Report and Recommendation of the President to the Board of Directors

Project Number: 54425-001 March 2021

Proposed Loan PT (Persero) Responsive COVID-19 for Recovery Project under the Asia Pacific Access Facility (Guaranteed by the Republic of )

Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS (as of 5 March 2021)

Currency unit – rupiah (Rp)

Rp1.00 = $0.0000697 $1.00 = Rp14,349

ABBREVIATIONS

ADB – Asian Development Bank AEFI – adverse event following APVAX – Asia Pacific Vaccine Access Facility Bio Farma – PT Bio Farma (Persero) COVID-19 – coronavirus disease Indofarma – PT Indofarma Tbk LIBOR – London interbank offered rate M&E – monitoring and evaluation MOH – Ministry of Health PAM – project administration manual RRC – rapid response component TA – technical assistance UNICEF – United Nations Children’s Fund VAP – Allocation Plan VIRAT – Vaccination Introduction Readiness Assessment Tool WHO – World Health Organization

NOTE

In this report, “$” refers to United States dollars.

Vice-President Ahmed M. Saeed, Operations 2 Director General Ramesh Subramaniam, Southeast Asia Department (SERD) Directors Ayako Inagaki, Human and Social Development Division (SEHS), SERD Winfried Wicklein, Country Director, Indonesia Resident Mission (IRM), SERD Said Zaidansyah, Deputy Country Director, IRM, SERD

Team leaders Azusa Sato, Social Sector Specialist, SEHS, SERDa Amr Qari, Principal Infrastructure Specialist, IRM, SERD Team members Priasto Aji, Senior Economics Officer, IRM, SERD Meenakshi Ajmera, Principal Safeguards Specialist, Office of the Director General (SEOD), SERD Emma Allen, Country Economist, Lao People’s Democratic Republic Resident Mission, SERD Eduardo Banzon, Principal Health Specialist, SEHS, SERD Yurendra Basnett, Senior Country Economist, IRM, SERD Aaron Batten, Principal Planning and Policy Economist, Operations Planning and Coordination Division; Strategy, Policy and Partnerships Department (SPD) Andrew Brian Bennett, Counsel, Office of the General Counsel Robert Boothe, Senior Planning and Policy Economist; Strategy, Policy and Business Process Division; SPD Elizabeth Burges-Sims, Senior Social Development Specialist (Gender & Development), SEHS, SERD Anastasia Carolina, Senior Project Officer (Urban Development), IRM, SERD Gail Oliver Domagas, Senior Financial Control Specialist, Loan and Grant Disbursement Section, Controller’s Department (CTL) Anna Fink, Economist (Regional Cooperation), Regional Cooperation and Integration Thematic Group (SDTC-RCI), Sustainable Development and Climate Change Department (SDCC) Anthony Gill, Senior Regional Cooperation Specialist, Regional Cooperation and Operations Coordination Division, SERD Prabhjot Rehan Khan, Social Development Specialist (Gender and Development), SDCC Aiko Kikkawa Takenaka, Economist, Economic Analysis and Operational Support Division, Economic Research and Regional Cooperation Department Keiko Koiso, Senior Procurement Specialist, Procurement Division 2 (PFP2); Procurement, Portfolio and Financial Management Department (PPFD) Rouselle Lavado, Senior Health Specialist, Social Sector Division, Central and West Asia Department Dennie Mamonto, Environment Officer, IRM, SERD Naning Mardiniah, Senior Safeguards Officer (Resettlement), IRM, SERD Kevin Moore, Senior Procurement Specialist, PFP2, PPFD

Antoine Morel, Principal Environment Specialist, SEOD, SERD Hung Ba Nguyen, Senior Regional Cooperation Specialist, SDTC- RCI, SDCC Felix Oku, Senior Social Development Specialist (Safeguards), Safeguards Division (SDSS), SDCC Myra Evelyn Ravelo, Financial Management Specialist, Public Financial Management Division, PPFD Lindsay Marie Renaud, Results Management Specialist, Results Management and Aid Effectiveness Division, SPD Francesco Ricciardi, Environment Specialist, SDSS, SDCC January Sanchez, Integrity Specialist, Office of the Head (AIOD), Office of Anticorruption and Integrity (OAI) Frances Lynette Sayson, Senior Integrity Officer, AIOD, OAI Deeny Uli Rosa Simanjuntak, Senior Project Officer, IRM, SERD Laarni Tabinas-Canonizado, Senior Financial Control Officer, Loan and Treasury Accounting Section, CTL Sayaka Takahashi, Senior Integrity Specialist, Prevention and Compliance Division, OAI James Villafuerte, Senior Economist, IRM, SERD Maria Angelica Vivar, Associate Project Analyst, SEHS, SERD Shekinah Wenceslao, Senior Operations Assistant, SEHS, SERD Won Mo Yang, Senior Financial Control Specialist, Loan and Treasury Accounting Section, CTL

Peer Reviewers Patrick Osewe, Chief of Health Sector Group, Health Sector Group, SDCC Jayantha Liyanage, Regional Advisor, Regional Office for Southeast Asia, World Health Organization Sowmya Kadandale, Chief of Health, United Nations Children’s Fund, Indonesia a Outposted to the Indonesia Resident Mission.

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page PROJECT AT A GLANCE I. THE PROPOSAL 1 II. THE PROJECT 2 A. Rationale 2 B. Project Description 8 C. ADB Value Addition and Experience 9 D. Summary Cost Estimates and Financing Plan 9 E. Implementation Arrangements 11 III. DUE DILIGENCE 11 A. Economic and Financial Viability 11 B. Governance 12 C. Poverty, Social, and Gender 12 D. Safeguards 13 E. Summary of Risk Assessment and Risk Management Plan 13 IV. ASSURANCES AND CONDITIONS 15 V. RECOMMENDATION 15

APPENDIXES 1. Design and Monitoring Framework 16 2. List of Linked Documents 19

Project Classification Information Status: Complete

PROJECT AT A GLANCE

1. Basic Data Project Number: 54425-001 Project Name Responsive COVID-19 Vaccines for Department/Division SERD/SEHS Recovery Project under the Asia Pacific Vaccine Access Facility Country Indonesia Executing Agency PT Bio Farma (Persero) Borrower PT Bio Farma (Persero)

Country Economic https://www.adb.org/Documents/LinkedDocs/ Indicators ?id=54425-001-CEI Portfolio at a Glance https://www.adb.org/Documents/LinkedDocs/ ?id=54425-001-PortAtaGlance

2. Sector Subsector(s) ADB Financing ($ million) Health Disease control of communicable disease 450.00 Total 450.00 3. Operational Priorities Climate Change Information Addressing remaining poverty and reducing inequalities GHG reductions (tons per annum) 0.000 Accelerating progress in gender equality Climate Change impact on the Low Fostering regional cooperation and integration Project ADB Financing Adaptation ($ million) 0.00 Mitigation ($ million) 0.00

Cofinancing Adaptation ($ million) 0.00 Mitigation ($ million) 0.00 Sustainable Development Goals Gender Equity and Mainstreaming SDG 1.1, 1.b Some gender elements (SGE) SDG 3.3, 3.8 SDG 5.4, 5.6 Poverty Targeting SDG 10.2 General Intervention on Poverty SDG 17.6

4. Risk Categorization: Complex . 5. Safeguard Categorization Environment: C Involuntary Resettlement: C Indigenous Peoples: C

. 6. Financing Modality and Sources Amount ($ million) ADB 450.00 Sovereign Asia Pacific Vaccine Access Facility (Regular Loan): Ordinary 450.00 capital resources Cofinancing 0.00 None 0.00 Counterpart 345.00 Others 345.00 Total 795.00

Currency of ADB Financing: US Dollar

Source: Asian Development Bank This document must only be generated in eOps. 05022021115707233615 Generated Date: 10-Mar-2021 9:01:25 AM

