TACR: Indonesia: Regional Roads

Technical Assistance Consultant’s Report

Project Number: 38479 April 2010

Republic of Indonesia: Regional Roads Development Project (Financed by the Japan Special Fund)

Main Report

Prepared by MMM Group Ltd, Canada In association with Pt Guteg Harindo & Pt Bina Karya (Persero), Indonesia

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents.

All the views expressed herein may not be incorporated into the proposed project’s design. The contents of this report reflect the project design from early 2010, under a multitranche finance facility lending modality. The project design has been subsequently amended in 2011 and converted to a single project loan lending modality. Therefore the reader should be aware that the report contents and the final design of the Regional Roads Development Project do not directly correlate.

CURRENCY EQUIVALENTS (as of 26 April 2009) Currency Unit – Rupiah (Rp) Rp 1.00 = $0.000110497 $1.00 = Rp 9,050

ABBREVIATIONS ACAP - Anti-Corruption Action Plan ADB - Asian Development Bank AMDAL - Analisis Mengenai Dampak Lingkungan (see EIA) AP - Affected Persons AusAID - Australian Agency for International Development BIMP-EAGA - Brunei Darussalam-Indonesia-Malaysia-Philippines – East Asia Growth Area Summit CIQS - Customs, Immigration, Quarantine and Security CTC - Core Team Consultant DGH - Directorate General of Highways DOP - Subdirectorate of Planning DSC - Design and Supervision Consultant EA - Executing Agency EIA - environmental impact assessment EINRIP - Eastern Indonesia National Roads Improvement Project EIRR - economic internal rate of return EIRTP - East Indonesian Road Transport Project EMDP - Ethnic Minorities Development Plan EMP - Environmental Management Plan (cf UKL) EMoP - Environmental Monitoring Plan (cf UPL) FDI - Foreign Direct Investment FFA - Framework Financing Agreement FIRR - Financial Internal Rate of Return FMAP - Financial Management Action Plan GDP - Gross Domestic Product GoI - Government of Indonesia HDM4 - highway design and maintenance 4 HAHTP - HIV/AIDS and Human Trafficking Prevention Plan IEE - Initial Environmental Examination IHCM - Indonesian Highway Capacity Manual IRI - international roughness index (IRI m/km) JBIC - Japan Bank for International Cooperation JTS - Java Transport Study (proposed by this study) LARAP - Land Acquisition and Resettlement Action Plan MFF - multitranche financing facility MPW - Ministry of Public Works NGO - Non Government Organization NRSC - National Road Safety Council P2JJ - Perencanaan Pengawasan Jalan dan Jembatan PIU - project implementation unit PMM - Project Management Manual PMU - Project Management Unit PPJJM - Pembinaan Jalan dan Jembatan Metropolitan PPTA - Project Preparation Technical Assistance PRS - Poverty Reduction Strategy ROW - right-of-way RSAP - Road Safety Action Plan SDEA - Subdirectorate of Environmental Affairs SRIP - Strategic Road Improvement Project SRRP - Sumatera Regional Road Project UKL - Upaya Pengelolaan Lingkungan – Environmental Management UPL - Upaya Pemantauan Lingkungan – Environmental Monitoring NOTES (i) The fiscal year (FY) of the Government and its agencies ends on 31 December. (ii) In this report, "$" refers to US dollars.

Preparing the Regional Roads Development Project – Final Report

CONTENTS I. BACKGROUND 5 A. Background to the Study 5 B. Description of Project Corridors 7 C. Conduct of the Study 9 D. Contents of the Report 11 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS AND OPPORTUNITIES 13 A. Performance Indicators and Analysis 13 B. Analysis of Key Problems and Opportunities 14 III. THE PROPOSED PROJECT 18 A. Impact and Outcome 18 B. Outputs 18 C. Special Features 20 D. Cost Estimates 20 E. Financing Plan 23 F. Implementation Arrangements 24 IV. PROJECT BENEFITS, IMPACTS AND RISKS 28 A. Economic Benefits 28 B. Social Dimensions and Poverty Reduction Impacts 29 C. Environmental Impacts and Mitigation Measures 31 D. Project Risks 32 V. ASSURANCES 32

Preparing the Regional Roads Development Project – Final Report

Tables Table 1 List of Subcomponent 2 Links 12

Table 2 Cost Estimates – Tranche 1 21

Table 3 Cost Estimates – Tranche 2 22

Table 4 Cost Estimates – MFF 22

Table 5 Financing Plans for MFF, Tranche 1 and Tranche 2 23

Table 6 Perceived Risks and Mitigation Measures 32

Table 7 Road Network Length 36

Table 8 Indonesian Roads Network Condition 2008 37

Table 9 Project Area: Road Network Condition 2008 39

Table 10 Roads Agency/Authority staff involved in National Road Management 45

Table 11 ADB Road Sector Loans 46

Table 12 Detailed Cost Estimate - Tranche 1 47

Table 13 Detailed Cost Estimate - Tranche 2 48

Table 14 Detailed Cost Estimate – MFF 48

Table 15 Detailed Cost Estimate - Tranche 1 - IsDB 48

Maps Project Area

Appendices APPENDIX 1: DESIGN AND MONITORING FRAMEWORK 34 APPENDIX 2: ROAD SECTOR ANALYSIS 36 APPENDIX 3: COST ESTIMATES 47 APPENDIX 4: CONTRACT PACKAGES TRANCHE 1 50 APPENDIX 5: SUMMARY OF PROPOSED CIVIL WORKS 52 APPENDIX 6: SUMMARY RESETTLEMENT PLAN 54 APPENDIX 7: SUMMARY ETHNIC MINORITY DEVELOPMENT PLAN 58 APPENDIX 8: IMPLEMENTATION SCHEDULE 62 APPENDIX 9: ECONOMIC ANALYSIS 63 APPENDIX 10: SUMMARY INITIAL ENVIRONMENTAL ANALYSIS 72 APPENDIX 11: SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY 80

Preparing the Regional Roads Development Project – Final Report

Annexes 1. Project Performance Monitoring 2. Project Implementation Plan and Financial Management Assessment 3. Technical and Design Summary 4. Comparison of HDM4 & IRMS 5. Assessment of Road Safety 6. Assessment of Vehicle Overloading 7. Poverty and Social Analysis 8. Draft Resettlement Framework 9a. Initial Environmental Examination 9b. Summary Initial Environmental Examination 10. Environmental Assessment and Review Framework 11. Economic Analysis 12. Generalized Scope of Consulting Services 13. Short Land Acquisition and Resettlement Plans and Due Diligence

Preparing the Regional Roads Development Project – Final Report

I. BACKGROUND

A. Background to the Study

1. During the 2006 country programming mission, the Government of Indonesia (Government) requested technical assistance (TA) to prepare the proposed Regional Roads Development Project for possible Asian Development Bank (ADB) financing. This project preparatory technical assistance (PPTA) was included in ADB’s Country Strategy and Program 2006-2009 for Indonesia1. The Government’s medium-term strategy for the Ministry of Public Works (MPW) identified road development in less-developed regions, including northern Kalimantan and southern Java, as a priority. After several missions to Indonesia2, the Government agreed to the impact, outcome, outputs, implementation arrangements, cost, financing arrangements, and terms of reference (TOR) for the TA. The design and monitoring framework is in Appendix 1.

2. Indonesia is a middle-income country, with carried development across its provinces and islands. Access to roads is key to the country’s poverty reduction strategy, as improved transport accessibility reduces poverty both directly and indirectly, e.g. through better access education and health facilities.

3. For medium-term developmental goals, the Government has committed to raising levels of sustainable economic growth, creating jobs, and accelerating achievement of its millennium development goals. It identifies infrastructure development and investment – including that related to road transport – as critical to meeting these objectives. Improved access to markets strengthened intermodal integration, enhanced transport networks in less developed and border regions and advanced regional integration and trade opportunities will result from this Government emphasis on road transport. The Government, through MPW, has given high priority to improving the road system through:

• Removal of capacity constraints • Rehabilitation of substandard highways • Development of a sustainable maintenance system to preserve the country’s road system, including increase expenditure • Investment in less developed area road networks, and • Improved border area connections

4. Road transport is the dominant mode in Indonesia, meeting 83% of passenger and 70% of freight demand. In recent years, MPW has concentrated major maintenance and rehabilitation on key highways in Java, Sumatra, Kalimantan, and Sulawesi3. While about 45% of the road network is paved – including more than 75% of the national road system – non-national road network coverage is poor. Road network density is already low nationally at about .4 kilometer (km) per 1,000 square kilometers (km2), but is significantly lower in less developed regions4. There are good road networks in northern Java and in parts of Sumatra, but road conditions in the rest of the country are fair to poor, especially in less developed provinces and border regions. Outside Java and Sumatra, traffic is generally low on national and provincial roads.

1 The TA concept paper was included as Appendix A8.5, and it first appeared in ADB Business Opportunities on 30 October 2007. 2 Separate missions were fielded between 1 July and 29 August 2007 and 2-13 October 2007 to visit proposed project areas, hold preliminary discussions with the Government, and define the overall scope of the proposed project. 3 Several years of minimal maintenance expenditure after the Asian financial crisis in 1997 caused a major repair backlog, resulting in large neglected sections of the national road network. 4 The road density for Kalimantan is only 0.19 km per 1,000 km2, compared to 0.90 km per 1,000 km2 in Java.

Preparing the Regional Roads Development Project – Final Report

5. Road sector development faces several ongoing problems: road maintenance, vehicle overloading and road safety. Poor interdepartmental coordination and overlapping or ambiguous responsibilities further contribute to ineffective implementation of sector-level programs5.

6. Road maintenance funding for national highways is adequate, but poor maintenance planning and inefficient procedures impact its overall effectiveness. Variable quality of work and supervision for maintenance and new construction reduces the life of road assets that subsequently require higher maintenance expenditure. In addition, the common practice of vehicle overloading accelerates the deterioration of national roads. Recently, an increased number of weighbridge stations have been constructed, but they are relatively ineffective due to maintenance, ineffective implementation of traffic regulations, and poor inter- and intra-government cooperation.

7. Road safety is poor due to a rapid increase in vehicle ownership, both two- and four-wheel, on an inadequate road network, which leads to a drastic education and testing, poor vehicle safety standards, low awareness of accident risks, and limited use of road safety measures in accident- prone locations.

8. Although international donors have been active in Indonesia since 1970s, the Asian Financial Crisis in 1997 and recent decentralization laws have negated many improvements achieved under previous programs. Donor support has continued to the road sector, accounting for about 30% of MPW’s 2007 road budget. ADB and the World Bank provide assistance for overloading regulation, ADB and AusAID finance road safety programs, and all donors support capacity development for MPW, the Directorate General of Highways (DGH), and the Ministry of Transportation (MOT).

9. DGH currently employs about 2,400 permanent staff, of whom about 1,500 are professionals. Staff at the DPUP and DPUK concerned with road works total about 18,000 including about 5,400 engineers. Because of the large volume and increasing complexity of the country’s road works programs, and the practice of DGH and regional public works departments to keep the number of civil servants on their roster as low as possible, all agencies rely heavily on domestic consultants, particularly for design and construction supervision activities. In addition, a small number of international consultants are generally recruited for internationally financed road work programs.

10. DGH recognizes the need for continuing training to maintain and upgrade the qualifications and skills of staff at all levels. In addition to various internal training activities, DGH has provided specialized international training programs, generally at postgraduate level, in engineering and related disciplines. The training programs have been supported by a number of bilateral and international agencies, including ADB.10 Since 1994, comprehensive National/Provincial Roads Master Training Plan (NPRMTP) and Kabupaten (rural district) Roads Master Training Plan (KRMTP), and more recently the RRSP have provided training funds. Training includes postgraduate master's degrees, short-course programs, annual formal skills upgrading courses, and project-related training. The risk that newly trained staff will seek other employment because of their improved skills is recognized and to ensure that appropriate benefit is obtained from the training program it is recommended that DGH require all newly trained staff to remain with DGH for a minimum of one year following training. DGH plans to implement this recommendation as part of its reorganization after implementing decentralization. It is suggested that details be prepared during the loan finalization to be implemented in Tranche 2.

11. Donors actively coordinate with DGH and MOT to ensure adequate funding for government needs and sufficient segregation of network coverage under donor-assisted projects. MPW strategic plans for 2006-2009 and 2010-2014 have identified priority investments to improve road infrastructure in southern Java and to address development of border areas in Kalimantan.

5 Institutional improvement in road safety issues is further affected by poor coordination with the police department, which is responsible for law enforcement, traffic management, and vehicle registration.

Preparing the Regional Roads Development Project – Final Report

12. In Java, economic growth and infrastructure development has favored regions and cities on the north coast, with south coast regions lagging far behind6. Improved road infrastructure in southern Java is necessary for increased economic growth to improve access to markets and to attract investment in that area. The national road network in the south is incomplete, with some road sections of the main Southern Trans Java Highway not yet constructed, not classified as national highway, or constructed below national standards. There are gaps in network coverage, particularly in coastal areas, and cross-island linkages are limited.

13. Kalimantan is a resource-rich island with low population and road densities. Economic activity is concentrated in coastal regions due to difficult conditions and terrain that have restricted interior development. Road network development is key to ensure that economic development will occur in these less developed and remote areas. Whereas the national highway network has expanded along the coast from provincial capitals, the interior road network is very limited and characterized by low-standard roads, poor maintenance, and low traffic volumes. DGH, through World Bank financing, is undertaking the Kalimantan Road Network Development Study (KRNDS), which will develop a 20-year strategic plan for Kalimantan’s road and inland waterway network7. The KRNDS will define a priority-ranked listing of roads for all Kalimantan provinces on a multi- criteria and economic basis.

14. Kalimantan’s border with Malaysia’s Sarawak and Sabah states has developed slowly, with only Entikong in West Kalimantan possessing full customs, immigration, quarantine and security (CIQS) and government agency facilities. Two other border posts, at Aruk and Badau, are at an advanced stage of developing full border facilities, and are expected to open in 2008.

15. Through the Brunei Darussalam-Indonesia-Malaysia-Philippines-East Association of Southeast Asian Nations Growth Area (BIMP-EAGA), ADB has funded a TA for improving CIQS facilities and procedures, which included analysis of road and sea barriers to trade, identified institutional and procedural problems, and transport link capacity constraints. ADB will provide additional regional TA support in 2008 under the BIMP-EAGA initiative, which will include development of a land-based transport corridor connecting West Kalimantan province with Sarawak state. This assistance will address transnational issues and the need to develop interregional transport agreements to remove various barriers; assess legal, policy, regulatory, and institutional environments; and identify gaps that constrain economic integration in BIMP-EAGA.

16. In addition, under the ADB-funded Road Rehabilitation (Sector) Project 8 and Road Rehabilitation 2 Project9 and the World Bank-funded National Road Improvement Project, MOT is receiving support to improve its performance. Weighbridges are being constructed through private sector operation and management arrangements, and these projects also support road safety programs for black spot improvements, creating awareness in local communities, and training of MOT personnel.

B. Description of Project Corridors

17. The South Java Corridor extends from the township of Labuhan in the province of Banten on the west coast of Java along the southern coast of Java to the town of Banyuwangi in the province of East Java on the eastern extremity of Java Island. The entire corridor is approximately 1570 km in length. The target links for the study had a length of approximately 921 km. Of this

6 The 30km-wide strip along the north coast of Java contains about half of the country’s population, including the major cities of Jakarta, Semarang, and Surabaya; all major ports; and about 65% of the country’s economic activity. 7 The KRNDS draft final report was submitted in March 2008. 8 ADB. 2001. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Republic of Indonesia for the Road Rehabilitation (Sector) Project. Manila (Loan 1798-INO). 9 ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Republic of Indonesia for the Road Rehabilitation-2 Project. Manila (Loan 2184-INO).

Preparing the Regional Roads Development Project – Final Report

8 some 133 km of the study links are planned new alignments. The corridor consists of national road, provincial road, and Kabupaten and non-status roads.

18. The study was given the task of reviewing the corridor component links in West Java through to East Java excluding Banten. The lower roads (in green) shown in East Java, south of Malang and east to Banyuwangi were excluded from this study, as new alignments are required. Similarly the (green) road in Yogyakarta south of Bantul was also excluded.

19. The planning and concept of the Southern Java Corridor has been around since 2004 and a number of provinces are well advanced in their planning. Three provinces have certain sections of the corridor designed as a four-lane expressway (two lanes in each direction) and approximately 10 km of the four-lane road have already been built. The terrain is a mix of flat and straight roads in Central Java with quite mountainous and winding roads in the other provinces.

20. In Kalimantan to the north of Java, three distinct corridors running north south have been selected for review. These access three of the eight border crossings into Malaysia.

21. The RRDP specific focus in East Kalimantan was on the road from Tanjung Selor north to the border. Significant portions of this road are next to impassable at various times of the year.

Preparing the Regional Roads Development Project – Final Report

Accessibility in fact north of Malinau could only be gained by motorboat to Tarakan then return by road back towards Malinau. The road from Tanjung Redeb north to Tanjung Selor is also very bad condition.

22. In West Kalimantan the corridor roads are traversable and the key routes were from Tayan north to the Entikong on the border, and from Singkawang, northeast to Aruk. The northwest corner of the province bounded by the triangle from Singkawang to Aruk to Liku is named the ‘Golden Triangle’ and concerted efforts are underway within the province and between countries to develop this area.

C. Conduct of the Study

1. Methodology

23. In July 2008 ADB signed a contract with MMM Group Ltd. to provide PPTA to the Ministry of Transportation, Indonesia for Preparing the Regional Road Development Project and the consultants’ team started work in Jakarta in July 2008. An Inception report was presented on August 29th and an Interim report on November 17th.

24. An Inception Mission by the Bank was made in August to assess the project status and a further mission in the third week of November. No changes to the TOR arose from these missions but clarification was provided as to the actual scope of the road network and the target purpose of the road network.

25. The overall aim of the project is to prepare loan documentation for funding of the development of a southern Java transport corridor and the improvement of access between Kalimantan and the northern Borneo areas of Sarawak and Sabah. This was achieved by working closely with the Sub Directorate of General Planning and provincial government agencies, collection and analysis of road and bridge data, provincial plans and progress documentation and analysis of the data and measuring the ‘readiness’ of the proposed links for development over a 6- 8 year period. All documentation, studies and recommendations conform to the Bank’s requirements.

26. An additional aim was to review the EIA situation and assist in the preparation of the Summary EIA (SEIA), IEE and Resettlement Plans (RP) and carry out a social and poverty impact analysis (SPA), including an Ethnic Minority Development Plan (EMDP) in accordance with the ADB’s requirements. When the preliminary design survey is completed and land requirements defined, changes to the RP will be required. These tasks and documentation are a requirement of the ADB.

27. Finally the project has reviewed road sector issues and a number of previous road studies in Java and Kalimantan and provides the basis for future detailed analysis of transportation planning, network extension and institutional capacity development, in the areas of poverty impact of road projects, road safety, vehicle overloading and other road asset management issues.

28. A number of working papers for economics, environment, social development, resettlement, road safety and road sector development were all provided during the course of the PPTA. During the months of August through December field surveys were carried out for road and bridge condition, inventory, traffic, environment, resettlement and social and poverty data collection.

29. Regional workshops were run in Java, East Kalimantan and West Kalimantan in January 2009 and a single public consultation in West Kalimantan also in January. The team has completed its data collection and analysis work and documentation and the Draft Final Report was submitted on 30th January 2009. Local P2JJ, Dinas Bina Marga, Bappeda and Bappedalda. Representatives of various departments from DGH, Jakarta also attended these. In general there is strong support for the development. In a number of cases, however, the regional agencies had slightly different priorities and were a little frustrated that funds would be made available for what

Preparing the Regional Roads Development Project – Final Report

10 they believe to be lower priority issues. This was particularly so in East Kalimantan where the regional focus is on border road development (east-west) rather than the corridor leading to the border. Similarly in West Kalimantan where a number of other border posts outside the PPTA scope were deemed to be of a higher developmental priority. These include Nanga Badau, Jagoibalang and Jasa. The approach roads to these crossings are also seen to be very important to the government agencies of West Kalimantan and even to BINTEK in Jakarta.

30. The team conducted a single public stakeholder consultation in Pontianak, West Kalimantan and presented project concepts and sought their recommendations, comments and feedback. Attendees included government agencies, villagers, local groups, and other people likely to be affected by the Project to discuss environmental concerns, land acquisition and resettlement issues, and economic development potential. In general, support for the development of roads in West Kalimantan was high and a number of concerns were stated and noted by the team.

31. At the Tripartite meeting held in June 2009, the Client asked the ADB and the Consultant to consider a further 14 roads (totaling 540 km) be added to the Project as part of Tranche 2. The GoI also asked if 526 km of roads that had been allocated to Tranche 2 be moved to Tranche 1.

Additional West Java Links Length Condition Width Environment Resettlement Length (km) (m) Class Class (km) Pamengpeuk-Rancabuaya (22.146) 32,40 Poor-bad 5 B C 32,40 Rancabuaya-Cidaun (22.145) 24,90 Poor-bad 5.5 B C 24,90 Cidaun-Sindang barang (22.145) 25,00 Poor-bad 5.5 B C 25,00 Sindangbarang-Tegalbuleud 52,30 Poor-bad 4.5 B B 52,30 (22.144) 32. The above West Java links had been surveyed in Component 1 but no detailed design, environmental or resettlement surveys been conducted. It was not possible after the tripartite meeting to make any comment about their inclusion in Tranche 1. The GoI was asked to provide additional support detail to justify their inclusion in the revised Final Report but as of December 2009 nothing was supplied to the Consultant. The first three of these have been added to Tranche 2 as potential candidates.

2. Study Team

33. The study team for the project consisted of:

Team Leader/Transport Specialist Glen Stringer Transport Economist Jacques Phedonos Transport Planner Tony Redshaw Environmental Venkata Nukala Social Development/Resettlement Peggy McDonald Road Design Engineer Adel Roufail Bridge Engineer Jianping Jiang Deputy Team Leader Nelfia Transport Economist Sri Purwanti Environmental Darman Siri, Budi Wayhono Social Development Specialists Dasmir Good, Istiqomah Djohariah, Witono

Preparing the Regional Roads Development Project – Final Report

Resettlement Specialist Darman Siri, Yuli Hastuti Highway Engineers Didy Nursandi, A. Bowo, Gip, Heru Setyawan Bridge Engineer Johan Sondakh

3. Executing Agency and Counterparts

34. The EA for the study was the Ministry of Transport, Department of Public Works, Sub directorate of General Planning. Counterparts for the study included:

Project Coordinator and Director Max Antameng Ph.D Counterpart Team Leader Didik Rudjito Msc DIC 35. The project team would like to express its thanks for the excellent help, support and advice given to them by the counterparts, other department staff of the EA head office and the various P2JJ, Bappedalda offices in the target provinces whose help during the site visits was invaluable.

