World Bank Document

Documentof FILE COPY The World Bank

FOR OFFICIALUSE ONLY Public Disclosure Authorized

Report No. P-2076-IND

REPORT AND RECOMMENDATION

OF THE

Public Disclosure Authorized PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMEt

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

TO Public Disclosure Authorized THE REPUBLIC OF INDONESIA

FOR AN

EIGHTH IRRIGATION PROJECT

May 16, 1977 Public Disclosure Authorized

This document has a restrieted distribution and may be used by recipients only in the performance of their official luties. Its contents may not otherwise be disclosed witdout World Bank authoriation. CURRENCYEQUIVALENTS

Currency Unit - Indonesia Rupiah (Rp)

US$1 = Rp 415 1 Rp = $0.0024 1 million Rp = $2,410

ABBREVIATIONSAND ACRONYMS

BIMAS - BimbinganMassal Swa Sembada Bahan Makanan "Mass Guidance for Self-Sufficiencyin Foodstuffs", a farm input-creditpackage program BUUD - Badan Usaha Unit Desa - Forerunner of KUD as Village Unit Cooperative DGWRD - Director(ate)-Generalof Water ResourcesDevelopment ELC-NK - Electro Consult - Nippon Koei INPRES - Instruksi Presiden - "Presidential Instruction" a rural public works program IPEDA - Iuran Penbangunan Dearah - Land Tax KUD - Koperasi Unit Desa - Village Unit Cooperative O&M - Operation and maintenance PUAT - Proyek Pengembangan Air Tanah - an executive body within DGWRD responsiblefor nationwidegroundwater investigations and development PROSIDA - Proyek Irigasi IDA - Agency of DGWRD created to execute Bank-assisted projects

GOVERNMENTOF INDONESIA FISCAL YEAR

April I - March 31 FOR OFFICIAL USE ONLY

REPORT AND RECOMMENDATIONOF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF INDONESIA FOR AN EIGHTH IRRIGATION PROJECT

1. I submit the following report and recommendation on a proposed loan to the Republic of Indonesia for the equivalent of $63 million to help finance an Eighth Irrigation Project. The loan would have a term of 20 years, including 4-1/2 years of grace, with interest a[t8.20% per annum.

PART I - THE ECONOMY

2. The last economic report on Indonesia, "Indonesia: Recent Developments and Medium-Term Perspective," of March 8, 1977 (1516-IND) described the recovery of the economy from the world recession and the financial troubles of Pertamina, the state oil company, and examined some of the important development issues which the country faces in the next few years.

3. During Indonesia's First Development Plan period (1969/70-1973/74)/1, the rehabilitation of the Indonesian economy was almost completed. Transport, power, irrigation works and other infrastructure facilities, after years of neglect, were greatly improved and strengthened. AgrLcultural oultput expanded at an average rate of 4.5% a year and foundations of modern industry - fertilizer, cement, etc. - were laid. During this pericd, the annual rate of economic growth exceeded 7.5%; domestic savings and investment also rose rapidly. With the start of the Second Development Plan period (1974/75- 1978/79), the Government expected that rehabilitation would be completed and a start made on a course of long-term development which would assure not only a satisfactory rate of economic growth but also a widier distribution of inicome. The first two years of the Plan were dominated by the developments in the oil sector - the sharp increase in the price oE oil and Pertamina's serious financial difficulties. The latter arose from Pertamina's undertaking of a large and diversified investment program without arraniging satisfactory financing. With the onset of the world recession, bank credit became much more restrictive. Pertamina was unable to roll over its short- term debt and failed to meet the financial obligations which were falling due. In the event, the Government stepped in and undertook to honor the oil company's obligations. The repayment of these obligations, along with the fall in export earLiltigsas a result of the recession, necessitated large foreign commercial borrowing, seriously strained the Government's budgetary resources and Indonesia's balance of payments, and led to a sharp decline in the foreign exchange reserves.

/1 Indonesian fiscal year April 1 to March 31. This documenthas a restricteddistribution and maybe usedby recipientsonly in the performance of theirofficial duties. Its contentsmay not otherwisebe disclosedwithout World Bank authorization. 4. During 1976/77 Indonesia's exports recovered strongly following improvements in the world economy, and rose to a level higher than expected earlier. Imports continued to increase rapidly, but the rate of price increase slowed down and Indonesia's terms of trade improved. Most of Pertamina's short-term debt had been repaid by the end of 1975/76, and disbursements on foreign borrowing continued to be high in 1976/77. As a result, Indonesia's foreign exchange reserves rose to a more comfortable level, i.e. $1.2 billion at the end of 1976 (and even higher levels in recent months) corresponding to about two months of imports.

5. The Government's budgetary position was also much better in 1976/77. With the boost in oil exports and a further renegotiation of oil contracts, oil revenues rose by close to 40%. Non-oil revenues also rose over and above the amounts budgeted, mainly as a result of Government efforts to curb smuggling and a more rigorous collection of customs duties. The additional revenues together with continued restraint in increasing current expenditures enabled the Government not only to increase development expenditures substantially but also to repay the debt to Bank Indonesia, which it had incurred in the previous year. This helped to neutralize the monetary expansion on account of the accumulation of foreign exchange reserves. The rate of inflation over the year decreased, from a high of 17% in the first quarter to only a modest increase in the last two quarters of 1976/77, giving an average increase of less than 15% for the year as a whole.

6. In 1976, the domestic economy recovered in other respects also. The available indicators suggest that industrial output and private investment rose faster than in the previous two years. The output and prices of tree crops rose with foreign demand, thus raising the incomes of the producers. This provided a welcome relief to the small producers, who had suffered from the declining foreign prices of their produce combined with rising domestic prices of consumer goods. However, the production of food crops slackened and rice output failed to rise appreciably for the second year in succession. The domestic price of rice was kept stable by means of very substantial imports, which reached 1.6 million tons (about 10% of domestic consumption) in 1976/77. Early in the year floods, and later on drought, affected both the wet season and dry season harvests. More importantly, a pest infesta- tion afflicted large areas in Java, particularly those planted with the high yielding varieties of rice, and the area under BIMAS and INMAS (the two credit extension schemes for rice growers) remained fairly constant over the last three years following a rapid increase during the First Development Plan period. Rice output also failed to increase because the use of fertilizer did not rise despite ample availability. The Government has now relaxed controls on the distribution of fertilizer and set its fertilizer/ rice price ratio at a level that should encourage fertilizer use.

7. The large increase in the oil revenues over the past three years has been invested, not consumed. Government development expenditures more than quadrupled over this period and in 1976/77 amounted to Rp 2 trillion (or about $5 billion); even after allowing for the high rate of inflation development expenditures rose in real terms by 35% a year. Rough estimates indicate that at present more than 20% of GNP is being invested in Indonesia. -3 -

8. The effect of the high level of investmentexpenditures, however, cannot yet be seen in the growth of the Indonesian economy. In fact, the economic growth in the first three years of Indonesia'sSecond Development Plan, i.e. 1974/75- 1976/77,has been somewhat slower than the observed long-term trend rate of 7.5% a year. The world recession,uncertainties following the Pertamina crisis and domestic inflation (whichmade certain domestic industriesuncompetitive with imports),all had a dampening effect on the growth of the economy. Indonesia'sgrowth rate also failed to accelerate because the economic benefits from investments Ln recent years have been slow in coming and because the growth in the privratesector slackened. New investmenthas been concentratedon relativelycapital-intensive industrial and infrastructureprojects with long gestation periods; some projects, such as Krakatau steel and the LNG, have been further delayed by slow implementation. Moreover, the realizationof economic benefits from investments in such sectors as transportation,telecommunications, etc. depends on the growth in demand which in turn is determined by the growth of the rest of the economy, which in Indonesia is mostly the private sector. Unfortunately, the private sector seems to have failed to provide the necessary momentum of growth. The indicationsare that investmentsin this sector, because of the Government'sattempts to control domestic inflation or because of the world recession,rose only modestly in the first two years of the Plan.

9. The orientationof the public sector investmentswas partly affected by the Government'stakeover of Pertamina'sprojects in the non-oil sector, but was also a result of its attempt to raise investment rapidly in response to the sharply rising oil revenues. It was easier and quicker to develop capital-intensiveprojects; plans for several of them in fact existed even before the improvementin public finances. On the other hand, new projects in such sectors as rural development,transmigration, health and education generallyrequired not only innovation but aLlsosetting up new institutions. Nevertheless,the Governmentviews the orientationof its investmentprogram with some concern. As part of its efforts to rescue Pertamina from bankruptcy,it initiateda careful review of all public sector investmentproposals and strengthenedits control over the direction of investments. Where practicable,the Government rejected or scaled down costly proposals. The budget for 1977/78 provides for a larger share of developmentexpenditures in such sectors as agriculture,health, family planning, education and regional development.

10. Reliable data on the recent trends in employmLentare not available. The labor force has been increasingat a rate of more than one million persons a year, but the current level of unemploymentand the extent of underemploymentare not known. While considerableinvestment activity and general economic prosperityis in evidence in urban and rural areas of Indonesia,there is no indicationthat the labor market has tightened or that the wages of unskilledworkers have more than kept pace with domestic inflation. However, the Government'sefforts at family planning appear to have yielded impressiveresults. Preliminaryestimates from an inter-censal survey in 1976 indicate that since 1971 the birth rate in Java and Bali has significantlydeclined. - 4 -

11. The long-termconsequences of the Pertamina crisis remain in the form of large foreign debt and burdensome unfinishedinvestment projects. The heavy foreign borrowing in the last two years has raised the level of debt service, which is now expected to reach $1.87 billion by 1980 or close to 17% of the projected export earnings compared to 13% in 1976. This does not take account of the contingentliabilities incurred with regard to the hire-purchaseof tankers, the exact amount of which is subject to litigation.

12. The prospectsfor Indonesia'sexport are generally good; the principal constraintis expected to be quantities availablefor export rather than foreign demand. Indonesia'sexport earnings,at least over the next five years, are expected to rise rapidly and it should not be difficult to meet the debt service obligationsand still to finance essential imports of consumer,intermediate and capital goods. However, to maintain the pace of development,Indonesia will continue to need a substantialinflow of foreign assistanceon concessionalterms. In order to keep the debt service burden manageable,resort to commercialborrowing in the next few years will have to be kept to a minimum. It is estimated that Indonesiawill need $2.1 billion in new external financingcommitments in 1977, and about the same amount next year, of which no more than one-thirdshould be on commercialterms. At the meeting of the Inter-GovernmentalGroup on Indonesia (IGGI) in April 1977, aid pledges of over $500 million from bilateral sources were made. The likely commitmentsfrom those IGGI donor countrieswhich did not pledge, from the multilateralagencies and from OPEC and East European countries should raise the total of official developmentassistance to $1.5 billion.

13. The heavy foreign debt service requirementswill also reduce the public sector resourcesavailable for investment. The net resource trans- fers from abroad are expected to decline from $1.56 billion in 1976/77 to about $640 million in 1980/81, or from about 5% to 1% of GNP. In order to maintain the high rate of domestic investment already reached, the Govern- ment would need to raise substantialadditional revenue over the next few years, the bulk of which would have to come from non-oil sources. The additional revenue raising effort is also necessary to keep inflation under control. The Governmenthas already taken steps in this direction;income tax procedures have been simplifiedand import duties are being more strictly enforced. These measures as well as some additionalones need to be vigorously pursued.

14. The medium-termoutlook of the Indonesian economy is good. Over the last eight years, GNP rose at an average rate of 7.5% a year, and food productionexpanded in step. This rate of growth could be maintained in future if the rate of investment continues to be high and the orientationof investmentsis shifted to less capital-intensiveforms. Thus the Government's efforts in mobilising domestic resourcesand careful investmentplanning would be crucial in maintaining the relativelyhigh rate of economic growth and creation of employment opportunities. The Government would also need to pay special attention to the production of rice, and food crops generally, so that the recent setbacks remain a temporarypheonomenon. PART II - BANK GROUP OPERATIONS IN INDONESIA

15. The discussion in Part I of this report underscores the need for a development program which provides productive work opportunities (with resultant increased incomes) for Indonesia's presently tnderemployed and growing labor force. Major efforts are needed to increase labor-intensive employment and programs directed towards improving the incomes of the poor and their living standards. To assist the Government in attaining its goals, the Bank is planning to increase its commitments to Indonesia and in particular to support projects designed to: improve agricultural cred[it;rehabilitate and expand irrigation systems; assist transmigration and other land development outside Java and Bali for and by smallholders; increase nonagricultural employment in the rural areas and small towns through the establishment of small- scale industries, rural credit schemes as well as vocational and nonformal education programs; develop the electric power system; construct urgently needed water supply and transport facilities; and expand the national family planning program.

