Northern Sumatra Irrigated Agriculture Sector Project

Completion Report

Project Number: 27361 Loan Number: 1579 May 2007

Indonesia: Northern Sumatra Irrigated Agriculture Sector Project

CURRENCY EQUIVALENTS Currency Unit – Rupiah (Rp)

At Appraisal At Project Completion 16 October 1997 10 April 2007 Rp1.00 = $0.000281 $0.0001 $1.00 = Rp3,555 Rp9,093

ABBREVIATIONS ADB – Asian Development Bank BAPPEDA – Badan Perencanaan Pembangunan Daerah (Regional Development Planning Agency) BAPPENAS – Badan Perencanaan Pembangunan Nasional (National Development Planning Agency) BIPP – balai informasi dan penyuluh pertanian (agricultural information and extension center) BME – benefit monitoring and evaluation CO – community organizer DAS – district agricultural services DCC – district coordination committee DGFC – Directorate General of Food Crops DGRD – Directorate General of Regional Development DGWR – Directorate General of Water Resources DWG – district working group DWRS – district water resources services EA – executing agency EIRR – economic internal rate of return ETESP – Earthquake and Tsunami Emergency Support Project FTF – farmer-to-farmer (training) FWUA – Federation of Water Users Associations IOMP – irrigation operation and maintenance policy IPM – integrated pest management ISF – irrigation service fee LCB – local competitive bidding MOA – Ministry of Agriculture MOHA – Ministry of Home Affairs MPW – Ministry of Public Works MUV – manufacturers’ unit value NAD – Nanggroe Aceh Darussalam NSC – national steering committee O&M – operation and maintenance PAS – provincial agricultural services PCC – provincial coordination committee PPL – penyuluh pertanian lapangan (agricultural field extension worker) PPMS – project performance monitoring system PWG – provincial working group PWRS – provincial water resources services R&U – rehabilitation and upgrading WUA – water users association

NOTES

(i) The fiscal year (FY) of the Government ended on 31 March until 2000 but now ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2005 ends on 31 December 2005.

(ii) In this report, "$" refers to US dollars.

Vice President C. Lawrence Greenwood, Jr., Operations Group 2 Director General A. Thapan, Southeast Asia Department (SERD) Country Director E. Cua, Indonesia Resident Mission, SERD

Team leader B. Alimov, Environmental Economist, SERD Team member P.P. Wardani, Senior Project Officer, SERD

CONTENTS

Page

BASIC DATA i MAP v I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Project Outputs 3 C. Project Costs 7 D. Disbursements 8 E. Project Schedule 8 F. Implementation Arrangements 8 G. Conditions and Covenants 9 H. Consultant Recruitment and Procurement 9 I. Performance of Consultants, Contractors, and Suppliers 10 J. Performance of the Borrower and the Executing Agency 10 K. Performance of the Asian Development Bank 10 III. EVALUATION OF PERFORMANCE 11 A. Relevance 11 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 11 D. Preliminary Assessment of Sustainability 12 E. Impact 12 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 12 A. Overall Assessment 12 B. Lessons 13 C. Recommendations 14 APPENDIXES 1. Project Framework and Outputs 15 2. Summary of Rehabilitation and Upgrading Works 23 3. Summary of Agricultural Support and Water Users Associations Strengthening 24 4. Summary of Project Costs 25 5. Utilization of Loan Proceeds 26 6. Project Implementation Schedule 27 7. Status of Compliance with Loan Covenants 28 8. Economic and Financial Analyses 34

BASIC DATA

A. Loan Identification

1. Country Indonesia 2. Loan Number 1579 3. Project Title Northern Sumatra Irrigated Agriculture Sector Project 4. Borrower Republic of Indonesia 5. Executing Agency Directorate General of Water Resources 6. Amount of Loan $130,000,000 7. Project Completion Report Number 972

B. Loan Data 1. Appraisal – Date Started 21 July 1997 – Date Completed 14 August 1997

2. Loan Negotiations – Date Started 15 October 1997 – Date Completed 17 October 1997

3. Date of Board Approval 13 November 1997

4. Date of Loan Agreement 5 December 1997

5. Date of Loan Effectiveness – In Loan Agreement 13 November 1997 – Actual 23 February 1998 – Number of Extensions 0

6. Closing Date – In Loan Agreement 31 October 2004 – Actual 30 April 2006 – Number of Extensions 2

7. Terms of Loan – Interest Rate 0.75% per annum – Maturity (number of years) 26 years – Grace Period (number of years) 6 years

8. Disbursements a. Dates

Initial Disbursement Final Disbursement Time Interval 15 May 1998 8 September 2006 100 months

Effective Date Original Closing Date Time Interval 23 February 1998 31 October 2004 80 months

b. Amount ($ million)

Category Original Last Amount Amount Undisbursed Allocation Revised Canceled Disbursed Balance Allocation 1. Civil Works 01A Part A 55.58 34.90 20.68 34.71 0.19 01B Part B 0.18 0.08 0.10 0.12 (0.04) 01C Part C 0.00 0.00 0.00 0.00 0.00 01D Part D 0.71 0.01 0.70 0.01 0.00 2. Equipment 02A Part A 1.30 0.91 0.38 0.90 0.01 02B Part B 0.56 0.85 (0.29) 0.84 0.01 02C Part C 0.06 0.09 (0.03) 0.08 0.01 02D Part D 0.12 0.30 (0.17) 0.28 0.02 3. Consulting Services 03A Part A 9.96 9.70 0.27 9.73 (0.04) 03B Part B 2.95 1.59 1.37 1.57 0.02 03C Part C 2.83 1.14 1.69 1.15 (0.01) 03D Part D 1.99 0.88 1.11 0.88 (0.01) 4. Survey and Investigation 04A Part A 11.49 2.00 9.49 2.01 (0.01) 04B Part B 0.11 0.09 0.01 0.08 0.01 04C Part C 1.20 1.08 0.12 0.80 0.28 04D Part D 0.36 0.19 0.17 0.18 0.01 5. Training 05A Part A 1.45 0.83 0.62 0.82 0.01 05B Part B 1.96 1.74 0.22 1.43 0.31 05C Part C 5.16 1.96 3.20 1.96 0.00 05D Part D 0.37 0.74 (0.37) 0.70 0.04 6. Interest During 21.23 7.48 13.75 5.74 1.74 Construction 7. Coordination and Monitoring 07A Part A 0.00 0.48 (0.48) 0.32 0.16 07B Part B 0.00 0.23 (0.23) 0.20 0.03 07C Part C 0.00 0.04 (0.04) 0.01 0.03 07D Part D 0.00 0.97 (0.97) 0.86 0.11 8. Unallocated 10.44 0.00 10.44 0.00 0.00 Total 130.00 68.24 61.76 65.38 2.86 ( ) = negative. Note: Totals may not be exact because of rounding.

9. Local Costs (Financed) - Amount ($ million) 30.9 - Percent of Local Costs 47.4 - Percent of Total Cost 29.2

iii

C. Project Data 1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 56.5 34.4 Local Currency Cost 160.5 72.0 Total 217.0 106.4

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 83.9 40.8 ADB Financed 108.8 59.7 Farmers 3.1 0.2 Total 195.8 100.7 IDC Costs Borrower Financed 0.0 0.0 ADB Financed 21.2 5.7 Total 217.0 106.4 ADB = Asian Development Bank, IDC = interest during construction.

3. Cost Breakdown by Project Component ($ million) Component Appraisal Estimate Actual

A. Irrigation Improvement 145.5 78.2 B. Agriculture Support 7.2 4.7 C. Water User Associations Support 0.8 4.4 D. Strengthening Implementation Coordination 14.9 3.1 E. Recurrent Costs 9.9 1.7 F. Taxes and Duties 17.5 8.7 G. Interest During Construction 21.2 5.7 Total 217.0 106.4 Note: Totals may not be exact because of rounding.

4. Project Schedule Item Appraisal Estimate Actual Date of Contract with Consultants Jan 1999 Sep 2002 Completion of Engineering Designs Jul 2001 Jun 2004 Civil Works Contract Date of Award Sep 2001 Jul 2003 Completion of Work Jul 2004 Dec 2005 Equipment and Supplies Dates First Procurement May 2001 Jun 2002 Last Procurement May 2004 Aug 2005 Completion of Equipment Installation May 2004 Sep 2005 Farmers’ Involvement in Civil Works Sep 2005 Start of Operations of Irrigation Systems Jan 2003 Jan 2004

5. Project Performance Report Ratings

Ratings

Development Implementation Implementation Period Objectives Progress From June 1998 to November 1998 Satisfactory Satisfactory From November 1998 to December 1998 Partly Satisfactory Satisfactory From January 1999 to June 1999 Satisfactory Satisfactory From July 1999 to November 2000 Partly Satisfactory Satisfactory From December 2000 to June 2003 Partly Satisfactory Partly Satisfactory From July 2003 to March 2004 Satisfactory Partly Satisfactory From April 2004 to September 2006 Satisfactory Satisfactory

D. Data on Asian Development Bank Missions No. of No. of Specialization Name of Mission Date Persons Person-Days of Membersa TA Fact Finding 2–9 Mar 1997 4 28 a, b, c, o TA Review Mission 10–13 Mar 1997 1 3 a Special TA Administration 7–11 Apr 1997 1 4 d Loan Fact Finding 28 Apr–9 May 1997 5 55 a, e, f, o, o Appraisal 22 Jul–13 Aug 1997 5 110 a, g, c, e, f Inception Mission 7–15 Dec 1998 3 24 h, i, j Special Project Administration 1 11–15 Dec 2000 2 8 h, h Special Project Administration 2 21–30 Mar 2001 2 18 h, j Review 1 11–22 Mar 2002 2 22 k, l Special Project Administration 3 23–26 Sep 2002 1 3 k Review 2 19–28 Nov 2002 1 9 k Review 3 20 May–5 Jun 2003 2 32 k, j Review 4 4–14 Nov 2003 3 30 k, j, m Review 5 3–14 Aug 2004 1 11 m Special Project Administration 4 11–13 Nov 2004 1 3 o Review 6 8–13 Aug 2005 3 15 m, m, o Special Project Administration 5 20 Mar–5 Apr 2006 2 32 n, m Project Completion Reviewb 15–24 Nov 2006 3 14 c, m, o TA = technical assistance. a a – rural development specialist, b – environment specialist, c – project economist, d – senior assistant, e – programs officer, f – young professional, g – counsel, h – senior project specialist, i – assistant project analyst, j – manager, k – senior water resources specialist, l – associate environmental analyst, m – senior project officer, n – project implementation specialist, o – staff consultant. b The project completion report was prepared by B. Alimov, environmental economist; and P. P. Wardani, senior project officer.

I. PROJECT DESCRIPTION

1. On 13 November 1997, the Asian Development Bank (ADB) approved a loan of $130.0 million to the Government of Indonesia to finance 60% of the total project cost of $217.0 million for the Northern Sumatra Irrigated Agriculture Sector Project (the Project).1 The objective of the Project was to raise agricultural productivity through improvements in existing irrigation systems and institutions in five provinces in northern Sumatra (Nanggroe Aceh Darussalam [NAD], North Sumatra, West Sumatra, Riau, and Jambi). The achievement of this objective was expected to assist the Government in realizing three key objectives for the agriculture sector: (i) increasing food crop diversification and production, (ii) improving the sustainability of irrigation investments, and (iii) promoting balanced regional development.

2. The Project aimed to improve existing small- and medium-scale irrigation schemes (generally less than 2,000 hectares [ha]) and agricultural support services, and to strengthen the provincial and district agencies closely involved in irrigated agriculture. Strengthening of water users associations (WUAs) was to be undertaken concurrently with irrigation system improvements, and implementation was to be shared among provincial and district level agencies. The project scope included (i) rehabilitation and upgrading of existing small- and medium scale irrigation schemes, (ii) strengthening of agricultural support services, (iii) strengthening of WUAs, and (iv) strengthening implementation coordination. The project framework is in Appendix 1.

3. The Directorate General of Water Resources (DGWR)2 of the Ministry of Public Works (MPW) was the Project’s Executing Agency (EA) with overall responsibility for project implementation and coordination with other agencies involved. Implementation of the project components was the responsibility of the provincial and district level agencies under the technical guidance of the DGWR for irrigation improvement, the Directorate General of Food Crops (DGFC) of the Ministry of Agriculture (MOA) for strengthening of agricultural support services, and the Directorate General of Regional Development (DGRD) of the Ministry of Home Affairs (MOHA) for strengthening of WUAs and implementation coordination.

