Irrigation Project Aimed at Increasingdomestic Rice Production

Report No. 1477a-IND Indonesia Appraisalof IrrigationIX

Public Disclosure Authorized May 5, 1977 Projects Department East Asia and Pacific Regional Office

FOR OFFICIALUSE ONLY Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank

Thisdocument has a restrcted distribution and may beused by recipients otrw i the perdormanceof theoroffidaal duttesh tts corntets may not otherwvisebe disclosedwithout World Bankauthorization. CURRENCY EQUIVALENTS

US$1.00 = Rupiahs (Rp) 415 Rp 100 = US$0.241 Rp 1 million = US$2,409.64

WEIGHTS AND MEASURES - METRIC SYSTEM

1 millimeter (mm) = 0.039 inches 1 meter (m) = 39.37 inches 1 kilometer (km) = 0.62 miles 1 square kilometer (sq km) = 0.386 square miles 1 hectare (ha) = 2.47 acres 1 cubic meter (cu m) = 35.31 cubic feet 1 liter (1) = 0.264 gallons (USA) 1 liter/second(1/sec) = 0.035 cubic feet per second 1 kilogram (kg) = 2.2 pounds 1 metric ton (ton) = 2,205 pounds

CONVERSIONFACTORS FOR RICE

1 ton "dry stalk paddy" = 800 kg paddy ("paddygabah") = 500 kg milled rice 1 ton paddy (gabah) = 630 kg milled rice

INDONESIA FISCAL YEAR

April 1 - March 31 FOR OFFICIAL USE ONLY

ABBREVIATIONS

ARD - Agency for Research and Development BIMAS - Bimbingan Massal Swa Sembada BaXian Makanan - "Mass Guidance for Self-Sufficiency in Foodstuffs" a farm input-credit package program BRI - Bank Rakyat Indonesia - People's Bank of Indonesia BULOG/DOLOG - Badan Urusan Logistik - "National Logistics Body" - rice procurement agency/Depo Logistik - provincial branch of BULOG BUUD - Badan Usaha Unit Desa - Forerunner of KUD as Village Unit Cooperative DGWRD - Director(ate)-General of Water Resources Development DGC - Directorate General of Cooperatives DGFC - Directorate General of Food Crops DIP - Project implementation budget DOI - Directorate of Irrigation GOI - Government of Indonesia HYV - High-Yielding Variety INMAS - Intensifikasi Massal - "Massive Intensification" - a farm input program INPRES - Instruksi Presiden - "Presidential Instruction" - a rural public works program IPEDA - luran Penbangunan Dearah - Land Tax KUD - Koperasi Unit Desa - Village Unit Cooperative MIHA - Ministry of Home Affairs MOA - Ministry of Agriculture NEDECO - Netherlands Engineering Consultants NFCE - National Food Crops Extension Project O&M - Operation and maintenance PPL - Lower level extension worker PPM - Senior level extension worker PPS - Subject matter specialist PROSIDA - Proyek Irigasi IDA - Agency of DGWRDcreated to execute IDA-assisted projects REC - Rural Extension Center SEDEKU - Semarang-Demak-Kudus Irrigation System in Central Java

This document has a restricted distributionand may be ued by recipientsonly in the performance of their officialduties. Its contents may not otherwisebe diaosed without WorldBank authorization. INDONESIA

APPRAISAL OF IRRIGATION IX

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ...... i-i

1. INTRODUCTION ...... 1

2. BACKGROUND ......

The Economy ...... Agricultural Production ...... 1 Project Formulation ...... 2

3. THE PROJECT AREA ...... 4

General ...... 4 ClimateClmte ...... 5 Soils and Topography ..... 6 Population, Farm Size and Land Tenure ...... 7 Agricultural Production...... 7 Storage, Processing and Marketing ...... 8 Agricultural Support Program ...... 8 Transportation ...... 9

4. THE PROJECT ...... 9

Project Works ...... 10 Consulting Services ...... 11 Water Supply, Demand and Quality ...... 11 Status of Engineering ...... 12 Implementation Schedule ...... 13 Cost Estimates ...... 13 Financing ...... 14 Procurement ...... 15 Disbursements ...... 16 Accounts and Audits ...... 16 Environmental Effects ...... 16

5. ORGANIZATION AND MANAGEMENT...... 17

Organization ...... 17 Agricultural Support Services ...... 18 Monitoring Benefits ...... 19 Operation and Maintenance ...... 19 Cost and Rent Recovery ...... 21 Page No.

6. PRODUCTION, MARKET PROSPECTS, PRICES AND FARM. INCOME ...... 22

Production...... 22 Market Prospects ...... 23 Prices ...... 23 Farm Income ...... 24

7. BENEFITS, JUSTIFICATION AND RISKS ...... 26

8. AGREEMENTSREACHED AND RECOMMENDATION ...... 27

ANNEXES

1. Climatological Data 2. Present and Projected Cropping Patterns and 'Production 3. Agricultural Supporting Program 4. The Project Works 5. Water Supply, Demand and Quality 6. Consulting Services 7. Cost Estimate 8. Schedule of Expenditures 9. Operation and Maintenance 10. Commodity Price Structure 11. Crop and Farm Budgets 12. Farm Labor Analysis 13. Economic Analysis 14. Cost and Rent Recovery

Charts

8964 PROSIDA Subproject Organization, SEDEKU Project 16008 PROSIDA Management Organization 16017 Water Resources Organization Chart 17046 Estimated Opportunity Cost of Farm Labor: SEDEKU Project 17134 Directorate of Irrigation Organization, Sungai Dareh Project 17255 Implementation Schedule, Sungai Dareh Project 17256 Implementation Schedule, SEDEKU Project

Maps

12632 Location Map 12642 SEDEKU Project 12643 Sungai Dareh Project INDONESIA

APPRAISAL OF IRRIGATION IX

SUMMARY AND CONCLUSIONS

1. Agricultureaccounts for over 40% of Indonesia'sGDP, about 66% of its employmentand nearly 80% of its non-oil exports. Rice, which accounts for 30% of agriculturalproduction, is the staple food and, throughoutthe First Five-Year Plan period (1969-74),Government programs concentratedon expanding its production. Despite these programs, rice imports continue at a rate in excess of 1.0 million tons per year, and self-sufficiencyin rice has remained a priority goal of the Government'sSecond Five-Year Plan (1974-79).

2. The Government of Indonesia (GOI) has requestedBank assistance to carry out the proposed project, the ninth Bank-assistedirrigation project aimed at increasingdomestic rice production. With the exception of one project that is assisting in the extension of an existing system (Credit 514-IND) and another (Loan 1268-IND) that is introducingtertiary systems on part of the areas covered by the first four credits, all the ongoing projects, including one that was completed in March 1976 (Credit 127-IND),have concentrated on restoringmajor engineeringworks of existing irrigation systems to their original design capacities in the shortest possible time. The eighth irrigation project would initiate the rehabilitationand improvementof the 140,000 ha Madiun irrigation system, the last major irrigation system in Java that is in need of rehabilitation. Constructionwork on the six ongoing projects is progressing relativelywell, although rising costs due to inflation have created budgetary constraints,resulting in delays in the projects' completion. Operation and maintenance (O&M) services on the completed systems, which have been unsatisfactoryin the past because of the insuffi- ciency and untimely availabilityof O&M funds, have improved following the allocation by the Central Government of substantiallyhigher levels (30% over 1975/76 levels) of O&M funds in its 1976/77 budget. To upgrade O&M services to acceptable standards, however, there is further need for even, higher levels of O&M funds, timely release of these funds, and an increase in the number of qualifiedO&M personnel to effectivelyutilize the available funds. To this end, GOI has agreed to allocate to the Bank-assistedirrigation systems in FY77/78, O&M funds totaling about Rp 3,350 million, of which about Rp 2,900 million would be for about 783,000 ha of rehabilitatedsystems and the balance of about Rp 450 million for about 330,000 ha to be rehabilitated in the projects' remaining constructionperiod. Although the above O&M funds are only 10% higher than FY76/77 levels, substantial improvementsin O&M services are expected due to GOI's agreement to take the necessary steps to ensure that at least half of the budgeted O&M funds would be released to the subprojectsby August 15 of each year, and the balance, in equal quarterly installmentsuntil the funds are fully released; and to progressivelyincrease the number of qualified O&M personnel in the Bank-assistedprojects until the additional numbers to be establishedby GOI in consultationwith the Bank are employed. - if -

3. The proposed project would assist the completion of rehabilitation and improvement of irrigation (8,000 ha) and coastal drainage works (19,000 ha) in the 30,000 ha Semarang-Demak-Kudus (SEDEKU) irrigation system in Central Java, which was started by GOI in 1970; construction of the first stage (3,500 ha) of the new 20,000 ha Sungai Dareh-Sitiung irrigation system in West Sumatera for the resettlement of the first 2,000 families to be displaced by the Wonogiri dam and reservoir in Central Java and for about 2,000 indigenous families in the area; and employment of consultants (foreign and local) to review existing designs and carry out studies and investigations on the feasibility of constructing nine medium-scale irrigation systems in Java, Sumatera and Sulawesi. The project components would require about 2,450 man-months of consultant services, of which about 1,650 man-months would be provided by Indonesian consultants.

4. The estimated cost of the proposed project is US$64 million (Rp 26,575 million), of which US$32.8 million or approximately 51% would be in foreign exchange. The Bank loan of US$35 million would finance the foreign exchange cost of the project (US$32.8 million) and US$2.2 million of local costs associatedwith financing expendituresof local consultantsto the same degree (80% of total cost) as foreign consultants. Vehicles and equipment (US$3.5 million) would be procured after international competitive bidding in accordance with Bank Group guidelines. Works in the SEDEKU area would involve a large number of small and different types of construction activities scattered over a wide area, which could not be grouped into contracts large enough to attract international contractors. This is also the case for works in the Sungai Dareh-Sitiung area. These works would, therefore, be carried out by force account (US$4.8 million) and locally advertised contracts (US$43 million) in a number of suitably sized contracts (minimum size US$125,000) that would enable large local contractors and joint ventures of local firms to undertake the work. Consulting services and mapping would cost US$12.7 million. Contingencies included in the above costs would amount to US$19.9 million., of which US$11.2 million would be for expected price increases during the four-year construction period.

5. PROSIDA, an agency within the Directorate General of Water Resources Development (DGWRD) of the Ministry of Public Works and Electric Power, which completed one and is currently executing four other Bank-assisted projects, would be responsible for implementing the SEDEKU component. The Directorate of Irrigation (DOI) in the DGWRD would execute the Sungai Dareh component and would supervise the feasibility studies on nine medium-scale irrigation systems, which would be carried out by consultants to be engaged under the project.

6. The economic rates of return on the project components would be 18% for SEDEKU and 15% for Sungai Dareh-Sitiung. Under a number of adverse assumptions, the rate of return on each part of the project would not fall below 10%.

7. The proposed project is suitable for a loan of US$35 million for a term of 20 years, including a grace period of 4-1/2 years. 1. INTRODUCTION

1.01 The Government of Indonesia (GOI) has requested Bank assistance in completing the rehabilitationand improvementof irrigation (8,000 ha) and coastal drainage works (19,000 ha) in the 30,000 ha Semarang-Demak-Kudus (SEDEKU) irrigation system in Central Java and in constructingthe first stage (3,500 ha) of the new 20,000 ha Sungai Dareh-Sitiungirrigation system in West Sumatra. This would be the ninth Bank-assistedirrigation project in Indonesia. With the exception of one project that is assisting in the extension of an existing system (Credit 514-IND) and another (Loan 1268-IND) that is introducingtertiary systems on part of the areas covered by the first four Bank Group credits, all the ongoing projects, including one that was completed in March 1976 (Credit 127-IND),have concentratedon restoring major engineeringworks of existing irrigation systems to their original design capacities in the shortest possible time. The eighth irrigation project, which was concurrentlynegotiated with this project, would initiate the improvementof the last major system in Java that is in need of rehabilitation.

1.02 The feasibility study for the SEDEKU area was prepared by the Semarang-KudusProject Office with consultant assistance (NEDECO and Binnie and Partners) and for Sungai Dareh (Stage I), by the DGWRD's /1 Directorate of Irrigation (DOI) and its consultants (Nippon Koei and Indah Karya). This report is based on the findings of an appraisal mission composed of Messrs. J.T. Caparas, J.J. O'Brien, M. Saddington, C.J. Poortman (Bank), K. Anderson, A. Feinstein and P. Judd (Consultants), which visited Indonesia in October! November 1976.

2. BACKGROUND

The Economy

2.01 The latest economic report on Indonesia, "Indonesia: Recent Devel- opments and Medium-Term Perspective," of March 8, 1977 (1516-IND), reviewed the medium- and long-term outlook for the Indonesian economy. That report also examined the outlook, potentials and problems of Indonesian agriculture. The main findings of that report are summarized in the President's Report for this project.

Agricultural Production

2.02 Agriculture, together with forestry and fishing, accounts for over 40% of Indonesia's GDP. The sector also provides part- or full-time employment for about 70% of the total labor force in Indonesia, and accounts for about 80% of the value of non-oil exports. Over the last five years the volume of total rural output increased at an average rate of between 4% and 5% per annum; however, the volume of rice production, the country's staple food, has been growing at between 3.5% and 4% over the same period. This

/1 Directorate General of Water Resources Development. -2 -

growth rate in supply has been insufficientto meet demand, and food grains still need to be imported. Specific programs to boost rice productionhave been included in both of Indonesia'sFive-Year Plans (RepelitaI covering 1969-74 and Repelita II covering 1974-79). These programs include rehabilitation of existing irrigation systems, creating rice price support policies, providing funds for research and extension,and improving the supply of seeds9 fertilizer,pesticide and credit. The Bank has been involved in various ways with all of these programs and the Government'sactions have been relativelysuccessful.

2.03 However, despite improvementsin production and institutional support, various studies indicate that unless foodgrain productionin Indonesia can be stimulatedto grow at a rate of at least 4% per annum, the current gap between supply and demand will widen in the future. The Govern- ment has set its sights on self-sufficiencyin foodgrains. However, to achieve that goal there will be a continued need for adequate supplies of credit, certified and high-yieldingvarieties of seed, fertilizerand pesticides. In addition, there is a need to improve irrigationfacilities and drying and storage facilities for grains.

2.04 Although production of secondary field crops (palawija),/lis believed to have declined during Repelita I partly because of shifts of land use to rice production, their position remains significant. Under Repelita II, their-production is being revitalized,and the Government has extended the BINASu agricultural support program to several of these crops. The Government has also begun research to improve palawija crop yields and through the INPRES program, to construct market facilities at subdistrict and village levels.

Project Formulation

2.05 Works on the SEDEKU project would represent a continuation of, and those on Sungai Dareh-Sitiung a departure from, the type of projects that have been undertaken with Bank assistance under the previous credits and loans. Irrigation Projects I through VII had as a major thrust, the rehabilitation of existing irrigation systems that:had become severely deteriorated due to lack of maintenance over more than 30 years following the advent of World War II. The rehabilitation of existing irrigation systems and the provision of tertiary systems have been the most cost effective way of increasing agricultural productivity through the utilization of available water supplies in Indonesia. Most of the previous assistance has been concentrated on the island of Java, which is the most intensely populated and developed area of the Indonesian archipelago.

2.06 With the projected implementation of Irrigation VIII,/2 the last major irrigation system in Java needing improvement would be under

/1 Palawija crops are those other than rice, sugar and estate crops; the major ones are soybeans, groundnuts, cassava, corn, onions and other vegetables.

/2 A US$63 million loan for Irrigation VIII was negotiated concurrently with this project. - 3 -

rehabilitation. In the remaining years of Repelita II, the Government would give priority to the rehabilitation of irrigation systems outside Java, accelerated completion of small- to medium-scale irrigation systems that are currently under construction in Java and the other islands, and construction of new irrigation systems in the other islands for indigenous and transmigrant families. The development of tidal land in Sumatera for transmigrant families and intensification of dry-season paddy cropping on existing irrigation systems in Java, by regulating water supplies through the construction of storage dams, would receive attention at the start of Repelita III (1979-84).

2.07 The Sungai Dareh-Sitiung project and the feasibility studies for nine irrigation systems to be financed under the project would largely assist in settling families displaced from irrigated areas in Java on lndeveloped but potentially irrigable areas, especially on islands other than Java. The Government chose the Sungai Dareh area (para. 3.02) as the resettlement site for about 10,000 families to be displaced by the Wonogiri dam and reservoir in Central Java because of the presence of a dependable water supply (para. 4.08) and the availability of virgin land which could be developed for irrigated paddy production (para. 3.06). About 20,000 ha could be served by a proposed gravity irrigation system, which is expected to be completed by late 1985. To provide employment for the first 2,000 families that were transmigrated from December 1976 to March 1977, however, the Government has requested Bank assistance for financing the construction of an interim system for 3,500 ha, which would be temporarily served by pumping. Although the studies for the gravity system have not progressed beyond the prefeasibility stage, a preliminary analysis based on a detailed layout and cost estimate of the interim system indicated that it would be technically and economically viable on its own. It has, therefore, been included for execution under the project. The feasibility study for the remaining 16,500 ha would be completed under the project and, contingent upon its results, detailed designs and tender documents would be prepared for the 16,500 ha. Construction would be considered for financing under a future project.

2.08 The nine small- to medium-scale irrigation systems for which GOI has requested Bank assistance for construction include two irrigation schemes in Central Java (12,800 ha) and one in Sulawesi (20,000 ha), which are proposed sites for the resettlement of about 15,000 families to be displaced by the Jatigede project /1 and for about 25,000 indigenous families, and two systems in Central Java (7,800 ha), two in West Sumatera (19,000 ha), one in North Sumatera (7,000 ha) and one in South Sumatera (15,000 ha), which would be developed for about 60,000 transmigrant and indigenous farm families./2 All nine projects have been studied in varying detail, and some construction

/1 A proposed storage project for irrigation and hydropower generation on the Cimanuk river in West Java, which would provide a dry-season water supply for the 92,000 ha Rentang irrigation system (Credit 127-IND). It is being considered for financing under a future project.

/2 In Java, each family would receive 0.5 ha of irrigated land; in the other islands, 1.0 ha. - 4 - has been undertaken at some project sites, but none of the projects satisfy study standards and criteria for Bank appraisal. The proposed loan would provide funds for the engagement of consultants to develop a feasibility report for each proposed development,from which future Bank appraisalwould be based.

2.09 The third project component would involve the upgrading of a 30,000 ha area for irrigated agricultureby completing the rehabilitation and improvementof the irrigation, drainage and flood control systems on the East Semarang Plain in Central Java. Constructionwas started by GOI in 1970 but, because of limited funds, progress had been slow. Much of the area is subjected to annual flooding that has discouraged proper maintenance of existing irrigation systems and precluded vital investment in extension of the tertiary system to achieve full productivity. Under the project, completion of project works would be accelerated to provide a comprehensive solution to flooding problems in the area, develop the essential internal drainage system for timely evacuation of local runoff and improve the existing irrigation system.

3. THE PROJECT AREA

General

3.01 The 30,000 ha Semarang-Demak-Kudus(SEDEKU) irrigation system is located on the 45,000 ha East Semarang plain on the north coast of Central Java. It consists of nine distinct small- to medium-sizedsystems that are susceptible to varying degrees of flooding. Twenty-threedamaging floods in the last 16 years inundated about 9,000 ha of those systems on an annual basis, and about 19,000 ha once in 5 years. Flooding is produced by local runoff that is not evacuated fast enough by the internal drains, and by overbank flow from 4 main rivers and about 20 minor streams, which collect runoff from upstream catchments and flow through the project area before discharging into the Java Sea. To alleviate flooding, and to restore the capacity of the 9 systems that have deterioratecd after almost 30 years of neglect, GOI, in 1970, initiated the rehabilitation and improvement of the SEDEKU irrigation system and 2 flood control and drainage schemes (Annex 4) as part of the overall development of the Jratunseluna Basin /1. Three of the nine irrigation systems (about 11,000 ha) were completely rehabilitated with Bank Group assistanceunder the Glapan-SedaLdisubproject (Credit 127-IND), but no provision was made for the rehabilitationor improvementof the flood control and drainage works. About 14,500 ha distributed over the remaining six systems were rehabilitated with GOI funds from 1970 to 1976, but because of damage sustained from repeated floodings, somle3,500 ha in these systems would require repairs and further improvement. Including the 4,500 ha for which nothing has been done to date, the total area requiring rehabilitation

/1 Jratunseluna stands for five river basins, namely, Jragung, Tuntang, Serang, Lusi and Juana, studies for which were undertaken from 1970 to 1974 with consultant assistance (NEDECO) financed under bilateral aid from the Netherlands. and improvementwould therefore be about 8,000 ha. The rehabilitationand improvement of the two flood control and drainage schemes in the SEDEKU area, which is being carried out wholly with GOI funds, has progressed slowly because of budgetary constraints. The uncompletedworks, which are currently estimated at 85% of the total, would be implementedunder the proposed project.

3.02 The proposed Sungai Dareh-Sitiung irrigation system is located along the south bank of the Batang /1 Hari, approximately 130 km east of Padang, the administrativeand commercial center of West Sumatera Province. About half of its 20,000 ha command area, which is dictated by topography rather than by water supply (para. 4.08), has been designated by GOI as the resettlementsite for about 10,000 families that would be displaced by the constructionof the Wonogiri dam in Central Java. The remaining 10,000 ha have been set aside for some 10,000 farm families that had settled spontaneouslyor had been transmigrated earlier on the surroundingareas. Constructionof an access road into the area from the Trans-Sumaterahighway, clearing of land for about 2,000 resettlementhomesites of 0.25 ha each, and constructionof about 1,000 houses have been completed, and constructionof internal roads and additional houses is in progress. GOI has already invested some US$4.0 million for clearing homesites and constructinghouses and village infrastructure. The standards of these works, which amount to about US$2,000 per new family, are excessive and would be reviewed in detail during preparation of the feasibility study for the remaining 16,500 ha (para. 4.04). In December 1976, the Depart- ment of Transmigrationresettled the first 500 families from Wonogiri, and the number of resettled families reached 2,000 by March 31, 1977. Resettlementof the 10,000 families is expected to be completed by mid-1980.

3.03 Because of the urgency of providing a livelihood for the first 2,000 families from Wonogiri, (para 2.07) an interim system for 3,500 ha, consisting of 2,000 ha of new land cleared by GOI and 1,500 ha of currently rainfed land owned by about 2,000 indigenous families,would be constructedunder the project. The interim system would be supplied with water from a temporary pumping station on the Batang Hari, and its canals and structureswould be designed to be compatiblewith the ultimate gravity system for 20,000 ha. The works for the remaining 16,500 ha would be constructedfollowing completion of the feasibilityreport and arrangement of suitable financing. The temporary pumping station would be dismantled after completion of the ultimate gravity system, for use in other areas.

Climate

3.04 The climate of Indonesia is fairly homogenous, even though the country spreads over a longitudinaldistance of about 5,000 km (95 E to 135°E and latitudinaldistance of about 1,800 km (50N to 10°S). Average annual temperatureis about 26& with a variation of only about 3-4 C throughout the nation (excludingthe relatively uninhabitedhigher mountainousregions). Two distinct seasonal weather patterns occur comprising a wet (northwest monsoon) and dry (southwestmonsoon) season generally extending from

/1 Batang means river in the West Sumatran dialect. - 6-

November to May and June through October, respectively. Mean annual precipitation in the area covered by the project in Java, Sumatera and Sulawesi ranges from about 1,500 to 3,000 mm, except in the Cilandak and Ciletuh areas in Java where it approaches or exceeds 4,000 mm p.er annum. Further information on the climate in each of the specific project areas is contained in Annex I.

