Administrative & Civil Service Reform
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The size of the civil service
Indonesia’s civil service consists of some 4.6 million people. Of this, about 500,000 are police and military, leaving some 4 million civilian civil service. At about 2 percent of the population, this is small compared to Indonesia’s South East Asian Neighbors, although it is about at par with other low or low-middle income countries such as China and India. In addition, a large but unknown number of civil service workers are not registered as such. These Tanang Kerja Non-PNS (non-pegawai negeri, or non-civil service workers) are either local government employees paid from local government revenue sources, or government employees paid from the development budget. They could add up to 20-30 percent to the numbers of public sector workers, but no systematic data are available. In addition to this, there are some 1.9 million retired civil servants whose pensions are included in the government wage bill, which is some 5 percent of GDP, or a quarter of Government spending.

Structure of the civil service
At first sight, Indonesia’s civil service is highly centralized: of the 4 million civil servants, some 3.5 million, or 88 percent are "central" civil servants according to their identification number (Table 1). This percentage has been very stable over the last decade and a half: in 1992 and 1985 it was 87 percent. However, almost half of the central civil servants—1.7 million—are seconded to regional governments, either at the provincial or at the district level. Most of these seconded civil servants are teachers (1.1 million primary school) and health workers (300,000). These civil servants are usually well integrated at the service delivery level, and are often perceived as "local" workers rather than central workers.

Health and education often distorts the degree of decentralization in a major way. Excluding these sectors civil service with almost 29 percent of the civil service administration at the subnational level, looks more decentralized, more in line with that of other countries, and more decentralized than the fiscal numbers suggest.

Taken as a group, subnational civil servants (seconded and decentralized civil servants) fall mainly under the jurisdiction of the province (Table 2). Of the 2.1 million in that group, 1.6 million is at the provincial level, the rest at the district/city level—again mainly because of health and education, which is predominantly the authority of the province. The concentration of workers at the provincial level implies that many of these workers would also have to shift affiliation from province to district, once decentralization occurs.

Of the 1.88 million central civil servants that are not seconded, all but 140,000 work in the regional offices of central government, the Kanvils and the Kandeps, the regional offices of central government. Most deconcentrated civil servants are subordinate to the provincial-level central representation, the Kanwil. Teachers, however, again distort the picture: some 700,000 secondary school teachers and other education personnel resorts at that level.

Organization of the Civil Service
The civil service system is captured in Laws 8/1974 and its revision of Law 43/99. The civil service is managed by a civil service board (Badan Kepegawai Negri), which keeps all records, and has to give approval to all appointments above a certain rank. All changes in the civil servant’s position have to be confirmed by a change letter from BKN.

Indonesia’s civil service has a dual system of positions. Every civil servant has a rank (Golongan, ranging from 1a to 4d) and of position. The positions can be structural (Eschalon IVb-Ia)—mainly managerial, although it includes some high-level advisors, or functional, for instance lawyer, teacher. There is no formal job classification in the civil service. Entry ranks are mainly determined by education level, and increases in rank are largely driven by seniority—with a maximum rank depending on the entry level of the civil servant.

Civil Service Pay
Civil servants are paid according to rank, seniority, and position. The pay scales according to rank include several elements: a base wage, a family allowance, a children’s allowance, a food allowance, and some other incidental allowances. Since the crisis, pay increases have also been given in the form of an allowance, not in the form of an increased base wage. In addition to the base wage and allowances, many positions either have a functional allowance, or a structural allowance. These allowances can for some positions be significantly larger than the other pay elements. For instance, a Rank IV, Eschelon Ia receives Rp. 1,150,000 ($120) in base wage and allowances, but Rp. 4,5 million ($500) in structural allowances per month.

There has long been a general perception that Indonesia’s civil service was underpaid. Studies undertaken by the World Bank and others since the early 1980s often record the perception of civil servants that they do not receive a "living wage." In part this perception may have been fed by the convoluted pay system as described, in part the problem of underpayment seems to have been real at least for some periods in the past. Currently, however—and after heavy pay increases over the last two years—the average civil servant no longer seems to be underpaid compared to Indonesia’s private sector (Table 3)

All civil servants are paid from the central budget—either through the central allocation for personnel (DIK), or through the Subsidi Daerah Otonom or SDO grant to the regions. Both DIK funds and SDO funds are first transferred to the regional treasury offices (KPKNs). For central and deconcentrated units, representatives of these units deliver a full list of civil servants working in their unit to the KPKN each month, together with proof of any material change that affects the wage bill (promotion, marriage, etc.). The KPKNs check their correctness—although they have no independent source of information, and upon approval, transfer the appropriate amount of money to the (commercial) bank account of the work unit. The Finance section in the work unit takes care of payment. For higher-level staff this is increasingly done by direct deposit of the payroll in an individual civil servant’s account, but for most staff it is still done in cash.

The focus on development and the accompanying expansion of the development budget during the New Order combined with a "balanced budget" philosophy brought on the one hand suppression of the wage bill, but on the other opportunities for diverting money from the development budget to supplement salaries. Some, in the form of honoraria and management fees were generally considered as part of the system. Others—such as abuse of procurement—were not, but became the cornerstone of an elaborate patronage system.

Box 1: Indonesian Civil Service – Informal Patronage Behavior

Through what many acknowledge to be a semi-formalized system, significant discretionary allowances are distributed by top management in individual agencies to their subordinates in exchange for loyalty and, frequently, collusion in malfeasance. Membership in such personal loyalty networks is reputed to be pervasive, ensuring that officials can accept bribes and kickbacks without fear of reprise, since their colleagues are likely to be engaged in the same practice. The existence of discretionary allowances locks staff into a loyalty network that enables extra-budgetary transactions to be conducted and shared under protected conditions.

This system appears to be enabled by the significant contribution of the development (non-recurrent) budget to civil service rewards. Requirements for its continued operation include a continued commitment to project financing by donors across a wide spectrum of agencies, and the current dysfunctional split between the routine and development budgets, which allows for inadequate project supervision.

Source: This box is adapted from "Pay and Patronage in the Core Civil Service in Indonesia," Mimeo, World Bank, March 2000, pp. 33-36.