Table of Contents -- Foreword -- Acknowledgments -- Glossary -- Executive Summary -- A Unique Opportunity -- Why this Report? -- Trends in Sectoral Spending and Public Investment -- Education -- Health -- Infrastructure -- Public Financial Management -- Fiscal Decentralization and Regional Inequality -- An Agenda for Implementation -- CHAPTER 1 Fiscal Space and Management -- Public Expenditure Trends -- Public Investment and Fiscal Space -- Debt -- Subsidies -- Civil Service Reform and Personnel Spending -- Medium-Term Fiscal Framework -- Policy Recommendations -- CHAPTER 2 Cross Sectoral Trends -- Economic Services -- Social Services -- General Public Services -- Intergovernmental Distribution of Sectoral Expenditures -- CHAPTER 3 Education -- Progress and Challenges in the Education Sector -- Public Spending -- Education Public Expenditures and Equity -- Education Public Expenditures, Efficiency and Outcomes -- Policy Recommendations -- CHAPTER 4 Health -- Progress and Challenges in the Health Sector -- Public Health Expenditures in Indonesia -- Equity: Inequality in Public Spending, Benefit, Incidence and Utilization of Health Service -- Quality of Health Services and the Health Workforce -- Policy Recommendations -- CHAPTER 5 Infrastructure -- Performance of the Infrastructure Sectors -- Public Expenditure in Infrastructure: Composition and Trends -- Spatial Balance and Equality of Access -- Recent Government Initiatives -- Policy Recommendations -- CHAPTER 6 Public Financial Management -- Progress and Challenges in Public Financial Management -- Budget Formulation and Approval -- Budget Execution -- Procurement -- Audit -- Policy Recommendations -- CHAPTER 7 Fiscal Decentralization And Regional Inequality -- Inequality and Decentralization -- Expenditures -- Revenues -- Sub-National Public Financial Management.

The Impact of Fiscal Decentralization on Inequality -- Policy Recommendations -- References -- Annexes -- Figure 1 Defining years in Indonesia's public expenditure allocation -- Figure 2 Sectoral spending in Indonesia: education and government apparatus dominate -- Figure 3 Public investment is slowly recovering -- Figure 4 Public investment roller-coaster -- Figure 1.1 Central government expenditures and revenues, 1994-2007 -- Figure 1.2 Composition of central government outlays -- Figure 1.3 Composition of sub-national government expenditure (province + district) -- Figure 1.4 Economic composition of public expenditure by level of government, 2005 -- Figure 1.5 Development expenditures have recovered to the pre-crisis level -- Figure 1.6 Public investment recovered to pre-crisis level but private investment did not -- Figure 1.7 Fiscal space continues to increase -- Figure 1.8 Unutilized fiscal space: central -- Figure 1.9 Unutilized fiscal space: sub-national -- Figure 1.10 Easing debt burden -- Figure 1.11 Declining budget deficits -- Figure 1.12 Repayments are below pre-crisis levels -- Figure 1.13 Subsidies and gasoline prices -- Figure 1.14 Fuel and electricity subsidies are dominant -- Figure 1.15 Domestic vs international fuel prices -- Figure 1.16 Saving from fuel subsidy adjustments -- Figure 1.17 Oil prices and production -- Figure 1.18 Regressive electricity subsidy, 2005 -- Figure 2.1 Distribution of national public expenditures in key sectors, 2001-07 -- Figure 2.2 Economic composition of government apparatus spending -- Figure 2.3 Sectoral distributions of public expenditures by level of government, 2005 -- Figure 3.1 Enrollment rates by income groups for primary and junior secondary education -- Figure 3.2 International comparison of education expenditures, 2004.