Soils and Topography

3.05 The soils in the SEDEKU project area are allivial, and of volcanic origin. They are slightly acid to alkaline in reaction9, contain sufficient organic matter, and have a high clay content. They are suited for rice production, which has been the major crop in the project area for many years. The rice crop responds positively to nitrogenous and phosphatic fertilizers. The topography is flat, with four principal rivers, the Penggaron, Dolok, Setu and Jragung, flowing from the higher land in the south to empty into the Java sea in the north. These rivers regularly overtop their banks and flood several portions of the project area, particularly the land just south of the Semarang-Demak road.

3.06 The soils in the Sungai Dareh-Sitiung aLrea are a mixture of red- yellow podzolics and alluvial deposits. Normally, red-yellow podzolics in Indonesia are shallow, quite permeable, unstable and infertile, They erode only slightly under natural vegetation but, when bare and fallow, they erode extensively. To prevent excessive erosion under cultivation, the wet-season crop should provide adequate groundcover. The instability of the soil causes a rapid breakdown of recently formed organic matter, such as grass roots and straw. This breakdown, which occurs under predominantly high moisture and temperature conditions, leads to the leaching of formed cations, particularly nitrates, phosphates and potash. Under rainfed farming, therefore, these soils can quickly become unproductive unless high levels of organic matter are maintained through good soil management practices. Nevertheless, rainfed crops could be profitably grown on them if crop management is reasonably good and adequate amounts of fertilizer are applied. Under the proposed year round irrigated paddy conditions at Sungai Dareh, these soils would be even more productive because: (a) soil erosion and the consequent loss of fertil- ity and destruction of soil structure would be minimal; (b) under the water- logged conditions that would prevail, nutrients (especially phosphates) would be more readily available, little nitrate would leach out (except from the 1-3 mm of surface soil where oxygen in the standing water may cause some nitrification), and loss of nitrogen as gas into the air would be virtually absent; (c) organic matter would mineralize slowly; and (d) the shallow, dense rice root system would gradually build up the organic matter content of the soil. Furthermore, since the soils at Sungai Dareh-Sitiung are mixed with alluvial deposits, they contain more fine soil particles and their percolation rates are, therefore, less than those of true red-yellow podzolics. On comparable soils in Lampung (Way Seputih, Credit .127-IND) and on irrigated land in West Sumatera, farmers have produced average paddy yields of about 3.9 ton/ha per crop. For the above reasons, it is reasonable to expect that the Sungai Dareh-Sitiung soils would be suitiable for irrigated paddy production. -7-

Population, Farm Size and Land Tenure

3.07 Rehabilitationand drainage of the SEDEKU area would serve an estimated rural population of 0.5 million, comprising about 60,000 farm and 40,000 landless-laborersfamilies. At Sungai Dareh-Sitiung,the project would serve about 24,000 people, consisting of 2,000 existing farm families and 2,000 farm families who would migrate to the area.

3.08 Farm size and land tenure data are sketchy. Information from surveys and local officials suggest an average farm size of 0.5 ha at SEDEKU, and 0.75 ha at Sungai Dareh-Sitiung on the area already settled and which would be irrigated. On the area to be developed and not yet settled, the farm size would be 1.0 ha. The following is a rough estimate of the present distributionof farm size at SEDEKU:

Farm Size No. of Farms Cultivated Area (ha) ------(%-)------

Less than 0.5 58 30 0.5 - 1.0 28 34 1.0 - 2.0 13 31 More than 2.0 1 5

3.09 At SEDEKU, some 60% of farmers are owner-operators,and 40% sharecroppers, while at Sungai Dareh-Sitiung all farmers are owner-operators. In most sharecroppingarrangements, the tenant and the landowner split the production, input and harvesting costs. The tenant provides the labor and the landownerpays the land tax. The Sungai Dareh-Sitiungarea has no landless laborers;however, in the SEDEKU area they comprise 40% of the rural population.

AgriculturalProduction

3.10 Irrigated rice is the most important crop in the SEDEKU project area. During the wet season, paddy is irrigated on 30,000 ha, and in the dry season on 2,600 ha. Additionally, some 4,000 ha of palawija crops are partially irrigated during the dry season, giving an overall annual cropping intensity of 122%. Soybean is the major secondary crop. All the project area is flooded, which depresses crop yields. However, floods of differing occurence frequency affect only certain portions of the area. While some 9,000 ha are flooded annually, the remaining 21,000 ha are flooded every two to five years. Crop yields are also affected by the efficiency of the irrigation systems. Approximately70% of the area's irrigation systems have been rehabilitatedand, consequently,yields on these areas are higher than on the nonrehabilitatedareas. Farmers plant only local rice varieties and use little fertilizer or other inputs on the 9,000 ha that are flooded annually. They plant 40% of their rice areas on the remaining 21,000 ha to high-yielding rice varieties (HYVs) in the wet season, and 50% during the dry season. Average wet season paddy yields are 1.9 ton/ha on the annually flooded areas (9,000 ha) and 3.3 ton/ha on the 21,000 ha; dry season paddy is limited to areas not subject to annual flooding and yields are 3.5 ton/ha. Soybeans yield 0.5 ton/ha. The flooding not only reduces crop yields and discourages farmers from using credit and crop inputs (HYVs, fertilizer and - 8 - pesticide), it also increases crop production costs, damages irrigation facilities, and reduces the area farmers can plant to irrigated dry-season crops.

3.11 Between the project area and the coastline, there are 21,000 ha of fishponds on which some 15,000 families depend for their subsistence. Floods, as they leave the project area, flow through this area before entering the sea. An estimated 25% of the fishponds are damaged annually with a 50% loss of the potential fish crop from the damaged ponds.

3.12 Secondary forest, bush and grass cover most of the Sungai Dareh- Sitiung project area. During the wet season farmers grow rainfed rice on 1,500 ha, but do not crop this area in the dry season. Rainfed paddy yields average about 1.6 ton/ha. Annex 2 gives more details on agriculturalproduction.

Storage, Processing and Marketing

3.13 Farmers sun dry paddy and store it in their houses. Insufficient concrete drying floors makes drying of the wet season crop difficult, and losses from rainfall can be considerable. Since farmer storage space is not always vermin proof, and cannot be readily fumigated, losses from rodents and insects are also high. Farmer cooperatives (BUUD/KUDs)and private individuals own more than sufficient rice mills at SEDEKU to handle the current annual production. At Sungai Dareh-Sitiung,private individuals own two rice mills which also are adequate for current production. Future increases in demand for milling capacity would be readily met, either by private capital or BUUD/KUDs. The rice milled is medium grade, around 35% broken.

3.14 At SEDEKU project area, farmers sell about 10% of the total annual paddy production to BUUD/KUDs and middlemen. At Sungai Dareh-Sitiung,farmers consume all their paddy production. The BUUD/KUDs at SEDEKU act as the purchasing agent of the Government'spaddy/rice marlketingagency (BULOG/DOLOG), and buy a standard grade of paddy at a fixed floor price. The floor price is currently Rp 70 (US$0.17)/kgfor 14% moist paddy at the village. Although during nonharvest periods prices on the open marlcetare usually higher than the floor price, farmers are often forced to sel:Ltheir paddy below the floor price during the wet-season harvest. In some cases, inadequate facilities prevent paddy from being dried to the required 14% content standard. In other cases, BUUD/KUD exhaust their credit lines from BULOG and are unable to obtain cash to pay the farmers. The farmers, who need cash immediatelyto meet tax payments or to pay off the last season's debts so that they can purchase inputs for the new season, are then forced to sell their paddy on the open market at a discount. Farmers sell their surplus secondary crop production in village and subdistrict markets.

Agricultural Support Program

3.15 The BIMAS program provides farmers with subsidized credit, fertilizer, agrochemicals; allowances for HYV seed, spraying, and cost of living; and extension advice for crop production. At SEDEKU, the BIMAS program covers 30% of the irrigated wet-season paddy crop, and 5% of the irrigated dry-season paddy. The program does not yet operate at Sungai Dareh-Sitiung. - 9 -

3.16 The National Seed Corporation at Sukamandi (Credit 246-IND) produces limited supplies of certified paddy seed. This is distributed through BUUD/ KUDs at Rp 150/kg. At SEDEKU, seed growers who obtain their planting material from district seed farms of the provincial agricultural services, also supply some certified seed.

3.17 In the SEDEKUproject area, staff of the Directorate of Food Crops Agriculture within the Ministry of Agriculture (MOA) provide extension services to farmers. Although all farmers are entitled to extension services, only BIMAS recipients currently receive extension advice due to the shortage of trained staff. The National Food Crops Extension Project (Loan 1267-IND) is correcting this deficiency. Although extension officers at the subdistrict level visit the Sungai Dareh-Sitiung project area, extension advice at the farm is practically nonexistent. Annex 3 gives more details on agricultural support programs.

Transportation

3.18 The SEDEKUarea is intersected by the main east-west highway running along the north coast of Java. Away from the hard-surfaced highway, the secondary roads are of variable quality and condition, but usually passable in the dry season. Floods severely damage the road network during the wet season, disrupting traffic and communications. A considerable part of the project area is virtually isolated from motorized transport and at a severe disadvantage with respect to access to agricultural services/inputs and markets.

3.19 The asphalt-paved Trans-Sumatera Highway passes through the Sungai Dareh-Sitiung area and will ultimately (1979) connect the project area with the harbor of Padang. At present there are no secondary roads in the area.

4. THE PROJECT

4.01 The proposed project is shown on Map 12632 and would include the following components:

(a) completion of the rehabilitation and improvement of irrigation (8,000 ha) and flood control and drainage works (19,000), including tertiary development on 17,000 ha of the 30,000 ha SEDEKUirrigation system in Central Java (Map 12642);

(b) construction of the 3,500 ha initial phase of the 20,000 ha Sungai Dareh-Sitiung irrigation system in West Sumatera, feasibility study for the remaining 16,500 ha, and, depending upon the results of the study, detailed engineering and preparation of tender documents for the 16,500 ha (Map 12643); and

(c) provision of local and expatriate consulting services for studies and investigations of nine small- to medium-sized irrigation projects in Java, Sumatera and Sulawesi. Project Works

4.02 Details of the pro4ect -. o7 -s Arex 4 and are summarized as follows:

SEDEKU Project

(a) rehabilitation of about 130 1-; z m,: and secondary irrigation

canals and about 200 divi 4 &ir_ad- related canal structures, including some bridges;

(b) rehabilitation and improvC--:- _00k of terti-ary irrigation canals, inc;ludi-ng abo.- .

(c) tertiary development on 127GC;OC -2iaI{E!Aing of the construction of about 1,200 km of tert am-d.. L- irrigation canals, 680 km of tertiary and quaternary dWaiVo, a _a; 1,200 tertiary and quaternary canal structures;

(d) construction of about 20 km of cat-n&_1aid riverbank protection;

(e) excavation of about 110 km of emisting flood channels;

(f) construction and/cr rehfil o_ about 25 flap and automati- cally controlled flood aeid dEaaf a tes;

(g) construction and/or reh-abiii-f-ic Of about 200 km of flood embankments and about 70 km of 2:,.Las.3Ction and access roads;

(h) rehabilitatior. and iomprove-ae . -. nt0 km of telecommunication lines and related £ac--

(i) construction of operatio a ai-.: ance (O&M) staff housing; and

(j) procurement of vehicles and aiiem'c-

Sungai Dareh-Sitiung_pr_Oo4ect

(a) construction of a temporary ,iatEr supply pumping plant with capacity of 5e5 cian/s _: oZ 29 m for the 3,500 ha initial phase of the proiect.

(b) construction of 30 km of primary Li-d35_m of secondary irrigation canals and about 100 control an:_t structures;

(d) tertiary development on 33,500 ti S- s g of the construction of about 55 km of tertiary Eand StfcL - anals, about 185 km of

quaternary canals, about 1404,a . 'ry and quaternary drains, and about 350 tertiary and qaate. canal structures;

(e) construction of about 75 km o fz and access roads; - 11 -

(f) installationof about 50 km of telecommunicationlines and related facilities;

(g) constructionof O&M staff housing; and

(h) procurement of vehicles and equipment.

Consulting Services

4.03 Consulting services (Annex 6) would be provided to assist in the implementationof the three project components. Assurances were obtained from the Government that consultants acceptable to the Bank would be engaged by December 31, 1977 under terms and conditionsapproved by the Bank.

4.04 For the SEDEKU project, about 50 man-months of foreign consultant services are included for supervising constructionof the flood control and surface drainage works and the rehabilitationof primary and secondary irrigation systems. About 220 man-months of local consultantassistance are also provided for the preparation of detailed designs and constructiondrawings for tertiary systems on 17,000 ha.

4.05 Consultantswould be utilized on the Sungai Dareh-Sitiungproject to complete detailed designs and supervise constructionof the 3,500 ha initial stage. The same consultantswould complete the required investigationsand prepare a feasibilityreport covering completionof the project to its full 20,000 ha potential. Particular attentionwould be devoted to the review of design standards for housing and village infrastructureto ensure that the cost of these works per family would be compatiblewith the investmentin irrigation development. Contingent upon the results of the feasibilitystudy and, subject to the approval of GOI and the Bank, the consultantswould proceed with the detailed engineeringand preparation of tender documents for the remaining area (16,500 ha). The consultantswould plan and design the initial stage to be compatiblewith the ultimate project to assure that an integrated project results. To perform the above services, about 295 man-months of foreign and 540 man-months of local consultant assistancewould be required.

4.06 Consulting services (465 man-months foreign and 870 man-months local) included in the project would be for the review of existing studies and designs, and for additional studies and investigationsrequired to establish the feasibilityof constructingsmall- to medium-sizedirrigation systems on nine proposed sites in Java, Sumatera and Sulawesi.

Water Supply, Demand and Quality

4.07 The SEDEKU area receives its water supply from 4 main rivers and about 20 minor streams. There is an adequate water supply for the entire area in the wet season; however, the lack of storage and low streamflow in the dry season limits irrigation to only about 22% of the irrigable area. This will increase with the project to about 35% due to more effective conveyance and distributionof available supplies, and eliminationof the need to replant paddy following annual floods. This latter condition results in the encroachmentof the late wet-season replanted paddy upon the limited river flow which would otherwise be available for dry-season crops. Removal of silt deposits in canals and river channels, which are used for irrigation - 12 - water conveyance,would increase their capacity to meet demands as well as to reduce overbank flows in time of floods.

4.08 The maximum diversion requirement for the Sungai Dareh-Sitiung project, based on an average percolation rate of 1.5 mm/day and evapotranspiration rates computed by the Penman Formula, is estimated to be about 1.6 1/sec/ha. Considering that the minimum recorded flow of the Batang Hari is about 80 cu m/sec, the diversion requirement of about 32 cu m/sec for the entire project and about 5.5 cu m/sec for the initial stage could be readily satisfied. Although this minimum flow was obtained from only one year of discharge measurements,dry season flows in future years are expected to be significantlyhigher than the peak diversion requirementbecause of the large catchment area-servicearea ratio (about 20)./1

4.09 The Batang Hari drains relativelyvirgin lands, and tests made on water samples obtained from it indicate that wat(erquality ranges from good to excellent for sustained irrigation. There are no physical or chemical constraints to the combination of those waters with project soils. Analyses that have been made indicate that total dissolveilsolids would be about 100 ppm. Hardness and the sodium absorption ratio are also good to excellent for sustained irrigation use.

4.10 Additional information concerning the water supply, demand and quality of project water is contained in Annex 5.

Status of Engineering

4.11 SEDEKU Project. The major study and p:Lanfor the integrateddevel- opment of the JratunselunaBasin (para. 3.01), including improvementof flood conditionsin the East Semarang area, was conducted by GOI and its consultants (NEDECO, 1970-74) with bilateral assistancefrom the Netherlands. The study for one of the two flood control and drainage schemes to be constructedin the area under the project presupposed constructionof the Jragung dam on the Jragung River upstream of the area for irrigation,hydropower generationand flood control. A feasibilitystudy has been completed for Jragung dam and it is anticipated that Bank assistance for constructionwill be requestedby GOI in the near future. Until the dam is constructed,the Jragung river 50-year flood would exceed the design flood by about 30%. In the event such a flood occurs, some portions of the Jragung embankmentsmay be breached or overtopped.

4.12 Detailed designs and constructiondrawings for works included in the project were prepared by NEDECO. The Semarang-KudusProject Office,/2 with the assistanceof their consultants (Binnie and Partners),reviewed the designs and updated the cost estimates.

/1 Experience in Indonesia indicates that an irrigationsystem which draws its supply from an unregulatedstream would be capable of supporting two crops of paddy annually if the ratio of the catchment area above its diversion structure to its service area is 7-9, or greater.

/2 An agency within the DGWRD's Directorate of Planning and Programming which supervised the NEDECO study. - 13 -

4.13 Sungai Dareh-SitiungProject. The project's prefeasibilitystudy was completed by the Directorate of Irrigation (DOI) with consultantassistance (Nippon Koei-IndahKarya). Based on the above study, DOI prepared the detailed layout of the interim system. The 1:5,000 scale maps with 0.5 m contours for detailed engineering of the system have been completed for the initial stage (3,500 ha), and similar maps for the entire service area (20,000 ha) are expected to be completed by June 1977. Consultants to be engaged under the project (para. 4.05) would design and supervise construction of the initial stage.

4.14 Small- and Medium-Sized Systems. Engineering studies on all nine of these irrigation systems have been completedby GOI to varying degrees of detail, but none of them are adequate for Bank appraisal. Consultants to be engaged under the project (para. 4.07) would review existing designs and carry out additional studies and investigationsto establish economic via- bility of the proposed systems and to provide a basis for estimating project costs.

ImplementationSchedule

4.15 Implementationschedules for the SEDEKU and Sungai Dareh-Sitiung projects are shown in Charts 17256 and 17255. For SEDEKU, a four-year constructionprogram would be required. Work would progress concurrentlyon all aspects of the project, flood control, drainage and irrigation systems, with the staging of works planned and scheduled to make each dry season's work fully functional at the beginning of the ensuing wet season. Those elements of the work that can be completed in a single dry season would be grouped and accomplishedby concentratedeffort. Work requiring more than one dry season would be conducted to minimize loss of effort and damage by excessive water during the wet season.

4.16 For Sungai Dareh-Sitiung,construction of project works would also require four years. Initial activity would be directed to constructionof the pumping plant and primary canal and procurement of electricaland mechanical equipment for the pumping plant. Constructionof the secondary and tertiary irrigation canals and drains would follow sequentially. It is anticipated that the resettledpopulation would be utilized during this period to assist in the constructionactivity.

Cost Estimates

4.17 The total project cost is estimated at US$64 million, of which US$32.8 million, or 51%, is the foreign exchange component. The Semarang- Kudus Project Office (SKPO) estimated the cost of the SEDEKU project based on quantities calculatedfor the entire project area and unit costs of similar ongoing works in Java. DOI estimated the cost of the Sungai Dareh-Sitiung project (3,500 ha) using quantities calculated for the entire system and unit costs of similar ongoing works in West Sumatera. Based on experiencewith previous irrigation projects in Indonesia, the followingadjustments in the cost estimateswere introducedduring appraisal: (a) the base estimateswere increased for some civil works items (excavation,fill, concrete,masonry, etc.); (b) all costs were updated to end-1977 prices; (c) physical contingencies of 10% were added for services (studies and investigations),which can - 14 - generally be estimated to within 10% accuiracy, and 25%£ for the rehabilitation and construction components, to provide for additional work or changed conditions that may be encountered after the work areas are dewatered. The cost estimates also include an allowance for expected price increases during cor- struction (21% of base cost plus physical contingencies), which are based on the following inflation rates projected from a large number of civil works contracts in the irrigation sector in Indonesia:

(a) Civil works - 20% in 1977, 15% in 1978-79, and 12% in L980-81; and

(b) Equipment and services - 7.5% in 1977-79 and 7% in 1980-81L

Costs of consulting services are based on recent contracts signed in Indonesia for similar services with local and foreign firms. The direct cost of foreign consultants (salaries, overseas allowance, company overhead and fee) amount to about US$6,500 per man-month. Including indirect costs (travel, housing, office and miscellaneous expenses), the total cost would be about US$8,000 per man-month. By comparison, total costs of local consultants amount to about US$2,000 per man-month.

4.18 Details of the project costs are presented in Annex 7 and are summarized below.

Foreign Local Foreign Total Local Foreign Total Exchange ---- (Rp million) ------(US$ million) … (%)

SEDEKU Irrigation and Drainage 6,020 5,070 11,090 14.5 12.2 26.7 46 Sungai Dareh Irrigation 2,030 2,580 4,610 4.9 6.2 11.1 56 Studies and Investi- gations 830 1,790 2,620 2.0 4.3 6.3 68

Base Cost 8,880 9,440 18,320 21.4 22.7 44,1 51

Physical Contin- gencies 1,785 1,825 3,610 4.3 4.4 8.7 51 Expected Price Increases 2,280 2,365 4.645 5.5 5.7 11.2 51

Total Project Cost 12,945 13,630 26,575 31.2 32.8 64.0 51

Financing

4.19 The proposed loan of US$35 million would finance the full foreign exchange cost of the project (US$32.8 million) and US$2.2 million of local costs associated with financing expenditures of local consultants to the same - 15 -

degree (80% of total cost) as foreign consultants. It would cover 55% of total project costs and 7% of local costs. GOI would provide the remaining Rp 12,035 million (US$29 million) to PROSIDA /1 and DOI out of annual budget appropriations.

Procurement /2

4.20 Pumping equipment,vehicles, and equipment for constructionand operation, costing about US$3.5 million, would be procured under international competitivebidding procedures in accordance with Bank Group Guidelines. A preference equal to 15% of the cif cost of the imported goods or the customs duty, whichever is smaller, would be extended to qualified local manufacturers in the evaluation of bids. Small off-the-shelfitems costing less than US$10,000 each and limited to a total of US$100,000, which are not suitable for internationalbidding, would be procured through normal Government procurement procedures acceptable to the Bank. There are sufficient supplies of such goods to ensure adequate competition. All contracts for vehicles or equipment exceeding US$100,000 in value would be submitted to the Bank for review before bidding and award.

4.21 Mapping (US$1.2million) in the areas covered by the feasibility studies would be carried out under locally advertised contracts following usual Government procedures acceptable to the Bank. There are suficient qualified mapping contractorsin Indonesia to assure competition. Consultant services (US$11.5million) would be procured in accordancewith Bank Group Guidelines.

4.22 The constructionof small structures for tertiary systems in the SEDEKU area and for all civil works in the Sungai Dareh-Sitiungproject, which are scattered over a wide area and time span would not be of interest to internationalcontractors. The same would apply to the irrigation and drainage works in the SEDEKU area, which would involve a large number of small and differing types of constructionactivities scattered over a wide area and could, therefore,not be grouped into contracts large enough to attract internationalcontractors. These works would be carried out by force account (US$4.8 million) or locally advertised contracts (US$43 million) following current Government procurementprocedures. Local contracting procedures were reviewed under the previous seven Bank Group projects and are acceptable with the following changes agreed upon by the Government: (a) except for tertiary canals and structures, the project works would be divided into a number of suitable contracts (minimum size US$125,000) that would enable large local contractingfirms and joint ventures of smaller contractors to bid within the categories or classes for which Government regulations require them to be prequalified; (b) to minimize late constructionstarts early in the dry season, invitations to bid for such contracts would be issued as bid documents are completed, and bids would be received and processed without waiting for the project implementationbudget (DIP) to be signed, but contract award and signing would be done after the DIP is approved; and (c) price escalation clauses, which are not provided in local civil works

/1 Agency of DGWRD which was created to execute IDA-assistedprojects.