D. Contents of the Report

36. The main body of this report summarizes the analysis and results of the study, and discusses issues raised by the review. The appendices to the report describe in more detail the methodology used in the study, the review of the preliminary design and the environmental, social and poverty impact studies. The remaining sections of this report are as described in the following paragraphs.

37. Section II gives the background to the transport and road sector in Indonesia and the region of the proposed corridors. It also looks at the problems and opportunities and the lessons learned in Indonesia from previous projects.

38. Section III describes the project and its objectives and special features. It sets out the cost estimate and financing plan and describes the implementing arrangements for the project.

39. Section IV describes the technical, economic, financial and institutional benefits of the project. It also looks at the impact on the road subsector, on resettlement, minorities, gender, poverty and the environment. It also describes the risks associated with the project. Section V sets out the consultants’ recommendations.

40. There are 11 appendices included with the executive summary. These are summaries of the key issues related to the project.

41. The main report is also accompanied by 12 supplementary annexes that describe the study methodology, technical analyses, and conclusions and recommendations in substantial detail.

42. The remainder of this report and appendices, except for Section V, which contains the consultants’ recommendations, has been formatted in a similar manner to ADB’s RRP as an aid in preparing the Project RRP.

43. At the start of the study, the following links were given to the Consultant as the target group for the Subcomponent 2 activities. All links that show ‘new alignments’ have been deferred to Tranche 2. The alignment studies are recommended in the JTS consulting services in Tranche 1.

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Table 1 List of Subcomponent 2 Links

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II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS AND OPPORTUNITIES

A. Performance Indicators and Analysis

1. The Road Sector

44. Indonesia's economic performance10has stabilized in recent years with GDP growth rising from 3.5% in 2003 to 6.1% in 2008. Inflation11 has remained high at about 6.6% in 2006-2007 but has increased to 11% in 2008 due to worldwide rises in energy and food. The average exchange rate in 2007 was 9,056 Rp/$USD has remained relatively constant since 2003 fluctuating within a range between 8,577 and 9,700 Rp/$USD. The changes represented the weakness of the US dollar during the period, and the recent strengthening of the US dollar has had a significant impact on the current exchange rate at the end of 2008 at around 11,000 Rp/$USD. Though the government has introduced significant reforms in the financial sector, including tax and customs reforms, Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment and unequal resource distribution among regions. The Anti-Corruption Commission has played a leading role in the anti-corruption campaign with a growing number of prosecutions (and convictions) for corruption.

45. Poverty had been falling since the end of the financial crisis in 1999 up till 2007. The accelerating growth over the last three years is reflected in Indonesia’s poverty and employment numbers. Indonesia’s poverty rate, measured at the national poverty line, fell from 16.6 percent in March 2007 to 15.4 percent in March 2008. The decrease continued the trend of gradually declining poverty rates. Both urban and rural poverty rates declined in 2008 and the decline was spatially uniform, with even the poorest provinces registering decreases in their poverty rates. Simulations suggest that given the robust growth in 2007 and 2008, poverty would have fallen even further, perhaps by as much as an additional two percentage points had it not been for the nearly 16 percent rise in food prices between April 2007 and April 2008.12 The global turmoil since mid-September has, however, adversely affected Indonesian economic outlook and recent indicators suggest that poverty rates may rise sharply in 2009. Even without the impact from the global financial crisis, the original target for poverty in 2009 was 8.2% was certainly not attainable.

46. Transport sector demand in Indonesia has been growing significantly faster than GDP for nearly a decade and congestion on the arterial road network is a widespread problem, especially in Java. Between 2000 and 2005, the number of registered vehicles13 increased by 77% for 4- wheel vehicles and by 110% for motorcycles. This represents an annual growth of about 12% for 4 wheel vehicles and 16% for motorcycles both significantly higher than growth in GDP. The national road network of 37,500 km consists of national arterial roads in Java of about 5,500 km, in Kalimantan of 6,400 km and Java Toll Roads of about 676 km in operation with 100 km under construction and a further 1,600 km planned for the next 2 to 3 years. Road construction budgets14 have more than doubled from Rp. 9,696,851 million in 2002 to Rp. 19,897,065 million in 2006 equivalent to an average annual growth of 12-13% in real terms, which is similar to the average growth in vehicles. The annual budget for 2009 is in the vicinity of 19 trillion rupiah.

47. Cargo transport by rail in Java and Sumatra has grown on average by about 6.3% during the period 2006-2008. During the same period passenger transport increased in the Jabotabek15 region by about 10% per annum while growth in Java outside the Jabotabek are increased by about 16% per year.

10 Source: World Fact Book - http://www.indexmundi.com/indonesia/gdp_real_growth_rate.html 11 Source: Statistic Indonesia http://www.bps.go.id/sector/cpi/table3.shtml 12 Source: Indonesia Quarterly Economic Update, 10 December 2008, The World Bank 13 Source: Statistic Indonesia. - State Police of Indonesia 14 Source: Statistic Indonesia http://www.bps.go.id/sector/construct/table2.shtml 15 Jabotabek Region defined by JAkarta-BOgor-TAngerang and BEKasi around Jakarta.

Preparing the Regional Roads Development Project – Final Report

48. The rapid economic development during the last decade has resulted in very high growth rates in traffic levels, which are now leading to congestion on many arterial roads. Government budgets for road maintenance and development have increased significantly in recent years to match the increased demand, but these are still insufficient to undertake the necessary work. The onset of the current financial crisis is being reflected in higher costs of food and fuel, and there are indications that this is having a significant effect on poverty levels during 2008. The exchange rate has also deteriorated during the last half of 2008, which will result in further increases in inflation and poverty.

2. Sector Policy Framework

49. The Government’s strategy for national highway development is to provide equivalent standards of roads to all regions according to the needs defined by the traffic level and to provide reasonable access between major towns to access to markets. A major part of its current road development program is in capacity expansion and network extension projects on the national network to serve the poor communities, and use improved roads to support regional cooperation with neighboring countries. New and better roads are seen as a key component of the Government’s strategy to broaden access to markets and services, facilitate economic growth and reduce poverty.

50. Road Safety: Indonesian traffic accidents are considerably higher than in developed countries, largely due to poor discipline but also due to the road designs particularly in built up areas where pedestrian traffic also uses the road or its shoulders.

51. Road transport sector growth and performance have been affected by decentralization. As part of the fiscal and administrative decentralization process, made effective in 2001, Law 32/2004 (revised 22/1999) has transferred most Government responsibilities to the regions, with regencies (Kabupaten) and cities (kota) as the main focal points. Law 33/2004 (revised 25/1999) specifies how the new regional responsibilities are to be financed. For instance, motor vehicle fuel taxes are collected directly by provinces or Kabupaten for their own purposes. New Road Laws are currently under preparation and are due to be published later in 2009.

3. Road Expenditure Management Systems

52. Road and bridge expenditure needs are assessed using DGH’s Indonesian Integrated Road Management System (IIRMS). Under constant development since the 1980s through to 2005, this computer-assisted tool maximizes the benefits of road improvements and maintenance funding allocations. IIRMS predicts pavement deterioration over time and under traffic load. The system analyzes the impacts of alternative treatment options for each link, thereby determining the economically optimum expenditure scenario, with or without budget constraints. DGH assesses budget requirements mainly on IIRMS outputs, but sometimes combines them with broader strategies for network development. The IIRMS was used and further amended during the PPTA.

B. Analysis of Key Problems and Opportunities

1. Sector Problems, Causes and Impacts

53. Development Budgets: Despite the high levels of investment in road development in Indonesia, the national road network still does not provide good access to areas away from primary traffic thoroughfares. Due to its size and geography, Indonesia has a vast network of roads with 37,500 km of National roads, 41,100 km of provincial roads and 249,000 km of Kabupaten roads. Development budgets are significantly reduced by the need to maintain this network.

54. Access Constraints: In West Java and Banten provinces, the southern coastline is isolated from the northern prosperous areas by a range of mountains that can be accessed mainly by narrow provincial roads with restricted widths (5 m). There is a coastal road along parts of this but

Preparing the Regional Roads Development Project – Final Report

15 there is no continuous linkage to the central parts of Java. In East Java, there are few major towns along the southern coastline and as a result this area is relatively poorly developed and there is very little good road access through the coastal areas. In Kalimantan the remote areas are associated with those close to the international boundary with Malaysia where there are no through roads.

55. Congestion: In Central Java and Yogyakarta, the road network is fairly well developed along the central belt due to the existing southern corridor but some sections are now experiencing high traffic levels and congestion and there is a need to widen or dual the roads to reduce the congestion.

56. Road Access: Under Indonesian Law, ‘arterial’ roads should only be accessed from collector roads at appropriate intersections. Upgrading existing collector roads to arterial roads would not therefore be feasible in areas with no alternative access roads. Even if the road was defined as a ‘strategic’ national road, the construction of a four lane divided carriageway, would seriously constrain the access of households living alongside the road, since they would have to turn to the left and travel to the next intersection or turning point.

57. Road Safety. Indonesia is experiencing a serious and worsening road safety problem. More than 30,000 road users are killed in crashes each year throughout the country. A Presidential Decree in June 2007 requested advice about establishment of a National Road Safety Council and the preparation of a road safety management program by the end of 2007. Recommendations for a National Road Safety Council (NRSC) have been provided to Government but no decision has been taken.

58. There is an urgent need for the National Road Safety Council to begin its work. The first major task of the NRSC should be development of a National Road Safety Strategy, involving all key stakeholders at the national level. That Strategy should provide direction for the allocation of resources towards the most pressing parts of the road toll. The next most urgent action is the preparation of a 3-5 year Road Safety Action Plan for Indonesia – to direct specific programs towards the most urgent road safety problems. Safety assessments of national highways will assist in developing countermeasures for high-risk locations. This will be important while crash records remain so poorly managed in Indonesia.

59. Vehicle Overloading and Control. The Government is clearly aware of the significant impact on road design life, condition and safety that uncontrolled vehicle overloading has made. Since 2005, Indonesia has been pursuing a Zero Tolerance overloading program where the tolerance level to overloading (above axle design levels) is reduced every three months. The zero tolerance point was planned for April 2009. A number of projects have attempted to improve this situation with a mixture of success. As a result of the study of past approaches, a Performance Based Road Monitoring Contract approach is recommended for further study. The basis of this approach is that the road construction contractor becomes the operator of weigh stations and the maintainer of the road. His incentives are to reduce the funding required to maintain the road due to (i) improved road construction quality as the contractor must also maintain it and (ii) increased diligence in deterring overloading that would otherwise lead to rapid road deterioration and once again increased road maintenance costs. DGLC has recently asked to drop a similar work component from RR2P. A suitable approach does need to be determined for the future.

2. Road Connectivity and Poverty Reduction

60. Indonesia’s poverty incidence was about 23% (about 48 million people) in 1998, then declined to about 18% (about 38 million) in 2002, according to the National Socioeconomic Survey (BPS SUSENAS). This further reduced to about 16.6% by 2004. Poverty is more common in rural areas than in urban centers, and in the project area, it varies from 11.6 – 13.9% in East Kalimantan, West Java and West Kalimantan to 19-21.1% in the remaining Project provinces of Yogyakarta, Central and East Java.

Preparing the Regional Roads Development Project – Final Report

61. National and strategic road networks are the arteries of trade and commerce and enable the incomes of the poor to grow. Agriculture products—cultivated largely by the poor, who rely on basic commodities hauled in from cities—need an effective transportation network to be delivered on time. The poverty assessment16 done in November 2000 notes that increasing the productivity of agriculture requires improved infrastructure, including transport, which will reduce regional disparity and rural poverty over the medium term.

62. Since 1999 ADB has adopted a Poverty Reduction Strategy (PRS) for projects that was enhanced in 2004 to allow ADB17 operations to be aligned with recipient countries’ own poverty reduction strategies. The strategy is based on three closely linked ‘pillars’ (i) pro-poor sustainable economic growth; (ii) inclusive social development; and (iii) good governance. Five themes are considered essential elements of the PRS: gender equality, environmental sustainability, private sector development, regional cooperation and capacity development. The PRS is most effective with relatively large investments with medium or long-term impact where continuing dialog with governments to support policy and institutional reforms that have a widespread and more indirect poverty reduction impact.

63. Poverty: The high growth rates in the economy have not been uniformly distributed and lower growth has occurred in areas with lower levels of infrastructure. Areas with poorer access to markets and ports have not developed as fast and as a result many parts of Indonesia still have significant poverty. Poverty levels are increasing in remote areas of Java and the GoI considers that the relatively high levels of poverty along the southern coast compared to the more affluent northern coast, is largely due to the poorer access in the south.

64. Land acquisition: The widening of roads or construction of new roads usually needs land acquisition to attain the required Right of Way. In Indonesia, in densely populated areas like Java, there is considerable ‘ribbon development’ along the roads. This results in a significant level of land acquisition and relatively high compensation rates since these properties are the ‘preferred’ sites with access to the road and have more buildings than in agricultural areas.

65. Resettlement: Widening roads to 15 meters (ROW) or more also requires resettlement of some households due to the need to demolish houses. This is particularly true for areas with ribbon development.

66. HIV/AIDS and Human Trafficking: While infrastructure is a powerful instrument for economic growth, it is also well established that transport sector projects resulting in increased mobility of populations facilitate the spread of less desirable impacts, in particular, the spread of HIV/AIDS and increased human trafficking. In Indonesia, the prevalence of HIV is growing and the seriousness of human trafficking in a number of Project provinces is well documented. In particular, experts see West Kalimantan as a “trafficking hotspot”.

67. Capacity expansion projects produce very high economic returns due to the large numbers of vehicles and the time saved by reducing congestion. While the direct benefits are received by the car owners and small businesses, competition in trade, transport and small businesses will usually result in reduced prices for products and services. In Indonesia even small changes in costs influence the poverty level significantly.

68. Network extension projects provide improved access to markets that results in lower costs of transport and opportunities to develop unused resources (agriculture, forest products) in the remote regions. The reduced costs result in higher farm gate prices for crops and lower prices for consumer products. The improved access improves transport facilities and removes the constraint

16 ADB. 2000. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of Indonesia for the Road Rehabilitation Sector Project. Manila (Loan 1798-INO, for $190 million, approved in December 2000). 17 ADB 2004c. Enhancing the Fight Against Poverty in Asia and the Pacific.

Preparing the Regional Roads Development Project – Final Report

17 that saturates the market in the remote area. Further economic development will be stimulated by these changes and poverty will be reduced in the region. Improved access also increases access to health and education facilities.

3. Government and ADB Transport Sector Strategies

69. Transport Services in the Project Area. The GoI has given special attention to rural infrastructure and services, specifically to the development of a southern trans-java corridor, under a series of initiatives dating back to February 2004. A joint agreement (611.51/2–HUK/2004; No.620/24/Desen/2004; No. 1 - 2004; No.119/0450; No.120.1/522/012/2004) was made in February 2004 regarding the development of a Southern Corridor across Java, which included the Governors of Banten, West Java, Central Java, Yogyakarta, and East Java. Further, from the 22nd to 23rd December 2004, a coordination meeting for the network was held in Surakarta, to discuss road status and function and border points between provinces.

70. Several other planning and coordination meetings were held between various government departments regarding the development of the corridor. Official references and decrees supporting this development have been prepared and agreed including;

• MPW decree No. : 369/KPTS/M/2005 dated 18 April 2005 about National Road Network Master Plan with Annex II.13 including a map of the south corridor as strategic national road network and • MPW decree No. : 280/KPTS/M/2006 about amendment of MPW decree No. : 369/KPTS/M/2005 about National Road Network Master Plan dated 24 July 2006. 71. These strategies are strongly supported by ADB, whose commitment to rural transport infrastructure and services has been reinforced by evidence that improved accessibility and more reliable and efficient services are critical prerequisites for rural poverty reduction.

72. In Kalimantan, the Government’s strategy is to develop a new international highway between Pontianak and Kuching in West Kalimantan and between Balikpapan and Kota Kinabalu in East Kalimantan. This is in accordance with the recent BIMP-EAGA18 initiative and aims to stimulate cross border trade and thereby promote economic development and reduction in poverty. A joint statement by them on the 12th January 2007 at the 3rd summit clearly indicates support for all aspects of co-operational development, land and sea transport, economy, tourism and customs, immigration, quarantine and security (CIQS) agencies.

73. Trade along the border of Sarawak - West Kalimantan has a long history with the first government intervention recorded over 40 years ago. Geography, economic growth, economic integration, and financial crisis have all contributed to the increase volumes of trade between Sarawak - West Kalimantan. Sharing borderlands provides greater opportunities for international trade/cross border trade. Connected with relatively good land transport and infrastructure, the distance of 400 km between capital cities (Kuching-Pontianak) is not seen as barrier to trade.

74. Both countries experienced rapid economic growth before 1997 economic crisis hit. Sarawak appeared to recover more quickly. In 2001 Sarawak’s real GDP growth was 6.4% compared to West Kalimantan with growth rate of 2.7%. Even though West Kalimantan trade economy is in its infancy, the current directions of policies that actively attract FDI (Foreign Direct Investment) clearly indicate the trade potential between West Kalimantan and Sarawak. Malaysian investment in the palm oil plantation industry clearly shows the level of cooperation and the intensity of capital movement.

75. Illegal logging has been at the centre of policy debates about the current state and future prospects of Indonesia’s forestry sector. One of the prevailing views is that clandestine cross-

18 BIMP-EAGA - Brunei Darussalam Indonesia Malaysia the Philippines - East ASEAN Growth Area

Preparing the Regional Roads Development Project – Final Report

18 border timber trade is responsible for illegal logging in the country. However the core problem has been shown to be in licensed forestry operations that engage in gross overharvesting and violate shipping regulations. These illegal actions have been necessitated by a vast supply-demand disparity in Indonesia’s woodworking sector. The current timber trade system in Indonesia that stresses administrative and document compliance is insufficient because it is easy to manipulate and its enforcement is lax. Therefore, there is an urgent need for a more stringent timber legality standard that would be simpler to enforce and easier to evaluate.

4. Road Sector Assistance and Lessons Learned

76. Readiness for Implementation. Based on RRSP and RR2P experience in implementing the first annual work programs of civil works, it is highly desirable to have all Tranche 1 projects ‘ready’ to be implemented at the start of the Loan. This implies detailed designs, design reviews and bidding documents will be ready to issue. This speeds up implementation and disbursements. Delays are being experienced in several RR2P projects due to the inexperience of the contractor and poor management. The pre-qualification process for contractors needs to be reviewed or scrutinized more stringently.

77. Quality of Engineering Designs. In the past, there have been some concerns relating to the quality of some detailed engineering designs. To improve quality under RRDP it is proposed that the engineering designs, prepared in the pre-loan period by GoI agencies, be supervised by independent consultants funded under RR2P. Previous Road Sector assistance by ADB is shown in Appendix 2.

78. Quality of Construction. The Project will give substantial emphasis to improving the quality control of construction. The Design and Supervision Consultant will have their powers and authority strengthened to ensure they have enough veto and control over observed ‘shortcuts’ in construction. Independent Technical audits will be carried out on a random basis to ensure all potential sources of quality reduction or payoffs are being monitored. Strong lines of communication will be decided and implemented to ensure that complains and issues from any source are quickly and directly dealt with.

III. THE PROPOSED PROJECT

A. Impact and Outcome

79. The expected impact of the Project will be the promotion of sustainable economic growth and poverty reduction in Southern Java and Northern Kalimantan as a whole and the project areas in particular. The primary outcome is improved transport accessibility and connectivity particularly in Southern Java and East Kalimantan. The Project will enhance road transport efficiency and safety generally and improve the road transport network by building a section in West Kalimantan to open up transportation and development opportunities in North Western Kalimantan, and between there and Malaysian. Together with other Project activities of road safety and intermodal transport studies, access to income-generating opportunities and social services for poor rural and minority villages’ will be achieved, particularly in East Kalimantan. The project will also promote regional cooperation, as the rehabilitated roads in Kalimantan are key transport links to the neighboring countries of Malaysia and Brunei.

B. Outputs

80. The Project will widen significant lengths of road, rehabilitate deteriorated road sections and replace bridges on the strategic Southern Corridor of Java and in the three strategic access roads in Kalimantan to neighboring countries.

Preparing the Regional Roads Development Project – Final Report

1. Civil Works: Road and Bridge Rehabilitation

81. The Project to be phased nominally over 7 years in two tranches. The first tranche will (i) expand carrying capacity through the widening and partial reconstruction of a total of 414.2 km of roads to a minimum width of 6 meters, (ii) replace or rehabilitate 169 bridges with a total length of 3,848 meters. The Project covers 6 provinces: West Java, Central Java, Yogyakarta, East Java, East Kalimantan and West Kalimantan. West Java, East Java and Yogyakarta will not be included in the first tranche projects as no projects meet the readiness criteria. The details of proposed rehabilitation works are in Appendix 5. Once rehabilitated, the roads and bridges will require routine maintenance. Roads will be widened within the existing right-of-way wherever possible.

82. The civil works will be monitored and support through the appointment of consulting services in the form of core team consultants to assist the Project Management Unit and design and supervision consultants to assist contractors with design issues and works quality.

83. The designs and initial tendering of the Tranche 1 projects will be prepared prior to the project loan by Government agencies with independent international auditing. Subsequent tranches will be undertaken within the project, coordinated and certified by the DSC. The GoI will provide the resources necessary to carry out the work by local design consultants.

2. Support to Road Sector Policies

84. Java Transport Study. To ensure a comprehensive strategic development plan is in place a complete Java transportation plan will be implemented. The study will key issues of (i) determination of Project corridor links where new alignments have been proposed by the Executing Agency and/or determined by the PPTA, amounting to approximately 214 km of roads (including bypasses), (ii) review the current status of the JARNS study recommendations and (iii) ensure a cohesive plan for network development exists.

3. Capacity Building and Training

85. Training of Engineering Staff. The DGH has expressed a desire to continue the improvement of the capacity of their staff. A number of Master degrees are proposed in different locations: 10 in England, 20 in Australia and 10 in Singapore. Five Doctorates are proposed for England. The distribution of disciplines will be of the order of 20 highway engineers, 10 Information technology and 10 others. For the Doctorates, three will focus on engineering and two on transport economics. Prerequisites for all studies will be that candidates must achieve a TOEFL score of 550 or more. Doctoral candidates must have at least 10 years experiences in the Ministry of Public Works. Procurement training in Manila at the ADB is also planned. Ideally this should be done early to maximize the training and bring it to bear on the RRDP procurement. This may require bridging financing. Recommendations are for a maximum 20 people, 2 from each individual six regions the rest will be from DG Highways (PMU and or PPU). Candidates for all courses will be drawn from each Project region and Central Bina Marga.