16. As of March 31, 1977, Indonesia had received 37 IDA credits totaling $561.8 million and 23 Bank loans amounting to $1,155.5 million. At that date, IFC investments totaled $59.7 million. The share of the Bank Group in Indonesia's total external debt (disbursed) outstanding at the end of 1976 was about 6% and the share of debt service was less than 1%. By 1978 these ratios are expected to increase to around 12% and 5%, respectively. A summary statement of IDA Credits, Bank Loans and IFC Investments as of March 31, 1977, as well as notes on the execution of ongoing projects are contained in Annex II.

17. To date, agriculture accounts for just over one third of all Bank lending to Indonesia, including four IDA credits for estate rehabilitation, seven Bank loans and IDA credits for the rehabilitation and expansion of the irrigation systems, two for fisheries, and one each for seeds production, beef cattle, sugar, smallholder tea, smallholder rubber, agriculture research, food crop extension services, transmigration and nutrition development. The Operations and Evaluation Department of the Bank is undertaking a study of Bank Group lending in the agricultural sector. In the industrial sector, the Bank has assisted in three projects to expand PUSRI's fertilizer production and distribution capacity, three for development finance companies (Government- owned and private) which play a major role in fostering the growth of industrial enterprises, and one for the Pulo Gadung industrial eMtate. Loans and credits have also been extended to the education (including technical and agicultural education, textbook production, vocational and civil service training), telecommunications, tourism, power generation and distribution, transportation (including highways, inter-island shipping, railroads and ports), population, urban and water supply sectors. Also a loan was extended for a national resource survey and mapping project and four credits for technical assistance to aid the Government in preparing and formulating its development programs and projects.

18. Bank lending to Indonesia started with an IDA Credit in 1968 for irrigation rehabilitation; lending on Bank terms began in June 1974. Dis- bursements on loans and credits are now at satisfactory 'Levels. The - 6 -

Indonesian authorities have become increasingly aware of the cost to the country of the delays in project execution caused by cumbersome procedures and of the need to establish an effective control system in BAPPENAS (the National Development Planning Agency). At the Government's request, the Bank arranged in 1974 for assistance under the Fourth Technical Assistance Credit (Credit 451-IND) to help set up a monitoring and control system. It is hoped that the system which is due to commence operation shortly will lead to better project administration.

19. Six Loans have been made to Indonesia this fiscal year prior to the proposed loan; two other loans are being presented to the Executive Directors at this time, which would bring total lending to Indonesia this fiscal year to $375.5 million. Projects for nucleus estate development, development finance company (BAPINDO), population, small enterprise credit, rural credit and non-formal education are expected to be ready for presentation in the next several months.

PART III - THE AGRICULTURAL SECTOR

20. Increased industrial and mining output (mainly oil) along with banking, trade and other services have contributed to an average real growth rate of GNP of about 7.5% per annum over the last five years or so; on the other hand, agricultural output has grown by only 4-5% per annum. In real terms, agricultural production represented about 45% of GDP in 1970; preliminary estimates indicate that in 1975 that share had fallen to about 37%. Over the same period, the share represented by food crop production fell from 26% to 22%. The rapidly rising value of oil revenues has led to a decline in the importance of the agricultural sector as a contributor to total export earnings. Although exports of agricultural, forestry and fishery products currently account for about 80% of the value of non-oil exports, they repre- sent only about one-third of the value of total exports.

.21. Despite its declining share of GDP and the value of exports, agriculture remains a major force in the life and welfare of the Indonesian people. Some 80% of the population live in rural areas, and agriculture provides part or full time employment for about 70% of the total labor force.

22. Within agriculture, rice accounts for nearly one-third of the value of agricultural production, dominates the scene, and has a considerable bearing on the aggregate volume of food output. In the late 1960s, rice production increased at a rate of some 5% per annum; however, that rate declined to about 3.5% per annum in the early 1970s and remains at that level. In general, yield increases have been responsible for about three-quarters of production increases. With the potential for increasing the area under rice and other major food crops being limited to, at best, inferior soil types compared with those now being used, improving yields through improved agricultural services and/or rehabilitation of irrigation facilities assumes even greater importance. -7-

23. The urgency of increasingproductivity in foodgrainproduction on existing areas is emphasizedby the lack of suita'blesoils on the islands outside Java and Bali, and the continued growth in demand for grain. Increased agriculturalproduction was given high priority in Indonesia's First Five-YearPlan (1969-74),with strong concentrationof Government programs on rehabilitationof irrigationsystems, creation of price support policies, provision of funds for research and extension,and improved supply of inputs and credit to farmers. Nonetheless,imports of rice have fluctuated for some years around one million tons annually and, due to droughts, reached 1.6 million tons in 1976/77. Indeed, the drought during 1976 has highlightedthe vulnerabilityof foodgrainproduction to climatic effects; because of weather and the inroads made by pests and disease, rice production in 1976 recorded no growth comparedwith 1975.

24. Self-sufficiencyin foodgrain production,with emphasis on rice, is a goal set by the Government for its Second Five-YearPlan (1974-79). Attainment of this goal will require a growth rate of rice productionof at least 4% per year. If such a growth rate is to be achieved and sustained, there will be a need for further intensificationof irrigationdevelopment, includingcompletion of ongoing rehabilitation,groundwater development, drainage and flood control schemes, and constructionof storage dams to increase cropping intensityin areas already irrigated as well as to serve new irrigationareas.

25. Assistance to the Government'sirrigation development program has been provided by the Bank through the financingof seven irrigationprojects (Credits 127, 195, 220, 289, 514-IND and Loans 1100 and 1268-IND),the upgrading of staff of the JatiluhurAuthority (a semiautonomousagency presently involved in carrying out three Bank-assistedprojects), and financing of trainingprograms to strengthen the technicaland administrative capabilitiesof PROSIDA - an agency of the Directorate-Generalof Water ResourcesDevelopment (DGWRD)created to execute'Bank-assisted projects. A Bank mission which visited Indonesia in September/October1976 to review work on the above-mentionedprojects concluded that progress is generally satisfactoryand that most of the problems contributingto a number of the projects being behind schedule (early management difficulties,slow starts in engagementof consultants,unanticipated heavy rains in the 1973 dry season, and inflationwith its resultant cost overruns)have now been overcome. The mission recommendedthat the Government departmentsconcerned (Ministryof * Public Works and Power, BAPPENAS and Ministry of Finance) take steps to ensure a more timely release of funds required for operation and maintenance (O&M) and undertake a review of future O&M funding and staffing requirements. Production increaseson all projects were generallyin line with appraisal estimates,and the economic rates of return remain quite satisfactory.

PART IV - THE PROJECT

Background

26. Under the previous seven Bank-assistedprojects, rehabilitationof Government-maintainedirrigation systems has consistedprimarily of those -8-

aspects most essentialto put the much neglected systemsback to near normal working conditions- reconstructingheadworks and weirs, primary and secondary canals and appurtenantstructures. Financing for developmentof tertiary and quarternarycanal systems, necessary in order to eliminatewater having to flow from secondarycanals over 50-100 plots before reaching the farthest fields in the command area, has been provided under Credit 514-IND and Loans 1100 and 1268-IND.

27. PROSIDA prepared the feasibilitystudies for Madiun rehabilitation (Stage I) and for Ciujung drainage, assisted in the former by ELC/NK (consultants). With assistancefrom ELC/NK, the feasibilitystudy for the Madiun pilot groundwaterproject was prepared by P2AT, a specialunit of the DGWRD responsiblefor groundwaterinvestigations and developmentin Indonesia. The project was appraised in October/November1976 and the loan negotiated in Washington from April 18-25, 1977. The Governmentdelegation was led by Mr. Suyono Sosrodarsono,Director-General of Water Resources Development. The AppraisalReport No. 1468a-INDdated May 5, 1977, is being distributedto the ExecutiveDirectors separately;a loan and project summary is contained in Annex III, and supplementarydata in Annex IV.

Project Areas

28. The Madiun rehabilitationproject area, part of the 140,000ha Madiun irrigationsystem, is located on the slopes and flood plain of the Madiun and Solo river watersheds in East Java and consists of 26 irrigation systems, varying in size from 140 ha to 11,800 ha, covering 75,000 ha in total. Fully developedand controlledirrigation systems account for about 60,400 ha, and less developed and insufficientlycontrolled systems, 7,200 ha; the remaining7,400 ha are covered by simple or village irrigation. Bounded on the west by a range containingLawu mountain, by the slopes of Wilis mountain on the east, a low range of hills on the south and the Kendeng hills on the north, most of the project area is located on the valley floor, receiving the bulk of its irrigationwater from the Madiun River and its tributaries (Map 12634).

29. The Ciujung drainage project area is situated on the low estuary lands of the Ciujung River and comprises 5,700 ha in 16 parcels of irrigated land within the 24,300 ha Ciujung subprojectarea in West Java. Due to the river's low gradient, almost all of the project area is subjected to annual flooding (Map 12633).

30. Although data on farm size and land tenure is sketchy, available informationindicates an average farm size of 0.5 ha in both project areas. At Madiun, where landless laborers comprise about 22% of the estimated 1.1 million rural population,some 80% of the farmers are owner-operatorsand 20% sharecroppers. Landless laborers account for about 30% of the estimated 100,000 rural populationat Ciujung, where some 60% of the farmers are owner- operatorsand 40% sharecroppers.

31. During the wet season the major crop in both project areas is paddy, of which 65,700 ha at Madiun and the entire 5,700 ha at Ciujung is irrigated. The remaining9,300 ha at Madiun is covered by sugarcane. In the -9-

dry season, farmers at Ciujung irrigate about 850 ha of paddy; at Madiun, the sugarcane area is irrigated, as well as 15,000 ha of paddy, with partial irrigation of palawija /1 crops (of which the major one planted is soybeans).

Pro-lectDescription

32. The 140,000 ha Madiun irrigation system compirises117 distinct systems served by about 120 km of main canals, 700 km of secondary canals, 1,200 headworks and 2,500 hydraulic structures. Under the proposed project (Stage I), work on 75,000 ha of the system would cover: (a) rehabilitation or reconstruction of 216 headworks; (b) rehabilitation of 440 km of primary and secondary canals (including 1,400 structures, charnel clearing and lining); and (c) improvement of drainage systems, some!30,000 ha of tertiary works, about 450 km of inspection and access roads, and 338 km of telephone communication lines (for operation and maintenance). In addition, provision is made for construction of buildings for operation and maintenance (O&M) personnel, staff housing, and procurement of vehicles and equipment.

33. Construction of a pilot groundwater scheme for about 2,800 ha at three different locations (Balong, Caruban and Tanon) in the Madiun-Solo area would require: (a) drilling, casing and developing, to depths of 100-150 m, about 30 wells; (b) procurement and installation of 44 turbine pumps with diesel primemovers and construction of pumphouses; and (c) procurement of vehicles and equipment. Additionally, about 15 km of inspection and access roads would be rehabilitated, 4 km of new roads constructed and, in the Tanon area, about 3 km of tertiary and 15 km of quarternary canals and drains would be constructed. Provision is also made for local inservice and overseas training of operation and maintenance staff.

34. Implementation of the flood control and drainage plan in the Ciujung area would require: (a) rehabilitation and improvement of gated control structures, weirs, box culverts, pipe drains aLndcheck dikes, which are all appurtenant to existing surface drainage systetms; (b) rehabilitation of existing secondary drains and construction of about 7 km of primary and 30 km of secondary collector drains; (c) dredging of 7 km of river channel; (d) surfacing of 5 km of existing road, construction of about 200 km of new roads along the drainage embankments, and reconstruction of 5 bridges; and (e) procurement of vehicles and equipment. Work on th,edrains and river channel would include raising and reconstructing floodLprotection and road embankments.

35. The proposed project also makes provision fcor technical assistance to PROSIDA for: the expansion of the Audio-Visual TraLiningAids program (started under Loan 1100-IND); design of tertiary irrigation and drainage systems in the Cirebon and Rentang subproject areas; a text processing and centralized records depository and retrieval system for documents related to ongoing and future Bank-assisted projects; and additional large-scale mapping on all Bank-assisted irrigation projects under PROSIDA management.

/1 Palawija crops are those other than rice, sugar and estate crops. -10

Organization and Management

36. Implementation of the tertiary construction and rehabilitation works in Madiun, flood control, drainage works and inspection roads in Ciujung, and the technical assistance component under the proposed project would be the responsibility of PROSIDA. It would carry out day-to-day supervision of tertiary construction and rehabilitation works in Madiun and direct drainage works at field level in Ciujung through its subproject offices in those areas. Respon- sibility for implementing the groundwater pilot project would rest with P2AT; direction at field level would be carried out through its Madiun subproject office, which was established and strengthened under previous Bank loans and credits.