/2 All costs in this section of the report include contingencies. - 16 - contracts, would be included in contracts extending beyond one year. For contracts estimated to cost US$500,000 and above, documents would be submitted to the Bank for review before tendering and award.

Disbursements

4.23 Disbursementswould be made at the rate of 100% against the foreign exchange cost of dLirectlyimported vehicles and equipment, 95% of the ex-factory cost of locally manufactured equipment, 65% for locally procured imported equipment, excludingvehicles, and 40% of total expendituresfor locally procured vehicles. Disbursementsfor both foreign and local consultants would be at 100% of total costs to encourage the use of local consultants and to enable the executing agencies to engage consu:Ltantsexpeditiously, since prior budgetary allocationswould not be needed. Disbursements for mapping would be at the rate of 80% of total expenditures,and for civil works, including tertiaries, at 60% of total costs. Disbursements for tertiaries would, however, be made only if each withdrawal applicationis accompaniedby a certificate from the site engineer stating that:all quaternary canals and drains in the tertiary block (four tertiary units of about 150 ha each) had also been constructed. Disbursements for force account works would be made against certificatesof expenditure,the document:ationfor which would not be submitted to the Bank for review, but would be retained by the borrower and made available for inspectionby the Bank's supervisionmissions. In consultationwith the Bank, any savings under the project would be used to finance similar additional works in the project area. The estimated schedule of expenditureson the project and the disbursementschedule are presented in Annex 8. Disbursementsare expected to be completedby December 31, 1981, about six months after the constructionperiod.

Accounts and Audits

4.24 The accounts of PROSIDA and DOI would be audited annually by inde- pendent auditors acceptable to the Bank. Assurances were obtained from the Government that: (a) the above agencies would maintain separate accounts for the project; (b) auditors acceptable to the Bank would be engaged to audit these accounts; and (c) audited financial statements, togetherwith the auditors' comments and opinion on the certificatesof expenditure for force account works, would be submitted to the Bank within six months of the close of each fiscal year.

EnvironmentalEffects

4.25 The two elements of the project that involve constructionactivities would each have local environmentalimpacts affecting the project lands and waterways. Studies of the nine resettlementprojects would have no significant environmentaleffects.

4.26 The SEDEKU area has been settled and developed for agricultural, village and fish farming activities for many years, and the environmental character of the area reflects those uses. The use of fertilizersand pesticides is already widespread in the area. People are constantlyreminded of - 17 - the toxic effect of pesticides on humans and domestic animals, and no adverse effects are envisaged provided care is exercised in their application. The work proposed would modify the man-made ecology of some existing channels, drains and irrigation systems. Impacts on the human environmentwould be predominantlybeneficial. There would be a reduction in the threat, magnitude and recurrence of flooding of farmlands, fish farms, villages, homes and other infrastructure. Annual epidemics that occur in the flood season (particularlycholera) would be reduced. Water supplies used by the villages would be improved and the potential for mosquito breeding would be reduced.

4.27 The Sungai Dareh-Sitiung area is essentially a virgin area having an environmentaland ecological character identical to that of much of the undeveloped area of West Sumatera. Clearing, leveling, settlement and development of the area would alter its environmentalcharacter. There are no known unique or endangered species in the project area. The 3,500 ha in the project are but a small part of the millions of hectares in Sumatera having identical natural conditions. The greatest environmentalimpact would be the alterationof the area from its present hostile nature to one to where man could live, survive and prosper in harmony with it.

4.28 The overall impact of the entire project upon the human environment would be positive.

5. ORGANIZATIONAND MANAGEMENT

Organization

5.01 PROSIDA, which completed rehabilitationworks under Credit 127-IND and is currently in charge of works under Credits 220, 289-IND, Loans 1100 and 1268-IND and portions of the proposed Irrigation VIII project, would implement the SEDEKU subproject. It would carry out day-to-day supervision of constructionthrough its office and staff in Semarang, which would be brought to full strength with the assignment of experiencedpersonnel drawn from the recently rehabilitatedGlapan-Sedadi subproject (Credit 127-IND). DOI, which is responsible for all irrigationdevelopment in Indonesia outside the PROSIDA and Jatiluhur areas, would implement the Sungai Dareh subproject. It would direct the work through its Provincial IrrigationService field office in Sungai Dareh, whose staff would be strengthenedwith the assignment of experiencedpersonnel drawn from DGWRD and PROSIDA subprojects that are nearing completion. Chart 16017 shows the DGWRD general organization;Chart 16008, the PROSIDA management structure;Chart 8964, the PROSIDA organization for the SEDEKU project; and Chart 17134, the DOI organizationfor the Sungai Dareh project.

5.02 With its long experiencein executingBank-assisted irrigation projects, PROSIDA should have no difficulty in implementingits part of the work with the assistanceof consultants. Although DOI is new to the Bank, it has had many years experience in executing projects financed with bilateral assistance from the United States, Netherlands,Japanese, British and Canadian Governments. It is, therefore, expected to have no difficulty in carrying out its part of the work with the assistance of consultants. Assuranceswere, - 18 -

however, obtained from the Government that: (a) the PROSIDA and DOI subproject offices engaged in project implementation would be adequately staffed; and (b) it would consult with the Bank before appointing a replacement for the General Manager of PROSIDA or the Director of Irrigation.

Agriculture Support Services

5.03 In order to attain the full future benefits of the proposed projects, agriculture support services need to be strengthened in the SEDEKU area, and introduced into the Sungai Dareh-Sitiung area. Wlile this project does not contain assistance to any agricultural support program, GOI has several ongoing programs which it would expand at SEDEKU, and introduce at Sungai Dareh-Sitiung. The Bank is assisting GOI in upgrading some of these programs, such as the extension service through Loan 1267-IND, the National Food Crops Extension Project (NFCE), and medium-term credit services through Credit 480-IND, and the upcoming Rural Credit Project. The Bank is also discussing with GOI the introduction of several other programs to improve agricultural supporting services, such as building village fert:ilizer stores, upgrading the management and operation of farmer cooperatives, and a second seeds project.

5.04 The MOA, Bank Rakyat Indonesia (BRI), Directorate General of Trans- migration (DGT), and Directorate General of Cooperatives (DGC) would supply agricultural supporting services in the project areas. At SEDEKU the recently introduced NFCE project would intensify and expanclextension services by reorganizing and increasing the number of field extension workers, and by rehabilitating and/or constructing rural extension centers for about every ten village units (10,000-12,000 farmers). At Sungai Dareh-Sitiung it would construct one rural extension center and introduce one field extension worker (PPL) to every 500-600 farmers. While this is a higher ratio than normal under the NFCE project, it would be possible as the total number of extension workers involved would be small. This higher ratio is justified in light of the exacting management procedures associated with rice growing on red-yellow podzolic soils. As at SEDEKU, the PPLs would be supervised by middle-level extension workers (PPMs), and subject matter specialists (PPSs) at the district level would support and train both the PPLs and PPMs. The PPSs would also conduct crop adaptive research at the district and subdistrict levels. The BIMAS Secretariat, within the MOA, would exparLd the BIMAS program (subsidized credit to cover seed, fertilizers, pesticides, crop spraying and cost of living expenses) at SEDEKU, and introduce it at: Sungai Dareh-Sitiung. BRI, which provides credit for the BIMAS program, would increase its field staff at SEDEKU and build and staff a village unit office at Sungai Dareh. Besides providing farmers with production credit through the village unit, BRI would also supply them longer term credit (three-five years) for any necessary land-leveling and for the purchase of drought animals, ploughs and other required farm equipment. The DGT would supply farmers at Sungai Dareh with some clothing, tools, cooking utensils, and seed, plus food for their first nine months of residence. The total value of DGTs assistance is some Rp 130,000 per family. The DGC would establish BUUD/KUDs and village fertilizer stores (kiosks) at Sungai Dareh-Sitiung to handle fertilizer and pesticide distribution at the retail level. The BUUD/KUDs would be equipped with paddy drying floors, grain warehouses, and rice milling facilities. By purchasing paddy from farmers, they would also undertake their usual task of maintaining GOI's paddy support price at the farm level. - 19 -

5.05 At full development,demand for fertilizerwould rise from its current level of 5,000 tons to 9,000 tons/year at SEDEKU, and from near zero ton to 2,300 tons/year at Sungai Dareh-Sitiung. The existing fertilizer supply channel at SEDEKU could handle the increased demand, and the repairing and upgrading of subdistrictroads under the INPRES program would help improve the distributionefficiency at the village level. The demand for certified rice seed would be 400 tons at SEDEKU and 70 tons at Sungai Dareh at full development. To meet these targets at SEDEKU, the quality of local seed growers' productionwould be upgraded under the provincial agriculture services ongoing work. At Sungai Dareh-Sitiung the provincialagricultural service would have to establish local seed growers. After project completion, production credit requirementswould also rise. At SEDEKU, the annual project area need would increase from Rp 330 million to Rp 830 million. While the BRI would be able to supply these funds, it would have to increase its field staff to avoid delays in processing and issuing the credits. The BRI has been gradually improving its services to farmers, and it is expected to continue doing this, and provide these additionalfield staff. At Sungai Dareh-Sitiung,production credit requirementswould reach some Rp 110 million per year at full project development. Assuranceswere obtained that GOI would take the necessary steps to ensure that adequate credit and agricultural inputs (includingfertilizers, agricultural chemicals and certified seed) are made available at the village level in both project areas, and to issue land certificatesto the Sungai Dareh-Sitiung settlers,which would enable them to obtain credit from banks in the project area.

5.06 The extension service, in cooperationwith the Provincial Irriga- tion Services and the Ministry of Home Affairs, would form farmer groups (water user associations)for extension, production planning,water management, and tertiary and quaternary unit constructionin each tertiary unit. The quaternary unit, some 20 to 40 farmers, would be the group's basic unit. As they would be vital in synchronizingcrop calendars and water supplies, assurances were obtained from GOI that a water-user associationwould be formed for each tertiary unit in the project areas to participate in the unit's constructionand to take over its operation and maintenance after project completion.

Monitoring Benefits

5.07 Benefits accruing from the project works executed in the SEDEKU and Sungai Dareh-Sitiungareas, together with related social aspects, would be monitored in accordance with the monitoring system set up under Loan 1100-IND (IrrigationProject VI appraisal report). Funds to carry out this work would be provided under a subsequentBank-assisted project.

Operation and Maintenance

5.08 During construction,PROSIDA would be responsiblefor operating and maintaining the irrigation and drainage works in the SEDEKU subproject. It would continue to operate and maintain the works during the first year after project completion to ensure that all defects are corrected and needed repairs are made before the systems are formally turned over to the Central - 20 -

project completion to ensure that all defects are corrected and needed repairs are made before the systems are formally turneu over to the Central Java Provincial Irrigation Service. Thereafter, the Provincial Irrigation Service would operate and maintain the primary and secondary irrigation and internal drainage systems and inspection roads a:Long the irrigation canals; the DGWRD's Directorate of Rivers, the main drainage channelr; and the Kabupatens (Districts), the district and village roads in the project area. Water-user associations on tertiary system- of about 150 ha each would operate and maintain these systems, using funds (lerived from the collection of 40-50 Kg of paddy from all beneficiaries to meet the full O&M costs. This is currently being done on a number of pilot tert:iary units and, in nearly all cases, the systems are being adequately maintained.

5.09 DOI would be responsible for O&M of Stage I (3,500 ha) of the Sungai Dareh-Sitiung system. It would continue t:o operate and maintain the system until irrigation development on the entire service area (20,000 ha) is completed. The entire system would eventually be turned over to the West Sumatera Provincial Irrigation Service, who would assume responsibility for O&M thereafter.

5.10 Although there have been some improvemetnts in O&M services in the completed and ongoing Bank-assisted irrigation projects in Indonesia, there is still a need for more trained staff, as well as an increase in budgetary allocations. This fiscal year's per hectare allocations for rehabilitated and unrehabilitated systems, which were established jointly by GOI and the Bank, are about 30% higher than last year's levels. The increase in O&M funding is reflected in the ongoing projects' maintenance programs that were reviewed by the Bank's supervision missions in August and November 1976. Despite the commitment of substantially higher levels of O&M funds, however, the major constraint to the improvement of O&M services is the untimeliness of fund releases for this purpose. Last year, significant fund releases to most subprojects were not made until the second semester of the fiscal year (rainy season), when little maintenance outside urgent repairs could be done. The subprojects obtained permission to use the carry-over funds during the first quarter of this fiscal year to meet operating expenses and carry out needed repairs, and due to delays in the signing of the DGWRD budget, the subprojects did not start operating with funds released from the current budget until August 1976. Because total releases of FY76/77 funds as of September 30, 1976 amounted to only 5-8% of the subprojects' budgets, however, no appreciable system-wide maintenance could be done although most systems had been out of service and ready for repairs for some time. To enable the subprojects to operate efficiently and carry out timely and effective system- wide maintenance in the dry season, GOI has agreed to allocate to the PROSIDA, Jatiluhur and SEDEKU systems in FY77/78, O&M funds totaling about Rp 3,350 million (Annex 9, Table 2) for about 783,000 ha of rehabilitated systems (Rp 2,900 million); 90,000 ha to be rehabilitated in FY77/78 (Rp 120 million); and about 240,000 to be rehabilitated in the projects' remaining construction period (Rp 330 million). Although the above O&M funds are only 10% higher than FY76/77 levels, a substantial improvement in O&M services would be realized if they are released in a timely manner and additional qualified O&M personnel are employed to ensure that the available funds would be effectively utilized. Therefore, assurances were obtained from the Government that: (a) adequate O&M funds, adjusted to keep pace with inflation and actual - 21 -

needs, would be allocated in future years for all Bank-assistedirrigation systems; (b) GOI would take the necessary steps to ensure that at least half of the budgeted O&M funds would be released to the subprojectsby August 15 of each year, and the balance, in equal quarterly installmentsuntil the funds are fully released; (c) to upgrade the standard of O&M services and to effectivelyutilize the available funds, GOI would progressivelyincrease the number of qualified O&M personnel in the Bank-assisted projects until the additional numbers to be establishedby GOI in consultationwith the Bank are employed; (d) GOI would inform the Bank by December 31 of each year of the proposed number of O&M personnel and per hectare O&M budget for each subproject; and (e) by June 1 of each following year, it would submit the approved O&M budget for each subproject and by October 1, the staffing provisions.

Cost and Rent Recovery

5.11 Irrigators in Indonesia pay a land tax (IPEDA), and, depending on the intensity of on-farm irrigation development,water charges for the operation and maintenance of the irrigation system below the secondary turn-out. IPEDA is collectedby village heads, and turned over to local and provincial administrationsfor use in public services. However, the increase in IPEDA caused by the project can be considered a direct project tax which contributes towards the operation and maintenance,plus capital repayments,on the main irrigation system. Since IPEDA is assessed as a percentage of the value of production, the amounts collectedwould increase as crop yields rise in response to the project. A GOI interministerialcommittee has recommended that part of this increase in IPEDA should be used to cover annual operating and maintenance costs, and recover a portion of the capital costs, of the irrigation rehabilitationor constructionworks. As a result of a Government decision to provide special allocationsunder its local infrastructure development program (INPRES) on the basis of IPEDA collectionperformance, IPEDA collection rates have improved markedly. Present and expected future levels of IPEDA and water charge rates in the two project areas are as follows (in 1977 prices):

SEDEKU Sungai Dareh-Sitiung With /a With Present Project Increment Present project Increment ------(Rp '000) ------

IPEDA 3.4 10 6.6 1 12 11 Water charges 0 3.9 3.9 0 3.9 3.9

Total 3.4 13.9 10.5 1 15.9 14.9

Cost recovery (%) 19 10 Rent recovery (%) 38-98 91

/a The with project condition refers to full agriculturaldevelopment in 1986. In future without the project, the IPEDA and water charges are assumed to remain at the present levels in 1977 prices. - 22 -

5.12 Water user groups at the tertiary canal level in Indonesia have traditionally contributed a portion of their crop to the water master (ulu- ulu), or he has received the use of an area of vi:Llage rice land, in payment for his services. As tertiary and quaternary canal and drain development has occurred under Bank-assisted irrigation projects, the irrigators have increased their contributions to completely cover all operation and maintenance costs for the tertiary/quaternary unit. At SEDEKU, where tertiary and quaternary canals and drains would be constructed on 17,000 ha under the project, the average water charge would be Rp 3,900/ha. The same charge would be levelled at Sungai Dareh-Sitiung.

5.13 Assurances were obtained that GOI, in accordance with its laws and regulations, would collect the adjusted IPEDA based on the increased productivity of all irrigated land served by the systems rehabilitated and constructed under the project; the amounts to be collected would be sufficient to ensure sound O&M practices and to recover a reasonable portion of the capital costs during the project's useful life, taking into account farmers' incentives and capability to pay; and it would submit to the Bank for review every two years, the IPEDA rates collected for dififerent land classes.

5.14 In determining the extent of cost recovery and the relation of project charges to benefits under the project, cost and rent recovery indices have been calculated (Annex 14). The cost recovery indices are 19% for SEDEKU and 10% for Sungai Dareh-Sitiung. Rent recovery indices were calculated for 0.5 and 1.5 ha farms at SEDEKU, and a 1.0 ha farm at Sungai Dareh- Sitiung. They indicated that at SEDEKU owner-operators would pay from 68% to 98% of their project rent in incremental project charges, and sharecroppers from 38% to 62%; and at Sungai Dareh-Sitiung owner-operators would pay 91%.

5.15 The project charges are considered satisfactory in both areas. Even though the rent recovery indices are low, no increases in project charges are proposed as some 90% of the SEDEKU project area farm families at present have per capita incomes below the absolute poverty level of US$95 (1975 prices). At full project development, some 70% of all farm families per capita incomes would still be below this figure. Besides paying a substantial total land tax (Rp 10,000 (US$24)/ha), irrigators would pay at least 10% of their gross value of production in village taxes (Annex 14, Table 1). As well, they would contribute tc the social life and welfare of'the village through religious taxes and compulsory feasts. At Sungai Dareh-Sitiung most farmers would be transmigrants who intially would have to develop their land for paddy production. Moderate project charges would assist farmers' cash flows during the early development period, and encourage full development of the area.

6. PRODUCTION, MARKET PROSPECTS, PRICES AND FARM INCOME

Production

6.01 The project would increase agricultural production through more intensive cropping, higher yields, and the development of new irrigated crop land. At SEDEKU the frequency of flooding on the 9,000 ha now flooded annually would be reduced to once in five years, while on the 21,000 ha now - 23 - flooded every two to five years the frequency would be reduced to less than once in five. The reduced flooding would increase yields and shorten the wet-season cropping period for paddy and thus allow increased planting of dry-season paddy. This, plus a more efficient irrigation distributionsystem would increase the annual cropping intensity from 122% to 135%. At Sungai Dareh-Sitiung 1,500 ha of rainfed and 2,000 ha of unused land would be developed for irrigation. The cropping intensitywould be 200%. Better water control and distribution at SEKEDU, new irrigation facilities at Sungai Dareh-Sitiung,plus a strengthenedand improved extension service and expanded credit facilitiesat both areas would encourage farmers to plant high-yielding rice varieties,and increase the use of fertilizer and crop protection chemicals. As a result, paddy yields at full developmentwould average 4.0 ton/ha on the 9,000 ha and 4.3 ton/ha on the 21,000 ha in the wet season, and 4.3 ton/ha over all the area in the dry season at SEDEKU; and 3.7 ton/ha in the wet and dry seasons at Sungai Dareh-Sitiung.Soybean yields would average 0.7 ton/ha at SEDEKU. Farmers would achieve these yields five years after the establishmentof adequate and reliable irrigation. At full development,about six years after completion of project works, annual paddy production would reach 152,000 tons compared to 96,000 tons at present in SEDEKU; and 26,000 tons compared to 2,400 tons at Sungai Dareh-Sitiung.Annual soybean production would reach 3,000 tons compared to 2,000 at present in SEDEKU. Annex 2 gives details of present and future crop yields and production.

Market Prospects

6.02 Self-sufficiencyin rice is a major government goal. Indonesian rice production has been unable to satisfy demand for many decades. Since 1968, imports have ranged between 0.5 and 1.6 million tons. According to government estimates of future demands, 0.6 million tons of imported rice would be needed in 1978, and substantialimports would continue to be required in subsequentyears. Thus, no difficultiesare foreseen in marketing the additional paddy from the project areas. Much of the incremental production from SEDEKU and Sungai Dareh-Sitiungwould be consumed at the farm level, and the balance would be marketed in the Semarang and Jakarta areas respectively. Palawija crop production at SEDEKU would be marketed locally.

Prices

6.03 For both the farm budget and economic analysis, farm inputs and outputs have been valued in end-1977 prices. For rice, soybean and fertilizers,these prices were derived from the Bank's CommodityDivision's forecasts for world market prices, and adjusted for transportationcosts. Only an estimated 10% of rice production from the project areas would be milled into high-grade rice (5% brokens); 60% would be medium-grade (25-35% brokens); and 30% would be low grade (42% brokens). Using this quality mix and the world market price forecasts, the equivalent economic farm-gate price for paddy would rise from US$147/ton in 1977 to US$191/ton in 1985 (in terms of end-1977 constant dollars) in the SEDEKU project area. Historically, the Government has followed a policy of keeping consumer food prices low by selling imported rice below its cost and keeping domestic floor prices low. To mitigate the effect of this policy on farm income, GOI has simul- taneously subsidized fertilizer and pesticide. In the last two years, - 24 - however, GOI has substantiallyraised domestic paddy prices to encourage rice production. This change in policy, combined with the fall of world prices from the record levels of 1973-74, has brought farm-gate prices fairly close to world levels. Thus, the floor price for paddy is now Rp 70/kg, as compared with an imputed economic price of Rp 76/kg. Although with some fluctuations, GOI has similarly gradually reduced the subsidies for fertilizers. GOI is expected to continue its efforts to align domestic and world market prices, and consequentlyat full development,economic and financial prices for inputs and outputs are assumed to coincide at the Bank's forecasted world market prices. Annex 10 gives similar details of the rice price at Sungai Dareh-Sitiung.

Farm Income

6.04 For farm income analysis, farm models have been prepared for two typical farm sizes (0.5 ha and 1.5 ha) at SEDEKU, and one farm size (1.0 ha) at Sungai Dareh-Sitiung. The SEDEKU models include farms in the area flooded annually, and areas flooded every two to five years, as well as for owner- operators and sharecroppers.Land use and cropping patterns for the present condition broadly reflect averages for cultivated lands in the project areas. The families who would occupy the newly developed land at Sungai Dareh-Sitiung are assumed to be earning their present incomes either from farms or from salaries. The analysis' results are summarized below and shown in further detail in Annex 11.

6.05 As shown in the table, present net crop income for sharecroppers and owner-operatorsvaries from Rp 20,000 to Rp 265,000 at SEDEKU. Similarly, at full development net crop income would vary from Rp 70,000 to Rp 410,000. Even allowing for the higher family farm labor and management input and the consequent reduction in off-farm earnings, the projected farm incomes are adequate to ensure that the farmers would have sufficient financial incentive to adopt the recommended cropping pattern and farm inputs.

6.06 Virtually all farm families in both project areas have per capita incomes at or below the absolute poverty level of US$95 (in end-1975 prices). After completion of the project, with an estimated five persons per family and one family per farm (these assumptions are probably on the low side, especially for the larger farms which often support more than one family), per capita farm incomes would average between US$60 and US$200. All Sungai Dareh-Sitiungfarmers, and about 30% of SEDEKU farmers, would then have per capita incomes above the absolute poverty level.