4. The loan became effective on 23 February 1998 and was closed on 30 April 2006. The final loan amount was $65.4 million. The Government’s contribution amounted to $40.9 million equivalent. At the Government’s request, three loan cancellations totaling $61.8 million were made during implementation, and $2.9 million was cancelled at project completion. Two loan extensions, totaling 18 months, were granted to complete project works.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

5. The Project was consistent with the Government’s objective to pursue an integrated approach that combines physical improvements and institutional strengthening, integrated planning and management of water resources on the basis of whole river basins to satisfy competing demands, increased decentralization of irrigation management, and balanced regional development. Although the Government’s irrigation development program had been successful and economically efficient in raising food crop production, in the mid-1990s there

1 ADB. 1997. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of Indonesia for the Northern Sumatra Irrigated Agriculture Sector Project. Manila. 2 Formerly known as the Directorate General of Water Resources Development.

2 was a growing awareness that more resources should be devoted to operating and maintaining existing irrigation systems if their full potential were to be realized. Hence, while continuing its emphasis on rehabilitation and upgrading of irrigation systems, the Government gave increased attention to improvement of operation and maintenance (O&M).

6. The Project remains consistent with the Government’s current National Medium-Term Development Plan of 2004–2009 that aims to increase the incomes and well-being of farmers, and specifically targets maintaining the level of domestic rice production at about 90% of domestic requirements to ensure self-reliance in food production. The Project also supports the Government’s decentralization program by strengthening provincial and district water resources services.

7. At the time it was prepared, the Project was directly supportive of ADB’s country operational strategy,3 which identified irrigation and water resources development as one of the key areas of ADB’s investment, with emphasis on (i) optimizing returns on existing investments in irrigation infrastructure through improved O&M and cost recovery, (ii) improving water use management and efficiency, and (iii) integrating water resources planning for irrigation and other sectoral uses. The Project remains consistent with the main principles of ADB’s water policy,4 which recognizes the Asia and Pacific region's need to formulate and implement integrated, cross-sectoral approaches to water management and development. The water policy guides ADB’s operations in Indonesia, where they focus on water conservation, efficiency improvement in irrigation, and a holistic approach to resource management within a river basin. The current ADB country strategy and program identifies management of water resources as a key element of ADB operations for environment and natural resources management.5

8. The Project was designed under an ADB-financed project preparatory technical assistance,6 which was conducted in close collaboration with the Government. The Appraisal Mission was fielded from 22 July to 13 August 1997 and reached an agreement with the Government on technical, financial, and organizational aspects of the Project.

9. The Project involved considerable participation from regional governments in planning, preparing, and implementing irrigation projects. The project financing arrangements included significant contributions from regional governments. The provision of counterpart funds from national and regional governments was generally adequate, although the Project suffered from persistent untimely provision of national government funds allocated for project implementation. The Project was reformulated in March 2001 to address the initial delays in project implementation caused by significant delay in recruitment of project consultants. Project implementation effectively started only in late 2002, almost 4 years after loan approval.

10. During project implementation, there were several changes in project scope. In September 1999, at the request of the Government, activities for improvement of data management for water resources planning envisaged under the irrigation improvement component, were transferred for implementation under the Capacity Building Project in the Water Resources Sector7 to avoid duplication of these activities. In 2001, the Project was

3 ADB. 1994. Indonesia: Country Operational Strategy. Manila. 4 ADB. 2001. Water for All: the Water Policy of the Asian Development Bank. Manila. 5 ADB. 2006. Indonesia: Country Strategy and Program 2006–2009. Manila. 6 ADB. 1996. Technical Assistance to the Republic of Indonesia for the Northern Sumatra Irrigated Agricultural Improvement. Manila. 7 ADB. 1994. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of Indonesia for the Capacity Building Project in the Water Resources Sector. Manila.

3 reformulated in response to the significant delay in project implementation. The project area was reduced from 250,000 ha to 140,000 ha, and the scope of work under the agricultural and WUA support components reduced proportionally. Consulting services were repackaged and reduced by about 40%. After reformulation, the project implementation was fast-tracked and some activities related to agricultural support, WUA empowerment, and planning and design were implemented within a shorter time frame than originally envisaged. Subsequently, the quality of these activities suffered. Simplified procedures for subproject approval adopted in October 2002 allowed for few cases of inadequate selection of sites that were not technically or economically feasible.

11. The earthquake and tsunami in December 2004 and the earthquake in March 2005 severely damaged many irrigation schemes in NAD province and Nias Island in North Sumatra province, including those financed under the Project. In May 2005, ADB approved a loan reallocation of $535,000 to finance preparatory work for emergency assistance for NAD and Nias Island in North Sumatra province as preparation activities for the Earthquake and Tsunami Emergency Support Project (ETESP).8 Currently, 37 project schemes damaged by earthquake and tsunami are being rehabilitated under the ETESP.

12. The new Water Law No. 7/2004 executed on 18 February 2004 generally defines the responsibility of maintenance and repair between national, provincial, and district governments and WUAs. However, the intended transfer of majority of the project facilities to WUAs for O&M was not in accordance with this new law. Subsequent Government Regulation No. 20/2006 on irrigation clarified the O&M of irrigation facilities, limiting the responsibility of WUAs mainly to O&M of tertiary systems. However, WUAs still play major partnership roles in management of main systems. The Project was relevant in addressing the need of strengthening WUAs and provincial and district water resources services—all major stakeholders in irrigation management under the decentralized framework. New regulations on water management and the positive trend of strengthening districts’ fiscal capacity provide solid foundations for proper O&M of irrigation facilities in the country.

13. The performance of the Project was mixed across the five provinces mainly because of the underlying differences in the role of paddy cultivation in these areas. The Project was “less successful” in the two provinces (Jambi and Riau) where paddy cultivation is not the primary economic activity, and accordingly there were weaker regional water resources services. The Project should have been more selective in the choice of project sites and tailored its approach, considering the different soil conditions and sociocultural characteristics of project provinces.

B. Project Outputs

14. The Project achieved the majority of its revised targets. The main observations and findings of this report, organized by project component, are discussed below. Appendix 2 provides a summary of output achieved in improving irrigation facilities and Appendix 3 summarizes agricultural support and strengthening of WUAs.

8 ADB. 2005. Report and Recommendation of the President to the Board of Directors on Proposed Grants to the Republic of Indonesia for the Earthquake and Tsunami Emergency Support Project and Contribution to the Multidonor Trust Fund. Manila.

1. Part A: Irrigation Improvement

15. The Project was to provide assistance to the Government to (i) rehabilitate and upgrade schemes (type A.1 schemes covering 130,000 ha) for which the infrastructure was essentially complete, and only minor rehabilitation and upgrading (R&U) were needed prior to introduction of needs-based O&M and irrigation service fees (ISFs); (ii) rehabilitate and upgrade schemes (type A.2 schemes covering 20,000 ha) that require relatively major repairs prior to introduction of needs-based O&M and irrigation service fees; (iii) rehabilitate and upgrade schemes (type B schemes covering 100,000 ha) for which responsibility for O&M was to be transferred to WUAs; (iv) strengthen provincial water resources services (PWRS) and district water resources services (DWRS) in the preparation and implementation of subprojects; (v) improve data management for water resources planning in DGWR; and (vi) integrate river basin planning principles into all irrigation design and management.

16. A total of 522 irrigation systems were rehabilitated, covering 143,000 ha in 58 districts— exceeding the revised project target of 140,000 ha (Appendix 2). At project completion, about 132,000 ha are actually being irrigated effectively; more than 40% of the nonirrigated areas are in Riau and Jambi provinces. The shortfall in effectively irrigated area in Riau and Jambi was mainly due to shortcomings in the selection process of provinces and subprojects, which did not appropriately take into consideration the specifics of these two provinces (para. 13). The irrigation systems in NAD and Nias Island in North Sumatra were damaged by earthquake and tsunami in December 2004 and earthquake in March 2005, but are currently being rehabilitated under the ETESP (para. 21). Thus, the area of effectively irrigated area under the Project is expected to increase to about 137,000 ha after the completion of rehabilitation works in NAD and North Sumatra provinces.

17. Farmers were involved in implementation of R&U works in all 522 irrigation schemes. Two approaches to involve WUAs in R&U works were used: (i) joint operation agreements between contractors and WUAs in North Sumatra, Riau, and Jambi provinces; and (ii) direct appointment of small works to WUAs in NAD and West Sumatra provinces. Civil works done directly by WUAs were more cost-effective than the ones done by contractors, and of good quality. They also helped increase the sense of ownership among communities for the rehabilitated infrastructure. Under Water Law No. 7/2004, WUAs’ responsibility is limited to O&M and repair of tertiary systems or small irrigation schemes (with a size of less than 50 ha). However, WUAs often take an active role in O&M, and assist district governments in operation of main and secondary canals through provision of funds for gatekeeping.

18. Changes in project design introduced during reformulation of the Project in 2001 affected the selection and planning and design activities for irrigation improvement. The financial ceilings for R&U works per scheme were found to be generally lower than the required investment for complete R&U—leading in some cases to only partial rehabilitation. Under Water Law No. 7/2004, the ISF program became redundant. The responsibility of WUAs is now limited to O&M and repair of tertiary systems and small (less than 50 ha) irrigation schemes. Therefore, the Project, under the WUA strengthening component, promoted collection of fees within WUAs to support their O&M activities.

19. In line with the Government’s policy of decentralization and regional autonomy, DWRS and PWRS played a major role in the selection, preparation, and implementation of subprojects. The strengthening of DWRS and PWRS were mainly through project experience. Formal training of PWRS and DWRS staff was limited since the project reformulation in 2001 adopted simplified procedures for R&U with less emphasis on training. Activities on improvement of data

5 management for water resources planning envisaged under the irrigation improvement component were transferred for implementation under the Capacity Building Project in the Water Resources Sector. However, as the project performance evaluation report indicated, they were only “partly successful”.9

20. Activities for integrated river basin management were carried out in four critical river basins: (i) Batang Hari (Jambi and West Sumatra); (ii) Kampar (Riau and West Sumatra); (iii) Sungai Ular (North Sumatra); and (iv) Peusangan (NAD). These cover 22% of the total area of the five project provinces. River basin management plans were drafted, and at the very end of project implementation, support was provided to establishment of the river basin management organization and provincial water council. However, these activities were carried out—not at the design stage—but only after the majority of all R&U works were completed. Late implementation of integrated river basin management activities was due to the uncertainty before issuance of Water Law No. 7/2004.

21. The earthquake and tsunami of December 2004 adversely affected the project implementation in NAD. The natural disaster severely damaged 3 project irrigation schemes and affected other 52 schemes in the province. It also caused an additional 5–6 month delay in project implementation. Combined with the earlier delays caused by security concerns, this affected the overall achievement in NAD. However, the completed works were successful and the remaining works will be finished under the ETESP, which ensures that project development objectives in NAD will be achieved. The Project, through loan reallocation of $535,000, supported the ETESP by conducting assessments of the post-tsunami agro-economical and sociological situation of the farming communities, nature of the tsunami soil deposits, public consultation with affected communities, and design of reconstruction in 23 project schemes.

2. Part B: Agricultural Support

22. The Project was to help provincial agricultural services (PAS) and district agricultural services (DAS) to (i) integrate the agricultural extension services into WUA strengthening, farmer participation in irrigation system improvement, scheme handover, and farmer-to-farmer training (FTF); (ii) establish demonstration areas to promote improved on-farm development, and to serve as centers for FTF training; (iii) develop FTF trainers and instigate an FTF training program using problem identification and solving by farmers; (iv) promote greater involvement of women; (v) facilitate the introduction of new agricultural technologies, crops, and varieties; and promote participatory farmer-based research and development; (vi) promote improved multiplication and distribution; and (vii) support and expand the integrated pest management (IPM) activities under the World Bank-financed Integrated Pest Management Training Project.

23. A total of 515 demonstration farms were established under the Project, compared with the revised target of 980 farms (Appendix 3). Demonstration farms focused on the implementation of the modified cropping pattern, high-yield variety, balanced fertilizing for rice and integrated pest management. Demonstrations were successful—demonstration farms exhibited significant increase in paddy yields of around 40% and cropping intensities of about 200% compared with regular farms.

24. A total of 428 agricultural extension workers were trained to assist farmers in the adoption and dissemination of agricultural research and technology. Training of about 8,000

9 ADB. 2006. Project Performance Evaluation Report for the Capacity Building Project in the Water Resources Sector. Manila.

6 farmers was coordinated with demonstration farming to enable greater field experience. Farmer training was successful and trained farmers are currently using more efficient methods of rice cultivation. However, further dissemination of agricultural technologies through FTF training is still limited and must be further supported by provincial and district agricultural extension services to reach its potential.