37. PROSIDA, who completed rehabilitation works under the First Irrigation project (Credit 127-IND) and is currently responsible for works under four other Bank-assisted projects, is one of the most efficient units of DGWRDand, with its long and significant experience in implementing irrigation projects in Indonesia, should have no difficulty in executing those components of the proposed project for which it would be responsible. Similarly, P2AT which, under the Fourth Irrigation project (Credit 289-IND) supervised the investigation of the groundwater potential in the Madiun-Solo area, is expected to have no problem in establishing the pilot groundwater subproject, which is an extension of these investigations. To ensure good coordination of the works within the overlapping service areas in Madiun, DGWRDhas appointed a subproject manager and a deputy subproject manager common to both PROSIDA and P2AT. During negotiations, assurances were obtained from the Government that: (a) the PROSIDA and P2AT subproject offices involved in project implementation would at all times be adequately staffed; and (b) should it be necessary to replace either the General Manager of PROSIDA or the General Manager of P2AT, consultations would be held with the Bank before new appointments are made (Section 3.07 (a) and (b) of the Loan Agreement).

38. Through Credit 289-IND and Loan 1100-IND, consulting services are being financed for the preparation of the Madiun rehabilitation and groundwater pilot project feasibility studies, as well as subsequent detailed engineering and continued groundwater investigations. Consulting services for studies and detailed design of drainage works were provided under Loan 1268-IND, and Loan 1100-IND provided for assistance in developing an audio-visual program for O&M training. Under the proposed loan, funds would be made available for consulting services to cover: (a) construction supervision of rehabilitation works, detailed design of tertiary systems, and a feasibility study for the proposed Bendo Dam in the Madiun project area; (b) preparation of detailed design and construction drawings for the pilot groundwater project, supervision of well drilling, installation of equipment, civil works construction, and operational guidance for the two years following implementation; (c) feasibility studies for large-scale groundwater development in the Madiun-Solo area; (d) supervision of construction of the Ciujung drainage works; and (e) design of the tertiary irrigation and drainage systems for the Cirebon and Rentang subprojects.]J In addition,

/1 Construction of the systems is being financed under Loan 1100-IND. - 11 -

consultingservices would also be provided for extensionand expansionof the audio-visualtraining program, and for identifyingand analyzing records managementproblems, text processing,and supervisingequipment installation and start-up and training staff for the records depositoryand retrieval systems.

39. In view of the substantialcost savings (see para. 42) and develop- mental benefits, the Governmentis endeavoringto encourage and develop local consultants. To upgrade the capabilityof these consuLtants,foreign firms would be encouragedto associatewith local firms approved by the Government and the Bank. A total of about 3,100 man-monthsof consultingservices would be required, of which about 2,620 (mainly for design ofEthe tertiary irrigation and drainage systems for Cirebon-Rentang)would be provided by Indonesian consultants. Given the scope and diversity of the project, the cost of consulting services (about 10% of total project costs) would not be out of line with costs of services for projects of this nature. To avoid possible implementation delays associatedwith the engagementof consultants,assurances have been obtained from the Government that consultantsacceptable to the Bank would be engagedby December 31, 1977, under terms and conditions approved by the Bank (Section 3.02 of the Loan Agreement).

AgriculturalSupporting Services

40. Farmers obtain credit from a number of sources, includingBank Rakyat Indonesia (BRI), village cooperatives(BUUD/KUDs), landlords, mer- chants and relatives. The main credit supplier is BRI who, through the BIMAS program, extends short-term loans to eligible A1 farmers for seed, fertilizer,agrochemicals, spraying and cost-of-livingexpenses. Currently, due in part to farmers' ineligibilityfor loans and in part to a shortage of BRI field staff to process and issue BIMAS credit applications,the program only covers 75% of irrigatedwet-season paddy, 37% of irrigated dry-seasonpaddy and 5% of the palawija area at Madiun, and, in Ciujung, 42% of the wet-season and 6% of the dry-season paddy. Rice seed, of which about 3,250 tons in the Madiun and 450 tons in the Ciujung project areas are currently used annually,are available through BUUD/KUDs or local seed farms.

41. At present, due to a shortage of trained staff, only BIMAS recipients are eligible for extension services. Participationwill be expanded through introductioninto the project areas of the Bank-assistedNational Food Crops Extension (NFCE) project (Loan 1267-IND). Fertilizer is supplied mainly under the BIMAS program and applicationrates are high and inconsistent with crop yields. This is primarily due to incorrectapplication procedures and timing, resulting in much of the fertilizerbeing wasted. Improved extension servicesunder the NFCE project will assist farmers in making more efficient use of fertilizer supplies.

/1 To be eligible for the loan, a farmer must not be more than two years overdue on his earlier BIMAS repayments. - 12 -

Prolect Cost and Financing

42. The estimatedproject cost is $118 million, of which $58.8 million (about 50%) would be in foreign exchange. Cost estimates include allowances for physical contingenciesof 10% for miscellaneousservices and 25% for the rehabilitationand drainage components. The latter is high because the costs have been based on sample areas where experienceunder ongoing irrigation rehabilitationprojects has shown that substantialadditional work is likely to be required after the existing structuresare dewatered. Provisions for price increasesdue to inflationamount to $24.3, or 21% of total project cost. For civil works, the assumed annual rates of inflation are 20% in 1977, 15% in 1978-79,and 12% in 1980-82. For equipmentand services they are 7.5% in 1977-79and 7% in 1980-82. Costs of consultingservices are based on recent contractssigned in Indonesia for similar services with local and foreign firms. The direct costs of foreign consultants(salaries, overseas allowance and company overhead and fee) amount to about $6,500/man-month. Including indirect costs (travel,housing, office and miscellaneousexpenses), the total cost would be about $8,000/man-month. By comparison,total costs of local consultantsamount to about $2,000/man-month.

43. The proposed loan of $63 million would finance 53% of total project costs, consistingof the foreign exchange componentplus an estimated $4.2 million of local costs of Indonesian consultants. The loan would have a repaymentterm of 20 years, including4-1/2 years of grace. The Government would provide to the various participatingagencies and units the remaining $55 million out of annual budget appropriations.

Procurement

44. Vehicles and equipmentfor constructionand operation (estimated cost $5.1 million including contingencies)would be procured after international competitivebidding in accordancewith Bank Guidelines. For purposes of bid evaluation,a preferenceequal to 15% of the c.i.f. price of imported goods, or the level of actual customs duty, whichever is lower, would be extended to qualifiedmanufacturers of these goods. Small off-the-shelf items of less that $10,000 each and limited to an aggregate total of $100,000, which are not suitable for internationalcompetitive bidding, would be purchased through normal Government procurementprocedures which are satisfactory to the Bank. There are sufficientsupplies of such goods to ensure adequate competition. All contractsfor vehicles and equipmentin excess of $100,000 in value would be submitted to the Bank for review before bidding and award. Mapping would be carried out under locally advertised contracts following usual Government procedureswhich are acceptable to the Bank. Con- sultants services would be procured in accordancewith Bank Group Guidelines.

45. Since drainage structures in Ciujung, small structuresfor tertiary systems in Madiun, and small pumphouses,power station buildings and tubewells in the Madiun-Soloarea are scatteredover a wide area and construction - 13 -

would occur over a period of about 5 years, they would be of little interest to international contractors. These works would, therefore, be carried out either by force account or locally advertised contracts following usual Government procedures, which were reviewed under previous Bank-assisted projects and are acceptable. This would equally applytto project works in the Madiun rehabilitation area, where the work is spretadover 75,000 ha in 26 separate service units with a great variety of work among the units. The preparation of detailed designs, construction drawings and specifications could be accomplished most efficiently by concentrating the work in each service unit and combining several units in each construction contract. Such groupings, even though they might be large in capital cost, would still not be attractive to international contractors because they would consist of a great number of relatively small and disparate constrtuctionactivities scattered over a wide area. Accordingly, assurances have been obtained from the Government that: (a) to ensure wide competition and upgrade the capability of the local contracting industry, the rehabilitation works (excluding tertiary networks) would be divided into a number of suitable contracts (minimum $125,000) that would enable large local contractors and joint ventures of small local firms to bid within the categories or classes for which Government regulations require them to be prequalified; (b) price escalation clauses, which are not normally provided in local civil works contracts, would be included in contracts extending beyond one year; (c) to minimize late construction starts, tenders would be advertised as bid documents are completed and bids would be processed even before the project implementation budget (DIP) is signed, although contract award and signing would only be done after the DIP is approved; and (d) for contracts estimated to cost $500,000 and above, documents would be submitited to the Bank for review before tendering and award (Schedule 4, Section B.l and D.l of the Loan Agreement).

Disbursements

46. Disbursement of the proposed loan would cover:

(a) 60% of total costs for civil works;

(b) 80% of total expenditures for mapping services;

(d) 100% of the foreign exchange cost of overseas training;

(e) 100% of the foreign exchange cost of directly imported vehicles and equipment; 95% of the exfactory cost of locally manufactured equipment; 65% for locally procured imported equipment (excluding vehicles); and 40% of total expenditures for locally procured vehicles.

In the case of the tertiary systems, disbursements would be made only if the withdrawal application is accompanied by a certificate from the site engineer stating that the quarternary canals and drains in the tertiary - 14 -

block have also been constructed(Schedule 1, para. 4(ii) of the Loan Agree- ment). Disbursementsfor force accountworks would be made against certifi- cates of expenditure,which would be retained by the Governmentand be made available for inspectionby Bank missions.

47. In order to enable PROSIDA to extend the contracts of consultants (engagedand funded under Credit 289-IND and Loan 1100-IND)who prepared the feasibilityreport and undertook detailed engineeringfor the Madiun rehabilitation subproject,set up the audio-visualtraining aids program, and prepared the Madiun-Solopilot groundwaterfeasibility study as well as continu- ing groundwaterinvestigations in the study area, it is recommendedthat expendituresfor consultingservices incurred from April 1, 1977, up to an amount of $100,000,be financed retroactively. In addition, since a number of bids for civil works under the project have already been processed and both PROSIDA and P2AT are anxious to award the contractsand have con- structioncommence as soon as possible,it is recommendedthat expenditures for civil works, up to a maximum of $1.0 million, incurred from April 1, 1977, be financed retroactively.

Operationand MŽaintenance(O&M)

48. During construction,and for a period of one year thereafter, PROSIDA, working with Provincial0&M staff, would be responsiblefor the operationand maintenance of tertiary systems and primary and secondary irrigationworks in Madiun. The systemswould then be formally turned over to the East Java Provincial IrrigationService, which would assume respons- ibilty for operating and maintainingthe primary and secondary systems. Assuranceshave been obtained from the Government that a water-user associa- tion would be formed in each tertiary unit (coveringabout 150 ha) in the project areas, to participatein the constructionof the tertiaries,utilize the improvedwater supplies,and operate and maintain the tertiary systems (Section4.06 of the Loan Agreement). The water-user associationswould collect 40-50 kg of paddy/ha from each beneficiary in order to meet O&M costs, a procedure that is currently being used on a number of pilot tertiary systems and has, in nearly all instances, resulted in the systems being adequately maintained.

49. Operation and maintenance of the Ciujung flood control and drainage works, and of inspection roads, would be the responsibilityof PROSIDA (workingwith ProvincialO&M staff) during constructionand for one year thereafter,before being turned over to the West Java Provincial Irrigation Service. The ProvincialIrrigation Service would then assume responsibility for O&M of the internal drains and inspectionroads along the embankmentsof the drains; the Directorate of Rivers for the main drainage channels;and the Kabupaten (District)for the district and village roads in the project area. During, and for a three-yeartransition period following establishment,P2AT would operate and maintain all works, including tubewells,pumps and diesel engines of the schemes in the groundwaterpilot project. The schemes would then be turned over to the East Java ProvincialIrrigation Service. To ensure proper O&M of the pilot project, assuranceshave been obtained from the Government that, within one year of project completion,a water-user associationwould be formed for each well for the purpose of establishingand - 15 -

collecting irrigation fees. Collection of these fees, based on the beneficiaries' capability to pay, would commence no later than one year after the well begins operating and would be used to cover part of P2AT's operating expenses, with the balance of the O&M costs during the transition period being provided by the Government. Once the schemes have been turned over to the Provincial Irrigation Service it would, during the first five years of well operation, gradually increase the fees in amounts sufficient to ensure sound O&M practices (Section 4.05(a) of the Loan Agreement). Assurances have also been obtained from the Government that, by June 30, 1981, it would furnish to the Bank a report on the implementation of the pilot groundwater project, including an assessment of the beneficiaries" capability to contri- bute to the project's replacement cost and its proposals for collecting such contributions from the beneficiaries. Based on this assessment, the water- user associations would establish and collect replacement charges in amounts to be agreed with the Bank (Section 4.05(b) of the Loan Agreement).