6.07 No reliable income data are available for the landless laborers who live in the project areas. However, assuming two full-timeworkers per family; an average wage rate of Rp 150/day; and 200 work days/year/worker, the annual income of a landless family can be no more than Rp 60,000 or US$145. Since employment opportunitiesare limited, many families probably earn less. Benefits to accrue to landless laborers under the project are discussed in para. 7.01. Farm Size Crop Income Off-Farm Income Farm Income /a (ha) Tenure Present Future Present Future Present Future Present Future ------(Rp '000)------(Rp '000)------(US$)-----

SEDEKU

0.5 /b Owner-Operator 45 130 50 45 95 175 230 420 Sharecropper 20 70 50 45 70 115 170 280

1.5 /b Owner-Operator 120 375 20 15 140 390 340 940 Sharecropper 60 195 20 15 80 210 190 510

0.5 /c Owner-Operator 85 140 50 45 135 185 330 450 1 Sharecropper 45 75 50 45 95 125 230 300 I

1.5 /c Owner-Operator 265 410 20 15 285 425 690 1,020 Sharecropper 125 210 20 15 145 225 350 540

Sungai Dareh-Sitiung

1.0 Owner-Operator - 370 - 30 137 /d 400 330 960

/a Rounded to nearest Rp 5,000 and US$10

/b Farms on the 9,000 ha which are presently flooded annually, and with the project would be flooded one in five years.

/c Farms on the 21,000 ha which are presently flooded every two to five years, and with the project would be flooded less than once in five years.

/d At present families who would occupy the newly developed irrigated land are assumed to be earning i.icomefrom farms or from salaries. - 26 -

7. BENEFITS, JUSTIFICAT ION ANDLO TSKS

7.01 By providing improved water contI i a ge, us new irrigation development on 3,500 ha, the proposed project would increase crop yields and production on a total 33,500'ha at SEPENJ and Sun$gaiDareh- Sitiung. It would directly benefit some 64,000 f,arm families or nearly 350,000 people; and through the provision of addil:onal em3layment oppor- tunities, would indirectly benefit some 40,000 landless laborers families.

Through increased crop production, annual cropping nt-v:--iry and net culti- vable area, the project would create a demand for an e--'- tiC nal 2D6 million man-days of farm labor per year, or about 10,9G00a0 T `Ea,sroved drainage at SEDEKU would reduce flood damage to -,hp f al:tough not included in the economic benefits, it would also reduc- -. ssiderable flood damage to public and private structures suchn as, digesand houses.

7.02 The economic rate of return would be 18% fo -t.lsSETEKU project and 15% for Sungai Dareh-Sitiung, in both cases usi. a e evaluation period; full project benefits being attainied six years after completion of construction; farm-gate prices for rice, soybean, and fertilizars based on the Bank's commodity price forecasts for 1985 expressed in December 1977

constant prices; a shadow foreign exchange rate; and a seasona"LI-y r,;S>ariable shadow wage rate for unskilled labor (Annex 12). Since clearing of homesites, construction of housing and village infrastructure and moving of the first 2,000 families from Java to the area have been conrpleted3 these costs were excluded, while GOI's assistance to settlers duriyng the first year (US$310/ settler) were included in the economic analysis of the Sungai Dareh-Sitiung project.

7.03 The rates of return for both areas ar_ sl-ge;y seusitive to cost overruns and moderately sensitive to delays in the realizatio-n-of project benefits, which further highlight the crucial role of sepporting agricultural services. However, even if the projects shoi^ld s!.tffer from both a 20% cost overrun and a two-year delay in the realization of benefits, the economic rate of return would still be about 10% in Sungai Dareh-Sitlung and 13% in SEDEKU. On the other hand, if project benefits turn out to be 20% higher than forecast because of higher commodity prices, the rate of return would be 21% for SEDEKU and 17% for Sungal Dareh-SItiun g.

7.04 At full agricultural development, the project would result in rice import savings of US$25.0 million annually at the projected world market price cif Semarang and Jakarta (Annex 10). 4fter deducting the incremental

cost of imported fertilizers, chemicals, fuel and >other farm inlouts, annual net foreign exchange savings would amount to about US$17.0 milliori.

7.05 No unusual engineering managemenit or organizational -problems are expected in the implementation of the project. R.apidinflation over the last several years led to sizeable cost overruns on projects initiated in the early 1970s. Inflation is now more under control. and larger provisions for price increases have been made for this project f-2dother projects recently financed by the Bank. Physical contingencies allowed are 25% for rehabilitation and construction works, and 10% for miscellaneous services. Considering the level of investigations made for the project, these would be adequate. As agricultural supporting services are not presently available in the Sungai - 27 -

Dareh-Sitiungproject area, there is a risk that the projected crop yields would not be obtained unless these services are introduced in adequate amounts and in a timely manner.

8. AGREEMENTSREACHED AND RECOMMENDATION

8.01 During negotiations,agreement with the Government was reached on the followingpoints:

(a) consultantsacceptable to the Bank would be engaged by December 31, 1977 on terms and conditions approved by the Bank (para 4.03);

(b) except for tertiary canals and structures, the project works would be divided into a number of suitable contracts (minimum size US$125,000)that would enable large local contracting firms and joint ventures of smaller contractors to bid within the categories or classes for which Government regulationsrequire them to be prequalified;to minimize late constructionstarts early in the dry season, invitations to bid for such contracts would be issued as bid documents are completed, and bids would be received and processed without waiting for the project implementationbudget (DIP) to be signed, but contract award and signing would be done after the DIP is approved; and price escalation clauses, which are not normally provided in local civil works contracts, would be included in contracts extending beyond one year (para 4.22);

(c) PROSIDA and DOI would maintain separate accounts for the project; auditors acceptable to the Bank would be engaged to audit these accounts;and audited financial statements,together with the auditor's comments and opinion on the certificatesof expenditure for force account works, would be submitted to the Bank within six months of the close of each fiscal year (para 4.24);

(d) the PROSIDA and DOI subproject offices involved in project implementation would be adequately staffed, and GOI would consult with the Bank before appointing a replacement for the General Manager of PROSIDA or the Director of Irrigation (para 5.02);

(e) GOI would take the necessary steps to ensure that adequate credit and agriculturalinputs (including fertilizers,agricultural chemicals and certified seed) are made available at the village level in both project areas, and to issue land certificatesto the Sungai Dareh-Sitiungsettlers, which would enable them to obtain credit from banks in the project area (para. 5.05);

(f) a water-user associationwould be formed for each tertiary unit in the project areas to participate in the unit's constructionand to take over its operation and maintenance upon completion of the project (para. 5.06); - 28 -

(g) adequate and timely O&M funds, adjusted to keep pace with inflation and actual needs, would be allocated to all Bank-assistedirrigation systems in future years; GOI would take the necessary steps to ensure that at least half of the budgeted O&M funds would be released to the subprojectsby August 15 of each year and the balance, in equal quarterly installmentsuntil the funds are fully released; to upgrade the standard of Cl&Mservices and to effectively utilize the available funds, it would progressivelyincrease the number of qualifiedO&M personnel in the Bank-assistedprojects until the additional numbers to be establishedby GOI in consulta- tion with the Bank are employed; it would inform the Bank by December 31 of each year of the proposed number of O&M personnel and per hectare O&M budget for each subproject; and by June 1 of each following year, it would submit the approved O&M budget for each subproject and by October 1, the staffing provisions (para. 5.10); and

(h) GOI, in accordance with its laws and regulations,would collect the adjusted IPEDA based on the increased productivityof all irrigated land served by the systems rehabilitatedand constructedunder the project; the amounts to be collectedwould be sufficient to ensure sound O&M practices and to recover a reasonable portion of the capital costs during the project's useful life, taking into account farmers' incentives and capability to pay; and it would submit to the Bank for review every two years, the IPEDA rates established and collected for different land classes (para. 5.13).

8.02 The project would be suitable for a Bank loan of US$35 million, with a 20-year maturity and a grace period of 4-1/2 years. The Borrower would be the Government of Indonesia. INDONESIA

IRRIGATION IX

ClimatoloRical Data

Total Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. or mean

SEDEKU Area Semarang /a

Mean temperature (OC) 26.2 26.1 26.8 27.6 27.9 27.6 27.1 27.2 27.2 28.1 27.9 27.0 27.2 Relative humidity (%) 84 85 83 79 77 74 73 72 70 71 75 80 77 Rainfall (mm) 333 311 252 231 154 107 84 72 99 157 224 226 2,250 4 Wind velocity (m/S) 4 4 4 3.5 3.5 3.5 4 4 3.5 4 4 3.5

Sungai Dareh Area Sungai Dareh /b

Rainfall (mm) 254 260 243 389 197 134 105 130 133 166 325 292 2,628

Padang /c

Mean temperature (OC) 25.9 25.8 26.0 26.1 26.3 25.9 25.7 25.6 25.4 25.6 25.7 25.7 25.8 Relative humidity (%) 81 82 83 84 83 83 83 82 84 82 82 83 83 Wind velocity (m/s) 3 4 3 3 3 3 3. 3 4 3 4 3 3

/a Data is mean for period 1956-65.

/b Data is mean for period 1964-73.

/c Data is mean for period 1972-75.

mxg- Bi- ANNEX 2 Page 1

INDONESIA

IRRIGATION IX

Present and Projected Cropping Patterns and Production

Present Cropping Pattern and Yields

1. SEDEKU. Situated in the East Semarang plain on the north coast of Central Java, the SEDEKU project area covers 30,000 ha. All the area is affected by floods with approximately9,000 ha being flooded annually, and the remaining 21,000 ha every two to five years. Irrigation systems cover the entire 30,000 ha, of which some 70% have been rehabilitatedby the GOI from its own funds, or with Bank Group assistance (Credit 127-IND). During the wet season, paddy is irrigated on 30,000 ha, and in the dry season on 2,600 ha. Additionally,some 4,000 ha of secondary crops are partially irrigated during the dry season, giving an overall annual cropping intensity of 122%. Soybeans is the major secondary crop, and in this report have been used to represent all secondary crops. Dry-season paddy is only irrigated on the area flooded every two to five years (21,000 ha). Table I shows the cropping patterns and production estimates at present and in future without the project.

2. Wet-season rice is grown between November and June. Depending on the start of the northwest monsoon, farmers usually transplantbetween November and the end of January. Because of flooding during December to February, farmers may have to replant considerableportions of their crops. They harvest over some 12 weeks, April through June. Farmers grow dry-season paddy between April and October, transplantingin April-June and harvesting in August-October. All rice is transplantedfrom field nurseries onto previously puddled land. Soybeans are grown from late April to mid-October. Depending on water supplies, these crops may receive from two to four irri- gations. Most soybean crops, however, suffer moisture stress and are mainly dependent on rainfall and residual subsoil moisture from the preceding crop.

3. Farmers plant only local rice varieties on the annually flooded area (9,000 ha). They plant 40% HYV rice on the area flooded every two to five years (21,000ha) in the wet season, and 50% in the dry season. Average wet-season paddy yields 1.9 ton/ha on the 9,000 ha and 3.3 ton/ha on the 21,000 ha; dry-seasonpaddy 3.5 ton/ha and soybeans 0.5 ton/ha on the 21,000 ha. The flooding not only reduces crop yi(eldsand discourages farmers from using credit and crop inputs (HYVs, fertilizer and pesticide),it also increases crop production costs, damages irrigation facilities,and reduces the area farmers can plant to irrigated dry-season crops.

4. Sungai Dareh-Sitiung. More than half of the proposed 3,500 ha irrigation service area is covered with secondary forest, bush and coarse grass. Farmers grow rainfed paddy on 1,500 ha during the wet season. As they use local varieties and practically no ferti:Lizeror pesticides,yields average 1.6 ton/ha. At present, farmers do not grow any dry-season crops. ANNEX 2 Page 2

Future Cropping Patterns

5. SEDEKU. Without the project, improved and expanded extension services and increased use of agriculturalinputs would marginally increase paddy yields on the rehabilitatedarea of the lesser flooded portion (21,000 ha). On this area, wet-season paddy would average 3.4 ton/ha and dry-seasonpaddy 3.6 ton/ha. All other yields would remain as now. The annual cropping intensitywould not increase.

6. Table 1 shows the expected changes in cropping pattern and intensity with the project. Improved drainage would reduce flooding on the annually flooded area to once in five years, and on the area flooded every two to five years to less than once in five years. This would shorten the wet-season cropping period, which in turn would allow farmers to increase their dry-season irrigatedpaddy area from 2,600 ha to 6,000 ha, and their soybeans from 4,000 ha to 4,500 ha. The annual overall cropping intensity would rise from 122% to 135%.

7. Sungai Dareh-Sitiung. Without the project, varietal improvement and some use of pesticideswould increase the wet-season paddy yield to 1.8 ton/ha. Cropping intensitywould not increase. With the project, the entire 3,500 ha would be irrigated. Farmers would irrigate paddy crops during both the wet and dry seasons, with an overall 200% annual cropping intensity (Table 1).

Future Yields

8. With good water management, control and distribution, a strengthened and improved extension service, and adequate credit and input supplies, the estimated future crop yields would average at SEDEKU: wet-season paddy, 4.0 ton/ha on area flooded one in five years (9,000 ha); 4.3 ton/ha on area flooded less than one in five years (21,000ha); and over all the area, dry-season paddy, 4.0 ton/ha; and soybeans 0.7 ton/ha. At Sungai Dareh- Sitiung, wet- and dry-season paddy would average 3.7 ton/ha. The projected yields would be achieved five years after the introductionof water or completion of drainage or rehabilitationworks.

9. The improved yields would be assisted by the use of HYV rice varieties throughout all areas, certified seed, heavier fertilizer and crop protection inputs. Rice HYVs would spread to 85% of the wet-season, and 100% of the dry-season rice areas. The introductionof the National Food Crop Extension Project to the project areas would play a key role in the organization of farmer groups for extension, crop production, and water management. The forming of these groups would help in synchronizingcropping patterns and calendarswith projected water deliveries, increasing contact between individual farmers and government programs, and ensuring better use of resources and inputs available to each farmer.

Development Constraints

10. The most important possible constraints to the project's success are discussed briefly. ANNEX 2 Page 3

II. Agricultural inputs. Organized ricultural inputs (BIMAS program, credit, seed, fertilizer and pesticides) are not yet available at Sungai Dareh. To achieve the projected crop yields, GOI would have to introduce these services to the project area. Transmigrants to the area would require the credit facilities normally made available to government-sponsored transmigrants. This would enable them to prepare their land for paddy production, purchase inputs, and subsist until their first successful harvest. Annex 3 discusses the agricultural services which would be introduced to the project area.

12. Crop protection. Major rice pests existing in the project areas are brown plant hopper, stemborer, leptocoriza and rats. The introduction of resistant rice varieties and chemicals would contain these diseases. However, pest control in both areas is inadequat:e and should be strictly supervised by the agricultural services.

13. Harvesting, drying and storage. At SEDEKU farmers harvest rice using small knives (ani-ani) or, occasionally, sickles. They thresh the crop by treading on the panicles or beating them on EL threshing floor. Paddy is sun-dried on mats in the house yard or on the roadside. Lack of proper concrete drying floors makes drying of the wet-season crop difficult and losses from rainfall can be considerable. Although the Government has initiated a program to provide drying floors at farmer cooperatives (BUUD/KUDs), more drying floors are required. Farmers store bagged paddy or dry stalk paddy in their houses or on racks in small outbuildings until it is sold or consumed. This storage is not always vermin proof and cannot readily be fumigated to control insects. Storage losses are around 5-8% while losses during harvest, drying and storage could be as high as 15-20%.

14. Processing. To process the increased production in both project areas, additional rice milling capacity would be required. Most mills in the SEDEKU area are currently operating at less than full capacity, but with the project their capacity would have to be expanded. At present there are only two rice mills in the Sungai Dareh-Sitiung area, and these would be insufficient to handle the incremental paddy production with the project.

15. Transport. Part of the incremental rice and soybean production in the project areas is expected to be sold outside of the region. This would require improvement of existing transport facilities. Away from the main highway, roads in the SEDEKU area are frequently impassable during the wet season, while secondary roads are virtually nonexistent in the Sungai Dareh- Sitiung area. INDONESIA

IRRIGATION IX

Summary of Cropping Patterns and Production

Present Future Without Project Future With Project (1986) Area Yield Production Area Yield. Production Area Yield Production (ha) (ton/ha) (tons) (ha) (too/ha) (tons) (ha) (ton/ha) (tons)

SEDEKU Wet season Paddy - area A /a 9,000 1.9 17,100 9,000 1.9 17,100 9,000 4.0 /e 36,000 Paddy - area B Lb 21,000 3.3 /c 69,300 21,000 3.4 /d 71,400 21,000 4.3 /f 90.300 Subtotal 30,000 86,400 30,000 88,500 30,000 126,300

Dry season Paddy -area A ------Paddy - area B 2,600 3.5 /g 9,100 2,600 3.6 /h 9,360 } 6,000 4.3 /f 25,800 Soybean 4,000 0.5 2,000 4,000 0.5 2,000 4.500 0.7 3.150 Subtotal 6,600 11,100 6,600 11,360 10,500 28,950

Total 36,600 97,500 36,600 99,860 40,500 155,250

Cropping intensity 122% 122% 135%

Sungai Dareh Wet season Rainfed paddy 1,500 1.6 2,400 1,500 1.8 2,700 - Irrigated paddy ------3.500 3.7 12,950 Subtotal 1,500 2,400 1,500 2,700 3,500 12,950

Dry season Irrigated paddy ------3,500 3.7 12,950

Total 1,500 2,400 1,500 2,700 7,000 25,900

Cropping intenaity 100% 100% 200%

/a "Present" and "future without" situation: area susceptible to annual flooding. "Future with project" situation: area susceptible to one-in-five year flood.

/b "Present" and "future without" situation: area susceptible to flooding every two to five years. "Future with proiect" situation: area susceptible to floods greater than the one-in-five year flood.

/c Composite yield: 70% of the area rehabilitated with a yield of 3.5 ton/ha; 30% of the area nonrehabilitated with a yield of 2.7 ton/ha.

Composite yield: 70% of the area rehabilitated with a yield of 3.7 ton/ha; 30% of the area nonrehabilitated with a yield of 2.7 ton/ha.

/e Composite yield: 55% of the area equipped with tertiary facilities with a yield of 4.2 ton/ha; 45% of the area without tertiary facilities with a yield of 3.7 ton/ha.

/f Composite yield: 55% of the area equipped with tertiary facilities with a yield of 4.5 ton/ha; 45% of the area without tertiary facilities with a yield of 4.0 ton/ha.

/R Composite yield: 70% of the area rehabilitated with a yield of 3.9 ton/ha; 30% of the area nonrehabilitated with a yield of 2.5 ton/ha.

/h Composite yield: 70% of the area rehabilitated with a yield of 4.0 ton/ha; 30% of the area nonrehabilitated with a yield of 2.5 ton/ha. ANNEX 3 Page 1

INDONESIA

IRRIGATION IX

Agricultural Supporting Services

OraLiization

1. Previous irrigation project appraisal reports, and the Irrigation Program Survey report (No. 705-IND) have described the organization of agricultural supporting services in Java. In addition, the National Food Crops Extension Project report (No. 1105a-IND) describes in detail the BIMAS (farm production credit and inputs) program, and the revised agricultural extension service, which would ultimately be introduced to the project areas. This annex, thus, only briefly describes the programs and supporting services available to farmers.

2. The most important Government organizations and programs which support farmers in agriculture include the following.

(a) The Directorate General of Water Resources Department (DGWRD) - contains agencies implementing water resource development projects and, through the Provincial Irrigation Services, operates irrigation systems to the secondary canal turnout.

(b) The Directorate General of Food Crop Agriculture (DGFC) - within the Ministry of Agriculture, plans and executes food crop production and plant protection services.

(d) Bank Raykat Indonesia (BRI) - provides credit to farmers and finances the BIMAS program which provides farm input packages and credit programs.

(e) BULOG/DOLOG - acts as Government's rice/paddy procurement agency.

(f) Agency for Research and Development (ARD) - within the Ministry of Agriculture, carries out agricultural research and development pr -ams.

(g) The Mir7stry of Home Affairs (MEA) - provides the provincial and 1Qcal ac-inistrative services.

3. All agenc ?s have a Central Directorate in Jakarta, whi-:h plans, supervises, provides technical assistance and finances programs on a national basis. Each --- > ib represented at the provincial, and district (kabupatan) ANNEX 3 Page 2 levels. Staff assigned to the provinces are administrativelyresponsible to local government,that is the Governor (province)and the Bupati (district), who coordinatethe programs and activities of the agencies within their area of command, and provide basic salaries and operatingexpenses.

Credit and BIMAS Program

4. Farmers obtain credit from six main sources: BRI, BUUD/KUD, village cooperatives(Lumbung Desa), landlords,merchants and relatives. Under the BIMAS program, BRI is the main source of production credit. For irrigated rice production, a farmer can obtain up to Rp 37,000/ha to cover seed, fertilizer, insecticide,rodenticide, spraying, and cost-of-living expenses. The loan is for seven months at 1%/month interest rate. To be eligible for the loan, a farmer must not be more than two years overdue with his earlier BIMAS repayments. It is estimated that approximately30% of the wet-season paddy in the SEDEKU project area is currently covered by the BIMAS program. The coverage is relatively low due to the risk of flooding and the problems of conducting new agricultural techniques under present conditions. However, after project completion, it is expected that 75% of the wet-seasonpaddy area would be covered by the BIMAS program. While BRI would be able to supply the credit required for the expansion of the coverage, it would have to increase its field staff to avoid delays in processing and issuing of BIMAS credits. There is at present no functioning distributionsystem of farm inputs through the BIMAS program in the greater Sungai Dareh-Sitiungarea. However, coverage is expected to reach at least 80% after completion of the project and introductionof the program.

5. BRI also supplies farmers and BUUD/KUDs with some medium-term credit (1-5 years) for purchases of draft and breeding cattle, pigs and chickens, hullers, water pumps, grain storage and drying floors. However, the volume is low, applicationprocedures are complicated and repayment terms restrictive. Most loans are for one to three years. A greater volume is required, and over longer repayment periods, particularlyfor storage or land development. The Bank is already assisting the BRI provide medium-term credit under Credit 480-IND. Although its repayment terms are easier than BRI's general repayment terms, it is restricted to a few provinces. A rural credit project, currentlybeing consideredfor financing,would provide credit for up to a maximum of 15 years over 7 provinces.

Research

6. Research for paddy and secondary crops is conducted at the Sukamandi National Research Centers for Paddy and Secondary Crops and at a number of field stations under the direction of the Agency for Research and Development. Under the National Food Crops Extension Project (NFCE/Loan 1267-IND), subject matter specialistswould conduct adaptive research at the district and subdistrict level. At these research establishments,rice and secondary crops foundation seed is produced, and rice varietal adoption and fertilizer trials are conducted, together with new varietal adoption trials for secondary crops. ANNEX 3 Page 3

Extension

7. Under the Bank-assistedNational Food Crops Extension Project, both project areas would receive substantial guidance and assistance. Existing Rural Extension Centers would be improved1,and a large number would be established. Lower-level extensionworkers (PPLs) would make contact with farmers through about 20 key farmers and some 100-150 progressive farmers. PPLs would be supervisedby middle-level extensionworkers (PPMs) and the head of their Extension Centers. Subject matter specialistswould support both PPLs and PPMs with technical advice and would assist in a continuous training program. At present, the SEDEKU project area has only 11 field extensionworkers (PPLs) to service 100,000 farm families, an average ratio of 1 PPL:9,100 farm families. Under the NCFE project, this ratio would be reduced to 1:1,700. Only very limited technical guidance and supervision is currently available in the Sungai Dareh-Sitiung area.

