Document of 5 P The WorldBank A

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No. P-3572-IND

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

IN AN AMOUNTEQUIVALENT TO $279.0 MILLION

To THE

Public Disclosure Authorized RF.PUBLIC OF INDONESIA

FOR A

THIRTEENTH POWER PROJECT

May 11, 1983 Public Disclosure Authorized

TisN document hals a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS

Currency Unit - Indonesian Rupiah

US$1 = Rp 970 Rp 10 = US$0.103 Rp 1 million = US$1,030

WEIGHTS AND MEASURES

1 metric ton = 1,000 kilograms (kg) 1 liter (1) = 0.0063 barrels 1 kilometer (km) = 0.6215 miles (mi) 1 kilovolt (kV) = 1,000 volts (V) 1 megavolt-ampere = 1,000 kilovolt-amperes (kVA) 1 kilovolt-ampere = 1,000 volt-ampere (VA) 1 megawatt (MW) = 1,000 kilowatts (kW) 1 gigawatt hour (GWh) = 1 million kilowatt hours (kWH)

ABBREVIATIONS

BAKOREN - The National Energy Board BOC - Board of Consultants CDC - The Commonwealth Development Corporation of the United Kingdom DGEP - Directorate-General of Electric Power, Ministry of Mines and Energy GOI - Government of Indonesia LNG - Liquified Natural Gas LRMC - Long Run Marginal Cost MME - Ministry of Mines and Energy Newjec - New Japan Consulting Engineers PLN - National Electricity Authority REPELITA - National Five-Year Development Plan (Repelita I, 1969-74, Repelita II, 1974-79, Repelita III, 1979-84)

GOVERNMENTOF INDONESIA FISCAL YEAR

April 1 - March 31 FOR OFFICIAL USE ONLY

INDONESIA

THIRTEENTH POWER PROJECT

Loan and Project Summary

Borrower: Republic of Indonesia

Beneficiary: Perusahaan Umum Listrik Negara (PLN), the National Electricity Authority

.Amount: $279.0 million equivalent (including capitalized front-end fee)

Terms: Repayable in 20 years including 5 years of grace at the standard variable interest rate.

Onlending Terms: The proceeds of the loan will be onlent from the Government of Indonesia (GOI) to PLN for 20 years including a grace period of 5 years; the onlending rate will be equivalent to the variable interest rate charged on the Bank loan plus a quarter percent for administrative charges. The GOI will bear the foreign exchange risk.

Project The project will provide peak hydroelectric generating Description: capacity to complement the steady growth of base-load coal-fired thermal generating capacity on the Java grid from 1984 onwards. The project comprises:

(a) construction of a storage dam, 125 m high, at Cirata on the Citarum river; a 1 km water conductor system comprising tunnels, surgetanks, and penstock tunnels; and a 500 MW power station (with four generating sets each rated at 125 MW), with an associated 500 kV step-up substation and a 25 km transmission line to nearby Saguling;

(b) construction machinery for a PLN task force; and

(c) support of the GOI's energy sector program by providing technical assistance, studies and related equipment.

IThis document has a restricted distribution and may be used by recipients only in the performance of | their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii -

The risks associated with the project are mainly those inherent in all major hydroelectric projects but long observation of river flows at the dam site, thorough preparatory work, and the retention of a special board of consultants to oversee design and construction, have reduced these risks. In addition, appropriate physical contingencies have been provided for unforseeable cond- itions especially expected on this project due to: (a) complications of geology in the Andesite quarry site; and (b) potential landslides of volcanic breccia and mud- stone zones. A further risk is delay to the project as a result of scarcity of local counterpart funding resulting from the present recession. Tariff action by PLN to increase its self-financing ratio will reduce its dependence on GOI budgetary funding. The measure to increase the disbursement percentage of the Bank loan against the civil works during the first two years of the project implementation will also help reduce this risk.

Estimated Costs:/l Local Foreign Total ---($ million) -- Site preparation and environmental related work 107.6 1/.4 125.0 Civil and metal works 49.1 139.6 188.7 Electrical and mechanical works 7.4 64.5 71.9 Engineering 5.2 25.9 31.1 Administration 5.5 - 5.5 Special construction machinery 0.1 1.0 1.1 Insurance 0.5 0.8 1.3

Total Base Cost 175.4 249.2 424.6

Contingencies Physical 28.6 36.1 64.7 Price 63.4 36.0 99.4

Total Cost of Cirata Project 267.4 321.3 588.7

Energy sector support 12.0 25.0 37.0

Total Project Cost 279.4 346.3 625.7

Interest During Construction Bank loan 1.4 72.6 74.0 Others 43.3 25.4 68.7 Front-end fee on the Bank loan - 0.7 0.7

Total Financing Required 324.1 445.0 769.1

/1 Project costs are exempt from direct taxes and duties. - iii -

Local Foreign Total Financing Plan: ($ million) ---

Bank - 279.0 279.0 Commonwealth Development Corporation 20.0 - 20.0 Export credits - 68.0 68.0 GOI/PLN /_ 304.1 98.0 402.1

324.1 445.0 769.1

Estimated Disbursements:

Bank FY 1984 1985 1986 1987 1988 1989 ------($ million) ------

Annual 39.0 55.0 82.0 57.0 28.0 18.0 Cumulative 39.0 94.0 176.0 233.0 261.0 279.0

Economic Rate of Return: 14%

Staff Appraisal Report: No. 4356-IND, dated May 3, 1983.