25. IPM activities were not linked to the World Bank-financed Integrated Pest Management Training Project since it was closed on 30 November 1999, before actual implementation of the Project started. However, IPM activities were implemented under the Project as part of demonstrations and trainings (Table A3.1 in Appendix 3). Final benefit monitoring and evaluation (BME) survey results indicate that the Project succeeded in facilitating the involvement of women, particularly with respect to their access to and sharing in project benefits. At project completion, almost 45% of all project beneficiaries were women.

26. In accordance with the project design, agricultural support activities were supposed to start only after completion of the R&U activities. Because of the significant delay in implementation of R&U works and persistent late availability of funds, agricultural support activities were implemented in a shorter time frame than originally planned, and consequently fell short of attaining planned targets under this component. Implementation of the agricultural support component was also affected by limited involvement of districts in planning and implementation of component activities primarily because financial resources were channeled through the central level, bypassing districts.

3. Part C: WUA Support

27. WUAs were to be strengthened concurrently with irrigation system improvements, and as a means of promoting greater beneficiary participation in system management and the financing of O&M of rehabilitated and upgraded irrigation facilities. The strengthening of WUAs was to be maximized through (i) shifting responsibility for the planning, design, and implementation of project-supported activities to district level staff where possible; (ii) fostering a partnership for cooperation between WUAs and the staff of district level agencies; (iii) promoting monetary and in-kind contributions from WUAs toward the cost of O&M; (iv) promoting an increased role of WUAs in irrigation management, and particularly cost recovery for O&M; and (v) supporting the legalization of existing (traditional) and new WUAs during project implementation in accordance with applicable laws. Under this component, support was also to be provided to regional development planning agencies (BAPPEDA) at provincial and district levels, PWRS and DWRS, PAS and DAS, and district revenue offices, to enhance the ISF program.

28. The Project recruited 417 community organizers (COs) to assist provincial and district government staff in strengthening and empowering WUAs. The process of selection, training, and coordination of COs was implemented differently among five project provinces to suit local conditions. In West Sumatra and NAD provinces, these activities were carried out by provincial universities. In North Sumatra and Riau provinces, selection training and coordination of COs were done directly by BAPPEDA, while in Jambi province the task was assigned to an established nongovernment organization.

29. A total of 1,515 WUAs, 237 WUAs federations, and 330 scheme level WUAs were formed and strengthened during the Project, of which 914 WUAs, 203 federation WUAs and 14 scheme level WUAs have been registered as legal entities (Appendix 3). WUAs were actively involved in project implementation and are currently operational. Most WUAs have

7 already started collecting cash contributions from their members toward O&M of tertiary systems and small irrigation schemes. In addition, they also assist district governments in the operation of main and secondary canals (para. 17). However, WUAs are still at the early stages of their existence and further support from provincial and districts working groups is needed to ensure WUAs’ sustainability. West Sumatra district governments continue employing COs in their effort to further support and ensure the sustainability of WUAs. In NAD, the majority of COs recruited under the Project are engaged under the ETESP to help WUAs in R&U works.

4. Part D: Strengthening Implementation Coordination

30. Provincial and district BAPPEDA in the five provinces in northern Sumatra were to be strengthened to improve their capabilities to (i) conduct workshops to formulate appropriate provincial action plans for an irrigation operation and maintenance policy (IOMP) statement; (ii) incorporate the principles of integrated river basin planning and management into regional development; (iii) coordinate activities of the provincial and district level implementing agencies; (iv) monitor and evaluate project implementation; (v) coordinate participatory research in irrigation and agriculture; (vi) ensure beneficiary participation in project planning, design, construction, and subsequent O&M; (vii) assess and rationalize the utilization of available staff and other resources available to the provincial and district level agencies for implementation of the O&M and ISF programs; and (viii) ensure coordination with other relevant provincial and district agencies.

31. Provincial and district coordination committees (PCCs and DCCs) headed by corresponding BAPPEDA were established in all project provinces and districts to oversee project implementation and coordination at regional level. Provincial and district working groups (PWGs and DWGs) were set up to assist these committees in daily working matters. BAPPEDA were actively involved in the project implementation through PWGs and DWGs, and coordination of all project activities at the provincial and district levels was satisfactory.

32. The Government’s IOMP statement of 1987, whose objective was to transfer a larger share of financial responsibility for O&M in publicly managed schemes from central budgets to local governments and farmer beneficiaries, was replaced by the new Water Law No. 7. Workshops conducted under the Project helped implementation of the new Water Law.

33. Supervision and coordination of BME activities were a responsibility of PWGs. Baseline surveys were undertaken in 2003 in four provinces (excluding NAD). Delay in BME implementation was due to the late start of project implementation. Follow-up BME surveys in four provinces were carried out in 2004 and 2005.10 The BME program was carried out in 70 irrigation schemes (22% of the project schemes) covering 39,600 ha (29% of the total project area). The BME surveys provide data on key indicators: food crop production, crop diversification, farmers’ income, sustainability of irrigation schemes, level of agricultural extension services, and involvement of women in project activities.

C. Project Costs

34. At appraisal, the project cost was estimated at the equivalent of $217.0 million, comprising $56.5 million in foreign currency and the equivalent of $160.5 million in local currency. ADB was to finance the entire foreign exchange cost, plus $73.5 million of the local currency cost, while the Government was to finance the remaining local currency cost of

10 Only one BME survey was conducted in NAD province in 2004 because of the security situation.

$87.0 million. The actual project cost at loan closing was $106.4 million, consisting of $34.4 million in foreign exchange cost and $72.0 million in local currency costs. ADB financed 100% of the foreign exchange cost and $31.0 million of the local currency cost, while the Government and farmers covered the remaining $41.0 million. At the request of the Government, three partial loan cancellations totaling $61.8 million were made during implementation.11 The net loan amount was $65.4 million after the cancellation of the unused loan balance of $2.9 million at loan closing. Appendix 4 shows the comparison of appraisal and actual project costs, by component.

D. Disbursements

35. Annual disbursements were low in the first years of the Project because of delayed project implementation. It gradually increased after the 2001 reformulation, and reached its highest achievement in 2004 when most of the civil works were carried out and completed. A total amount of $65.4 million was disbursed under the loan, or about 96% of the revised loan amount of $68.2 million. On the loan closing date of 8 September 2006, surplus fund amounting to $2.9 million was cancelled. Initially, an imprest account of $1.0 million was established for the Project. However, when project implementation gained momentum, in 2004 the size of imprest account was increased to $3.0 million to expedite disbursements. Utilization of the imprest account was good, with an average turnover ratio of 2.7 compared with the recommended ratio of 2.0. Yearly utilization of loan funds is shown in Appendix 5.

E. Project Schedule

36. The appraisal implementation schedule envisaged completion of project works within 6 years (Appendix 6). However, mis-procurement of project consulting services led to a delay in the start of the Project. The consulting services, which were instrumental in project implementation, were mobilized only from June to September 2002. The first civil works contract commenced in July 2003. Despite fast-tracking of project implementation, the loan closing date was extended twice for a total of 18 months: (i) from October 2004 to December 2005 to provide agriculture services and strengthening of farmers of rehabilitated irrigation systems, and (ii) from January to April 2006 to complete the remaining works that could not be finished within 2005 because of late release of budgets suffered nationwide.

F. Implementation Arrangements

37. The Project was implemented under the same arrangements as designed at appraisal. The EA of the Project was DGWR, which was supported in implementation by DGRD in MOHA, DGFC in MOA, and relevant provincial and district government agencies. At the central level, project coordination was facilitated by the National Steering Committee (NSC) chaired by the deputy chairman in the National Development Planning Agency (BAPPENAS). A project secretariat comprising representatives of the four major government agencies at the national level (BAPPENAS, DGWR, DGRD, and DGFC) was set to assist the NSC throughout project implementation. The project secretariat was responsible for preparation of the annual work plans based on submissions of the provincial coordination committees.

11 The first loan cancellation of $14.6 million was made on 16 July 1998 because of local cost savings from the depreciation of the rupiah against the dollar after the 1997–1998 Asian financial crises. The second loan cancellation of $1.7 million was made on 24 September 1999 after transfer of data management activities to the Capacity Building Project in the Water Resources Sector. The third loan cancellation of $45.5 was made on 6 October 2000 as a part of project reformulation.

38. PCCs and DCCs coordinated project implementation activities at the provincial and district levels. PWGs and DWGs constituted within PCCs and DCCs managed, coordinated, and guided project implementing agencies in respective provinces and districts on a day-to-day basis. Coordination at the national level and between the project secretariat and PWGs was satisfactory. However, project coordination with DWGs was less satisfactory, partly because DWGs had a limited role in preparation of annual work plans under the Project.

39. The allocation of funds for project activities was made annually on the basis of consolidated annual work plans approved by the NSC and ADB. After budget approval, loan funds were transferred to provincial and district governments. The funds for all central and provincial activities and entire agricultural component activities were available through the national development budget, while the rest of the activities were funded through the Government’s budget administered by the Ministry of Finance under coordination with MOHA. There was persistent delay in the release of budgets, which negatively affected project implementation. The national development budget was usually released around May and the funds under the emergency budget were available around July. The 2005 budget allotments were released as late as November 2005. To address the negative impacts related to this, the Government made an exception in 2005 by allowing the carryover of the 2005 budget up to 30 April 2006 for activities contracted prior to 30 November 2005. Late release of budget allotments in 2005 was a main reason for the second loan extension.

G. Conditions and Covenants

40. Twenty four of the 27 loan covenants were complied with; 2 covenants were not applicable, and 1 covenant was partly complied with (Appendix 7). With the issuance of Water Law No. 7/2004, two covenants on ISF collection and transfer of project facilities to WUAs became irrelevant. WUAs continue voluntary collection of fees for their O&M activities (para. 29). The covenant on land reclassification was partly complied with. A review of land classification was done during subproject selection. However, no land reclassification was carried out, although it seemed to be needed in some areas. Although the covenant on provision of counterpart funds was complied with, the provision of funds was untimely throughout project implementation.

H. Consultant Recruitment and Procurement

41. The Project engaged a total of 211 person-months for international consultants (292 person-months estimated at appraisal and 146 person-months at reformulation in 2001) and 2,137 person-months for national consultants (2,440 person-months estimated at appraisal and 1,311 person-months at reformulation) in accordance with ADB’s Guidelines on the Use of Consultants (2006, as amended from time to time). There was a significant delay in the fielding of project consultants because of two irregularities in the recruitment process, which were brought to ADB’s attention in October 1998 and March 1999, respectively. In December 1999, ADB’s investigation concluded that two lead consulting firms submitted falsified documents. ADB rejected proposals from both firms and requested the EA to restart the recruitment process. Subsequently, the consulting services arrangements were changed during the project reformulation in 2001. In line with the Government’s policy of decentralization and regional autonomy, the consulting services were changed from six expertise packages to three geographic procurement packages and one for implementation coordination. The scope of consulting services was reduced from the appraisal estimate in line with the overall reduction in the project scope. However, the consultants’ inputs were increased later to accommodate additional requirements for consulting services during two loan extensions totaling 18 months.

The services of package four consultants at the end of 2004 could no longer be extended because the lead and one of its associated firms were sanctioned by ADB. Subsequently, it was agreed to assign the contract to one of the other three international firms in association with the original individual national consultants. The Project also engaged 417 community organizers for implementation of WUA strengthening activities (para. 28).

42. Civil works were carried out by local contractors under the Government’s local competitive bidding (LCB) procedures acceptable to ADB. Small-scale civil works for tertiary systems were carried out by WUAs. All supplies and equipment were procured in accordance with ADB’s Guidelines for Procurement. Although some supply contracts were small and valued within ADB’s direct purchase ceiling, these contracts had to be tendered using the Government’s standard LCB procedures.

I. Performance of Consultants, Contractors, and Suppliers

43. In general, the consultants performed their services satisfactorily and in accordance with their terms of references. The consulting services were more centralized, thus were more effective in assisting central and provincial government agencies—rather than district agencies—in project implementation.

44. The performance of civil works contractors was satisfactory. Delays in construction of civil works were usually associated with persistent delays in budget provision. The quality of civil works done by WUAs was also satisfactory.

J. Performance of the Borrower and the Executing Agency

45. The performance of the Borrower was satisfactory. The Government established the necessary imprest account and generally met counterpart fund requirements. However, persistent delays in provision of national government funds allocated for the Project slowed down project implementation.

46. The performance of the EA was satisfactory. DGWR successfully undertook its role as the lead EA, meeting its responsibility for project implementation, coordination, and supervision. DGFC, DGRD, and relevant provincial and district government agencies also successfully met their responsibilities in project implementation. The Project was a good example of successful cooperation among several oversight and sectoral government agencies at different government levels.