Seed

8. Approximately1,380 tons of rice seed are used annually in the SEDEKU area. This figure reflects substantial seed losses due to flooding and frequent replanting. About 88% of the seed is obtained by retention from the farmer's production and 12% from seed growers. In the Sungai Dareh-Sitiung area, practically all farmers use seed from their own production. Certified paddy seed is produced by the National Seed Corporation at Sukamandi and is distributed through BUUDs, KUDs and local kiosks at about doable the commercial paddy price. Supplies of this seed are limited. Most districts have one or more local seed farms which are run by district agriculturalpersonnel. At full development,farmers in the SEDEKU area would use about 1,140 tons of rice seed per year. In the Sungai Dareh-Sitiungarea, total rice seed requirementswould amount to 210 tons per annum. If rice seed would be renewed every five crop seasons, the estimated annual requirementof quality rice seed would be 400 and 70 tons for the SEDEKU and Sungai Dareh-Sitiung project areas respectively.

Fertilizer

9. Generally,fertilizer is supplied under the BIMAS program and phys- ically distributedthrough local BUUDs and KUDs. Farmers in the SEDEKU area currently apply some 4,940 tons of fertilizer to their rice and secondary crops, of which 3,900 tons are urea and 1,040 tons are triple superphosphate(TSP). Little fertilizer is used in the areas susceptibleto annual flooding. At full project development,some 9,100 tons of fertilizer would be required for the rice and secondary crops annually, consistingof 7,200 tons of urea and 1,900 tons of TSP. The Sungai Dareh-Sitiungproject would require 1,400 tons of urea and 900 tons of TSP at full development.

10. Supplies of fertilizerare adequate in the SEDEKU area; however, critical shortagesoccur due to transportproblems and lack of storage within villages. No fertilizer distributionsystem is currently in operation in the Sungai Dareh-Sitiung area. ANNEX 3 Page 4

Farmers' Organizations

11. BUUDs/KUDs. BUUDs are precooperativeswhich convert to farm cooperatives,or KUDs, when proven viable. The cooperativesdistribute farm inputs and provide such processing services as paddy drying and cleaning, in addition to storage. BUUDs and KUDs act as agents of the Government's rice/paddy procurement agency (BULOG/DOLOG)at the village level. Under the project, the number of BUUDs/KUDs in both project areas would be increased to a level at which there would be one cooperative per village unit. ANNEX 4 Page 1

INDONESIA

IRRIGATION IX

Project Works

Semarang-Demak-Kudus(SEDEKU) Subproject

1. The coastal plain of East Semarang in Central Java covers a gross area of 45,000 ha, of which about 30,000 ha are served by the SEDEKU irrigation system. This system consists of nine distinct small- to medium- scale irrigation systems (Table 1), three of which were completely rehabilitated with Bank Group assistance under Credit 127-IND. GOI completely rehabilitated four and partially rehabilitatedtwo of the remaining six systems from 1970 to 1976. Because of damage sustained from repeated floodings (para. 3.01), however, some rehabilitatedareas in those six systems would require further repairs and improvement. Some 8,000 ha in those systems would thereforebe rehabilitatedand improved under the proposed project by repairing or reconstructingabout 130 km of primary and secondary canals and about 200 division, control and related structures, including some bridges, and by constructingabout 20 km of canal bank protection. In addition, tertiary systems would be rehabilitatedand constructedto PROSIDA standards (Loan 1268-IND)on 17,000 ha of the 30,000 ha service area. Tertiary works would include the rehabilitationand improvement of about 100 km of tertiary canals, including about 300 structures, and the constructionof about 1,200 km of tertiary and quaternary irrigation canals, 680 km of tertiary and quaternarydrains, and about 1,200 tertiary and quaternary canal structures.

2. To minimize damage due to flooding in the SEDEKU area (para. 3.01), two main flood control and drainage schemes /1 would be rehabilitatedand improved under the project. The components of the two schemes would be sized according to the following criteria, which have been adopted by GOI for this, and similar flood control and drainage projects in Java: (a) internal drains would be designed to cope with the local runoff produced by a 5-year storm without submerging the crops for more than 72 hours; and (b) main drains would be sized to allow safe passage of a 50-year flood. The required channel capacitieswould be met by enlarging the channel cross- sections (desiltingor excavation) and/or by raising their flood embankments. The embankment heights and the level of protection to be provided by them would be reviewed by the project consultants,and GOI, in consultationwith the Bank, may reduce their frequencyof failure if it is shown that such failure would pose a serious threat to the rural population. The channel capacity of the Jragung River, one of the main rivers included in the eastern flood control and drainage scheme, is based on projected flood

/1 These schemes are the Western Scheme, which drains the area between the East Banjir canal and the west bank of the I)olokriver, and the Eastern Scheme, which drains the area between the east bank of the Dolok river and the west bank of the Tuntang river. ANNEX 4 Page 2 discharges after the constructionof the proposed Jragung dam /1. Until the dam is constructed,the Jragung river 50-year flood would exceed the design flood by about 30%. In the event such a flood occurs, some portions of the Jragung embankmentsmay be breached or overtopped. The flood control and drainage works would include: (a) excavation of about 110 km of new and existing flood channels; (b) rehabilitationor reconstructionof about 200 km of flood embankments;(c) constructionof about 0.5 km of river bank protection; (d) constructionand/or rehabilitationof about 20 flap and automaticallycontrolled flood and drainage gates; and (e) rehabilitation or reconstructionof about 70 km of inspection and access roads.

3. The excavation of new and existing channels,construction of new flood embankments,and raising of existing embankmentswould require about 8.6 million cu m of earthwork, about 6.0 million cu m of which would be carried out by hand labor. Only the excavation in water (about 2.6 million cu m) too deep or too dangerous to be carried out efficientlyby hand labor, would be done by equipment.

4. The Prauwvaart canal, which traverses the project area for most of its width and acts as a major drainage and irrigation canal by intercepting several minor streams and using the interceptedwater to irrigate its 4,300 ha command area, would be rehabilitatedand upgraded by: (a) constructinga masonry lining along its bank that is adjacent to the Semarang-Demakhighway over most of its length, to keep that bank from progressivelyeroding and slipping; (b) desilting its invert to restore its original capacity; and (c) rehabilitatingor reconstructingits automatic control gates to ensure that they would maintain a constant water level in the canal for water supply purposes and open automaticallyto discharge surplus water to the sea through downstream flood channels. All other canals would be unlined, except where shown to be required.

5. Control gates would be constructedat points where the internal drains discharge into the main drains to ensure that, by closing them in the dry season, fresh water would be trapped within the sytem for irrigation and domestic consumption. In the wet season, they would be kept open to allow unrestricteddrainage to take place.

6. Tertiary systems in the SEDEKU area would be upgraded or constructed to the PROSIDA standards establishedunder Loan 1268-IND. Tertiary canals would deliver water to units of about 150 ha. Quaternary canals taking off from the tertiaries would convey water to units of about 10-15 ha; below that level, irrigationwould be from field to field. Local consultants to be engaged under the project (para. 4.03) would prepare the design and construction drawings. PROSIDA would layout the systems and construct the control

/1 A proposed storage dam for the dry-season irrigation of about 10,000 ha of the SEDEKU system, hydropower generation and flood control. Feasi- bility study has been completed by GOI with consultant assistance (ECI) financed under bilateral aid from USAID. At GOI's request the dam would be considered for financing under the future Irrigation XI project. ANNEX 4 Page 3

and protective structures. Farmers would excavate t-ietertiary and quarter- nary canals under the supervision of PROSIDA, at daily wage rates equal to the prevailing rates for work done under the INPRES Program.

Sungai Dareh-Sitiung

7. The proposed works for the 3,500 ha interim irrigation system in the Sungai Dareh-Sitiung area (para. 3.02) would include: Ca) construction of a pumping station equipped with five mixed flow pumps with electric motor drives, which would each be capable of delivering 1,100 1/sec against a head of 29 m; (b) installation of a diesel electric generating plant equipped with six 600 KVA generating sets, one of which would be a standby unit, for a total installed capacity of 3,600 KVA; (c) construction of about 30 km of primary and 35 km of secondary canals and about 100 control and related structures; (d) construction of about 50 km of primary and secondary drainage channels; (e) tertiary development on 3,500 ha consisting of the construction of about 55 km of tertiary and subtertiary canals, 185 km of quaternary canals, 140 km of tertiary and quaternary drains, and about 350 tertiary and quaternary canal structures; (f) construction of about 75 km of inspection and access roads; (g) installation of about 50 km of telecommunications and related facilities; (h) construction of housing for O&M personnel totaling about 650 sq m in floor area; and (i) procurement of vehicles and equipment.

8. The principal source of water supply is the Batang Hari, a major river having a minimum flow of about 80 cu m/sec. The ultimate gravity system for the 20,000 ha would include a weir and intake on the Batang Hari, which would be located about 7 km upstream of Kecamatan /1 Sungai Dareh; about 105 km of primary canals; 155 km of secondary canals; and about 600 control and related structures. About seven years would be required to complete the system. The pumping plant for the initial stage would be dismantled after completion of the ultimate gravity system, for use in other areas.

9. To make the interim development compatible with the ultimate system, the interim canals and structures would be sized for the initial design discharge to obtain optimum hydraulic conditions, but: (a) for reaches of the interim canals that would be incorporated into the ultimate plan, sufficient right of way would be acquired for the ultimate plan; (b) canal cross-sections to be adopted could readily be enlarged to provide the ultimate capacity; and (c) interim structures to be constructed could be enlarged to cope with the ultimate discharge by providing additional bays with as little disruption of the flow as possible.

Studies and Investigations

10. The DGWRD and DOI have requested Bank assistance in finalizing the planning and investigations of nine small- to mtedium-sized irrigation projects located in Java, Sumatera and Sulawesi (Map 12632). Table 1 provides a

/1 Subdistrict. ANNEX 4 Page 4 compilationof the projects, approximate size, provincial location, status and preliminary cost estimates for development of feasibility reports and for construction.

II. The status of the nine projects varies from the planning to the construction stages, but constructionthat has taken place is limited to weirs and headworks and the initial reaches of the primary canals. The standards and criteria that have been used in planning the works are those of DOI and the associatedProvincial public works authorities. Information made available to the mission indicated that additionalstudies and investigations would be needed to provide a sound basis for evaluatingproject costs and benefits. This portion of the project would provide assistanceto DOI for the review of existing designs and the completion of the feasibility study for each project. Study standards and criteria would be adequate to demonstrate engineering,agricultural and economic feasibility required for Bank appraisal of the works.

12. Three of the projects, Cilandak and Ciletuh, in West Java and Wawotobi or other suitable sites in Sulawesi, are proposed resettlementareas for the 15,000 families that would be displaced by the constructionof the Jatigede project./l Although 2,000 families from Jatigede could be relocated at the two projects in West Java, the principal purpose of these projects would be to provide resettlementopportunities for families presently located in and adjacent to the respective projects. The proposed system in Sulawesi would be capable of accommodating the remaining 13,000 families that would be dislocatedby the Jatigede project.

13. Some of the proposed projects in Sumatera could be designed to provide resettlementopportunities for families from the general project areas and from Java.

14. There would be no conflict between the nine projects and other governmental efforts under the Directorate of Transmigrationto achieve population dispersal. The projects are addressed solely to the construction of facilitiesto provide dependablewater supplies for the irrigationof lands to be occupied by families resettled under any specific program.

15. Present land use in all of the project areas is primarily for rainfed agriculture,predominantly palawija crops, but with modest areas of paddy production. It is anticipatedthat some of the defined project lands could be provided with irrigationsystems capable of supportingyear-round paddy production.

/1 A storage project for irrigationand hydropowergeneration on the Cimanuk river in West java, which is being consideredfor Bank financing. INDONESIA

IRRIGATION IX

SEDEKU IRRIGATION SYSTEM

Status of Rehabilitation

Irrigation Water Supply Total Service Rehabilitated To be Rehabilitated Under the Project System Source Area Area Previously rehabilitated but requiring further Unrehabilitated Total repairs and improvement Area Area

Prauwvaart /a Prauwvaart Canal /b 4,300 4,300 1,555 - 1,555

Polder Batu /a Dolok River 470 470

Penggaron /a Penggaron River 4,590 4,590 1,300 - 1,300

Glapan Setu /a Setu River 1,545 1,545

Dolok /a Dolok River 1,956 1,041 - 915 915

Jragung /a Jragung River 5,617 1,987 600 3,630 4,230

West Glapan /c Tuntang River 8,140 8,140

Ketitang /c Tuntang River 849 849

Guntur /c Bl River 1,937 1,937

Total 29,404 24,859 3,455 4,545 8,000

/a Partially or completely rehabilitated by GOI (1970-1976).

/b Intercepts flows of several minor streams and acts as a drainage and irrigation canal.

/c Completely rehabilitated by PROSIDA under the Glapan-Sedadi subproject (Credit 127-IND). ANNEX 4 Table 2

INDONESIA

IRRIGATION IX

Work Items, Quantities and Unit Prices

Quantity Unit Unit Price (Rp)

I. SEDEKU Irrigation & Drainage System

Housing for O&M staff 1,250 sq m 40,000 Inspection & access roads 70 km 11,000,000 Headworks & weirs 6 ea 63,500,000 Primary & secondary canals Earthwork 725,500 cu m 500 Masonry lining 193,500 sq m 5,700 Canal structures 200 ea 2,000,000 Drainage canals & structures Earthwork 7,870,000 cu m 525 Structures 25 ea 25,000,000 Tertiary development 17,000 ha 75,000 Telecommunication lines 200 km 500,000 Land acquisition 463 ha 1,350,000

II. Sungai Dareh Irrigation System

Preliminary works L.S. - 70,000,000 Design office (Bandung) 400 sq m 80,000 Field office 400 sq m 80,000 Staff housing Type A 1,000 sq m 80,000 Type B 650 sq m 60,000 Other buildings 600 sq m 60,000 Water supply system L.S. - 10,000,000 Electric lighting system L.S. - 12,000,000 Inspection & access roads 75 km 3,500,000 Pumping station Civil works L.S. - 100,000,000 Erection of equipment L.S. - 50,000,000 Primary & secondary canals Earthwork 770,000 cu m 650 Structures 100 ea 5,000,000 Drainage canals & structures L.S. - 250,000,000 Tertiary development 3,500 ha 90,000 Telecommunications 50 km 750,000 Land acquisition 200 ha 750,000 ANNEX 4 Table 3

INDONESIA -

IRRIGATION IX

Project Development Costs

Item Cost/ha /a Cost/family (US$) …

I. SEDEKU Irrigation and Drainage

Inspection and access road 116, Housing for O&M staff 15 Headworks & weirs 132 Primary & secondary canals 524 Canal structures 146 Tertiary development 212 Drainage canals & structures 704 Telephone, communications 29 Land acquisition 102

Total /b 1,980 990 /d

II. Sungai Dareh Irrigation

Preparatory works 79 Housing for O&M staff 40 Inspection & access roads 237 Pumping station civil works & equipment 555 Primary & secondary canals 476 Canal structures 476 Drainage canals & structures 237 Tertiary development 257 Telephone communications 40 Land acquisition 158

Total /c 2,555 2,300 /e

/a Excluding price contingencies (21% of base cost plus physical contingencies) and engineering, supervision and administration (10%). /b Based on 8,000 ha of primary & secondary systems improvement, 17,000 ha of tertiary development and 19,000 ha of flood control and drainage improvement; would apply only to areas where all three of these rehabilitation components are present. Average cost based on entire system would be about US$1,000/ha. /c Based on Stage I development of 3,500 ha. /d Based on average landholding of about 0.5 ha/family. /e Based on average landholding of about 0.9 ha/family. ANNEX 4 Table 4 Page 1

INDONESIA

IRRIGATION IX

Vehicles and Equipment /a

Item Quantity Unit Cost Amount -- U__---Us -

SEDEKU Subproject

Construction and O&M Equipment /b Dragline (3/4 cu yd) & mats 5 75,000 375,000 Bulldozer, swamp (120 hp) 5 50,000 250,000 Road roller (6-8 tons) 2 30,000 60,000 Vibratory roller (1 ton) 2 10,000 20,000 Pumps (5" ) 4 6,000 24,000 Trailer, low bed (20 ton) 1 60,000 60,000

Subtotal 789,000

Vehicles Jeeps 8 7,000 56,000 Station wagons (LWB) 2 10,000 20,000 Motorcycles 20 500 10,000

Subtotal 86,000

Other equipment Lot - 25,000

Total 900,000

Sungai Dareh Subproject

Pumping station equipment Pumps, mixed flow with electric motor, 1,100 1/sec 5 50,000 250,000 Diesel electric generating sets, 600 KVA 6 120,000 720,000

Subtotal 970,000 ANNEX 4 Table 4 Page 2

Vehicles and Equipment

Itemf Quantity Unit Cost Amount ------US$-

Vehicles Jeeps 8 7,000 56,000 Station wagons, long wheel base 6 10,000 60,000 Motorcycles, 100 cc 50 500 25,000

Subtotal 141,000

Miscellaneous equipment Office equipment Lot - 39,200 Survey equipment Lot - 52,100 Geological & soil investigations equipment Lot - 145,000 Agro climtological & irrigation engineering equipment Lot - 25,000

Subtotal 261,300

Total 1,372,300

Studies & Investigations

Vehicles Jeeps 14 7,000 98,000 Station wagons, long wheel base 7 10,000 70,000

Subtotal 168,000

Equipment Office equipment Lot - 88,000 Survey equipment Lot 118,000 Agro climatological and irrigation engineering equipment Lot 25,000

Subtotal 231,000

Total 399,000

Grand Total 2,671,300 Rounded (US$2.7 million)

/a Equipment to be procured under the project would be augmented by equipment from other projects which have been completed or are nearing completion. /b Equipment would be used for force account work or may be leased to contractors with insufficient equipment, if necessary., Upon completion of the works, some of the equipment would be retained for O&M and the balance, transferred to other construction areas. ANNEX 4 Table 5

INDONESIA

IRRIGATION IX

SMALL- TO MEDIUM-SCALE SYSTEMS

Studies and Investigations

Estimated Cost Province and Construction of Studies and Project Area Status /a Cost Estimate Investigations /b (ha) (US$ million) (US$ million)

Southeast Sulawesi

Wawotobi 20,000 Planning 37.5 1.5 West Java

Cilandak 5,800 Construction 10.9 0.4 Ciletuh 7,000 Construction 14.5 0.4

Central Java

Waduk Ketro 3,600 Design 3.5 0.2 Bapang 4,200 Design 5.1 0.3

West Sumatera

Batang Tongar 8,000 Design 22.8 0.4 Panti Rao 11,000 Design 17.4 0.6

North Sumatera

Batang Gadis 7,000 Design 12.2 0.4

South Sumatera

Air Beliti 15,000 Planning 16.6 0.7

Grand Total 81,600 140.5 5.2

/a All work completed to date have thus far been carried out with GOI funds.

/b Including vehicles and equipment. ANNEX 5 Page 1

INDONESIA

IRRIGATION IX

Water Supply, Demand & Quality

SEDEKU Project

1. The water supply problem in this area in the wet season has been one of surplus rather than deficient water supply. The most critical water problems are those of excessive and prolonged inundation of large areas with consequent loss of paddy production, a reluctance to plant all potentially productive areas because of the flood threat, the necessity to replant paddy following destructive floods in hopes of salvaging a rice crop grown during the latter stages of the wet season, and unwillingness to make necessary investments in the maintenance of irrigation works due to the certainty of frequent damaging floods.

2. There are four major rivers in the area, the Penggaron, Dolok, Jragung and Tuntang. Additionally, there are about 20 smaller rivers and streams traversing or wholly contained in the area. The bulk of the flood water comes from the four major rivers, and the minor rivers and streams are essential internal drains for carrying off the local runoff and overbank flow. All of the waterways serve as sources of irrigation water supply during the nonflood periods. The Dolok, Setu and Jragung rivers are inter- cepted in their lower reaches by the Prauvwaart Canal which is adjacent to the Semarang-Demak road and serves as a source of supply for irrigation and domestic user and is equipped with automatic gates that regulate its level for both supply and drainage purposes. The Penggaron and Tuntang rivers drain directly to the sea. In its lower reaches the Penggaron is known as the Babon river.

3. Major diversion points for water supply in the area are the Puncanggading weir on the Penggaron river, Barang weir on the Dolok river, Jragung and Guntur weirs on the Jragung river, an

4. Because of the necessity to replant wet-season paddy following the frequent floods and lack of adequate water storage facilities, only about 15% of the agricultural lands are irrigated in the dry season. With the project, this is expected to increase to between 20 and 25%, due to increased channel capacities, and improved irrigation facilities permitting more even distribution of the available supply in the dry season. ANNEX 5 Page 2

58 With the flood control and drainage measures that are included 4n this project, it would be possible to restore the irrigation system to proper working order. This would include about 17,000 ha of tertiary systems and rehabilitation of 8,000 ha of primary and secondary systems to more fully utilize the available water supply and agriculture lands. The other socio-economic advantages of the project related to water supply would be the improvement of water quality for village and domestic purposes, reduction of the magnitude and inundation time of villages, homes and roads in the area, and reduction of losses to commercial fish farms lying between the agricultural lands and the coast.

Sungai Dareh-Sitiunj Project

6. The water supply for the initial stage of the Sungai Dareh-Sitiung project will be derived from the Batang Hari. This is one of the largest rivers in the West Sumatera province, having a drainage area of about 4,300 sq km above the proposed diversion point. For the full scale project of 20,000 ha, water supply would be derived from the Batang Hari and its three tributaries, the Batang Siat, Piruko and Mimpi, which have a combined drainage area of about 7000 sq km.

7. Stream flow records of the Batang Hari are available from April 1975 to March 1976 (Table 1). The minimum flow recorded during that period was 80 cu m/sec. This is about 15 times as large as the diversion requirement for the 3,500 ha first stage development of about 5.5 cu m/sec, and more than twice the diversion requirement for the full-scale project without considering the availability of water from the other three streams that will be utilized. The quality of water in all of the streams is good to excellent for sustained irrigation use.

8. Since the initial stage of the project includes a temporary pumping plant on the Batang Hari for water supply, the effect of floods will be an important design consideration. Rainfall records in the basin are available from 1956. Utilizing the Gumb2l method, maximum daily precipitation was developed for varying frequency of occurrence. Maximum hourly intensities were obtained for corresponding frequencies, and the Rational method employed to estimate probable flood frequencies for Batang Hari and Batang Siat. These data are presented in Table 2.

