| 4. In which ways is the initiative creative and innovative?
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Given the participatory nature of the initiative, the LG of Barru continuously adjusted the plan based on the needs and opportunities identified. Nonetheless, they developed an implementation framework to guide the reform processes as follows:
(1) Establishment of a licensing reform working group. The LG established a working group, led by the OSS, with members from the executive branch and the local legislative council (DPRD) to lead the licensing reform process.
(2) Understanding licensing problems better by obtaining the views of the private sector and technical departments. The working group conducted a series of discussions both with the local technical departments and with the private sector. In addition, a customer satisfaction survey was conducted in early 2012 to quantitatively measure the satisfaction of licensing services. The results of the discussions and the survey confirmed that citizens had to pay more than the official fee for permits, wait for long periods of time, and had a feeling of uncertainty regarding the process.
(3) Mapping the licenses and developing license reduction plan. The Legal Bureau of the LG conducted a mapping exercise that identified 129 types of licenses, 95% of which were not authorized to the OSS. Based on these results, formal and informal consultations were held with the technical departments and the private sector to identify types of licenses that could be repealed, merged or transferred to the OSS. The LG of Barru adopted an incremental and opportunistic approach -- licenses that were under technical departments that had strong support for reform were prioritized.
(4) Building broader support for reform. The series of discussions discussed above also aimed to raise awareness and to expand the network of licensing reform supporters among business executives and CSOs. In addition to face-to-face discussions, radio talk shows were aired to involve the broader community. Demand from the general public, CSOs, the private sector, as well as DPRD members was effective in driving reform within the government.
(5) Issuing regulatory framework for licensing reform. Based on the processes above, the LG issued two local regulations limiting the types of licenses that are required for any businesses operating in the district to 30 types in 2011 and 2012. In addition, a district head decree was issued to remove fees associated with other types of licenses/permits for micro and small businesses. Three regulations were issued in 2012-2013 to incrementally transfer the licensing authority of 23 types of licenses to the OSS. Two regulations on SOPs – for business licensing and complaint handling – were issued in 2012. A district head decree was issued to establish the OSS technical teams in 2012. In addition, three additional decrees were issued to improve the performance of the OSS – on additional allowances for OSS staff, code of conduct, and service charters.
(6) Building the capacity of the OSS staff and technical teams’ members. YAS trained OSS staff and technical teams’ members on the implementation of SOPs and service standards and helped to promote a service-oriented office culture.
(7) Preparing physical infrastructure. The office layout was changed to create separate front and back offices. Information about licensing procedures and requirements was posted on information boards and the internet. Complaint handling infrastructure was installed.
(8) Promoting the OSS and increasing the coverage. In addition to promoting the OSS and its reformed licensing services through public events and radio talk shows, a “mass-licensing day” event was held in 2012 to reach out to micro and women-owned enterprises. Approximately 60% of the 360 local business owners who participated were women. In addition, OSS staff regularly visit villages to provide licensing services for the residents.
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| 5. Who implemented the initiative and what is the size of the population affected by this initiative?
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The main driver of the reform was the licensing working group established by the LG of Barru. The working group, led by the OSS, includes members from the OSS, Legal Division, Organization Division, Administrative Division, and Local Development Planning Board (BAPPEDA). In addition, three members of the local legislative council (DPRD) were also involved in the working group. They led the overall design and implementation of the business licensing reform in Barru. There were 14 technical departments of the LG that held the authority of issuing licenses prior to the initiative that were involved in the implementation of the initiative. The district head also played an important role in supporting the initiative and issuing 11 local-level regulations discussed above.
The working group was supported by the Makassar-based NGO Justice and Welfare Foundation (YAS)that helped the working group to interact with and obtain support from other LG technical departments, local business associations, and other CSOs (academics, mass media, and NGOs). YAS also brought to bear the experience and lessons-learned it had gained from assisting other LGs in South Sulawesi.
Local-level business associations, particularly the Indonesian Young Entrepreneurs Association (HIPMI), Mattriowalie Market Kiosk-owner Association (HPPM), Indonesian Hotel and Restaurant Association (PHRI), Regional Forum of Small and Medium Enterprises (FORDA UKM), Indonesian Construction Associations (GAPENSI and GAPEKNAS), were heavily involved in providing feedback to the LG, promoting the OSS to the private sector and discussing complaints received by the OSS.
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| 6. How was the strategy implemented and what resources were mobilized?
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The LG of Barru spent a significant amount of money on the design and implementation of the initiative, as well as for the operations of the OSS, including Rp 409 million (about $40,900) in 2011, Rp 558 million (about $55,800) in 2012, and Rp 998 billion (about $99,800) in 2013. In addition, YAS was supported by Kinerja-USAID program, which allocated funding in the amount of about Rp 393 million (about $39,300) and Rp 283 million (about $28,300) in 2012 and 2013, respectively. These funds were used to finance training/workshops/meetings and other activities, as well as YAS’ personnel and travel expenses.