I. THE PROPOSAL

1. I submit for your approval the following report and recommendation on a proposed loan to the state-owned enterprise, PT Bio Farma (Persero) (Bio Farma), to be guaranteed by the Republic of Indonesia, for the Responsive COVID-19 Vaccines for Recovery Project under the Asia Pacific Vaccine Access Facility. The project will provide Bio Farma with financing for vaccine procurement and logistics based on an agreed list of eligible expenditures to vaccinate priority populations against the coronavirus disease (COVID-19). The rapid response component (RRC) under the Asia Pacific Vaccine Access Facility (APVAX) will be utilized. The project is aligned with the following operational priorities of Strategy 2030: (i) addressing remaining poverty and reducing inequalities, (ii) accelerating progress in gender equality, and (iii) fostering regional cooperation and integration.1 The project is consistent with the Asian Development Bank (ADB) country partnership strategy for Indonesia, 2020–2024, as it will improve the well-being of Indonesians by strengthening the health system and preventing the spread of COVID-19.2

2. The project fulfills all APVAX access criteria as shown in Table 1.

Table 1: Compliance with Access Criteria of the Asia Pacific Vaccine Access Facility Access Criteria ADB Staff Assessment 1. Demonstrated COVID-19 has infected more than 1.3 million Indonesians, causing about 35,000 fatalities, adverse impact of including more than 840 fatalities of health care workers. Health services have suffered COVID-19 severe disruption. Women have been exposed to greater risk than men because of their professional affiliations and roles within households. COVID-19 caused real gross domestic product to contract by 2.1% in 2020, down from an original growth forecast of 5.2%. Approximately 30 million people have experienced reductions in work hours or job loss, worsening the incidence of poverty. 2. Completed needs The government has assessed vaccine needs using the Vaccination Introduction assessment Readiness Assessment Tool developed by WHO and UNICEF, which has identified gaps in logistics, service delivery, pharmacovigilance, and vaccine acceptance. The government has started to strengthen cold chain storage and distribution capacity, train vaccinators, develop guidelines for adverse effects following immunization, and scale up risk communication and community engagement. National Presidential Regulation No. 99/2020, as amended by Presidential Regulation No. Vaccination 14/2021, provides the legal basis for Indonesia’s Vaccination Allocation Plan, which Allocation Plan comprises, among others, access prioritization criteria, a procurement plan, and implementation arrangements, including a medical waste management plan. Recommendations from the Indonesian Technical Advisory Group on and the WHO Strategic Advisory Group of Experts on Immunization are incorporated into the Vaccination Allocation Plan, which consists of government-funded and employer-funded programs. Given the devastating impact of the pandemic on the health care system and the economy, the government is seeking to vaccinate 181.5 million Indonesians, or 67% of the population. under the government-funded program are free of charge and mandatory. In parallel, the employer-funded program seeks to accelerate vaccination coverage by allowing businesses to pay for the free provision of vaccinations to their employees and families. Incremental Standard operating procedures for collection, storage, treatment, and disposal of medical medical waste waste, overseen by the Ministry of Health and the Ministry of Environment and Forestry, management plan have been strengthened in response to the COVID-19 pandemic. Governor’s letter ADB has received the Governor’s letter confirming the government’s commitment to implement its VAP and comply with vaccine eligibility criteria under the Asia Pacific Vaccine Access Facility. 3. Established The Committee for Handling COVID-19 and National Economic Recovery, through its effective project management office, regularly engages with development partners on the development Vaccination Allocation Plan and the needs assessment. WHO coordinates information partner sharing monthly among development partners supporting the implementation of the

1 Contribution to Strategy 2030 Operational Priorities (accessible from the list of linked documents in Appendix 2). 2 ADB. 2020. Indonesia: Country Partnership Strategy, 2020–2024—Emerging Stronger. Manila.

2

Access Criteria ADB Staff Assessment coordination Vaccination Allocation Plan. To strengthen coordination, ADB has been leading meetings mechanism with of key partners providing vaccine-related support, including the Government of Australia’s clear ADB role Department of Foreign Affairs and Trade, UNICEF, WHO, and the World Bank. ADB = Asian Development Bank, COVID-19 = coronavirus disease, UNICEF = United Nations Children’s Fund, WHO = World Health Organization. Source: ADB.

II. THE PROJECT

A. Rationale

3. Background. COVID-19 continues to spread widely in Indonesia, with more than 1.3 million people infected and about 35,000 fatalities as of early March 2021.3 In February 2021, the daily positivity rate (the percentage of individuals who tested positive out of the total number tested) stood at over 20% which is significantly higher than the 5% benchmark set by the World Health Organization (WHO). Surveillance systems and volunteers have been deployed to carry out contact tracing, but a wide gap remains between the number of cases suspected and tested.4

4. Impact on the health system.5 COVID-19 has affected the delivery of health services in Indonesia and hampered the attainment of universal health coverage. With more than 840 fatalities among health care workers, COVID-19 has hindered the delivery of health services,6 reducing working hours and service provision in around half of the country’s 10,000 community health centers.7 Fear of contracting the virus is reported to have depressed public utilization of health services in 92% of community health centers.8 Disruption to routine health services, including immunization, could raise the incidence of communicable disease, which would further strain a health system already struggling to cope with COVID-19.9

5. Impact on poor and vulnerable groups. COVID-19 has had a severe impact on Indonesia’s economy, causing real gross domestic product to contract by 2.1% in 2020, the first contraction in over 2 decades. The pandemic also reversed some hard-won development gains. Approximately 30 million people have experienced reduced work hours or job loss,10 and the poverty rate rose from 9.2% in September 2019 to 10.2% in September 2020.11 Regional inequity in health outcomes has been exacerbated (footnote 7), partly because 17% of the population lacks national health insurance coverage, which impedes health care access.12 As older people are particularly vulnerable to COVID-19, people aged 60 and over account for more than 48% of deaths related to COVID-19 in the country.13

3 Government of Indonesia. COVID-19 Handling Committee and National Economic Recovery (accessed 4 March 2021). 4 WHO. 2020. Coronavirus disease 2019 (COVID-19): Situation Report – 44. Geneva. 5 Sector Assessment (Summary): Health (accessible from the list of linked documents in Appendix 2). 6 Digital Center for Indonesian Health Workers. Thank You Health Heroes Indonesia (accessed 4 March 2021). 7 Center for Indonesia's Strategic Development Initiative. 2020. Puskesmas' Capacity to Respond to COVID-19 Pandemic. . 8 United Nations Office for the Coordination of Humanitarian Affairs. 2020. Situation Update: Response to COVID-19 in Indonesia (As of 7 December 2020). New York. 9 United Nations. Ensure health lives and promote well-being for all ages. Geneva. (accessed 5 March 2021). 10 World Bank. 2020. Indonesia Economic Prospects Towards a Secure and Fast Recovery. Washington, DC. 11 ADB. Forthcoming. Asian Development Bank Outlook 2021. Manila. 12 Badan Penyelenggara Jaminan Sosial Kesehatan (Health Social Security Organizing Body). Home (accessed 4 March 2021). 13 COVID-19 Handling Task Force. COVID-19 Distribution Map (accessed on 27 February 2021).