/1 Includes estimated interest during construction on loans and credits. a a REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF INDONESIA FOR A THIRTEENTH POWER PROJECT

1. I submit the following report and recommendation on a proposed loan to the Republic of Indonesia for the equivalent of $279.0 million (including the capitalized front-end fee) to help finance a Thirteenth Power Project. The loan would have a term of 20 years, including five years of grace, at the standard variable interest rate. The proceeds of the loan would be onlent to Perusahaan Umum Listrik Negara (PLN), the National Electricity Authority, at an interest rate equivalent to the variable rate charged on the Bank loan plus a quarter percent for administration charges, for 20 years including a grace period of 5 years. The foreign exchange risk will be borne by the Government of Indonesia (GOI). In addition to the Bank loan, a loan of $20 million equivalent would be provided by the Commonwealth Development Corporation of the United Kingdom (CDC) to help finance part of the project cost. The project would also involve about $68 million equivalent in export credits.

PART I - THE ECONOMY/1

2. A basic economic report, "Indonesia: Growth Patterns, Social Progress and Development Prospects" (No. 2093-IND dated February 20, 1979), was distributed to the Executive Directors on February 26, 1979, and a country economic memorandum has been prepared in each subsequent year. The latest of these, titled "Indonesia: Financial Resources and Human Development in the Eighties" (No. 3795-IND dated May 3, 1982) was distri- buted to the Executive Directors on May 6, 1982. Annex I gives selected social and economic indicators for the country.

Background

3. The Republic of Indonesia is a highly diverse country spread across an archipelago of more than 13,000 islands with a land area of about two million sq km. It now has a population of over 150 million, growing at about 2.3% p.a., and is the world's fifth most populous nation. The country has a highly diversified resource base, with plentiful primary energy * resources, significant mineral deposits, large timber potential and a developed system of agricultural commodity production and export. A high proportion of these primary resources are located on the sparsely populated islands of Sumatra and Kalimantan, while two thirds of the population live

/1 Substantially unchanged from the President's Report on Fifth Bapindo Project (No. P-3525-IND), circulated under cover of R83-109, dated April 21, 1983, and approved by the Executive Directors on May 10, 1983. on Java which has areas with some of the highest rural population densities in the world. About 20% of the population live in urhan areas in both Java and the Outer Islands, and the current rate of urban nopulation growth is over 4% p.a. The 1981 estimate of GNP per capita is $520, which places Indonesia for the first time amongst middle income countries./l

Macroeconomic Developments and Resource Management

4. Until 1981, the economy had been growing at almost 8% p.a. for over a decade. This was associated with rapid increases in public expendi- tures, total investment and savings. The initial impetus for this occurred in the period of recovery from the turbulence of the mid-60s. The Govern- ment took effective action to restore macroeconomic stability, liberalize the economy, rehabilitate infrastructure, and provide incentives for domestic and foreign private investment. However for the last decade the dominant external influence has been the huge expansion, and significant variability, in foreign exchange earnings from oil. Net exports from the oil and gas sector rose from $0.6 billion in 1973/74 to $10.8 billion in 1980/81, when the current account enjoyed a surplus of $2.5 billion. Oil receipts also provide about 70% of Central Government receints and have helped finance the sustained increase in demand via the budget. The pattern of expenditures has also helped foster diversified growth: of particular note has been the support for agriculture, througb investment in infrastruc- ture, support services and effective use of subsidies to maintain producer incentives. This bore fruit in two successive record rice harvests in 1980 and 1981. During 1971 to 1980 manufacturing has also enjoyed a high growth rate (of about 14% p.a.) from a very low base, but here sectoral growth has been in spite of a more restrictive policy environment and distorted incentives.

5. Since 1981 the macroeconomic resource position has changed dra- matically. Depressed international markets and a weak oil price have led to a turnaround in the current account of about $9 billion in two years, with a deficit of the order of $7 billion likely for 1932/83. Following the reduc- tion in the OPEC market price from $34 to $20 in early 1983, resource prospects worsened further. Faced with mounting pressure on the currency, on March 30, 1983, the GOI devalued the rupiah by 28% from Rp 703 to Rp 970 to the US dollar. This was an important step in the short run adjustment process, but barring a major recovery in oil prices, other adjustments will be necessary, in particular in the rephasing of import-intensive public expenditures. These measures will lead to a reduction in the growth rate. At a more fundamental level the change in external prospects have emphasized the need for substantial structural change in the eighties. The development of a strong and diversified nonoil production and export base is essential to the restoration of reasonable growth.

