[FKP at BAPPENAS] Towards Pro-poor Village Fund and Spending


National Development Planning Agency (BAPPENAS) hosted the FKP again in the month of August 2016. The first event on 16 August 2016 was a presentation by Daan Pattinasarany (The World Bank) and Rofikoh Rokhim (Article 33) on village fund allocation and poverty alleviation. The study has several objectives, one of which is to find the correct formulation of village fund allocation by conducting simulations of six different pre-existing and other proposed formulas. Data of 74,430 villages were employed to carry out the simulation. In addition, another simulation was conducted using data of 23,170 villages dispersed in 30 provinces to assess the village fund’s appropriate proportion of Basic Allocation (Alokasi Dasar or AD) and Formulated Allocation (Alokasi Formula of AF).

The study found that the amount of fund allocated and the rural poverty index (intended to gauge village poverty rate) have a positive correlation. The simulation result implies that the current Village Fund formula is still yet to achieve the goal of equalization between villages. It was suggested that the formulation of Village Fund needs to be made according to the needs of each village, rather than to fulfill the political promise of “One Village, One Billion.” On the other hand, another simulation has shown that reducing the amount of Basic Allocation (AD), while holding Formulated Allocation (AF) constant could significantly decrease the inequality of Village Fund distribution between villages. The Village Fund per capita inequality could further be reduced if it was followed with an increase in population/poor population weighting in Formulated Allocation .

In conclusion, the current formulation of Village Fund is still creating inequality between regions, hence the purpose of equalization and enhancement of public services have not been accomplished. Several recommendations could be proposed in order to optimize the efforts towards a more equal Village Fund allocation which includes grouping or creating a cluster region according to the needs of the village, shifting the paradigm from “equal per village” to “equal per village population”, and improving the formulation in which the proportion of Basic Allocation could be further reduced to 50% and increasing the weight of population factors in Formulated Allocation formulation, and to also assess other village indicators such as fiscal discipline and potential revenue of the village which could also be put into consideration in Village Fund formulation. If these concerns are not addressed by fiscal year 2017, then the cost of changing it in fiscal year 2018 will be bigger. On the other hand, the Village Fund allocation inequality will be further exacerbated.

Reported by Mochammad Rizcky Pramonanda





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