50. Although there have been some improvements Ln O&M services in the completed and ongoing irrigation projects, a major constraint has been the untimeliness of fund releases; in addition, there is still need for increases in budgetary allocations and trained staff. In its FY77/78 budget, the Government has allocated about Rp 3,350 million for O&M of all Bank-assisted irrigation systems, but further improvements in O&M services will only be realized if the allocated funds are released to the subprojects in a timely manner, and additional personnel employed to ensure that the available funds are effectively utilized. Accordingly, the following assurances have been obtained from the Government (Section 4.03 (b) and (c) of the Loan Agreement:

(a) adequate O&M funds, adjusted to keep pace with inflation and actual needs, would be allocated in future years for all Bank- assisted irrigation systems;

(b) the necessary steps would be taken to ensure that at least one- half of the annual budgeted O&M funds would be released to the subprojects by August 15 of each year and tlhebalance in equal quarterly installments until the total annual allocated amounts are fully released;

(c) to upgrade the standard of O&M services and effectively utilize the available funds, the number of qualified O&M personnel in Bank-assisted projects would be progressively increased until adequate staff levels, established by the Government in consul- tation with the Bank, have been attained; and

(d) by December 31 of each year, it would inform the Bank of the proposed number of O&M personnel and per ha budget for each subproject; by June 1 of each following year, it would submit the approved O&M budget; and by October 1, the staffing provisions.

Cost Recovery

51. Irrigators in Indonesia pay a land tax (IPEDA) assessed as a percentage of the value of production and, depending on the intensity of onfarm - 16 -

irrigationdevelopment, water charges for O&H of the system below the secondary turnout. As a result of a Government decision to provide special allocations under its local infrastructuredevelopment program (INPRES) on the basis of IPEDA collectionperformance, there has been a marked improvement in assessmentsand collectionrates in all irrigatedareas in Indonesia. The current average annual IPEDA rates are Rp 7,000/ha at Madiun and Rp 4,000/ha at Ciujung. At full project development,these rates (in 1977 prices) are expected to increase to Rp 12,000/haat Madiun and Rp 9,000/ha at Ciujung. Based on these incrementalrates, the cost recovery indices are 28% for Madiun rehabilitationand 9% for Ciujung drainage. The project charges in the Madiun area are consideredsatisfactory. The low level of cost recovery in Ciujung is acceptablesince the per capita incomes of some 70% of all farm families in the area would still be below the country'sabsolute poverty level. To ensure the irrigators'continued contributionstowards the maintenanceof project works, assuranceshave been obtained from the Government that: (a) under its laws and regulations,it would collect the adjusted IPEDA rates based on the increasedproductivity of all irrigated land rehabilitatedand constructedunder the project, at levels consistentwith the beneficiaries' capabilityto pay; (b) the amounts collectedwould be sufficientto ensure sound O&M practices and to recover a reasonableportion of capital costs during the project's useful life; and (c) the IPEDA rates collected for differentland classeswould be furnishedevery two years to the Bank for comments (Section4.04 of the Loan Agreement).

Benefits and Justification

52. The proposed project, by providing improvedwater control distribution and drainage,would increase crop yields and production on a total of 80,700 ha at Madiun and Ciujung. Production on the 2,800 ha served by the pilot groundwaterdevelopment component would also be increasedby providing a new source of irrigationwater and continued investigationof the groundwater resource. The project would directly benefit some 167,000 farm families (about 1.0 million people) and, through the provision of additionalemployment opportunities,some 49,000 landless laborers'families (about 294,000 people). On project completion,the increase in paddy productionis expected to total 93,000 tons annually (about 1.1 ton/ha, or 90 kg/person). After deducting the incrementalcost of imported chemicals,fuel and other farm inputs, the annual net foreign exchange savings would amount to about $26 million at full development.

53. Using, in all cases, a 30-year evaluationperiod; full benefits being attained 6 years after completionof construction;farm-gate prices for rice, soybeans, sugarcane and fertilizersbased on the Bank's commodityprice projectionsfor 1985 expressed in December 1977 constant prices; a shadow foreign exchange rate; and a seasonablyvariable shadow wage rate for unskilled labor, the economic rates of return would be 21% for the Madiun rehabilitation(which accounts for 75% of project costs), 18% for the Ciujung drainage (15.1% of project costs) and 13% for the Madiun-Solo pilot groundwater developmentcomponents (10% of project costs). The weighted economic rate of return for the three componentswould be 20%. Sensitivityanalyses indicate that, even taking into account cost overruns, reductionsand delays in benefits,valuing of farm labor throughoutthe year at market wage rates - 17 - and foreign exchange at the official exchange rate (Rp 415 US$1.00), the rates of return would not fall below 16% for the Madiun rehabilitaion,14% for the Ciujung drainage,and 9% for the pilot groundwaterdevelopment components.

54. The majority of the beneficiariesof the project would be small farmers and sharecroppers. At full project development (1986),per capita farm income at Madiun would increaseby 14-55% (from $35-110 to $40-170) and at Ciujung by 33-100% (from $30-50 to $40-100). An estimated 85-90% of the project areas' farm families presentlyhave per capita incomes at or below the estimatedabsolute poverty level of $95 (1975 prices). At full developmentthe project would increase this group's income on average by 40%, thereby raising above the absolute poverty level (but still below the 1975 Indonesianper capita GNP of $210) the incomes of one fifth to one quarter of the farmers in the group. The projectwould also benefit the landless labor force, by creating a demand for an additional4.9 million man-days of farm labor per year.

EnvironmentalEffects

55. The areas embraced by all three elements of the project have been under irrigationand cultivationfor many generationsand no permanent adverse ecologicaleffects are anticipatedfrom the project works. The use of fertilizersand pesticides is alreadywidespread in the project areas, where users are constantlyreminded of the toxic effect of pesticideson humans and domestic animals and urged to exercise care in their application.

PART V - LEGAL INSTRUMENTSAND AUTHORITY

56. The draft Loan Agreement between the Republic of Indonesia and the Bank, the report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement of the Bark and the text of a draft resolutionapproving the proposed loan are being distributedto the Executive Directors separately.

57. Features of the Loan Agreement of special interest are listed in Section III of Annex IV of this Report.

58. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank.

PART VI - RECOMMENDATION

59. I recommend that the ExecutiveDirectors approve the proposed loan.

Robert S. McNamara President

Attachments May 16, 1977 Washington,D.C. *.5;:I pzcA OsDT OTPage Ioflo4aiss 4ot0"t5# *SOCIAL INDICATR$U DATA $"gIavp1o 4"e L^"b-^"ggtK°" It"|&~~~~~0.*0---- ...... 0------9.-w-6 ...... -----*w-- *- ...... INDONCSIA REFERENCE COUNTRIES 1191O) TOTAL. 1943 NOST RECINT ASRIC. 2o3,6 *190 t970 ESTIMATE IANSLADESH INDIA PHILIPPINEtP

SNP PllERjITA (UISS) iOo 110.0 180.0 90,0 110.0 230.0

a . POPULATION.AND...... VITAL STATSIT1C5

POPULATION Cm;;:YR: MILLION) 95,4 116.3 131,6 70.8 547.6 3b,9

POPULATION DENSITY PER SQUARE NM. 50.0 61,0 69,0 496.0 167.0 123.0 PER S0. KH, SRICULTURAL LiND 15,.0 411,0 453,0 695.0 308.0 279.0 VITAL STATISTICS eRUDE BIRTH RATE 1/THOU, NV) 46,0 45.9 42,9 00, 1sD 44,2 CRUDE DEATH RATE (IT4OU,AV) 25.a 20.6 16,9 at2. 9 O3 Z tCNANT NORTALETY RATE (ITHOU) t2S.0/ab ; la 0o ;. 80,0 LIFE EXPECTANCY AT BIRTH CY*S) 47.5 ,. 4o.O 43,3 47,2 55.6 2.9 3.3 tROSS REPRODUCTIONRATE 2, 3.12 3., 3.1

POPULATION GROWTH RATE ttl TOTAL' 2.1 2.0 2.5/a 2. /a 2,3 3.0 UR8AN , 3.7/ 4.1 t3 4.0

URBAN POPULATION CX Of TOTAL) 14.9 17.S/b 10.2 6.4 1908 27.6

AtC STRUCTURE (PERCENTU 2 0 TO 14 YEARS 4 . /a 44.0 43.9 k46.4 41.6 45,6 Is TO ba YEARS 55,37 53.5 53.6 51O SS5 51.6 65 yEARS AND OVER 2. 2.5I 2;s 2.6 3.1 2.8

AIG DEPENODNCY RATIO 0,8 I 0 0, 0,9 ECO40MIC DEPENDENCY RATIO 09 013 1.16 lb II .S

FAMILY PLANNING 9 3 ACCEPTORS (CUMULATIVE. THOU) 25 : /c 6786.2 / Ism3ss .5, USERS (Y OF MARRIED WOMEN) , ., , 2.o

EMPLOYMENT

TOTaL LABOR FORCE (THOUSAND) 14600,0 44200.0 /A 2230o.0 21000. o 12300.o LAoR* FORCE Iw AGRICULTURE9 (XI 75.0 69 oO0 ;I ° 6/4 /a UNEMPLOYED tX OF LAIO FIRCE) 5,a ,, ., ,, 7.0

INCOmE DIS3TRUTyl3N

I or PRIVATE oNCOME RCECD 00. HIGHEST 5t OF HOUSEHOLDS , ,, 33 f/ I7/ 25, HIGHEST 20t OF HOUSEHOLDS , 52.0 4,23 53,1 LOwEST 301 or HOU4SHDLDS b a8 9 074 7 LOWEIT 40A Of WOUSEHOLDS .. *- 17,3 19.6 E 13.,

IS1TRISUTION OP LAND 0WNERSHIP ,-w... .. ,,.. S ONEND 8r TOP I0X Dr OWNERS 4H, O. 3'b.^J O S OWNED BY SMALLEST 10 ONNCRS 3:0n :.. 1' 0

HEALTHAND NUTRITION _...... 9 POPULATION PER PHYSNCIAN 41380:0 A 2b370,0 16870.0 7NooJ0 na 48 C0o POPULATION PER NURS INo PRSON 7?7630.0 7290. 0 420 ao3 5220. 0 POPULATIMN PER HOSPITAL BED 1370.0& 1640.0 L~1450.0 8 42 0: o0 I6bl 090,0

PER CAPITA SUPPLY OF - CALORIES (X OF REQUIREMENTS) 89.0 9t.0 98 0 .. n 100,o PROTEIN (GRAMS PER DAY) 43,0 43,0° - 545.7 .OF WHICH AOMA6L AND PULSE 15.0 14. n , .0 22,0 9,0 DtATH RATE C/THu) AGES 1.0 *. *. *. ..

EDUCATION

ADJUSTED ENROLLMENT RATIO 1 PRIMARY SCHOOL 59.0 69.0 79. 0 sf .0 / 6A$ 10 0, SCDAYSCHOOL 6.0 12.0 19.0 I5.7 40, tEARS Of SCHOOLING PROVIDED 1 (FIRST AND SECONO LEVELI 42.0 12.0 02.0 10.0 2. (10 VOCATIONAL ENROLLMENT tX OF SECONDOAR) 2407nO 9.0 32, 0 1 0 a 04 d e b ADULT LITERACY RATE (Xi 41.0 59.0 b2,0/, . 33,0

HOUSING

-E;S;NS PER RoOM (URBAN) ,, 2.1 OCCUPIED OWcLLINpS WITHOUT 2.1 PIPED WATER CR) ACCESS TO ELECTRICITy 76e R DOP ALL DWELLINiS) RURAL 4WLLINS8 CONNECTED 23,0 TO ELECTRICITY CX) . *..

CONSUNPTION a5.0 RADIS RECge IVf E ^ Rs (P[R THOU POP) 7.0 11 0.0 a9 o 6 0 21 0 PASSENgER,EARSO CPEN THOU POPi 1.0 2,.0 2,0 . 0 ELECTRICITY (owN/yR PER CAP) 15.0 20.0 27,0 10.0 1t,0 23S0 NEWSPRTNT CKGwYR PER CAP) 0.2 0.3 O0' 20,0 01, 235.0

see NOTES AND DEFINITION# ON RCVER;C MIMEX I Page 2 Of 4 pages

NOTES

Unless ethersaie noted, dote for 1960 refer to any year between 1959 and 1961, for 1970 between 1968 and 1970, and for Most Recent Ettieate betseen 1973 and 1975.

* Including West Irian.

** The Philippines has bero selected as an objective teentry for ito geographical similarity and hecause of its apparent advanced stage of economic develolpment.

L7DON7ESIA 1960 l/ Exlotdes West Irian; Lb 1962; /c 1951-56; /d 1961-63; /I 10 years and ever, ability to read or sfitf in either Latin or non-Latin charactern.

1970 /a 1961-71; lb 1971; /c 1968 to 1970; /d Including ridwiven; /e Total, hospital bed incosaplete.

