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LESSONS:

Second Development Policy Support Program and Third Development Policy Support Program

| country: Indonesia

Program Loan Modality. The modality with indicative actions being formulated in the predecessor program (Second Development Policy Support Program or DPSP-2) which then form the basis for the translation into triggers in the successor program (Third Development Policy Support Program or DPSP-3) have shown that it is a practical and a sufficiently flexible approach to pursue constructive policy dialogue.

Donor coordination. The Development Policy Loan(DPL)/Development Policy Support Program (DPSP) developed to become the most important platform for key donors to coordinate policy-based programs in Indonesia. The Government welcomed the development of a consistent approach to key reform issues among key donors as a harmonized approach not only strengthens the reform agenda but also reduces transaction costs of the Government in dealing with development partners.

Coordination within Government. To develop joint positions on targeted policy issues necessitated regular and continuous interagency consultation and coordination that may have indirectly led to systemic changes in policy coordination processes within key agencies of the Government. This was noted by stakeholders during the review process. It was also mentioned not to expand the policy dialogue into too many fields as coordination involving multitudes of departments would become increasingly difficult.

Formulation of triggers and flexibility. In formulating triggers equal weight needs to be given in driving reform processes by also assuring the continuity of the Program. A deep understanding of the bureaucracy and political will is absolutely essential. Besides the selection of triggers it was important to identify the reformers that assisted in pushing for their implementation.

Strengthening change management capacity in the Government. The success of DPSP-2 and DPSP-3 hinged on the proactive role taken by key counterparts willing to take up difficult change-management functions. This involved a strong communications strategy with all concerned stakeholders, making assessments of potential gains and losses to key stakeholders, having realistic assessments of the timeframes required to implement specific actions, and identifying potential risks and obstacles as well as remedial and palliative actions. It was widely recognized that supporting the agencies leading the reform process (through advisory services or technical support) would yield disproportionately large benefits in terms of facilitating future reforms and the formulation and design of the Government’s forward-looking reform agenda.

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