86. In addition, to improve the capacity of road safety engineers, a series of road safety initiatives are planned including a) development of a road safety audit manual for Indonesia b) a series of introductory workshops on road safety issues and c) a number of pilot road safety audits. In addition, train the trainer programs are planned for traffic police and a public awareness campaign. Participants at the NGO meeting, criticized the proposed project component of Capacity Building and Training by upgrading qualifications to master and doctorate level for Directorate General of Highway staffs. They stated that as this is a loan that would be paid by people, it is inappropriate if those staffs take the advantage for their personal benefit by upgrading the education level. This will need to be handled carefully by the government who have made concessions to this by proposing to choose people from each of the provinces being affected by the project.

Preparing the Regional Roads Development Project – Final Report

87. A HIV/AIDS and Human Trafficking Prevention Plan (HATPP) will be implemented in the province of West Java, Central Java, Yogyakarta, East Java, West Kalimantan and East Kalimantan. The need for information, education, and communication on HIV/AIDS and STIs and the prevention of trafficking will be made a contractual obligation of the construction contractors. This obligation will include the provision of HIV/AIDS and Human Trafficking awareness training to construction workers and full cooperation with project and local prevention activities.

C. Special Features

88. Regional Cooperation and Cross-Border Trade. The Project includes sub-projects on three corridors providing access roads to border crossings to Malaysia from East and West Kalimantan. These sub-projects will support the BIMP-EAGA initiatives. The GoI is actively following the proposed development of improved cross border road links. The upgraded access roads will benefit international traffic and international commerce between Pontianak in West Kalimantan and Kuching in Malaysia, and between Balikpapan in East Kalimantan and Kota Kinabalu in Malaysia and Burma. For many of the border areas of Northern Kalimantan the nearest cities are actually in Malaysia and better access and easier cross border processing facilities will boost their access to trading and supply centers. Malaysia has committed to developing the corresponding corridors in Malaysia if Indonesia goes ahead with interrelated road development. These developments will substantially reduce travel times and costs and boost income levels for villagers and businesses near the border areas. This potential may not be reflected in the current traffic numbers that are quite low. This is predominately due to access difficulties because of poor roads and complicated border crossing procedures.

D. Cost Estimates

89. The RRDP will be a Multitranche Financing Facility (MFF) with 2 tranches implemented over 7 years. The total cost of the Project is estimated at $650 million, with a foreign exchange cost of $500 million (77 percent) and a local currency cost of $150 million (23 percent). The total costs include physical contingencies, price contingencies, and interest and other charges during construction. Appendix 3 provides the detailed disbursement of costs during the project and the following table summarizes the component costs. The following three tables show a summary of cost estimates for each tranche and the total project.

90. For the overall project costing, the financial cost estimates are based on estimated 2009 contract prices, at an exchange rate of 9,050 Rp/US$. Price contingencies of 8% and physical contingencies are both included. Given the current financial crisis, and that the defined project is for works over a period of 7 years, there is a significant risk that considerable price fluctuations may occur. For this reason Tranche 2 is budgeted at projected cost levels which can be adjusted at the time of definition of the specific tranche projects.

Preparing the Regional Roads Development Project – Final Report

Table 2 Cost Estimates – Tranche 1

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Table 3 Cost Estimates – Tranche 2

91. An estimate of approximately US 50 million dollars has been allowed for land acquisition and resettlement on Project corridor roads, in particular for Tranche 2 projects. The final amount is dependent on the selection of links, actual designs and results of the alignments and transport studies. GoI had stated that their contribution is not be used for this, however, it is suggested that their contribution be reduced by the amount needed to fund the land acquisition and resettlement as these are critical aspects to the achievement of the Project objectives.

92. In order to reach the Loan figure of US 500 million, it was required to reduce the amount of works possible in the second tranche to about 40% of the amount estimated during the PPTA. In addition to this, additional links suggested at the Tripartite meeting have not been included. These could account for at least another US 50 million.

Table 4 Cost Estimates – MFF

Preparing the Regional Roads Development Project – Final Report

E. Financing Plan

93. The Government has requested ADB to help finance the Program through the MFF in amount up to the equivalent of $500 million. Of this, the Islamic Development Bank will provide $70 million. The financing will be provided in accordance ADB’s policy primarily from ADB’s ordinary capital resources (OCR). The MFF will comprise multiple loans, subject to the submission related periodic financing requests (PFR) by the Government and execution of related loan agreements and other warranties and representations. The Government will enter into a framework financing agreement (FFA) with ADB. The maximum amount of financing from OCR be $ 430 million equivalent and such financing will follow the provisions of the Ordinary Operations Loan Regulations applicable to a London interbank offered rate (LIBOR)-based loans, subject to modifications that may be included under individual loan agreements. The Government has provided ADB with (i) the reasons for its decision to borrow under ADB’s LIBOR-based lending facility; and (ii) an undertaking that these choices were its own independent decision, and not made in reliance on any communication or advice from ADB.

94. There is an estimated US 50 million of land acquisition and resettlement needed during Tranche 1 assuming the proposed road widths (generally 6m) and current alignments. It is recommended that this amount come from the GoI contribution. This excludes land acquisition and resettlement for new roads whose alignments are yet to be determined (as a result of the pre-loan detailed design).

95. Tranche 1 projects include only those links that need work and are ‘ready’. In order to separate the possible Tranche 1 projects into ADB and IsDB funding without having overlap, the Java roads have been tentatively allocated to the IsDB portion of the loan. The Java portion slightly exceeds the proposed contribution of US 70 million but is relatively close after including contingencies, taxes and duties.

Table 5 Financing Plans for MFF, Tranche 1 and Tranche 2

Preparing the Regional Roads Development Project – Final Report

F. Implementation Arrangements

1. Project Management

96. DGH will be the implementing agency, responsible for the overall execution of the Project. DGH will establish a project management unit (PMU) headed by a manager with experience in externally financed projects. Appointed for the duration of the Project, the PMU staff will be responsible for the day-to-day implementation and accountable for technical and financial reporting. The PMU head will ensure compliance with ADB procurement guidelines and ADB safeguard policies. The PMU staff will be assisted by experienced engineers, accountants, and other staff as required. ADB is comfortable with DGH’s capacity and resource management. A core team of consultants will be financed under the Project and assist the PMU staff in management, administration, monitoring, procurement, construction supervision and any land acquisition. Design and Supervision Consultants (DSC) will be appointed to oversee the civil works and to design the later tranches.

97. DGH and BAPPENAS will act as the implementing agencies. Each will appoint experienced project staff members to monitor and follow up the implementation of their project components. DGH will implement the road rehabilitation, capacity-building components and road safety awareness campaign subcomponents.

98. Road and bridge rehabilitation works will be executed by contractors in the 6 project provinces, under the supervision and management of the P2JJs, assisted by field teams of consultants, one each in Java and Kalimantan. The P2JJs will be responsible for preconstruction (preparation and acceptance of detailed designs), and procurement committees appointed by the project manager for preparation of tender documents for ADB approval, prequalification of contractors, arrangement of pre-bid meetings, evaluation of bids, and awarding of contracts related to civil works.

2. Project Readiness

99. Project readiness requires that the detailed designs of road links must be completed before implementing the first year’s program. It is expected, though not confirmed, that P2JJs assisted by Government-financed local consultants will carry out this task under advance procurement action. The P2JJs and PMU staff, before contract award and implementation, will review the detailed designs. Any design work for the road links to be rehabilitated in the following years and not completed under the above arrangements will be completed by the field team consultants hired under the Project. It is recommended that international independent auditors be appointed to review designs and design procedures are key points in this process.

100. During the tripartite meeting in May 2009, DGH requested the inclusion of an additional set of links from each province. Some of these form part of the southern corridor and some do not. All the links requested were not in the initial priority list. Some of these links were examined as part of Subcomponent 1 and whilst they are in poor condition and have B and C categories for Environment and Resettlement, insufficient data on construction costs and houses affected is available to meet the readiness criteria. The three links are shown below. Of these the last two have been proposed as candidates for Tranche 2.

101. Project management arrangements were put in place before loan negotiations, including senior appointments to the steering committee, the PMU, and the implementing agencies. DGH has assigned a project manager and staff to the PMU.

Preparing the Regional Roads Development Project – Final Report

3. Implementation Schedule

102. The Project will be established as a multi-tranche program of works that will implement sub-projects, which are approved and ‘ready’ in the first tranche to be implemented in the first four years of the program. A second tranche will run for five years commencing year 3 of the loan. Subprojects for tranche 2 will be identified during the first tranche and these will require additional studies and activities such as land acquisition and resettlement to be completed. Any subprojects requiring new alignments will be delayed to the second tranche since they will require several studies and approvals prior to acceptance. Overall the program is expected to run over a period of 7 years. It is expected that preliminary design will be commenced in September 2009 funded by GoI. Loan-related activities are expected to start early 2010. The implementation schedule is shown in Appendix 8.

4. Procurement

103. All procurement to be financed from the project loan will be in accordance with ADB’s Guidelines for Procurement. Contracts valued in excess of $1.0 million for goods and $1.5 million for civil works will be procured by international competitive bidding, with smaller civil works contracts fulfilled through local competitive bidding. Supply contracts not exceeding $1 million will be procured through international shopping. It is expected that only international competitive bidding will be used. Equipment and spare parts required for the Project, and estimated to costs, in the aggregate, the equivalent of less than $100,000 may be procured directly from the manufacturers of the original equipment or their agents. Prior to such procurement, a list of individual items to be procured, an estimate of their costs, an indication of potential sources of supply and any related documents shall be submitted to ADB for approval. After award, three copies of each contract for such items shall be furnished to ADB.

104. The main civil works for Tranche 1 will be divided into approximately 10 packages of road and bridge contracts (about 433 km of roads). All these packages which will be procured under international competitive bidding procedures. The detailed designs for tranche 1 subprojects will be prepared using GoI funding prior to loan commencement.

5. Consulting Services

105. The Project will require 307 person-months of international consulting services. Of these, 98 will be for the supervision of the civil works, and 174 for international staffing of the Core Team Consultant and 35 for the Transport Study. Approximately 9,071 person-months of domestic engineering and technical consultants will be engaged. Of these 1206 person-months will be allocated to the Core Team Consultant and 7,790 for the Design and Supervision Consultant and Field Teams for each project, to ensure proper design, supervision, and project management, as well as to train engineering staff. About 75 person-months will be allocated to Java Transport study. All consultants to be financed under the loan will be recruited in accordance with ADB’s Guidelines on the Use of Consultants, and ADB’s quality- and cost-based selection method will be used and the submission of full technical proposal requested. Generalized terms of reference are in Annex 12.

6. Disbursement Arrangements

106. Disbursement will be based on an annual expenditure plan for the project activities that will be consolidated by the PMU and included in DGH’s budgeted list of projects. Budget preparation and consolidation will have inputs from defined levels in the project management, and will be consistent with the overall project procurement plan, which identifies activities to be undertaken by each level of project management.

107. The loan proceeds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2001). The Project will use direct payments and standard commitment procedures.

Preparing the Regional Roads Development Project – Final Report

108. Sufficient supporting documentation, as defined in the Loan Disbursement Handbook, must be kept at each level of project management to substantiate all expenditures incurred from the loan proceeds. Staff at DGH, the PMU, and implementing agencies will be trained in ADB’s disbursement procedures.

7. Accounting, Auditing and Reporting

109. The PMU and implementing and other agencies involved in project implementation will prepare and maintain accounts exclusively for the Project and will register in such accounts all receipts and payments for the Project in accordance with sound accounting principles and procedures. Annual project accounts will be prepared by one auditing firm acceptable to ADB, based on sound and acceptable accounting principles. Audited project accounts, audited financial statements, and the audit opinion must be submitted to ADB within 6 months of the end of the financial year and at project completion. The financial statements and the auditor’s report will be in English. The Government and DGH were informed of ADB’s policy on submission of audited accounts, which covers failure to submit audited accounts and financial statements on time. A formal warning will be issued for accounts more than 6 months overdue, and disbursements will be suspended for accounts that are 12 months overdue.

110. An audited opinion of the project accounts will reflect (i) an assessment of the adequacy of accounting and internal controls systems with respect to project expenditures and other financial transactions and to ensuring the safe custody of project financed assets; (ii) a determination as to whether the Borrower and project implementing agencies have maintained adequate documentation on all relevant transactions, including specific mention of SOE and imprest account transactions; (iii) a confirmation that expenditures submitted to ADB are eligible for financing and identification of any ineligible expenditures; and (iv) a confirmation of compliance with financial loan covenants and ADB requirements for project management. Under Indonesian regulations, the Inspectorate General has to audit the Project’s financial accounts and the effectiveness of control mechanisms established within the Project. Copies of all such reports will be sent to ADB.

111. The PMU will be responsible for (i) collecting and consolidating all project progress reports, site reports, technical and financial reports, and their submission to ADB; and (ii) preparing quarterly progress reports, the midterm project evaluation report, and the overall project completion report. The quarterly reports will be submitted to ADB within 15 days of the end of each quarter due. The implementing agencies will be responsible for (i) preparing monthly and quarterly project progress, technical, and financial reports covering site-specific activities; and (ii) collecting and consolidating field data and feedback from local participating agencies and contractors that, in turn, will be relayed to the PMU. Implementing agencies and the PMU will do their accounting and reporting by e-mail. Off-the-shelf databases and other software will be used to set up effective and transparent accounting, monitoring, and financial reporting systems. The quarterly reports submitted to ADB will be posted on the Project’s website, located as a link within the MPW website.

8. Monitoring and Evaluation of Project Performance and Benefits

112. DGH and ADB have agreed on a set of indicators to monitor and evaluate the Project’s performance in relation to its expected impact, outcomes, and outputs. The details of the indicators and baseline values will be established by DGH, in consultation with ADB, and with the assistance of the core team of consultants, at least 2 months before civil works begin in the project provinces. DGH will be responsible for data on (i) average volume capacity ratios, (ii) average road roughness, (iii) classified traffic counts, (iv) number of traffic accidents and (v) lengths of paved road to remote areas. DGH will also provide baseline data and future monitoring. Monitoring indicators will be measured each year and for 3 years after project completion. Each assessment will consist of an evaluation of changes that occurred in the preceding year. Comments and findings regarding these project indicators will be included in the midterm review.

Preparing the Regional Roads Development Project – Final Report

113. To demonstrate the effectiveness of its operations and to be accountable for its performance to stakeholders, ADB uses the project performance management system. The monitoring will be undertaken with a focus on a few key representative communities in the project area. A basic monitoring framework was constructed for the Project to permit a more definitive assessment of the actual benefits.

114. The RRDP has two distinct areas of interest and methodology from the point of view of monitoring (i) the Project Implementation Activities, which would require continuous assessment of progress during the implementation phase and (ii) the Social Impact resulting from the Project implementation which will be undertaken periodically during the project implementation period and continue after the project is completed to assess the medium and long term impact.

115. The first component will be undertaken by the CTC and DGH Technical Assistance, and necessary staff will be available for the purpose of recording, monitoring and reporting during the implementation period. The results would be reported in the quarterly and annual reports required by the project. The second component would be better administered by a single agency likely to be operational for a prolonged period that can provide intermittent services. An NGO is proposed as a suitable organization to undertake this type of monitoring every 3 years for a period of 15 years from the start of the project. Results would be reported during the first year of the project to establish the baseline parameters using the agreed procedures. Subsequently monitoring would be carried out at three year intervals and cumulative reports made on the findings to that time.

116. The Project Implementation Activities. The road development objective of the Project is to improve economic competitiveness, reduce traffic congestion and improve accessibility on key economic corridors and support international border cooperation initiatives in the islands of Java and Kalimantan. A number of individual parameters (Appendix 1) have been identified which will be monitored for each sub-project. These will be aggregated to create an index representing the average change resulting from the sub-projects completed. The key performance indicators for the road development objective are (i) percentage reduction in travel times, (ii) number of technical audits carried out, and (iii) number of kilometers of betterment, capacity expansion, and new roads constructed, and number of meters of bridges completed.

9. Project Review

117. ADB will carry out regular loan reviews and a midterm review of the Project prior to the second tranche commencement to be agreed on between the DGH, the implementing agencies, and ADB. This will focus on project impacts, particularly relating to institutional, administrative, organizational, technical, environmental, and social aspects. The Project’s economic viability and other aspects that may have an impact on project performance will be reassessed during this review. The review will also examine compliance with covenants specified in the loan agreement. The EA and the implementing agencies will make sure that their staff visit the field frequently and join ADB for all project review missions.

118. The NGO meeting raised questions about the links in Yogyakarta as either being funded by APBN or not necessary, or having environmental issues on karsts etc. No Yogyakarta roads have been proposed for Tranche 1 and thus the validity of any of the concerns raised can be addressed during the PPTA for Tranche 2.

119. All proposed links were reviewed and visited in February 2010 and checked for suitability. At this time several links were adjusted to meet the latest needs a) inclusion of bypass at Tebas- Sambas, b) Tanjung-Sanggau inclusion based on available monies) c) dropping of the Giriwoyo- Glonggong (already completed), d) dropping of certain sections along the Tebas – Sambas link and e) inclusion of the alternative route from Wawar – Tambak Mulyo. The project has remained responsive to expressed needs and changing conditions.

Preparing the Regional Roads Development Project – Final Report

10. Anticorruption Measures

120. Following governance issues in 2003, an ADB-assisted project with the then Directorate General of Urban and Rural Development, Ministry of Settlement and Regional Infrastructure (MPW now), jointly addressed weaknesses and defined remedial actions to improve project implementation. The recent EINRIP project funded by AUSAID, produced comprehensive ACAP measures which further strengthened these resolves. DGH has agreed with the ADB to adopt these procedures, adjusted for specific ADB concerns, for the RRDP. These measures broaden the mandate of the inspectorate general to make it a more effective internal auditor instead of just an auditor of the financial accounts and provide for more transparency. The action plan will target not only the functioning of regional governments and DGH, but also the performance of auditors, consultants, and contractors, and ADB’s project implementation. The full ACAP is presented in Annex 2, Appendix 2.

121. The Government is fully aware of the ADB’s anticorruption policy and has been using it on several ADB projects in recent years. The policy, together with other ADB safeguard policies, will be included in the training provided to DGH, the PMU, and implementing agency staff. The Government is committed to creating and sustaining a corruption-free environment, and has agreed to abide by the relevant provisions of ADB’s anticorruption policy during project implementation. A new anticorruption law gives the Government strengthened legal powers of investigation and enforcement in cases of corruption. Finally, provisions will be included in all contracts to specify the right of ADB to audit the accounts of contractors, suppliers, and service providers as they relate to the Project.

122. Poor-quality work as a result of corruption is a major issue. Substantial emphasis will be placed on improving quality control by (i) strengthening construction supervision through specific additional powers and authority to reject defective works and by disapproving related payment requests, (ii) conducting independent technical audits through the core team of consultants, (iii) training all professional construction supervision staff in quality control aspects before their mobilization, and (iv) promoting awareness of quality control at all times during implementation.

IV. PROJECT BENEFITS, IMPACTS AND RISKS

A. Economic Benefits

123. The economic appraisal for each subproject has been based on all construction work taking place in year one with a life cycle period covering 20 years. In all cases the appraisal compares a project case (with the roads being improved with partial overlay and widening or full reconstruction) with a without-project do minimum alternative comprising limited investment on the existing route. A 12 percent discount rate is used throughout. It should be noted that in most cases the existing roads are quite narrow (4-5 m – 5 m) and generally in poor condition. Some travel may not be taking place because of the quality of the existing road but in the selected corridor congestion is not the predominate problem. As a result of the project, any congestion on existing roads will be reduced but more importantly the existing roads will benefit from faster, cheaper and safer travel. It is expected that some additional trips will be generated as the economy responds to lower transport costs and traffic from neighboring centers and even from the mid Java routes will divert to use the wider better quality roads. If these roads are not upgraded, people in the remote parts of the project area will have less mobility and the mainly poor inhabitants will not be able to participate in the mainstream of economic activities. The project will provide employment opportunities both during and after construction and will remove constraints on economic growth and, with the increased growth, achievement of higher incomes.

124. The evaluation uses last quarter 2008 economic prices and is based on other concurrent projects. Additional benefits to “normal” traffic (i.e. traffic that would have been present in the do minimum case) result from improvements in road and traffic conditions between the do minimum and project case and amount to savings in (i) VOCs, (ii) personal travel time for vehicle occupants (other than drivers and crew, whose costs are included in VOCs), (iii) road accident costs and (iv)

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29 the value tied up in freight during transit. In addition there are the expected benefits of additional trips made solely as a result of the lower costs brought about by the project (“generated” traffic) and the gains and losses to the new corridor as a result of passengers and goods choosing to divert from existing more northern corridors (in Java). The Kalimantan roads are evaluated in the same way, i.e. focusing on conventional road user benefits and taking no account of any additional economic gains that may be induced by the introduction of new road capacity.

125. The EIRR for the projects vary from subproject to subproject but in most cases the project’s EIRR are above the threshold or very close. West Java projects range between 12-25%, Central Java from 12 to 50% and Yogyakarta from 14 to 35% (and these are all 7 m planned roads). For East Java the EIRR range from 7 to 35%. This is indicative of the fact that the terrain in this area is perhaps the more difficult and therefore more expensive to build and the existing traffic is the lowest. In Kalimantan due 1) to the condition of the current roads in East Kalimantan and 2) the current impassable nature of the road for much of the year, the EIRR are low (assumed traffic of 300 AADT) and generally less than 10%. In West Kalimantan the main route from Sosok to Tayan has EIRR 16 to 21% (for widening to 7m) and the new route from Singkawang to Aruk ranges from 2 – 10%.

126. Sensitivity analyses confirm the robustness of the Java corridor subprojects with those that are already 10% and above, being little affected by an increase of up to 10% in construction costs or lower than expected VOC benefits (as much as 20%). Changes in the principal variables, e.g. construction costs, traffic growth, benefits do not have a significant impact on economic viability, and the EIRR remained above the threshold of 12 percent in most cases. An annual traffic growth has been assumed of around 5.6% and it is expected though not include in the analyses that should the corridor be built to the standard intended, and additional 2% traffic could divert to it from neighboring corridors. The economic analysis of the project also reviewed the viability should motorcycle benefits be excluded. In most cases the viable links remained viable.

