The Government of Indonesia has increasingly focused on addressing the country's rising inequality. The two-pronged approach aims at improving the quality of village spending and service delivery and on better understanding how fiscal transfers affect development at the local level.
Law No.6/2014 on Village or the Village Law substantially increases the total value of government fiscal transfers from US$4 billion in 2015 to an estimated US$12 billion in 2018 to 74,954 villages across the archipelago. Despite previous spending increases in priority sectors, Indonesia's performance against key development indicators remains below that of many countries at similar or lower level of economic development.
Institutionalizing good governance principles of participatory and inclusive practices in village government system the Village Law PASA supports multi-level of governments to assess and improve the effectiveness of annual fiscal transfers to villages, strengthening fiduciary systems, and institutionalizing PNPM's participatory mechanisms and practices into long-term reforms of the legal and regulatory frameworks for local governments' core systems.
The overall objective of the Village Law PASA is to support government efforts to ensure accountable village governance and participatory village development. The program delivers three main types of support:
The program provides analytical and technical support to Directorate General of Fiscal Balance of Ministry of Finance, The National Development Planning Agency (Bappenas), Ministry of Home Affairs, Coordinating Ministry of Human Development and Cultural Affairs, Ministry of Villages, Development of Disadvantaged Regions and Transmigration, and other stakeholders.
The Village Law PASA Program is organized around four programmatic pillars:
In the village of Loloan, in North Lombok, the village government allocated Rp 27 million in village funds in 2016 to repair and renovate the bridge and road system in the hamlet of Tanah Petak Lauk. This initiative was intended to improve the community’s economic livelihood by providing improved access for members of the community who work crushing and breaking rocks.