.E The four points are:
�:1�_Oganizat+errai Capacity
The personalities of the senior executive staff in Samarinda provide an important
resource for the successful implementation of Laws 22 and 25. In particular, the
Secretary to the Mayor is versed in western business and financial practices, at least as
they relate to making investment decisions. As a result he has begun to develop the
skills of the administrative staff to ensure that they are able to "hold their own" during
negotiations with foreign firms.
While not official, Samarinda is, in practice, organized similarly to a council manager
structure of government. This was noted by the Finance Director who, along with his
staff, brings considerable talent and knowledge to the organization, which will enhance
the Kota's ability to implement Law 25. In practice, the secretary to the mayor is
City of Samarinda 5
functioning much as a city manager would in the budget process. The Director of
Finance, the Planning Agency and the Secretary make up the budget committee,
reviewing departmental requests and taking responsibility for integrating the routine and
development budgets. This practice is one of the first noted, vis-a-vis the completion of
the seven diagnostics, which brings the status of the finance director on par with that of
the Planning Agency.
As with all autonomous regions in Indonesia, reorganizing the local government is aiq
ongoing and iterative process. Samarinda seems to be taking steps forward informally,'
but did not address why such steps had not been taken formally. However, given the
number of expected new presidential and ministerial degrees yet to be passed, informs
reorganization may be the most efficient way to move forward for the time being.
3.2 Transparent Budget and Financial Systems
The richness of East Kalimantan's natural resource base makes securing the special
revenue funds from the central government a priority. Like Kutai Kabupaten, Samarinda
officials felt that it will be critical to:
• Lobby Jakarta for timely and accurate transfer of funds;
• Develop a mechanism that provides an accurate estimate of the income
generated from the natural resources so that the transfers from the GOI are
complete.
Contrary to other local governments interviewed, Samarinda financial officers addressed
the expenditure side of the budgetary and financial systems. Due to lack of experience
and limited computer capacity, however, the progress made in reforming budget and
finance practices is conceptual. Moving from concept to reality should be part of the
partnership work plan.
3.3 Effective Citizen Participation
Samarinda officials describe their programs as citizen oriented, with citizen based \
budgeting and an investment strategy that provides citizens opportunities to secure
contracts. There is, however, no evidence that citizens have been involved in these
processes or that a strategic development plan (one which addresses the needs of
citizens in a logical and orderly fashion) is in place. The latter is illustrated by the list of
capital projects that the Mayor mentioned (see footnote 1).
3.4 Efficient Delivery of Urban and Environmental Services
Little discussion ensued regarding the delivery of actual services. The city officials are
primarily focused on securing revenues. Samarinda's potential wealth, as defined by the
projected revenues to be derived from natural resources, can become a disincentive for
developing efficient management practice for the delivery of services. When cities have
excessive or at least sufficient revenues, political will to instill financial discipline is often
times not exercised. Building a transparent financial and budgetary system will provide a
mechanism by which to determine how, or if, the Kota (both legislative branch and the
executive branch)are making good financial decisions.
4. Recommendations for the Partnership Exchange
Samarinda would benefit from developing the staffs ability to negotiate agreements with
other levels of government and other institutions. Inherent in this skill set is the ability to
analyze information and make realistic projections. This internal skill set should be
gained from the budget and finance training that will be given to the staff. In terms of
City of Samarinda 6
•
how this can be applied to the partnership, it is recommended that one or more of the
following types of agreements should be pursued:
• A plan for rental or other compensation for public use of city land by province and
central government (don't quite understand this sentence...does she mean a tax
program in lieu of something else, or simply a tax program-the sentence isn't
grammatically correct.)
• Intergovernmental agreements on development standards of central government
owned land.
• Partnership with local institutions for small business economic development training
and/or certificate.
It is recommended that the partner cities (both US and Indonesian), should work
collaboratively to develop an effective lobbying program. This recommendation is based
on the need to define the actual authority of the local government (as it relates to the
management of natural resources), as well as the need to be able to secure actual
revenues, from the central government, that are common among several of the local
governments in East Kalimantan. This can and should be done in cooperation with the
associations. In the early stages of development, East Kalimantan might become one of
the associations' pilot advocacy activities, which can be replicated in other provinces as
the associations capacity to advocate on behalf of their members improves.
City of Samarinda 7