MOST REC7ENTtSTldATE: /a 1970-75; /b 1976; /c 1971: /d 1968 to 1975; /e Mostly ucneplfyed c.orkers seetkig theif first job; /f Incene recipients,; Including midwives; /h 1972; /i 10 yearn and ever, ability to read or write in either Latin or ono-Latin characters; /j Not compsrable with 1970.

BANGLADESO 1970 Ia The 1970-75 population growth rate is uboconally Iee doe to thb effects of the car of independence and noss population movemnots across the borders during that period. Presently, the overage population growth rate is estimated at 3'i per annum; /b Ratio of pep.lation under 15 and 6i and over to total labor force; c 1966-67; /d 1967-68; /n Registered, net all practicing in the country; /f Goverasment hospital estoblishmests only; /g Approxinate enrollment as percentage of population in 6-10 and 11-15 age groups.

INDIA 1910 /a Ratio of population under 15 and 65 and over to labor farce age 15 and over; Lb 1907-68; /c 1ncluding oidwiven; /d 1967.

PHILIPPINES 1970 to As percentage of e.ploynoot; Lb Not including private vocational schools.

h16, may 5, 1977

DPI 7ITIONM OF SOCOAL7NDICATORS

Land Area (thou te2e Popu7atioe Per nursing perso- - PopulCtion divided by number of prac-icing Total - fotal surface area ceeprisiag land area and inland woters. nal and fenle gradcasce norao, "'rained" or "certified" n-raes, and Uaric. - Most recent eacirate of agricultural area need tonporarily or parse- auniliery pernsonnl with training or xpori.ence. e.ently for crops, pastures, rarket & kitchan gardens or to lie fallee. P-pvlabioe per buaictal bai -pfPtgtica dividd by nosber of hbspital beds availahie fo pubic and prlete inneral and apectaliend hospital and iNP per .apit. (5501 - CNP per capita entimates at current orkte prices, rehabilitation centers; eccludea nursing hanen and esrablishmnnts for .calculted by seen conver-ion -ethod as World Baek Atlas (1973-75 basis); custodial and preventive care. 1960; 1970 end 1975 dare. One capita -spl-c of caloence % of rCumeetl -teputed tens energy equivalent of n t fond supplies avilable in country per apits per day; pcralatlon and visal statistics ava~~~~~~~~~~ilablesupPlies noprise dosstin pruductlon ,ioputs lens ncpnrts, and Ponuleion "iid-vearnmlli"n)o of July first: if nat available, overage changes ic stuck; not nupplits ecrlode anital feed, seeds, quantities used at two end-year astixates; 1160, 1970 und 1975 data. in food process lg and loaso in distribution; acqirv ets wer estitnatd by Sac boar.d us physiolegleal nee ds for n-sa activity and health oonsid- Population dennisi - per square us - Mid-year Ppoulation per square kilqxeter eniag anvirncnnatal tneper-turn, body weights, age and se diatributions of (1D0 bectrreo) of total area. popalatian, and allowing lDM for wsate at household level. PoPulrti-n denoity - ver square ku of agric. 1god - Cqrpuetd as ob-ee for Par copitr sanelpy ci rprtei (gramr par dan) - Protein ntennt of per capita agricultural land pply. net supply of fuod per day; net aupply of fund is defined an above; raqoire- n-cc fur all ocatries established by USDA Ecuconic Raeanroh cervices Vital statistics provide icr a minimue allowance of 60 gaca of total protein per day, and trade birth rate Per thoosand. aenrage - An-..l live birth. per thousaed or 20 cross of sntnsi and pulse protein, of which 10 grees should be 1 naniai =id-year pepulaioc_; ten-year arithnetic averagen endiog in 1960 and 1970, protein; these standards are loer than those of 75 grn of tota protein and fit-yeer average ending n 1975 for sst recent etlstiete. and 23 grass of animal protein as anaverage for the world, proposed by FAf C'rude death rate per thousand. aree-. - Annual deaths per thousand of nid-year in the Third World Food Sa-ey popsll ion; tee-year arithnetic averageu ending in 1963 sad 1970 sad five- artf d PoIs - Proosin supply of fed year avanfgc ending ig 1975 Far nest recent setinata. darived free acioals ted pclsle in grose per day. mnfant aurtlito rate (/that) - Annual deaths of infapts under o.e year of age DSoth race (/thou) uegn 1-4 - Annual deaths per th usand In age greep 1-4 per tbousand lIce births. years, to children in this age greup; suggested an so indicator of Life enpectoncy at birth lyre' - .verage nuaber of yvars of life reusi"i`g at palnutrition. birth; usually ftiv-year averages ending ic 1960, 1970 and 1975 for deyelop- ing coutneies. Eduta.i.n reproduction,tta-,crrce-rons cumbar of live daughtera a conan will bear Adiustad eneclisecnt ratio - priaury school - Enrollment of all ages an per- in her normal repc-d-t rice periud if aheexperiences present age-apecifit cectage uf primary schoul-age pupulteino; intludes children aged 6-11 yearn fertility rates; usually five-year averages ending in 1960, 1970 and 1975 hot edjonted for different lengthc of pninary education; for cvuntine ith for developing counttien -uiversal education, enrullmeni msyex.eed 1007. osince popln re belo Ponplatiae creets rate (7. - totl - Compound annnal growth rates of nii-yesr or above the official schoal age. populatius fcr 1910-if 19fD an 905 dh,asted nasrellnet rfatla-seundary nchool - (spated as abore; secondary Populatita grown rate (Ml - urban - Cepotad like growth rate of total education requires at least fonc years of approved primary inetructio; papalerion; differenr dnfinition= of urban areac nay affect co-par-biloty of pro-ides generel vocational or tescrhe training uiatructions far pupil dsea enang cunstries. of 12 no 17 yearn of age; correspopdnenecourses one geperally cxcluded. Urban population (E of total; - Ratio of unban to tet1 pop.lanlte; different Yearaf nehaulinZ ero_ided (firs end second levels) - Total years cf definiti_na of urban areans ny affeet ronparability of dsts snosg eoeatries. echeoling; at econdary level, veat.etinl instruction nay be partially or ro:plenely exclsded. Mn7estructure ;eercnot) - Children (0-14 yars), working-age (15-64 years), sateol enrolment 1% of aecondarha - Iocaoirsei institutions include and retirnd (65rears slid Osar) as per aena sof nod-year papolantio. industrial at crier dthehical.proorose ,d,ote, operate independently or as Age deendeoncs retSo - oS-ia of populatipp nuder 15 and 65 and over to those dnpar-.ents of secondary institutions. of ages 15 thraugh t4 Adult literacy race III - Litarate adults (able to resd ond write) as per- iconeoel depende-cy ratio' Ralo of population under 15 and 65 and over to centage uf tatal adolt populaties aged 15 years and ever. the labor farte In age gru-y of 15-64 years. -at 2 fousin Fonilv slaselec tars 3L,stdut1ive, thou) - Icalative number of acceptprs of hirrh-r-c:, uS Oriens ,nd-'r sspies of national frpily placsing prugrac Persons rer ruee (urban) - Ahutrncnumber of p.rronu per rotm in oc-upied since 'srpIin conventional deellings in urban aras; dwellings exclude non-pernanent Faeily pIannin -osser (-/a ut ried ween) - Pectanen of married coaee ef strutturro and unoccupied parts. child-bearing ace (15-44 years) c use birth-control devices to all nrried .occupied dwellings withot pired cater (Y.) - Orcupied conventional d-llings senicustme afe fgrnap. it urban and rural areas witho-t inside or outside piped water facilities anpretge of aL cuieddelns geanloynent aecees ~~~~~~~~~~~~~toeleericity ( of a.ldldwttfc; oorusstldwgtnnar Total lahr force (chouand: - Eco-iceally sttlve persons, incilding armed eleatricity in livini qIartorn an petgst o tohtiln inrs and fornea and a-nployed but ercludiog housswives, ntudnnts, etc .; definitions rural r. in varios coautrfes a re rat cnpar.able. Rural dwellinfs connected to electricity 1) - Computed as above for rural Labor feoce in acri-sltor (7.) - Agricultural labor force (in farming, forestry, dwellings oly. h-ntinf and fishing) en percescage of total labor force. Une,ployed (Y of lobor foren - 'neepleynd are oneally defined as persona cho Ch.ons tion are able and willing to take a Job, out nf a job on a given day, rtmained out Radio r-ceivers (per thou pop) - A15 types of rneceiers fun radio broadcasts of a job, and sebking wark fan a specified nini-un perold 00t eaceeding one to general public per thousand of papulotion; encluden unlicenned retciv.e. week; nay not be cnpanable between countries doe t0 different definitiona in councrien and to years when ragistration of radio aets was in effect; of nn_ployed and aource of data, e.g., espley.ent office statiutlcs, s_ple data fis encent years nay nut bn conparabl nioce moai c.outries abolished ouryeys, cpoaplsary unemplgoyent inlitanae. inersfag. er ears9eerthateon) - P'asseng..ger carn cepninem otor earn seating Incoae distributimon - Percentage of private intone (both io cash and kind) less than night parseen; necludes onbolances, hnarses and Jilitary reeeived by richest 5%, richest 20%, poorent 20%, and poorest 40% of hPuse- vethiles. holds. Elent-icity (klh/vr per cap) - Annual eo-susption of industrial, cocercial, public and p tiornlnttrifty in hileeatt huaro Pen nepita. genearally Distribution of land erahip- Percentagea of land owned by weaIthiest 10% basn en pndci-a data,withou.t alowance for lassna in frida but aLlow and poorest 10% of land owners, ifg far imports aod exparts of electricity. Rewsonnit Ike/yr per conS - Per caPita on-1e censoption in kilsgn-n Health and Ngtrition re-strastdonsentle praduction piur net imponrta o neoptiprt. Populatien per physician - Ppoplatiot divided by nmaber af practicing physicians qualified frtn a =edical school at univnrsity level. ANNEXI Page 3 of 4 Dages

INDONESIA

ECONOMIC INDICATORS

GROSSNATIONAL PRODUCT IN 1975 ANNUALRATE OF GROWTH(%, constant prices)

US$ Mil % 1960 *.55 1965 _70 1971-75

GNP at Market Prices 28,146 100.0 1.9 4.9 7.1 Gross DomesticInvestment 6,891 24.5 3.3 11.5 17.1 Gross NationalSaving 5,634 20.0 5.8 5.1 Current Account Balance -1,257 - 4.5 Exports of Goods, NFS 4,738 16.8 1.5 7.8 6.5 Imports of Goods, NFS 5,533 19.7 0.2 10.9 27.1

OUTPUT, LABOR FORCE AND PRODUCTIVITYIN 1971

Value Added Labor Force-/ V. A. Per Worker US$ Nil Mil ____

Agriculture 4,221 44.8 30.5 69.0 138 65.0 Industry 1,915 20.3 3.0 6.8 638 300.0 Services 3,279 34.9 8.3 18.8 395 185.0 Unallocated - - 2.4 5.4 Total/Average . 9,415 100.0 44W.2 213 100.055

GOVERNNIT FINANCE CentralGovernment (Rp Bil.) - % of GDP 1976/77* 1975/76 1975 1974 Current Receipts 2,904 2,201 18.1 17.0 CurrentExpenditure 1,613 1,247 10.2 10.2 Current Surplus 1,291 954 7.8 7.7 CapitalExpenditures 2,070 1,425 11.7 9.8 ExternalAssistance 784 492 4.0 2.4 * Provisionalestimates.

