LOCAL GOVERNMENT BEST PRACTICES IN SINGAPORE AND INDONESIA

5.1. Local Government Best Practices in Singapore

5.1.1 Disclosure System to Promote Corporate Transparency

Singapore has championed a disclosure system that produces

credible specialized firms’ information about publicly traded firms. It has
promoted corporate transparency, brought to means as the widespread
availability of relevant and reliable information about the periodic
performance, financial position, investment opportunities, governance,
value, and risk public trading firms. What best practices exist in
Singapore can be measured in the quality of corporate reporting,
including intensity, measurement principles, timeliness, the credibility
(i.e., audit quality) of disclosures by locally listed firms. Singapore is a
notable exception when the local market has tried to improve exposure
standards using voluntary mechanisms.

Singapore is a regional financial center in Southeast Asia. Its

system of corporate governance has been ranked the best in Asia by the
Asian Corporate Governance Association in its annual rankings of Asian
countries from 2000 to 2004 (Asian Corporate Governance Association,
2005). The creditability of Singapore’s corporate boards has also
received global recognition. In the World Competitiveness Report, the
country has consistently found itself placed in the top 10 position for the
effectiveness of its corporate boards in supervising the management of
company in the same five-year period (IMD, 2000-2004). In 2005,
Singapore is ranked 11th (IMD, 2005). The rankings are an indication of
the level of corporate governance in place in Singapore. They indicate
that Singapore has made considerable progress in introducing best
practice and a corporate governance framework with systems in place to
encourage good governance.

Corporate governance in Singapore has and still has many

similarities to English law because the Companies Act uses English
precedents. The Companies Act also takes examples from other
jurisdictions such as Australia. Thus, Singapore’s structure and board
responsibilities are similar to those in England and in most respects
similar to most Commonwealth countries. It can be said that this
foundation of corporate laws and regulations allows Singapore to
improve its corporate governance over time, as there are many things to
be commended in the UK corporate governance system.

The corporate governance framework in Singapore highlighting

what underlies the best practices in disclosure in Singapore. It is sound
public policy to adapt the best in disclosure practice for Singapore that
partly accounts for Singapore’s high ranking internationally. The
underlying objective on the part of the policy makers is to establish
Singapore as an international financial center and a global hub for
commerce. To achieve this, Singapore must adopt standards and
practices international corporations are accustomed to and expect. This
paramount objective shapes the future of corporate governance best
practice, especially in disclosure and transparency. For stakeholders and
the public-at-large, good disclosure practices improve public
understanding of the structure and activities of enterprises, corporate
policies and performance with respect to environmental and ethical
standards, and Best Practices in Asian Corporate Governance
companies’ relationships with the communities in which they operate.

Corporate governance in Singapore has four pillars: (1) board

processes, (2) disclosure and transparency, (3) auditing and compliance,
and (4) accountability to shareholders. It is disclosure and transparency
that relates to the effective and total communication between the
company, its shareholders and stakeholders within its sphere. In today’s
competitive global business landscape, many businesses are actively
contending for their shareholders’ attention so that they can continue to
rely on them for their financing needs. An effective communication
program is therefore critical to ensure that key company strategies,
directives and messages are relayed in a timely manner. Evidence
suggests that investors will pay a premium for better governance, which
includes a powerful disclosure regime. In an Investor Opinion Survey
 conducted by McKinsey, the World Bank and the Institutional Investor
magazine in 2002, 89 percent of respondents in Asia said that they
would ante up more for the shares of a well-governed company than for
those of a poorly governed company with similar financial performance.

Of the four pillars, corporate disclosure, doubtless, will have the

most substantial and direct effect on a company’s valuation. Business
analysts may use various yardsticks to value a company, but what is
common to all the different valuation methods is the use of an equity
premium. The equity premium translates into an information premium if
there is a solid level of disclosure. Good disclosure practice will raise the
company’s value, as it lowers risk and uncertainty, and lowers the
premium. Lower premium in turn leads to higher value. A good corporate
disclosure practice means prompt and voluntary disclosure of
information about the company’s financial performance and of
transactions involving the interests of directors, managers and
controllers. PricewaterhouseCoopers recommends the following actions
as exemplary disclosure practice: disclosing material information in a
timely manner; avoiding selective disclosure during meetings with
investors; providing broad market information to all retail and institutional
investors, both local and foreign; and offering information above and
beyond statutory requirements.

