Adi Nugroho Dwiutomo

Integrating Poverty-Environment-Climate in Budgeting(Indonesia case)

Adi Nugroho DwiutomoDeputy Director for State Budget Expenditure

DG Budget – Ministry of Finance

Poverty and Environmental Initiative (PEI) Asia Pasific Regional Meeting Dhaka, 2 June 2016

Ministry of FinanceRepublic of Indonesia

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Background PEI IndonesiaA

The Role of Ministry of Finance in Sustainable Development

B

Outline

Integrating Poverty-Environment-Climate into Budgeting, Approach and Tools

C

Challenges and the Way ForwardD


A

B

A. Background PEI Indonesia

C

D

• PEI Indonesia operationalized under SDF(Sustainable Development Financing) Project

• SDF project document signed in October 2014

• Environmental issues as an entry point as Indonesia’s development challanges

• Environmental activities is limited to Climate change and biodiversity

• PEI Indonesia collaboration with SIDA and BIOFIN


Indonesia’s GHG emission is predicted to increase from 2.1 to 3.3 GtCO2e between 2005 and 2030 (Second National Communication, 2010)

Indonesia is vulnerable to changingclimate. Potential economic loss due to climate change and climate disaster in 2100 is predicted 7% from GDP (WB,2010, ADB,2010)

Indonesia is Mega-biodiversity country. Biodiversity is nationalcapital asset, but the full potential is undervalued and it is decreasing (MoEF, 2014)

Indonesia’s challenges toward sustainable development

The three action plans have not yet translated to budget documents at national and sub-national level.

No mechanism in place to monitor the budget allocation and tracking

Limited fiscal instrument to support actions.

CC Mitigation

3 Indonesia’s Action Plan

CC Adaptation

Biodiversity

Click to edit Master title styleB. The Role of Ministry of Finance in Sustainable Development

Fiscal Policies

Revenue Policies Expenditure Policies Financing Support

Domestic Resource mobilizationFiscal incentives and disincentives policies for strategic sectors

Budget optimization Budget reallocation to productive spendingTargeted spending

Direct investmentGovernment facility or risk guaranteePublic private partnership

Human DevelopmentHigh quality education, linkages between education and industrial needs, vocational education, innovation and productivity enhancement

Sustainable Natural Resource ManagementDownstream Industries, fisheries, agriculture

Inclusive GrowthPoverty AlleviationSocial protectionFinancial inclusion

Investment ClimatePublic and private partnership,Connectivity,Logistic,Technology

Macroeconomic StabilitySustainable growthPrudent fiscal and monetary policy, Incentives mechanism, purchasing power

Pathway towards sustainable development

SDF Contribution

Mid-term National Development Planning

Government Work Plan

State Budget

LM/A Strategic Plan

LM/A Work Plan

Budget Document

Presidential Decree on Budget Detail Budget Execution Document

5 Yr

1 Yr

1 Yr

President Platform

6

SDF Contribution

Indonesia Planning and Budgeting System

Temporary Ceiling

Trilateral Meeting

LM/A WPGWP

RKA-KLcompila-

tion

Assessment Forum

Draft State Budget

Preliminary discussion

FNDraft

Budget Law

Cabinet Meeting

Indicative Ceiling

Definitive Ceiling

RKA-KLadjustment

Budget doc assessment

Presidential Decree

DIPA

Budget Law

Process

Agree-ment

7

K/L

LM/ACommission

Budget Committee

RKA-KL

CCM CCM

CCM

CCM

CCM

CCM

Cabinet Meeting

Cabinet Meeting

LM/ACommission

Indonesia Planning and Budgeting System

CCMClimate Change Mitigation

Click to edit Master title stylePoverty and Climate Change Related Program in Indonesia’s Development Planning

Strategy Targets Mid Term Target

2016 Target

Poverty Comprehensive socialprotection program

Sustainable livelihood development

Basic service provision for poor

Decrease in poverty rate Decrease in gini ratio Decrease in unemployment

rate

7-8 % 0,36 4 - 5%

9-10 % 0,39 5,2 -

5,5%

Climate Change

Eco friendly agriculture activity, renewable energy utilization, domestic waste management

Private and people contribution for GHG emission

CC fiscal insentives Optimizing the

implementation of RAN API

Level of Greenhouse emissions reduction in 5 priority sectors (forestry, agriculture, energy, transportation, and waste)

Number of vulnerable areas which increase in resilience of people caused by CC and the National Action Plan for CC Adaptation. implementation

26%

15 areas

19,1%

4 areas


*The calculation includes budget allocation associated with mitigation and adaptation of Climate Change, including on forestry, environment, and renewable energy sectors.