3

6. Impact on gender. COVID-19 has put women’s health at greater risk because of reduced access to sexual and reproductive health services. Moreover, women are at higher risk of exposure to COVID-19 than men as they comprise the majority of health and social workers (68%) and nurses and doctors (74%) and are more likely than men to be caregivers in the home.14 A recent survey reported that about 65% of women have spent more time on unpaid domestic work since the pandemic began than previously.15 An estimated 39% of female informal workers have lost their jobs, with only 20% of them receiving government support.16 Further, the number of reported cases of violence against women and girls has increased during the pandemic.17

7. Government coordination for COVID-19 vaccination. The government has established a robust set of mechanisms to coordinate its response across different levels of government. The Committee for Handling COVID-19 and National Economic Recovery, headed by the coordinating minister for economic affairs, oversees COVID-19 response, including the vaccination program. The executive chair of the committee is the Minister of State-owned Enterprises, who has been closely coordinating vaccine procurement efforts.18 Vaccination implementation teams— comprising central, provincial, and district officials—have been assigned to ensure strong coordination of vaccination administration activities. Provincial and city and/or district governments will assume responsibility, through their health offices, for service delivery including vaccine administration, while local government units, especially in subdistricts and villages, will support registration and community engagement efforts. Presidential Regulation No. 99/2020, as amended by Presidential Regulation No. 14/2021, sets out implementation arrangements for vaccine procurement and distribution.19 It authorizes the Minister of Health to assign the 100% state-owned vaccine manufacturer, Bio Farma, and its subsidiaries, PT Indofarma Tbk (Indofarma) and PT Tbk (Kimia Farma), to procure vaccines.20

8. The Minister of Health assigned to Bio Farma and Indofarma lead roles in procuring COVID-19 vaccines for three reasons. First, Bio Farma is the sole supplier of vaccines for the National Immunization Program, and has a track record of delivering vaccines expeditiously to suppress past disease outbreaks.21 With annual production capacity of approximately 2 billion doses and 12 WHO-prequalified vaccines, Bio Farma has played an integral role in bolstering national, regional, and global health security. Second, since its establishment in 1890, Bio Farma has acquired deep expertise and a broad network in the global vaccine industry, which has positioned it well to source COVID-19 vaccines quickly and negotiate cost-effective purchase

14 Australia Indonesia Partnership for Economic Development. 2020. Policy Brief – Gender Matters in COVID-19: Snapshot of Impacts and Adequacy of Policy Response. Jakarta. 15 UN Women. 2020. Whose Time to Care? Unpaid Care and Domestic Work during COVID-19. Bangkok. 16 United Nations Children’s Fund (UNICEF). 2020. Indonesia COVID-19 Response Situation Report – Situation in Numbers (Oct 13, 2020). New York. 17 National Commission on Violence Against Women. 2020. Media Release & Executive Summary Study on the Dynamics of Changes in a Household during COVID-19 in 34 Provinces in Indonesia. News release. 28 July. 18 The government has also been an outspoken advocate for vaccine cooperation within the Association of Southeast Asian Nations, putting Indonesia at the forefront of regional collaboration. Office of Assistant to Deputy Cabinet Secretary for State Documents and Translation. 2020. COVID-19 Vaccines Must be Accessible for All Countries, Foreign Minister Says. Jakarta. 19 Government of Indonesia. 2020. Presidential Regulation 99/2020 on Vaccine Procurement and Implementation. Jakarta; and Government of Indonesia. 2021. Amendment (No. 14/2021) to Presidential Regulation Number 99 Year 2020 about Procurement of Vaccines and Implementation of Vaccinations in Handling Coronavirus (COVID- 19) Pandemic. Jakarta. 20 Bio Farma owns an 80.6% stake in Indofarma and a 90.0% stake in Kimia Farma. These subsidiaries manufacture, distribute, and retail pharmaceutical products. 21 For example, Bio Farma was the key supplier of vaccines in 2019. Rep-Pun. 2019. Bio Farma Was Chosen by WHO and UNICEF in the Provision of Monovalent Oral Polio Type 2 Vaccine. Berita Official Website of West Java Province. 26 April.

4 agreements with suppliers. Finally, Bio Farma and Indofarma possess the requisite logistics capability to import, store, and deliver vaccines safely and efficiently.

9. Government’s COVID-19 Vaccination Allocation Plan (VAP).22 Presidential Regulation No. 99/2020, as amended by Presidential Regulation No. 14/2021 (footnote 19), provides the legal basis for Indonesia’s VAP, which comprises, among others, access prioritization criteria, a procurement plan, and implementation arrangements, including a medical waste management plan. These plans are supported by various decrees23 and guidelines,24 incorporating recommendations from the Indonesian Technical Advisory Group on Immunization.25 The VAP consists of government- and employer-funded programs. To attain herd immunity as quickly as possible to aid economic recovery, the government seeks to vaccinate, free of charge, 181.5 million Indonesians, or 67% of the population.26 Eligible target groups and their order of priority are summarized in Table 2. The order of priority is consistent with the recommendations of the WHO Strategic Advisory Group of Experts on Immunization, as it first protects health care workers, public officers, older people, and people at high risk of .27 Vaccination began on 13 January 2021. As of 5 March 2021, 2.4 million health care workers, public officers, and people aged 60 and over had received their first dose, and over 1.1 million of them, mostly health care workers, had received the required two doses.28

Table 2: Prioritization of Vaccine Access Phasea Order of priority Location 1 Around 1.3 million health care workers, and assistants, support staff, and medical students Nationwide working in facilities, aged 18–59 2 a. Around 17.4 million public officers (teachers, village and sub-district officials, state civil servants, police, military, legal enforcement officers, and other public officers including those at transport terminals, banks, and state electricity and water companies, as well as officers providing services to the community), aged 18–59 b. Around 21.5 million people aged 60 and over 3 Around 63.9 million socially and economically vulnerable people at high risk of transmission Selected 4 Around 77.4 million remaining population starting with those at high risk of transmission areasb a Phases 1 and 2 are expected to be completed around June 2021, and phases 3 and 4 will be implemented from June 2021–March 2022. b Six “special intervention” locations, reflecting the high number of cases and insufficient health facility capacity, have been identified in , Sleman, DKI Jakarta, Jember, Semarang, and Makassar. Source: Ministry of Health.

10. Government-funded vaccination program. Given the devastating impact of the COVID-19 pandemic in the country, the government is keen to achieve herd immunity to protect lives and livelihoods. If the spread of COVID-19 is not controlled, there are serious concerns that

22 National Vaccination Allocation Plan (accessible from the list of linked documents in Appendix 2). 23 Government of Indonesia, Ministry of Health (MOH). 2021. MOH Decree 10/2021 on Implementation of Vaccinations to Control COVID-19 Pandemic. Jakarta; 2020. MOH Decree 28/2020 on Implementation of Vaccine Procurement in the Control of COVID-19. Jakarta; 2020. MOH Decree 6573/2020 on the COVID-19 Implementation Team. Jakarta; 2020. MOH Decree 12758/2020 on Determination of Vaccines for the Implementation of COVID-19 Vaccination. Jakarta; 2020. MOH decree 18/2020 on Medical Waste Management in Health Service Facilities. Jakarta; and 2021. Decree 423/2021 of the Director General of Disease Prevention and Control about Technical Instructions for the Implementation of Vaccinations in the Control of COVID-19. Jakarta. 24 Government of Indonesia, MOH. 2020. Report of the Minister of Health for Handling COVID-19. Jakarta; 2020. Technical Guidelines for the Implementation of Vaccinations for Management of COVID-19. Jakarta. 25 The group is composed of 18 vaccine experts from various prominent organizations, both national (e.g., Indonesian Pediatrics Society and Indonesian Medical Association) and international (e.g., WHO and UNICEF). 26 The total population aged over 18, or 188.7 million, and minus 7.2 million people for whom vaccines are yet to be proven safe and efficacious notably pregnant women and those with certain medical conditions. 27 WHO Strategic Advisory Group of Experts on Immunization. COVID-19 Materials (accessed on 4 March 2021). 28 Government of Indonesia, MOH. COVID-19 Vaccine Situation as of 4 March 2021 (accessed on 4 March 2021).

5 the health of the population will further deteriorate while the economy may face consequences worse than what Indonesia experienced in the aftermath of the Asian Financial Crisis in 1997-98. Hence, vaccination is mandatory for eligible recipients under the government-funded program to increase vaccine uptake and accelerate the achievement of herd immunity, which will help prevent the spread of emerging strains as well. Exemptions and postponements are permitted for medical reasons.29 Service providers carry out pre-vaccination screening, with additional screening for those over 60 years old, to determine whether exemptions or postponements apply.30 Under Presidential Regulation 14/2021, failure by eligible recipients to participate in the vaccination program may result in imposition of administrative sanctions by ministries, agencies and subnational governments in accordance with their respective authorities.31 Further, eligible recipients who do not participate in vaccination and also obstruct the implementation efforts to prevent the spread of COVID-19 may incur sanctions pursuant to Law No. 4 of 1984 on Infectious Disease Outbreaks.32 The government expects that vaccination, together with comprehensive social assistance programs, can shield the poor and vulnerable from negative impacts arising from COVID-19.33 Presidential Regulation 14/2021 also provides for the cost of medical care and compensation in case of any adverse events following immunization (AEFI) to encourage vaccine uptake. At the same time, there is some evidence that government advocacy efforts are contributing to one of the highest vaccine acceptance rates in the world,34 with one Indonesia- specific survey showing an acceptance rate of 80%.35 There is clear recognition within the government that awareness building campaigns and advocacy will drive the success of the vaccination program with sanctions being a last resort. In the rollout of the vaccination program, the government’s first and foremost focus is to achieve early success and provide a high degree of assurance to the people that collective action is critical to ensure positive health outcomes and restoration of livelihoods.