K. Performance of the Asian Development Bank

47. ADB’s performance was rated “satisfactory”. ADB monitored the Project closely from the start of implementation. It fielded twelve missions, and took timely steps to solve problems in implementation. Reformulation of the Project in 2001 helped to start project implementation. However, the shorter time frame for implementation resulted in lesser inputs for agricultural support, WUA empowerment, and planning and design activities. In 2006, ADB promptly addressed the concerns of nongovernment organizations in Jambi and North Sumatra. However, slow investigation of irregularities in the recruitment of consulting services at the start of the Project resulted in a delay in project implementation.

III. EVALUATION OF PERFORMANCE

A. Relevance

48. The Project was relevant in terms of consistency with ADB’s country strategy and the Government’s development objectives and remains so now. The Project directly supported the Government’s goal to pursue an integrated approach that combines physical improvements and institutional strengthening, integrated planning, and management of water resources on the basis of whole river basins to satisfy competing demands, increased decentralization of irrigation management, and balanced regional development. The Project increased rice production, contributing to the country’s goal of self-reliance in food production.

B. Effectiveness in Achieving Outcome

49. The Project was “less effective” in meeting its outcome. It achieved the majority of its physical revised targets and significantly raised rice production in the area. Project targets were satisfactorily achieved in the three provinces where paddy cultivation is traditionally a primary activity (NAD, North Sumatra, and West Sumatra provinces) and which include the overwhelming majority of project schemes. However, project scope was significantly reduced at reformulation to address the significant delay in the start of the project implementation. Project impact could have been enhanced further if not for a limited time frame for proper planning and design, which affected the quality of irrigation improvements and agricultural support. WUA strengthening activities were implemented in a much shorter time than originally envisaged, and additional support to ensure the sustainability of WUAs is still needed.

C. Efficiency in Achieving Outcome and Outputs

50. The project activities were effectively implemented with a reduced scope and within a shorter time frame than envisaged at appraisal, and the Project efficiently used its resources to achieve its revised immediate outcomes and outputs. The Project Completion Review Mission estimated that base case economic internal rates of return (EIRRs) for the five provinces were 28.2% for West Sumatra, 25.9% for NAD, 29.9% for North Sumatra, 14.6% for Jambi, and 6.8% for Riau (Appendix 8). This shows that, except for Riau, project investments are economically viable. Riau represents less than 4% of the total project area. The base case EIRR for the entire Project is estimated at 25.2%. Since this was a sector project, at appraisal, the Project’s EIRR was not computed, but instead the EIRRs for four selected irrigation schemes were estimated to range from 18.9% to 33.6%.

51. The Project had a positive impact on beneficiaries’ income and paddy productivity. The Project has increased paddy yields from an average of 3.6 to 4.3 tons/ha while cropping intensity increased from 153% to 176%. An additional 200,000 tons of paddy has been produced annually as a result of the Project. Net annual incomes of farmers increased by an average of Rp1.7 million ($190 in constant 2006 prices) in NAD, North Sumatra, and West Sumatra provinces. Income increase in the other two provinces was lower and estimated at about Rp1.3 million ($145 in constant 2006 prices). The Project also had some indirect economic benefits from more efficient flood control and additional aquaculture production. Demonstration farms established under the Project were successful, and with adequate support from district agricultural services, could be replicated on a wider scale.

D. Preliminary Assessment of Sustainability

52. The new Water Law No. 7/2004 and Government Regulation No. 20/2006 define the responsibilities for O&M and repair of irrigation facilities between central, provincial, and district governments; and WUAs. Currently, O&M funds are often inadequate—particularly at district level. However, new regulations on water management and continuous strengthening of the fiscal capacity of districts provide a solid foundation for proper O&M of irrigation facilities in the country. Therefore, in order to ensure the sustainability of project investments, additional resources and attention to O&M are necessary at national, provincial, and especially district levels. Project sustainability is more likely in West Sumatra, NAD, and North Sumatra than in Jambi and Riau provinces—mostly because the local governments in the former three provinces show stronger support for irrigation management than in Jambi and Riau provinces. Since the overwhelming majority of the project area lies within West Sumatra, NAD, and North Sumatra provinces, the sustainability of overall project benefits is rated “likely”.

E. Impact

53. The Project included capacity building initiatives at local levels and thus directly supported the decentralization process in the country. Relevant provincial and district institutions were strengthened by training provided under the Project. The experience of working together to achieve common project objectives has created stronger bonds between the provincial and district water resources and agricultural agencies.

54. The Project generated a positive impact on the environment. The lining of irrigation canals reduced soil losses and risk of flood damage, and increased water use efficiency. As a result of agricultural support under the Project, farmers are more aware of the harmful effects of using excessive amounts of chemicals and are taking appropriate measures to use biological control measures since many of them are now using part of their paddy land for aquaculture activities. The Project focused on improving the management of existing systems, so it did not require any significant land acquisition or resettlement. The Project also did not encounter any indigenous peoples’ issues during implementation.

55. The Project also enabled more women to participate in irrigation activities. At project completion, almost 45% of all project beneficiaries were women compared with the appraisal estimate of 35%. Women were provided training in new agronomic practices, agricultural processing, WUAs activities, and leadership. Increased food supply as a result of increased paddy production has also improved food security and nutrition for their families.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

56. The Project suffered significantly from delays in the start of its implementation and further suffered from the untimely provision of counterpart funds. These delays caused project activities to be implemented within a shorter time than originally planned. Despite the significant delays in implementation and problems with provision of counterpart funds, the Project met the majority of its key physical targets and achieved its immediate development objectives. Increase in farm productivity has led to increased farmers’ incomes, which have helped reduce the incidence of poverty and provide a base for further rural development in the project areas. However, continued support from the local governments and respective central government

13 technical agencies is important in ensuring that these achievements will be sustained and accelerated.

57. The Project supported the decentralization process in the country and promoted the concept of beneficiary participation in all aspects of water use planning and implementation in small irrigation schemes. The experienced gained by all participants in working closely on the Project will be invaluable in promoting more rapid economic growth and development in the near future. Farmers and local government officials show a higher degree of ownership compared with earlier implemented irrigation management projects in the country. National, provincial, and district governments allocate part of their budget for O&M of main and secondary irrigation canals, and farmers collect fees for O&M of tertiary canals.

58. Based on ADB’s project performance rating assessment criteria, the Project is rated “successful”.12

B. Lessons

59. The following lessons were learned from implementation of the Project:

(i) Projects to be implemented by local governments should be accompanied by capacity building to ensure their sustainability.

(ii) The delays in issuing Government Regulation No. 20/2006, which was to clarify the responsibilities on irrigation O&M across national, provincial, and district governments and WUAs, resulted in uncertainty and incompleteness in the implementation of scheme O&M.

(iii) The significant delay in the start of project implementation caused many project activities to be implemented in a shorter time frame than originally envisaged, resulting in lower quality of agricultural support, WUA empowerment, and planning and design. Activities to support integrated river basin planning into irrigation design and management were also inadequate. A catch-up plan should have considered the potential negative effects on project outcome caused by limited time of implementation.

(iv) Project implementation suffered from persistent delays in provision of counterpart funds. Proper planning could have minimized effects of the budget issue.

(v) The financial ceiling on the R&U of schemes was set too low for adequate rehabilitation of many facilities. Thus, while the coverage of the Project was extensive, some of the works were only minor and did not meet the needs for full rehabilitation.

(vi) Civil works done by WUAs were implemented effectively, were of high quality, and increased ownership by the beneficiaries. Implementation of simple R&U contracts should have been given to WUAs in all project provinces.

12 In accordance with ADB. 2006. Guidelines for Preparing Performance Evaluation Reports for Public Sector Operations. Manila, the overall project performance was rated based on the four core evaluation criteria (relevance, effectiveness, efficiency, and sustainability).

(vii) The demonstration plots under the agricultural support component were generally successful. However, the dissemination of new agricultural technologies and practices had been very limited. Since the potential economic benefits of adoption of new agricultural practices are great, more emphasis should have been paid to these activities during project implementation. Agricultural support activities should have started even before the completion of R&U activities.

C. Recommendations

1. Project Related

60. Operation and Maintenance. Currently, O&M budget for facilities rehabilitated under the Project are often inadequate, particularly at district level. DGWR and DGRD should continue monitoring the O&M needs of the project schemes; and closely coordinate with provincial and districts governments to ensure allocation of sufficient funds for O&M of the completed project facilities at central, provincial, and district levels.

61. WUA Strengthening. The involvement of WUAs in O&M of irrigation facilities is key to project sustainability. District working groups, with the assistance of DGWR and DGRD, should prepare a work program and ensure adequate resources for WUA strengthening.

62. Agricultural Support. Farmers need additional assistance from agricultural extension services. District agricultural services with assistance from MOA should prepare an intensified agricultural program in the project area, and district governments should ensure adequate funds for implementation of this program. MOA should provide relevant training and technical support in the implementation of this program.

63. Further R&U support. The Project originally intended to rehabilitate irrigation facilities covering 250,000 ha. The Project rehabilitated only about 140,000 ha since the project scope was reduced at project reformulation. Further rehabilitation of areas in Sumatra will help the country move towards its goal of self-reliance in food production.

64. Timing of the Project Performance Evaluation Report. The project performance evaluation report should take place in about 4 years. That will provide a better picture of the likely sustainability of the system improvements funded by the Project.

2. General

65. The key general recommendations for future irrigation management projects include the following:

(i) The experience of the Project revealed that many lessons identified at appraisal remained, in particular inadequate O&M of completed schemes and inadequate agricultural support. ADB needs to pay greater attention to adequately addressing the key lessons learned in the formulation of future projects.

(ii) If there is a significant delay in the start of project implementation, a careful evaluation should be made to determine an adequate revised time frame that will ensure that the quality of project activities is not sacrificed.

Appendix 1 15

PROJECT FRAMEWORK AND OUTPUTS

Design Performance Monitoring Mechanisms Assumptions Summary Indicators/Targets Goal

To increase the • Annual incomes for • Benefit monitoring and • Political will to make sustainability of 35,000 farming evaluation (BME) decentralization of irrigated agriculture in families in Nanggroe reports from the governmental functions northern Sumatra Aceh Darussalam provincial development work in a harmonious and (NAD), North planning agency effective manner Sumatra, West Sumatra, Jambi, and • Provincial government • Effective coordination at Riau increased by statistics provincial and district $200 to $300 by levels by provincial and 2004 • District government district development and statistics planning agencies (BAPPEDAs) • Loan review missions • Sufficient operation and • Project performance maintenance (O&M) funds monitoring system provided by provincial and (PPMS) district BAPPEDA, with commensurate cash and in-kind contributions by farmers through their water user associations (WUAs)

• Condition of main system O&M assured by the District Water Resources Services (DWRS) in cooperation with WUAs

• Central Government assures President Instruction Program (INPRES) funding to cover local governments’ counterpart funding during project implementation

• Farmers perceive that WUAs effectively represent their interests, and willingly participate

• Farmers motivated to utilize fully the improved facilities, and to improve their application of higher technology

• Government policies in relation to rice, other

16 Appendix 1

Design Performance Monitoring Mechanisms Assumptions Summary Indicators/Targets crops, and agricultural extension are conducive to active farmer participation

• Government effectively communicates with WUAs and delivers on commitments Purpose

To raise agricultural • Annual production of • BME reports • Government (at central productivity through rice increased by and local levels) commits improvements in 60% (yields • Provincial and district funds for project existing irrigation increased from government statistics, implementation systems and institutions 3.7 tons per hectare including irrigation [t/ha] to 4.7 t/ha) service fee (ISF) • Provincial and district records governments provide • Capability of qualified staff for project Provincial and • Project completion implementation District Water report Resources Services • Government committed to (PWRS and DWRS) • Training evaluation effective decentralization and Agricultural reports of irrigation activities to Services (PRAS and provincial and district DAS) in five • Annual performance governments provinces raised to evaluation reports the level of • Government committed to autonomously • Project performance operate and maintain functioning agencies audit report large-scale and handover schemes as efficiently as • Main irrigations • PPMS possible systems operated efficiently by DWRS • Loan review missions • Improved agricultural in cooperation with technology identified, WUAs, and available tested, and adopted; and water distributed crop inputs assured equitably to all users • Agricultural extension • Beneficiaries budgets assured, and effectively involved research–extension in management of linkages formed their irrigation schemes, including • Government adopts a O&M, in cooperation policy to maximize farmers’ with DWRS and contribution (in cash and DAS kind) for O&M

• ISF program is supported through effective public relations and provision of resources by provincial and district governments

Appendix 1 17

Design Performance Monitoring Mechanisms Assumptions Summary Indicators/Targets Project Components/Outputs

1. Irrigation improvement

1.1 Rehabilitation and • R&U of 130,000 ha • Loan review missions • WUAs fully involved in upgrading (R&U) of Type A.1 planning and introduction of schemes completed, • Project progress reports implementation of works improved O&M and O&M improved • Survey, design, and • R&U of 20,000 ha of construction are performed Type A.2 schemes to a reasonable standard completed, and O&M improved • Selection criteria are adhered to • R&U of 100,000 ha of Type B schemes • Works completed on time completed, and O&M responsibilities • Adequate budgets handed over to WUAs