Figure 3.3 Education spending by program and level of government, 2004 -- Figure 3.4 Central and sub-national budget allocations to the education sector -- Figure 3.5 Net enrollment rates over time -- Figure 3.6 Primary education: district enrollment rates within provinces -- Figure 3.7 Primary and secondary school STRs by selected countries, 2003 -- Figure 3.8 Percent of primary schools with oversupply or undersupply, by region -- Figure 3.9 Estimated financial cost of teachers' salaries and newly-stipulated increases -- Figure 3.10 Trend in reading and mathematics test scores in PISA International Standardized Test -- Figure 4.1 Regional comparison of infant mortality and under-five mortality rates, 2004 -- Figure 4.2 Infant and child mortality rates by province, 2002-03 -- Figure 4.3 Trend in health expenditures, 1995-2007 -- Figure 4.4 Regional comparison of health expenditures, 2004 (budget 2006) and IMR -- Figure 4.5 Trends in health expenditure by level of government -- Figure 4.6 Health spending and district revenue, 2004 -- Figure 4.7 Composition of total health expenditure -- Figure 4.8 Private expenditure on health over time -- Figure 4.9 Healthcare utilization over time -- Figure 4.10 Private health insurance participation rates -- Figure 4.11 Insurance participation by quintile, 2005 -- Figure 4.12 Utilization of public and private health services over time -- Figure 4.13 Number of hospitals by type of provider/owner -- Figure 4.14 Specialized vs general care in public and private hospitals, 2003 -- Figure 4.15 Dual practice in Puskesmas -- Figure 4.16 Per capita public expenditure on health by province: maximum, minimum and mean -- Figure 4.17 Private share of healthcare by quintile -- Figure 4.18 Trends in healthcare utilization -- Figure 4.19 Utilization of outpatient care, 2005 -- Figure 4.20 Ratio midwives and service area.

Figure 4.21 Distribution doctors and midwives -- Figure 4.22 Population per Puskesmas -- Figure 4.23 Doctors per Puskesmas -- Figure 4.24 Puskesmas - sources of medication -- Figure 5.1 Infrastructure investment, 1994-2004 -- Figure 5.2 Proportion of roads that are paved, 2003 -- Figure 5.3 Composition of infrastructure expenditures, 2004 -- Figure 5.4 Impact of decentralization on government infrastructure investment -- Figure 5.5 Distribution of investment expenditures by spending unit -- Figure 5.6 Trends in PLN's expenditures -- Figure 5.7 Investment in roads by level of government and private sector -- Figure 5.8 Number of loans to PDAMs approved by the Ministry of Finance, 1993-2005 -- Figure 5.9 Variation in the percentage of households with electricity connections -- Figure 5.10 Variation in the percentage of villages with asphalt road as the main access road -- Figure 5.11 Distribution of households by source of water use and consumption quintile -- Figure 5.12 Variation in the proportion of households in sampled villages with access to piped water -- Figure 6.1 Gap between budget and realization -- Figure 6.2 Disbursement of non-recurrent expenditures -- Figure 6.3 Who is in charge? Responsibilities in the budget preparation process -- Figure 6.4 Schematic profile of project disbursement -- Figure 7.1 Pronounced regional disparities -- Figure 7.2 Sub-national revenue before and after decentralization -- Figure 7.3 The composition of the DAU pool -- Figure 7.4 Distribution of natural resource shared revenue and shared tax revenue (per capita, 2006) -- Figure 7.5 Results from the PFM performance measurement framework -- Figure 7.6 Regional distribution of the 2006 DAU increase -- Figure 7.7 Fiscal revenues of local governments using diff erent DAU allocation -- Figure 7.8 Using fiscal gap formula, the DAU could better benefit the poor.

Table 1.1 Total national public expenditures (central + province + district) -- Table 1.2 Economic composition of national public expenditure, 2001-07 -- Table 1.3 Composition of central government expenditure -- Table 1.4 Quantifying the widening of fiscal space -- Table 1.5 Oil price elasticity of sub-national revenues (estimates for 2008) -- Table 1.6 International comparison of government debt -- Table 1.7 Central and regional debt outstanding -- Table 1.8 Domestic fuel prices vs international prices -- Table 1.9 Intergovernmental distributions of civil service by seniority and total personnel spending -- Table 1.10 Medium - Term Fiscal Framework -- Table 2.1 Sectoral distribution of national public expenditures. -- Table 2.2 Trend of spending in the government apparatus sector -- Table 3.1 Gross and net enrollment rates for different levels of education, 1995-2005 -- Table 3.2 National public expenditure on education (central + province + district) -- Table 3.3 Education public expenditure in Indonesia's neighboring countries -- Table 3.4 Nominal education expenditures by level of government, 2001-04 -- Table 3.5 Share of development and routine expenditures by level of government, 2001-05 -- Table 3.6 Routine expenditure distribution by level of sub-national government 2002-04 -- Table 3.7 Social returns to education by level of education, 2004 -- Table 3.8 Education spending as percentage of central sub-national and national spending -- Table 3.9 District expenditures on education by poverty quintile -- Table 3.10 Cost estimates for "Education for All" (EFA) -- Table 3.11 Comparison of teacher salaries in selected World Education Indicator (WEI) participant countries -- Table 4.1 Regional comparison of health outcomes, 2004 -- Table 4.2 Trends in Indonesian health expenditures, 2001-07.

Table 4.3 Levels and shares of health expenditures at different levels of government.