11. Employer-funded vaccination program. This program seeks to accelerate vaccination coverage by allowing businesses to purchase COVID-19 vaccines from Bio Farma or other entities authorized by the Minister of Health to vaccinate employees and their families free of charge. Bio Farma and Kimia Farma will procure vaccines for the employer-funded program. To ringfence human resources and logistics capacity for the government-funded program, vaccines procured through the employer-funded program must differ from those procured for the government-funded program, and health facilities that administer vaccinations under this program must similarly differ from those under the government-funded program. The central government will regulate and oversee the implementation of vaccination under the employer-funded program by establishing (i) minimum standards for health facilities providing vaccination services, (ii) a price ceiling for the vaccination that covers vaccines and associated services, and (iii) reporting requirements. The employer-funded program is fully aligned with the VAP and will further

29 Government of Indonesia, MOH. 2021. Decree 423/2021 of the Director General of Disease Prevention and Control about Technical Instructions for the Implementation of Vaccinations in the Control of COVID-19. Jakarta. 30 Eligible recipients with heart, chronic kidney, or liver disease and those undergoing cancer treatment receive exemptions. Those who exhibit severe allergies from the first dose are exempted from the second dose. Vaccination is postponed for those who (i) exhibit a temperature above 37.5 degrees Celsius, high blood pressure, fever, cough, runny nose, or shortness of breath in the past 7 days; (ii) have contracted COVID-19 in the past 3 months; (iii) currently receive treatment for blood clotting disorders or immune deficiencies; or (iv) are pregnant. 31 Such sanctions may include postponement or termination of provision of social security or social assistance, suspension or termination of government administration services, and/or a fine. 32 The sanctions may include fines and imprisonment. 33 The scope and scale of social assistance programs have increased significantly over the past 12 months. For example, the basic assistance program and the conditional cash transfer program now cover 18.8 million and 10.0 million families, respectively. 34 M. Sallam. 2021. COVID-19 Worldwide: A Concise Systematic Review of Vaccine Acceptance Rates. Vaccines 2021. 9 (2): 160. 35 World Bank. 2021. Indonesia High-frequency Monitoring of COVID-19 Impacts. Jakarta.

6 contribute to the achievement of herd immunity. The timing of vaccinations under the employer- funded program will be subject to vaccine availability, but it is expected that priority groups under phases 1 and 2 will already have been largely vaccinated before its rollout.

12. Procurement plan. The government has mandated that all vaccines to be procured must be listed under the Ministry of Health (MOH) decree HK.01.07-MENKES-12758/202036 and that, prior to administration, emergency use authorization or a distribution permit must be obtained from the Indonesian Food and Drug Supervisory Authority (footnote 23). Table 3 summarizes the government-authorized short-term vaccine procurement plan as of early March 2021 for 2021– 2022, which was developed on the basis of cost, availability, efficacy, cold-chain capacity, and potential for domestic production. The government, Bio Farma, and Indofarma have entered into binding commitments as shown in Table 3 to vaccinate 181.5 million Indonesians.

Table 3: Short-Term COVID-19 Vaccine Procurement Plana AstraZeneca Serum Institute Sinovac Life Supplier Indonesiab COVAX/GAVI of Indiad Sciences Others Requested 50.0 108.0 50.0 125.5e Negotiations binding ongoing with commitment Pfizer (for the (million doses) government- Estimated Q2 2021–Q1 Q2 2021–Q1 Q2 2021–Q1 2022 Q4 2020–Q1 funded program) delivery timeline 2022 2022 2022 as well as Purchase Signed with Bio Allocation letter Signed with Bulk vaccine Sinopharm and agreement Farma in from COVAX Indofarma in contract signed Moderna (both status December 2020 received by October 2020 and with Bio Farma in for the employer- Ministry of Health updated through September 2020 funded program) on 26 February commitment letter 2021c in December 2020 COVAX = COVID-19 Vaccines Global Access, COVID-19 = coronavirus disease, GAVI = Gavi the Vaccine Alliance, Q = quarter. a Assessment of how vaccines supplied by AstraZeneca Indonesia, Serum Institute of India, and Sinovac Life Sciences may meet vaccine eligibility criteria under the Asia Pacific Vaccine Access Facility is set forth in Eligibility Criteria for Use of Funds Under the Rapid Response Component (accessible from the list of linked documents in Appendix 2). b Manufacturing of AstraZeneca vaccine subcontracted to Siam BioScience of Thailand. c Indonesia has been allocated 11.7 million doses of the AstraZeneca vaccine through May 2021. d Manufacturing Covovax vaccine using technology licensed from Novavax. Novavax has initiated a concurrent rolling review process for authorization with multiple stringent regulatory authorities. e Under the September 2020 agreement, Sinovac will deliver 140.0 million doses of bulk vaccine, which Bio Farma will process into 122.5 million ready-to-use doses. Sinovac has already delivered 3.0 million ready-to-use doses to Bio Farma, based on a separate purchase agreement signed in 2020. Emergency use authorization given by the Indonesian Food and Drug Supervisory Authority on 11 January 2021. Source: Ministry of Health.

13. Medical waste management plan.37 The government anticipates an increase in medical waste such as syringes, vials, and personal protective equipment from vaccinators because of COVID-19 vaccinations. Prior to COVID-19, standard operating procedures were in place for collection, storage, treatment, and disposal of medical waste, overseen by the MOH and Ministry of Environment and Forestry. These procedures were strengthened in response to the COVID-19 pandemic (para. 36). Currently, 20 of 34 provinces have at least one licensed medical waste treatment facility, and provinces lacking one send their waste to neighboring provinces for treatment and disposal. To enhance waste management capacity, the government is installing

36 At present, these vaccines are those manufactured by AstraZeneca, Moderna, Novavax, Pfizer Inc. and BioNTech, Sinovac Life Sciences, Sinopharm, and Bio Farma. 37 Due Diligence of Indonesia’s Medical Waste Management System (accessible from the list of linked documents in Appendix 2).

7 additional centralized waste treatment facilities and procuring more equipment for sterilization and disposal, including autoclaves and incinerators.

14. Monitoring and evaluation (M&E). To ensure the successful implementation of the VAP, the government is putting in place the One Data system, an integrated data management system for M&E. The One Data system tracks the vaccination process at each stage (pre-, during, and post-immunization) under the supervision of relevant agencies and ministries. The government will collate data on eligibility and basic personal details, monitor and record coverage (including follow-up for second doses) and certification, monitor service quality and pharmacovigilance, and reconcile demand and supply logistics data. To improve accountability, reports for M&E purposes produced from the One Data system will be made publicly available.