9. The wate7 balance computation for the initial project is based upon a double crop of rice on the entire 3,500 ha. It is derived by the modified Penman formula for potential evapotranspiration and crop coefficients for paddy from a PROSIDA/NEDECO study. Effective rainfall was computed as 50% of the daily rainfall between 5 and 50 mm, with rainfall of less than 5 or more than 50 mm being considered ineffective. Percolation was estimated at 1.5 mm/day. Conveyance losses of 15% were assumed, and operational losses of 20% of the diversion requirement were estimated to arrive at the total diversion requirement. The water balance for the 3,500 ha initial stage is given in Table 3. ANNEX 5 Table I

INDONESIA

IRRIGATION IX

Discharge Records of Batang Hari

Daily discharge Peak Year Month Max. Min. Mean Discharge ------(cu m/sec) ------

1975 April 600 195 398 900 May 360 165 263 480 June 456 97 277 - July 296 80 188 410 August 313 180 247 410 September 456 177 317 635 October 246 127 187 365 November 303 120 212 446 December 182 114 163 280

1976 January 365 143 254 502 February 271 118 195 405 March 258 146 202 392 ANNEX 5 Table 2

INDONESIA

IRRIGATION IX

Estimated Peak Discharges

Peak flood discharge Frequency B. Hari B. Siat (cu…- m/sec) ------

Once in 100 years 4,200 650

Once in 50 years 3,800 590

Once in 5 years 2,400 440

Once in 2 years 1,700 370 INDONESIA

IRRIGATION IX

SUNGAI DAREll PROJECT

Water Balance Computation

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

1. Potential evapotranspiration (mm) 134 128 134 120 124 117 124 124 114 117 118 121 2. Crop coefficient 1.40 1.40 1.09 1.16 1.31 1.40 1.40 1.40 1.09 1.16 1.31 1.40 3. Consumptive use (mm) 188 180 146 140 163 164 174 174 123 136 156 170 4. Percolation (mm) 47 42 23 23 47 45 47 47 23 24 45 47 5. Effective rainfall (mm) 141 134 67 100 109 80 58 57 39 50 180 163 6. Crop intensity (%) 94 50 6 6 50 94 94 50 6 6 50 94 7. Puddling requirement (mm) - - - 53 88 150 - - - 53 88 150 8. Nursery requirement (mm) - - 1 4 4 2 - - 1 7 5 2 9. Net water requirement (3+4-5) 6+7+8 (mm) 89 44 7 61 143 274 154 82 8 67 104 203 10. Irrigation water point /1 (mm) 131 65 11 90 211 403 227 121 12 99 153 298 11. Diversion requirement (1/s/ha) 0.49 0.27 0.04 0.35 0.79 1.56 0.85 0.45 0.05 0.37 0.59 1.11 12. Diversion requirement (3,500 ha) (mcm) 4.6 2.3 0.4 3.2 7.4 14.1 8.0 4.2 0.4 3.5 5.4 10.4 (3,500 ha) (cu m/sec) 1.7 1.0 0.2 1.2 2.8 5.5 3.0 1.6 0.2 1.3 2.1 3.9 13. Available water supply /2 (cu m/sec) 143 118 146 195 165 97 80 180 177 127 120 114 14. Water balance (cu m/sec) +141 +117 +146 +194 +162 +91 +77 +178 +177 +125 +118 +110

/1 Overall water efficiency, 68% including conveyance and application losses.

/2 Minimum flow recorded during each month over period of record.

( t ANNEX 6 Page 1

INDONESIA

IRRIGATION IX

Consulting Services

1. SEDEKU Project. This major civil works undertaking will require the review by foreign consultants (to be engaged under the project) of existing detailed designs and construction drawings prepared by NEDECO for channel modifications, embankment improvement and construction, dredging, and rehabilitation of existing irrigation and drainage systems. The same consultants would supervise construction of those works. Local consultants would be employed to prepare detailed designs and construction drawings for tertiary irrigation and drainage facilities.

2. It is estimated that about 50 man-months of expatriate consulting services and about 220 man-months of local consulting services, including surveyors 'and draftsmen, will be required.

3. The consultants' review would be based upon the feasibility studies and subsequent deailed engineering conducted by NEDECO, and included in its report on the Jratunseluna Basin /1 Development Plan, May 1974. That study embraced a larger area than the SEDEKU area, but the plan for the SEDEKU area is an integrated and coordinated part of the whole.

4. Sungai Dareh-Sitiung Project. Detailed design of the irrigation and drai-. age system for the initial 3,500 ha development would be performed by foreign and local consultants working from the feasibility study undertaken by DOI. The same consultants would complete the feasibility study for the development of the remaining 16,500 ha for irrigated agriculture. Subject to the results of that study and, contingent upon the approval of GOI and the Bank, the consultants would proceed to prepare the remaining area for implementation following arrangements for suitable financing. A total of about 540 man-months of local and 295 man-month of foreign consultant assistance would be required, of which 190 man-months local and 145 man-months foreign would be for work associated with the initial stage and the feasibility study.

5. Studies and investigations. For the past decade, DOI has been identifying, planning, designing and constructing small- to medium-sized irrigation projects throughout Indonesia. To date there has been no direct Bank assistance for these activities, and financing has been from GOI funds. Due to budgetary constraints, progress in implementing the program has been slow and somewhat fragmented. A major objective of the program has been to plan and construct irrigation systems that would complement GOI efforts

/1 See para. 3.01. ANNEX 6 Page 2 towards population dispersal. The studies included in the project cover nine specific sites in Java, Sumatera and Sulawesi. They would be directed to the development of irrigation schemes for those areas to assure successful settlement. Some of the areas would be settled by families participating in the GOI program for population dispersal, in addition to those that would be displaced by the construction of Jatigede dam in Java. Others would be developed for the benefit of farm families that are already in the surrounding area.

6. All nine project areas have been studied in varying detail ranging from reconnaissance grade to near feasibility standards. Some construction has been undertaken at several project sites, consisting of construction of weirs, headworks and the initial reaches of primary canals. General plans for irrigation system development exist for all areas. However, study standards and criteria would have to be upgraded to assure engineering, agricultural and economic feasibility required for appraisal of the proposed works by the Bank.

7. The project would provide for the engagement of local and foreign consultants to develop a feasibility report for each of the proposed devel- opments for future appraisal by the Bank. The work would include soil surveys and land classification, hydrologic investigations, agricultural, agronomic and economic analyses, and final scheme development and design.

8. The total consultant requirement would approximate 870 man-months of local consultant and about 465 man-months of foreign consultants effort over a two year period.

9. A summary of consultant services required for the entire project is presented in Table 1. ANNEX 6 Tab le 1

INDONESIA

IRRIGATION IX

Summary of Consultant Requirements

Foreign /a Local /b Man-months -----

SEDEKU

Review of existing designs and construction drawings and construction supervision of irrigation and drainage works. 50

Tertiary systems, detailed design and preparation of construction drawings (17,000 ha). - 220

Subtotal 50 220

Sungai Dareh

Initial stage (3,500 ha), detailed engineering and construction supervision, including tertiary systems on 2,000 ha, and feasibility study for ultimate system. 145 190

Detailed engineering and preparation of tender documents for remaining 16,500 ha. 150 350

Subtotal 295 540

Studies and Investigations

Java and Sumatera systems 345 650 Sulawesi system 120 220

Subtotal 465 870

Total 810 1,630

/a Includes expatriates assigned to the field and short-term specialists.

/b Includes engineers, draftsmen and technicians. ANNEX 6 Table 2 Page 1

INDONESIA

IRRIGATION IX

Estimated Consultant Requirements

Man-Months

SEDEKU

A. Local Design Engineers 220

B. Expatriate

Design Engineer 6 Hydraulic Engineer 6 Construction Engineer 24 Short-term Specialists 14 50 Subtotal (SEDEKU) 270

Sungai Dareh

Initial Stage

A. Local Design Engineers 190

B. Expatriate

Electrical-Mechanical Design Engineer 10 Civil Design Engineers 30 Construction Engineers 48 Hydraulic Engineers 8 Agricultural Economist 12 Soil Scientist 12 Short-term Specialists 25 145 Subtotal 335

Second Stage Design

A. Local Consultants 350

B. Expatriate

Design Engineer 48 Hydraulic Engineer 18 Estimators 24 Specification Writer 18 Short-term Specialist 42 150 Subtotal 500

Subtotal (Sungai Dareh) 835 ANNEX 6 Table 2 Page 2

Feasibility Studies - Small- to Medium-Sized Projects

Java and Sumatera Systems

A. Local Consultants (Planning and Design) 650

B. Expatriate

Planning Engineer 30 Hydraulic/Hydrologic Engineer 24 Civil Design Engineer 45 Irrigation Engineers 48 Structural Geologist 18 Agricultural Economists 48 Soil. Scientists 72 Short-term Specialists 60 345 Subtotal 995

Sulawesi System

A. Local Consultants 220

B. Expatriates

Planning Engineer 24 Hydraulic/Hydrologic Engineer 12 Civil Design Engineer 12 Irrigation Engineer 30 Agricultural Economist 6 Soil Scientists 24 120 Subtotal 240

Subtotal (Feasibility Studies) 1,335

Grand Total 2,440 Local (1,630) Expatriate (810) ANNEX 7 Table I

INDONESIA

IRRIGATION IX

Cost Estisate /a

Foreign Local Foreign Total Local Foreign Total Exrhange ------Rp Million US$ Millio- ---- ()

I. SEDEKU Irrigation aod Drainage Civil Worka Hoosing for 06H staff 40 - 40 0.1 - 0.1 35 Inspection and acoess road 455 335 790 1.1 0.8 1.9 40 Headworko and weirs 165 210 375 0.4 0 5 0.9 55 Prinary and secondary canals 760 745 1,495 1.8 1.8 3.6 50 Canal structures 205 210 415 0.5 0.5 1.0 50 Tertiary develop-ent 915 370 1,285 2.2 0.9 3.1 30 Draioage canals and structures 2,370 2,405 4,775 5.7 3.8 11.5 50

Sobrotal 4,900 4,275 9.173 11.8 10.3 22.1 47

Consulting servic.s /b 165 250 415 0.4 0.6 1.0 55 Vehicles aod equipr.et /c - 375 1,375 - 0.9 0.9 100 Telephone coora-nications - 85 85 - 0.2 0.2 80 Adnioistration and overhead 330 85 415 0.8 0.2 1.0 15 Land acquinition iX 625 - 625 1.5 - 1.5 -

Base cost 6,020 5,070 11,090 14.5 12.2 26.7 46

Physical contingeocies 1,205 995 2,200 2.9 2.4 5.3 46 Exp-cted price increases /d 1,745 1,490 3,235 4.2 3.6 7.8 46

Total 8,970 7,555 16,525 21.6 18.2 39.8 46

IT. Slngei Dareh Irrigation Syste= Civil Works Preparatory works 40 45 85 03.1 0.1 0.2 30 Offices & henning for OM5 staff 210 80 290 0.5 0.2 0.7 35 Inspection and across roads 165 85 250 0.4 0.2 0.6 40 Pumping station /h 80 85 165 0.2 0.2 0.4 55 Prizary and secondary canals 250 250 500 0.6 0.6 1.2 50 Canal structures 250 250 500 0.6 0.6 1.2 50 Drainage canals and structures 125 125 250 (.3 0.3 0.6 50 Tertiary contruction 210 80 290 0.5 0.2 0.7 30

Slbtotal 1.330 1,000 2_330 3.2 2.4 5.6 43

Consulting services Le 370 915 1,285 0.9 2.2 3.1 70 Vehiclen and eq.ip-ent /c - 580 580 - 1.4 1.4 100 Telephone co-ounicati.os - 40 40 - 0.1 0.1 80 Administration and overhead 165 45 210 C.4 0.1 0.5 15 Land acquisition 165 - 165 C.4 - 0.4 -

Base cost 2,030 2.580 4.610 4.9 6.2 11.1 56

Physical contingencies 495 665 1,160 1.2 1.6 2.8 56 Fxpected price increases /d 455 665 1,120 1.1 1.6 2.7 56

Total - 2.980 3.910 6.890 7.2 9.4 16.6 56

III. Studies and inventigations Java and Su-atera nyntens Consulting services /f 500 955 1,455 1.2 2.3 3.5 65 Vehiclen and equinent - 85 85 - 0.2 0.2 100 Mapping 40 85 125 0.1 0.2 0.3 80

Subtotal 540 1.125 1.665 1.3 2.7 4.0 68

Sulawreni system Consulting servicen /f 210 330 540 0.5 0.8 1.3 65 Vehiclos and equip-est - 85 85 .- 0.2 0.2 100 Mapping 80 250 330 0,2 0.6 0.8 80

Base Cost 830 1,790 2,620 2.0 4.3 6.3 68

Phynical costingoncies 85 165 250 0.2 0.4 0.6 68 Expected price increases 80 210 290 0.2 0.5 0.7 68

Total 995 2,165 3,160 2.4 5.2 7.6 68

Grand Total 12.945 13,630 26,575 31.2 32.8 64.0 51

/a Updated to end 1977 prices and based on exchange rate of Rp 415 - US51.0. /b Provided for co-ntruction supervision (foreign and local ononultants) and tertiary design on 17,000 ha (local consultants) at billing rates of US$6,000-US$7,000/ran-=onth for expatriates, US51,200-US$1,500/ man-month for local engineers and US0450/man-onuth for local draftonen; al.o inc-iden consultants' travel anod riscellaneous expessen. /c See Amono 4, Table 4. /d Sne Table 2. /e Provided far detailed engineering and construction supervision on firat 3,500 ha and feasibility study and detailed engineering for 20,000 ha (foreign and local consaltatsr) at billing rates nimilar to those in footnote /b. /f Provided for feasibility studios on modium-.rale irrigation nynteta (foreign and local consultLants) at billing rates similar to those in footnote /b; also includes consultants specialieed equipment, travel and niscellaneous expenses. LLand valued at Rp 150 - Rp 250/sq m. /h Includes civil works and erection of electrical and nechanical eqoipnent. ANNEX 7 Table 2

INDONESIA

IRRIGATION IX

Expected Price Increases

Calendar Year 1977 1978 1979 1980 1981

Annual InflationRate, % Civil works /a 20 15 15 12 12 Equipment & services 7.5 7.5 7.5 7 7

IndonesianFiscal Year /b Total 77/78 78/79 79/80 80/81 Increase … ______…(%)…------

Annual InflationRate Civil works 4 /c 15 13 12 Equipment & services 2 Ic 7.5 7.5 7

… ______-…_- IUS$Million ------…-… I. Sedeku Irrigation and Drainage System Civil works - 1.8 3.2 2.1 7.1 Equipment & services _ 0.2 0.3 0.2 0.7

Total - 2.0 3.5 2.3 7.8

II. Sungai Dareh Irrigation System Civil works - 0.5 0.7 0.5 1.7 Equipment & services - 0.2 0.5 0.3 1.0

Total - 0.7 1.2 0.8 2.7

III. Studies and investigations Civil works - - - - Equipment & services - 0.6 0.1 - 0.7

Total - 0.6 0.1 - 0.7

Grand Total - 3.3 4.8 3.1 11.2

/a Projected from inflation rates experiencedin a large number of contracts in irrigation projects in Indonesia and based on assumption that inflation rates for local currency component equal those for indirect foreign exchange costs.

/b April 1 - March 31.

/c Base cost already updated to end-1977 prices. ANNEX 7 Table 3

INDONESIA

IRRIGATION IX

Proposed Allocation of Proceeds of Loan

Cost Loan Total Foreign Amount US$ million ------

I. Civil works: PROSIDA 22.1 10.3 14.4 DOI 5.6 2.4 3.7 Physical contingencies 1.2 0.6 - Expected price increases 1.2 0.6 -

Subtotal 30.1 13.9 18.1 /a

II. Vehicles and equipment: lb PROSIDA 1.1 1.1 1.2 DOI 1.9 1.9 2.0 Physical contingencies - - - Expected price increases 0.2 0.2 -

Subtotal 3.2 3.2 3.2 /c

III. Consulting services: PROSIDA 1.0 0.6 1.0 DOI 7.9 5.3 8.3 Physical contingencies - - - Expected price increases 0.4 0.2 -

Subtotal 9.3 6.1 9.3 /d

IV. Mapping: DOI 1.1 0.8 1.0 Physical contingencies - - - Expected price increases 0.1 0.1 -

Subtotal 1.2 0.9 1.0 /e

V. Unallocated: Balance of physical contingencies 7,5 3.8 1.6 Balance of expected price increases 9.3 4.6 1.9 Administration and overhead 1.5 0.3 - Land acquisition 1.9 - -

Subtotal 20.2 8.7 3.4

Total 64.0 32.8 35.0

/a Disbursements will be 60% of total expenditures.

/b Includes telecommunications equipment.

/c Disbursements will be 100% of foreign expenditures for directly imported goods and equipment, 95% of ex-factory costs for locally manufactured equipment, 65% of total expenditures for locally procured imported goods and equipment, excluding vehicles; and 40% imported goods and equipment, 95% of ex-factory costs for locally manufactured equipment, 65% of total expenditures for locally procured imported goods and equipment, excluding vehicles; and 40% of total expenditures for locally assembled vehicles.

/d Disbursements will be 100% of total expenditures for both foreign and local consultants.

/e Disbursements will be 80% of total expenditures. ANNEX 8 Table 1

INDONESIA

IRRIGATION IX

Schedule of Expenditures

Indonesian Fiscal Year /a Total 77/78 78/79 79/80 80/81 Cost ------US$ million ------

I. Sedeku Irrigation and Drainage System 4.8 13.1 14.6 7.3 39.8

II. -Sungai Dareh Irrigation System 2.0 5.5 6.0 3.1 16.6

III. Studies and Investigations 1.0 5.8 0.8 - 7.6

Total 7.8 24.4 21.4 10.4 64.0

/a April 1 - March 31. ANNEX 8 Table 2

INDONESIA

IRRIGATION IX

Schedule of Expenditures

Indonesian Fiscal Year /a Total ItEm 77/78 78/79 79/80 80/81 Cost

-- … US$ Million ------

I. Sedeku Irrigation and Drainage System Civil works 3.3 7.7 7.7 3.4 22.1 Equipment & services 0.7 1.6 1.6 0.7 4.6

Base Cost 4.0 9.3 9.3 4.1 26.7

Physical contingencies 0.8 1.8 1.8 0.9 5.3 Expected price increases - 2.0 3.5 2.3 7.8

Total 4.8 1.3.1 14.6 7.3 39.8

II. Sungai Dareh Irrigation System Civil works 0.8 2.0 2.0 0.8 5.6 Equipment & services 0.8 1.8 1.8 1.1 5.5

Base Cost 1.6 3.8 3.8 1.9 11.1

Physical contingencies 0.4 1.0 1.0 0.4 2.8 Expected price increases - 0.7 1.2 0.8 2.7

Total 2.0 5.5 6.0 3.1 16.6

III. Studies and Investigations Civil works - - - - - Equipment & services 0.9 4.7 0.7 - 6.3

Base Cost 0.9 4.7 0.7 - 6.3

Physical contingencies 0.1 0.5 - - 0.6 Expected price increases - 0.6 0.1 - 0.7

Total 1.0 5.8 0.8 - 7.6

Grand total 7.8 24.4 21.4 10.4 64.0

/a April 1 - March 31. ANNEX 8 Table 3

INDONESIA

IRRIGATION IX

Schedule of Disbursements

Accumulated Bank Fiscal Year Disbursements and Semester (US$ Million)

1978 1st 0.1 2nd 0.6

1979 1st 3.4 2nd 9.8

1980 1st 15.4 2nd 24.9

1981 1st 30.2 2nd 33.5

1982 1st 35.0 ANNEX 9 Table 1

INDONESIA -

IRRIGATION IX

OPERATION AND MAINTENANCE

Breakdown of Current and Proposed O&M Funds

Item 76/77 77/78 --- (Rp/ha) ----

Salaries, irrigation supervisors and below 820 880

Annual desilting 500 550

Canal repairs, trimming and sodding 155 190

Maintenance of headworks, structures, gates, masonry linings, etc. 1,100 1,150

Transport 50 60

Administration 35 40

Housing and office 15 25

Workshops 130 140

Inspection roads 120 140

Communications 25 30

Hydrological stations 70 75

Maintenance of drainage works 180 220

Total /a 3,200 3,500

/a From Central Government. In addition, Provincial Government allocates about Rp 900/ha to cover salaries of personnel above irrigation supervisor, for a total of Rp 4,100/ha. ANNEX 9 Table 2

INDONESIA

IRRIGATION IX

OPERATION AND MAINTENANCE

FY77/78 Budgetary Allocation for Bank-Aasisted Pro1ect a

Rehabilitated Areas /b R1977/78ehabilitation Areaa /c| Future Rehabilitation Areas /d I Total Area I Unit Total Unit Total Unit Total I Total Unit Subproject Area Budget Budget Area Budget Budget I Area Budget Budget Area Budget Budget (ha) (Rp/ha) (Rp Million)l (ha) (Np/ha) (Rp Million) I (ha) (Rp/ha) (Rp Million)I (ha) (Np Million) (Rp/ha)

Credit 127-IND I I . I Rentang | 90,216 3,500 315.8 I _ _ _ _- _ _ 90,216 315.8 3,500 Cisedane I 40,663 3,500 [42.3 I - - _ I _ _ _ I 40,663 142.3 3,500 Glapan-Sedadi 46,010 3,500 161.0 | - - - I - _ _ 46,010 161.0 3,500 Way Seputih | 11,500 3.500 40.3 I - 13,500 /e 1,000 13.5 | 25,000 53.8 2.152 Total 1188,389 3,500 659.4 I _ _ _ | 13,500 1,000 13.5 | 201,889 672.9 3,333

Credit 220-IND Ciujung 24,300 3,500 85.1 -- _ - - 24,300 85.1 3,500 Pemali-Comal 1123,283 3,500 431.5 I _ _ _ _- - I 123,283 431.5 3,500 Sadang 1 47,330 3.500 165.7 3.000 1.300 3.9 I _ _ 50,330 169.6 3.370 Total 1194,913 3,500 682.3 | 3,000 1,300 3.9 I _ _ _ I 197,913 686.2 3,467

Credit 289-IND I Pekalen-Sampean 1148,550 3,500 519.9 I 50,000 1,300 65.0 | 30,560 1,600 48.9 I 229,110 633.8 2,766

Loan 1100-IND Cirebon I 12,000 3,500 42.0 I 20,000 1,300 26.0 I 56,515 1,600 90.4 I 88,515 158.4 1,790 Sampean Baru - -- _ I _ _ _ | 8,000 /f _ _ | 8,000 1 Total I 12,000 3,500 42.0 I 20,000 1,300 26.0 I 64,515 1,400 90.4 I 96,505 158.4 1,641

Loan 1268-lND1 NBrth Sadang I _ _ - | 2,000 1,300 2.6 I 4,000 /f - _ I 6,000 2.6 433

Irrigation VIII Madiun (Stage I) _- _ _ _- _ _ 75,000 1,600 120.0 | 75,000 120.0 1,600 Subtotal (PROSIDA) 1543,852 3,500 1,903.6 | 75,000 1,300 97.5 1187,575 1,454 272.8 | 806,427 2,273.9 2,820

Credits 195 6 514-IND I Jatiluhur 1230,000 4,200 966.0 I 15,000 1,300 19.5 | 43,000 /g 1,000 43.0 I 288,000 1,028.5 3,571

Irrigation IX SEDEKU /h | 9,000 3,500 31.5 I - - - | 8,000 1,600 12.8 _ 17,000 44.3 2,606

Grand Total 1782,852 3,706 2,901.1 I 90,000 1,300 117.0 1238,575 1,377 328.6 1,111,427 3,346.7 3,011

/a Fron Central Government (established jointly by GOI and the Bank).

/b Would require full OM funds.

/c Would require operating funds until they are shut down for rehabilitation.

/d Would require funds for operation and urgent repairs to keep systems functioning until they are rehabilitated.

/e System rehabilitated but service area not yet cleared; minimal maintenance funds required.

/f No water supply until main canal is completed.

/S Primarily nontechnical systems requiring significant new systen construction (minimal maintenance funds).

