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World Bank Document Document of FLE The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. P-3485-IND REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE Public Disclosure Authorized INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$30.0 MILLION TO THE Public Disclosure Authorized REPUBLIC OF INDONESIA FOR A PUBLIC WORKS MANPOWER DEVELOPMENT PROJECT March 11, 1983 Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency unit = Indonesian Rupiah (Rp) US$1 = Rp 700 RplOO = US$0.143 Rp 1,000 = US$1.43 Rp 1 million = US$1,428.57 GOVERNMENT OF INDONESIA FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS BAPPENAS - National Development Planning Board BIDANG DIKLATS - Training Units within the Training Department of the Ministry of Public Works, which serve the Directorates General BINA MARGA - Directorate General for Highways, Bridges and Land Clearing in the Ministry of Public Works BSP - Bureau for Construction Industry Development in the Ministry of Public Works CIPTA KARYA - Directorate General for Urban and Regional Planning, Housing and Water Supply in the Ministry of Public Works CMDU - Curricula and Materials Development Unit to be established in the Training Department of the Ministry of Public Works DPUP - Provincial Department of the Ministry of Public Works GAPENSI - Professional Association for Small and Medium-sized Contractors GOI - Government of Indonesia LAN - Civil Service Training Institute Mandor - Labor subcontractor who directly hires and supervises construction labor MPW - Ministry of Public Works PENGAIRAN - Directorate General for Water Resource Development in the MPW PERBINIKON - Project unit in the Bureau for Construction Industry Development of the MPW PRD - Professional Resources Development Program PUSDATIK - Center for Data Processing and Statistics in the MPW PUSDIKLAT - Training Department in the MPW4 REPELITA - National Five-Year Development Plan (Repelita I, 1969-74, Repelita II, 1974-79, Repelita III, 1979-84) RTC - Regional Training Center of the Training Department of the MPW FOR OFFICIAL USE ONLY INDONESIA PUBLIC WORKSMANPOWER DEVELOPMENT PROJECT Loan and Project Summary Borrower: Republic of Indonesia Amount: $30.0 million equivalent (including capitalized front-end fee) Terms: Repayable in 20 years, including 5 years of grace at the standard variable rate Project Description: The main objective of the project is to improve the effectiveness of Ministry of Public Works (MPW) construction activities through manpower training. The project aims to: (a) strengthen the management of MPW staff training and related planning activities; (b) establish a Curricula and Materials Development Unit in the MPW; (c) expand and upgrade the MPWNs training facilities and staff training program; and (d) provide experimental training for small and medium-sized contractors and mandors (labor subcontractors who directly hire and supervise construction labor). A second objec- tive is to strengthen Government planning and management capabilities through provision of fellowships for key staff of economic and policy-making agencies. The principal benefits of the project would be improvements in the execution of MPW projects through increased skill levels of staff. A related benefit would be enhanced effectiveness in use of training resources. The contractor and mandor training would improve the skills of those trained. Results would be used to develop and provide larger training programs. The fellowship training would contribute to improvements in the management of Indonesian development programs. The project faces a risk that adequate commitment, required by the several MPW units involved with staff training, could not be achieved. To reduce this risk, management improvements for staff training and improved courses would be developed jointly; and existing respon- sibilities for training management would be retained and enhanced. A related risk is that the central training authorities would be unable to implement the project This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii - effectively while simultaneouislystrengthening the management and content of training. This risk would be minimiied through provision of an experienced Project Director for MPW components and additional staff and consultant services for facilities' planning, procurement and financial management. A risk also exists that the contractor and mandor training would be ineffective. To reduce this risk, the industry would participate actively in planning the training. Estimated Costs /1 /2: Local Foreign Total ------- $ million ------- Management of MPW Training 1.38 5.69 7.06 Activities Curricula and Materials 3.44 4.33 7.76 Development Regional Training Centers 8.54 5.69 14.22 Contractor and Mandor