Effective Public Financial Management (PFM) for enhanced public sector performance

INDONESIA RISING. Policy Priorities for 2010 and Beyond 53480 Effective Public Financial Management (PFM)1 for Enhanced Public Sector Performance Key Messages2 The basic framework for PFM reform has been established, the project components of major reforms are well underway and the government is poised to broaden and deepen the reform agenda. Key Action 1. Expand existing PFM reforms to improve the quality and level of service delivery, budget efficiency and disbursement. 2. Draft and implement a transparent and comprehensive procurement law underpinned by a professional development program for procurement staff based on modern business processes and IT systems. 3. Remove rigidities in the management of the civil service, to promote efficiency and performance-based human resource policies. 4. Expand the current focus on compliance to strengthened internal controls, and reorient audit and oversight functions to ensure the efficiency and effectiveness of government operations. 5. Coordinate and sequence the PFM reform agenda to promote understanding and ownership among all stakeholders including line ministries and the Parliament (DPR). 6. Develop an effective monitoring and evaluation system that ensures resources are expended to achieve the best possible outcomes improvement as overall manufacturing growth has been Where Indonesia Stands Now weak, the transition out of agriculture slow, and the mining 12 and energy sectors have performed poorly. The success of the Indonesian economy over the past several years reflects a restoration of sound PFM in Indonesia now compares favorably with its macroeconomic management, political stability, and up regional peers and those with comparable per capita GDP3, until recent times a favorable global context. Growth but significant challenges remain. Since 2002, Indonesia surpassed 6 percent for two consecutive years and exports has put critical pieces of its PFM foundation in place, more than doubled between 2003 and 2008 thanks in passing laws on State Finance, Treasury and Accounting, great part to the commodity price boom (see Fig 1). reorganizing the Ministry of Finance (MoF), issuing an Formal sector employment is expanding again, investment updated Presidential Decree on Procurement and forming has risen