/h For OM purposes, 10,926 ha of this system, which vere rehabilitated under the Glapan-Sedadi subproject (Credit 127-IND), would continue to be funded under that subproject. AtiNEK 10 Table 1

INDONESIA

IRRIGATION IX

Commodity Price Structure, 1977 and 1985 (Rp and US$/ton at constant end 1977 prices) /a

SEDEKU 1977 1985 Rp/ton US$/ton Rp/ton US$/ton

Rice

Export price Thai 5%-42% brokens mix f.o.b. Bangkok /b 114,400 220 150,800 290 Ocean freight and insurance 10,400 20 10,400 20 Port handling, storage and transport to wholesalers 3,700 7 3,700 7 Transport mill to wholesaler -2,000 -5 -2,000 -5 Rice price ex-mill, project area 126,500 243 162,900 313 Paddy equivalent price (63% rice recovery) 79,700 153 102,600 197 Milling costs less value of by-products -700 -i -700 -1 Drying and cleaning -1,500 -3 -1,500 -3 Handling and transport costs, farm to mill -1,200 -2 -1,200 -2 Farm-gate paddy price /c 76,300 147 99,200 191 (Financial farm-gate price) /d (65,000) (157) (79,300) (191)

Singai Dareh 1977 1985 Rp/ton US$/ton Rp/ton US$/ton

Rice

Export price Thai 5%-42% brokens mix f.o.b. Bangkok /b 114,400 220 150,800 290 Ocean freight and insurance 10,400 20 10,400 20 Rice price c.i.f. Jakarta 124,800 240 161,200 310 Freight and insurance Jakarta-Padang -4,100 -8 -4,100 -8 Port handling, storage and transport to wholesalers -2,500 --5 -2,500 -5 Transport mill to wholesaler -4,1100 -8 -4,100 -8 Rice price ex-mill, project area 114,100 219 150,500 289 Paddy equivalent price (63% rice recovery) 71,900 138 94,800 182 Milling costs less value of by-products -700 -1 -700 -1 Drying and cleaning -1,500 -3 -1,500 -3 Handling and transport costs, farm to mill -1,200 -2 -1,200 -2 Farm-gate paddy price /c 68,500 132 91,400 176 (Financial farm-gate price) /d (65,000) (157) (79,300) (191)

/a Economic prices; figures in parentheses are financial prices.

lb Assumed rice quality: 10% of production, 5% brokens; 60% nedium grade, 25-35% brokens; and 30% lower grade, 42% brokens. Prices assumed in 1985 (in constant end-1977 prices), 5% brokens US$405/ton, 25-35% brokens US$275/ton and 42% brokens US$263/ton.

/c At a shadow foreign exchange rate of US$1.00 = Rp 520.

/d At the official exchange rate of US$1.00 = Rp 415. Present: financial price calculated as follows: floor price at BUUD/KUD for 14% mo sture content paddy Rp 70/kg less Rp 1.5/kg drying and cleaning, Rp 1.2/kg transport from farm to BUUD/KUD, Rp 2.3/kg for market imperfections. In the future, distor- tions between internal and world prices are expected to be eliminated. ANNEX 10 Table 2

INDONESIA

IRRIGATION IX

Commodity Price Structure, i977 and 1985 (Rp and US$/ton at constant end-1977 prices) /a

SEDEKU 1977 1985 Rp/ton US$/ton Rp/ton US$/ton

Soybean

Export price f.o.b. US Gulf port 119,600 230 173,700 334 Ocean freight and insurance 19,800 38 19,800 38 Port handling, Semarang 2,900 6 2,900 6 Price on truck, Semarang 142,300 274 196,400 378 Transport farm to Semarang -2,900 -6 -2,900 -6 Farm-gate price /b 139,400 268 193,500 372 (Financial farm-gate price) /c (130,000) (313) (154,400) (372)

SEDEKU and Sungai Dareh 1977 1985 Rp/ton US$/ton Rp/ton US$/ton

Urea

World export price /d 89,400 172 100,400 193 Ocean freight and insurance 11,400 22 4,200 8 Handling and distribution costs to retail level 19,100 37 19,100 37 Transport BUUD kiosk to farm 1,000 2 1,000 2 Farm-gate price /b 120,900 233 124,700 240 (Financial farm-gate price) /c (71,000) (171) (99,600) (240)

TSP

World export price /e 71,200 137 89,400 172 Ocean freight and insurance 11,400 22 11,400 22 Handling and distribution costs to retail level 19,100 37 19,100 37 Transport BUUD kiosk to farm 1,000 2 1,000 2 Farm-gate price /b 102,700 198 120,900 233 (Financial farm-gate price) /c (71,000) (171) (96,700) (233)

/a Economic prices; figures in parentheses are financial prices.

/b At a shadow foreign exchange rate of US$1.00 Rp 520.

/c At the official exchange rate of US$1.00 = Rp 415. Present financial price is calculated as follows: fixed retail price at BUUD/KUD of Rp 70/kg plus Rp 1/kg BUUD/KUD to farm transport cost. In the future, distortion between internal and world prices are expected to be eliminated.

/d Zxport price 1977 f.o.b. Tokyo, 1985 f.o.b. Palembang.

/e Export price 1977 f.o.b. Tokyo. ANNEX 11 Page 1

INDONESIA

IRRIGATION IX

Crop and Farm Budgeats

1. Annex 2 contains the existing and proposed cropping patterns. This annex shows separately for the SEDEKU and SungaiLDareh-Sitiung areas:

(a) production costs for irrigated and raiLnfedcrops at present, and in the future "with" the project (Tables 1, 2). At SEDEKU separate production costs have been prepared for the 9,000 ha (Area A) flooded annually under present conditions, and flooded once in five years with the project; and the 21,000 ha (Area B) flooded every two to five years under present conditions and flooded less than once in five years with the project. Present costs and input use are based on interviewswith farmers and government officials in the areas during appraisal. Without the project little change is expected in the future level of inputs. Future input levels for "with project" conditions are based on recommendationsof the BIMAS program at SEDEKU, and of the provincial agriculturalservices at Sungai Dareh-Sitiung;

(b) monthly labor requirementsper ha based on present and proposed cropping calendarsfor the wet and dry seasons (Table 4). Present labor requirementsand those in the future without the project, are assumed the same. Under project conditions, labor used for planting would fall at SEDEKU on the 9,000 ha (Area A) now flooded annually since flooding would be reduced to one in five years, and consequently so would replanting after flooding. Labor requirements would increase in both areas for weeding, fertilizer and pesticide applications,irrigation, harvesting, threshing and drying. Labor requirementsat Sungai Dareh-Sitiung are lower than at SEDEKU because farmers would use buffalos or cattle extensivelyfor cultivation;introduce mechanical threshing, and generally use farm labor more efficientlyas labor is scarce relative to Java;

(d) farm budgets for typical family farms of 0.5 and 1.5 ha in the SEDEKU area (Tables 6, 7), and 1.0 ha in the Sungai Dareh-Sitiung area. The Government proposes to establish 1.0 ha farms at Sungai Dareh-Sitiung. Since sharecropper'sfarms are common at SEDEKU, they have been analyzed independently. The budgets are calculated according to cash flows. Labor costs include only hired and harvest labor, not farm family labor, and were determined for nonharvest periods by calculating the excess of total monthly labor requirements over an estimated 40 man-days of farm family labor per ANNEX11 Page 2

month. Hired farm labor is costed at Rp 220/day at SEDEKU, and Rp 350/day at Sungai Dareh-Sitiung. For the analysis, soybeans represent the area of secondary or palawija crops at SEDEKU. Average annual land taxes at present and with the project, respectively, are Rp 2,000 and Rp 10,000/ha on Area A, and Rp 4,000 and Rp 10,000/ha on Area B at SEDEKU; Rp 1,000 and Rp 12,000/ha at Sungai Dareh-Sitiung. In both areas farmers would contribute Rp 3,900/ha annually for O&M of the tertiary and quaternary units. At SEDEKU, except for the landlord paying the land tax and the share cropper and his family contributing their labor, the landlord and sharecropper divide equally gross production less harvesting and other production costs; and

(e) the cash flow for a 1.0 ha farm at Sungai Dareh-Sitiung from the first year of settlement until crop production reaches its maximum in year six. In year one the farmer would have to land level, and would only have time to grow one rice crop. However, income from that crop plus nine months of DGT food aid should be sufficient to meet his family's needs. In the following years crop income should meet the farm families income needs. INDONESIA

IRRIGATION IX

Crop Production Costs: Present Situation (1977) /a

SEDEKUJ Sungai Dareh Area A Area B Irrigated Rice Irrigated Rice Irrigated Soybean Rainfed Rice Wet season Dry season Wet season Dry season Dry season /b Wet season

Cash Inputs (Rp '000/ha)

Cultivation 13.6 13.6 13.6 8.0 20.0 Seed 5.0 (4.2) 3.8 (3.3) 3.2 (2.9) 3.2 (2.9) 4.2 (3.9) 2.7 (2.6) Fertilizer 3.5 (2.2) 3.5 (2.2) 22.9 (13.8) 23.8 (14.4) 1.3 (0.9) 6.9 (4.3) Agro-chemicals - - - - 7.3 (2.1) 7.5 (2.1) - - Harvesting 4.3 (3.7) 4.3 (3.7) 7.6 (6.4) 8.0 (6.8) - - 3.3 (3-1) Other 1.0 (1.0) 1.0 (1.0) 1.9 (1.9) 1.8 (1.8) 1.6 (1.6) 1.0 (1.0) Interest - (2.1) - (2.0) - (2.2) - (1-8) - (0.4) - (2.8) Total cash inputs 27.4 (26.8) 26.2 (25.8) 56.5 (42.9) 52.3 (37.8) 7.1 (6.8) 33.9 (33.8) Labor inputs (man-day/ha)

Land preparation 55 55 55 55 10 24 Planting 52 40 40 40 20 40 Crop management 60 57 82 83 18 36 Harvesting 48 48 59 59 28 20 Total labor inputs 215 200 236 237 76 120

/a Economic prices based on world market prices for rice and fertilizer for use in economic analysis. Figures in parentheses are financial prices.

/b Although irrigated, most crops suffer moisture stress and are mainly dependent on rainfall and residual subsoil z moisture from the preceding crop. INDONESIA

IRRIGATION IX

Crop Production Costs: Future Without Project /a

SEDEKU Sungai Dareh Area A Area B soybean Rainfed rice Irrigated rice Irrigated rice Irrigated season /b Wet season Wet season Dry season Wet season Dry season Dry

Cash Inputs (Rp'000/ha) 8.0 20.0 Cultivation 13.6 13.6 13.6 (2.7) 4.2 (2.6) 5.8 (4.6) 3.7 (3.2) Seed 6.4 (5.2) 5.0 (4.0) 4.3 25.2 (20.1) 1.4 (1.1) 7.4 (5.9) Fertilizer 3.7 (3.0) 3.7 (3.0) 24.1 (19.3) 7.6 (7.6) 1.1 (1.1) - - Agrochemicals - - 7.3 (7.3) (8.0) 10.5 (8.4) - - 4.9 (4.3) Harvesting 5.7 (4.5) 5.7 (4.5) 9.9 (1.9) 1.0 (1.0) 1.0 (1.0) 1.0 (1.0) 2.3 (2.3) 1.9 (2.0) 1.9 Other (3.0) (2.7) - (2.6) - (0.5) - Interest - (2.3) - (2.2) -

57.4 (51.3) 10.2 (9.2) 37.0 (37.4) Total 30.4 (29.6) 29.0 (28.3) 61.5 (55.9)

Labor Inputs (man-days/ha) 55 10 24 Land preparation 55 55 55 40 20 40 Planting 52 40 40 83 18 36 Crop management 60 57 82 60 28 20 Harvesting 48 48 59 238 76 120 Total 215 200 236

fertilizer for use in economic analysis. Figures in /a Economic prices based on world market prices for rice and parentheses are financial prices.

and are mainly dependent on rainfall and residual /b Although irrigated, most soybean crops suffer moisture stress subsoil moisture from the preceding crop.

I'. t I-x INDONESIA

IRRIGATION IX

Crop Production Costs: Future with Project at Full Development (1986) /a

SEDEKU Sungai-Dareh IrrigatedRice ~IrrigatedSoybean IrrigatedRice Wet season Dry season Wet season Dry season Wet season Area A Area B Area A+B

Cash Inputs (Rp '000/ha)

Cultivation 13.6 13.6 12.6 Seed 20.0 20.0 4.1 (2.5) 4.1 (2.5) 4.0 (2.4) Fertilizer 5.8 (4.6) 3.7 (2.4) 3.7 (2.4) 31.0 (24.8) 31.0 (24.8) 32.6 (26.3) Agro-chemicals 3.0 (2.4) 40.7 (32.5) 40.7 (32.5) 10.0 (10.0) 10.0 (10.0) 10.0 (10.0) Harvesting 3.8 (3.8) 11.9 (11.9) 11.9 (11.9) 11.9 (9.5) 12.8 (10.2) 12.8 (10.2) Other - - 25.6 (20.5) 25.6 3.0 (3.0) 3.0 (3,0) 3.0 (3.0) (20.5) Interest 2.5 (2.5) 3.0 (3.0) 3.0 - (3.4) - (3.0) (3.4) - (3.4) - (0.7) - (6.4) - (6.4) Total cash inputs 73.6 (66.8) 74.5 (67.5) 75.0 (67.9) 15.1 (14.0) 104.9 (96.7) 104.9 (96.7) Labor Inputs (mian-day/ha)

Land preparation 55 50 Planting 10 30 40 40 Crop management 20 40 95 100 Harvesting 20 55 65 65 35 25 Total labor inputs 255 255 85 150

/a Economic prices based on world market prices for rice and fertilizer for use in economic analysis. Figures in parentheses are financial prices.

M{D t.1>4

I- INDONESIA

IRRIGATION IX

Crop Production Costs: Physical Inputs

SEDEKU Sungai Dareh Area A Area B Irrigated Rice IrriRated Rice Soybean Rainfed Rice Irrigated Rice Inputs/ha Wet season Dry season Wet season Dry season Dry season Wet season Wet season Dry season

Present Cultivation : (animal-days) /a 17 17 17 10 - 28 Seed ((kg) 65 50 34 32 30 40 Fertilizer /b : urea (kg) 25 25 155 161 - 40 TSP (kg) 5 5 40 42 12 20 Agro-chemicals: diasinon (1) - - 1.8 1.9 0.5 - zinc phosphide (gm) - - 185 180 - - Harvesting : (% of crop yield/ha) 3 Interest /c : (%/month) 2 2 1 1 2 2

Future without project Cultivation : (animal-days) /a 17 17 17 10 - 28 Seed . (kg) 65 50 34 33 30 40 Fertilizer /b : urea (kg) 25 25 154 160 - 40 TSP (kg) 5 5 40 42 12 20 Agro-chemicals: diasinon (1) - - 1.8 1.9 0.3 - zinc phosphide (gm) - - 200 200 - - Harvesting : (% of crop yield/ha) 3 3 3 3 - 3 Interest /c : (%/month) 1.5 1.5 1.5 1.5 2 1.5

Future with proiect (1986) Cultivation : (animal-days) /a 17 17 17 17 - 28 28 Seed : (kg) 32 30 32 30 30 30 30 Fertilizer /b : urea (kg) 200 200 200 200 - 200 200 TSP (kg) 50 50 50 50 25 130 130 Agro-chemicals: diasinon (1) 2.5 2.5 2.5 2.5 1.0 3.0 3.0 zinc phosphide (gm) 200 200 200 200 - 200 200 Harvesting : (Z of crop yield/ha) 3 3 3 3 - 7 7 Interest /d : (%/month) 1 1 1 1 2 1 1

/a Costed at Rp 800/day, for animal pair and driver.

/b TSP - Triple superphosphate.

/c Rice - interest is charged on 100% (cash inputs - harvesting costs) for 5 months. Soybean - interest is charged on 90% of cash inputs for 3 months.

/d Rice - interest is charged on 90% (cash inputs - harvesting costs) for 7 months. Soybean - interest is charged on 90% of cash inputs for 3 months. INDONESIA

IRRIGATION IX

Monthly Labor Requirements (man-days/ha) /a

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total

SEDEKU

Wet season - Irrigated Paddy - Area A - P 40 38 11 27 27 22 16 34 215 - w 45 43 42 41 32 17 35 255 Paddy - Area B - P 43 41 33 36 28 3 17 35 236 - W 45 43 42 41 32 17 35 255

Dry season - Irrigated Paddy - Area A - P Area B -P 9 27 57 42 35 49 18 237 Paddy - Area A+B - W 10 28 60 40 41 58 18 255 Soybean -p 5 15 14 9 8 17 8 76 - w 7 19 13 10 10 26 85

Sungai Dare

Wet season Rainfed paddy - P 23 21 5 15 14 11 10 21 120 Irrigated paddy - W 28 26 6 20 18 14 12 26 150

Dry season Irrigated paddy - W 12 31 43 12 13 32 7 150

/a P = Present, and in future without the project. W = Future with the project. INDONESIA

IRRIGATION IX

Crop Budgets /a

SEDEKU Sungai Dareh Wet Season Dry Season Wet Season Dry Season Irrigated Paddy Irrigated Paddy Irrigated Soybean Paddy Paddy Area A Area B Area A Area B Rainfed Irrigated Irrigated

Present

Yield (ton/ha) 1.9 3.3 3.5 0.5 1.6 Farm-gate price (Rp '000/ton) 65 65 65 130 65 Gross value of production (Rp '000/ha) 124 215 228 65 104 Production costs, excluding labor (Rp '000/ha) 27 43 39 7 34 Net value of production, excluding labor (Rp '000/ha) 97 172 189 58 70 Labor requirements (man-days/ha) 215 236 237 76 120

Future Without Project

Yield (ton/ha) 1.9 3.4 3.6 0.5 1.8 Farm-gate price (Rp '000/ton) 79 79 79 154 79 Gross value of production (Rp '000/ha) 150 269 284 77 142 Production costs, excluding labor (Rp '000/ha) 30 56 51 9 37 Net value of production, excluding labor (Rp '000/ha) 120 213 233 68 105 Labor requirements (man-days/ha) 215 236 238 76 120

Future With Project

Yield (ton/ha) 4.0 4.3 4.3 4.3 0.7 3.7 3.7 Farm-gate price (Rp '000/ton) 79 79 79 79 154 79 79 Gross value of production (Rp '000/ha) 316 340 340 340 108 292 292 Production costs, excluding labor (Rp '000/ha) 67 68 68 68 14 97 97 Net value of production, excluding labor (Rp '000/ha) 249 272 272 272 94 195 195 Labor requirements (man-days/ha) 255 255 255 255 85 150 150 /aFca /a Financial prices and costs are used, based on Tables 1-2, and Annex 10, Tables 1-2. eD >1 INDONESIA

IRRIGATION IX

Farm Budzets La

SEDEKU (0.5 ha farm) Area A Area B p Vw W P v __ Unit Own- Share- _ _ Own- Share- Own- Share- Own- Share- Own- Share- Own- Share- Oper. cropper Oper. cropper Oper. cropper Oper. cropper Oper. cropper Oper. cropper

Paddy - wet season ha 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Paddy - dry season ha - - - - 0.1 0.1 0.07 0.07 0.07 0.07 0.1 0.1 Soybean ha 0.05 0.05 0.05 0.05 0.08 0.08 0.08 0.08 0.08 0.08 0.08 0.08 Total cropped area ha 0.55 0.55 0.55 0.55 0.68 0.68 0.65 0.65 0.65 0.65 0.68 0.68 Cropping intensity X 110 110 110 110 135 135 130 130 130 130 135 135 Total paddy production tons 0.95 0.95 0.95 0.95 2.43 2.43 1.90 1.90 1.95 1.95 2.58 2.58 Total aoybean production tons 0.03 0.03 0.03 0.03 0.06 0.06 0.04 0.04 0.04 0.04 0.06 0.06 Gross value of production Rp '000 65.7 65.7 79.9 79.9 202.0 202.0 128.7 128.7 160.2 160.2 213.8 213.8 Sharecropper's payment to land owner Rp '000 /b - 28.9 - 35.2 - 88.9 - 56.7 - 70.5 - 94.1 Production costs Rp '000 13.7 6.9 15.3 7.6 41.3 20.7 24.6 12.3 32.3 16.1 41.7 20.8 Hired fare labor costs Harvest Rp '000 /c 7.9 7.9 9.6 9.6 24.2 24.2 15.4 15.4 19.2 19.2 25.7 25.7 Other Rp '000 ------Net value of production Rp '000 44.1 22.0 55.0 27.5 136.5 68.2 88.7 44.3 108.7 54.4 146.4 73.2 Land tax xrPEDA) Rp '000 /d 1.0 - 1.0 - 5.0 - 2.0 - 2.0 - 5.0 - Net crop income Rp '000 43.1 22.0 54.0 27.5 131.5 68.2 86.7 44.3 106.7 54.4 141.4 73.2 Incremental net crop income (future with project - future without project) Rp '000 - - - - 77.5 40.7 - - - - 34.7 18.8

La Financial costs and prices.

/b Landlord and sharecropper share equally gross production, less harvesting costs, and production costs. Landlord pays land tax. /c Nonfamily labor at 12X of gross production.

/d IPEDA rates in area A of Rp 2,000/ha in the present situation and Rp 10,000 in the future situation with the project. IPEDA rates in area B of Rp 4,000/ha in the present situation and Rp 10.000 in the future situation with the project. INDONESIA

IRRIGATION IX

Farm Budgets /a

SEDEKU (1.5 ha farm) Sungai Dareh Area A Area B (1.0 ha farm) P W w P W w w Unit Own-. Share- Own- Share- Own- Share- Own- Share- Own- Share- Own- Share- Owner Oper. cropper Oper. cropper Oper. cropper Oper. cropper Oper. cropper Oper. cropper Operator

Paddy - wet season ha 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.0 Paddy - dry season ha - - - - 0.3 0.3 0.22 0.22 0.22 0.22 0.3 0.3 1.0 Soybean ha 0.15 0.15 0.15 0.15 0.23 0.23 0.23 0.23 0.23 0.23 0.23 0.23 -

Total cropped area ha 1.65 1.65 1.65 1.65 2.03 2.03 1.95 1.95 1.95 1.95 2.03 2.03 2.0

Cropping intensity X 110 110 110 110 135 135 130 130 130 130 135 135 200

Total paddy production tons 2.85 2.85 2.85 2.85 7.29 7.29 5.72 5.72 5.89 5.89 7.74 7.74 7.4 Total soybean production tons 0.08 0.08 0.08 0.08 0.16 0.16 0.11 0.11 0.11 0.11 0.17 0.17 -

Gross value of production Rp '000 195.7 195.7 238.4 238.4 602.8 602.8 386.1 386.1 482.3 482.3 640.0 640.0 585 Sharecropper's payment to land owner Rp '000 /b - 86.1 - 104.9 - 265.3 - 169.9 - 212.2 - 281.6 - Production costs Rp '000 41.2 20.6 45.8 22.9 123.8 61.9 74.2 37.1 97.3 48.6 124.8 62.4 194

Hired farm labor costs Harvest Rp '000 /c 23.5 23.5 28.6 28.6 72.3 72.3 46.3 46.3 57.9 57.9 76.8 76.8 - Other Rp '000 /d 8.1 4.1 8.1 4.1 14.5 7.3 13.2 6.6 13.2 6.6 14.5 7.3 9

Net value of production Rp '000 122.9 61.4 155.9 77.9 392.2 196.0 252.4 126.2 313.9 157.0 423.9 211.9 382

Land tax (IPEDA) Rp '000 /e 3.0 - 3.0 - 15.0 - 6.0 - 6.0 - 15.0 - 12.0

Net crop income Rp '000 119.9 61.4 152.9 77.9 377.2 196.0 246.4 126.2 307.9 157.0 408.9 211.9 370

Incremental net crop income (future with project - future without project) Rp '000 - - - - 224.3 118.1 - - - - 101 54.9 -

/a Financial costs and prices.

/b Landlord and sharecropper share equally gross production, less harvesting costs, and production costs. Landlord pays land tax.

/c Non-family labor at 12% of gross production.

/d Based on 40 man-days per month maximum availability of family labor.