/1 On the basis of the World Bank's system of country classification and Atlas methodology for calculation of GNP. -3-

Incomes, Employment and iluman Development

6. Despite the high concentration of the resource windfalls, the available evidence, from household expenditures surveys, indicates a fairly wide distribution of the benefits of growth and a reduction in poverty _ncidence over the past ten years. This is also borne out in the basic health indicators, with a 25% reduction in the infant mortality rate and an increase in life expectancy from 47 to 53./I These improvements should not, however, mask the continued existence of widespread poverty. Almost 50% of the population are estimated to have been in this condition in 1978. The core of the poverty problem continues to be in rural Java, where landless laborers form a large, and possibly rising, fraction of the population, and where, for most of the 1970s, there is little evidence of any rise in real agricultural wages. Tlowever, in the last two years of good rice harvests it is likely that significant improvements occurred on Java, while agricultural incomes on parts of the Other Islands dependent on export crops have declined in the face of the international recession. Following the devalua- tion this situation will likely reverse. Export incomes should rise, backed by the international recovery, but real incomes in Java could be adversely affected.

7. In the future the availability of productive employment will be a key determinant of the distribution of income. The labor force will grow at about 3% p.a., equivalent to around 2 million people p.a., in the next decade. In 1980 agriculture still accounted for 55% of employment, and industry only 13%; the growth of services employment, from 24% of the total in 1971 to 32% in 1980, was the main mechanism for providing incremental employment in the 197Os. The growth in service incomes was partly sustained by rising oil incomes in the 1970s; if services are to continue to be a major source of labor income there is again a strong case for diversifying the pattern of productive growth. The key issue is one of widespread underemployment in the traditional sectors. To tackle this a sustained rise in labor demand is crucial - through the maintenance of overall growth and the encouragement of labor-intensive processes in both the traditional and the industrial sectors.

8. In the 1970s there was substantial progress in extending the pro- vision of social services throughout the population. Universal enrollment in primary education has been virtually achieved and the enrollment rate in junior secondary schools is now 35%. However, the wealk educational base of the population continues to be a major obstacle to rapid economic develop- ment and a substantial further expansion of secondary and tertiary education will be necessary as well as a major effort to raise the quality of the whole system. The situation is similar in the health sector. There has been a large expansion in facilities, notably at the sub-district level, but continued expansion and an improvemnent in quality will be necessary to increase effectiveness. This will have to be complemented by a major expansion in water supply and sanitation if the improvement in indices of

/1 On the basis of the 1971 and 1980 population censuses. -4-

mortality and morbidity in the 1970s is to be maintained. Currently only 18% of the rural and 401% of the urban population have access to safe water/I compared with Government targets of 60% and 75%, respectively, for 1990.

Policy for Structural Change

9. Indonesia's past growth performance has been good, but the country is now faced with the need both to put the nonoil economy on to a viable long-run growth path and to effectively improve the basic needs situation of the poor. The re-emergence of a significant foreign exchange constraint has reduced the capacity of the economy to carry a high level of investment. Policies that promote appropriate investment choices in the public and private sector will be critical if the structural adjustment process is to be sustained.

10. In industry, the Government of Indonesia (GOI) is planning a program of large-scale natural resource-based investments, in refineries, LNG, petrochemicals, fertilizer, cement, pulp and paper, basic metals and mining. This would broaden the industrial base, but will have very limited employment implications and is very foreign-exchange intensive in the construction phase. Of greater importance for both employment and exports is the encouragement of agriculture and the small- and medium-scale private manufacturing through an improvement in the economic environment. The 28% devaluation of March 30, 1983, substantially improved incentives for production of tradeable goods. Furthermore, the GOI has initiated a general review of the trade regime, with a view to removing the distortions caused by the wide variations in rates of effective protection. It has also embarked on a program designed to promote the expansion of nonoil exports, including export financing arrangements, export insurance, improved ports procedures, export processing zones and a system of export certificates (duty rebates). However, the private sector suffers from significant domestic constraints to its expansion, including a heavy regulatory burden, especially in the area of investment licensing, and a distorted and poorly developed financial system. Further policy reforms to alleviate these constraints are needed to create an environment conducive to private investment.

11. The energy sector is at the core of the structural adjustment problem. Oil and gas now account for 9R% of domestic consumption of commer- cial energy and demand has been growing rapidly. If Indonesia is to avoid a serious reduction in foreign exchange earnings from the oil sector in the 1990s, it is essential to diversify energy usage and improve the efficiency of energy consumption. This will require both price and investment measures. In January 1983 domestic oil prices were increased by about 60%, and this followed a similar increase in January 1982. This was a decisive step that substantially reduced the differential between domestic prices and

/1 Government estimates for 1981. - 5 -

the average opportunity cost; however, relative prices between products diverge widely from those prevailing on the international market. In addition a major program of investment is planned, with public and private participation, in coal exploration and development, exploitation of hydro and geothermal resources, and a sixfold increase in electric power generation in the coming decade.