INMI, CIRDIT and PRICES 1971 1972 1973 1974 1975 1976 TBillion Rp outstandingend period)

Money and Quasi Money 469 695 987 1,452 1,995 2,645 Bank credit to Public Sector 387 333 357 412 1,637 1,752 Bank Credit to Private Sector 317 500 908 1,163 1,353 1,690

(Percentagesor Index Numbers) Money and Quaai Money as % of GDP 12.8 15.2 14.6 14.8 16.4 GeneralPrice Index (Sept. 1966 = 100) 642 807 1,028 1,370 1,640 1,873 Annual percentagechanges ins GeneralPrice Index 2.6 25.7 27.4 33.3 19.7 14.2 Bank credit to Public Sector .. -14.0 7.2 15.4 297.3 7.0 Bank creditto Private Sector *- 57.7 81.6 28.1 16.3 24.9

NOTEs All conversionsto dollars in this table are at the average exchange rate prevailing during the period covered. 1/ Conversionat an exchangerate of Rp 390 = US$1. 2 Total labor force; unemployedare allocatedto sector of their normal occupation. "Unallocated" consists mainly of unemployedworkers seekingtheir first job.

not available

not applicable

East Asia & Pacific Programs

April 30, 1977 ANNEX I Paee 4 of 4 pages

T1AD3 PADMEITSAND CAPITAL FLOWS

BALANCEOF PAYMNTS mERCHANDISEgXPORTS (AVRRAGE1973475)

1974 1975 1976 US $ Mil % (MillionsUSS) Provisional

Exports: 4351 4738 6033 Oil (net) 1897 50.4 Oil (net) 2169 2921 3650 Rubber 416 11.0 Non oil 2182 1817 2383 Timber 602 16.0 Imports -4220 -5533 -6297 Palm oil 132 3.5 Resourcegap 131 - 795 - 264 Tin 138 3.7 Factor service: - 210 - 462 - 781 Coffee 99 2.6 Interest - 64 ; 178 - 354 Investmentincome - 146 - 284 - 427 All other commodities 483 12.8 Balance on CurrentAccount - 79 -1257 -1045 Total 3767 100,0

Direct Foreign Investment 462 497 432 ExTERNA.LDEBT. DECEMBR 31, 1976 Net MLT Borrowing Disbursements 664 2395 2365 US $ Mil Amortization - 80 - 322 - 435 Subtotal 584 2073 1930 Public Debt, incl. guaranteed 10,140 Capital Grants 62 .. .. Non-Guaranteed Private Debt .. Other Capital (net) - 126 -2250 - 205 Total outstanding& Disbursed Other items n.e.i - 214 - 46 -_37 1/ Increasein Reserves (+) 689 - 983 737 DEBT SERVICERATIO for 1976-

Gross Reserves(end year) 1473 590 1494 Net Reserves (endyear) 1472 489 1226 Public Debt. incl. guaranteed 13.1 Non-GuaranteedPrivate Debt Fuel and Related Materials Total outstanding& Disbursed Imports 4 120 152 of which: Petroleum 1 116 146 Exports of which: Petroleum 2169 2921 3650 IBRD/IDALENDING , arch 31, 1977? Million US$

IBRD IDA RATE OF EXCHANGE _ Outstanding& Disbursed 254.4 423.5 UNuoh July1971 Since August 1971 Undisbursed 901.1 138.3 as $1l.OO = Rp 375 US $1.00 = Rp 415 U disbursed 1,155.5 863 Rp 1000 = US$2.67 Rp 1000 = US$2.41

1/ Ratio of Debt Serviceto Exportsof Goods and Non-FactorServices, with oil exports on a net basis (i.e. escludingfactor payments and importsof the oil companies)

not available

not applicable

East Asia & Pacific Programs

April 30, 1977 ANNEX II Page 1

THE STATUS OF BANK GROUP OPERATIONS IN INDONESIA

A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of March 31, 1977)

Loan/ US$ Million Credit Fiscal Amounts (less cancellations) Number Year Purpose Bank IDA Undisbursed

Ten credits closed 113.4 0.0

155 1969 Agricultural Estates 16.0 0.1 194 1970 Second AgriculturalEstates 17.0 0.5 195 1970 Second Irrigation Rehabilitation 18.5 0.5

220 1971 Third Irrigation Rehabilitation 14.5 0.9 246 1971 Seeds 7.5 1.5 259 1971 Tea 15.0 2.7 260 1971 Second Highway 34.0 0.7

288 1972 Second Education 6.3 1.3 289 1972 Fourth Irrigation Rehabilitation 12.5 0.7 300 1972 Population 13.2 6.6 310 1972 Development Finance Co. (BAPINDO I) 10.0 0.7 318 1972 Inter-Island Fleet Rehabilitation 8.5 2.3 319 1972 Fourth Agricultural Estates ; 11.0 4.7

334 1973 Second Electricity Distribution 40.0 4.5 355 1973 Beef Cattle Development 3.6 1.6 358 1973 North Sumatera Smallholder 5.0 1.6 Development 387 1973 Third Education 13.5 8.4 388 1973 Third Highway 14.0 2.8 399 1973 West Java Thermal Power 46.0 13.2 400 1973 Smallholder and Private Estate Tea 7.8 7.0 405 1973 Sugar Industry Rehabilitation 50.0 8.1

428 1974 Pulo Gadung Industrial Estate 16.5 10.8 436 1974 Private Development Finance Co. of Indonesia (PDFCI) 10.0 6.3 451 1974 Fourth Technical Assistance 5.0 4.2 479 1974 Bali Tourism 16.0 14.6 480 1974 Fisheries Credit 6.5 3.3

514 1975 Jatiluhur Irrigation Extension 30.0 28.7 ANNEX II Page-2

Loan/ (US$ Million) Credit Fiscal Amounts (less cancellations) Number Year Purpose Bank IDA Undisbursed

1005 1974 Railway 48.0 35.0 1040 1975 Jakarta Urban Development 25.0 8.0 1049 1975 Five Cities Water Supply 14.5 12.3 1054 1975 Development Finance Co. (BAPINDO II) 50.0 24.6 1089 1975 Second Fertilizer Expansion 115.0 10.9 1100 1975 Sixth Irrigation 65.0 60.2 1127 1975 Fourth Power 41.0 31.9

1139 1976 Fertilizer Distribution 68.0 20.9 1179 1976 Agricultural Research and Extension 21.5 21.5 1197 1976 National Resource Survey and Mapping 13.0 12.9 1236 1976 Fourth Highway 130.0 127.9 1237 1976 Fourth Education 37.0 36.1 1250 1976 Second Shipping 54.0 54.0 1254 1976 Third Fertilizer Expansion 70.0 42.6 1259 1976 Fifth Power 90.0 90.0 1267 1976 National Food Crops Extension 22.0 22.0 1268 1976 Seventh Irrigation 33.0 31.8

1318 1977 Transmigration & Rural Development 30.0 30.0 1336 1977 Second Urban Development 52.5 52.5 1337 1977 Tanjung Priok Port 32.0 32.0 1363 1977 Second Private Development Finance Co. of Indonesia (PDFCI-II) 15.0 15.0 1365 /a 1977 Sixth Power 116.0 116.0 1373 1977 Nutrition Development 13.0 13.0

Total 1,155.5 561.3 1,039.4 of which has been repaid 0.9 0.0

Total now outstanding 1,154.6 561.3

Amount sold 0.1 of which has been repaid 0.0 0.1 0.0

Total now held by Bank & IDA /b 1,154.5 561.3

Total undisbursed 901.1 138.3 1,039.4

/a Not yet effective.

/b Prior to exchange adjustment. ANNEX II Page 3

B. STATEMENT OF IFC INVESTMENTS (as of March 31, 1977)

Fiscal US$ Million Year Loan Equity Total

1971 P. T. Semen Cibinong Cement 10.6 2.5 13.1 1971 P. T. Unitex Textiles 2.5 0.8 3.3 1971 P. T. Primatexco Indonesia Textiles 2.0 0.5 2.5 1971 P. T. Kabel Indonesia Cable 2.8 0.4 3.2 1972 P. T. Daralon Textile Manuf. Corp. Textiles 4.5 1.5 6.0 1973 P. T. Jakarta Int. Hotel Tourism 11.0 - 11.0 1973 P. T. Semen Cibinong Cement 5.4 0.7 6.1 1974 P. T. Primatexco Indonesia Textiles 2.0 0.3 2.3 1974 P. T. Monsanto Pan Electronics 0.9 - 0.9 1974 P. T. PDFCI Devl. Fin. Co. - 0.5 0.5 1974 P. T. Kamaltex Textile 2.4 0.6 3.0 1976 P. T. Semen Cibinong Cement 5.0 1.5 6.5 1976 P. T. Semen Cibinong Cement - 1.1 1.1 1977 P. T. Daralon Textile Manuf. Corp. Textiles 0.2 - 0.2

Total 49.3 10.4 59.7

Less: sold or repaid and cancellei 22.3 1.7 24.0

Total held by IFC 27.0 8.7 35.7

Undisbursed (including participants portion) 3.1 0.4 3.5 ANNEX II Page 4

C. PROJECTS IN EXECUTION /1

Cr. No. 155 AgriculturalEstates: US$16 Million Credit of June 20, 1969; Effective Date: December 10, 1969; Closing Date: December 31, 1976

The credit is fully committed.

Cr. No. 194 Second AgriculturalEstates: US$17 Million Credit of June 15, 1970; Effective Date: February 9, 1971; Closing Date: June 30, 1977

Project progress is good in the oil palm group which has surpassed the appraisal report target for new planting by 100%. Progress in the rubber group has been unsatisfactory with only 50% of the appraisal report target for new planting achieved. Planting costs are excessive and investment planning weak. The project has suffered from management deficienciesand shortage of funds for investment. The Minister of Agriculture has recently made the necessary changes in managementof the rubber group and the Govern- ment is expected to review its financialpolicies, particularlywith regard to dividends.

Cr. No. 195 Second Irrigation Rehabilitation: US$18.5 Million Credit of June 15, 1970; Effective Date: December 31, 1970; Closing Date: November 30, 1977.

Progress has been delayed first by initial difficulties in equipment procurement and civil works execution, and later, by rising construction costs. Project completion will therefore be about 2-1/2 years behind schedule. The rehabilitated and new facilities are technically sound and hydraulically adequate. The quality of maintenance of completed works is improving with the availability of operation and maintenance funds substantially higher than previous levels. The credit is about 96% disbursed and the remaining funds will finance all outstanding civil works. The estimated project cost has more than doubled since appraisal due to high inflation rates and increases in contract quantities, but the estimated economic rate of return remains satisfactory because rice prices and yields have been higher than those projected during appraisal.

/I These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II Page 5

Cr. No. 220 Third Irrigation Rehabilitation: US$14.5 Million Credit of November 6, 1970; Effective Date: May 28, 1971; Closing Date: December 31, 1977.

Overall project completion is expected by October 1977, about two years behind schedule. The problems which caused this delay - difficulties in preparation of contract documents, late financial allocations, heavy rains in the 1973 construction season and, more recently high inflation rates and consequent civil works cost overruns - have been mainly overcome, but time lost cannot be regained. The quality of maintenance of completed works is improving with the availability of operation and maintenance funds substantially higher than previous levels. The estimated project cost is about twice the appraisal estimate, but rice prices and yields substantially higher than those projected at appraisal enable the project to achieve an estimated economic rate of return of over 20%.

Cr. No. 246 Seeds: US$7.5 Million Credit of May 1l, 1971; Effective Date: December 7, 1971; Closing Date: September 30, 1977.

Construction of the irrigation infrastructure and the seeds processing plant has been completed satisfactorily. Land development at Sukamandi will be limited to about 1,600 ha (65% of appraisal estimates) by the Closing Date to enable the project authorities to consolidate production and other operations. Significant results for 1976/77 are expected to be: (a) area under production - 1,800 ha (58% of the appraisal estimate), (b) yields of rice seed - 3.5 tons per ha (87%), and (c) production of certified seed - 4,900 tons (42%). Due mainly to the delay in the development of irrigation infrastructure, and partly to overly optimistic assumptions during appraisal, the targets for per ha yield and certified seed production will not be achieved by September 1977. Due to cost escalation and implementation difficulties, only one seed multiplication district, out of the three planned at appraisal, has been developed. Based on present levels of production the National Seeds Corporation (NSC) is not commercially viable and will need continued financial support from the Government. The future of the project and of NSC depend on Government policy for the further development of the seed industry.

Cr. No. 259 Tea: _US$15 Million Credit of June 24, 1971; Effective Date: September 17, 1971; Closing Date: June 30, 1978.

Agricultural achievements to date have far exceeded appraisal expec- tations necessitating construction and rehabilitatiLon of three additional factories. Project completion, estimated for December 1977, can probably be advanced. Rising costs are creating pressure on available funds and the main challenge for the two PTPs will be to reduce working capital requirements, as well as overhead and indirect costs, and improve labor productivity. ANNEX II Page 6

Cr. No. 260 Second Highway: US$34 Million Credit of June 24, 1971; Effective Date: August 10. 1971; Closing Date: December 31,1978.

Quality of work is satisfactory and cost overruns have been relatively small despite sharp price increases due to efforts to reduce construction quantities, and to cost savings for consulting services. Construction work is completed; however, postponement of the Closing Date to December 31, 1978 has been agreed to permit payments for the completion of detailed engineering of the Padang-Medan Road, the initiation of which was delayed to reconsider road design standards in relation to those recently developed for the highway betterment program and to take into account IDA's recommendations regarding standards for urban portions of the road.

Cr. No. 288 Second Education: US$6.3 Million Credit of March 9, 1972; Effective Date: June 7, 1972; Closing Date: March 30, 1978.

The project is about 12 months behind schedule because of late appointment of consultant architects and lack of funds to meet cost overruns. The main causes of delay have been overcome and significant progress is being made. All civil works are expected to be completed by September 1977. Furni- ture and equipment are being delivered. The expert services are virtually completed. Progress of the fellowship program and teacher training is satisfactory. The Government has made budgetary provisions to meet the cost overruns. Disbursements have improved. Delayed implementation required postponement of the Closing Date by 15 months to March 30, 1978.