15. Needs assessment.38 Using the Vaccination Introduction Readiness Assessment Tool (VIRAT) developed by WHO and the United Nations Children’s Fund (UNICEF), MOH regularly assesses readiness for COVID-19 vaccination introduction and administration with support from development partners and the Indonesian Technical Advisory Group on Immunization.39 Indonesia has made good progress so far, but challenges remain. In the area of logistics, a recent UNICEF assessment of 9,750 health facilities showed that 27 of 34 provinces need to upgrade their cold chain equipment, and 447 of 514 districts lack adequate equipment to accommodate the expected volume of COVID-19 vaccines. At minimum, 110 walk-in cold rooms and 5,400 ice- lined refrigerators are required.40 To address these gaps, discussions are under way with MOH for Bio Farma to enter contractual arrangements with private logistics companies to provide additional cold-chain storage and distribution capabilities, while the government will procure and upgrade or repair equipment for health facilities. Bio Farma’s logistics management information system monitors the location of vaccines and temperature conditions. As of early March 2021, more than 13,000 service points that fulfill minimum standards for vaccination had been identified, and at least 30,000 vaccinators had been trained. Simulation exercises to check the service flow and procedures have taken place at four health centers. Further training for health workers is expected, and incentives for vaccinators are being planned. Regarding pharmacovigilance, the Indonesian Food and Drug Supervisory Authority will issue approvals for all vaccines prior to administration. Guidance for AEFIs has been developed, and national and provincial AEFI committees have been established. While a recent survey shows vaccine acceptance to be around 80%,41 in the past Indonesia has experienced challenges relating to hesitancy.42 To address vaccine hesitancy, development partners have supported the formulation and implementation of communications and advocacy strategies, and the government has undertaken communication campaigns to build public confidence and address misinformation. MOH oversees the implementation of VIRAT activities, with support from ministries, agencies, and development partners including ADB.

16. Financing needs. To finance vaccine procurement and rollout, the government has so far allocated $3.98 billion in budgetary resources.43 Bio Farma and Indofarma have the public mandate for procuring COVID-19 vaccine doses (Table 3) under the government-funded program amounting to more than $1.5 billion in 2021–2022. Bio Farma and Indofarma require immediate financing of at least $1.0 billion to meet payment obligations under existing vaccine purchase

38 Vaccine Needs Assessment (accessible from the list of linked documents in Appendix 2). 39 The needs assessment is informed by the VIRAT. 40 UNICEF. 2021. Cold Chain Assessment. Jakarta. 41 The World Bank. 2021. Health services during the COVID-19 pandemic. Jakarta. 42 P. Pronyk et al. 2019. Vaccine hesitancy in Indonesia. The Lancet. 3 (3). E114-E115. 43 Governor’s letter in the National Vaccination Allocation Plan (accessible from the list of linked documents in Appendix 2).

8 agreements. Once the vaccines are procured, MOH will purchase them from Bio Farma and Indofarma and pay both firms from its budgetary allocation.

17. Development partner coordination.44 The Committee for Handling COVID-19 and National Economic Recovery regularly engages through its project management office with development partners on the VAP and on the vaccine needs assessment. WHO coordinates monthly information-sharing among development partners supporting VAP implementation. ADB leads meetings of key partners providing vaccine-related support to Indonesia, including Australia’s Department of Foreign Affairs and Trade, WHO, UNICEF, the World Bank, the United States Agency for International Development, and the United States Centers for Disease Control and Prevention. Immediate financing support is expected from (i) the World Bank, which is planning to provide additional financing of $500 million to the government for vaccine deployment and COVID-19 public health response more generally, including scaled up testing and health worker capacity building, with approval expected in May 2021; and (ii) the Islamic Development Bank through the International Islamic Trade Finance Corporation, which is planning to provide a working capital facility of $100 million to Bio Farma, to be guaranteed by the sovereign.

B. Project Description

18. Impact and outcome. The government, through the Ministry of State-Owned Enterprises and Ministry of Finance, and Bio Farma have requested ADB support for COVID-19 vaccine procurement and logistics under APVAX to help address Indonesia’s urgent public health and economic challenges associated with COVID-19. The project is aligned with the following impacts: transmission of COVID-19 reduced, public health improved, and economic productivity restored (footnote 23); and SARS-CoV2’s spread, morbidity, and mortality reduced; and confidence of citizens restored.45 The project will have the following outcome: priority populations vaccinated against COVID-19, with the target of vaccinating at least 27 million people assuming a minimum wastage rate of 15%.46

19. Output: COVID-19 vaccines procured and deployed to provinces. The project will provide financing for vaccine procurement by Bio Farma and/or its subsidiary Indofarma through the RRC of APVAX for the delivery to MOH-designated locations of at least 65 million doses of COVID-19 vaccine under the government-funded program. The agreed eligible expenditure items under the RRC are (i) vaccines that meet any of the APVAX vaccine eligibility criteria,47 including for any advance payments; and (ii) international logistics and related services required for the transportation of vaccines from the place of purchase to designated delivery points in Indonesia. Bio Farma and Indofarma have entered into agreements with a number of COVID-19 vaccine suppliers, and the potential pathways for such vaccines to satisfy the eligibility criteria have been identified.48

20. ADB technical assistance (TA)49 will assist smooth distribution of COVID-19 vaccines. Support will be given to (i) upgrade Bio Farma’s vaccine logistics management information system to incorporate predictive analytical features that can forecast vaccine demand and support

44 Development Partner Coordination (accessible from the list of linked documents in Appendix 2). 45 ADB. 2020. ADB’s Support to Enhance COVID-19 Vaccine Access. Manila. 46 The design and monitoring framework is in Appendix 1. 47 The eligibility of vaccines for APVAX financing will adhere to the criteria stated in paragraph 29 of the APVAX policy paper. ADB. 2020. ADB’s Support to Enhance COVID-19 Vaccine Access. Manila. 48 Eligibility Criteria for Use of Funds under the Rapid Response Component (accessible from the list of linked documents in Appendix 2). 49 ADB. Regional: Support for Human and Social Development in Southeast Asia.

9 refinement of the logistics strategy for vaccine rollout; (ii) train Bio Farma staff to use the upgraded information system, ensuring at least 50% of those trained are women; and (iii) fund around 10 scholarships for Bio Farma staff to obtain internationally recognized certification in supply chain management, at least half of which shall be awarded to women.

C. ADB Value Addition and Experience

21. ADB will deploy a mix of financing and TA modalities to support the formulation and implementation of the government’s VAP. First, knowledge work undertaken by ADB helped inform the government’s prioritization of vaccine access and deployment plans.50 Second, the low financing cost of the proposed ADB loan to Bio Farma for vaccine procurement will result in lower vaccine prices for the government as it seeks to vaccinate its citizens free of charge. Third, ADB TA support to upgrade Bio Farma’s vaccine logistics management information system and provide related training and certification, including to women, will ensure that vaccines are deployed to appropriate locations expeditiously and with minimal risk of wastage. Fourth, ADB is supporting the MOH to establish a new strategic delivery unit that will be closely involved in coordinating and monitoring the implementation of the VAP.51 To ensure that Indonesia is adequately prepared for the next pandemic, ADB is planning to provide financing support to Bio Farma to expand its capacity to produce non-COVID-19 vaccines through a project tentatively planned for Board consideration later in 2021. ADB will support Indonesia’s health sector reform strategy, and the alignment of national vaccine activities and COVID-19 recovery plans with those of other members of Association of Southeast Asian Nations.

22. In 2020, ADB worked closely with MOH and UNICEF on the delivery of critical medical equipment and supplies through a $3.0 million grant under the Asia Pacific Disaster Response Fund.52 In April 2020, ADB committed $1.5 billion under the COVID-19 Active Response and Expenditure Support Program to provide budget support for urgent public health, social, and economic assistance.53 In September 2020, ADB approved the $500 million Disaster Resilience Improvement Program to help manage fiscal risks arising from future disasters triggered by natural hazards and pandemics.54 The following lessons from these interventions have been incorporated in to project design: (i) the need to leverage the knowledge and expertise of leading health sector agencies, such as WHO and UNICEF, in formulating the needs assessment and risk mitigation measures, (ii) the importance of having a robust coordination mechanism among relevant ministries through establishment of a steering committee, and (iii) the critical need for strong data analytics capability in driving sound policy making through investments in information technology systems.