12. Agriculture will continue to be of great importance for export revenue (accounting for almost 75% of 1980 nonoil exports), food production and employment. Rice production has been steadily rising to an estimated total in 1982 of 23.2 million tons, compared with 13 million a decade earlier. This achievement is largely a result of the provision of new, and the rehabilitation of existing, irrigation systems, and the dissemination of new agricultural technology particularly with respect to the timely delivery of seeds and fertilizers. Future investment in physical infrastructure, especially in irrigation and rural roads, combined with a favorable market environment and good support services will be the main determinants of further expansion in food production. In the past tree crops have suffered from relative neglect, and the age structure of the trees is now very old, but GOI has a highly ambitious program of rehabilitation and replanting, necessitating substantial investment in manpower and improved organization of distribution and marketing. Transmigration remains a high priority program for promoting development in underpopulated regions, providing opportunities for landless families on Java, Bali, and Lombok, and relieving economic and environmental pressures on those densely populated islands.

Financing Development - Domestic Resources and External Capital Flows

13. With a relative decline in oil incomes, alternative sources of domestic savings will have to be found. This will require a major increase in resource mobilization through the public sector over the medium term, through a combination of reduced subsidies on petroleum products and increased nonoil taxes. In 1981 it is estimated that taxes on the domestic economy were only 6% of GDP, if the domestic oil subsidy is netted out, compared with well over 10% for comparable countries. The 1982/83 and 1983/84 budgets represented a significant effort to improve the situation, with major reductions in the oil subsidy and increases in nonoil taxes, but this will have to be sustained in following years. In addition to public resource mobilization it is becoming increasingly important to encourage the growth and improve the efficiency of distribution of financialized savings, through an improved financial regime and the development of a domestic capital market.

14. Even with effective measures to mobilize domestic resources there will be a substantial need for foreign savings in the 1980s, especially in the short-run adjustment to loss in oil income. The most important compo- nent of this will be in the form of medium- and long-term debt flows. Total disbursed and outstanding external public debt was almost $20 billion at the end of 1982 and undisbursed debt amounted to an additional $12 billion. The -6-

Inter-Governmental Group on Indonesia remains a principal source of external capital, including Official Development Assistance, to the country. During the 1970s, however, Indonesia experienced an unusually rapid transformation in its public debt structure from a situation of heavy reliance on official concessional loans to increasing use of private, nonconcessional and variable interest loans in the second half of the decade. In 1982 private source debt accounted for 52% of new commitments of public debt. The fact that Indonesia remains highly creditworthy at the beginning of the 1980s, and the efficiency with which GOI has managed debt, are clear indicators of how far the country has progressed. However, the debt servicing capacity depends on commodity production rather than a broad industrial base, and this makes Indonesia somewhat more vulnerable to developments in interna- tional markets. The implication is that debt utilization should remain very prudent, and that there will be a continued justification for official debt of long maturities in the 1980s. With the sharp decline in oil export receipts the debt service ratio will rise in the short term, but present projections indicate that the overall debt position will remain manageable.

PART II - BANK GROUP OPERATIONS IN INDONESIA /1

15. As of March 31, 1983, Indonesia had received 48 IDA credits totalling $931.8 million, and 76 Bank loans amounting to $5,295.6 million. IFC investments totalled $136.8 million. The share of the Bank Group in Indonesia-s total (disbursed) external debt outstanding at the end of 1980 was 10.7%, and the share of debt service, 7.1%. By the end of 1981, these ratios increased to 11.2% and 7.4%, respectively. Annex II contains a summary of IDA credits, Bank loans and IFC investments as of February 28, 1983, as well as notes on the execution of ongoing projects. Given the critical importance of agriculture (including transmigration) for employ- ment, food security and exports, over one-third of Bank Group supported projects have been in this sector. In addition, loans and credits have been extended to virtually all other sectors of the economy, including transpor- tation, education, urban development, water supply, rural development, nutrition, industrial development financing (including small-scale indus- try), power, telecommunications, population and technical assistance.

16. During Repelitas I and II, and in line with the objectives of these first two Five-Year Plans, a high proportion of Bank Group lending was directed initially toward the rehabilitation and then the expansion of infrastructure and production facilities. Special attention was also given to meet the shortage of skilled manpower and technical assistance needed for

/1 Substantially unchanged from the President's Report on the Fifth Bapindo Project (No. P-3525-IND), circulated under cover of R83-109, dated April 21, 1983 and approved by the Executive Directors on May 10, 1983. - 7 -

preinvestment studies and project execution. Repelita III, published in early 1979, stressed the need for continued high growth and stability, but departed from previous plans by placing special emphasis on more equitable income distribution and poverty alleviation. This focus, which was fully in line with the conclusions of the basic economic report, required greater attention to employment generation (particularly in the industrial sector) and to improvements in basic public services. While Bank lending was already consistent with these objectives, increased emphasis has been given to these priorities.