Cr. No. 289 Fourth Irrigation Rehabilitation: US$12.5 Million Credit of March 9, 1972; Effective Date: May 5, 1972; Closing Date: June 30, 1977.

The construction program has escalated in cost by 190% over the appraisal estimate due to an increase in the magnitude of the works and price escalation due to unexpected inflation. The bulk of the remaining work will be accomplished largely with Government funds. Completion of the project is expected by September 1978. The Government has therefore, requested that the Closing Date be postponed to December 31, 1978. Feasibility studies included in the project have been completed and groundwater investigations are nearing completion.

Cr. No. 300 Population: US$13.2 Million Credit of April 20, 1972; Effective Date: November 2, 1972; Closing Date: June 30, 1978

The national family planning program, of which the project is an integral part, is expanding in terms of the numbers of new acceptors recruited annually and now covers about 15% of all married women in the reproductive age group. Implementation of the civil works component is now on schedule; because of the shift in strategy from static to mobile services, and because of a large scale Government-financed program to construct and rehabilitate ANNEX II Page 7

Maternal and Child Health/Family Planning centers, the Government has requested a reduction'in the number of centers to be constructed under the project, to which IDA and the United Nations Fund for Population Activities (as partners in jointly financing the project) have agreed.

Cr. No. 310 Development Finance Co. (BAPINDO I): US$10 Million Credit of June 7, 1972; Effective Date: August 10, 1972; Closing Date: August 31, 1977.

Prior to the original Closing Date which was December 31, 1976, about $700,000 remained undisbursed and the Closing Date has been postponed to August 31, 1977 to allow time for BAPINDO to submit documents for reimbursement.

Cr. No. 318 Inter-Island Fleet Rehabilitation: US$8.5 Million Credit of June 28, 1972; Effective Date: October 19, 1972; Closing Date: September 30, 19713.

At the request of the Government the Clos:ing Date has been postponed to September 30, 1978 in order to provide for several new projects of ship rehabilitation. It is expected that the Crediitwill be fully disbursed by the new Closing Date but that, due to sharply increased costs, just over half the tonnage of shipping expected at appraisal will have been rehabilitated.

Cr. No. 319 Fourth Agricultural Estates: US$11 Million Credit of June 28, 1972; Effective Date: January 30, 1973; Closing Date: June 30, 1981.

Physical progress of the project which is being executed by PNP X, a Government-owned estate group, continues to be satisfactory, with plantings of rubber and oil palm ahead of appraisal estimates and in excellent condition. Coffee is a promising crop, and cloves planted in 1974 are growing well. A hybrid coconut seed garden has been established, the first in Indonesia. PNP X management needs to pay more attention to cost control and financial planning. Substantial cost increases have taken place largely due to an expansion in the size of the program compared with appraisal estimates. The Government has agreed to provide part of the shortfall in project funding and discussions with the Government are proceeding on a proposed increase in the budgetary allocation. PNP X is participating in the execution of smallholder development under the Transmigration and Rural Development: Project (Loan 1318-IND) and the proposed Nucleus Estates and Smallholders Project.

Cr. No. 334 Second Electricity Distribution: US$40 Million Credit of September 29, 1972; Effective Date: March 12, 1973; Closing Date: December 31, 1977.

The Jakarta distribution program financed from Credits 165-IND and 334-IND (together $55 million) encountered implementation delays due to procurement problems and cumbersome management procedures. As a result the project is ANNEX II Page 8

two years behind the original schedule. These difficultieshave been resolved and recent progress is encouragingand no further delays are expected. The Closing Date has been postponed from December 31, 1976 to December 31, 1977.

Cr. No. 355 Beef Cattle Development: US$3.6 Million Credit of January 31. 1973: EffectiveDate: May 30, 1973; Closing Date: March 31. 1980.

Several problems have seriously delayed project implementation. Government'sbudget allocation has been insufficient,and financialmanage- ment and coordinationhave been weak. The last supervisionmission undertook a thorough project review and its recommendations,which include major changes in project scope and objectives,are being prepared for considerationby the ExecutiveDirectors.

Cr. No. 358 North Sumatera SmallholderDevelopment: US$5 million Credit of February 14, 1973; EffectiveDate: August 13, 1973; Closing Date: December 31, 1981

The project'sgoals of oil palm and rubber plantings by smallholder participantsshould be completedby the end of 1977 at the present rate of progress, which is now ahead of schedule. Costs of the project have increased from $10 million estimated at appraisal to about $26 million by completion date. However, higher than anticipatedoutput of and prices for rubber and palm oil and changes in project development techniqueshave more than compen- sated the cost increases, and the project's return to the economy is likely to be higher than anticipatedat appraisal. No effectivemechanism for the credit-assistedportion of the project has yet been developed.

Cr. No. 387 Third Education: US$13.5 Million Credit of June 1, 1973; EffectiveDate: August 29, 1973; Closing Date: December 31, 1981

The project finances the production and distributionof 138 million primary school textbooks,and related in-service training for 350,000 primary school teachers. Distributionof the first 31 million textbookshas been completed and they are beginning to be used in schools this year. Production of 49 million textbooksscheduled for 1976 is well under way. Book delivery has been improved and teaching equipment has been procured and delivered. Teacher training continuesto proceed on schedule. Project management has been strengthenedby addition of Indonesianstaff to a reorganizedproject unit, and by recruitmentof specialistsunder a technicalassistance contract signed with UNESCO.

Cr. No. 388 Third Highway: US$14 Million Credit of June 1, 1973; EffectiveDate: June 25, 1973; Closing Date: June 30, 1977.

Constructionwork on the two North Sulawesi road sections included iRvethgeeRioAgiRaysmat§fllfegegfiAXbp 18ZiiSi;ie* r& fieffl aVvs ANNEX II Page 9

and extra amounts of unforeseen work. The project: is 50% complete and the Closing Date will probably have to be postponed by one year. Project costs are likely to exceed original estimates by 80% mainly due to sharply escalated prices. As a :onsequence, the disbursement rate for construction is now in the process of being lowered. The training program has been successfully completed. Feasibility studies and detailed engineering for the road betterment program are nearing satisfactory completion.

Cr. No. 399 West Java Thermal Power: US$46 Million Credit of June 22, 1973; Effective Date: August 28, 1973; Closing Date: June 30, 1978.

Bids received for the first two 100 MW units at Muara Karang were about 65% higher than estimated at the time of appraisal. This, together with construction cost increases, has resulted in an increase in the total project cost of more than 100%. Government will provide the additional funds required. PLN has satisfactorily met the initial targets in its financial recovery plan provided for under the terms of the Credit Agreement.

Cr. No. 400 Smallholder and Private Estate Tea: US$7.8 million Credit of June 22, 1973; Effective Date: November 30, 1973; Closing Date: March 31, 1982.

Fewer than anticipated credit applications have necessitated scaling down project targets from 10,000 ha to about 6,000 ha for smallholder tea and from 3,500 ha to 2,300 ha for estates tea. The demand by farmers for technical assistance has been encouraging. Over 3,000 farmers have been instructed in tea cultivation at village level courses and at the Project Management Unit (PMU) training center. The project spin-off has been excellent; about 2,000 ha of tea were replanted or rehabilitated using funds outside the credit program but still under the influence of the PMU. A marketing study indicates that tea consumption in Indonesia increases by 5% yearly and all of the tea produced by the project will be consumed domestically. Tea prices at farm level are well above appraisal estimates which is part of the reason why farmers have been reluctant to apply for long-term credit.

Cr. No. 405 Sugar Industry Rehabilitation: US$50 Million Credit of June 26, 1973; Effective Date: April 22, 1974; Closing Date: June 30, 1979.

The scope of the project has been reduced by the deletion of six minor rehabilitations from the project description due to cost overruns. The revised project consists of the major rehabilitation of two factories and the construction of a new factory together with associated agricultural development, sugar research and technical assistance components. Due to late project start-up and delays in arranging consultancy services, project completion will be delayed by one year. Factory construction and rehabilitation is progressing satisfactorily. ANNEX II Page 10

Cr. No. 428 Pulo Gadung Industrial Estate: US$16.5 Million Credit of September 14, 1973; Effective Date: November 13, 1973; Closing Date: December 31, 1978.

The estate is developing satisfactorily.Of 430 ha earmarked for the project, about 270 ha had been acquired by September 1976, and 128 ha had been developed for occupation. Seventy-fourfactories are located on the estate of which 37 are operating and 37 are in various stages of construction or commission.Factory employment is 16,275 and an estimated 1,400 are employed on average in both factory constructionand land development. Overall, operationsare profitable.

Cr. No. 436 Private DevelopmentFinance Company of Indonesia (PDFCI): US$10 Million Credit of November 2. 1973; EffectiveDate: March 6. 1974; Closing Date: December 31, 1978.

Despite a long start-up period and difficultiesin recruiting qualified staff, the project has progressedsatisfactorily. The Credit is almost fully committed.

Cr. No. 451 Fourth TechnicalAssistance: US$5 Million Credit of January 2. 1974: Effective Date: February 15, 1974; Closing Date: December 31, 1977.

Progress under the project is satisfactory.

Cr. No. 479 Bali Tourism: US$16.0 Million Credit of June 14, 1974; EffectiveDate: December 4, 1974; Closing Date: August 31, 1979.

Project implementationhas improved after initial difficulties. The evaluationsof project tenders have been approved by IDA. Infrastructure constructionstarted in July 1976 and completionis scheduled for October 1979. Budgetary allocationsas requested by the Bali Tourism Development Corporation for FY76/77 are satisfactory. Preliminarydiscussions with three potential hotel investorsare underway. Promotionalefforts to attract additional investors and tourists have been intensified,and additional flights from Sydney and Hong Kong to Bali have been approved by the Minister of Communicationsand Tourism.

Cr. No. 480 Fisheries Credit: US$6.5 Million Credit of June 14, 1974; EffectiveDate: January 8, 1975; Closing Date: June 30, 1979.

After some initial delays, the project as a whole has generally been progressing satisfactorily. Constructionof shore facilities at Ambon is ANNEX II Page 11

nearing completion.Boat constructionis underway and the contract for equipment has been awarded. The quality of lending for fishpond development needs to be improved although lending for this component in terms of the number of subborrowersand P-ea covered had met targets envisaged during appraisal. Bidding for ice plant constructionshould start soon. The justification for the trawler subprojectis being reviewed by the Government.

Cr. No. 514 Jatiluhur Irrigation Extension: US$30 Million Credit of October 3, 1974; EffectiveDate: January 10, 1975; Closing Date: December 31, 1980.

Initial organizationaldifficulties and a delay in awarding the first constructioncontract caused a delay of about 18 months in the project schedule. The first constructioncontract was awarded in February 1977, the next four are scheduledfor November 1977, and the last two for May 1978. From a revision of bid prices for the first contract, the total cost of civil works is now estimated to be about 40% higher than altthe time of the last review of project progress. The total project cost has increased about 130% since appraisal in May 1974.

Loan No. 1005 Railway: US$48.0 Million Loan of June 14, 1974; EffectiveDate: August 16. 1974; Closing Date: December 31, 1978.

Procurement of material and equipment, which had been slow due to poor organizationand inadequatebudget allocation,has now improved. The bulk of the contractshave been signed. Passenger traffic in 1975 was slightly lower than in 1974, but still higher than forecast; freight traffic has continued to decline due mainly to poor maintenance and inadequatemotive power. Efforts are being made to strengthen the effectivenessof the technical assistance program and to more closely monitor project developments. Although tariffs were raised in May 1975, increasingpassenger revenues by about 25% and freight revenues by about 10%, the operating ratio is likely to deteriorate further, as operating costs have continued to rise at an even faster rate.

Loan No. 1040 Jakarta Urban Development: US$25 Million Loan of September 27, 1974; Effective Date: January 15, 1975; Closing Date: December 31, 1977.

The kampung improvement part of the project is substantially complete. Some 2,080 ha have been upgraded as compared with the original plan of 1,980 ha. The sites and services component is about 15 months behind schedule. This is primarily due to land acquisition problems encountered in the early stages of the project. Project costs are expected to be about 7% above the appraisal estimate. The allocation of plots and core houses is expected to begin in July. Some problems have arisen with regard to the procedures to be utilized in allocating the plots, and these are being reviewed currently by the Government. ANNEX II Page 12

Loan No. 1049 Five Cities Water Supply: US$14,5 Million Loan of October 31, 1974; Effective Date: May 21, 1975; Closing Date: June 30, 1980.

Due to administrative and managerial problems the project is running 13-18 months behind schedule. This delay together with higher rates of inflation than anticipated is expected to increase project costs 25-30% above the appraisal estimate. Detailed engineering and preparation of tender documents have been completed and the project has reached its construction phase. The reorganization of the Directorate of Sanitary Engineering and the establishment and development of local water enterprises are proceeding satisfactorily.