D. Summary Cost Estimates and Financing Plan

23. The project is estimated to cost $795 million (Table 4). Detailed cost estimates by expenditure category and by financier are included in the project administration manual (PAM).55

50 ADB. Regional: Policy Advice for COVID-19 Economic Recovery in Southeast Asia. 51 ADB. Regional: Regional Support to Address the Outbreak of Coronavirus Disease 2019 and Potential Outbreaks of Other Communicable Diseases. 52 ADB. Indonesia: COVID-19 Emergency Response. 53 ADB. Indonesia: COVID-19 Active Response and Expenditure Support Program. 54 ADB. Indonesia: Disaster Resilience Improvement Program. 55 Project Administration Manual (accessible from the list of linked documents in Appendix 2).

10

Table 4: Summary Cost Estimates Amounta Item Description ($ million) A Base Costb

COVID-19 vaccines eligible under rapid response component 600.00 Storage, distribution and other related costsc 169.00 B Contingenciesd 21.27 C Financing Charges During Implementatione 4.73 Total Cost 795.00 COVID-19 = coronavirus disease. a Vaccines are exempt from taxes and duties. b Prices as of December 2020. c Includes insurance, clearance, and overhead costs. d Includes physical and price contingencies. e Includes interest and commitment charges on all sources of financing. Sources: Asian Development Bank, Bio Farma, and Indofarma.

24. To finance the project, Bio Farma has requested a regular loan of $450 million from ADB’s ordinary capital resources under the APVAX RRC, which will be backed by a sovereign guarantee. Because of its unique financing needs, Bio Farma has also requested that the loan have a 3-year term, including a grace period of 2 years. This is because Bio Farma has determined a 3-year loan term to be sufficient for it to complete the procurement and deployment of COVID-19 vaccines and receive full payment from the government for the sale of such vaccines, the proceeds of which will be used to repay the loan. Since APVAX policy prescribes a 10-year term for the RRC component (footnote 45), a Board waiver will be required for the shorter term of 3 years.56 Such a waiver is justified on the basis that it better meets the financing needs of Bio Farma, while also benefiting ADB through lower capital utilization and liquidity requirements. The loan will have its annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility, a commitment charge of 0.15% per annum, and such other terms and conditions set forth in the draft loan agreement. For this loan, based on a custom-tailored loan amortization schedule, the average maturity is 2.8 years, with no maturity premium payable to ADB. Bio Farma has made its own independent decision to borrow under ADB’s LIBOR-based lending facility.

25. The summary financing plan is in Table 5. In the event Bio Farma chooses to utilize loan proceeds to procure COVID-19 vaccine from the Serum Institute of India through Indofarma, then (i) Bio Farma shall enter into an onlending agreement with Indofarma, and (ii) Indofarma shall enter into a project agreement with ADB.

Table 5: Summary Financing Plan Amount Share of Total Source ($ million) (%) Asian Development Bank Ordinary capital resources (APVAX RRC loan) 450.0 57 Bio Farma and Indofarma 345.0 43 Total 795.0 100 APVAX = Asia Pacific Vaccine Access Facility, RRC = rapid response component. Sources: Asian Development Bank, Bio Farma, and Indofarma estimates.

56 APVAX policy sets the terms for regular ordinary capital resources loans to Group C developing member countries at (i) up to the first $500 million, 10 years including a grace period of up to 3 years; and (ii) above $500 million, 5 years including a grace period of up to 3 years.

11

E. Implementation Arrangements

26. Procurement will be carried out in a manner consistent with simplified and expedient procedures permitted under the ADB Procurement Policy (2017, as amended from time to time) and Procurement Regulations for ADB Borrowers (2017, as amended from time to time). Following the APVAX policy (footnote 45), ADB member country procurement eligibility restriction will be waived, and universal procurement will apply. Value for money will be achieved by securing multiple types of vaccines on reasonable commercial terms and through close monitoring of contract implementation to improve the probability of timely delivery. Implementation arrangements are summarized in Table 6 and described in detail in the PAM (footnote 55).

Table 6: Implementation Arrangements Aspects Arrangements Implementation period April 2021–June 2023 Estimated completion date 30 June 2022 Estimated loan closing date 31 December 2022 Steering committee The committee—chaired by the Minister of Health and comprising senior representatives from Bio Farma, Indofarma, the Ministry of State-Owned Enterprises, Ministry of Finance, the Ministry of Health, and Asian Development Bank (ADB)—will meet on a quarterly basis to review progress and any actions required to strengthen implementation. Management (i) Executing agency Bio Farma (ii) Implementing agency Indofarma Procurement Multiple contracts for the purchase of eligible vaccines through direct contracting will be financed in full or in part by up to $445.27 million of the loan proceeds Retroactive financing Retroactive financing (not exceeding 30% of the loan amount) of eligible expenditures and/or advance contracting incurred after the presidential declaration of a public health emergency on 31 March 2020 is contemplated on the basis that aggregate approved percentage of retroactive financing and outstanding advance financing shall not exceed 60% of the loan amount. A number of vaccine purchase agreements have already been signed by Bio Farma and Indofarma (Table 3). Disbursement Disbursement of the loan proceeds will follow ADB's Loan Disbursement Handbook (2017, as amended from time to time) and detailed arrangements agreed between Bio Farma and ADB. Sources: ADB and Bio Farma.

III. DUE DILIGENCE

27. ADB’s standard due diligence requirements for processing sovereign operations have been applied.

A. Economic and Financial Viability

28. Economic analysis. The COVID-19 pandemic is both a health and an economic crisis, causing loss of lives and a major economic downturn. The achievement of herd immunity from COVID-19 through vaccination will allow the resumption of economic activities that generate jobs and build human capital, and promote trade and investment domestically and internationally.

29. Financial analysis.57 Bio Farma is financially strong and capable of absorbing the additional debt to be incurred to finance vaccine purchases. Financial covenants covering debt– equity, current, and debt service coverage ratios are included in the loan agreement with Bio Farma for monitoring and compliance during project implementation. Indofarma, however, may encounter challenges in managing its debts once it borrows from Bio Farma to purchase vaccines

57 Financial Analysis (accessible from the list of linked documents in Appendix 2).

12 from the Serum Institute of India because of the large size of the loan relative to Indofarma’s equity base. Under the financial management action plan, ADB will require quarterly submission of debt–equity, current, and debt service coverage ratios at Indofarma and consolidated group levels for monitoring purposes.58

B. Governance

30. Financial management. Based on the assessment, it is concluded that the overall pre- mitigated financial management risk of the project is substantial, partly because of Bio Farma’s lack of experience in managing and administering projects funded by international financing institutions and the extraordinary scale of COVID-19 vaccine procurement and distribution. Actions identified to mitigate risk include (i) supporting Bio Farma and Indofarma with a financial management consultant; (ii) providing training to accounting and finance staff of Bio Farma and Indofarma on ADB’s financial management and disbursement guidelines and policies; (iii) using the One Data system to track vaccines and monitor implementation; (iv) ensuring independent internal audit, oversight, and supervision by Indonesia’s Central Financial and Development Supervisory Agency; and (v) annual audits conducted by Indonesia’s Supreme Audit Agency.

31. Procurement.59 Bio Farma and Indofarma have experience procuring vaccines from international vaccine suppliers. In 2020, Bio Farma and Indofarma bilaterally negotiated and signed agreements with AstraZeneca Indonesia and Sinovac Life Sciences, and with the Serum Institute of India, respectively, to purchase COVID-19 vaccines. These existing agreements were reviewed, and findings documented by ADB (footnote 59). Procurement risk is assessed as medium, as ADB’s support is based on its review of the existing, and any future, bilaterally negotiated agreements, to ensure compliance with the APVAX policy including the vaccine eligibility criteria. The scale of procurement by Indofarma under the project is significantly larger than its regular operation. To address possible resource constraints at Indofarma, Bio Farma will provide administrative and logistical support as required.

32. Anticorruption. Integrity due diligence was completed in respect of Bio Farma and Indofarma, and no significant integrity risks were identified. ADB's Anticorruption Policy (1998, as amended to date) was explained to and discussed with the government, Bio Farma, and Indofarma. Specific policy requirements and supplementary measures are described in the PAM (footnote 55).

