30
One important aspect which had been underlined by the WG on PFM was the idea to separate the administrative mechanism between foreign loans and grant arrangement. This is
caused by fundamental differences in characters of foreign loans and grants.
149
WG on PFM suggested that the government should amend the PP No. 22006 to simplify the government
procedures especially for the foreign grants to be administered in the state budget. Additionally, WG PFM also tried to satisfy their second task to find alternative financing
sources andor new funding schemes. The WG on PFM had analysed the operation of several multi donor funds in Indonesia. Some important findings include development trust fund
requires a clear policy and regulation to ensure the smooth implementation of activities funded through this mechanism. The clarity of legal aspects in establishing a trust fund, such as the
appointment of national trustee is also important.
150
This was also become one of the most important recommendations from A4DES to the government of Indonesia to establish a national
policy regarding a development trust fund. After conducted long discussion with various stakeholders, PP No. 102011 as a replacement of the PP No. 22006 finally was enacted by the
President of Indonesia along with the provision regarding development trust fund within the regulation.
D. MCA-
I’s Accountable Entity as the First Indonesian Development Trust Fund
, 2012
Given Indonesia’s sound policy performance and the success of the Threshold Program, in December 2008 MCC’s Board of Directors selected Indonesia as eligible for a Millennium
149
Aid for Development Effectiveness Secretariat, supra note 134, 100-101.
150
Id .
31
Challenge Compact.
151
The Threshold Program is financial assistance contract between the United States and a country which designed to improve low indicators scores and making the
country competitive for MCA Compact funding.
152
The preparation to receive the Compact grant continued with lengthy process such as conducted constrain analysis, public hearing, drafted various concept papers, fact findings, due
diligent, appraisal and early negotiations, prepared draft of grant agreement, designed an accountable entity, designed a tax exempt mechanism.
153
The most challenging part of the MCA’s preparation probably was the process of establishing an institution so-
called MCA’s accountable entity AE. The AE is a legal entity designated by the Government to implement the Program on behalf of the Government during
the Compact term. The AE can take many legal forms, as long as satisfies the legal requirements and requirements such as must be independent legal entity that can ensure civil
society and private sector participation in the decision-making process of the Program.
154
For example In Tanzania, it was a government parastatal established by presidential decree under the Ministry of Finance. In Namibia, it is a separate unit within the ministry-level
government National Planning Commission. While in Georgia, the Government of Georgia form
ed a public corporation to act as MCA’s AE.
155
151
White House, Fact Sheet: Indonesia and the Millennium Challenge Corporation Jun 25, 2015, 5:37 AM available at
http: https:www.whitehouse.govsitesdefaultfilesindia-factsheetsUS- Indonesia_MCC_Fact_Sheet.pdf
.
152
See generally Millennium Challenge Account, Program and Activities, Threshold Program Agreements Sept. 15, 2015, 5:47 PM
http:www.mcc.govprogramsthreshold.php ; see Rebecca Stubbs, The Millennium Challenge
Account: Influencing Governance in Developing Countries through Performance-Based Foreign Aid 636, 42 Vand.
J. TransnatL L. 621 2009.
153
Indonesian Nat’l. Dev. Planning Agency, Compact Program Indonesia: Report to the President of Indonesia 2011 unpublished power point on file with author.
154
Guidelines for Accountable Entities and Implementation Structures, MCC US July 21, 2008.
155
Id.
32
At the time the GoI designed the AE, another team under the coordination of Bappenas were still struggling to draft a new law regarding trust fund as mandated by Government
Regulation No. 102011. These two teams finally agreed to collaboratively design an entirely new legal entity which could be operated as development trust fund as well as satisfy the
technical requirement of the MCC’s AE.
156
As a result, in November 10, 2011 Perpres No. 802011 regarding Trust Fund was enacted along with the MCC’s approval to assign the MCA-Indonesia formed as a development trust