/e IPEDA rates in area A of Rp 2,000/ha in the present situation and Rp 10,000/ha in the future situation with the project. IPEDA rates in area B of Rp 4,000/ha in the present situation and Rp 10,000/ha in the future situation with the project. INDONESIA

IRRIGATION IX

Sungai Dareh: Cash Flow for 1.0 ha Irrigated Farm

-…______-… --- Year ------…------0 /a 1 2 3 4 5 6

Crop Production 1. Irrigated paddy - wet season (ha) - 0 1 1 1 1 1 2. - dry season (ha) - 1 1 1 1 1 1 3. Paddy yield - wet season (ton/ha) - 0 1.8 2.3 2.8 3.2 3.7 4. - dry season (ton/ha) - 1.8 2.3 2.8 3.2 3.7 3.7 5. Total paddy production (tons) - 1.8 4.1 5.1 6.0 6.9 7.4 Value of Crop Production 6. Gross value of production (Rp'000) - 135 324 403 474 545 585 7. Production costs excluding labor (Rp'000) - 86 175 181 186 191 194 8. Hired farm labor cost (Rp'000) - 0 4 6 8 9 9 9. Land tax (IPEDA) (Rp'000) - 2 4 6 8 10 12 10. Value of production less cash costs (Rp'000) - 47 141 210 272 335 370

GOI Assistance to Farmers 11. Food (Rp'000) - 90 - - - - - 12. Seed (Rp'000) - 5 - - - - - 13. Clothing, cooking utensils and tools (Rp'000) - 35 - - - - - 14. Total (Rp'000) - 130 - - - - -

Farm Family Income 15. Farm income (10 + 11) (Rp'000) 87 137 141 210 272 335 370 16. Off-farm income (Rp'000) 50 0 0 10 20 30 30 17. Total (15 + 16) (Rp'000) 137 137 141 220 292 365 400

/a Year 0 represents the present situation. Families would be earning income from farms or from salaries.

rD t ANNEX 12 Page 1

INDONESIA

IRRIGATIONIX

Farm Labor Analysis

Labor Supply

1. Comprehensiveand reliable statistics on population and labor force in the SEDEKU area do not exist. Using data from local government officials, the rural population in the project area is estimated at 0.5 million. This consists of about 60,000 farm families and 40,000 landless laborers families. Assuming each family supplies two full-timeworkers, the total number of farm workers is 200,000. If each worker is available to work 240 days per year, or 20 days a month, the present total annual labor supply is 48.0 million man-days. The rural labor force is growing at an estimated rate of 2% per year. Assuming that the rural work force continues to grow at this rate, the rural labor force would total 244,000 in 1986 at full project development. This is equivalent to 58.6 million man-days a year, or 4.9 million man-days a month.

Labor Requirements

2. Annex 11, Table 4 gives estimates of average monthly and annual labor requirementsper ha for the various crops. Labor requirementsin the future without the project would remain at present levels. With the project, however, due to better water control, crop management techniques and higher yields, labor requirementswould increase for weeding, fertilizer and pesticide applications,irrigation, harvesting and threshing. They would decrease for planting on the area now flooded annually (9,000 ha).

3. Table 1 gives estimates of the total monthly and annual labor requirements. At SEDEKU the present annual requirementsare 7.8 million man-days, or only 16% of the estimated labor supply. With full developmentof the project, annual labor requirementswould reach 9.6 million man-days, still only 16% of the projected labor supply. Without the project, however, the situationwould be considerablyworse with only 13% of the available labor being utilized. On a monthly basis, the demand for labor fluctuates consid- erably and has a distinct seasonal pattern. The labor utilization rate varies from 30% during the peak month (January) to less than 5% during the month with the lowest labor requirement (October).

Economic Cost of Farm Labor

4. Detailed informationon wages actually paid in the project areas is limited. Even if it were available, wages paid probably would not reflect the true cost of labor to the economy, for much of the work is done by unpaid family labor or in exchange for work done by other farmers. In addition, wage rates are frequently set by custom rather than market forces, ANNEX 12 Page 2 and labor mobility is limited. Therefore, the economic cost of labor can be only roughly approximated. The average peak wage rate is Rp 220/man-day in SEDEKU. However, unemployment is substantial even during the peak season, and this rate most probably does not reflect the economic cost of labor. Rather, it may be that social custom and a recognitionby employers of the laborer's subsistenceneeds that supports wages at this level. Data on non-peak wages and on wages available from alternative types of employment during this period are also limited; generally,however, these wages are lower than peak season wages, and undoubtedly, the cost of labor to the economy is lower during these periods than during the peak season.

5. The following analysis attempts to estimate an opportunitycost of labor in the project areas, taking into account generally prevailing rural unemployment and the large seasonal fluctuation in labor requirements. It does not attempt to adjust for intertemporalor interpersonalincome distribution effects nor to value leisure. The marginal opportunity cost of farm labor in the project areas can be approximatedby S-shaped curves (Chart 17046).

6. Three straight-linesegments can reasonably approximate the S-shaped curve and three points determine the curve's position. Point A on the chart represents the minimum opportunitycost of farm labor and includes the economic value of alternative employment (casual non-farm labor, fishing, house repairs), plus the value of additional food required because of the more strenuous farm work with the project. The mission estimates this opportunity cost at Rp 100 per man-day. Point B indlicateswhere the opportunity cost equals the market wage and rural labor is fully employed. That point is at Rp 220 per man-day. Point C indicates the point at which the wage rate is sufficientlyhigh that laborers are attracted to meet increases in requirements, thus, to the right of this point, the opportunity cost and market wage remain constant. This wage is estimated at Rp 250 per man-day.

7. The monthly marginal opportunity cost is read from the curve at the correspondinglevel of labor requirement. With the project at full development, the opportunity costs vary from Rp 100 per man-day to Rp 110 per man-day. The total economic cost of farm labor is the area under the curve at each level of employment. The total incremental economic cost of farm labor (differencebetween the total economic cost of farm labor in the future "without" and "with" project) is shown in Table 2, as is the total incremental labor requirement,together giving an average shadow wage rate of Rp 106 per man-day in the SEDEKU area.

8. Farm labor was not shadow-pricedat Sungai Dareh-Sitiungsince farmers would be fully employed throughout the year developing their farms and double-croppingirrigated paddy. Few, if any, landless laborers would live in the project area. The average market wage rate is Rp 350/man-day, and was used in valuing farm labor throughout the year. INDONESIA

IRRIGATION IX

Total Monthly Labor Requirement ('000 man-day)

Area Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. NOv. Dec. Total (ha)

SEDEKI

Present (- Future without project)

Wet season Paddy - Area A 9,000 360 343 100 242 242 198 145 305 1,935 Area B 21,000 903 860 693 755 588 64 358 735 4,956 Dry season Paddy - Area A - Area B 2,600 23 70 148 110 91 128 46 616 Soybean 4,000 20 59 56 36 32 68 33 304 Total 36,600 1,263 1,203 793 1,040 959 466 146 123 196 79 503 1,040 7,811 Future with project

Wet season Paddy - Area A 9,000 405 387 378 370 287 153 315 2,295 Area B 21,000 945 903 882 860 673 357 735 5,355 Dry season Paddy - Area A&B 6,000 60 168 360 240 246 348 108 1,530 Soybean 4,500 32 85 58 46 46 116 383 Total 40,500 1,350 1,290 1,260 1,322 1,213 418 286 292 464 108 510 1,050 9,563

Sunaai Dareh

Present (- Future without Project)

Wet season Rainfed Paddy 1,500 34 32 7 22 21 17 15 32 180 Future with project

Wet season Irrigated paddy 3,500 98 91 21 70 63 49 42 91 525 Dry season Irrigated paddy 3,500 42 108 151 42 45 112 25 525 Total 7,000 98 91 21 112 171 200 42 45 112 25 42 91 1,050 INDONESIA

IRRIGATION IX

Economic Cost of Farm Labor at SEDEKU at Full Project Development (1986)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

510 1,050 9,563 Labor requirement W /a 1,350 1,290 1,260 1,322 1,213 418 286 292 464 108 503 1,040 7,811 ('000 man-days) W /b 1,263 1,203 793 1,040 959 466 146 123 196 79 103 108 Marginal opportunity cost W 110 109 109 110 109 102 101 101 103 100 103 108 (Rp/man-day) W 109 109 104 107 107 103 100 100 100 100 10.8 51.8 109.2 992.9 Economic cost of farm labor W 141.7 134.8 131.7 138.8 126.8 42.2 28.7 29.3 47.1 51.0 108.2 806.4 (Rp million) W 132.0 125.7 80.9 107.6 99.3 47.3 14.6 12.3 19.6 7.9

27.5 2.9 0.7 1.0 186.5 Incremental economic cost W-W 9.7 9.1 50.8 31.2 27.5 -5.1 14.1 17.0 of farm labor (Rp million)

/a W = Future with proiect.

Table 1). /b W - Future without project, which is the same as the present situation (Annex 12, I ANNEX 13 Page 1

INDONESIA

IRRIGATION IX

Economic Analysis

Foreign Exchange

1. Due to the existence of import taxes, quantitative restrictions and export subsidies, the official exchange rate of Rp 415 = US$1 misstates the economic value to the economy of foreign exchange used in carrying out the project and savings through increased food grain production. Using the Squire-van der Tak approach,/1 the estimated standard conversion factor for Indonesia is 0.8. This rate (Rp 520 = US$1.00) was used in the economic analysis.

Benefits

2. Expected cropping patterns and agricultural production are shown in Annex 2. Farm-gate prices for rice, soybean and fertilizer, both for the present and the future, are calculated in Annex 10, while crop production costs are reflected in Annex 11. Tables 1 and 2 of this Annex show the net return to the areas (without costing farm labor) in the future "with" and "without" the project. Incremental farm labor cost is shown in Table 2 of Annex 12.

3. Additional future benefits would accrue to the project in the SEDEKU area as a result of reduced flood damage to fishponds. On the assumption that on average 500 ha, or 25%, of the total area of fishponds is inundated during the wet season and 50% of the crop is lost, the incremental net return to the area is Rp 25 million at full project development./2 This is reflected in Table 3 of this Annex.

Investment Costs

4. Investment costs are expressed in end-1977 prices and, as calculated for the economic analysis, have been adjusted to exclude taxes, transfer payments and price contingencies. In addition, adjustment has been made to the

/1 L. Squire and H.G. van der Tak; Economic Analysis of Project; Baltimore and London, The Johns Hopkins University Press, 1975.

/2 Using a 1985 fish price of Rp 330/kg at the fishpond (in constant 1977 prices); and a wet-season yield without the project of 150 kg/ha, and with the project of 300 kg/ha, the gross value of production without the project would be Rp 49,500/ha, and with the project Rp 99,000/ha. Allowing for a production cost of Rp 43,000/ha with or without the project, the net value of production without the project is Rp 6,500/ha, and with the project Rp 56,000/ha. Rounding to the nearest Rp 1,000/ha, Rp 50,000/ha is the value of incremental production with the project. ANNEX 13 Page 2 capital costs of the SEDEKU project to reflect the use of unskilled labor in off-seasonperiods (civil works cost reduced by 5%), while the capital costs of the Sungai Dareh-Sitiungproject have been reduced by Rp 1,600 million to reflect the fact that Rp 1,210 million of consulting services and Rp 390 million of equipment (water pump) should be charged to the main project of 20,000 ha. Food, clothing, equipment and seed aid to farmers, costing Rp 260 million, and farmers' own investment in land leveling costing Rp 105 million, were added to Sungai Dareh-Sitiung project costs. Actual investment costs used in the analysis are Rp 14.3 billion for SEDEKU, and Rp 4.8 billion for Sungai Dareh-Sitiung. The foreign exchange component of the investment costs is converted to Rupiah at the shadow foreign exchange rate. Annual O&M costs of the SEDEKU area are estimated at Rp 6,000/ha,at full development,while O&M costs of the Sungai Dareh-Sitiung irrigation system are estimated at Rp 5,000/ha/year.

Development Period

5. Constructionof both projects will be phased over a period of four years starting in the Indonesian Government'sEY 1977/78. It is envisaged that 20% of the two project areas will become ciperationalin 1979/80, 40% by 1980/81, 70% by 1981/82, and 100% by 1982/83. Full project benefits should be achieved by 1986/87, ten years after the commencementof construction.

Economic Rate of Return

6. Using the foregoing assumptionsand discountingproject benefits and costs over a 30-year period, the economic rate of return is 15% for the SEDEKU area and 18% for the Sungai Dareh-Sitiung area (Table 4).

SensitivityAnalysis

7. Some of the basic assumptionsmade in the economic analysis have been varied in order to examine their impact on the rates of return of the two projects. The effects of the various assumptionsas to prices, implementation, costs and yields are given below: ANNEX 13 Page 3

Sungai SEDEKU Dareh-Sitiung _ (%) …

Best estimate 18 15

Construction costs overrun estimates by 20% 16 13

Two-year delay in the realizationof benefits 15 11

Constructioncosts overrun 20%, and benefits delayed two years 13 10

Benefits reduced by 20% 15 12

Benefits increased by 20% 21 17

Farm labor valued at market wage rate 17

Foreign exchange costs valued at the official exchange rate 16 12

8. The figures indicate that the rates of return of both projects are most sensitive to a delay in the realization of benefits and to a lesser extent to an overrun of constructioncosts. Valuation of farm labor at the market wage rate does not substantiallyaffect the rate of return of the SEDEKU project. Valuation of foreign exchange costs at the official exchange rate of US$1 = Rp 415 would reduce the rates of return by between 2% and 3%. INDONESIA

IRRIGATION IX

Economic Analysis: Projected Future Production Without the Project

Cropped Farm-gate Gross Value of Production Net Value of Net Area Yield Price Production Costs Production Return (ha) (ton/ha) (Rp '000/ton) /a ------(Rp '000/ha) /b ------(Rp million)

SEDEKU

Wet season Paddy - Area A 9,000 1.9 99 188 30 158 1,422 Paddy - Area B 21,000 3.4 99 337 62 275 5,775

Dry season Paddy - Area B 2,600 3.6 99 356 57 299 777 Soybean 4,000 0.5 194 97 10 87 348

Total 36,600 8,322

Sungai Dareh

Wet season Rainfed paddy 1,500 1.8 91 164 37 127 191

Total 1,500 191

/a Economic prices from Annex 10.

/b Based on Annex 11, Table 2; excludes the cost of labor. ( x LO'- INDONESIA

IRRIGATION IX

Economic Analysis: Projected Future Production at Full Project Development (1986)

Cropped Farm-gate Gross Value of Production Net Value of Net Area Yield Price Production Costs Production Return (ha) (ton/ha) (Rp '000/ton) /a - …------(Rp '000/ha) /b - (Rp million)

SEDEKU

Wet season Paddy - Area A 9,000 4.0 99 396 74 322 2,898 Paddy - Area B 21,000 4.3 99 426 75 351 7,371

Dry season Paddy - Area A&B 6,000 4.3 99 426 75 351 2,106 Soybean 4,500 0.7 194 136 15 121 545

Total 40,500 12,920

Sungai Dareh

Wet season Irrigated paddy 3,500 3.7 91 337 105 232 812

Dry season Irrigated paddy 3,500 3.7 91 337 105 232 812

Total 7,000 1,624

/a Economic prices from Annex 10.

/b Based on Annex 11, Table 3; excludes cost of labor. D INDONESIA

IRRIGATION IX

Economic Analysis: Incremental Net Value of Agricultural Production at Full Project Development (Rp million)

Net Return to Project Area Incremental Less Incremental Plus Incremental Net Incremental Without Costing Farm Labor /a Net Net Value Return Farm Labor Cost Return to Fishponds Without With of Production Project Project

SEDEKU 8,322 12,920 4,598 186 /b 25 4,437

Sungai Dareh 191 1,624 1,433 305 /c _ 1,128

/a From Annex 13, Tables 1 and 2.

/b Incremental labor requirements from Annex 12, Table 1, costed at shadow wage rate of culated in Annex 12. Rp 106/man-day as cal-

/c Incremental labor requirements from Annex 12, Table 1, costed at actual wage rate of Rp 350/man-day calculated in Annex 12. as

rD X ANNEX 13 Table 4

INDONESIA

IRRIGATION IX

Economic Costs and Benefits (Rp million)

Irrigation System Year Project Cost Project Benefits Capital O&M Total (Incremental)

SEDEKU: 1 (1977/78) 2,123 0 2,123 0 2 (1978/79) 4,983 0 4,983 0 3 (1979/80) 4,983 35 5,018 178 4 (1980/81) 2,215 72 2,287 534 5 (1981/82) 0 125 125 1,158 6 (1982/83) 0 180 180 2,049 7 (1983/84) 0 180 180 2,940 8 (1984/85) 0 180 180 3,652 9 (1985/86) 0 180 180 4,187 10-30 (1986-2006) 0 180 180 4,437

Economic Rate of Return 18%

Sungai Dareh: 1 (1977/78) 665 0 665 0 2 (1978/79) 1,660 0 1,660 0 3 (1979/80) 1,660 3 1,663 45 4 (1980/81) 765 7 772 135 5 (1981/82) 0 12 12 295 6 (1982/83) 0 17 17 520 7 (1983/84) 0 17 17 755 8 (1984/85) 0 17 17 935 9 (1985/86) 0 17 17 1,070 10-30 (1986-2006) 0 17 17 1,128

Economic Rate of Return 15% ANNEX 14 Page 1

INDONESIA

IRRIGATION IX

Cost and Benefit Recovery

1. The annex examines the implicationsfor public revenues and farmers' incomes of the Government'spolicies towrardsthe recovery of the capital and recurrent costs of the project. In determining the extent of cost recovery and the relation of project charges to benefits, two indices have been used, which are defined as follows for the present project.

(a) Cost Recovery Index: the ratio of the present worth of incrementalproject charges paid by project farmers to the present worth of incrementalproject constructionand operation and maintenance costs; and

(b) Rent Recovery Index: the ratio of the present worth of incrementalproject charges paid by a typical farm family to the present worth of incremental"project rent" accruing to the family before paying project charges, where "project rent" is defined as net incremental income less incremental value of family labor, general taxes, returns to management, and incremental investments,and allowances for uncertainty and miscellaneouscosts.

The upper limit of the rent recovery index is 100%, but it would normally be less than that because of political difficulties,tax disincentives,and the cost of collectingthe taxes. Rent is a difficult concept to measure in practice but an attempt is made to determine reasonable quantitativeesti- mates of its various components based on qualitative considerations.

2. All water charges, costs and benefits are measured at present values discounted at 10% annual rate of interest over the 30-year evaluation period of the project, and expressed in terms of end-1977 constant prices. Costs and benefits represent financial flows.

3. Farmers pay a land tax (IPEDA), and water charges for the O&M of the tertiary unit. IncrementalIPEDA can be considered a direct project tax, which contributes towards the O&M, plus capital repayments,on the main irrigation system. The IPEDA rate varies depending on the quality of the main irrigation system. Similarly, the tertiary/quaternaryunit water charge would vary according to the development of the tertiary unit.

Cost Recovery

4. SEDEKU. In the cost recovery analysis,US$32.0 million construction costs are charged against the SEDEKU project. Annual incrementalO&M costs would average Rp 2,500 (US$6)/ha for the main irrigation system. At full ANNEX 14 Page 2 project development,annual incremental project charges would be Rp 10,500 (US$25)/ha. Discounted at 10%, the present value of incrementalconstruction and O&M costs are US$25.4 million, and incrementalproject charges US$4.8 million, giving a 19% cost recovery index.

5. Sungai Dareh-Sitiung. US$10.0 million constructioncosts are charged against the Sungai Dareh-Sitiung irrigation project. Annual incremental O&M costs would average Rp 5,000 (US$12)/ha for the main system. At full project development,annual incrementalproject charges would be Rp 14,900 (US$36)/ha. Discounted at 10%, the present value of incremental constructionand O&M costs are US$7.9 million, and incrementalproject charges US$0.8 million, giving a 10% cost recovery index.

Rent Recovery

6. SEDEKU. Rent recovery indices were calculated for both owner- operators and sharecropperson 0.5 ha and 1.0 ha farms. Separate recovery indices were calculatedfor farms situated in areas susceptibleto regular flooding (Area A) and for farms situated in areas which are flooded less frequently (Area B). Table 1 lists the assumptionsused in calculating project rent. Discounting incremental project rent and charges at 10% over 30 years, the rent recovery indices vary from 68% to 98% for owner-operators; and 38% to 62% for sharecroppers (Table 1).

7. Sungai Dareh-Sitiung. Similarly, at Sungai Dareh a rent recovery index was calculated for an owner-operatoron a 1.0 ha farm. The rent recovery index is 91% (Table 1).

8. No increase is proposed in the projected land taxes and water charges farmers would pay under the project. Even though the cost recovery indices are low, estimated project charges are considered satisfactoryin both areas since firstly some 90% of the SEDEKU project area's farm families presently have per capita incomes below the absolute poverty level of US$95 (1975 prices). At full project developmentsome 70% of all farm families' per capita incomes would still be below this figure. Besides paying a substantial total land tax, Rp 10,000 (US$24)/ha,irrigators would pay at least 10% of their gross value of production in village taxes (Table 1). As well, they would contribute to the social life and welfare of the village through religious taxes and compulsory feasts. Secondly, at Sungai Dareh- Sitiung most farmers would be transmigrantswho initiallywould have to develop their land for paddy production. Moderate project charges would assist farmers' early cash flows, and encourage full developmentof the area. INDONESIA

IRRIGATION IX

Rent Recovery (Rp '000)

SEDElU Sungai Dareh /a 0.5 ha Farm 1.5 ha Farm 1.0 ha Farm Area A Area B Area A Area B Own. Oper. Sharecr. Own. Oper. Sharecr. Own. Oper. Sharecr. Own. Oper. Sharecr. Own. Oper.

A. At Full Project Development

Incremental /b - gross value of farm production 122.1 61.1 53.6 26.8 364.4 182.2 157.7 78.8 425 - less cash production costs 40.6 20.3 15.9 7.9 128.1 64.1 47.7 23.8 152

Equals net cash income 81.5 40.8 37.7 18.9 236.3 118.1 110.0 55.0 273

- less imputed family labor value /c 12.3 12.3 4.9 4.9 36.5 36.5 14.1 14.1 53 - less imputed farmer's management /d 12.2 6.1 5.4 2.7 36.4 18.2 15.8 7.9 43 - less imputed return on own capital /e 3.6 0.6 2.4 0.6 10.7 1.7 7.1 1.7 8 - less allowance for risks /f 24.4 12.2 10.8 5.4 72.8 36.4 31.6 15.8 85 - less miscellaneous /g 18.3 3.1 8.0 1.3 54.7 9.1 23.7 3.9 64

Equals project rent 10.7 6.5 6.2 4.0 25.2 16.2 17.7 11.6 20

Incremental direct charges /h 6.0 2.0 5.0 2.0 17.9 5.9 14.9 5.9 15

B. Discounted Flows Over Prolect Life aL

Project rent 56.9 34.6 33.0 21.3 134.0 86.2 94.2 61.7 105 Direct charges 39.0 13.0 32.5 13.0 116.3 38.3 90.4 38.3 96

Rent recovery (X) 68 38 98 61 87 44 96 62 91

lAIn calculating the incremental value of production/costs/allowances of farm production for the Suagai Dareh area, in the vithout project situation the farmer was assumed to have a 0.5 ha farm in the Wonogiri area with characteristics identical to the 0.5/"B" type in the the SEDEKU area.

/b Future with project minus future without project.

/c At Rp 220/man-day in SEDEKU, at Rp 350/man-day in Sungai Dareh.

/d At 10% of gross incremental value of production.

/e At 10% of farmer's own incremental capital.

/f Estimated at 20%,of gross incremental value of production.

JA At 15% of gross incremental value of production, including 10% as taxes for village administration and 5% for storage losses; sharecroppers would not pay any incremental villages taxes.

Lh Incremental water charges (Rp 3,900/ha) and additional land tax (IPEDA); sharecroppers do not pay land tax.

Ji Net present value of project rent and incremental charges, discounted at 10% per year over the project life (30 years). INDONESIA IRRIGATION PROJECT IX PROSIDA SUB-PROJECT ORGANIZATION SEDEKU PROJECT

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