127. The GoI has specific standards for each class of road. National roads are ideally to be 7m wide with 2 m shoulders etc and a minimum 15m ROW. If these policy widths are applied to the corridor roads, significant cost increases are seen as well high levels of land acquisition and resettlement being required. Construction of 6m roads where currently there are roads in poor condition with widths from 4.5 - 6m with 1m sealed shoulders will provide significant improvements and be more easily implemented. Though the RRDP corridor links have been nominated as having strategic or arterial function, considering the currently low traffic volumes, an interim width of 6m + 1m or 6m + 2m is deemed to be adequate for the next 5-10 years. These issues need to be agreed between the GoI, the provinces and the ADB before detailed designs commence.

128. It is also recommended that, prior to loan negotiations that serious consideration is given to implementing performance-based maintenance contracts for at least one key road in which the construction contractor becomes the maintenance contractor. This is especially recommended for a road that may have a weigh station being operated. Potential contractor bidders should be notified of this requirement at the bidding stage.

B. Social Dimensions and Poverty Reduction Impacts

1. Poverty Reduction

129. The Project’s poverty reduction impacts are distinctly different in Java and Kalimantan. Java is relatively well serviced with transport networks. In the south of Java however, trans-java transportation is still limited with large sections of the route still incomplete, narrow and in poor condition or needing to be bypassed to other corridors running east-west. Much of the traffic flow is agricultural commodities from poor areas to the larger northern cities. It is expected that local economies will improve, with lowered transport costs to major centers and more access to lateral markets where current connections are poor or non-existent. With greater east-west access and

Preparing the Regional Roads Development Project – Final Report

30 easier access to the southern beaches, it will also promote tourism opportunities and an increase in local businesses.

130. In Kalimantan, where the roads network is still limited and interregional trade is largely restricted to the Tayan-Entikong corridor of the Project area. Though the Aruk border gate has recently been constructed, the major Project Corridor to the border is being promoted under this loan. Upgrading the international border corridors will promote interregional and international linkages, and provide alternate markets and opportunities for local communities. This shift will reduce costs, promote all-year access, and increases the potential for small- and medium-scale entrepreneurs to make use of the area’s natural resources. Improved road access will facilitate government administration and social service delivery.

131. Construction will create temporary jobs, and routine maintenance will employ unskilled and semiskilled workers. Women will be encouraged to work and will be treated equitably. DGH will ensure that employment opportunities are announced to local communities and will also ensure that contractors conform with appropriate labor laws and standards. DGH will monitor the use of local labor and appropriate labor laws and standards within the first 3 months of the commencement of each construction contract and take appropriate action to improve the employment and compliance if needed. A summary poverty reduction and social analysis is in Appendix 11.

2. Safety, Health and Gender Concerns

132. HIV/AIDS and Human Trafficking Prevention Plan: The Project will have few adverse social impacts. ADB and the Government have agreed that the Project should have an HIV/AIDS prevention initiative targeting construction workers and the people they interact with, specifically addressing the disproportionate impact of HIV/AIDS on women, who are more vulnerable than men. It is recommended that this prevention plan is implemented through cooperation with Indonesia's National AIDS Committee (NAC) and Provincial AIDS Committees (PACs). These agencies would take the lead roles to plan, coordinate, monitor and report activities in each province. NAC has demonstrated strong support for this prevention plan and, along with West Kalimantan PAC, have contributed advice, costs estimates and prepared proposals for undertaking the work. As the Human Trafficking component will focus on increasing awareness of the problem, NAC's experience with information and education programs can readily accommodate the administration and delivery of this activity within the single prevention plan. Action for the control and prevention of HIV/AIDS and Human Trafficking would include (i) Baseline surveys, (ii) Advocacy, (iii) Information and education campaigns, (iv) Provision of Medical Packages (HIV/AIDS and STI testing clinics at construction sites), (v) Reporting and Independent Monitoring.

133. To mitigate these risks, construction contracts will require contractors to allow their workers to attend education sessions where materials such as condoms and awareness brochures will be distributed. It is estimated that the total budget of the HIV/AIDS and Human Trafficking Prevention Plan would be Rp. 320 million, to be expended during Tranche 119. Implementation of these activities will begin at least 3 months prior to the commencement of civil works.

134. The NGO meeting raised the question that there was no gender study related to the HIV/AIDs in the final draft of PPTA though this is one of the issues highlighted in the final draft PPTA. Furthermore, there were no mitigation measures for women included to minimize impacts of HIV/AIDs. The teams response is the HIV/AIDS plan, will be designed and implemented by the National AIDS Committee through Provincial and District AIDS Committees in accordance with the Indonesian National Action Plan and local action plans.

19 Although, West Java and Yogyakarta road improvements do not begin until Tranche 2, it is highly recommended that the HIV/AIDS and Human Trafficking Prevention Plan begin as early as possible.

Preparing the Regional Roads Development Project – Final Report

3. Involuntary Resettlement

135. In general, Project road alignments follow existing centerlines and most Tranche 1 projects remain within the existing right-of-way. Initial short and full LARAPs have been prepared for those projects in Tranche 1 that have minor resettlement impacts. These are included in Annex 13. As the preparation of resettlement estimates are based only on preliminary design and initial resettlement surveys for Tranche 2 projects, LARAP studies will be carried out during loan implementation, specifically Tranche 1. Adequate resources will be identified and committed during land acquisition and resettlement planning. It is essential for adequate budgetary support, which is fully committed, be made available to cover the costs of LARAP studies, including adequate human resources for supervision, liaison and monitoring for all resettlement activities. The project has instigated eight short LARAP studies culminating in detailed resettlement plans for each sub-project. Resettlement estimates will be updated (land acquisition, compensation, resettlement and rehabilitation/ livelihood restoration) and will be prepared in consultation with affected households (Ahs) and concerned groups. The final draft Resettlement Plans and budgets have been submitted to ADB for review and approval.

4. Indigenous Peoples’ Policy

136. It is not anticipated that indigenous communities will be significantly impacted by resettlement activities. East and West Kalimantan are the provinces least impacted by resettlement activities and projects surveys reveal that traditional indigenous communities are living more than ten km from the existing roads. At the NGO meeting is was stated that there are in fact Dayaks (IPs in Kalimantan) living less than 10 km from the road. It is our understanding from surveys and letters from regency officials that on the Kalimantan roads no true IPs live in the proposed project sites. Another issue raised by Sanggau regency was that they were neither approached nor consulted regarding roads being upgraded in the area. In fact there was a late submission from Sanggau regency to include an additional road from Tanjung – Sanggau. This late inclusion has been viewed by the Team, the ADB and been surveyed for environmental and social issues and remains included in Tranche 1.

C. Environmental Impacts and Mitigation Measures

137. All subprojects in Tranche 1 have been classified into environmental category B (UKL-UPL) according to ADB, The environmental concerns associated with Tranche 1 subprojects are (i) presence of highly erodible soils in the hilly terrain of Java, (ii) landslides and flashfloods in Java due to narrow river basins, high intensities of rainfall and erodible soils, (iii) locations of subprojects in the production forests in Kalimantan and illegal logging, (iv) floods in West Kalimantan, (v) impact on quarry sites and (v) noise and air pollution during operation of project roads in Central Java. Mitigation measures are proposed for all the anticipated environmental impacts and engineering designs will address all these concerns.

138. Construction of civil works during implementation will create localized and short-term impacts. These construction related impacts can be mitigated by (i) the contractors’ work practices, especially those related to the storage of construction materials and cleanliness of the work sites; (ii) cooperation by the local authorities with the contractor in terms of traffic management and use of public space and utilities; (iii) strict enforcement of the correct construction practices and standards by the project management staff/authority; and (iv) incorporation of the mitigation measures identified in the IEE into the bid documents and specifications..

139. The project will directly benefit over 0.3 million people located within immediate vicinity of the roads by providing improved access and economic development. The project would also benefit environment in terms of reduced soil erosion and landslides; and rock fall protection through slope stabilization measures and construction of retaining structures. Dust generation from the unpaved and damaged roads will be reduced by the improvement of pavement. Health risk to the roadside communities and damage to the biological environment will be reduced due to pavement improvement and soil erosion control measures. Road safety will be by improved

Preparing the Regional Roads Development Project – Final Report

32 geometrical design of realigning sharp vertical and horizontal sections, and installing traffic control facilities.

D. Project Risks

140. The main risks to the Project and the measures taken to minimize them are presented in Table 3.

Table 6 Perceived Risks and Mitigation Measures Project Risk Measures Taken to Minimize Risk Government fails to provide counterpart Related covenant Funds Bid costs are higher than estimates The preliminary designs for first-year program to be reviewed during detailed design before contract bidding DGH fails to maintain the project roads Consultants will be appointed to help strengthen once rehabilitated maintenance planning, funding, and implementation. The Government will assure availability of adequate funds. Risk of spread of STDs and HIV/AIDS Contractors will be required to adopt strict controls over workers’ conduct. Workers will be required to attend awareness campaigns. Environmental damage during or after Contractors will be required to adopt environmental construction protection and comply with mitigation measures. Project is not implemented in the projected Consultant services and civil works contracts are procured 84 months in advance. Close monitoring and accountability measures Included. Ensure any LARAP studies are implemented. Corruption in project implementation, Implementation arrangements designed in compliance with particularly in procurement the ADB anti corruption guidelines AIDS = acquired immunodeficiency syndrome, DGH = Directorate General of Highway, HIV = human immunodeficiency virus, STD = sexually transmitted disease, TA = technical assistance. Source: Asian Development Bank. V. ASSURANCES

141. In addition to the standard assurances, DGH and the Government have given the following assurances, which are incorporated in the legal documents:

(i) The Government will ensure that implementation arrangements of the Project, the provision of funds from loan proceeds, and the corresponding counterpart government contributions necessary for financing project activities are provided in a timely fashion throughout project implementation, including required expenditures for operation and management of weighbridges, in the manner agreed with ADB. (ii) The Government and DGH will ensure that the fiduciary control, fraud, and anticorruption action plan is fully implemented as agreed. (iii) The Government will ensure that the funds are available for the pre-loan preparation of the detailed design packages for Tranche 1 subprojects. They will also ensure that appropriate consultants are contracted to perform the detailed design works according to the Bina Marga standards. The ADB have agreed to supply through the RR2P an international independent audit facility to review designs and provide input. (iv) The Government, through DGH, will establish baseline values at least 2 months prior to commencement of civil works in project provinces, for performance and benefit monitoring purposes, as to be agreed with ADB, and monitoring indicators will be measured each year and for 3 years after project completion. (v) The Government will submit quarterly project progress reports and progress reports to ADB periodically on the revised PSAP and consult with ADB on further road sector policy measures, if and when available.

Preparing the Regional Roads Development Project – Final Report

(vi) The Government will keep ADB informed of all transport sector and road subsector studies undertaken in Indonesia and will provide ADB with copies of all available documents relevant to such studies, including consultants’ reports, and will ensure that ADB has the opportunity to comment on the recommendations contained therein. (vii) The Government will assure ADB of availability of funding for regular maintenance and implementation, as required, of the national roads rehabilitated under the Project. Furthermore, DGH will ensure that annual road maintenance plans are prepared for the improved roads on the basis of the agreed-upon maintenance standards, traffic volumes, and assessment of needs. (viii) DGH will ensure that road safety measures identified as needed during project preparation—including guardrails, road markings, and warning signs—and staff training in road safety and traffic engineering are incorporated in final designs for project-funded civil works and are implemented in accordance with designs. (ix) The Government will ensure that all Project activities will comply with Government laws and regulations governing environmental and social impact assessment, ADB’s Environment Policy (2002) and all actions identified on SIEE and IEE will be implemented. The contract documents for all civil works under the Project will include specific measures as indicated in the SIEE and IEEs to mitigate negative environmental impacts caused by Project activities. Adequate environmental management plan and environmental monitoring plan will be implemented. The contractors engaged under the civil works contracts will be required to comply strictly with all environmental impact mitigation requirements to be set out in the contract documents, and the consultants engaged for construction supervision to monitor closely the compliance by the contractors with the environmental impact mitigation requirements. Semi-annual reports on implementation of the Environmental Monitoring Program as stated in the IEEs will be submitted to ADB. (x) The Government will ensure that the civil works contractors comply with all applicable laws related to gender, labor, and workers’ safety, including ensuring that women are given equal pay for work that is equal to men. (xi) DGH will ensure that civil works contracts will include appropriate clauses requiring contractors to allow their workers to attend planned campaigns on STDs and HIV/AIDS during construction and will maintain adequate sanitation and working conditions. (xii) DGH will ensure that adequate drainage of project roadways is provided by appropriate Design and implementation of cross-falls, shoulder grading, crossdrains, culverts, and side-ditches. (xiii) In the event land acquisition or resettlement is needed, the Government will ensure that a Resettlement Plan will be prepared for approval by ADB. The Government will ensure that all land acquisition and resettlement activities will be completed prior to the award of a civil works contract. All land acquisition and resettlement activities will be carried out in accordance with the Compensation Policy Framework and Procedural Guidelines (CPFPG) developed by DGH, the Government’s laws, regulations, and procedures, and ADB’s requirements as defined in ADB’s Policy on Involuntary Resettlement. In case of discrepancies between the Government’s laws, regulations, and procedures, and ADB’s requirements, DGH and ADB will agree upon a mutually acceptable resolution. (xiv) The Government will ensure that, to the extent that any indigenous peoples are likely to be affected under the Project, the measures set forth in the CPFPG, the Government’s laws, regulations, and procedures, and ADB’s requirements as defined in ADB’s Policy on Indigenous Peoples shall apply. In case of discrepancies between the Government’s laws, regulations, and procedures, and ADB’s requirements, or to the extent there is an omission in CPFPG or a discrepancy with the ADB’s requirements, then DGH and ADB will agree upon a mutually acceptable resolution.

Preparing the Regional Roads Development Project – Final Report Appendix 1 34 Appendix 1: DESIGN AND MONITORING FRAMEWORK

Design Performance Data Sources/ Reporting Assumptions and Summary Targets/Indicators Mechanisms Risks

Impact Assumptions Improved and Gross domestic product of Government statistical • Transport sustainable economic project districts and publications by district and infrastructure growth in the Project 'regions' increased commodity investment areas implemented as

planned. Measurable increase in • Continuation of cross border trade and political stability people movements under BIMP-EAGA initiatives Improvement to the condition of the project areas and accessibility to the more remote communities served by the project roads

Outcome Assumptions More efficient and Volume/Capacity Ratio Government accident statistical • Transport safer transport (VCR) will be reduced to data infrastructure systems through less than .3 investment reduced congestion implemented as and improved traffic Annual DGH surveys planned. flow in the project Average Condition of Road • Improved safety areas improved from 9.6 to 3.0 design incorporated m/km IRI ADB review missions into construction planning Annual Traffic Growth Performance Monitoring increased from 5.6 to 7% System Risks per year • Rapid deterioration of

MFF progress and completion the road network Number of serious road reports caused by poor accidents decreased from a overloading fatality rate of 9.9 deaths enforcement or per 10,000 registered maintenance vehicles to less than 7 • Government unable or unwilling to meet

land acquisition, The percentage of villages resettlement and with paved roads access environment increases from 57% to 90% requirements by 2020

34 Appendix 1 35

Outputs (Tranche 1) Assumptions A new road The Central Java road will Annual DGH surveys • Support from local constructed between be of length 24.4 km and a governments and

Karangbolong and roughness level of 3 m/km communities. Wawar IRI ADB review missions • Sufficient funding and project/studies progress in timely MFF progress and completion manner reports A number of roads will 242 km of road in the be bettered and project area will be Risks widened to 6m widened and/or • Government unable reconstructed at a or unwilling to meet roughness level of 3 m/km land acquisition, IRI resettlement and environment requirements A number of roads will 296 km of road will be be bettered rehabilitated or partially • Government requests reconstructed to a change to the project roughness of 3 m/km IRI roads to be considered for road works • DGH unable to complete the detailed design of the Tranche 1 projects prior to loan commencement

Activities with Milestones Inputs Investment Program 1. DGH commences detailed design phase of Tranche 1 projects by September • ADB: $ 430 million 2009 • IsDB: $ 70.0 million 2. Periodic financing request for Tranche 1 submitted by the Government and GoI: $ 150 million approved by the ADB by late 2009 • 3. Consultants for construction supervision and project monitoring of Tranche 1 are recruited by last quarter of 2010 Tranche 1 4. Design and supervision consultants for Tranche1 are appointed by early 2011, one for the IsDB projects and two for the ADB projects. • ADB: $ 194.2 from 5. Civil Works contracts under Tranche 1 commence in first quarter of 2010 ordinary capital 6. Feasibility of Tranche 2 projects, completed (possibly by another PPTA) 1 resources year prior to the start of Tranche 2 • IsDB: $ 70 million • GoI: $ 79.3 million

DGH = Directorate General of Highways IsDB = Islamic Development Bank IRI = International Roughness Index MFF = Multitranche Financing Facility

Preparing the Regional Roads Development Project – Final Report Appendix 2 36 APPENDIX 2: ROAD SECTOR ANALYSIS

A. Indonesian Road Network 1. Indonesia’s infrastructure investment fell from approximately 6% of GDP before 1997 to a low of just over 2% of GDP in 2001, and has since risen to around 3% of GDP. This level of investment has not been sufficient to meet the growing demand for infrastructure services. In the road sector, the Government has recognized these challenges and is taking appropriate steps to fill this financial gap by undertaking fiscal and road sector institutional reforms through a) gradual removal of fuel subsidies which were causing a massive drain on the budget20, b) passing legislation aiming at enhancing private sector participation, and c) devolution of the responsibility of managing provincial and district roads to local government levels21.

2. The road network of Indonesia is extensive with approximately 37,570 km of National roads, 41,100 km of provincial roads and 249,000 km of Kabupaten roads. The National administrative class is further categorized into a) 19,000 km of arterial road and 18,570 km of collector roads. The Provincial roads consist of 37,270 km of primary collector and 3,800 of secondary collector. In addition Indonesia classifies lower class roads as local roads and desa (village) roads.22

Table 7 Road Network Length

Source: BPS: Badan Pusat Statistik: 2007, DGH Pusdatin 3. The term non-status road is now being used freely though it is not an official designation and therefore no statistics are available for them. It is an interim status that has come about perhaps as a result of decentralization and the creation of new provinces. They can be defined as a) new roads under construction or (b) national roads that have been downgraded to provincial road, where the appropriate government/governor decree is still in process.

4. The length of sealed roads has steadily increased over the years, doubling in length in the last twenty years. The road density has also increased and now stands at approximately 21 km per 100 sq km, up from 12 km per 100 sq km in 1987. In addition to the national, provincial and Kabupaten roads shown above, there would be a significant but undocumented additional length of desa roads.

5. Despite recent funding increases and a renewed emphasis on maintenance, average road conditions are not improving and significantly less than those levels experienced before the Asian financial crisis of (1997/98). A contributing factor to the overall drop is the increase in road length and the addition to the national and provincial road base of previously Kabupaten roads. These

20 Making the most of Indonesia’s new opportunities: Indonesia Public Expenditure Review, 2007, World Bank 21 Indonesia Road Sector Policy Note: May 13th 2009 22 Road Law 2006

36 Appendix 2 37 usually have been added as a result of creating new provinces. The condition level inhibits economic development and access to basic services for the poor particularly in the East.

Figure 1 - Indonesia National and Provincial Roads - Good Condition

Source: IIRMS Database – 2008-2009 – Some years are missing from the database 6. Due to the increase in network length and the aging of the network, road maintenance and development budgets are being stretched and in many cases, the backlog of roads needing routine and periodic maintenance far exceeds the available budget. Between 77% and 83% of the good condition roads are national roads23. About one third of the national roads are in poor-bad condition, whilst 50% of the provincial roads are in poor condition.

Table 8 Indonesian Roads Network Condition 2008

Road Condition by Road Status Good Fair Poor Bad Total Status IRI < 4 IRI 4 - 8 IRI 8 - 12 IRI >= 12 (km) National 23% 54% 13% 10% 34,974 Provincial 7% 46% 23% 25% 35,155 Total km 10,334 35,238 12,387 12,171 70,130 Total % 15% 50% 18% 17% 100% Source: IIRMS Database 2008-2009 IRI – International Roughness Index in m/km IRI 7. During the last twenty years of foreign donor-lending to GoI, the dominant goal has been the improvement of the key national and provincial roads throughout the archipelago. In Java, most of the “economic viability”-based road projects have been in the north and centre of the island where the majority of the traffic and population is based. Due to the density of the population and the difficulties involved in acquiring additional land to widen key transport corridors, unless Indonesia is willing to go to great expense in buying expensive land in the north and south, the alternative is to improve and expand the relatively sparsely populated regions to the south of Java. Not only does this provide an alternative route at reduced cost, compared to further developing the northern or middle corridors, it also provides a valuable boost to the economic viability of the southern regions of Java.

B. Project Road Network 8. National and provincial lengths for project provinces are shown in Figure 2 and Figure 3. The paved portion in Kalimantan is steadily increasing while Java has decreased slightly as new provinces contribute previously Kabupaten roads and non-status roads are added to the network.

23 Though both tables are derived from IIRMS data, the data is obtained from different modules of the system which define ‘good’ slightly differently.

Preparing the Regional Roads Development Project – Final Report Appendix 2 38 Figure 2 Java National and Provincial Road Network (km)

Figure 3 Kalimantan National and Provincial Road Network (km)

Source: IIRMS Database – 2008-2009 – Some years are missing from the database

9. The conditions in the project provinces are shown below in Figure 4 and Figure 5. Java shows a dramatic drop off in percentage of the network in acceptable condition.

Figure 4 Java National and Provincial Roads in Good Condition

Figure 5 Kalimantan National and Provincial Roads in Good Condition

38 Appendix 2 39

Source: IIRMS Database – 2008-2009 – Some years are missing from the database 10. The condition matrix for the national and provincial roads in the project provinces is shown in Table 9 . Some 58% of the roads are in good condition in the project area compared to 65% for all Indonesia.

Table 9 Project Area: Road Network Condition 2008

Project Area: Road Condition by Road Status Good Fair Poor Bad Total Status IRI < 4 IRI 4 - 8 IRI 8 - 12 IRI >= 12 (km) National 14% 56% 18% 13% 8,379 Provincial 1% 45% 32% 22% 8,813 Total km 1,308 8,654 4,259 2,970 17,192 Total % 8% 50% 25% 17% 100% Source: IIRMS Database – 2008-2009

11. The bridge network of Indonesia is extensive with over 34,000 national and provincial bridges registered in the Bridge Management System. Of these, about 17,300 are national bridges. The following tables show national bridge lengths and condition. Typically bridges over 30m in length are truss bridges. More than 80% of the national bridges are in good to fair condition.