1.2 Strengthening of • Capabilities of 38 • Loan review missions PWRS and DWRS PWRS and DWRS strengthened

• Quality assurance introduced into survey, design, and construction activities

• Staff and other resources in the provincial and district level agencies assessed and rationalized

• Training programs identified, participants selected, and training provided

1.3 Improvement of • Minimum water • Loan review missions data management resources data set for water established in • Project progress reports resources planning Directorate General of Water Resources (DGWR)

18 Appendix 1

Design Performance Monitoring Mechanisms Assumptions Summary Indicators/Targets • DGWR staff trained in data management

• Existing data set converted

1.4 River basin • River basin planning • Loan review missions planning concepts integrated into all irrigation • Project progress reports design and management, and specific planning studies in critical basins undertaken 2. Agricultural support

2.1 Improvement of • Agricultural • Loan review missions extension services Information and Extension Centers • Project progress reports (BIPP) strengthened in 33 districts

• Food Crops and Horticulture Extension Action Plan developed in 647 locations

• Capabilities of agricultural field extension workers (PPLs) as community organizers strengthened (2,350 PPLs)

• Demonstration areas, to serve as centers for farmer- to-farmer (FTF) training, established

• FTF trainers developed and an FTF training program initiated

• Demonstration plots established

Appendix 1 19

Design Performance Monitoring Mechanisms Assumptions Summary Indicators/Targets • Integrated pest management (IPM) activities supported and strengthened

• Greater involvement of women facilitated, particularly with respect to their access to, and sharing in, project benefits

2.2 Strengthening of • Capabilities of 5 PRAS and DAS PRAS and 33 DAS strengthened

3. WUA support

3.1 Strengthening of • WUAs surveyed and • Project progress reports • Local ISF approach does WUAs their level of not conflict with that at the functioning • Loan review missions national level ascertained and PPMS • No delay in government • 3,560 WUAs (each • BME reports approvals for counterpart with about 100 funding farmer members) • Initial, midterm, and end established by 2004 of project surveys • Competent consultants appointed • WUAs assisted to • Annual reports of complete the PWRS and DWRS • Competent contractors administrative and engaged legal procedures for

formal recognition • No delays in payments to contractors • Inventory of

rehabilitation and • No delay in equipment and upgrading of motorcycle procurement irrigation facilities

determined in • WUA leaders with consultation with adequate skills and WUAs motivation are found

• Needs-based O&M • Government accepts

budgets, and O&M responsibility for providing

service standards for timely and equitable water

candidate supplies to irrigators

subprojects,

prepared in

consultation with

WUAs

20 Appendix 1

Design Performance Monitoring Mechanisms Assumptions Summary Indicators/Targets • WUA support to O&M implemented

on 250,000 ha

• Training of WUA

members in improved water management, O&M,

and farm technology implemented in 250,000 ha; and the

impacts evaluated

3.2 Improvement of ISF • Administrative and legal procedures for

ISF simplified, and transparency improved

• Special study on alternative approaches to ISF

completed, and viable alternatives recommended

• Improved alternative forms of support from farmers (in cash and in kind) formulated and pilot- tested

4. Project • Capabilities of the 38 Loan review missions implementation provincial and district coordination BAPPEDA strengthened

• Research topics (related to O&M and agriculture) identified and work undertaken through the appropriate agencies, including local universities

Appendix 1 21

Activities Inputs 1. Project Administration

• Project manager appointed • National, provincial, and district project counterpart budgets

• Letters of instruction issued to standing provincial • Inception workshops and district coordination committees

• Project management units formed in each of five provinces

• Terms of reference, short lists, and evaluation criteria for consultants prepared and approved

• Selection of consultants completed and approved

• Contracts for consulting services negotiated and approved

• Consultants mobilized

• Counterpart staff nominated

• Priority districts/subdistricts identified

• First year action plan formulated

• Schemes for initial development identified

• Administration of each project component assured by the EA and other implementing agencies throughout project implementation

2. Irrigation Improvement

• Rehabilitate and upgrade, and introduce improved • $144.9 million O&M • 146 person-months international consultants, and 1,059 person-months national consultants (i) Rehabilitate and upgrade type A.1 schemes • $29.3 million (ii) Rehabilitate and upgrade type A.2 schemes • $55.8 million (iii) Rehabilitate and upgrade type B schemes, • $40.6 million and hand over responsibility for their O&M to WUAs (iv) Strengthen the capacity of PWRS and DWRS • $16.3 million to prepare and implement subprojects

• Improve water resources data management • $1.9 million • 35 person-months international consultants, and 118 person-months national consultants

• Integrate river basin planning into all irrigation • $1.0 million design and management, and undertake some • 29 person-months international consultants, and 53 specific basin studies person-months national consultants

22 Appendix 1

Activities Inputs 3. Agricultural Support

• Establish Food Crops and Horticulture • $2.1 million Extension Action Plans (EAPs)

• Strengthen PRAS • $5.0 million

• Strengthen Agricultural Information and • $0.3 million Extension Centers (BIPPs) • 15 person-months international consultants, and 486 person-months national consultants

4. WUA Support

• Provide water user training (PTGA) • $12.2 million

• Form WUAs, construct small buildings • 39 person-months international consultants, and 425 person-months national consultants • Involve WUAs in planning infrastructure and O&M programs

• Promote WUAs participation in ISF/In-kind contributions

• Formulate and pilot-test alternative forms of support from farmers (in cash and in kind)

• Conduct a study on alternative approaches to ISF

5. Project Implementation Coordination

• Supply equipment to provincial and district BAPPEDAs

• Identify training requirements for WUAs • $3.8 million

• Initiate and complete WUA training • 28 person-months international consultants, and 299 person-months national consultants • Coordinate benefit monitoring and evaluation

• Establish management information system (MIS) between district and provinces, between provinces, and between provinces and Jakarta

Total cost: $168.3 million (excluding taxes, recurrent cost, and interest and other charges during construction)

Appendix 2 23

SUMMARY OF REHABILITATION AND UPGRADING WORKS

Original Functional at Revised R&U R&U Project Number of Province Program Program Completion Subprojects (ha) (ha) (ha)

A. Nanggroe 10,300 8,100 6 type A2 Aceh Darussalam 22,246 20,939 13 type A1 6,750 6,750 38 type B Subtotal (A) 70,000 39,296 35,698 57 subprojects

B. North Sumatra 2,154 2,154 2 type A2 14,050 13,460 15 type A1 28,838 26,653 149 type B Subtotal (B) 80,000 45,042 42,267 166 subprojects

C. West Sumatra 1,867 1,837 2 type A2 13,273 13,273 17 type A1 25,482 24,947 238 type B Subtotal (C) 70,000 40,622 40,057 257 subprojects

D. Riau 4,243 2,422 4 type A2 862 370 1 type A1 3,254 2,126 21 type B Subtotal (D) 14,000 8,359 4,918 26 subprojects

E. Jambi 3,628 3,428 1 type A2 2,956 2,315 3 type A1 3,529 2,964 12 type B Subtotal (E) 16,000 10,113 8,707 16 subprojects

Total 250,000 143,432 131,647 522 subprojects ha = hectare, R&U = rehabilitation and upgrading. Source: Directorate General of Water Resources.

24 Appendix 3

SUMMARY OF AGRICULTURAL SUPPORT AND WATER USERS ASSOCIATIONS STRENGTHENING

Table A3.1: Agricultural Training and Demonstration Activity Nanggroe North West Riau Jambi Total Aceh Sumatra Sumatra Darussalam (persons) (persons) (persons) (persons) (persons) (persons) A. Training Provided 1. Agriculture Extension 48 65 195 60 60 428 Workers 2. Key Farmers 630 860 1,050 300 227 3,097 3. Farmer Field School 1,609 1,065 1,566 205 300 4,745 Total (A) 2,287 1,990 2,811 565 587 8,270

B. Demonstration 1. Target 280 280 280 70 70 980 Total (B.1) 280 280 280 70 70 980

2. Demonstration Completed a. Farm Management 66 54 42 11 23 196 b. On Farm Water 3 26 10 0 0 39 Management c. Gender 15 13 47 9 10 94 d. Agribusiness 15 10 24 3 10 62 e. Farmer Research 2 16 13 0 10 41 f. Integrated Pest 8 13 2 2 8 33 Management g. Seed Multiplication 9 13 21 2 5 50 Total (B.2) 118 145 159 27 66 515 Sources: Directorate General of Water Resources and Directorate General of Food Crops.

Table A3.2: Establishment and Strengthening of WUAs No. Province Number of Area Established Legalized Schemes (ha) WUA FWUA WUA FWUA 1. Nanggroe Aceh 57 39,296 440 60 404 47 Darussalam 2. North Sumatra 166 44,575 380 64 104 47 3. West Sumatra 257 40,205 483 71 194 67 4. Riau 26 8,813 79 13 79 13 5. Jambi 16 10,113 133 29 133 29 Total 522 143,002 1,515 237 914 203 ha = hectare, FWUA = Federation of Water Users Associations, WUA = Water Users Association. Sources: Directorate General of Water Resources and Directorate General of Regional Development.

Appendix 4 25

SUMMARY OF PROJECT COSTS ($'000)

Component Appraisal Estimate Actual Foreign Local Total Foreign Local Total A. Irrigation Improvement 1. Civil Works 23,858 86,226 110,084 15,315 46,414 61,729 2. Equipment 1,125 1,015 2,140 901 901 3. Consulting Services 3,135 7,881 11,016 6,334 3,395 9,729 4. Survey and Investigations 2,833 9,877 12,710 124 1,887 2,011 5. Training and Demonstration 847 1,241 2,088 257 566 823 6. Coordination and Monitoring 322 322 - Recurrent Costs 6,153 6,153 1,517 1,517 - Recurrent Costs – Farmers 3,066 3,066 205 205 - Administration 7,391 7,391 2,665 2,665 - Taxes and Duties 15,158 15,158 7,551 7,551 Subtotal (A) 31,798 138,008 169,806 22,931 64,522 87,452

B. Agricultural Support 1. Civil Works 79 273 352 100 117 217 2. Equipment 483 792 1,275 835 835 3. Consulting Services 389 2,878 3,267 1,039 527 1,566 4. Survey and Investigations 27 89 116 12 71 83 5. Training and Demonstration 206 1,722 1,928 799 633 1,431 6. Coordination and Monitoring 199 199 - Recurrent Costs 576 576 0 0 - Administration 293 293 345 345 - Taxes and Duties 781 781 433 433 Subtotal (B) 1,184 7,404 8,588 2,785 2,323 5,108

C. WUA Support 1. Equipment 83 83 2. Consulting Services 409 409 557 593 1,150 3. Survey and Investigations 61 202 263 289 512 801 4. Training and Demonstration 527 1,431 1,958 5. Coordination and Monitoring 7 7 - Administration 84 84 401 401 - Taxes and Duties 75 75 400 400 Subtotal (C) 61 770 831 1,456 3,344 4,800

D. Strengthening Implementation Coordination 1. Civil Works 307 1,101 1,408 4 13 17 2. Equipment 156 41 197 280 280 3. Consulting Services 990 3,928 4,918 757 125 881 4. Survey and Investigations 324 1,138 1,462 87 97 184 5. Training and Demonstration 494 5,378 5,872 353 342 695 6. Coordination and Monitoring 862 862 - Recurrent Costs 142 142 0 0 - Administration 1,041 1,041 136 136 - Taxes and Duties 1,505 1,505 292 292 Subtotal (D) 2,271 14,274 16,545 1,480 1,866 3,346

E. Interest During Construction 21,230 21,230 5,738 5,738 Total 56,544 160,456 217,000 34,390 72,055 106,445 Note: Totals may not be exact because of rounding. Sources: Directorate General of Water Resources and the Asian Development Bank’s Loan Financial Information System.

