This note draws on a longitudinal study (Sentinel Villages) that investigated the patterns of participation, transparency and accountability under Village Law between 2015 and 2018. The findings from this research indicate that, since the introduction of Village Law, levels of community participation in village meetings (musdes), while relatively stable, continue to be low at around 16%. Participation patterns are also not broad-based and inclusive, with participation mostly from the elites (male, well off and socially engaged), and limited participation from women or other marginalized groups. Since 2014, village governments have improved on key metrics of transparency, disclosing and sharing more information. However, there was an overall low level of awareness at the village level on village programs, budgets, and plans. Under Village Law, systems of upward accountability and reporting have been strengthened. This has not been matched with similar progress on systems of downward (social) accountability to the community. Strengthening participation, transparency and accountability, necessitates each actor to play its role effectively, and particularly realising the full potential and role of the village community, facilitators, and the Village Council (Badan Permusyawarahan Desa or BPD).

The role of the local government in village development is largely defined by the Local Government Law (UU 23/2014), which forms the legal basis for local government regulations related to organization and functions of local technical agencies in providing guidance and supervision to village governments. Both the Village Law (UU 6/2014) and Local Government Law (UU 23/2014), which were passed in the same year, define authorities of village governments and local governments, respectively. However, these two laws provide different guidance on the role of local governments in supporting and supervising village governments. The Local Government Law and its derivative regulations mandate a critical role of district government agencies to oversee villages (particularly the District Agency for Village Community Empowerment and Sub-district), which differentiates the role of district government and villages related to village and community empowerment affairs. Current efforts to align the Local Autonomy Law and Village Law through a revised government regulation on concurrent government affairs are expected to address the gaps and conflicts in these laws. In the meantime, some district governments have initiated local regulations and positioned the local government as a critical facilitator for village development.

There has been a ten-fold increase in village expenditures on infrastructure between 2012 and 2016; however, the quality of the infrastructure over the same period has declined. Most village funds are spent on infrastructure. In 2018, less than half of projects, 46%, met technical specifications (meaning the structures were built according to code), compared to 82% in 2012. Further, there has been an 80% drop in Operations and Maintenance (O&M) in the same period. The quantity and quality of technical assistance to villages is insufficient to meet the demand from villages. Local governments are mandated to provide supervision of infrastructure under the Village Law and PP47/2015, but face difficulties in fulfilling this role.

Between 2015 and 2018, there has been a 130% increase in the size of village expenditures. The majority of village funds are spent on general government and public works. Most villages are selecting smaller projects, and in some cases even distributing funds equally between hamlets (dusun). The central government’s focus on disbursement conditions and budget absorption necessitates fast implementation which forces villages to choose small projects. Village governments’ upward accountability has improved significantly, and the over the overall corruption rate (0.18%) is low. However, there are some areas where the government can further strengthen systems to ensure better utilization of village funds, including harmonizing guidance on village fund prioritization, in line with RPJMN cycle and priorities; clarify operational guidelines on inter-village and village-district projects, including jurisdictional authority, asset ownership, and operations and maintenance (O&M) responsibilities; strengthen financial controls, including audit, consolidated reports on village budgets (APBDes), and simplified village financial reporting templates; develop a consolidated joint village financial management oversight plan that links community social accountability tools with strengthened formal financial control mechanisms.

In 2014, the Government of Indonesia (GoI) passed the Village Law, which aims to support poverty reduction, improve service delivery, promote community harmony, and bring citizens and the state closer together, by increasing the voice of local communities in development decisions. There are some early signs that some villages are taking advantage of these new opportunities. Evidence indicates that most villages are investing in small-scale infrastructure projects, which improve access to critical needs such as roads and irrigation. However, these investments have only led to marginal improvements to village Village Development Index (IPD) scores and are unlikely to create new economic opportunities, increase human capital, or transform livelihoods. Optimising the implementation of the Village Law is a long-term process that will necessitate policy adjustments as local realities change. These policy briefs highlight four key issues stand out with respect to improving Village Law implementation in the short term.