0 - 20 m 20 - 30 m 30 - 60 m 60 - 100 m > 100 m Total Total Length % Length % Length % Length % Length % Length Count

Indonesia 106,761 32% 43,707 13% 72,421 22% 37,946 11% 71,892 22% 332,726 17,348

Java 22,146 32% 7,304 11% 15,978 23% 7,747 11% 16,031 23% 69,206 4,317

Kalimantan 7411.9 36% 4,080 20% 2,594 12% 1,746 8% 5,012 24% 20,844 975 Source: National Bridge Lengths - IIRMS Database – 2008

Source: National Bridge Condition - IIRMS Database – 2008 12. Traffic Accidents have increased, as has overloading throughout Indonesia, especially in the last 5 years. Accident incidences have increased by 50%, the number of deaths by 25%, serious injury by 30%. It is well known that many accidents are not reported even those where fatalities have occurred and especially those with slight or serious injuries. A contributing factor to the high accident rates is the mix of traffic on the roads, the poor quality and width of the roads, poor driver education and poor signage and enforcement.

Preparing the Regional Roads Development Project – Final Report Appendix 2 40

Material Number of Serious Slight Losses Year Incidents Fatalities Injury Injury (Million Rp) 1992 19 920 9 819 13 363 14 846 15 077 1993 17 323 10 038 11 453 13 037 14 714 1994 17 469 11 004 11 055 12 215 16 544 1995 16 510 10 990 9 952 11 873 17 745 1996 15 291 10 869 8 968 10 374 18 411 1997 17 101 12 308 9 913 12 699 20 848 1998 14 858 11 694 8 878 10 609 26 941 1999 12 675 9 917 7 329 9 385 32 755 2000 12 649 9 536 7 100 9 518 36 281 2001 12 791 9 522 6 656 9 181 37 617 2002 12 267 8 762 6 012 8 929 41 030 2003 13 399 9 856 6 142 8 694 45 778 2004 17 732 11 204 8 983 12 084 53 044 2005 18 116 11 451 9 253 11 168 51 355 Source: Indonesian State Police – Badan Pusat Statistik – Later years unavailable B. Vehicle Fleet and Traffic 13. In 2006 the Indonesia vehicle fleet had 11.6 million trucks, cars and buses and 33.4 other motorized vehicles (motorcycles and agricultural vehicles). Between 1987 and 2006 the vehicle ownership increased over 5 times, from 7.9 million vehicles to 38.1 million. The single largest increase has been motorcycles, from 70% to 75% of the vehicular fleet. The table below shows the total Indonesian figures compared to the regional centers (East and West Kalimantan, and Java). It is clear that growth experience in these centers is not as high compared to the whole of Indonesia.

Source: Indonesian State Police – Badan Pusat Statistik – Later years unavailable

C. Toll Roads 14. At the national level, a lack of high standard arterial connections along major trade and commercial corridors and congested arterial roads, has increased travel time and transport costs – 43% of the arterial network on Java was congested in 2000 and this is expected to rise to 55% by 2010. Compared to many countries Indonesia has made substantial progress, with the policy and regulatory framework, although more can always be done to improve/fine tune regulations. There remain issues related to the project cycle, project preparation and implementation. While some progress has been made in the toll road sector to convert Jasa Marga into a corporatized entity that will bid for projects in competition against or as a partner with private companies, this has not yet been seen in practice. Progress to date in the implementation of PPP projects has been poor. Only 650 km of toll roads are in place, mainly in urban areas, compared with an estimated need of about 2,000 km.

40 Appendix 2 41

D. Road Administration 15. Four national Government agencies play key roles in the road sector. The National Development Planning Agency (BAPPENAS) formulates national development strategies, establishes broad policy and investment priorities, and prepares and supervises the implementation of annual development budgets. The Ministry of Communications (MOC) is responsible for policy formulation, and for planning, regulating, and managing most transport infrastructure (except roads) and some transport services. Within MOC, the Directorate General for Land Communications (DGLC) is responsible for land communications. The Ministry of Public Works (MPW), through its Directorate General of Highway (DGH), develops and maintains the national roads, sets technical standards for all types of roads, and provides technical assistance (TA) to road agencies at the lower administration levels. DGH has regional offices (P3JJ) for road design and supervision. The Ministry of Home Affairs coordinates the management of lower levels of government (provinces, districts, and municipalities) in relation to the road sector.

E. Main Sector Issues and Government Initiatives 16. The Indonesian road network in general terms is in reasonable condition but only 65% of the primary national and provincial roads in good to fair condition. Network coverage in most provinces is good. Demand for road transport is increasing. Insufficient funding to road maintenance in the past has increased the number of roads that are beyond maintainable condition and the backlog of deferred maintenance. A number of key factors contribute to the current situation, namely: a) extensive nature of the network, b) the fact that Indonesia is an archipelago with 17,500 remote islands which are perhaps poorly serviced, c) continual lack of funds for proper maintenance, d) a range of soil types that affect the longevity of the roads, e) ongoing overloading issues throughout the country.

1. Business Procedures 17. Procurement and Bidding Documents. For procurement and subsequent execution of works, outdated performance standards resulted in very poor quality of the road network. There appears to be no mechanism available to measure contractor performance and even where there is known poor quality works being performed, no formal censure or blacklisting process is adopted. DGH has developed standard bidding documents for civil works based on ADB and World Bank guidelines to streamline procurement procedures. For larger contract packages, such as those under ADB financing, it adopts FIDIC contracts and international competitive bidding procedures. E-procurement is used in many cases.

18. Quality Control. A 2–3 year performance guarantee and/or defect liability are included in contracts. Laboratory equipment is being enhanced, and mobile quality control squads are set up in all district offices. A third-party quality control system has been introduced.

19. Asset Management. The DGH now use a comprehensive road management system (IIRMS – Indonesian Integrated Road Management System) developed through various foreign loans over the past 20 years. It consists of a comprehensive database of road and bridge inventory, various analysis options for road sectioning, analysis and program selection and is linked to geographic information database of road inventory. Work is still required on the completion of the Bridge management component of this which is still a DOS program developed in 1989-1993. The system though comprehensive, still lacks good work history records. Most of the budgeting component is performed outside of the system and unfortunately no annual tracking of road expenditure is possible. The IIRMS uses standard pavement management principles to evaluate and recommend annual road projects.

20. Project Management and Monitoring. Foreign funded projects usually have project management units established which track financial and physical aspects of the projects. These are always assisted by Technical Assistance services using a mix of international and local consultants. The DGH’s ability and capacity to implement this form of project and manage associated loans is increasing every year. For national and provincial funded works projects, local

Preparing the Regional Roads Development Project – Final Report Appendix 2 42 project management units are used. There is less oversight and control over the quality of the works produced and corruption and shortcutting is more prevalent.

2. Road Safety 21. Indonesia is experiencing a serious and worsening road safety problem. More than 30,000 road users are killed in crashes each year throughout the country. It is estimated that more than one million are injured. The known fatality rate (9.9 deaths per 10,000 registered vehicles) for the last known year (2004) is more than 8 times that of Australia (1.2 deaths per 10,000 registered vehicles), and twice that of Malaysia (4.5 deaths per 10,000 registered vehicles). With rapidly growing motorization in Indonesia, mainly through a dramatic growth in motorcycles, this fatality rate is likely to worsen in the immediate future. More than 90% of the road casualties in Indonesia are in the economically productive age group 15 to 50 years of age. This accentuates the cost of crashes – it is currently estimated to be some Rp 41 trillion corresponding to 2.9% of the Indonesian GDP. A Presidential Decree in June 2007 requested advice about establishment of a National Road Safety Council and the preparation of a road safety management program by the end of 2007. Recommendations for a National Road Safety Council (NRSC) have been provided to Government but no decision has been taken.

22. Current World Bank predictions indicate that global road fatalities will increase by more than 65% between the years 2000 and 2020, unless intensified safety interventions are implemented. Fatalities are predicted to increase by more than 80% in low and middle-income countries such as Indonesia, but decrease by nearly 30% in high-income countries. Without effective interventions, Indonesia is predicted by the World Bank to experience over 50,000 deaths per annum on the roads by 2020. In fact the ADB-ASEAN National Road Safety Action Plan (2005-2010) for Indonesia predicts that, without effective interventions, road deaths will rise to some 49,000 per annum by 2010.

23. The Directorate General of Highways (DGH) in the Ministry of Public Works (MPW), is responsible for the planning, design, construction and maintenance of the national road network. It also sets standards for design and construction for all roads as well as being a major player in skills development in the roads area. Consequently, DGH has a major role to play as a key agency for road safety in Indonesia.

24. The Directorate General of Land Transport in the Ministry of Transport has responsibility for overview of traffic and safety aspects including overloading and traffic control devices. There is an urgent need for the National Road Safety Council to begin its work. The first major task of the NRSC should be development of a National Road Safety Strategy, involving all key stake holders at the national level. That Strategy should provide direction for the allocation of resources towards the most pressing parts of the road toll. The next most urgent action is the preparation of a 3-5 year Road Safety Action Plan for Indonesia – to direct specific programs towards the most urgent road safety problems. Providing technical assistance to the DGH to train staff and implement road safety audit and safety assessments of national highways should be a priority. DGH has some dedicated officers who are keen to see audit introduced nationally. They are hampered by a lack of skilled staff and by an inability to secure sufficient DGH funds to initiate actions.

25. DGH has moved to make road safety a higher priority and the draft of the DGH five-year plan (2010-2104) has the reduction of road “black spots” and the improvement of those locations, as one of its performance targets. Within DGH the capacity to undertake RSAs is not yet available, with few staff having received training on project specific basis. One such project was the Eastern Indonesia National Road Improvement Project (EINRIP).

26. The ADB RR2P project has a road safety component that is about to start where training of road safety auditors will be the key objective. The IBRD SRIP project is assisting the MOT with through technical assistance to commission the development and implementation of an Integrated Road Safety Management System for Directorate of Traffic Police (DTP) of the Indonesian National Police, the DTP of Jakarta Metropolitan Police (JMP) and Central Java Police (CJP), and their main Resort Polices. This follows on from previous work done on the development of a road

42 Appendix 2 43 traffic accident data collection system. This project will also finalize the design and development of road traffic accident data collection methodology and approach including the tools and facilities required as well as improving and strengthening the Traffic Police capability on road safety, focusing on data collection, analyses, reporting and investigation including cross functional compliances and applications (tabulation and analyses). AusAID are about to implement a Road Safety training and audit program targeting the capacity building of DGH staff.

27. For the RRDP, it is recommended to focus on ensuring that all subproject designs adhere to standard road safety design parameters, avoid creation of black spots and improve existing black spots on the project corridors where specific works have been planned. Road safety audit can be implemented at modest cost in Indonesia. Draft guidelines exist and a final audit manual can be readily prepared and workshops run to begin to raise the awareness and the knowledge of Indonesian engineers, particularly in DGH. Safety assessments of national highways will assist in developing countermeasures for high-risk locations. This will be important while crash records remain so poorly managed in Indonesia.

3. Overloading 28. The RRP for the RR2P project identified one of the project risks was premature damage to pavement as a result of truck overloading. The RR2P planned to minimize this effect by minimized through technical assistance, training, and a road safety awareness campaign. Recently the overloading component of the RR2P has been postponed and moved under the auspices of the MOC who plan to implement a form of it through a Bappenas TA. Part of the reasoning is that the previous effort under RRSP was seen as ineffective.

29. Vehicle overloading is a serious problem in various parts of Indonesia. Indonesia, through the MOC, is pursuing a Zero Tolerance overloading stance. A staged approach is being implemented and was commenced in 2005, with diminishing tolerance to overloading implemented one a tri-monthly basis. The zero tolerance point is planned for April 2009. A Performance Based Road Monitoring Contract is recommended where the road construction contractor then becomes the operator of weigh stations and the maintainer of the road with incentives for reduced funding required maintain the road due 1) improved road construction quality as the contractor must also maintain it later and 2) increased diligence in deterring overloading that might lead to rapid road deterioration and once again increased road maintenance costs. The MOC is very keen to support and implement such a system. Although overloading cases have decreased significantly in the target areas since the initial implementation of public-private weigh stations, collusion and lax enforcement at the weigh stations are still endemic.

F. Road Sector Revenue and Expenditures 30. The total budget allocation for preservation of the 34,629 km national road network from all funding sources for the year of 2005 and 2006 are Indonesian Rupiah (IDR) 6.7 Trillion (US$745 Million) and IDR 7.3 Trillion (US $811 Million) respectively. In 2009 the budget allocation was around IDR 9.79 Trillion (US $950 Million) and a similar amount budgeted for 2010. The total MOT budget was IDR 16.07 Trillion (including civil aviation) that represents about 50% of the recommended budget.24

31. For the year 2005, from US$ 745 Million allocation fund, around 66% (492 Million) come from Government budget and 34% (US$ 253 Million) come from international funding agencies while for the year 2006, 77% (US$ 624 Million) and 23% (US$ 187 Million) come from Government budget and international funding agencies respectively. (US$ 1= IDR 9,000). For the fiscal years 2005 and 2006, funds allocated for national road maintenance are US$144 Million and US$167 Million respectively.

24 Transportation Commission of the House of People’s Representative (DPR), Wednesday, May 27, 2009

Preparing the Regional Roads Development Project – Final Report Appendix 2 44 32. Most of the funds for national road maintenance (around 90%) come from the Government budget, and the rest comes from international funding agencies. Around US$601 Million and US$644 Million was allocated for the fiscal years 2005 and 2006 respectively for national road betterment and new construction. Of this allocation, 70% comes from the Government budget and 30% from international funding agencies. Funding needs steadily increase each year but are fundamentally insufficient for the growing maintenance and development needs. Significant portions of the yearly national road budgets used to finance national road preservation and new construction road works are provided by major international funding agencies, namely; the Asian Development Bank (ADB), the World Bank and Japan Bank for International Cooperation (JBIC).

33. There is a lack of a sustainable financing mechanism for road maintenance works. Financial sustainability for the preservation of road assets is potentially achievable but recent spending patterns reflect dependence on and vulnerability to public budget. Revenues raised from the road sector through vehicle ownership and license fees, fuel levy and various road user charges at local and national levels exceed road preservation expenditure. These revenues are however considered as general taxation and current legislation has prevented the creation of a sustainable financing mechanism that would secure adequate sources of finance (e.g. Road Fund).

34. A project was established by the World Bank in 2004, intended to establish a Road Fund, to be financed directly from road user charges to be levied or allocated by Provinces, and managed by a Road Board including a cross-section of road users and representatives of the road sector. The principles, draft legislation and other preparations were identified under services performed during 2001 and 2002. This project met resistance from Ministry of Finance and Ministry of Home Affairs to the concept of earmarking of fuel taxes or other revenues for road maintenance. It was concluded that a "road fund" as previously envisaged could not be set up under GoI's budget principles that strictly separate revenue from expenditure. Had this concept been applied, it would have provided 25 to 30% of the total budget required for road maintenance throughout Indonesia.

G. Road Engineering, Construction and Maintenance 35. The overall responsibility for road planning, construction and maintenance in Indonesia lies with the Directorate General of Highways, which guides network management and sets national standards and regulations.

36. Road projects are designed by planning and design institutes at the provincial and central levels. Design sub-directorates are staffed by experienced, well-qualified personnel. The construction and maintenance of all roads are undertaken through outsourcing to private contractors. Construction supervision is carried out by provincial departments. At least for national roads, these are then managed under regional implementation units in the central office in Jakarta. Drawing on the experience gained under ADB- and World Bank-financed projects, competitive bidding practices have become common practice. The use of ADB and IBRD anticorruption practices has become more commonplace as the incidence of corruption leading to poor quality construction is targeted. One aspect of this that is on the rise is e-procurement for prequalification, tendering and submissions.

37. Historically Indonesia has suffered from weak road management capacity and performance. Despite sustained and substantial investments in capacity building over two decades, technical and management capacity still needs improvement. Programs and budget allocations often lack objectivity, transparency and public consultation. These shortcomings have been exacerbated by very lengthy procurement procedures and poor control and supervision of the quality of road works. The cost of road service delivery is high. As indicated in Table 10, the Directorate General of Highways (DGH) operates at a very high staff/network length ratio that is typical of the relatively non-business-like approaches to road management.

44 Appendix 2 45

Table 10 Roads Agency/Authority staff involved in National Road Management

Roads Agency* Length of network Total Number Number of staff (km) of Staff per 100 km

Indonesia (DGH) 34,629 4,316** 12.5

New Zealand 10,500 189 1.8

South Africa 16,150 149 0.9

Namibia 42,238 278 0.7

Tanzania 28,891 791 2.7

* Road Authority with all of its construction and maintenance works contracted out to the private sector ** Excluding support and contractual staff, and including 2580 staff in the DGH regional offices (Balai) who work on national roads Source: Indonesia Road Sector Policy Note: May 13th 2009

38. Trial performance based maintenance contracts were instigated in 2008 and it is strongly encouraged that additional contracts of this nature be implemented by GoI to 1) improve construction quality and 2) contribute to the enforcement of overloading. The consultant has suggested in the Overloading document that performance based maintenance if implemented correctly does ensure roads are maintained at a high level and for a minimum cost. This has been shown to be successful in many places in Australia, New Zealand and so on. The key problem for Indonesia is a) a new concept which will have to be fine tuned to ensure a good fit to local conditions and b) that the road is initially in good condition. It has been recommended that the combination of the three factors of a) construction b) maintenance and c) overloading enforcement for one contractor give greater control and incentive than separating them into separate contracts or phases.

Preparing the Regional Roads Development Project – Final Report Appendix 2 46 Table 11 ADB Road Sector Loans

46 Appendix 3 47

Appendix 3: Cost Estimates

The following tables show the Cost estimates for the Project for each of the two tranches and for the MFF as a whole. Tranche 1 includes the co financing amount of US 70 million dollars from the Islamic Development Bank.

Table 12 Detailed Cost Estimate - Tranche 1

The ascertaining of the resettlement and environmental issues and development of the initial designs for the RRDP road projects has been based on the stated desire to have the corridors become strategic routes. It was stated, after the Tripartite meeting, that officially the eastern part of Sumatera and the southern part of Java are designated conservation areas due to 1) their proximity to the ring of fire with increased seismic activity and 2) due to the mountainous and remote setting it is a buffer or conservation priority area. It has been at least until recently that the government policy is not to encourage people or businesses to flock to the south coast of Java for these reasons. It has been suggested that the only development required in the area is to have good quality 5 m roads that provide all weather access for the local communities. In this scenario three benefits would open up 1) many more options for tranche 1 works, 2) the total amount of road works that could be performed would increase significantly and 3) there would be a huge reduction in land acquisition and resettlement costs.

Preparing the Regional Roads Development Project – Final Report Appendix 3 48 Table 13 Detailed Cost Estimate - Tranche 2

Table 14 Detailed Cost Estimate – MFF

Table 15 Detailed Cost Estimate - Tranche 1 - IsDB

48 Appendix 3 49

Preparing the Regional Roads Development Project – Final Report Appendix 4 50

Appendix 4: Contract Packages Tranche 1

The suggested Tranche 1 program for IsDB funding are all the road and bridge projects in East and Central Java links in the above list. Coupled with this would be a design and supervision consultant to monitor those contracts. The Client has recently asked for additional roads to be included in Tranche 1. At the time of completing this report, insufficient information was available to permit full analysis.

50 Appendix 4 51

Proposed Tranche 2 Packages

Preparing the Regional Roads Development Project – Final Report Appendix 5 52

Appendix 5: Summary of Proposed Civil Works

1. The alignments in East Kalimantan are predominately flat, the geological condition is very plastic and elastic soil (A6 – A4) with CBR value are varies from 2 % - 4 %, Extensive soil investigation would need to be carried out at each project site.

2. The alignments of the West Kalimantan are also very flat with the geological condition consisting of 2 types of soil 1) Elastic and swell type (A7) with CBR value varies from 1% - 2%, and 2) peat clay with CBR value varies from 0% - 1 %. Extensive soil investigations would need to be carried out at each project site. In addition, many of the roads are very low lying and are prone to flooding. Local Dinas officers have asked that several bridges be raised and great care taken to ensure that raised roads or bridges do not form a barrier such that inland flooding cannot flow out to the see and secondly that tidal action from the coast does not gain access to better farming land on the east of the roads.

3. The terrain of the Java roads is generally mountainous. The geological condition reveals very plastic and elastic soil. In several locations especially in East Java the soil type are Karsts (lime stone) and are subject to frequent collapse. A number of road sections in Central Java are relatively flat and quite straight.

4. The general requirement is that a minimum ROW of 15 m be achieved as this matches the current DGH standards for arterial roads. Tranche 1 does include some links that have 14 m and short distances of less than 14 m. Since 14 m is adequate for the proposed designs they have been selected for Tranche 1, but the Client should note the recommendation to proceed with full 15 m ROW land acquisition.

5. A new alignment is strongly recommended at one location in Central Java, as the existing road cannot be widened due to land acquisition costs being too expensive.

6. Five new alignments are being sought by the East Java Dinas officers. At present the road is being built in disconnected sections as gravel roads. Efforts are underway to determine suitable alignments and grades (less than 10%) for the connecting sections. The whole terrain through which this road runs is not optimal for a strategic or arterial road.

7. All project roads are designed as two lane two way roads, which consist of 6 m carriage ways plus 2 x 1 m hard shoulder and 2 x 1 side ditch. Where possible in rural areas where sufficient ROW is available, 2m shoulders are recommended. All shoulders should be sealed with penetration macadam.

8. The earthwork and stone works are estimated at 3.4 million m3 of cut and 2.9 million of fill. Bridges and culverts total 437 with total length of approximately 13,471 m.

9. For Java and East Kalimantan asphalt concrete pavement has been recommended with 10 cm of Asphalt, a 20 cm of aggregate "A" (graded aggregate class A) for base, 25 cm aggregate "B" (graded aggregate class B) for sub base and 25 cm of clean sand or selected material for sub grade. This pavement thickness should be adequate to stand the high proportion of heavy vehicles in the traffic mix.

10. For several links in West Kalimantan an Asphalt concrete pavement has been recommended with 10 cm asphalt, 20 cm of aggregate "A" for base, 30 cm aggregate "B" for sub base, and one layer of geotextile with 75 cm of capping material (ungraded lime stone with max size 12.5 cm).

52 Appendix 5 53

11. For the link Singkawang-Tebas in West Kalimantan, asphaltic concrete pavement has been recommended with 10 cm of asphalt, 25 cm of aggregate "A" for base, 25 cm of aggregate "B" for subbase, three layers of geotextile with 20 cm of clean sand between each to increase the existing CBR (existing CBR is only 1 %).

12. The reasons for asphaltic cement pavement are:

• The alignment passes through areas with very elastic and plastic soil (A6 - A4) with CBR between 2% and 4%, to peat clay with CBR 1%. To reduce concerns about possible post construction settlement it is easier and cheaper to repair asphalt than cement concrete. • West Kalimantan has very low CBR (peat clay with CBR can vary 0 % - 1%). To increase the existing CBR it is suggested to use: o 1 (one) layer of geotextile with 75 cm of capping material. o 3 (three) layer of geotextile with 20 cm of clean sand for each layer 13. Anti skid layer can be incorporated in asphalt surface. This is important in the mountainous areas.