C. Poverty, Social, and Gender

33. Key poverty and social issues.60 The project will have positive social benefits by increasing the availability of vaccines and the chance for the population to be immunized, resulting in better health outcomes and enabling people to restore livelihoods, increase productivity, and improve economic outcomes. Vulnerable men and women will be prioritized for vaccination in line with the WHO Strategic Advisory Group of Experts on Immunization equity principles (para. 9). Bio Farma employees, particularly women, will benefit from upskilling and certification through the project.

58 Financial Management Assessment (accessible from the list of linked documents in Appendix 2). Financial ratios will be calculated based on definitions set forth in the loan agreement. 59 Strategic Procurement Plan (accessible from the list of linked documents in Appendix 2). 60 Summary Poverty Reduction and Social Strategy (accessible from the list of linked documents in Appendix 2).

13

34. Gender. The project is categorized as some gender elements, considering Bio Farma’s commitment to undertake actions that benefit women. It seeks to accelerate progress in gender equality by supporting greater participation of women for skills development and certification in logistics system management, a nontraditional profession for women in Indonesia. Further actions will be identified during project implementation. ADB will recruit a gender and social inclusion specialist to support Bio Farma’s implementation and reporting on gender actions through the collection and analysis of disaggregated data where appropriate. The government will ensure that women and all vulnerable population groups receive vaccinations in line with the VAP.

D. Safeguards

35. In compliance with ADB’s Safeguard Policy Statement (2009), the safeguard categories are as follows.61

36. Environment (category C). The administration of COVID-19 vaccines will result in a temporary increase in immunization waste. Immunization waste management is stipulated in Minister Decrees 56/201562 and 18/2020,63 and technical guidelines (footnote 23). Current and planned arrangements for the collection, transportation, treatment, and disposal of incremental medical waste were reviewed and confirmed to be adequate.

37. Involuntary resettlement (category C). The project is classified category C for involuntary resettlement impacts. None of the project activities will involve land acquisition and involuntary resettlement, and thus no resettlement plan is required for the project. In the event involuntary resettlement issues are identified during project implementation, a specific mitigation plan will be prepared in accordance with ADB’s Safeguard Policy Statement (2009).

38. Indigenous peoples (category C). The project is classified category C for indigenous peoples safeguards, and there is no need to prepare an indigenous peoples plan. Indigenous peoples’ culture, beliefs, and livelihood systems will not be negatively affected by the project.

E. Summary of Risk Assessment and Risk Management Plan

39. Considering that risks and required mitigation measures will evolve as vaccines continue to be rolled out, ADB will work with Bio Farma, Indofarma, MOH, other relevant ministries and agencies, other development partners, and civil society organizations to monitor vaccination program rollout. Major risks and mitigating measures are summarized in Table 7 and described in detail in the risk assessment and risk management plan.64

Table 7: Summary of Risks and Mitigating Measures Risks Mitigation Measures Vaccine hesitancy • MOH and MCIT, supported by UNICEF, have launched tailored communication including due to campaigns for health-workers and community and religious leaders. potential backlash • UNICEF is supporting the government’s media engagement efforts to emphasize caused by positive messaging on vaccinations, ensure responsible coverage of adverse effects pronouncement of following immunization, and avoid misinformation on social media platforms. sanctions

61 ADB. Safeguard Categories. 62 Government of Indonesia, Ministry of Environment and Forestry. 2015. MOEF Decree No. 56/2015 on Procedures and Technical Requirement of Hazardous Waste Management from Healthcare Facilities. Jakarta. 63 Government of Indonesia, MOH. 2020. MOH Decree No. 18/2020 on Medical Waste Management in Health Service Facilities. Jakarta. 64 Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2).

14

Risks Mitigation Measures • Government is mobilizing wide publicity for vaccination of socially prominent people including President Jokowi, who was the first to be vaccinated in the rollout. • Islamic Cleric Council has announced issuance of halal certification for vaccines. Poor and • In its policy dialogue with ADB, the government has clearly indicated that public disadvantaged education and awareness building will receive foremost attention. individuals bear the • ADB, together with other development partners, will support the government in brunt if sanctions are addressing vaccine hesitancy through effective advocacy and communication while imposed for failure to ensuring that imposition of sanctions will be used as a last resort. obtain vaccination • MOH will engage with relevant ministries, agencies, and subnational governments to boost vaccine uptake among poor and vulnerable populations by addressing their unique informational needs and accommodating their preferences regarding convenient timing and venue for vaccinations. • The government has given assurances to ADB in the guarantee agreement that feedback from the public and civil society will be taken into account on possible imposition of sanctions. As part of this, MOH will regularly report to ADB on policy pronouncement and enforcement of sanctions. • ADB is supporting Ministry of Social Affairs to strengthen social assistance programs Failure to administer • MOH will collate beneficiary data from multiple sources to improve data quality, vaccinations under including voter registration data and other records maintained by community officers. government-funded • MOH is using a robust monitoring system to ensure proper identification and validation program in line with of eligible recipients. access prioritization • MOH and Ombudsperson have put in place complaints and grievance redress systems criteria, including due to (hotline, web, and phone application). incomplete or • MOH is closely monitoring the progress of the government-funded program to ensure inaccurate data of that the majority of priority populations under phase 1 and 2 will have been vaccinated priority groups or prior to commencement of the employer-funded program. diversion of resources • Presidential Regulation stipulates that the type of vaccines and health facilities differ to the employer-funded between the employer-funded program and the government-funded program, to program ensure human resources and logistics capacity for the government-funded program are ring-fenced. Weaknesses in sub- • MOH and Bio Farma have prepared plans to contract additional cold chain storage and national supply chain distribution capacity through private sector logistics companies. systems disrupt delivery • Bio Farma’s logistics management information system is supporting real time location of vaccines to health and temperature tracking of vials to minimize wastage. facility level, resulting in • MOH is procuring supplies and equipment such as fridges, temperature monitoring higher than acceptable devices, personal protective equipment, disinfectant, and medicines to treat wastage rates anaphylactic shock. Weak coordination • Project steering committee, chaired by the Minister of Health, established to strengthen among and between coordination among central government ministries. central and subnational • Vaccine implementation teams with representation from central, provincial, and district government agencies and/or city levels in place to ensure coordination on planning, logistics, service delivery, communications, and monitoring and evaluation Inability of the • Provincial AEFI committees trained to carry out proper surveillance procedures and government to respond coordinate actions among key stakeholders. in a timely manner to • Grievance redress system in place to report AEFI. AEFI • Bio Farma’s logistics management information system can track location of defective batches and facilitate timely recall. Weak governance and • Bio Farma’s procurement planning undertaken in consultation with national financial procurement agency and BPKP. mismanagement of the • BPKP has issued guidelines for conducting internal audit of the Vaccination Allocation government's Plan, with coverage including selection of right beneficiaries, timeliness of Vaccination Allocation vaccinations, adequacy of cold chain infrastructure and health-worker capacity, Plan monitoring of AEFI, and robustness of reporting systems. • Inspectorate General of MOH and inspectorates of the subnational governments will undertake internal audit under BPKP’s supervision, with reports submitted to the President’s Office as well as concerned governors, mayors, and regents. • Indonesia’s Supreme Audit Agency will undertake external audit.

15

Risks Mitigation Measures Weakening of • ADB to monitor, on a quarterly basis, the debt-equity, debt service coverage, and Indofarma’s financial current ratios for Indofarma and for the consolidated group. position due to high • Indofarma to submit debt management plan to ADB if debt-equity ratio exceeds 3.0, leverage debt service coverage ratio falls below 1.2, or current ratio falls below 1.0. AEFI = adverse event following immunization, BPKP = Badan Pengawasan Keuangan dan Pembangunan (Central Financial and Development Supervisory Agency), COVID-19 = coronavirus disease, MCIT = Ministry of Communication and Information Technology, MOH = Ministry of Health, UNICEF = United Nations Children’s Fund, WHO = World Health Organization. Source: Asian Development Bank.