5.1.2. Establishment Of Corporate Governance Committee

A Corporate Governance Committee was subsequently set up to

come up with a Code of Corporate Governance, which was accepted
by the Singapore Government in April 2001. The Singapore Code of
Corporate Governance was introduced in 2001 and implemented from
January 2003. It was also included in The Singapore Exchange’s
listing rules. The Code sets out principles and best practices in four
main areas, namely board matters, remuneration, accountability and
audit, and communications with shareholders. The Code aims to
encourage Singapore-listed companies to enhance shareholder value
through good corporate governance. All listed companies are required
 to include a complete description of their corporate governance
practices with reference to Code provisions in their annual report and
to provide adequate explanations when deviations occur (Tan and
Tan, undated; Sim, 2001). The Code is consistent with Singapore’s
disclosure-based regime for the capital markets. The intent is not just
to mandate requirements, but also to strengthen disclosure and
promote fair dealing. In general, listed companies have stood by the
principles set out in the Code (Yam, 2003).

Besides the board and remuneration matters, the Code of

Corporate Governance also provides guidelines to improve the quality
of corporate financial reporting. It spells out the mechanism to
safeguard the company’s assets and resources (accountability and
audit; internal controls) as well as accountability to shareholders
through effective and comprehensive communications. The
accounting, audit, internal audit and accountability to shareholders
principles work towards strengthening companies’ corporate
governance practice. Through board monitoring, these changes will
limit the discretion management has on the nature and extent of
information disclosed in annual reports. Best Practices in Asian
Corporate Governance.

5.2 Local Government Best Practices in Indonesia

5.2.1. Implementation of Sustainable Development Goals (SDG)

In 2014, the new administration established a new vision of

national aspiration called Nawa Cita, or the nine visions or hopes,
which aims at ensuring the safety of all citizens, developing good
governance, developing peripheral regions, reforming law-
enforcement agencies, improving the quality of life, increasing
productivity and competitiveness, developing strategic sectors of the
economy, overhauling the character of the nation, and strengthening
the spirit of Indonesia’s “unity in diversity” and social reform. In order
to realize the nine visions, the government translated them into the
National Medium-Term Development Plan (RPJMN) 2015–2019 that
has been well-aligned with the SDG targets. This alignment is the
principal foundation for SDG implementation in Indonesia.

The Government of Indonesia consistently applied “whole of

government” and “whole of society” approaches throughout the
processes of SDG preparation. For example, important documents
such as the National Guidelines for SDG Action Plans, the SDG
indicators metadata and the Voluntary National Review of Indonesia
(2017), which is the report to the UN High-Level Political Forum, have
all been prepared with input from various stakeholders.

The National Secretariat of SDGs at Bappenas has written

communication strategy guidelines on the SDGs in order to raise
more awareness, interest and commitment to create more
engagement from all parties and stakeholders that have not been
involved in implementing the SDGs programmes in Indonesia. The
communication strategy guidelines set out four platforms of
stakeholders involved in the SDGs: the government; philanthropy and
private sector; academia and civil society organizations; and media.
Each of these stakeholders will have unique roles and responsibilities
with respect to the SDGs and approaches to communicate to the
public about their own SDG-related programmes and efforts through
forums, social media and official meetings. The guidelines emphasize
that key messages about the purpose of SDGs – leaving no one
behind and improving the quality of life, the environment, and the
welfare of the nation in a sustainable way – should be consistently
conveyed through various communication forums by stakeholders.

To kick off implementation of the SDGs, the President established

an institutional structure of SDG monitoring and implementation. The
SDG Steering Committee is chaired by the President, while the SDG
Implementation Team is chaired by the Head of Bappenas. The
Steering Committee will oversee the Implementation Team. The
Implementation Team and four Working Groups consist of
representatives from the government, philanthropy and business
community, civil society organizations, and academics and experts.
The Working Groups are responsible for preparation of SDG Action
Plans in their respective areas, conducting research and monitoring
progress toward the SDGs.

The President also instructed national and local governments to

develop three additional development planning documents in regards
to SDGs implementation. The Roadmap of the SDGs will be the
official guidelines for all levels of government towards the long-term
implementation of the SDGs. The National Action Plan of the SDGs
and the Regional Action Plans of the SDGs are five-year work plans
for implementing various development programmes and activities that
are related to the achievement of national and local SDG targets.