17. Because the country has moved from a position of resource surplus to deficit, as discussed in Part I, the development momentum will in all likelihood decelerate in the short run. To minimize this adverse impact will require effective policy reform to improve the environment for private investment and to mobilize additional domestic resources so that investments in industry, infrastructure, tree crop development and human resources development can continue. The Bank's program of lending and economic work is being geared to support the required measures. The primary emphasis of Bank involvement will be on policy and institutional development and tech- nical assistance in the key sectors. This will involve a close integration between sector work and lending and the gradual broadening of lending to the subsector and sector level in order to assist with policy issues at this level. The only significant shift in the composition of lending involves a rapid expansion planned in the education sector, a direct response to the severe shortage of skilled manpower. In the industrial sector, in-depth sector work is focused on a policy to promote industrialization which will build on Indonesia-s comparative advantage in labor and resource intensive industries. This analysis may lead to a series of industrial projects which would facilitate sectoral reform. In energy, sector work and continued lending is concentrating on policies to diversify Indonesia's energy base, rationalize pricing and improve sectoral planning. Irrigation and tree crops will continue to absorb a substantial portion of lending in view of the importance of these sectors, and continued support for transpcrt is anticipated. Continued lending in the areas of provision of social services, in population, health and nutrition, urban development and water supply will increasingly emphasize institutional support and the development of innovative low-cost solutions.

18. The last two years have seen major improvements in the disburse- ment ratio /1 from a low of 13% in FY80, compared to a Bank-wide average of 21.31%, in Thailand of 21.2% and in Nigeria of 17.31% in that year, to 18% in FY82. The poor FY80 ratio was in large part merely a result of the rapid increase in commitments during the FY77-79 period when total Bank/IDA

/1 The ratio of actual disbursements during the fiscal year to the cumula- tive undisbursed amount at the beginning of the fiscal year. 8-

commitments to Indonesia increasedby 122% compared to a Bank wide increase of 83%. However, it also reflectedimplementation difficulties arising out of GOI's budgetary, procurementand payment procedures,including issuance of tender documentsand opening of letters of credit. The severe shortage of managerial and technicalmanpower of course compounds the problem. A number of steps have been taken by GOI and the Bank to address these issues. Several special Bank missions have visited Indonesia to analyze the problems and make recommendationsfor simplifyingbudgetary and financialprocedures. The GOI and the Bank have also institutedformal and regular joint review procedures to identify general and project specific problems and work out corrective measures. In addition,procurement seminars were held in Jakarta in September 1979 and November 1981. As a consequenceof these joint i,nitiatives,GOI has taken measures to streamline some of the complex budgetary and financialprocedures affecting project implementation. In addition, the Bank is helping the GOI in a special effort to identify problems in the constructionindustry with a view to developing appropriate remedial actions and policies. Weaknesses in the domestic contracting industry have been identifiedas one of the major causes of implementation problems in Indonesia. Finally, to reduce initial project implementation difficulties,many operationsare now being presentedfor Board considera- tion at a later stage in the project cycle. As a result of these efforts, improvements are taking place. This was reflected in an increase in disbursements from $204.0 million in FY79 to $501.3 million in FY82, and $301.2 million for the first six months of FY83. It is nevertheless important that the Bank and GOI maintain their efforts.

19. From 1968 until 1974, all lending to Indonesia was made through IDA. Due to the country's improved creditworthiness following the commod- ity and oil price boom in 1973/74, the bulk of the Bank Group-s subsequent lending has been through IBRD loans, with a modest amount of IDA lending being justified primarily on poverty grounds, as the per capita GNP was well below the IDA cutoff of $625. Given Indonesia's much improved credit- worthiness, IDA lending was discontinued in FY80.

20. The proposed project constitutesthe twelfth lending operation presented to the Executive Directors this fiscal year. Projects under advanced stage of preparationand appraisal include the Third Agricultural Training, the Second Nonformal Education, the Nucleus Estate and Smallholder Sugar, and the Provincial IrrigationProjects.

PART III - THE ENERGY SECTOR AND ELECTRICITY SUBSECTOR

Energy Resources

21. Indonesia is richly endowed with energy resources including oil, natural gas, coal, hydropower and geothermal energy. Oil and natural gas now account for almost all of total ccmmercial energy consumption. While - 9 -

undiscovered oil reserves are estimated at 10-40 billion barrels, proven resources are 9.5 billion barrels. Unless massive new reserves are discov- ered, production capacity is unlikely to increase beyond 1.9 million barrels per day. GOI has therefore adopted a policy of promoting alternative indigenous energy sources.