Loan No. 1054 Development Finance Co. (BAPINDO II): US$50 Million Loan of November 20, 1974; Effective Date: January 14, 1975; Closing Date: December 31, 1978.

The loan is expected to be fully committed in the second quarter of 1977. Despite significant institutional improvements achieved by BAPINDO, the company has still a high level of arrears; its appraisal work is slow and administrative costs are excessive. These problems are being addressed through a Program of Action discussed and agreed between the Government, BAPINDO and the Bank.

Loan No. 1089 Second Fertilizer Expansion: US$115 Million Loan of February 28, 1975; Effective Date: April 29, 1975; Closing Date: August 31. 1978.

The Project (PUSRI III) was mechanically completed in December 1976, one month ahead of schedule. As there was a slight delay in the completion of the related gas project, the gas requirement of PUSRI III for start-up during November 15, 1976 - January 7, 1977 was met by advancing the scheduled shutdown of PUSRI II for annual maintenance by two months. Meanwhile, the PUSRI III gas system has been completed. Total cost of PUSRI III is expected to be within the appraisal estimate.

Loan No. 1100 Sixth Irrigation: US$65 Million Loan of April 10, 1975; Effective Date: June 20, 1975; Closing Date: June 30, 1982.

Most of the project programs have advanced well during the first year of operation. Design of works for the Cirebon and Rentang subproject systems are beyond the capability of PROSIDA to execute, and assistance will be provided in Irrigation VIII to expedite this work. Critical review of the program for benefit monitoring is underway. ANNEX II Page 13

Loan No. 1127 Fourth Power: US$41 Million Loan of June 17, 1975; Effective Date: October 23, 1975; Closing Date: June 30, 1980.

The project provides for the expansion of the Muara Karang thermal power station at Jakarta by addition of a third 100 MW generating unit. The general construction contracts covering this unit as well as the first two financed under Credit 399-IND have been awarded. The project is on schedule and expected to be completed in early 1980.

Loan No. 1139 Fertilizer Distribution: US$68 Million Loan of July 10, 1975; Effective Date: August 28, 1975; Closing Date: December 31, 1979.

All the contracts for the original project have been let and most materials and three ships have been delivered to Indonesia. Savings of about $30 million were realized in the original project. Procurement of an additional ship and bulk reception facilities to serve expansion of fertilizer output beyond that anticipated at appraisal was approved by the Executive Directors on April 5, 1977. The expanded project is underway and is likely to be completed successfully by the revised Closing Date, postponed by one year.

Loan No. 1179 Agricultural Research and Extension: US$21.5 Million Loan of December 19, 1975; Effective Date: February 23, 1976; Closing Date: December 31, 1981.

Project implementation is one year behind schedule due to problems in the appointment of executive architects for detailed design and supervision of construction of the research centers and of the consultant firm which will provide research and extension specialists. However, the pace of implementation has recently improved; the contract for research and extension services was signed in February 1977 and negotiations with the architects are in progress.

Loan No. 1197 National Resource Survey and Mapping Project: US$13.0 Million Loan of February 5, 1976; Effective Date: April 2, 1976; Closing Date: December 31, 1981.

The project agency, BAKOSURTANAL, has made considerable progress since the Loan was signed. Several senior staff required for administration and project procurement have been appointed and preliminary designs for project facilities have been comnpleted. Preparation of equipment specifications and planning of aerial photography operations to support detailed resource surveys of the southern Sumatera region are also proceeding. ANNEX II Page 14

Loan No. 1236 Fourth Highway Project: US$130 Million Loan of April 15, 1976; EffectiveDate: August 13, 1976; Closing Date: December 31, 1980.

Contractshave been signed or awarded for the constructionof the first package of roads totalling 585 km and for nine consultancyassignments. Progress is about six to nine months behind the initial project implementation schedule,mainly due to the unforeseenbunching of many activities (negotiationsfor the consultancyassignments, prequalification of contractors, tendering,etc.) and a general shortage of staff to deal with the rapidly increasingwork load.

Loan No. 1237 Fourth EducationProject: US$37 Million Loan of April 15, 1976; EffectiveDate: June 17. 1976; Closing Date: December 31. 1980.

Project implementationunits have been establishedand the team leaders for technicalassistance are in place. Contracts with the consultant architects have been signed. Site selection and acquisitionare generally satisfactorywith some exceptionsdue to difficult site conditions and higher site costs. The project is about 10 months behind schedule due to initial delay in the appointmentof consultant architects and signing of agreements with UN agencies for technical assistance. The problems causing delays are being followed up with the Government agencies concerned.

Loan No. 1250 Second Shipping Project: US$54 Million Loan of May 20, 1976; EffectiveDate: October 8, 1976; Closing Date: December 31. 1980.

The appointmentof a number of consultantshas been delayed which could cause a lag in the implementationof the project. The financial position of the state shipping company (PELNI) is unsatisfactory,which may result in financialproblems for the project entity (PANN). The Government is aware of this potential problem and is consideringsteps to deal with it. The project is being closely followed.

Loan No. 1254 Third Fertilizer Expansion Project: US$70 Million Loan of May 20, 1976; Effective Date: August 15, 1976; Closing Date: June 30, 1979.

The Project (PUSRI IV), which is designed to have an annual capacity of 570,000 tons of urea, is about four months ahead of schedule, but the related gas project is experiencingsome delay. Efforts are being made by the Government to accelerate the gas project. According to present indications,PUSRI IV is likely to be commissionedin mid-October 1977. No cost overrun is foreseen for this project. ANNEX II Page 15

Loan No. 1259 Fifth Power Protect: US$90 Million Loan of May 20, 1976; Effective Date: September 20, 1976: Closing Date: March 31, 1981.

The procurement of equipment is underway.

Loan No. 1267 National Food Crops Extension Project; US$22 Million Loan of June 4, 1976; Effective Date: September 21, 1976; Closing Date: June 30, 1982.

Project implementationis progressing satisifactorily.

Loan No. 1268 Seventh Irrigation Project: US$33 Million Loan of June 4, 1976; Effective.Date: September 21, 1976; Closing Date: December 31, 1981.

The implementingagencies have completed the prequalificationfor contractors and consultants and the project is ahead of schedule in the North Sadang area, in the mapping program and in preparation of the construction schedule for tertiary development.

Loan No. 1318 Transmigrationand Rural Development Project: US$30 Million Loan of July 21, 1976; Effective Date: February 28, 1977; Closing Date: December 31, 1981.

The first village has been constructed,and the first settlers moved from Java in October 1976.

Loan No. 1336 Second Urban Development Project: US';52.5Million Loan of November 4, 1976; Effective Date: March 28. 1977; Closing Date: March 31, 1980.

The progress of civil works is ahead of schedule, and costs are generally within the estimates. Progress is being made in developing Govern- ment capabilitiesin undertaking a nation-wide kampung improvement program in the future.

Loan No. 1337 Tanjung Priok Port Project: US$32 Million Loan of November 4, 1976: Effective Date: March 3, 1977: Closing Date: December 31, 1979.

Final design by consultants is proceeding and the contract for supply of container cranes has been let. ANNEXII Page 16

Loan No. 1363 Second PDFCI Project: US$15 Million Loan of January 28. 1977; Effective Date: April 21. 1977: Closing Date: June 30, 1981.

This loan became effective on April 21, 1977.

Loan No. 1365 Sixth Power Project: US$116 Million Loan of February 4. 1977. Closing Date: December 31, 1982.

This loan is expected to become effective by June 1977.

Loan No. 1373 Nutrition Development Project: US$13.0 Million Loan of March 14, 1977; Effective Date: March 31, 1977; Closing Date: March 31. 1982.

This loan became effective on March 31, 1977. ANNEX III Page 1

INDONESIA: EIGHTH IRRIGATION PROJECT

LOAN AND PROJECT SUMMARY

Borrower: Republic of Indonesia

Amount: $63 million equivalent in various currencies.

Terms: 20 years, including 4-1/2 years of grace, with interest at 8.20% per annum.

Project Description: Major components of the project are:

(a) rehabilitation of 75,000 ha of the 140,000 ha Madiun irrigation system in East Java, including introduction of tertiary syst:ems on 30,000 ha;

(b) construction of flood control and drainage works and inspection roads on 5,700 ha of low-lying coastal land in the Ciujung irrigation system in West Java;

In addition, the project makes provision for for consultant services; extension of an -ongoing audio-visual training program for operation and maintenance and construction personnel (includLng necessary buildings); establishment of a centralized records depository and reltrieval system for documents related to Bank-assisted irrigation projects; production of additional large- scale maps covering all unmapped areas of PROSIDA-managed irrigation systems; and procurement of vehicles and equipment.

Project Costs: The table below summarizes the cost of the project: ANNEX III Page 2

% of Local Foreign Total Foreign Exchange ---- ($ million) -----

Madiun rehabilitation 26.2 22.2 48.4 46 Ciujung drainage 5.4 4.2 9.6 44 Groundwaterpilot project 1.4 5.3 6.7 79 Technical assistance 5.3 6.7 12.0 56

Base cost 38.3 38.4 76.7 50

Physical contingencies 8.6 8.4 17.0 50 Expected price increases 12.3 12.0 24.3 50

Total project cost 59.2 58.8 118.0 50

Financing Plan: The proposed loan of $63 million would finance the foreign exchange cost of the project plus an estimated $4.2 million of local costs.

Estimated Disbursements:

Bank FY 1978 1979 1980 1981 1982 Total

Annual 1.6 10.4 18.9 22.7 9.4 63.0 Cumulative 1.6 12.0 30.9 53.6 63.0

Procurement: (a) Vehicles, materials and equipment, costing about $5.1 million, would be procured after internationalcompetitive bidding in accordancewith Bank Group guidelines. For purposes of bid com- parisons, qualified domestic manufac- turers of these goods would be given a margin of preferenceequal to 15% or the level of customs duties, whichever is less. Small off-the-shelfitems costing less than $10,000 each, up to an aggregate total of $100,000,would be purchased through normal Government procurementprocedures, which are satisfactoryto the Bank.

(b) Civil works in all project areas would be divided into a number of suitable contracts which would be let to prequalified contractorsfollowing usual Government procedures,which are satisfactoryto the Bank. ANNEX III Page 3

Consultants: The Government would engage consultantswho would work with the various organizations involved in project implementationto help in the preparationof feasibilitystudies, detailed design and constructiondrawings, and assist in the establishmentof the records and retrieval system and expansion of the audio-visualtraining program.

Economic Rates of Return: The weighted economic rate of return for Madiun rehabilitation,Ciujung drainage, and Madiun pilot groundwaterdevelopment would be 20%.

Appraisal Report: Report No. 1468a-IND, dated May 5, 1977. East Asia and Pacific Projects Department. ANNEX IV Page 1

INDONESIA

EIGHTH IRRIGATION PROJECT

SupplementaryData Sheet

Section I: Timetable of Key Events

(a) Time taken to prepare project: three years.

(b) Project preparation coordinatedby DGWRD.

(d) First mission to consider project: May 1976.

(e) Departure of Appraisal Mission: October 1976.

(f) Follow-up Appraisal: January 1977.

(g) Completion of negotiations: April 25, 1977.

(h) Planned loan effectiveness: September 1977.

Section II: Special Bank ImplementationActions

A Bank supervisionmission is scheduled for September 1977 to assist in the initial stages of implementationof the project.

Section III: Special Conditions

(a) Government to ensure adequate staffing of subproject offices and to consult with Bank before appointing replacementsfor General Manager of PROSIDA or General Manager of P2AT (para. 37).

(b) Government to engage consultantsby December 31, 1977 (para. 39).

(c) Disbursements for tertiary systems to be made only if withdrawal applicationis accompanied by certificate from the site engineer stating that quarternarycanals and drains iLnthe tertiary block have also been constructed (para. 46). ANNEX IV Page 2

(d) Operation and maintenance (O&M) (paras. 48, 49 and 50)

(i) Water-user associationsto be formed in each tertiary unit at Madiun and for each well in the pilot groundwater project.

(ii) Adequate O&M funds to be allocated in future years for all Bank-assistedirrigation systems.

(iii) At least half of all annual budgeted O&M funds to be released to subprojectsby August 15 of each year and the balance in equal quarterly installmentsuntil total annual allocated amounts are fully released.

(iv) Government to progressivelyincrease number of additional qualifiedO&M personnel until adequate staff levels have been attained.

(v) Government to inform the Bank by December 31 of each year the proposed number of O&M staff and per ha budget for each subpro-ject;by June 1 of each following year the approved O&M budget; and by October 1, the staffing provisions.

(e) IPEDA Rates (para. 51)

(i) Government to adjust rates at levels consistent with beneficiaries' capability to pay.

(ii) Amounts collected to be sufficient to ensure sound O&M practices and to recover a reasonable portion of capital costs.

(iii) Rates established and collected for different land classes to be furnished to the Bank every two years for comments. IBRD 12633

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