14. A joint foreign–local team will carry out the supervision of all civil works and E&M works. Due to the prolonged nature of the loan, it is planned that two consecutive supervision consultants will be appointed during the loan. Contracts will be open for domestic and international firms. The local supervision offices will be staffed by domestic consultants, with oversight by Jakarta-based team. They will be responsible for managing and supervising project contracts, bridge works, environmental and other monitoring.

15. The project will involve land acquisition and resettlement, which will be financed from domestic sources.

Preparing the Regional Roads Development Project – Final Report Appendix 6 54

Appendix 6: Summary Resettlement Plan

A. Status of the Resettlement Plan 1. Resettlement: Preliminary resettlement estimates for land acquisition, number of affected households and acquisition costs have been prepared for each sub-project. This includes the assignment of ADB's resettlement categories (A - significant, B- not significant, C - no impact) to each sub-project link. Land Acquisition and Resettlement Action Plan (LARAP) study costs estimates and ToRs and a Project Resettlement Framework, to guide the implementation process has also been prepared in accordance with ADB and GOI policy.

2. As the preparation of resettlement estimates are based only on preliminary design and initial resettlement surveys, LARAP studies will be carried out during loan implementation. Adequate resources will be identified and committed during land acquisition and resettlement planning. Adequate budgetary support will be fully committed and made available to cover the costs of LARAP studies, including adequate human resources for supervision, liaison and monitoring for all resettlement activities. LARAP studies will culminate in detailed resettlement plans for each sub-project. Resettlement estimates will be updated (land acquisition, compensation, resettlement and rehabilitation/ livelihood restoration) and will be prepared in consultation with affected households (Ahs) and concerned groups. The final draft Resettlement Plans and budgets will be submitted to ADB for review and approval.

B. Scope of Land Acquisition and Resettlement

3. The Project target corridors are located on the islands of Java and the Indonesian part of Borneo. Project work on the island of Java encompasses the South of the Southern Trans Java Highway (STJH) in West Java, Central Java, East Java and Yogyakarta Provinces. On Borneo Project roads are located in West and East Kalimantan Provinces with a focus on areas of interest near the Malaysia border.

4. The RRDP will be a Multitranche Financing Facility with 2 tranches implemented over 7 years and will improve 1274 km of roads. These are existing roads25 with carriageways ranging from 4m to 7m that will be widened/improved to 6m to 7m. In total, the project passes through 20 districts comprising a total population of 18 million.

5. Since these roads are existing roads and the main transport route in most locations, there is considerable ribbon development along them, most particularly in the densely populated Java corridor. Preliminary surveys for land acquisition requirements, based on the final ROW requirements26, indicate that about 2.7 million m2 of land and potentially 2,722 housing structures (approximately 10,888 people) will be impacted. Preliminary surveys show that 73 percent of household structures are permanent, constructed of brick and/or timber, 27 percent semi permanent dwellings, constructed mainly of timber and thatching and 44 percent are less than 36 m2. Seventy-three percent of residents have lived in their house for more than five years but only 20 percent of owners had an official land title deed. LARAP studies undertaken during loan implementation will update these estimates and provide impact assessment of other affected assets including telecommunications lines and electrical power lines, irrigation systems, roads, sheds, walls, graves and trees.

6. The RRDP multi-tranche program of works, will implement sub-projects which are approved and ‘ready’ in the first tranche for implementation in the first four years of the

25 There are about 60 km of new alignment being considered in Central Java. 26 Initial estimates of resettlement impacts assume that construction activities will have limited impact beyond the preliminary design ROW requirements. This will need to be verified during detailed design.

54 Appendix 6 55 programme. A key factor in determining readiness was the degree of resettlement impacts and those selected for Tranche 1 are sub-projects where resettlement impacts are the least severe. Thus, along the 444.5 km of road to be improved during Tranche 1, only one link will impact structures (63 AH) and 475 thousand m2 of land will need to be acquisitioned.

7. A second tranche has been identified as sub-projects but will require additional studies, including those for land acquisition and resettlement and any new alignments.. Loan-related activities are expected to start early 2010 and no civil works will begin until resettlement plans have been finalized and compensation, relocation and other entitlements have been approved.

8. Table A6 - 1 provides a breakdown of the overall Project resettlement requirements and costs by tranche.

Table A6 - 1: Resettlement Impact for Tranche 1 Land and Structure Acquisition Resettlement/ Income Restoration Design Length (km) Cost of Resettlement/ LARAP Study Area Acquisition No. Affected Income Cost Link Name Needed (Rp.m.) Households Restoration (1000's m2) (Rp.m.) Central Java 58.3 - - - - - East Java 46.5 - - - - - West Kalimantan 149.4 250 26,563 63 2,005 601 East Kalimantan 190.3 225 22,500 - - 432 Total Tranche 1 444.5 475 49,063 63 2,005 1,033 Total Project Cost 1,273.5 2,666 504,721 2,722 86,992 10,346 Project Preliminary Resettlement Survey

C. Resettlement Cost and Implementation Schedule 9. The resettlement implementation schedule will be prepared based on the Project construction timetable agreed by MPW and ADB. MPW will ensure that (i) resettlement impacts are accurately quantified, (ii) detailed mitigation measures formulated, where necessary, (iii) new information is disclosed to affected persons, and (iv) the RPs are submitted to ADB for concurrence prior to commencement of land acquisition or demolition.

10. Preliminary estimates of resettlement costs have been calculated using unit values for land and structures except where values were exceptional as in high density town areas. Overall the total cost of resettlement activities is expected to be Rp. 602,059 million, of which land and structure acquisition is expected to be Rp. 504,721 million. Costs covering new settlements and income restoration are expected to amount to Rp. 86,992 million. LARAP costs are estimated at Rp. 8,277 million with Monitoring and Evaluation estimated at 2,069 bringing total resettlement study costs to Rp. 10,346 million.

D. Policy Framework and Entitlements 11. A Project Resettlement Framework (RF), to guide the implementation process has been prepared in accordance with ADB and GOI policy. For those unavoidably affected by the project resettlement activity, the aim of the RF and RPs is to minimize the impacts on people, households, businesses and others affected by the land acquisition required by the project.

12. The overall goal of the RPs will be to compensate and assist affected people and to restore their living standards to levels equal to, if not better than, that which they had before the project. In accordance with ADB and GOI policy, permanent loss of residential or commercial structures and agricultural or commercial land, for those who have formal legal rights (hak milik) or customary and

Preparing the Regional Roads Development Project – Final Report Appendix 6 56 traditional rights (adat or ulayat) and those whose claim over the affected land is under application for full title will be compensated at replacement cost based on market value that reflect recent land sales. In the absence of such recent sales, value will be based on productive value (for productive/ agricultural) and based on similar location attributes for residential and commercial land.

13. Where relocation is required, all efforts will be made to allow those loosing housing to acquire new housing sites with their existing group or village, and close to a road. All sites will be provided with water supply, electricity, telephone and other key facilities. There will be no reduction in house compensation for depreciation, and people can salvage materials from their old houses. Those people losing land temporarily during construction will receive a payment equivalent to production value foregone for the period of loss, which is expected to be 2 years. The land used temporarily will also be restored by the contractor to the original condition. In addition, the resettlement plan will comprise an Income Restoration component, which will include improved agricultural techniques and small business training that will need to be tailored for different provinces.

E. Resettlement Strategy 14. Efforts to minimize resettlement effects will be made through consultations with MPW, local officials and the communities during detailed design. Within Tranche 2 options for bypasses and realignments will be considered in order to avoid towns and large clusters of rural housing. The final alignment will be optimized to avoid large losses of housing and high yield agricultural area. For those unavoidably affected, the resettlement strategy is to replace losses of housing, land, other assets, infrastructure and income.

15. The resettlement strategy will include measure to encourage the participation and understanding of people affected by project activities. Provision of information on the projects should start early27 and will continue throughout all stages of project development, in order to facilitate dialogue with affected people and other stakeholders. MPW should develop a project communications plan and designate a focal point to maintain contact with affected people. With respect to land acquisition, compensation and resettlement, information should be distributed to affected peoples (APs) and publicized in the following manner: (i) prior to loan appraisal, the draft Resettlement Plan (RP); (ii) following completion of the final RP, the final RP; and, (iii) following any revisions, the revised RP. This information can be in the form of brochures, leaflets or booklets, in the local language(s) as well as English, the working language of the ADB. When APs include non-literate people, other appropriate methods of communications will be used.

F. Vulnerable People and Gender Strategy 16. The project will ensure adequate compensation for affected people which will give special consideration for vulnerable people include the elderly, disabled, households headed by women, extremely poor households, and indigenous people. It is not anticipated that indigenous communities will be significantly impacted by resettlement activities; East and West Kalimantan are the provinces least impacted by resettlement activities and projects surveys reveal that traditional indigenous communities are living more than ten km from the existing roads. Nevertheless, resettlement organizations staff will include members of indigenous groups and ensure that communications and public consultations are undertaken with respect for appropriate language groups and cultural sensitivity.

17. Women are likely to be affected in a number of ways by the Project resettlement activity. A number of strategies are, therefore, recommended to ensure gender-sensitive resettlement and rehabilitation measures and to engage women actively in the planning and implementation of the

27 Public consultations were held in West Kalimantan in January 2009.

56 Appendix 6 57 resettlement program and other programs. The MPW and the Independent Monitoring Organization (IMO) should be directly involved in all aspects of the development and implementation of the gender strategy, to ensure that these measures are adequate and satisfactory to female APs and other stakeholders. Therefore, the socio-economic profile of APs will disaggregate available data by gender and LARAP study will include a gender analysis. The RP will also develop a Gender Strategy to define specific measures to ensure that women share in the project benefits, for example, project-related employment and to minimize risks to women associated with land acquisition and resettlement, or with changed conditions due to the road improvements.

G. Institutional Arrangements 18. MPW will assume the overall responsibility for implementing resettlement according to the approved RPs. Provincial and District offices will take the primary responsibility for the resettlement consultation, implementation and timely delivery of entitlements, with assistance from concerned townships and villages.

19. Provincial levels should be directly responsible to coordinate the planning, implementation and reporting of land acquisition and resettlement, and district offices will be set up in all the relevant districts with staff assigned to implement resettlement planning.

H. Consultation and Grievance Redress 20. There shall be effective mechanisms for hearing and resolving grievances during implementation of the resettlement plan. Grievance mechanisms and appeal process, including assurance that project policies and procedures are designed to ensure that APs restore their pre- project living standards. This includes information about the responsibilities of the MPW, provincial resettlement committees and other stakeholders to help to resolve confusion, misunderstandings or problems about land acquisition, compensation rates, rehabilitation and relocation. It will also include information about procedures for filing complaints and the appeal process.

I. Monitoring and Reporting 21. The plan for internal and external monitoring and evaluation will be included in the RPs completed during loan implementation. MPW will engage a qualified domestic monitor to carry out independent resettlement monitoring and evaluation. The monitor will ascertain whether APs have (i) received their full entitlements on time and (ii) fully restored their livelihoods, income levels and living standards. The monitor will conduct a baseline survey prior to resettlement, semi-annual investigations during resettlement and annual survey updates for two years after the completion of resettlement. The household survey will include a representative number of those severely affected by loss of land, those losing housing, and those classified as economically vulnerable. The monitor will provide ADB and MPW with copies of the monitoring and evaluation reports twice a year during resettlement implementation and once a year after resettlement completion.

Cost estimates for Monitoring and Evaluation are included in the LARAP study costs. Separately, these are expected to be Rp. 2.2 million.

Preparing the Regional Roads Development Project – Final Report Appendix 7 58

Appendix 7: Summary Ethnic Minority Development Plan

A. HIV/AIDS Transmission and Human Trafficking Prevention Plan (HAHTP) 1. Social risks have been identified for the project and appropriate mitigation measures are in place in the HIV/AIDS and Human Trafficking Prevention Plan (HAHTP). An HIV/AIDS and Human Trafficking Prevention Program (HATPP) is required to ensure that communities are not subject to increased risk of HIV/AIDS and human trafficking because of the improved road infrastructure. The improved road will increase migration and mobility generally and, in particular, the more open borders between Indonesia and Malaysia will increase economic activity between the two countries. Although these changes to transport facilities will bring many positive economic and social benefits, the increase migration and mobility also have well documented interlinked impacts for HIV/AIDS and human trafficking.

2. Although the estimated annual number of new HIV infections decreased in South and South-East Asia from 450,000 in 2001 to 340,000 in 2007, in South-East Asia and particularly in Indonesia, the prevalence of HIV is growing. The increasing number of new HIV infections in Indonesia makes the epidemic one of the fastest growing in Asia. Most recent estimates indicate that there are more than 200,000 people living with HIV (PLHIV) in Indonesia. HIV is predicted to be predominantly spread In the near future through sexual modes of infection.

3. The majority of HIV infections in Indonesia occur through the use of contaminated injecting equipment, unprotected paid sex and, to a lesser extent, unprotected sex between men. Many injecting drug users also buy or sell sex. According to estimates of adult populations at risk of HIV Infection in 2006, the National AIDS Committee reported that at there were 219,200 people injecting drugs and 50 percent of them were infected with HIV. Two of the five provinces most affected by injecting drug use are the East and West Java. HIV/AIDS prevalence rates are disproportionately high in West and East Kalimantan.

4. Thousands of people have been documented as having been victims of human trafficking. Trafficking instances occur throughout the country, but particularly in West Kalimantan, East Java, Central Java, East Nusa Tenggara, Lampung, West Java and Sulawesi. The most common forms of trafficking revolving around trafficking of women, men, girls and boys into the manufacturing industry and plantations as well as women and girls into domestic work and forced prostitution. Women sold as “mail order brides” and the forced reproductive servitude of expectant mothers for the purpose of selling their babies are also documented forms of trafficking.

5. Most human trafficking to Malaysia takes place through two major corridors, one of which is known as the western corridor. The western corridor is composed of two points of departure to Malaysia from Batam and Entikong. Once people cross into Sarawak through Entikong, they can then travel by air from Kuching to Kuala Lumpur. Traffickers from most of Sumatra and the western part of Java use this corridor. West Kalimantan is seen by experts as a “trafficking hotspot” and is considered a major transit, source and destination area for trafficking. The International Organization for Migration (IOM) has supported existing shelter and service facilities for trafficked persons in Pontianak, Jakarta, Surabaya and Makassar. In July 2006, these facilities provided services to a total of 1,231 trafficked persons – 329 (295 female and 34 male) of them originated from West Kalimantan with the majority of these cases involving exploitation in Malaysia28.

28 When They Were Sold, International Catholic Migration Commission (ICMC) and Indonesia American Center for International Labor Solidarity, November 2006.

58 Appendix 7 59

6. Groups vulnerable to HIV/AIDS and human trafficking that are of particular concern to the project are construction workers and communities along the road improvements. Potential impacts of the road project on HIV/AIDS and Human Trafficking include the following:

• Construction activities associated with the road project may affect the spread of HIV/AIDS and STIs. Road workers will be stationed at construction sites and many of these may be poor migrant workers and these workers will be predominantly young, sexually active people. • The communities bordering the construction sites interacting with the construction workers will be vulnerable to HIV/AIDS and trafficking for prostitution. The interaction might lead to the introduction of HIV and sexually transmitted diseases (STI) from the newcomers to the community members and vice versa. After completion of the works, workers with HIV/AIDS and STIs will take them back to their communities of origin. • When the roads are improved there will be the potential for people living away from the roads and outside the project areas to migrate to the road areas. This may crate new residential zones along the road changing the structure of communities. Peoples’ lives may become unstable increasing their susceptibility to drug use and HIV/AIDS. • Improving the roads will promote tourism along the southern coast of Java and in West and East Kalimantan. This may increase the potential risk of HIV/AIDS to nationals and foreigners and may increase the opportunities for human traffickers. • Road improvements may provide more favorable routes for drug dealers increasing the flow of illegal drugs to the areas and the number of drug users in the project area. • The road project will significantly improve access to and from Indonesia and Malaysia. Improving the roads linking Indonesia and Malaysia will facilitate the migration of poor Indonesian workers to Malaysia, which may aggravate the epidemic’s spread. Subsequently, this may also result in increased discrimination against people living with HIV/AIDS. As traffic increases along the Southern Coastal Corridor and between the two countries, truck drivers might also contribute to accelerating the spread of HIV and STIs. • The project will improve the road and border facilities at the Aruk allowing increased passengers and cargo movement. These improvements will make the Aruk border crossing more appealing to commercial transport and tourism. However, it is likely that these improvements will also appeal to human traffickers who will shift their transport routes to this border crossing and may even increase the number of victims originating in the project area.

G. Recommendations for Mitigating Measures 7. The RRDP HIV/AIDS and Human Trafficking Prevention Plan (HATPP) will be implemented in the province of West Java, Central Java, Yogyakarta, East Java, West Kalimantan and East Kalimantan. All HATPP activities will be consistent with Indonesia's National HIV/AIDS Strategy and Action Plan and policies to prevent human trafficking. All HATPP activities will support ongoing government prevention programs and will be implemented through the relevant national, provincial, district and sub-district agencies working in the project area. Therefore, HATPP will not only mitigate potential risks arising from the project but will help to build capacity throughout stakeholders and partners. The mitigating measures will take two forms:

1. A specific HIV/AIDS and Human Trafficking Prevention Plan financed under the loan will be included. This prevention Plan will be consistent with prevention policies of Indonesia and ADB’s social development policies and will target construction workers and resident populations in the Project area.

2. The need for information, education, and communication on HIV/AIDS and STIs and the

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prevention of trafficking will be made a contractual obligation of the construction contractors. This obligation will include the provision of HIV/AIDS and Human Trafficking awareness training to construction workers and full cooperation with project and local prevention activities.

8. It is recommended that the prevention plan is undertaken through cooperation with Indonesia's National AIDS Committee (NAC) and Provincial AIDS Committees (PACs). These agencies would take the lead roles to plan, coordinate, monitor and report activities in each province. NAC has demonstrated strong support for this prevention plan and, along with West Kalimantan PAC, have contributed advice, costs estimates and prepared proposals for undertaking the work. As the Human Trafficking component will focus on increasing awareness of the problem, NAC's experience with information and education programs can readily accommodate the administration and delivery of this activity within a the single prevention plan.

9. It is estimated that the total budget of the HIV/AIDS and Human Trafficking Prevention Plan would be Rp. 320 million, to be expended during Tranche 129. Although all provinces involved in the Project will participate in the Prevention Plan, it is highly recommended that greater emphasis is placed on East and West Kalimantan30, where the project will be providing access to new boarder crossings into Malaysia. Hence, besides, the risks to communities from an inflow of construction workers, it is anticipated that the East and West Kalimantan road improvements will significantly increase truck traffic in the longer-term, which will tend to increase the already significant sex industry in these provinces. Furthermore, the boarder areas between Kalimantan and Malaysia are recognized human trafficking "hot spots'. The implementation of these activities should begin at least 3 months prior to the commencement of civil works.

G. Other Mitigating Measures 10. Community Construction Disturbances: Some disturbances might occur during project implementation that will upset community life. For example, damaged to irrigation and drainage systems and pollution of surface drinking water caused by construction. In addition, villagers stated that construction teams often left damage and debris behind and that night time construction creates excessive noise for people living close to construction sites.

Mitigating Measure and Proposed Actions Proposed Actions Targets Lead/Supporting Timing Funding Monitoring Agencies Requirements Indicators Involved (Rp) /Source PROJECT BENEFITS Improvement of Rural 14 districts in the MPW and 2010 - Rp. 6.461 billion - No of roads Roads Java corridor and provincial and 2018 improved/constructed 6 districts in East transport bureaus 1,273.5 km of improved roads and West Kalimantan MITIGATING MEASURES HIV/AIDS and Human All construction MPW, National 2010 - a) Rp. 320 million - No. of clinics Trafficking Prevention Plan locations/ camps AIDS Committee 2012 project and local No. of community (HAHTP) and towns/villages (NAC) and government meetings along the road Provincial AIDS No. of The HATPP comprises four Committees components poster/brochures (PACs) No. of TV/radio a) Advocacy actions on announcements HIV/AIDS/STIs and No. tests Trafficking Prevention to be Health Department, No. of HIV/AIDS organized and /STI/HVC infections Construction b) Information and education Independent Contractors

29 Although, West Java and Yogyakarta road improvements do not begin until Tranche 2, it is highly recommended that the HIV/AIDS and Human Trafficking Prevention Plan begin as early as possible. 30 Although, the population levels in East and West Kalimantan are relatively low in comparison to provinces of the Java Corridor, the risk of the project increasing the severity of HIV/AIDS and human trafficking indicates that Kalimantan should receive funding disproportionately to its population size.

60 Appendix 7 61

Mitigating Measure and Proposed Actions Proposed Actions Targets Lead/Supporting Timing Funding Monitoring Agencies Requirements Indicators Involved (Rp) /Source campaigns (IECs) on monitoring report HIV/AIDS and STI and trafficking prevention through: No. of reported cases of trafficking c) Construction workforce, transport workers, local No. of community communities, and meetings/ awareness entertainment workers session provided with access to quality HIV, STI, and other No. of monitoring health services. sites Frequency of d) Independent Monitoring by monitoring a consultant/organization No. of cases of recognized and experienced HIV/AIDS and human in monitoring and evaluating trafficking HAHTP. No of community meetings Protection of Communities All construction MPW and 2010 - a) 0 Working hours from Construction camps and Contractors 2018 b) 30 No of pedestrian Disturbances villages along the c) 40 crossing and over/ a) Prohibit night time road under passes construction Length of irrigation b) Restoration of damaged to and drainage canals irrigation and drainage No of reported systems instances of c) Building of pedestrian pollution, damage crossing, over/under passes and debris left and culverts. No of fines c) Fines for polluting surface No of community drinking water or leaving meetings damage or debris behind Resettlement Resettlement MPW, counties, 2010 - Resettlement- Rp. No. of affected a) Full compensation affected people district, township 2014 504,721 million people b) Special governments Resettlement Plan consideration/funds for LARAP studies vulnerable people and monitoring - Rp 10.3 million Income Recovery and Resettlement- MPW, Provincial 2010 - Rp. 86,992 million Types of training Training Support affected people, and District 2014 available Income recovery for including agencies and No. of attendees in resettlement affected people vulnerable groups development courses (e.g., agricultural and non- organizations No. of community agricultural training for meetings for training livelihood restoration)

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Appendix 8: Implementation Schedule

62 Appendix 9 63

Appendix 9: Economic Analysis

Java, Kalimantan and Combined RRDP results and Sensitivity Tests 1. The proposed Java project, Tranche 1, comprises 100.2 km of national, provincial and rural roads from the province of West Java to East Java. The Kalimantan selected corridors comprise approximately 333.4 km in the East and West provinces. The project will be implemented in 2 tranches over approximately 7 years. Current planning is for Tranche 1 only. Subproject selection for Tranche 2 will be finalized through a separate PPTA.