22. The estimated natural gas reserve is 69 trillion cu ft (TCF) of which 85% is non-associated and can be developed independently of oil. However, reserves are generally located away from population and industrial centers. The Arun field in North Sumatra has 17 TCF and Natuma, in the South China Sea, 35 TCF. Production of natural gas reached 2,700 million cu ft per day in 1979. Half of this was exported as LNG to Japan from Arun and Badak. LNG production is expected to double by 1985 to 15 million tons per year and to reach 28 million tons by 1990. Gas pipelines have been laid to domestic steel and fertilizer factories and domestic consumption is expected to increase by 15% every year.

23. Indonesia's coal reserves are believed as high as 20 billion tons, mostly located in West and Seuth Sumatra and Kalimantan. While production is currently about 450,000 tons per year, major increases are expected by GOI. Coal will become the major source of fuel for the power sector as major thermal plants come on line in the 1980s. Work started early in 1982 on a 3.2 million tons per year mine at Bukit Asam in South Sumatra, and on a 0.6 million ton per year mine at nearby Muara Tiga coal field. Muara Tiga has reserves to increase production to 2.8 million tons per year by 1990. These two mines will supply coal to the Suralaya thermal power station which is currently under construction in West Java; two 400 MW generating sets will be in commercial operation there during 1985. A crash program to raise the production at Ombilin in West Sumatra to 1.3 million tons per year by 1989 is now under active consideration by GOI. In addition, in 1981, GOI entered into a number of production sharing agreements with private foreign and Indonesian joint-venture companies for exploration and exploitation of Kalimantan coal reserves. Exploration is now in progress.

24. Indonesia's total hydroelectric resources are large but its development is limited by its geographic distribution relative to demand. The greatest potential (over 35%) lies in Irian Jaya where the demand is less than one percent of total domestic demand, while Java, which accounts for 80% of the current demand, has less than 10% of the total potential. Existing hydro- electric (both PLN and non-PLN) installations aggregate to 1,312 MW; they are located mainly in Java (489 MW), Sumatra (612 MW), and Sulawesi (181 MW). Schemes with an aggregate capacity of about 980 MW are currently under construction. PLN is now carrying out a basic systematic countrywide resource survey which, by mid-1983, would prepare a reliable inventory of hydroelectric sites and a detailed program for their investigation. Such resource survey will be followed up with various prefeasibility and feasi- bility studies of the potential hydroelectric sites; the Bank will finance studies of 26 such hydroschemes under the energy sector support program - 10 -

included in this project. Further, in 1982, GOI/PLN entered into an innova- tive design-and-construct turnkey contract for the 190 MW Mrica hydroelec- tric project in Central Java, financed mainly by commercial credits. If this venture results in completion by the target date and at reasonable costs, this approach could enable more rapid development of hydro resources in future.

25. Surface rmianifestationsof geothermal energy are found on all islands except Kalimantan, but only a few sites have been investigated and only one, Kamojang in West Java, has been delineated. It is believed that potential reserves may approach 10,000 MT distributed as follows: Java 5,500 MW: Sulawesi - 1,400 MW; Sumatra - 1,100 MW4; other islands - 2,000 MW. GOI, in collaboration with the Government of New Zealand, initiated devel- opment of Kamojang field in 1976. The first 30 MW generating set was just commissioned for commercial operationin January 1983; the twelfth power project (Loan 2214-IND) will assist in expanding the station by 110 Ml. In 1982, PERTAMINA (the National Oil and Gas Company) entered into a joint- operation contract with Union Geothermal, a subsidiary of Union Oil of California, for development of the Salak field in West Java; up to 495 MW of capacity is ultimately believed possible there. Exploration is in progress. GOI has announced its intention to develop 900 MW: of geothermal capacity by the end of the decade and plans to lease other sites to successful bidders.

26. Besides promoting the exploitation of alternative commercial energy sources, GOI is also exploring the possibility of substituting charcoal for kerosene, which is widely used for cooking and lighting. Indonesia-s forestry resources are abundant, and since they represent renewable sources of energy, the cotntry could derive considerable savings if appropriate technologies were developed to facilitate the use of firewood for energy.