Technical resources used included national-level guidelines and training modules, as well as YAS’ institutional memory in supporting OSS development in other districts in South Sulawesi. Human resources used were the local stakeholders in Barru – government, private sector and other CSOs – as well as YAS’ personnel.
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| 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
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There are three most significant outputs of the initiative:
(1) Reduced types of business licenses required by the LG of Barru. Prior to the intervention, 129 types of licenses were required by the LG. Through license mapping and intensive discussions with technical departments and the private sector, there are only 30 types of licenses required after the intervention (77% reduction). Significant deregulation has eased access to business formalization and reduced opportunities for corruption.
(2) Improved quality of licensing services. All 30 types of business licenses can now be issued by the OSS. In addition, processing times have been significantly reduced. Based on five basic licenses as a proxy, the official time to process and issue licenses was reduced by 30%, particularly due to the OSS’ ability to process various licenses simultaneously. It was estimated that the actual time to process a license in many instances was reduced by 50%. Most of these were resulted from the local-level regulations issued, particularly on transfers of authority and SOP for issuing licenses, as well as improved capacity of the OSS staff and the members of the OSS technical teams. The customer satisfaction surveys confirmed this improvement, jumping from 77.3 percent in 2011 to 82.0 percent a year later.
(3) Improved governance of licensing services. Transparent and clear information about the requirements and procedures to obtain business licenses, as well as introduction of complaint handling mechanism (channels include telephone, short messaging service, suggestion boxes, in person, and by email) have significantly reduce the opportunity for corruption. The improvement of customer satisfaction index discussed above reflects this. The 2012 survey also found no complaints about extraneous costs. These resulted from the issuance of local-level regulations on SOPs for complaint handling as well as additional allowance for OSS staff. In addition, improvement of physical infrastructure and incentive interactions with the CSOs, particularly the business associations, have contributed to these achievements.
(4) Improved opportunities for businesspeople. This initiative provides equal opportunities for people living in rural and urban with licensing services. One year after the mobile licensing service was launched, the OSS issued 739 home building licenses – one of the licensing authority of the office - for 739 village families.
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| 8. What were the most successful outputs and why was the initiative effective?
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Monitoring and evaluation was conducted through the following activities:
(1) Internal government reporting. The OSS is tasked to monitor the quality of services, the outcomes and impacts of the improved licensing services and report to the district head and the heads of relevant technical departments on a monthly basis. Reported indicators include volume of licenses issued and funds collected from licensing fees. In addition, the OSS occasionally writes reports and memos to the district to raise specific problems that require higher-level follow-up as well as to propose new reform initiatives.
(2) Customer satisfaction survey implementation. As discussed above, the LG conducts annual surveys to measure the satisfaction of the OSS customers. To maintain the quality and integrity of the survey, an independent survey firm was contracted to implement the survey.
(3) Regular meetings with business associations. The OSS meets with business associations on a quarterly basis to primarily discuss the results of the complaint handling mechanism as well as to discuss outstanding issues raised by the private sector.
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| 9. What were the main obstacles encountered and how were they overcome?
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The biggest challenge during implementation was overcoming resistance from the local technical departments managed the issuance of licenses prior to the transfer of authority and deregulation. The reduction of licensing authority created a disincentive for institutional and individual support for those losing authority. In addition, there are several national-level technical regulations that are not supportive of the efforts to simplifying regulatory environments or to transfer authority to the OSS. For example, technical regulations on health and environmental programs specifically state that the licenses must be reviewed by the respective local technical departments. Similarly, one regulation requires all types of restaurant, regardless of size, to conduct environmental assessments and prepare monitoring plans (UKL/UPL) that are costly for micro businesses.
The licensing working group took five actions to overcome these challenges. First, as discussed under section B.2, an incremental and integrated approach was adopted. A gradual reduction of types of licenses and transfer of licensing of authority was conducted without waiting for all technical departments to agree to cede control. Second, the working group held a series of discussions with local technical departments that at first were unsupportive of licensing reform. These efforts were ultimately successful in winning over early resistors. Third, based on input from the working group, the district head of Barru made consistent public statements on various occasions that he wanted the LG to improve its investment climate by reducing the number of licenses required and by increasing the authority of the OSS. Fourth, the OSS technical teams – representatives of technical departments who are authorized to review and clear license applications – were established to ensure that technical license applications were adequately reviewed. Fifth, the LG took the initiative to follow the spirit, rather than the letter, of national-level regulations through the issuance of its own local-level regulations.
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