Jakarta, April 29, 2025 — The Center for Regional Studies and Information (PATTIRO) held a coordination meeting with the Directorate of Regional Budget Planning (PAD) at the Ministry of Home Affairs to discuss proposed revisions to Government Regulation (PP) No. 12 of 2019 concerning Regional Financial Management. The meeting, held at the Ministry of Home Affairs office, aimed to strengthen the direction of regional fiscal policy to support sustainable development, particularly in performance-based environmental financing. This is also a crucial moment in the preparation of Regional Medium-Term Development Plans (RPJMDs) in the regions, ensuring alignment with ongoing efforts at the regional level and commitments at the central level.

Driving Performance-Based Environmental Initiatives in Regulations

The coordination meeting began with an introduction from Ramlan, PATTIRO’s Program Manager, who explained that the main agenda of the meeting was to push for revisions to PP 12/2019 to accommodate performance-based financing within the Regional Budget (APBD) structure. Fitria, PATTIRO’s Executive Director, then emphasized the importance of performance-based incentives in the environmental context. She highlighted that PATTIRO, along with partners including The Asia Foundation, has developed new approaches to integrate ecological issues into fiscal policy, as initiated through the Ecological Fiscal Incentive (EFT) scheme in the 2025-2029 National Medium-Term Development Plan (RPJMN).

PATTIRO’s Proposal: Special Financial Assistance (BKK) and Performance Strengthening in Regional Budgets

In its presentation, PATTIRO proposed three key points for the revision of PP 12/2019: First, the regulation of Special Financial Assistance (BKK) within PP No. 12 of 2019 concerning Regional Financial Management should be performance-based. Second, the regulation of performance-based BKK should be considered for sustainability under a Regional Regulation (Perda) legal umbrella within PP No. 12 of 2019 concerning Regional Financial Management. Third, there should be clear regulations regarding the transparency and accountability mechanisms and indicators for the allocation and disbursement of Special Financial Assistance

Responding to these proposals, Hendriwan, Director of PAD (Regional Budget Planning) at the Ministry of Home Affairs, expressed his appreciation for PATTIRO’s initiative. He emphasized several points, including that revisions should be carried out gradually and involve relevant ministries/agencies, especially the Ministry of Environment and Forestry (KLHK), to ensure integration into broader national policies. Furthermore, PATTIRO’s proposals should be incorporated into strategic documents that can serve as regional references, such as the RPJMD or technical regulations of the Ministry of Home Affairs. He also stressed the importance of collaboration between the central government, regional governments, and civil society organizations. Forums like the Green Leadership Forum (GLF) were deemed highly strategic for fostering consensus and synergy among stakeholders.

Best Practices and Opportunities for Regional Implementation

PATTIRO notes that local governments have taken several positive steps to incorporate environmental issues into their Regional Budgets (APBD). First, through the recognition of environmental service compensation, which aligns with the mandate of the Environmental Management Law, this compensation has started to be included in regional budgeting practices. Second, the Ministry of Home Affairs Regulations concerning APBD Guidelines have begun to incorporate environmental issues, though further refinement is needed to better motivate regional heads to prioritize the environment in fiscal management. Ramlan emphasized that regulatory changes, such as the revision of PP 12/2019, will strengthen the legal basis for realizing more sustainable APBDs.

Closing and Follow-Up: Strategic Role of GLF and Letter to KLHK

The coordination meeting concluded with a commitment to follow up on the proposals by sending an official letter to the Ministry of Environment and Forestry (KLHK). PATTIRO is expected to promptly submit a formal proposal to KLHK as an initial step towards inter-ministerial synergy. Furthermore, the meeting highlighted the optimization of the Green Leadership Forum (GLF) as a strategic platform to discuss and formulate performance-based and environmentally-sound APBD policy strategies. Ramlan affirmed that PATTIRO is ready to continue its collaboration with the Ministry of Home Affairs and other stakeholders to refine regional budget management policies that are fair, transparent, and sustainable..

Author: Fabya Luthfiana, Program Officer PATTIRO