Special Allocation Fund - Model for Rural RE Implementation

In the recent years government of Indonesia spent lot of money to electrify rural areas. There are many programs such as decentralization fund support, energy independent village, rural electrification, energy facility support from Ministry of Under Developed Areas, and also Kecamatan Development Project (KDP) project under Ministry of Internal Affairs. Beside those major programs there are smaller projects by local governments, non government organizations and other government institutions.

In short, there are many models of implementation and so far there is no evidence of the best implementation model that can be used by many and replicated easily. Implementation model applied by NGOs usually are close to ideal however the success rate is also questionable since there is not enough information. Quite ideal here means there is a combination of top down and bottom up approach. The level of community involvement is usually also quite high and there is specific activity to facilitate the community to be ready with the new installation. Government's implementation model varies between implementing Ministries. The common characteristics of government's approach are top down, little community participation, and lack of monitoring and supervision.

Since the volume of government projects is much bigger than of NGO or other smaller institutions, there is a need to have a model that can guarantee success and government of Indonesia intends to make the Special Allocation Fund for Rural Energy as the example. The Special Allocation Fund (SAF) has been applied to other sectors such as health and education. SAF give financial support to local governments to implement projects that are fulfilling central government's role. SAF is included in local govt budget. There are three main criteria for a regency to get SAF support; general, specific and technical. The first two are not closely related to the sector (e.g. education, health or energy). The third one is specifically designed for the sector.

There are risks of SAF implementation especially in the rural energy component. Proposal of projects will be submitted by regency offices which so far has no track records in providing good proposals. Implementation will be carried out by regional governments with, maybe, low supervision capability. Money is directly transferred to regional government's account without any ear mark, therefore regional government can use the money for other purposes. Those are just some of many risks. SAF implementation needs stronger efforts in capacity development, and also improvement of SAF disbursement mechanism.

Ministry of Energy is the only Ministry that will implement rural energy projects, therefore there will be no more projects from Ministry for the Under Developed areas or other Ministry. This is actually very good because, technical ministry should understand better about the sector and how to implement it. The challenge for the Ministry of Energy will be how to successfully implement SAF and how to monitor its implementation. A feedback loop should be created since so far there is no such system. Feedback loop can ensure better implementation of SAF in the future phases.

In 2011, Directorate General for Electricity and Energy Utilization (or the new DG) will do the test phase for one year. Hopefully this new model will be successful. Here is a link (in bahasa) reporting about SAF policy by Bappenas.