Institutions in the Energy Sector

27. The principal agency responsible for the implementation of GOI policies in the energy sector is the Ministry of Mines and Energy (MME). MME was established in 1978 to coordinate all activities in the energy sector and control the three state enterprises responsible for the execution of GOI policies in the energy subsectors PERTAMINA for oil and gas, BATUBARA for coal and PLN for electricity. Other ministries and agencies are also involved in the sector: for example, Public Works deals with hydropower resource surveys, Agriculture oversees forestry products, and the National Atomic Energy Commission is responsible for nuclear development. In order to ensure appropriate coordination of energy policy the President recently established an inter-ministerial National Energy Board (BAKOREN) to oversee sectoral development. Perhaps one of the most important of these organiza- tional steps was the establishment of a unit for energy planning in the MME under the control of Directorate General of Electric Power (DGEP). The Bank is also assisting MME in this area of institutional development (para. 30). - 11 -

Bank Role and Strategy in the Energy Sector

28. The Bank has been actively involved in some of the sectoral developments described above. During 1981, at the invitation of GOI the Bank/UNDP carried out a detailed assessment of the Indonesian energy sector, identifying policy options and analyzing investment priorities to provide a framework for technical assistance and advice to GOI on institutional aspects. The results have been incorporated in a report (No. 3453, August 1981) entitled 'Indonesia Issues and Options in the Energy Sector." This report confirms earlier findings that alternatives for oil must be developed quickly for electricity generation, and recommends that this should be extended to industry, transportation and households. It further points out that subsidized oil prices, weak institutions, manpower shortages and a lack of detailed energy sector planning remain the chief obstacles to rapid substitution of oil.

29. Subsidized petroleum product prices have caused serious distor- tions in the economy by failing to reflect the opportunity cost of these products. The effects of this have been to favor the use of oil over other competing fuels, the promotion of domestic consumption over exports and, because the degree of subsidy between oil products is uneven, to distort demand between individual petroleum products. The Bank has had a continuous dialogue with GOI on the quiestion and has highlighted the consequences of this policy in its economic and sector work, particularly in the above Energy Sector Report. During these discussions, GOI has expressed its intention eventually to eliminate subsidies on domestic oil consumption, subject to maintaining the ability of poorer consumers to satisfy their energy needs. This was most recently reflected in the domestic oil prices increase of more than 60% in January 1983, which followed a similar increase in January 1982. While this was a decisive step that substantially reduced the differential between domestic prices and the average opportunity cost, price relativities between products diverge widely from those prevailing on the interantional market. For example, prices for aviation fuel and regular gasoline are 119% and 144% of international levels, whereas prices for kerosene and industrial diesel oil are 40%4 and 55% of international levels. The Bank is currently finalizing a detailed follow-up study of the above Energy Sector Report whose specific focus is on the pricing of energy products and the implications of increasing energy prices in the industrial, household and transportation sectors and on macro-economic environment. On completion of this study, the Bank will hold further discussions on the energy policy issues with GOI.

30. The Bank is also providing various assistance for the institu- tional development in the energy sector. Under the fifth technical assist- ance project (Credit 898-IND) the services of various experts are being provided for the energy planning unit of the MME. Under the seventh power project (Loan 1513-IND) a consultant, PA International of the UK, designed a management information system for all DGEP activities, which will be imple- mented during the next two years. In addition, a number of assistance - 12 -

efforts have been devised for PLN in such important areas as planning, construction, accounting and training, and are mostly financed with the Bank funds (paras. 44 and 45). Furthermore, in the coal subsector, various steps are being initiated for the institutional and manpower development under recent Bank-assisted projects, the Bukit Asam Coal Mining Development and Transportation Project (2079-IND) and the Coal Exploration Engineering Project (Loan 2153-IND); and their progress will be closely monitored.

31. The magnitude of investments necessary to implement GOI's policy of diversification of energy sources is large. The Bank estimated that the annual investments in the energy sector will increase from about $1.27 bil- lion in 1980 to about $10 billion (at 1980 levels) in the year 2000. About half of these will be directly in the electricity subsector. The Bank-s lending strategy for energy is to continue its support for the investment program in the electricity subsector during the next few years with a focus on steps to overcome institutional weaknesses and manpower shortages. Additionally, future projects are expected in coal mining development, and possibly in city gas/LPG production to assist GOI's energy diversification policy.

The Electricity Subsector

32. The electricity subsector is regulated by MME through the DGEP. It comprises (i) PLN, (ii) captive plants installed by private parties for their own use, (iii) some small municipal franchises, and (iv) a small n,'ber of cooperatives which were set up to provide electricity in certain rural areas remote from PLN supply systems. Legislation was enacted in 1979 to provide for private and cooperative franchise participation in the electricity sector.

33. PLN-s Organization. PLN is a public corporation (Perum) constituted under Presidential Decree No. 18 of 1972, with responsibility for the generation, transmission and distribution of electricity and the planning, construction and operation of electricity supply facilities. PLN is managed by a board of directors headed by a President Director, who is appointed by the President and is accountable to the Minister of Mines and Energy. The President Director has authority for all day-to-day operations of PLN. The board currently includes five other directors with functional responsibility respectively for planning, construction, operations, finance and administration. Operational responsibility devolves to 17 regions, and responsibility for major construction to 14 project managers. Also reporting to the board are three staff units responsible respectively for power research, education and training, and management services, and an audit unit, called the Corporation Inspectorate.