In order to help local governments to draft their Regional Action

Plans of the SDGs, Bappenas has prepared the National Guidelines
for SDG Action Plans (RAN TPB). These guidelines are intended to
give national and local stakeholders a good understanding in
conducting the planning and budgeting processes, as well as a
greater sense of ownership in implementing programmes and
activities to achieve SDG targets.

To implement its new vision, 10 national priority programs for the

Government Work Plan have been implemented in Indonesia in 2018
and beyond, covering education, health, housing and residential
areas, business and tourism, energy security, food security, poverty
eradication, infrastructure development, connectivity maritime and
other maritime issues, and regional development. This priority
program is designed to address the most serious challenges facing
the country - increasing inequality between regions, increasing
poverty and increasing unemployment. All of these national priorities
are in line with the SDGs to a large extent.
 As a member of the G20 group of countries and a middle-income
country, Indonesia is no longer considered by traditional donors to be
a beneficiary of development assistance; its status has changed to
that of a partner in implementing development projects. As such, in
order to fund development programmes, in particular programmes
which relate to achieving the SDGs, the Government of Indonesia
needs to increasingly rely on its own revenues from taxes.

The current government strategy is to strengthen domestic

financial resource mobilization and multi-stakeholder partnerships to
acquire funding for its development programmes. This is happening
through increasing public–private partnerships in financing strategic
projects, developing banking services, increasing tax revenues, and
exploring alternative contributions from private sector organizations,
philanthropic foundations, funds from the diaspora and religious social
funds such as the well-known Badan Amil Zakat Nasional (Baznas).

The private sector in Indonesia has been among the most active
partners in mobilizing stakeholders for the SDGs. The Association of
Philanthropy Indonesia (Filantropi Indonesia), together with the
Indonesian Global Compact Network (Indonesian Business Council
for Sustainable Development) and the Indonesian Chamber of
Commerce (KADIN), have launched the Indonesia Philanthropy and
Business Forum for the SDGs (Forum Filantropi dan Bisnis –
Indonesia untuk SDGs), which is comprised of 10 associations,
representing more than 600 businesses and philanthropic foundations
in Indonesia.

5.2.2. The “Whole Of Society” Approach To Programme And Budget

Planning.

A unique example from Indonesia’s planning process is a well-

established practice of consultations about programme and budget
planning at the local and national level, called “Musrenbang”.
Although the practice of Musrenbang was introduced in Indonesia well
before the SDGs and the 2030 Agenda, it could become an important
forum for discussions about programmes and budgets that are
oriented towards SDG targets.

Musrenbang is a deliberative multi-stakeholder forum that

identifies and selects community development priorities. It aims to be
a process for negotiating, reconciling and harmonizing differences
between government and non-governmental organization (NGO)
stakeholders, and reaching mutual consensus on development
priorities and budgets. All government officials together with local
citizens gather at Musrenbang every year, which begins in January at
the village community-level to discuss the next year’s proposal of
development programmes and budgets to be included in the
government work plan.

Since the decentralization process was launched in 1999, the

central government of Indonesia has spearheaded efforts, through
regulations and other actions, to encourage a participatory approach
in community and regional planning, and has opened up “entry points”
for citizens to get involved in local governance. These participatory
entry points have been implemented through the Musrenbang process
which was officially started since the Law of the National Development
Planning System was adopted in 2004. Regional governments have
supported these measures by directly implementing participatory
practices such as public hearings and participatory planning. Such
“grassroots consultations” aim to encourage a sense of local
ownership in community projects, build and sustain democratic
institutions, reduce conflicts and achieve development objectives.
Despite these objectives, Musrenbang consultations in recent years
have started to become ceremonial in their approach. Local
government officials are also often perceived to have a lack of
commitment to genuine and broad-based community participation.

Nevertheless, Musrenbang provides a crucial opportunity for the

government to acquire valuable input on subnational and national
governments’ budget formulation processes. The process of the
forums starts in each village, continues to sub-districts, districts/cities,
then provinces and ends in the capital city. At each level, the
discussions result in selection of programmes. At each respective
level, the government then prepares a programme and budget
proposal on the basis of the Musrenbang discussions. Subsequently,
the proposals are collated at upper levels of government, and are
discussed at the national Musrenbang.