RESULT AT NATIONAL LEVEL : 2014 – 2015 Increase in Climate Change Responsive Budget Allocation

Source: Website DG Budget, Ministry of Finance


Finding: No system in place to monitor and track the CC expenditure. Climate Expenditure Review was done manually. Sub-National Financial system is different with National.

AT SUB NATIONAL LEVEL : Climate Public Expenditure ReviewIncrease in Climate Change Responsive Budget Allocation

Jambi Province DI Yogyakarta Province Central Java Province


0.3 0.3

6.5

0.1

0.7 0.5 0.9

5.3

7.4

0

1

2

3

4

5

6

7

2012 2013 2014

Bangka Belitung - Mitigation Public Expenditure (Billion Rupiah)

Mitigasi

Forestry and Peatland

Agriculture

Waste

Total Mitigasi

35.7

65.8

21.3

1.0 1.4

19.2

0.5

10.9 11.7

0.4 4.1

6.5 5.7 6.7 6.0

43.6

88.7

64.7

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2012 2013 2014

(Bangka Belitung, Adaptation Public Expenditure (Billion Rupiah)

Economy Security

Social and livelihood Security

Ecosystem security

Special District Security

Supporting System

Total Adaptation

Indonesia’s Actions towards Sustainable Development

BUDGET TAGGING:

Tracking climate change-related budget

PERFORMANCE-BASED BUDGETING

Prioritization of climate activity based on cost-effectiveness including poverty and gender benefits.

Monitoring effectiveness & efficiency of expenditure.

PRO POOR AND GREEN PLANNINGBUDGETING

Enhance Coordination National-SubNational

Issuance of fiscal policies, and mechanisms for financing prioritized and effective pro-poor and climate change activities

Pro Poor Priorities:• Social assistance• Basic services• Develop social liveihood

CC Priorities:• Forestry, Peat-land & Marine Resources

protection• Agriculture and Irrigation system

rehabilitation• Energy and Industry • Public Transport, Urban & Regional

Infrastructure• Education and Health • Disaster Management

Click to edit Master title styleSDF approach and tools

• Climate Public Expenditure and Institutional Review (CPEIR), CPEIR at national level combine with cost benefit analysis MFF Mitigation Fiscal Framework.

CPEIR Subnational : Bangka Belitung and NTT

• Climate Public Expenditure Review (CPER), CPER Subnational : Jambi, DI Yogyakarta, Central Java

• Institutional Context Analysis (ICA), in Bangka Belitung

• Gender Poverty Analysis (GPA), in Bangka Belitung

• Vulnerability Assessment (VA), in Bangka Belitung

• Climate budget tagging at national level : 6 line ministries (Min. Environment and Forestry, Min. Agriculture, Min. Industry, Min.Energy Minreal Resources, Min.Public Work, Min.Transportation)

Click to edit Master title style2014 Budget Tagging Aplication System embeded to State Financial System

BUDGET TRACKING REGULATIONMinistry of Finance Regulation No. 136/2014 regulates line ministries to tag activities/ output spending related with climate change through the budget system.

Click to edit Master title style2015 Budget Tagging Integrated to Performance Based BudgetingSystem through ADIK Aplication

13 achieved

MDGs Achievement

14 off track 36 on track

I. Goal 1a. Povertyb. Caloric intake

II. Goal 4a. infant mortality rateb. Children mortality rate

III. Goal 5a. Maternal mortality rate

IV. Goal 6a. HIV and AIDS

V. Goal 7a. CO2 Emissionb. Drinking waterc. Sanitation in rural area

VI. Goal 8a. Export import ration to GDP

Mapping to SDG

indicator

I. Goal 1 (Poverty)II. Goal 2 (StarvingIII. Goal 3 (Health)IV. Goal 3 (Health)V. Goal 3 (Health)VI. Goal 3 (Health)VII. Goal 7 (Energy)VIII. Goal 6 (Water and Sanitation)IX. Goal 6 (Water and Sanitation)X. Goal 17 (Means of

Implementation)

Some of indicator has already stated in Mid Term Development Planning Improvement on budget tagging can improve the information related to indicator

achievement

Click to edit Master title styleD. Challenges and The Way Forward

• Inter-ministerial coordination among the key Ministries (MoF, Bappenas, MoHA, MoEF)

• Improving capacity and compliance of line ministries

• M & E of the implementation of budget tagging

• The critical step for performance-based budgeting systems is toimprove indicators which reflect long term economic results as an implications of climate change and environmental degradation

The Challenges of Implementation both at National and Sub-National level


Thank you

Ministry of FinanceRepublic of Indonesia

Adi Nugroho Dwiutomo

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