2. The economic appraisal for each subproject has been based on all construction work taking place in year one with a life cycle period covering 20 years. In all cases the appraisal compares a project case (with the roads being improved with partial overlay and widening or full reconstruction) with a without-project do minimum alternative comprising limited investment on the existing route. A 12 percent discount rate is used throughout. It should be noted that in most cases the existing roads are quite narrow (4-5 m – 5 m) and generally in poor condition. The future life cycle costs for the with project case assume a periodic overlay of 3-4 cm every 5 or so years depending on a particular roughness threshold. In intervening years standard routine maintenance is performed e.g. patching, pothole repair, minor overlays on small sections, drainage repair etc.

3. The do nothing case chosen for the without project case is a real do nothing where no significant maintenance or reconstruction occurs during the 20 year life cycle and the roughness is capped at 16 IRI m/km. It is assumed that standard routine maintenance as described above is performed every year in the without project case.

4. Some travel may not be taking place because of the quality of the existing road but in the selected corridor congestion is not the predominate problem. As a result of the project, any congestion on existing roads will be reduced but more importantly the existing roads will benefit from faster, cheaper and safer travel. It is expected that some additional trips will be generated as the economy responds to lower transport costs and traffic from neighboring centers and even from the mid Java routes will divert to use the wider better quality roads. If these roads are not upgraded, people in the remote parts of the project area will have less mobility and the mainly poor inhabitants will not be able to participate in the mainstream of economic activities. The project will provide employment opportunities both during and after construction and will remove constraints on economic growth and, with the increased growth, achievement of higher incomes.

5. The evaluation uses last quarter 2008 economic prices and is based on other concurrent projects. Additional benefits to “normal” traffic (i.e. traffic that would have been present in the do minimum case) result from improvements in road and traffic conditions between the do minimum and project case and amount to savings in (i) VOCs, (ii) personal travel time for vehicle occupants (other than drivers and crew, whose costs are included in VOCs), (iii) road accident costs and (iv) the value tied up in freight during transit. In addition there are the expected benefits of additional trips made solely as a result of the lower costs brought about by the project (“generated” traffic) and the gains and losses to the new corridor as a result of passengers and goods choosing to divert from existing more northern corridors (in Java). The Kalimantan roads are evaluated in the same way, i.e. focusing on conventional road user benefits and taking no account of any additional economic gains that may be induced by the introduction of new road capacity.

6. The EIRR for the projects vary from subproject to subproject but in most cases the project’s EIRR are above the threshold or very close. West Java projects (Tranche 2) range between 11.8- 34.7%, Central Java from 4.6 to 15.9% and Yogyakarta from 13.7 to 34.9% (and these are all 7 m planned roads). For East Java the EIRR range from 6.7 to 35.3%. This is indicative of the fact that the terrain in this area is perhaps the more difficult and therefore more expensive to build and the existing traffic is the lowest. In Kalimantan due 1) to the condition of the current roads in East

Preparing the Regional Roads Development Project – Final Report Appendix 9 64

Kalimantan and 2) the current impassable nature of the road for much of the year, the EIRR are low (assumed traffic of 300 AADT) and generally less than 10%. In West Kalimantan the main route from Sosok to Tayan has EIRR 14.2% (for widening to 7m) and the new route from Singkawang to Aruk ranges from 6.6 – 8.3%. Additional generated traffic has been assumed for the new routes leading to the borders with Malaysia and Brunei.

7. Sensitivity analyses confirm the robustness of the Java corridor subprojects with those that are already 10% and above, being little affected by an increase of up to 10% in construction costs or lower than expected VOC benefits (as much as 20%). Changes in the principal variables, e.g. construction costs, traffic growth, benefits do not have a significant impact on economic viability, and the EIRR remained above the threshold of 12 percent in most cases. An annual traffic growth has been assumed of around 5.6% and it is expected though not include in the analyses that should the corridor be built to the standard intended, and additional 2% traffic could divert to it from neighboring corridors. The economic analysis of the project also reviewed the viability should motorcycle benefits be excluded. In most cases the viable links remained viable. The following tables show the Economic data for Tranches 1 and 2 and the total MFF for selected roads.

64 Appendix 9 65

Preparing the Regional Roads Development Project – Final Report Appendix 9 66

66 Appendix 9 67

8. It can be seen from the above tables that on each island each of the tranches are robust and the overall MFF is equally viable as shown below.

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9. Market conditions in the project area are conducive for the growth of small business and a number of government programs exist that encourage diversification and promote business development; vocation and technical training, micro-credit and improvements to local infrastructure. Although most people are engaged in farming, there is significant underemployment available for commercially-oriented non-farm activities.

1. In the short term, significant road construction activity will stimulate an increase in demand for daily necessities and supply of local construction materials, both of which will provide small business opportunities. This could accelerate the development of sustainable small businesses by providing experience and seed money for such things as restaurants and catering, barber and beauty salons and transport services.

Results of Economic Analysis – Kalimantan 2. In general the results of the economic analysis for Kalimantan road sub-projects are less impressive than those for Java. This is not a surprise as Java is much more densely populated that Kalimantan and the geological and geomorphological conditions in Kalimantan study areas are more adverse than those encountered in Java. Construction costs are higher. Combined with lower traffic volumes results in economic indicators that are lower than Java.

3. Seven road sub-projects were evaluated in Kalimantan numbered for the purposes of the analysis 016 to 022.

Kalimantan Road Sub-projects and Results

Source: Consultant’s Calculations 4. Internal Rates of Return range from 6.59% to 15.5%. Three road sub-projects have IRRs below the 12% threshold: Link 019 – 6.59%, Link 021 – 8.6% and Link 018 – 11.37%.

5. However as with the Java component of the RRDP, the cash flows for the individual Kalimantan sub-project roads were combined into a single cash flow representing the entire Kalimantan component. A piece-meal approach to the analysis often ignores the fact that benefits are often transferred from one portion of the network to another. There are also in addition reasons of social and transport equity that dictate that entire regions should be considered as a whole. Investments always have multiplier effects and external benefits.

6. The combined IRR for all Kalimantan Tranche 1 is 11.2%. The combined Kalimantan result due to its critical nature was also subjected to a series of sensitivity tests to determine the component’s overall performance when key variables are changed as a result of changes in external conditions not under the control of the project itself.

7. Increases in benefits are very likely due to generated traffic effects (see also below) as well as other trade and exogenous developmental benefits and impacts on the agricultural sector and Indonesian – Malaysian trade. Increases in benefits 10% increases IRR from 14% to 15.1% whilst a 20% increase in benefit improves IRR to 16.1%.

68 Appendix 9 69

Kalimantan Component Sensitivity Test Results

8. Given the above sensitivity tests for the Kalimantan component it appears to be made up of a robust cash flow that can confidently resist negative changes in the exogenous environment. Given the nature of the developmental potential of Kalimantan and the conservative analytical approach adopted the Kalimantan component can be recommended for funding.

Generated Traffic Test 9. High roughness increases transport costs and suppresses traffic. It has been observed that improvements to paved standards from gravel to AC for example reduces VOCs substantially and leads to traffic generation. For Kalimantan traffic generation factors of 25% were tested. These are based on quite modest ‘base year’ ‘normal’ traffic. In addition the benefits from generated traffic are subject to the ‘rule-of-half’ so that additional benefits may be quite modest.

10. Nevertheless the IRRs of all road sub-projects increase. Given initial road conditions as measured by roughness the generated traffic factor can be as high as 60% especially where as with Kalimantan, road condition was a major factor in access constraint.

11. In such cases traffic generation factors can range from 25%-60% with IRI before-works of 15 and post-works 3.

12. Internal Rates of Return for Kalimantan with 25% traffic generation were as follows:

LINK No Generated Generated Traffic Traffic 25% Link 016 20.4% 21.7% Link 017 17.4% 18.4% Link 018 11.4% 12.6% Link 019 7.6% 8.7% Link 020 12.4% 13.1% Link 021 10.4% 11.3% Link 022 15.5% 16.7%

13. These would be considered minimum increases in IRR. Overall Java component IRR for Tranche 1 was 9.2% whilst Kalimantan component IRR Tranche 1 was 11.2%. The combined IRR for Tranche 1 was 10.7%, for Tranche 2, 22.3% and for the overall MFF IRR of 16.7%. As for Kalimantan a series of sensitivity tests were carried out for the combined Java+Kalimantan cash

Preparing the Regional Roads Development Project – Final Report Appendix 9 70 flow i.e. for the entire RRDP project. The results, as expected, show that the RRDP project is very resistant to exogenously caused increases in costs or decreases in costs and benefits respectively. It shows that the overall the project components and sub-projects have been intelligently designed and the project will contribute substantially to Indonesian economic growth.

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Appendix 10: Summary Initial Environmental Analysis

A. Introduction 14. This Summary Initial Environmental Examination (SIEE) has been prepared as part of the ADB TA ‘Regional Roads Development Project (RRDP) for Subcomponent 2 road links covering about 1400 km in Southern Java and northern Kalimantan islands of Indonesia. An Initial Environmental Examination (IEE) was also prepared in accordance with the Environmental Policy of the Asian Development Bank, 2002 and the ADB Environmental Assessment Guidelines, 2003. The IEE was prepared based on detailed field investigations, review of proposed civil works, stakeholder consultations, and detailed review and analysis of available spatial database for all environmental parameters in project areas such as terrain, soils, geology, rivers, forests, protected areas, land use and population. The IEE was prepared with the active cooperation of Sub directorate of Environmental Affairs (SDEA) of DGH, provincial environmental agencies (Bappedalda), and ADB’s project team in Manila.

B. Description of the Project 15. 21 subprojects covering approximately 1,400 km of roads from Southern Java and Northern Kalimantan will be improved to promote sustainable economic growth and poverty reduction. The civil works under the project include widening and partial reconstruction of all roads to a minimum width of 6m and construction of about 60 km of new road alignments. All project roads are designed as two lane two way roads, which consist of 6 m carriage ways plus 2 x 1 m hard shoulder and 2 x 1 side ditch. In addition the project will construct or rehabilitate about 437 bridges and culverts, and slope stabilization and rock fall protection structures, and drains. Additionally, the project will require operation of asphalt plant; borrow pits and temporary establishment of contractor’s yards and material storage sites.

16. 14 subprojects are located in 4 provinces of Java (2 in West Java, 4 in Central Java, 3 in Yogyakarta, and 5 in East Java) and 7 subprojects are located in 2 provinces of Kalimantan (4 in West Kalimantan and 3 in East Kalimantan). Average daily traffic in the project areas ranges from 400 to 40,000 vehicles per day in Java, and from 100 to 7,000 vehicles in Kalimantan. 75 percent of traffic is from motorcycles. The civil works will be implemented from 2010 over 7 years in two tranches.

C. Description of the Environment 17. Topography: Most of the subprojects in Java are passing through rolling and hilly terrain. The elevations of the project roads ranges from 1 to 324m in West Java, 1 to 444m in Central Java, 77 to 870 m in Yogyakarta, and 5 to 765 m in East Java. Some of the road links in the hilly areas require realignment to improve horizontal radii and forward site distance. Subproject 5 in West Java passes through steeply sloping terrain and requires realignment. Most of road links in Kalimantan are located in flat and rolling terrain will elevations generally ranging from 0 to 135 m in West Kalimantan, and 3 to 147m in East Kalimantan. The road links located on northern side of East Kalimantan close to Malaysia border are passing through hilly areas with elevations ranging from 138 to 490m.

18. Climate: The road links in all the provinces are located in tropical climate with two distinct seasons, dry season from May to September, and wet season from October to April. Distribution of annual rainfall in Kalimantan is more uniform, while rainfall in southern part of west Java is very high compared to other parts of Java. Yogyakarta and East Java have comparatively less rainfall. Average annual rainfall in Kalimantan ranges from 2,500 to 4,000 m, and in Java ranges from 1,000 to 3,500m. Average temperature in project areas generally ranges from 20oC to 30oC.

19. Soils: Leptosols are the major soil groups in the rolling and hilly terrains of South Java. Leptosols are very shallow soils over hard rock with a sandy loam texture with a moderate

72 Appendix 10 73 subsurface drainage. With a top soil sand fraction of 49%, leptosols are highly susceptible to erosion in hilly terrain. Fluvisols are the other major soils groups in the coastal areas of South Java and West Kalimantan. Fluvisols are the young soils in alluvial deposits with loam texture and poor to moderately well drainage. East Kalimantan links are dominated by Acrisols, which are sandy clay loams with subsurface accumulation of low activity clays.

20. Geology: Rock formations along project roads are dominated by volocanics and volcanic sediments in West Java; alluvial rocks in Central Java; Limestone and soft rocks in Yogyakarta and East Java. Limestone in Gunung Kidul district of Yogyakarta consists of karst formations. Karst formations, according to GOI guidelines, are protected areas. Geology of Kalimantan is mostly consists of sandstones and alluvium.

21. Water Resources: River basins in Java are very narrow with widths ranging from 10 to 70km. Hence, the rivers of Java are generally swift, narrow, and shallow and cause flashfloods due to high intensities rainfall and soil erosion. Kalimantan has a great numbers of small and big rivers. Watersheds in Kalimantan are very wide and most of the rivers are navigable even by large ships. Major use of surface water is for irrigation, navigation and fishing. Landslides and floods are the major natural hazards in project area with nearly 26 percent of villages in the project districts are susceptible to these hazards.

22. Water Quality: Because of high rainfall intensities and watershed erosion, most rivers in Java and Kalimantan carry large quantities of sediment that results in river regime problems. Water quality data of 3 rivers (Grindulu River in East Java; Jali and Grlwaya rivers in Central Java) near the project roads is generally good except in Jali River in Central Jakarta, where high COD and BOD values are noticed. Water quality near urban areas is deteriorating due to domestic, industrial sources, return flows from agricultural fields, indiscriminate fishing practices and lack of proper sewerage networks.

23. Natural Hazards: Floods, landslides, earthquakes, tropical storms, and tsunamis are the general natural disasters in the project areas. In a national survey conducted in 2006 by Bureau of Public Statistics of GOI in 4,576 villages of the project districts, nearly 32 percent of the villages in the project districts are susceptible for various natural hazards. Landslide and flooding are the major natural hazards in about 26% of the villages. 3 percent of villages have experienced major floods. 1.35% of villages have reported to be susceptible for earthquakes.

24. Quarries and Borrow Pits: The quarries and borrow pits required for construction activities are located in all the project areas. Sand and gravel are available from all the river sites of alluvial areas. Volcanic rocks, soft rocks and sand stone formations are good sources of aggregates. Volcanic formations are the good sources of aggregates.

25. Air and Noise Quality: Air quality data at 6 locations (3 in East and 3 in Central Java) near the project roads suggest air quality parameters, except TSP at one site are within the standards. General sources of air pollution in the project areas are traffic in urban areas, industries, quarry and mining areas and domestic fuel combustion for cooking, vehicle emissions, dust from unpaved roads, forest burning. Noise quality data at 6 locations (3 in East and 3 in Central Java) near the project roads suggests Noise quality is higher than the standards in all the 3 locations in Central Java. The general sources of noise pollution in the project areas are traffic in urban areas, industries, quarry and mining areas.

26. Forests: Nearly 75% of the Indonesia’s total land area has been designated as forests by the ministry of forest. Subproject 3 in West Java is passing abutting a marine protected area and conservation forest (Sindangkarta) for 2 km length. This forest is protected by a fenced wall and consists of mangroves and green turtles. Subprojects 13 and 14 in East Java, and Subproject 18 in West Kalimantan are passing through protected forests. The proposed road development in

Preparing the Regional Roads Development Project – Final Report Appendix 10 74 protected forests is limited to within available ROW for Subproject 18. All subprojects in East Kalimantan are passing through these production forests for a length of 230 km. While subprojects 16 and 17 in West Kalimantan are passing through secondary forest area.

27. Flora and Fauna: None of the subprojects are passing through any biomass reserves or bird areas. However, Indonesia has very rich and varied biodiversity. Unique animals that live in Java are buffalo (Bos Javanicus), Merak bird (Papo Muticus), Mencek (Muntiacus Muntjak), while typical plants are Palahlar (Diptek Ocarpuspee dir), Kabao (Dipterocarpus Gracilis), Werejit (Excoecaria agallocha lin). Important flora in Kalimantan are orchid, palma, meranti (Dipterocorpoceae), and sensitive fauna are orangutan, bear, deer, porcupine, snakes, monkey, etc.

28. Fish, Fisheries and Aquatic Biology: 9 marine protected areas are located along south Java coast near project road links, but none of them are intruded by the project roads. Mangroves located in the marine protected areas are usually habitat for many coastal resources like crabs, lobster, shrimp and fish. Mangroves also support flourishing fish aqua culture activities. A turtle sanctuary, Sindangkarta, is located near Subproject 3 in West Java. Fresh water fishery (such as tuna, tongkol, kap, dam kerapu) is cultivated in rivers, irrigated fields and ponds

29. Land Use: Most of the land use along the project roads in Java is mostly residential due to ribbon development along the roads and agriculture. In East Kalimantan, the land use along the project roads is mostly production forest, while in West Kalimantan it is secondary forest consisting of rubber and oil palm plantations. .

30. Protected Areas: None of the subprojects are passing through any IUCN protected areas. However, subproject 4 is passing close to the Gunung Selok, a protected area of IUCN category V (protected landscape), which is located about 300 m away from project road. The forest is fenced and controlled by security guard. It is separated from the project road by paddy fields. Some rare medicinal plants are located in this forest. Karst terrain in Gunung Kidul district of Yogyakarta is classified as protected area by GOI. Subprojects 9 and 10 are passing through these karst terrain classified as Karst Area Class 1 and are supposed to be active cave formations and sources of huge underground reservoirs. No new road alignments are proposed in this area.

31. Population: The project road links are passing through 6 provinces and 20 districts. Population density in Java generally varies from 250 to 1,000 per sq km while in Kalimantan it is less than 25 per sq km. Total population located within the immediate vicinity of the project roads is 1,383,335 (1,275,658 from Java and 107,677 from Kalimantan). Male to female ratio in the project districts is 51:49 and average household population is 4. 8 major towns (densely populated) are located in Java and only 2 major towns are located in Kalimantan near the project roads.

32. Economic Resources: Major sources of economy along the project roads are agriculture, forest products, industry, fishing and mining. Major food crops cultivated along the road corridor are rice, corn, cassava, peanut, soybean; and commercial crops are coconut, oil palm, rubber, cacao, and pepper. Plantation products from forests and private farms are other major source of income in project areas. Forest production from the project provinces are: teak, fines, occassia mangiuk and wood in West and Central Java; lumber and teak wood in East Java; forest charcoal, hard resin, rattan in West Kalimantan; and wood in East Kalimantan. Animal husbandry is also contributing to economy of the region, and main livestock are cows, buffalos, goats, sheep, pigs, and horses. Due to abundance of freshwater and coastal areas fishery forms a major source of economy in project areas especially in Kalimantan.

33. Road Safety: Road safety has been a critical problem in Indonesia for many years. More than 30,000 road users are killed in crashes each year throughout the country. More than 90% of the road causalities are the economically productive age groups of 15 to 50 years. The main

74 Appendix 10 75 factors behind high road accident levels in Indonesia are: poor geometric design of roads with improper vertical and horizontal curves; higher proportion of motorcycles among the vehicle fleet (75%); unsafe speeds adopted by many motor cyclists; the amount of uncontrolled road side activities particularly vendors; uncontrolled roadside access; unsafe condition of overloaded vehicles; poor standard of traffic management, traffic signals and lane markings.

D. Screening Environmental Impacts and Mitigation Measures 34. Most of the subprojects have been classified into environmental category B (UKL-UPL) according to ADB and GOI guidelines, and are not expected to create any major environmental concerns. However, there will be localised short-term impacts during construction activities due to implementation of civil works such as;

• Increased soil erosion, landslides and/or siltation from cut and fill operations, including increased risks to downstream rivers and coastal resources • Clearing of right of way, removal of vegetation (trees and shrubs) and disposal of spoils • Extraction and transport of construction material from existing quarry sites • Temporary use of land immediately adjacent to the road for siting of contractor’s yard, asphalt plant and construction camps • Reduced air quality and visibility (Air quality impacts and/or noise pollution from construction activities, quarry sites, material storage sites, temporary diversion roads, excavations, vehicle and equipment use and asphalt mixing plant • Reduced water quality (Water and soil pollution) at bridge rehabilitation sites from improper handling of and disposal of wastes and materials • Drainage from construction camps, material stockpiles, excavations and quarry activities • Interruption to smooth traffic flow, increased traffic congestion and public safety problems • Social conflicts due to project activities 35. These construction related impacts can be mitigated by (i) the contractors’ work practices, especially those related to the storage of construction materials and cleanliness of the work sites; (ii) cooperation by the local authorities with the contractor in terms of traffic management and use of public space and utilities; (iii) strict enforcement of the correct construction practices and standards by the project management staff/authority; and (iv) incorporation of the mitigation measures identified in the IEE into the bid documents and specifications. An environmental monitoring budget is provided to implement environmental management plans.

36. Soils and Materials: The main impacts on land during construction are from (i) spoils due to clearing of land for site preparation (ii) extraction of fill materials from cut section, and/or borrow pits; (iii) excess cut from the landslide areas; (iv) conversion of the existing land uses such as agriculture and plantations to stockpiles of materials; (v) soil erosion in mountainous slope, side slope, borrow pits and non compacted embankments; (vi) excess rocks from the mountain scaling; and (vi) contamination of the land from hazardous and toxic chemicals and construction material spillage. During construction, a balanced cut and fill approach will be designed for each road link. Excess cut, if any, will be used to shape the embankment side slopes, strengthening the toe of the high slopes road bench and filling the low lying government lands and for plantation in pre- approved areas. Contractors will submit a spoil plan to Bappedalda for approval. The spoil plan should show the location of any borrow pits to be used and fill location for excess cut and the measures to be taken to rehabilitate these pits and cuts upon finalization of the Project.