IV. ASSURANCES AND CONDITIONS

40. The government, Bio Farma, and Indofarma have assured ADB that implementation of the project shall conform to all applicable ADB policies, including those concerning anticorruption measures, safeguards, gender, procurement, financial management, and disbursement as described in detail in the PAM and loan documents. The government, Bio Farma, and Indofarma have agreed with ADB on certain covenants for the project, which are set forth in the draft loan agreement, project agreement, and guarantee agreement.

41. No withdrawals shall be made from the loan account for financing any contract to supply eligible vaccines until ADB has received a letter from the government confirming (i) which COVID- 19 vaccines have been selected to be procured using the proceeds of the loan; (ii) which of the eligibility criteria in the definition of eligible vaccines (footnote 47) has been satisfied in respect of the COVID-19 vaccines to be procured; and (iii) that the eligible vaccines have received all necessary authorizations of the government, and have been authorized by the Indonesian Food and Drug Supervisory Authority and any other relevant regulatory authorities for distribution and administration within the territory of the country, and based on the information provided in the aforementioned letter, ADB has notified the government that the COVID-19 vaccines to be procured are designated as eligible vaccines.

V. RECOMMENDATION

42. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve:

(i) the waiver of the prescribed loan term for regular ordinary capital resources loans under the rapid response component of the Asia Pacific Vaccine Access Facility, as described in para. 24; and (ii) the loan of $450,000,000 to PT Bio Farma (Persero), to be guaranteed by the Republic of Indonesia, for the Responsive COVID-19 Vaccines for Recovery Project under the Asia Pacific Vaccine Access Facility, from ADB’s ordinary capital resources, in regular terms, with interest to be determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility; for a term of 3 years, including a grace period of 2 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft loan and guarantee agreements presented to the Board.

Masatsugu Asakawa President 10 March 2021

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Impacts the Project is Aligned with Transmission of COVID-19 reduced, public health improved, and economic productivity restored (Health Minister Decree 10/2021)a SARS-CoV-2’s spread, morbidity, and mortality reduced, and confidence of citizens restored (ADB's Support to Enhance COVID-19 Vaccine Access, 2020)b

Data Sources and Reporting Risks and Results Chain Performance Indicators Mechanisms Critical Assumptions Outcome By 2022: Priority populations At least 27 million people in Ministry of Health R: Vaccine hesitancy vaccinated against priority groups vaccinated vaccination among priority groups, COVID-19 against COVID-19 in line with records including due to potential the government’s Vaccination backlash caused by the Allocation Plan, disaggregated pronouncement of

by sex and age (2020 baseline: sanctions 0) (OP 1.1)c R: Incomplete or inaccurate data hampering the

registration of target eligible recipients

A: Adequate numbers of sufficiently trained vaccinators to administer vaccinations by targeted date as per the government’s Vaccination Allocation Plan

R: Weaknesses in subnational supply chain systems disrupt delivery of vaccines to the health facility level, resulting in higher than acceptable wastage rate

R: Vulnerable groups not prioritized in practice due to political pressures or the diversion of human resources and logistics capacity to the employer- funded program

R: Weak governance and financial mismanagement of the government's Vaccination Allocation Plan

Appendix 1 17

Data Sources and Reporting Risks and Results Chain Performance Indicators Mechanisms Critical Assumptions A: The government will pay foremost attention to public education and awareness building measures for vaccination, while ensuring that imposition of sanctions will be used as a last resort

Output By 2022: 1. COVID-19 1a. At least 65 million dosesc of 1a–c. Ministry of A: Bio Farma’s vaccine vaccines procured ADB-financed COVID-19 Health quarterly logistics management and deployed to vaccine procured and deployed reports and Bio information system provinces under the government-funded Farma or tracking the geographic program in line with the Indofarma location and temperature government’s Vaccination quarterly reports of vials in real time to Allocation Plan (2020 baseline: enable timely corrective 0) (OP 1.1.2)d actions and minimize wastage

(Under the TA facilitye) A: Vaccines purchased by Bio Farma and 1b . Bio Farma’s Digital Indofarma meeting Healthcare Directorate’s vaccine APVAX vaccine logistics management ’s eligibility criteria in a information systemf upgraded timely manner and at least 30% of staff (at least 50% of whom are women) trained to use it (2020 baseline: not upgraded and 0 staff trained) (OP 1.1.1) 1c. Around 10 scholarships for internationally recognized certification in supply chain management awarded to Bio Farma employees, with at least 50% of scholarships awarded to women (2020 baseline: 0) (OP 1.1.1; OP 2.1.1) Key Activities with Milestones 1. COVID-19 vaccines procured and deployed to provinces 1.1 Procure COVID-19 vaccines (Q2 2021–Q1 2022) 1.2 Identify required upgrades to Bio Farma’s Digital Health Directorate’s vaccine logistics management information system and mobilize consultant support (Q2 2021) 1.3 Upgrade Bio Farma’s Digital Health Directorate’s vaccine logistics management information system, identify Bio Farma staff for training, and conduct training (Q2 2021–Q4 2021) 1.4 Identify and enroll suitable candidates, including women, in certification program in supply chain management (Q3 2021–Q2 2022)

Project Management Activities

18 Appendix 1

Data Sources and Reporting Risks and Results Chain Performance Indicators Mechanisms Critical Assumptions Bio Farma establish data collection systems to report on DMF indicators, including for sex- disaggregated data. Bio Farma and Indofarma submit annual audited project financial statements. Bio Farma prepare quarterly progress reports. Bio Farma prepare a project completion report. Inputs ADB: $450.00 million (APVAX RRC loan) and $0.35 million (TA)e Bio Farma and Indofarma: $345.00 million A = assumption, ADB = Asian Development Bank, APVAX = Asia Pacific Vaccine Access Facility, COVID-19 = coronavirus disease, DMF = design and monitoring framework, OP = operational priority, Q = quarter, R = risk, RRC = rapid response component, TA = technical assistance. a Government of Indonesia, Ministry of Health. 2021. MOH Decree No. 10/2021 on Implementation of Vaccinations to Control COVID-19 Pandemic. Jakarta. b ADB. 2020. ADB's Support to Enhance COVID-19 Vaccine Access. Manila. c The total expected number of doses is 65 million, sufficient for 27 million people, based on (i) two doses per person and (ii) a vaccine wastage rate of 15%. d The Government of Indonesia’s Vaccination Allocation Plan prioritizes access to vaccination for the following groups: (i) health care workers, with women representing 68.0% of health and social workers and 74.0% of nurses and doctors; (ii) civil servants, of whom 51.5% are women; and (iii) people aged 60 and over, of whom 52.36% are women. e ADB. Regional: Support for Human and Social Development in Southeast Asia. f Doses procured by Indofarma will also be tracked through Bio Farma’s Digital Health Directorate’s vaccine logistics management information system. Contribution to Strategy 2030 Operational Priorities Expected values and methodological details for all OP indicators to which this project will contribute results are detailed in Contribution to Strategy 2030 Operational Priorities (accessible from the list of linked documents in Appendix 2). In addition to the OP indicators tagged in the DMF, this operation will contribute results for OP 7.3.3 (measures to improve regional public health and education services supported in implementation). Source: Asian Development Bank. Appendix 2 19

LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/RRPs/?id=54425-001-3

1. Loan Agreement 2. Guarantee Agreement 3. Project Agreement 4. Vaccine Needs Assessment 5. Project Administration Manual 6. Contribution to Strategy 2030 Operational Priorities 7. Development Partner Coordination 8. Country Economic Indicators 9. Debt Sustainability Assessment 10. National Vaccination Allocation Plan 11. Strategic Procurement Plan 12. Summary Poverty Reduction and Social Strategy 13. Risk Assessment and Risk Management Plan 14. Indicative Master List of Eligible Items, and Agreed List of Acceptable Expenditure Items (‘Positive List’), for ADB Financing under the Rapid Response Component

Supplementary Documents 15. Eligibility Criteria for Use of Funds under the Rapid Response Component 16. Sector Assessment (Summary): Health 17. Financial Analysis 18. Financial Management Assessment 19. Due Diligence of Indonesia’s Medical Waste Management System