26 Appendix 5

UTILIZATION OF LOAN PROCEEDS

Annual Disbursement ($)

Year Actual Actual Percentage of Actual Disbursement Cumulative Disbursement 1998 110,426 110,426 0.2 1999 343,735 454,161 0.5 2000 652,904 1,107,065 1.0 2001 1,577,616 2,684,681 2.4 2002 1,106,813 3,791,494 1.7 2003 9,737,486 13,528,980 14.9 2004 28,751,642 42,280,622 44.0 2005 14,027,941 56,308,563 21.5 2006 9,071,461 65,380,024 13.9

Total 65,380,024 65,380,024 100 Source: The Asian Development Bank’s Loan Financial Information System.

e ndix 6

Appendix 6 27 27

PROJECT IMPLEMENTATION SCHEDULE Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Description 1998 1999 2000 2001 2002 2003 2004 2005 2006 Preparatory Works 1. Organizing Project Office

2. Recruitment of Consultants

3. Mobilization of Consultants

A. Irrigation Improvement 1. Rehabilitation and Upgrading a. Survey, Planning and Design

b. Construction

2. Institutional Strengthening of Provincial and District Water Resources Services 3. Improvement of Data Management 4. Farmers' Involvement in Civil Works B. Agricultural Support 1. Establish Demonstration Areas

2. Farmer-to-Farmer Training

3. Introduction of New Agricultural Technologies

4. Promote Greater Involvement of Women

C. Water Users Association Support

D. Strengthening Implementation Coordination

Project Changes 1. Cancellation of Savings due to Depreciation of Rupiah 2. Transfer of Data Management to Capacity Building Project 3. Project Reformulation

Legend: = Original = Actual Original Revised Sources: Directorate General of Water Resources and the Asian Development Bank's Loan Financial Information System. Closing Date Closing Date

28 Appendix 7

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Reference in Loan Covenant Agreement Status of Compliance

The Borrower shall cause the Project to be carried Section Complied with. out with due diligence and efficiency and in 4.01(a) conformity with sound administrative, financial, engineering, environmental, agricultural and irrigation practices.

In the carrying out of the Project and operation of the Section Complied with. project facilities, the Borrower shall perform, or cause 1.01(b) to be performed, all obligations set forth in Schedule 5 to the Loan Agreement.

The Borrower shall make available, promptly as Section 4.02 Complied with. needed, the funds, facilities, services, land and other O&M budgets were provided with resources which as required, in addition to the a delay. proceeds of the Loan, for the carrying out of the Project, and for the operation and maintenance of the project facilities.

In the carrying out of the Project, the Borrower shall Section 4.03 Complied with. cause competent and qualified consultants and (a) The consultants fielded in August contractors, acceptable to the Borrower and the 2002. Bank, to be employed to an extent and upon terms and conditions satisfactory to the Borrower and the Bank.

The Borrower shall cause the project to be carried Section Complied with. out in accordance with plans, design standards, 4.03(b) specifications, work schedules and construction methods acceptable to the Borrower and ADB.

The Borrower shall ensure that the activities of its Section 4.04 Complied with. departments and agencies with respect to the Coordination between carrying out of the Project and operation of the the Provincial Working Group Project facilities are conducted and coordinated in (PWG) and the District Working accordance with sound administrative policies and Group (DWG) should be procedures. continued after completion.

The Borrower shall maintain, or cause to be Section Complied with. maintained, records and accounts adequate to 4.06(a) A financial management team in identify the goods and services and other items of the Project Secretariat has good expenditure financed out of the proceeds of the Loan. record of expenditures.

Appendix 7 29

Reference in Loan Covenant Agreement Status of Compliance

The Borrower shall (i) maintain, or cause to be Section Complied with. maintained, separate accounts for the project: (ii) 4.06(b) have such accounts and related financial statements audited annually, in accordance with sound auditing standards, by auditors available but in any event not later than nine (9) months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto.

The Borrower shall furnish, or caused to be furnished Section Complied with. to the Bank all such reports and information as the 4.07(a) Bank shall reasonably request concerning (i) the Loan, and the expenditure of the proceeds and maintenance of the service thereof; (ii) the goods and services and other items of expenditure financed out of the proceeds of the Loan; (iii) the Project and any subproject; (iv) the administration, operation and financial condition of DGWR and the other agencies of the Borrower responsible for the carrying out of the Project and the subprojects, and for operation of project facilities, or any part thereof:; (v) financial and economic conditions in the territory of the Borrower and the international balance-of-payments position of the Borrower; and (vi) any matters pertaining to the purposes of the loan.

Without limiting the generality of the foregoing, the Section Complied with. Borrower shall furnish, or caused to be furnished, to 4.07(b) the Bank six-monthly reports on the carrying out of the Project and on the operation and management of the Project facilities…

Promptly after physical completion of the Project, but Section Complied with. The Report was in any event not later than three (3) months thereafter 4.07(c) submitted to ADB in August the Borrower shall prepare and furnish to the Bank a 2006. Project Completion Report.

The Borrower shall enable the Bank’s representative Section 4.08 Complied with. to inspect the Project, the subproject, the goods financed out of the proceeds of the Loan, and any relevant records and document.

. The Borrower shall ensure that the Project facilities Section 4.09 Complied with. are operated, maintained and repaired in accordance with sound administrative, financial, engineering,

30 Appendix 7

Reference in Loan Covenant Agreement Status of Compliance environmental, agricultural, irrigation, and maintenance and operational practices

Directorate General for Water Resources (DGWR), Schedule 5, Complied with. as the project executing agency, shall provide overall paragraph 1 supervision, coordination and management of the Project. The Implementing Agencies shall be responsible for implementation of particular Project components at the provincial and district levels

The Borrower shall establish, within one month from Schedule 5, Complied with. the Effective Date, a Project Secretariat, with paragraph 2 representatives from BAPPENAS, MOF, DGWR, DGFCP, DGRD and DGPARA, to assist the standing National Steering Committee responsible for coordinating regional development activities and approving an Annual Work Plan (AWP) for the Project. The Project Secretariat shall be chaired by a senior representative from DGWRD and shall be responsible for preparation of the AWP based on the submissions of the Provincial Coordinating Committees concerned referred to in paragraph 3 of this Schedule.

Provincial and District Coordination Committees: The Schedule 5, Complied with. Borrower shall ensure that (i) standing Provincial and paragraph 3. District Coordinating Committees shall coordinate . Project implementation activities; and (ii) cause the Implementing Agencies to create, fill and maintain sufficient staff positions at the provincial and district levels to executive, monitor and evaluate the Project adequately; and (ii) Provincial Working Groups (PWGS) constituted within the Provincial Coordinating Committees concerned shall, on a day- to-day basis, inter alia (a) manage, coordinate and guide the Implementing Agencies; (b) identify, review and assess all proposed subprojects in the provinces concerned in terms of technical, social, environmental, institutional and economic adequacy.

Selection of Subprojects: The Borrower shall ensure Schedule 5, Complied with. that subprojects shall be selected and processed on paragraph 4 Project Secretariat, PWGs, and the basis of criteria and in accordance with detailed DWGs actively involved in procedures agreed upon with ADB. subproject selection.

Notwithstanding the Bank’s approval of an Annual Schedule 5, Complied with. Work Plan, the approval of the Bank shall also be paragraph 5 required before proceeding with any tendering,

Appendix 7 31

Reference in Loan Covenant Agreement Status of Compliance contract award, or implementation of a proposed subproject if any of the following conditions apply: (i) the subproject would be the first subproject in the district concerned, (ii) the economic internal rate of return is less than 12 percent; (iii) resettlement is required; (iv) an environmental impact assessment is required; (v) the estimated cost of civil works is more than the equivalent of $2,500 per hectare for subprojects under Part A(1)(a) of the Project, or more than the equivalent of $500 per hectare for subprojects under Part A(1)(b) of the Project; (vi) the net service area is greater than 2,000 hectares; or (vii) the subproject shall require land use conversion. For all such proposed subprojects, the PWRS and/or PIP concerned shall prepare and submit to ADB for approval a Summary Subproject Report containing such information as the Bank may require.

Counterpart Funds: Without limiting the generality of Schedule 5, Complied with a delay since section 4.02 of this Loan Agreement, the Borrower paragraph 6 O&M budgets were provided with shall make sufficient provisions in the national, a delay. provincial and district level budgets to fund in a timely manner all counterpart financing requirements, including, without limitation, the annual incremental O&M requirements for each subproject financed under the Project. Project beneficiaries under Part A(1)(a) of the Project shall be encouraged to provide ISF contributions (after completion of the relevant R&U works) towards the costs of O&M of the main irrigation systems, and the Borrower shall ensure that the provincial and district governments concerned supplement these ISF contributions as necessary through allocation of necessary funds from provincial and district APBD resources to ensure O&M funding at the relevant NBB level. The appropriate level of O&M funding shall be reviewed periodically by the PWGS, in consultation with the Bank, and each Project province shall furnish to the Bank satisfactory evidence of approved budgetary allocations for O&M at the agreed level.

Subproject Benefit Monitoring and Evaluation: The Schedule 5, Complied with. Borrower shall ensure that the PWG concerned will paragraph 7 Final Baseline survey completed satisfactorily coordinate benefit monitoring and in October 2005. evaluation of subprojects, including arranging for: (i) carrying out socioeconomic profiles in the Project provinces concerned; (ii) compilation and integration of relevant data collected by PWRS and PRAS; and (iii) supervising collection of additional data covering key performance indicators to show the extent of impact of Project interventions.

32 Appendix 7

Reference in Loan Covenant Agreement Status of Compliance

Environmental Management and Monitoring Schedule 5, Complied with. Systems: In accordance with the applicable paragraph 8. EIAs were undertaken during government regulations, the Borrower shall establish preparation of SSRs and BSRs, environmental management and monitoring systems and reported in quarterly for each subproject prior to its implementation, and progress reports. report, to the Bank on the findings for such subproject at six-month intervals thereafter during Project implementation.

Handover of irrigation schemes to WUAs: The Schedule 5, Not applicable. Borrower shall ensure that, in connection with the paragraph 9. No handover of schemes at handover of irrigation schemes, under Part A (I)(b) of project completion in accordance the Project to WUAS; (i) the farmers concerned with the new Water Law No.7 of continue to remain eligible for, and receive, relevant 2004. The law stipulates that the training and technical guidance from staff of DWRS, Government is now responsible DAS and BIPP; and (ii) in the event of major damage in carrying out of O&M of to any such irrigation scheme, the Borrower shall irrigation facilities. assist in reconstruction of such schemes as necessary.

WUA Registration: Prior to commencement of Schedule 5, Complied with. irrigation improvement under Part A of the Project, paragraph the Borrower shall take appropriate measures in the 10. Project provinces, satisfactory to the Bank, to strengthen existing village water user administrative systems or WUAs, as applicable, to enable such systems or WUAs to undertake within their respective jurisdictions effective continuing O&M activities in respect of the irrigation schemes to be improved under the Project. To this end, the Borrower shall encourage registration of such existing water user administrative systems or WUAs, or creation of new registered WUAs within the Project provinces, in accordance with the requirements of the WUA Regulation. In connection with such registration, the Borrower shall (i) exempt, or arrangers exempt, WUAs from making payment of any fees required by local governments for such purpose; and (ii) provide necessary guidance to facilitate the timely establishment of such WUAs.

Irrigation Service Fee (ISF) Collection: The Borrower Schedule 5, Not applicable. shall take necessary measures to ensure that, during paragraph 11 Project implementation and thereafter, all water user administrative systems or WUAs responsible for irrigation schemes rehabilitated or upgraded under part A(I)(a) of the Project are empowered to collect, on an ongoing basis, ISF from their respective

Appendix 7 33

Reference in Loan Covenant Agreement Status of Compliance members to found the O&M of such irrigation schemes.

Reclassification of Land: The Borrower shall take Schedule 5, Partly complied with. No necessary measures within the project paragraph 12 reclassification of land was implementation period to update reclassification of reported. land in the subproject areas to improve land and building tax revenue collection within the Project provinces.

Training: The Borrower shall (i) ensure that existing Schedule 5, Complied with. trainers and training facilities are made available for paragraph 13 the training requirements under the Project; and (ii) prepare a detailed program setting forth such training requirements and submit the program to the Bank for its review and approval in each AWP.

Annual Project Reviews: The Project Secretariat shall Schedule 5, Complied with. be responsible for conducting annual reviews of paragraph 14 Project implementation progress. During the third and subsequent years of Project implementation, comprehensive reviews shall be undertaken to assess, for each Project province (a) the progress of physical works, agricultural services and institutional improvements carried out under the Project; and (b) the adequacy of counterpart funding. Such comprehensive reviews shall identify, inter alia, problems and delays occurring during Project implementation in order to allow appropriate ongoing adjustments to Project formulation.

34 Appendix 8

ECONOMIC AND FINANCIAL ANALYSES

1. The economic analysis was undertaken on the basis of the methodology used during appraisal to allow for comparison between the targets set at appraisal and those achieved at the Project Completion Review Mission. This analysis was undertaken comparing the cost and benefits in the with- and without-project scenarios. The economic internal rate of return (EIRR) was estimated for the five individual project provinces and for the Project as a whole. The analysis was based on data obtained in the Government’s project completion report and collected from field visits undertaken by the Project Completion Review Mission. A. Major Assumptions

2. The economic analysis is based on the assumptions outlined in the following sections.

1. Prices

3. All prices are expressed at the world market price level in the national currency. The actual and forecast farm-gate commodity prices are based on world market prices published by the World Bank. These prices are adjusted to constant 2006 prices using the World Bank manufacturers’ unit value (MUV) index.1 Local costs have been adjusted to constant 2006 prices based on the consumer price index for Indonesia2 while foreign costs have been similarly adjusted using the MUV index.