Training 3.33 1.44 4.76 Professional Resources Development 0.06 3.15 3.21 Fellowship Program Base Cost 16.73 20.29 37.02 Physical contingencies 1.49 1.44 2.93 Price contingencies 4.19 3.49 7.68 Total Project Cost 22.41 25.22 47.63 Front-end fee on Bank Loan - 0.22 0.22 Total Financing Required 22.41 25.44 47.85 /1 Imported equipment and materials would be exempt from duties. Taxes and duties on other items are estimated at $1.9 million (4% of project costs). /2 Totals are rounded. - iii - Financing Plan: Local Foreign Total ------ $ million ------- IBRD 4.56 25.44 30.00 Government 17.85 - 17.85 22.41 25.44 47.85 Estimated Disbursements: Bank FY 1984 1985 1986 1987 1988 …--------- $ million ------- Annual 1.3 2.6 3.6 9.0 13.5 Cumulative 1.3 3.9 7.5 16.5 30.0 Rate of Return: Not applicable Staff Appraisal Report: No. 4173-IND dated March 4, 1983. REPORT AND RECOMMENDATIONOF THIE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF INDONESIA FOR A PUBLIC WORKSMANPOWER DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed loan to the Republic of Indonesia for the equivalent of $30.0 million (including the capitalized front-end fee) to help finance a Public Works Manpower Development Project. The loan would have a term of 20 years, including five years of grace, at the standard variable interest rate. PART I - THE ECONOMY /1 2. A basic economic report, "Indonesia: Growth Patterns, Social Progress and Development Prospects" (No. 2093-IND dated February 20, 1979), was distributed to the Executive Directors on February 26, 1979, and a country economic memorandum has been prepared in each subsequent year. The latest of these, titled "Indonesia: Financial Resources and Human Development in the Eighties" (No. 3795-IND dated May 3, 1982) was distri- buted to the Executive Directors on May 6, 1982. Annex I gives selected social and economic indicators for the country. Background 3. The Republic of Indonesia is a highly diverse country spread across an archipelago of more than 13,000 islands with a land area of about two million sq km. It now has a population of over 150 million, growing at about 2.3% p.a., and is the world's fifth most populous nation. The country has a highly diversified resource base, with plentiful primary energy resources, significant mineral deposits, large timber potential and a developed systeim of agricultural commodity production and export. A high proportion of these primary resources are located on the sparsely populated islands of Sumatra and Kalimantan, while two-thirds of the population live on Java which has areas with some of the highest rural population densities in the world. About 20% of the population live in urban areas in both Java and the Outer Islands, and the current rate of urban population growth is over 4% p.a. The 1981 estimate of GNP per capita is $520, which places Indonesia for the first time amongst middle income countries./2 /1 Substantially unchanged from the President's Report on the Provincial Health Project (No. P-3402-IND), circulated under cover of R83-13, dated January 20, 1983, and approved by the Executive Directors on February 8, 1983. /2 On the basis of the World Bank's system of country classification and Atlas methodology for calculation of GNP. Macroeconomic Developments and Resource Mlanagement 4. Until 1981, the economy had been growing at almost 8% p.a. for over a decade. This was associated with rapid increases in public expenditures, total investment and savings. The initial impetus for this occurred in the period of recovery from the turbulence of the mid-60s. The Government took effective action to restore macroeconomic stability, liberalize the economy, rehabilitate infrastructure, and provide incentives for domestic and foreign private investment. Hiowever for the last decade the dominant external influence has been the huge expansion, and significant variability, in foreign exchange earnings from oil. Net exports from the oil and gas sector rose from $0.6 billion in 1973/74 to $10.8 billion in 1980/81, when the current account enjoyed a surplus of $2.5 billion. Oil receipts also provide about 70%, of Central Government receipts and have helped finance the sustained increase in demand via the budget. The pattern of expeniditures has also helped foster diversified growth: of particular note has been the support for agriculture, through investment in infrastructure, support services and effective use of subsidies to maintain producer incentives. This bore fruit in two successive record rice harvests in 1980 and 1981. During 1971 to 1980 manufacturing has also enjoyed a high growth rate (of about 14% p.a.) from a very low base, but here sectoral growth has been in spite of a more restrictive policy environment and distorted incentives.
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