37. Soil Erosion and Slope Stability Problems: Road construction in hilly terrain is expected to cause soil elision unless precautionary measures are taken. There are a few slope-stability issues in the links that are passing through hilly areas. In addition, construction activities will cause soil erosion due to cut and fill. The impact of soil erosion and unstable side slope are (i) Increased run off and sedimentation causing a greater flood hazard to the downstream, (ii) loss of topsoil affects the growth of vegetation that causes ecological imbalances, (iii) destruction of aquatic environment in nearby lakes, streams, and reservoirs caused by erosion and/or deposition of sediment

Preparing the Regional Roads Development Project – Final Report Appendix 10 76 damaging the spawning grounds of fish. Erosion control and slope stabilization measures will be incorporated in the engineering design, (i) side ditches and berms, rock lining and slope walls will be designed along the road, where appropriate. (ii) design of proper drainage system. (iii) The sites with high erosion risk will put down to shrub buffer strips. For very steep slope section, short tunnels are recommended. Engineering design will also consider cross drainage and floodwater flows incase road links on elevated fills will obstruct natural drainage. For a long-term solution to the slope stability problem, it is crucial that land degradation is stopped. Maintaining a vegetative cover in the mountain areas would reduce erosion through run-offs, land and mud slides. .

38. Water: Project roads will cross a number of small streams and rivers and could affect the surface runoff flow pattern. In terms of water quality, the Project will increase silt load during construction in bridge sites. Embankments and construction materials (fill, sand, and gravel) are subject to wash out with rainwater. There is the potential for hydrocarbon leakage and spills from storage and mixing plants; discharge of sewerage from work camps to the water resources; or percolation through seepage and contamination of the local water table. To mitigate this, (i) bridges and culverts will be rehabilitated and installations of small drainage structures are recommended in the engineering design; (ii) open surface will be covered by grasses and creepers to reduce wash-away material; (iii) hydrocarbons will be stored in secure, impermeable, and bounded compounds away from surface waters and all contaminated soil will be properly handled according to acceptable standards; (iv) construction and work sites will be equipped with sanitary latrines that do not pollute surface waters and contractors will submit a simple sewage management plan to PMU; (v) cofferdams, silt fences, sediment barriers or other devices will be included in the design to prevent migration of silt during excavation and boring operations within streams; (vi) discharge of sediment-laden construction water (e.g., from areas containing dredged spoil) directly into surface watercourses will be forbidden. Sediment laden construction water will be discharged into settling lagoons or tanks prior to final discharge; and (vii) drainage system will be periodically cleared so as to ensure adequate storm water flow.

39. Air Quality: During construction, air quality is likely to be degraded by exhaust emissions from the operation of construction machinery; fugitive emissions from asphalt plants; and dust generated from haul roads, unpaved roads, exposed soils and material stockpiles. In order to mitigate these, the following will be implemented: (i) Construction equipment will be maintained to a good standard and idling of engines will be discouraged. Machinery causing excessive pollution (e.g., visible smoke) will be banned from construction sites. (ii) The contractor will submit a dust suppression program prior to construction. The plan will detail action to be taken to minimize dust generation (e.g., spraying of roads with water, vegetation cover in borrow sites), and will identify equipment to be used. (iii) Construction materials will be stored away from the residential areas and will be properly covered. (iv) The asphalt plants will be located about minimum1 km away from the settlements to avoid direct impact of emissions on local settlements. The operation of the Project road will lead to emissions of major air pollutants such as Hydrocarbon (HC), Carbon Monoxide (CO), Nitrogen Oxides (NOx), Sulfur Dioxide (SO2), and Particulate Matter (PM) due to increased traffic. Dust generation from the unpaved and damaged roads will be reduced by the improvement of pavement. The health risk to roadside communities and damage to the biological environment will also be reduced by pavement improvement.

40. Noise and Vibration: Operation of heavy machinery can generate high noise and vibration levels. Health centers, schools and prayer halls are the sensitive receptors residential areas, in general, are the major receptors. Strong vibrations by compaction equipment and rock blasting can damage nearby houses and other structures. To prevent noise and vibration, the operation will be restricted between 0600 to 2100 hours within 500m of settlements and 150m from sensitive receptors (hospitals and schools). During any blasting activities, local community will be informed in advance on detonation schedule. Blasting will be held only during day time and should be carried out not using high powered explosives. During operation, noise levels along the project roads, especially in Yogyakarta, will be increased due to the higher traffic volume. Noise monitoring will be carried out during operation stage to assess noise levels, and if required noise

76 Appendix 10 77 mitigation measures such as preventing blowing horns near schools, hospitals and other sensitive areas, reducing vehicle speeds near traffic intersections, and establishing sound barriers are to be designed.

41. Quarry Sites: Quarry sites are the major sources of environmental impact due dust and noise pollution, loss of biodiversity, and generation of spills. Management plan to be followed for quarry sites are (i) Priority must be given to the use of existing quarry sites, if they are available and suitable; (ii) Quarry sites must be selected amongst those offering the highest ratio between extractive capacity (both in terms of quality) and loss of natural state; (iii) Quarry sites lying close to the alignment, with a high level of accessibility and with a low hill gradient, are preferred; (iv) In the case of quarries located in the mountainous or hilly Ares, or wherever the slopes are important, terraces are implemented. After implementing terraces and drainage system, a vegetal coverage is provided by seeding grass and planting both bushes and trees. Maintenance of the vegetal layer is required in the first two years after plantation.

42. Forests: 230 km of subproject roads in East Kalimantan are passing through production forests, and nearly 50 km protected forest is passing through 2 subprojects in East Java and one subproject in West Kalimantan. Commercial plantations such as rubber and oil palm are located along the project roads in West Kalimantan. Due to proposed road widening, some of the forest vegetations are to be removed. Proper approvals are to be taken from the forest department for clearing of any forest vegetation. Workers will be trained regarding nature protection and the need to avoid falling trees during construction. Contractors will be responsible supplying appropriate fuel in the work camps to prevent fuel-wood collection. No construction camps, asphalt mixing plants, material storage sites are to be located in the forest areas.

43. Fauna: The potential impacts from construction worker camps are poaching of edible animals and birds of the locality in spite of prohibitions. The contractors’ environmental health and safety manager will be responsible for providing adequate knowledge to the workers regarding the protection of fauna.

44. Fish, Fisheries, and Aquatic Biology: The main potential impacts to aquatic flora and fauna in the watercourses from the proposed project are increased suspended solids from earthworks erosion and bridge construction, sanitary discharge from work camps and hydrocarbon spills. Mitigation measures to address these issues are presented in paragraph 25.

45. Social Impacts: Road improvement under the project requires considerable land acquisition and resettlement. A resettlement and compensation framework has been prepared for the project. Campsites for construction workers are the important locations that have significant impacts such as health and safety hazards on local resources and infrastructures of nearby communities. This may lead to antagonism between residents and workers. To prevent such problems, the contractor will provide temporary worksite facilities such as health care, eating space, and praying places. In addition, a mechanism will be established to allow local people to raise grievances arising from the construction process. The use of local during the construction will increase benefits to the local community and resolve such conflicts. The construction sites may potentially impact public health through the spread of malaria, HIV/AIDs and other sexually transmitted diseases. Mitigation measures will include creating a good environment at work sites and educating the construction workers. Awareness campaigns for the education of road users on the importance of the culturally sensitive sites normally help to preserve them. Improved road signage and awareness display boards will be placed at the religiously sensitive sites: the cemetery and mosques located along the Project roads. These will alert construction workers and road users. During construction, extreme precautions will be taken to ensure that cemetery and religiously sensitive places are protected and respected. It is highly recommended that contractors consult with local people during civil works close to these sites.

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E. Institutional Requirement and Environmental Monitoring Plan 46. The Executing Agency and the lead Implementing Agency for the Project will be the Directorate General of Highways (DGH) in the Ministry of Public Works (MPW). The Directorate of Planning (DOP) in DGH will be responsible for overall project management. Day to day project management will be undertaken by a PMU (Project Management Unit) established within DGH. Direct responsibility for project implementation will be by P2JJ. The Project will provide PMU with the assistance of a SDEA, Design and Supervision Consultant (DSC) to help ensure the implementation of environmental management practices at each stage of the construction

47. The PMU shall submit the following environmental reporting documentation to the ADB: (i) Baseline Monitoring Report prior to commencement of civil work, (ii) Environmental Monitoring Reports twice annually during the construction period and annually for three years after completion of construction; and (iii) Project Completion Environmental Monitoring Report, three years after completion of construction, summarizing the overall environmental impacts from the Project.

48. The provincial implementing agencies have very limited experience, resources and equipment for environmental management and monitoring. It will be very difficult for and SDEA to efficiently supervise monitoring of the environmental and social/resettlement parameters as it is located at national level. For a better understanding of road related environmental issues, implementation of mitigation measures and subsequent monitoring and capacity building of the implementing agencies is proposed. Training for the officials is crucial for proper environmental monitoring addressed in the IEE. The primary focus of training is to enable the staff to carry out environmental monitoring, implement the environmental management plans and conduct impact assessments. After participating in such training, the participants will be able to make brief environmental assessments for their respective projects, conduct monitoring of environmental plans, and incorporate environmental features into future project designs, specifications and tender/contract documents.

F. Stakeholder Consultations and Information Disclosure 49. Public consultations were conducted at Pontianak, West Kalimantan on January 19, 2009, in accordance with the guidelines on Public Consultation and Information Disclosure in ADB’s Environmental Assessment Guidelines, 2003. The consultation involved affected people, community leaders, NGOs, and national and provincial government officials. Information regarding the proposed consultations was distributed through provincial government bodies prior to Consultation to ensure participation by a wide cross-section of the community. Public consultation notice is also published in a local news paper. In addition to this formal public consultation, several other consultations were held in all provinces during social and environmental field studies through interviews and meetings with the affected people, NGOs, provincial environmental agencies, forest departments, P2JJ and Dinas PU. Consultation methods included public meetings, focus group meetings and interviews with the affected people. A total of 44 consultations were conducted during September 2008 to January 2009 involving about 202 people. The consultation process indicated that the public generally supports the Project and are anticipating improved economic benefits. The major concerns identified are related to land acquisition and compensation, soil erosion, employment opportunities during construction, floods and drainage problems, protection of irrigation facilities and natural resources during construction works, traffic safety and dust suppression. Recommendations from the consultation will be included in the engineering design.

50. Information disclosure will be made available by (i) placing the SIEE on the internet at ADB’s website in the Report and Recommendation of the President (RRP), (ii) making copies of the IEE/SIEE available on request, (iii) preparing and disseminating an information brochure in Bahasa Indonesia, explaining affected peoples’ entitlements and the compensation and grievance procedures, and (iv) establishing a formal grievance redress committee, including community representatives. The DGH/Contractor will be responsible for managing the grievance program

78 Appendix 10 79

G. Findings and Recommendations 51. Most of the road links that are categorized as B (UKL-UPL), and no major negative environmental impacts are likely to occur due to the construction activities and normal operations after the proposed construction. Recommendations are made to mitigate expected negative impacts and adequate fund is provided to cover environmental monitoring and mitigation cost. The road links that are categorized as AMDAL require further environmental assessment studies. Environmental assessment and Review Frame Work (EMRF) has been prepared for the project.

52. Construction activities associated with the proposed Project consist widening and improvement of roads and rehabilitation of bridges. The major potential environmental impacts from the proposed project are associated with (i) soil conservation (slope stability and erosion control), (ii) protection of water resources (increased sedimentation and hydrocarbon storage), (iii) construction impacts on residents (air quality, noise and vibration), (iv) environmental management of construction yards (solid waste, sanitary wastewater, hydrocarbon storage), (v) protection of flora/fauna (poaching and fuel wood collection), and (vi) protection from negative social impacts. Mitigation measures for these impacts have been detailed in the Project IEE and this document. Effective implementation of these mitigation measures is anticipated to reduce the identified environmental impacts to acceptable levels.

53. The project will directly benefit over 1.4 million people located within immediate vicinity of the roads by providing improved access and economic development. The project would also benefit environment in terms of reduced soil erosion and landslides; and rock fall protection through slope stabilisation measures and construction of retaining structures. Dust generation from the unpaved and damaged roads will be reduced by the improvement of pavement. Health risk to the roadside communities and damage to the biological environment will be reduced due to pavement improvement and soil erosion control measures. Road safety will be by improved geometrical design of realigning sharp vertical and horizontal sections, and installing traffic control facilities.

H. Conclusions 54. The RRDP is anticipated to have significant positive impact on the economies of the local communities and to the national economy. Based on the results of the IEE, the Project will not generate significant environmental impacts provided the mitigation measures detailed in this document and in the Project IEE are implemented appropriately. An EARF has been prepared for the subprojects.

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Appendix 11: Summary Poverty Reduction and Social Strategy

A. _Linkages to the Country Poverty Analysis

Yes Is the sector identified as a national X Yes Is the sector identified as a national priority in country poverty partnership priority in country poverty analysis?

No agreement? No Contribution of the sector or subsector to reduce poverty in Indonesia: The Republic of Indonesia has a population of 223 million and is the world's forth most populous country. The average population growth rate from 1999 to 2007 was 1.2 percent31 and the total population is expected to reach 251.6 million by 201532. Since the economic crisis and political transformation of 1997-1998, Indonesia has made significant strides in reducing poverty and strengthening democracy. Between 1999 and 2002, the proportion of people living in poverty fell from 23 percent to 18 percent. The United Nations now classifies Indonesia as a middle income country. The global turmoil since mid-September has, however, adversely affected Indonesian economic outlook and recent indicators suggest that poverty rates may rise sharply in 2009. Even without the impact from the global financial crisis, the original target for poverty in 2009 was 8.2% is certainly not attainable. The Government’s Medium-Term Development Plan 2005–2009 seeks to raise levels of sustainable economic growth, create jobs, and accelerate the achievement of the MDGs. ADB’s strategy for 2006–2009 is to help the Government achieve higher levels of pro-poor sustainable growth and to enhance social development. The project directly contributes to these objectives by improving road transport efficiency and improving the access to income- generating opportunities and social services. In particular, the less developed areas, such as in East Java and the northern road sections in Kalimantan where road conditions are poor, will have improved connectivity which will help create the conditions necessary for developing local resources and generating employment to raise living standards. ADB’s objective for the transport sector is to improve Indonesia’s transport network by increasing the quantity and quality of infrastructure and operations. RRDP directly addresses these constraints by focusing on one of the ADB's key areas of engagement, to improve infrastructure. The Project will increase investment in the transport sector by improving capacity of 1,274 km of selected roads in the South Java Corridor and in East and West Kalimantan. RRDP will also help improve inefficient institutional structure and inadequate planning through capacity building activities within MPW and provincial transport agencies. The project will improvement road at the border with Malaysia, thereby promoting regional cooperation, improving cross-border trade, transport services and livelihoods of the poor living in the border area. It will also contribute to the efficient development by strengthening connectivity between the Indonesia and Malaysia, reducing transport bottlenecks and increasing competitiveness.

B. Poverty Analysis Poverty Classification: General intervention

What type of poverty analysis is needed? The project area covers 20 districts, 14 in Java and 6 in Kalimantan. The total population of the project area is 18 million with an average poverty rate of 19 percent. The road improvements will lead to lower transport costs, improved transport services and improved access to markets and social services, increased competitiveness, expansion of economic opportunities, diversification of rural livelihoods, and poverty reduction. About 50 percent of people living along the project roads in Java are depended on agriculture as their main source of income but in Kalimantan this is about 85 percent. Farmers will benefit from reduced transport costs, better access to markets, increased opportunities for diversification and increase competition for their products leading to increased incomes and community development. The project will increase economic development in the area and the growth of off-farm income opportunities, particularly in more rural project areas. These will also open new opportunities and prospects for factories and agro-processing plants. In particular, reduced transport costs and time savings will benefit the fishing industry in both Java and Kalimantan where travel constraints restricts access to ports and urban markets for small-scale fishers. Tourism is just starting to develop in the project areas and it is expected that the project could boost international tourism in Kalimantan and local tourism in the Java corridor. Better roads will encourage better transport services, improved efficiency and affordability of rural passenger services thereby increasing services to poor villages. This will be most important in areas near the Malaysian border and in East Java where conditions are poor and there is limited bus service. Both poor and non-poor will travel more in response to increased access, lower transport costs and timesavings. Road improvements will help provide better access to jobs, markets, health care, schools and other services and will increase the range of goods and services available in the community. In the project area, over 25 percent of children under the age of 15 are not in school and

31 Key indicators for Asia and the Pacific 2008 32 HDR 2007/2008

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women stated that improved access to schools was the most important benefit from the project. Rural road improvements will provide better year round access for more isolated communities (Kalimantan and East Java), help to develop these communities and encourage more medical staff and primary school teachers to work there. The improved project roads and transport services will increase attendance at secondary schools and high schools that are located in larger towns.

C. Participation Process

Is there a stakeholder analysis? Yes X No Project surveys and community participatory consultations were carried out in preparing the poverty and social strategy. This provided an understanding of the concerns and constraints facing communities, farmers and gave people the opportunity to express transport related concerns and opinions of both positive and negative impacts arising from the project. In total 393 local residents living in the project area were surveyed. According to local residents, increased job opportunities and economic development in the area were clearly seen as the most important economic benefits with 39 percent and 34 percent of respondents selecting these respectively. Overall, 62 percent all respondents stated that the improved road would make traveling easier and faster travel and many thought better roads would improve land values. Farmers had a keen understanding of the direct link between transport costs and farm profit margins and expected lower freight costs and improved access to benefit them directly. People also placed a good degree of emphasis on a cleaner environment with less dust. Residents also stated improved roads would provide better access for children traveling to schools and would improve road safety.

Is there a participation strategy? Yes X No The first public consultation meeting to inform communities about the project, including the Resettlement aspects and the HIV/AIDS and Human Trafficking Prevention Plan, was held in January 2009. A series of participatory disclosure and planning workshop will be held to give MPW the opportunity to inform participating communities about project activities and gather community comments and concerns before LARAP studies and civil works begin. Before the alignments are finalized, local government officials and communities will be consulted to minimize losses of high- quality arable land and structures. Provincial and district governments and community organizations will be involved in the implementation of the Resettlement Plan. Indigenous people will benefit from the project. It is not anticipated that indigenous communities will be significantly impacted by resettlement activities; East and West Kalimantan are the provinces least impacted by resettlement activities and projects surveys reveal that traditional indigenous communities are living more than ten km from the existing roads. Nevertheless, resettlement organizations staff will include members of indigenous groups and ensure that communications and public consultations are undertaken with respect for appropriate language groups and cultural sensitivity.

D. Gender Development

Strategy to maximize impacts on women: Poor women and children will benefit from easier transport, time savings and improved access to medical facilities and other social, and from a general improvement in their quality of life. Women will also benefit from greater access to information and jobs, including migrating women, and increased opportunities for selling and buying goods at local markets. Gender disaggregated indicators will be monitored in the project performance management system. Gender strategies have been mainstreamed into the Resettlement Plan and the HAHTP. Women are likely to be affected in a number of ways by the project resettlement activity. The RF includes a gender strategy; the socioeconomic profile of APs will disaggregate available data by gender; LARAP studies will include a gender analysis; and RPs will ensure gender-sensitive resettlement and rehabilitation measures that ensure women are actively engaged in the planning and implementation of the resettlement plans, income restoration programs and other programs. The MPW the IMO should be directly involved in all aspects of the development and implementation of the gender strategy, to ensure that these measures are adequate and satisfactory to female APs and other stakeholders. The HAHTP will also provide specific activities and benefits for women and will take gender differences into consideration, including differences in men’s and women’s duties and work schedules. Has an output been prepared? Yes No X

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E. Social Safeguards and Other Social Risks

Item Significant/ Plan Required Not Significant/ None

Resettlement Significant X A Resettlement Framework has been prepared and ToRs for 10. Full LARAP studies have been formulated. The project will X Not significant ensure adequate compensation for affected people which will None give special consideration for vulnerable people include the elderly, disabled, households headed by women, extremely Short poor households, and indigenous people. Therefore, RPs will include a gender strategy and resettlement organizations will None ensure that communications and public consultations are undertaken with respect for appropriate language groups and cultural sensitivity.

Affordability Significant With improvement of the local roads, more transport services Yes at lower cost will be available to the poor. Not significant x No X None

Labor Significant x MPW will ensure that project construction contracts include Yes clauses to encourage local employment for construction and Not significant maintenance. MPW will ensure that employment No X None opportunities are announced to local communities and will also ensure that contractors conform with appropriate labor laws are standards. MPW will monitor the use of local labor and appropriate labor laws and standards within the first 3 months of the commencement of each construction contract and take appropriate action to improve the employment and compliance if needed. Contract documents will include clauses, prohibiting child labor for construction and maintenance activities, ensuring equal pay for men and women for work of equal value, and requiring a timely payment for workers on a monthly basis.

Significant X Indigenous peoples will benefit from the project and it is it is Yes Indigenous not anticipated that indigenous communities will be Not significant No X Peoples significantly impacted by resettlement activities; East and None West Kalimantan are the provinces least impacted by resettlement activities and projects surveys reveal that traditional indigenous communities are living more than ten km from the existing roads. Nevertheless, resettlement organizations staff will include members of indigenous groups and ensure that communications and public consultations are undertaken with respect for appropriate language groups and cultural sensitivity.

HIV/AIDS and Human Trafficking Prevention Program Yes (HATPP) Other Risks Significant X An HIV/AIDS and Human Trafficking Prevention Program and/or (HATPP) is required to ensure that communities are not Vulnerabilities Not significant subject to increased risk of sexually transmitted infections No X and human trafficking because of the improved road infrastructure. None The RRDP HATPP will be implemented in the province of West Java, Central Java, Yogyakarta, East Java, West Kalimantan and East Kalimantan. All HATPP activities will be consistent with Indonesia National HIV/AIDS Strategy and Action Plan and policies to prevent human trafficking. All

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Item Significant/ Plan Required Not Significant/ None HATPP activities will support ongoing government prevention programs and will be implemented through the relevant national, provincial, district and sub-district agencies working in the Project area. Therefore, HATPP will not only mitigate potential risks arising from the Project but will help to build capacity throughout stakeholders and partners. The mitigating measures will take two forms: - A specific HIV/AIDS and Human Trafficking Prevention Plan financed under the loan will be included. This prevention Plan will be consistent with prevention policies of Indonesia and ADB’s social development policies and will target construction workers and resident populations in the Project area. - The need for information, education, and communication on HIV/AIDS and STIs and the prevention of trafficking will be made a contractual obligation of the construction contractors. This obligation will include the provision of HIV/AIDS and Human Trafficking awareness training to construction workers and full cooperation with Project and local prevention activities. It is recommended that implement of the prevention plan is undertaken through cooperation with Indonesia's National AIDS Committee (NAC) and Provincial AIDS Committees (PACs). These agencies would take the lead roles to plan, coordinate, monitor and report activities in each province.

Preparing the Regional Roads Development Project – Final Report