4. The import parity prices for rice and the economic prices of other commodities are in Tables A8.1–A8.4. The price of labor is assumed at Rp25,000 per day, which is the prevailing price found at project completion. Labor costs have been shadow-priced at 0.8 of the wage rates while other inputs have been adjusted by the standard conversion factor of 0.9, following appraisal methodology.

2. Period of Analysis

5. The Project’s economic life is assumed to be 25 years, from 1998 to 2022, as at appraisal.

3. Project Cost

6.. The economic costs for the total Project are based on actual investment costs incurred from 1998 to 2006. Actual investment costs are significantly lower than appraisal estimates because of several partial loan cancellations. Costs are expressed in economic prices, by excluding taxes and duties and applying the standard conversion factor of 0.9 to the local component of costs. Investment costs are expressed in constant 2005 base prices, by adjusting the local cost element by the consumer price index and the MUV index for the international cost component.

4. Project Benefits

7. The project area (farm and cropped) with and without the Project is shown in Table A8.5. The Project has increased paddy yields from an average of 3.60 to 4.31 tons per hectare (tons/ha), with the cropping intensity rising from 153% to 176%. The target at appraisal was

1 World Bank, MUV Index 2005. 2 2005. ADB. Key Indicators of Developing Asian and Pacific Countries. Manila.

Appendix 8 35 marginally higher with expected yields at 4.76 tons/ha and cropping intensity of 189%. The main reasons for this are: (i) high incidence of crop damage caused by pest and diseases since there is no intensive program on integrated pest management; (ii) unforeseen high commodity prices for tree crops have diverted farm labor away from paddy cultivation in some areas, thus lowering the cropping intensity; and (iii) rapid growth in aquaculture activities in the paddy areas as farmers utilize the additional water for this high-income enterprise. Therefore, the expected annual increase in paddy production is assumed at 200,000 tons compared with the appraisal target of 500,000 tons.

8. The cost of the Project on a per ha basis is Rp4.71 million/ha compared with an appraisal estimate of Rp6.64 million/ha; or a saving of 29%. Farmers’ income has been raised by Rp4.97 million/ha/year compared with Rp3.50 million/ha/year at appraisal, which was partly due to recent increases in domestic rice prices.

B. Economic Performance

9. Results of the economic analysis are summarized in Table A8.6. The base case EIRR for the entire Project is estimated at 25.2%, which is higher than the opportunity cost of capital of 12%. The EIRRs for project provinces were estimated at 25.9% for Nanggroe Aceh Darussalam (NAD), 29.9% for North Sumatra, 28.2% for West Sumatra, 6.8% for Riau, and 14.6% for Jambi. At appraisal, the EIRR for the Project was not computed; instead, the EIRRs for four selected irrigation schemes were estimated to range from 18.9% to 33.6%. The Project Completion Review Mission estimates are in line with the expected outcome at appraisal, except for Riau province, which represents less than 4% of the total project area.

10. The main project risks are (i) the possibility of a decrease in commodity prices, and (ii) deterioration of irrigation facilities caused by lack of or inadequate operation and maintenance (O&M). Sensitivity analysis shows that a fall in prices by 10% would reduce the project EIRR to 21.0%, which is still higher than the opportunity cost of capital of 12%. With inadequate O&M, the Project could potentially lose its overall impact, which makes O&M the most critical factor for project sustainability.

C. Financial Performance

11. Farm model analysis was carried out for representative farm models in project provinces to access the direct impact of the Project on the beneficiaries (Tables A8.7–A8.10). Net annual incomes of farmers increased by an average of Rp1.6 million ($175 in constant 2006 prices) in Nanggroe Aceh Darussalam, North Sumatra, and West Sumatra provinces. Income increase in the other two provinces was lower and estimated at about Rp1.2 million ($135 in constant 2006 prices).

Appendix 8 36

Table A8.1: Import Parity Prices of Paddy 36 (Constant 2006 Prices)

Item 2002 2003 2004 2005 2006 2007 2008 2009 2010 2015 A World price, nominal Thailand 5% broken $/ton 206 198 238 286 269 279 263 244 225 226 pp e Quality differential, 5% 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 0.95 ndix 8 Equivalent value of Indonesian product $/ton 196 188 226 272 256 265 250 232 214 215 Freight and insurance cost to Jakarta $/ton 15 15 15 15 15 15 15 15 15 15 Value at Indonesian port $/ton 211 203 241 287 271 280 265 247 229 230 Exchange rate Rp/$ 9,311 8,577 9,000 9,800 9,300 9,300 9,300 9,300 9,300 9,300 Value at Indonesian port Rp/kg 1,962 1,738 2,167 2,812 2,516 2,604 2,463 2,295 2,127 2,136 Port handling charges, storage, and loss, 10% Rp/kg 196 174 217 281 252 260 246 230 213 214 Internal handling/transport costs, near port Rp/kg 50 50 50 50 50 50 50 50 50 50 Value at wholesale market Rp/kg 2,208 1,962 2,434 3,144 2,818 2,915 2,759 2,575 2,390 2,400 Transport costs, local to wholesale market Rp/kg 30 30 30 30 30 30 30 30 30 30 Wholesale margin, 3% Rp/kg 66 59 73 94 85 87 83 77 72 72 Value at local market/processor/mill Rp/kg 2,112 1,873 2,331 3,019 2,703 2,797 2,647 2,468 2,288 2,298 Trader margin, 3% Rp/kg 63 56 70 91 81 84 79 74 69 69 Ex-mill price Rp/kg 2,048 1,817 2,261 2,929 2,622 2,714 2,567 2,393 2,220 2,229 Conversion, paddy to rice, 65% Rp/kg 1,331 1,181 1,470 1,904 1,704 1,764 1,669 1,556 1,443 1,449 Milling cost Rp/kg 150 150 150 150 150 150 150 150 150 150 Transport cost, farm gate to local market/mill Rp/kg 15 15 15 15 15 15 15 15 15 15 Farm gate price Rp/kg 1,166 1,016 1,305 1,739 1,539 1,599 1,504 1,391 1,278 1,284 Economic price Rp/kg 1,227 1,076 1,365 1,799 1,600 1,659 1,564 1,451 1,338 1,344 kg = kilogram, Rp = Rupiah Source: World Bank Price forecast, May 2006.

Appendix 8 37

Table A8.2: Economic Price of Urea (Constant 2006 Prices) Item 2002 2003 2004 2005 2006 2007 2008 2009 2010 2015 World price, Europe bulk $/ton 101 139 175 203 210 193 189 181 173 147 Quality/Price differential Asia 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 Equivalent value of Indonesian product $/ton 111 153 193 223 231 212 208 199 190 162 Freight and insurance cost $/ton 27 27 27 28 29 29 29 29 30 31 Value at Indonesian port ex-Jakarta $/ton 84 126 166 195 202 183 179 170 160 131 Exchange rate Rp/$ 9,311 8,577 9,000 9,800 9,300 9,300 9,300 9,300 9,300 9,300 Value at Indonesian port ex-Jakarta Rp/kg 783 1,080 1,490 1,914 1,879 1,705 1,664 1,582 1,491 1,216 Port handling charges, storage, and loss, 5% Rp/kg 23 32 45 57 56 51 50 47 45 36 Internal handling/transport Rp/kg 30 30 30 30 30 30 30 30 30 30 Value at wholesale market Rp/kg 837 1,142 1,564 2,001 1,965 1,786 1,744 1,659 1,566 1,282 Marketing margin, 10% Rp/kg 84 114 156 200 196 179 174 166 157 128 Transport cost, wholesale to farm gate Rp/kg 40 40 40 40 40 40 40 40 40 40 Farm gate price Rp/kg 960 1,296 1,761 2,241 2,201 2,004 1,958 1,865 1,762 1,450 Economic price Rp/kg 987 1,324 1,788 2,269 2,229 2,032 1,985 1,892 1,789 1,477 kg = kilogram; Rp = Rupiah Source: World Bank Price forecast, May 2006. Table A8.3: Economic Price of Potassium Chloride (Constant 2006 Prices) Item 2002 2003 2004 2005 2006 2007 2008 2009 2010 2015 World price, E Europe bulk $/ton 122 113 186 147 155 142 136 130 124 103 Quality differential $/ton 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Equivalent value of Indonesian product $/ton 122 113 186 147 155 142 136 130 124 103 Freight and insurance cost $/ton 20 20 20 20 20 20 20 20 20 20 Value at Indonesian port $/ton 142 133 206 167 175 162 156 150 144 123 Exchange rate Rp/$ 9,311 8,577 9,000 9,800 9,300 9,300 9,300 9,300 9,300 9,300

Value at Indonesian port Rp/kg 1,322 1,141 1,854 1,637 1,628 1,507 1,451 1,395 1,339 1,144 Port handling charges, storage, and loss, 5% Rp/kg 40 34 56 49 49 45 44 42 40 34

Internal handling/transport costs - near port Rp/kg 30 30 30 30 30 30 30 30 30 30 A pp

Value at wholesale market Rp/kg 1,392 1,205 1,940 1,716 1,706 1,582 1,524 1,467 1,409 1,208 en

Marketing margin, 10% Rp/kg 139 120 194 172 171 158 152 147 141 121 di x 8 Transport cost, wholesale to farm gate Rp/kg 40 40 40 40 40 40 40 40 40 40

Farm gate price Rp/kg 1,571 1,365 2,174 1,927 1,917 1,780 1,717 1,654 1,590 1,369

Economic price Rp/kg 1,603 1,397 2,206 1,959 1,949 1,812 1,749 1,685 1,622 1,401 37

kg = kilogram; Rp = Rupiah Source: World Bank Price forecast, May 2006.

38 Appendix 8

8 6 5 8 0 8 0 0 . 6 8 6 0 8 2 1 1 52 30 40 1 0 1 3 1 0 ,748 , , 2

1,831 2 9 183

1 2,054

8 0 0 0 0 0 0 0 . 1 9 0 9 1 2 1 59 30 40 3 1 3 1 2 , , 201 204

2 9

2,042 1,953 2,286

3 0 9 0 0 0 0 0 . 2 0 0 0 2 2 0 1 61 30 40 4 3 2 2 0 2 , , 2 214 2

2,137 2,046 2,391

8 0 8 0 0 0 0 0 . 2 40 0 1 1 2 3 1

5 3 64 30 2 2 2 , 200

223 9 2,

2,233 2,139 2,496

0 7 7 0 6 6 0 6 . 0 9 2 2 0 2 4 1 40 30 69 3 6 2 0 2 2 , , 2

239

9 2

2,386 2,288 2,665

0 6 3 0 7 7 0 7 . 0 1 3 3 2 5 1 40 72 30 3 8 2 2 2 , , 200

249

9 2 2,781

2,492 2,390

0 0 5 0 9 9 0 9 .

0 7 0 2 2 2 4 1 40 73 30 8 440 8 0 2 2 2 , , 2

254

2 9 2,543

2, 2,838

2 4 0 0 1 1 0 1 . 6 0 2 2 2 4 1 40 65 30 5 0 2 2 2 , 200

226 9 2,

2,169 2,530 2,264

3 7 9 9 0 9 9 7 0 3 7 2 7 9 1.0 40 51 30 5 0 0 1 1 1 , , 2

179 8 2

1,707 2,007 1,788 (Constant 2006 Prices)

2 1 9 9 0 9 9 1 9 6 2 6 8 1.0 40 53 30 3 0 1 1 1 , , 200

184 9 2

1,760 1,843 2,067

g n n n n k o o o o / t t t t / / / / p Rp/$ $/ton $ $ $ $ Rp/kg Rp/kg Rp/kg Rp/kg Rp/kg Rp/kg Rp/kg R

Table A8.4: Economic Price of Di-Ammonium Chloride .

6 0 % 0 2 y

t c

cast, Ma e, and loss, 5 n pr

sts, near port e

esia rt co ah s

t o o k r l c

o u % s, storag e p b

e Rupi n port n e olesale to farm gate x 8 h ranc ale mark ial w in, 10

rop e of Indon t harg

Bank Price for u s Rp = esia e

esia ndi g ng/transp e u n e li l E ins d o rld ng c n o pric h d li a Appe w Indon g mar nt valu ic an ge rate le price, at y differe a an e at Indon e at e kilogram; rld rm gate pric ansport cost, o eight r r a

38 Item W Qualit Econom kg = Source: W Equiv F Valu Exch Valu Port hand Internal h Valu Marketin T F

Appendix 8 39

Table A8.5: Paddy Cropped Area and Yield (With and Without Project [ha])

Item 2002 2003 2004 2005 A. Field Area NAD 217 20,797 35,183 35,698 North Sumatra 0 30,675 40,101 42,267 West Sumatra 0 30,253 40,057 40,057 Riau 0 2,273 4,858 4,918 Jambi 0 8,264 8,502 8,707 Total (A) 217 92,263 128,700 131,647

B. Cropped Area - Without Project NAD 347 33,275 56,292 57,117 North Sumatra 0 49,080 64,162 67,627 West Sumatra 0 45,380 60,086 60,086 Riau 0 2,273 4,858 4,918 Jambi 0 10,909 11,222 11,493 Total (B) 347 140,917 196,619 201,241

C. Cropped Area - With Project NAD 391 37,435 63,329 64,256 North Sumatra 0 55,215 72,182 76,081 West Sumatra 0 51,431 68,097 68,097 Riau 0 3,182 6,801 6,885 Jambi 0 13,636 14,028 14,367 Total (C) 391 160,899 224,436 229,686

D. Crop Yield - Without Project (tons/ha) NAD 4.20 4.20 4.20 4.20 North Sumatra 4.00 4.00 4.00 4.00 West Sumatra 3.60 3.60 3.60 3.60 Riau 3.20 3.20 3.20 3.20 Jambi 3.60 3.60 3.60 3.60 Total (D) 18.60 18.60 18.60 18.60

E. Crop Yield - With Project (tons/ha) NAD 4.20 4.33 4.47 4.60 North Sumatra 4.00 4.13 4.27 4.40 West Sumatra 3.60 3.73 3.87 4.00 Riau 3.20 3.40 3.60 3.80 Jambi 3.60 3.73 3.87 4.00 Total (E) 18.60 19.32 20.08 20.8 ha = hectare; NAD = Nanggroe Aceh Darussalam. Note: Totals may not be exact because of rounding. Source: Project Completion Review Mission estimates.

40 Appendix 8

8 9 9 3 7 6 4 5 4 9 1 8 5 3 8 0 1 4 2 4 4 2 6 0 9 1 5 2 5 7 7 4 3 6 , , , , , , 6– 1 2 3 8 5 5 12,61 41,46 11,24 13,31 35,53 27,24 31,92 43,17 48,85 39,86 104,1 145,5

201

8 9 9 3 9 5 4 1 7 6 4 8 5 3 8 0 1 4

4 4 2 0 6 9 1 5 2 5 5 7 4 7 3 6 1 9 , , , , , , , , 1 2 8 3 5 5 4 1 201 12,61 41,46 0 11,24 13,31 35,53 27,24 3 43,17 48,85 39,86 1 145,5

9 3 8 9 5 4 9 1 4 7 6 8 5 3 8 0 1 4

4 4 2 0 6 9 1 5 1 6 4 1 3 4 7 5 6 4 5 7 4 7 3 6 6 4 2 3 5 5 2 1 8 8 1 , , , , , , , , , , , , , , , , 0 1 2 8 3 5 5 2 1 1 3 5 5 7 3 8 9 2 1 4 1 1 4 31,92 3 2 4 4 3 104,1 1

9 3 5 4 8 9 9 5 4 7 6 8 8 3 0 1 4 1

4 4 2 6 9 5 1 0 2 4 1 1 6 3 5 7 7 6 3 4 1 9 2 3 6 4 , , , , , , , , , , 5 5 3 8 4 1, 2, 1 1 3 2 1 201 0 3 43,17 48,85 35,53 39,86 27,24 1 1 1 4 1 145,5

9 5 1 4 5 4 7 6 8 9 9 3 8 8 3 0 1 4

2 0 6 4 4 5 9 1 7 5 6 2 4 7 5 7 6 3 5 1 8 8 1 , , , , , , , , , , 0 8 3 1 2 5 5 5 3 8 9 2 11,24 13,31 35,53 27,24 12,61 41,46 4 31,92 4 4 3 104,1 1

1 5 4 4 9 3 7 6 8 9 9 8 8 5 3 0 1 4

0 6 4 4 2 5 9 1 4 1 3 4 1 6 2 1 4 7 5 7 6 3 2 3 5 2 6 4 1 9 , , , , , , , , , , , , , , 8 3 1 2 5 5 1 3 4 5 7 2 1 1 201 1 1 0 3 2 1 4 3 43,17 48,85 39,86 1 145,5

1 5 4 4 9 3 8 8 9 7 6 9 5 8 3 0 1 4

ah 0 6 4 4 5 2 9 1 7 5 6 0 4 7 5 7 6 3 24 31 5 1 8 8 1 , , , , , , , , , 0 1 2 3 5 5 5 8, 3 8 9 2 12,61 41,46 35,53 27,24 31,92 4 4 4 3 11, 13, Rupi 104,1 1

9 3 1 2 8 2 9 4 7 0 9 6 7 8 9 5 4 5

4 4 4 3 5 2 9 9 7 1 1 6 4 1 7 p Million]) 9 5 7 9 4 4 9 7 5 2 6 4 2 3 1 , , , , , , , , , , , , R m; Rp = 4 7 6 6 8 1, 2, 2 3 2 1 1 3 0 a 200 2 3 4 3 49,45 56,10 46,19 1 4 1 1 1 1 168,4

ssal

u 9 6 3 6 7 2 8 9 5 4 8 9 3 5 9 8 1 0

1 0 8 6 4 4 5 4 1 4 6 3 8 2 1 6 5 7 50 7 2 0 9 7 3 5 onomic Cost and Benefits 0 , , , , , , , , , , , , , 0 7 1 2 6 9 1 0 9 5 3 2 9 4 2 12,61 41,46 11,24 13,31 9 11,94 5 3 5 6 5 4 4 1 1

Aceh Dar

8 9 5 4 9 9 3 2 9 7 5 0 0 4 1 3 1 9

oe 5 4 4 7 1 1 1 6 4 1 4 7 6 5 7 1 6 4 2 3 4 , , , , , , , , , 8 1 2 7 2 1 1 3 3 200 1 4 1 1 1 56,15 45,24 10,70 61,04 69,47 57,86 49,79 210,4 169,0

Nanggr

(Constant 2006 Prices [ 8 9 5 4 9 3 0 9 4 9 2 6 4 3 0 0 5 9

4 4 4 6 6 9 9 3 1 3 5 3 8 6 5 7 0 7 4 61 46 4 3 9 7 6 5 9 4 0 , , , , , , , , , , , , , , , 0 1 2 8 9 6 8 2 1 7 5 4 6 6 1 2 2 12,50 9 5 4 5 6 5 5 4 11,24 13,31 4 1 1 1

Table A8.6: Project Ec 0 8 8 4 6 2 2 6 1 0 8 2 4 0 3 8

return; NAD = 1 1 6 0 4 9 9 2 2 1 5 6 1 5 11 7 0 2 3 5 6 , , , , , , , of 9 1, 9 3 2,512 8,664 3 6 5 2 s estimates. 200 e 14,52 68,83 78,46 65,71 6 5 1 6 15,64 10, 2 1 n’ 238,7 2

) ) ) ) ) al rat 4 7 6 1 8 6 1 4

9 8 4 4 4

47 4 4 6 9

Miss 6 8 11 99 w

4,739 6,062 1,322 3,668 200 32,49 34,84 28,97 26,72 71,60 38,51 32,87 (3, (3,

106,0 171,0 vie (23,05 (39, (64,

mic intern

4 7 0 0 8 1) 4)

29 07 5 7

on R 17) 02) 24) 58) 3 154 % % % % % (177) % 9 2 6 1 4 5,905 7,389 4,249 econo 1 5 9 1 9 2 25,42 49,76 17,52 . . . . . 200 8 110,8 135,6 109,7 431,3 (25,60 (49,61 . 4 5 5 9 8 (128,2 (105,5 (104,9 (413,8

6 1 2 2 2 2 x 8

t Completi ndi

t ec c

t t Appe matra s s o o

i C C Proje

negative, EIRR = R R R R R R D tal Benefits tal Benefits tal Cost tal Cost tal Benefits tal Benefits tal Benefits tal Benefits tal Cost tal Cost tal tal m est Su R R R R R R I I I I I I o o o o o o o o o o o o e t E Tota Net Benefits E North Sumatra T Net Benefits E Jamb T E Net Benefits Net Benefits E W Net Benefits E Riau

40 I NA T T T T T T T T T T ( ) = Source: Proj Net Benefits

Appendix 8 41

Table A8.7: Model for Representative Farm in Nanggroe Aceh Darussalam (Constant 2006 Prices) Without Project With Project Item Unit Number Cost/unit Total Number Cost/unit Total (Rp) (Rp’000) (Rp) (Rp’000) Farm Size – 0.66 hectare, Main Season Material Seeds kg 17 4,500 74 17 4,500 74 Fertilizer - Urea kg 99 2,201 218 99 2,201 218 - TSP kg 99 2,781 275 99 2,781 275 - KCL kg 99 1,917 190 99 1,917 190 Chemicals liter 1.0 150,000 149 1.0 150,000 149 Tractor Rental package 0.7 600,000 396 0.7 600,000 396 Others 233 300 Subtotal 1,602 1,602 Total Cost 3,664 3,664 Yield Price Yield Price Yield / Total Income kg 2,200 1,539 3,387 3,036 1,539 4,674

Net Income 1,853 3,072 KCL = potassium chloride; kg = kilogram; Rp = Rupiah; TSP = triple super phosphate Source: Project Completion Review Mission’s estimates.

Table A8.8: Model for Representative Farm in North Sumatra (Constant 2006 Prices) Without Project With Project Item Unit Number Cost/unit Total Number Cost/unit Total (Rp) (Rp’000) (Rp) (Rp’000) Farm Size – 1.33 hectare, Main Season Material Seeds kg 33 4,500 150 33 4,500 150 Fertilizer - Urea kg 200 2,201 439 200 2,201 439 - TSP kg 200 2,781 555 200 2,781 555 - KCL kg 200 1,917 382 200 1,917 382 Chemicals liter 2.0 150,000 299 2.0 150,000 299 Tractor Rental package 1.3 600,000 798 1.3 600,000 798 Others 469 469 Subtotal 3,093 3,093 Total cost 7,083 7,083 Yield Price Yield Price Yield / Total Income kg 5,320 1,539 8,189 5,852 1,539 9,008

Net Income 5,097 5,916 KCL = potassium chloride; kg = kilogram; Rp = Rupiah; TSP = triple super phosphate Note: Totals may not be exact because of rounding. Source: Project Completion Review Mission’s estimates.

42 Appendix 8

Table A8.9: Model for Representative Farm in West Sumatra, (Constant 2006 Prices) Without Project With Project Item Unit Number Cost/unit Total Number Cost/unit Total (Rp) (Rp’000) (Rp) (Rp’000) Farm Size – 0.67 hectare, Main Season Material Seeds kg 17 4,500 75 17 4,500 75 Fertilizer - Urea kg 101 2,201 221 101 2,201 221 - TSP kg 101 2,781 279 101 2,781 279 - KCL kg 101 1,917 193 101 1,917 193 Chemicals liter 1.0 150,000 151 1.0 150,000 151 Tractor Rental package 0.7 600,000 402 0.7 600,000 402 Others 237 300 Subtotal 1,558 1,622 Total Cost 3,568 3,715 Yield Price Yield Price Yield / Total Income kg 2,211 1,539 3,404 2,680 1,539 4,125

Net Income 1,846 2,504 KCL = potassium chloride; kg = kilogram; Rp = Rupiah; TSP = triple super phosphate Note: Totals may not be exact because of rounding. Source: Project Completion Review Mission’s estimates.

Table A8.10: Model for Representative Farm in Jambi (Constant 2006 Prices) Without Project With Project Item Unit Number Cost/unit Total Number Cost/unit Total (Rp) (Rp’000) (Rp) (Rp’000) Farm Size – 0.90 hectare, Main Season Material Seeds kg 22 4,500 100 22 4,500 100 Fertilizer - Urea kg 134 2,201 294 134 2,201 294 - TSP kg 134 2,781 372 134 2,781 372 - KCL kg 134 1,917 256 134 1,917 256 Chemicals liter 1.3 150,000 200 1.3 150,000 200 Tractor Rental package 0.9 600,000 535 0.9 600,000 535 Others 237 300 Subtotal 1,994 2,058 Total Cost 4,672 4,813 Yield Price Yield Price Yield / Total Income kg 2,211 1,539 3,404 2,680 1,539 4,125

Net Income 1,409 2,068 KCL = potassium chloride; kg = kilogram; Rp = Rupiah; TSP = triple super phosphate Source: Project Completion Review Mission’s estimates.