34. PLN's Facilities. PLN is the dominant executive agency in the electricity subsector. It currently has about 3,000 MW of installed gener- ating capacity - 1,150 MW of steam (oil fired), 800 MW of gas turbines, 500 MW of diesels, and the balance in hydroelectric installations. PLN also - 13 -

operates over 6,400 km of transmission lines at 70 and 150 kV and about 50,000 km of distribution lines, the bulk of which are in Java. About 2,000 km of 150 kV transmission lines under construction are scheduled for completion this year. Java now has a fully interconnected grid at 150 kV. By 1904, a 500 kV system covering West and Central Java will be commissioned; it will be extended to East Java by 1086.

35. PLN's Market. A study to assess potential demand in Java (which. presently accounts for about 80% of the electricity consumption) was under- taken in 1974-76 by consultants financed under an early power project (Credit 399-IND). It showed that the underlying demand is so large that PLN's sales growth would be limited only by its ability to supply until about 1990; only thereafter would it be limited by growth of the market itself. From 1977 to the present, PLN's sales have increased annually by an average of 22%. Long waiting lists for new service connections and the relatively low utilization of electric power inIndonesia by comparison with neighboring countries, evidence a rarket potential consistent with the 1975 study. New forecasts are now being compiled by PLN. The present projec- tions are that PLN's sales will grow at an average rate of about 20%X per year until the end of the decade.

36. PLN-s Long-term Development Plan. PLN follows the practice of preparing annually a long-term development plan to cover the projected requirements of generation, transmission, distribution and other facilities. The latest plan, covering the development period 1982/83 to 1993/94, shows generating capacity increasing to about 19,000 MW. Coal-fired steam, hydro- electric, and geothermal plants will register the greatest growth. These sources, which presently account for only 1P7 of the total generating capa- city, will increase their share to over 70% by 1993/04. Oil accounted for 80% of PLN-s generation in 1981/°2 but its share is expected to decline to about 20% in 1993/94. It is thus a vital part of GOI's program of develop- ment, of non-oil energy sources. The annual investments (1983 prices) are projected to increase from $1.05 billion in 1982/83, to about $2.56 billion at the end of the decade. PLN should be able to implement it provided the required finance can be mobilized (para. 39) and provided management can maintain the impressive rate of organizational growth (para. 45).

37. PLN's Financial Results. Coincident with PLN-s incorporation in 1972, measures were set in hand with the support of the Bank Group to establish a sound financial basis for the organization and eliminate the operating losses which were then being incurred. This was achieved by 1976. Since then, PLN-s growth has been impressive: energy sales increased from 2,800 GWh in 1975/76, to 9,400 GWh in 1982/33, and capital expenditure grew from under Rp 200 billion to around Rp 800 billion in the same period. However, tariffs remained unchanged from 1976/77 through 1979/80 and earn- ings and rates of return were negligible until 1980/81. In the period 1975/76 through 1982/83 PLN self-financed 19%o of its capital program, mainly from depreciation retentions and customer connection contributions. Borrow- ing accounted for 33% of the program, but the major source of funding was - 14 -

GOI, which provided 48% of the program by way of equity contributions. As a result of this mix of funding, PLN's debt: equity ratio is still quite low at 30:70. Its latest balance sheet shows a healthy current ratio of 4.1 and substantial liquidity. The main financial issues currently facing the corporation are power tariffs and capitalization policy.

38. Power Tariffs. In 1979, GOI and PLN agreed under the seventh power project that tariffs for electricity should reflect long-run marginal costs (LRMC) as closely as possible. Since then PLN had made three tariff increases including the latest one of 38% in February 1983. The present average tariff level (Rp 75 per kWh) is about 65% of the current average LRMC. Financial performance targets agreed between PLN and the Bank (para. 40) are predicated on attainment of an average tariff level equivalent to LRMC by 1985/86. However, the above tariff increases in the past have been effected entirely through energy charges /1 without appropriate adjustments in demand charges /1 resulting in a distorted tariff structure. While the present basic tariff schedule was introduced in May 1980, its structure is therefore due for revision. One of the major distortions is that peak hour charges (to industrial/ commercial customers) are substantially below the costs of peak hour supply. Accordingly, an agreement was reached during negotiations for the proposed project that PLN will complete by December 31, 1983 a study of its cost and tariff structure which would better reflect LRMC of electricity supply (including peak hour characteristics). Based on the result of such study, and after consultation with the GOI and the Bank, PLN will design by March 1984 a new tariff structure and thereafter will implement the appropriate recommendations and update its analysis of LRMC each year (Section 3.08 of the draft Project Agreement).

39. Capitalization Policy. The attainment and maintenance of tariff levels at LRMC would set a parameter to PLN's internal cash generation capability. Furthermore, the size of PLN's planned capital expenditures, and budgetary constraints facing GOI in the near term, suggest that it would be imprudent for PLN to count on continuing to receive such a large propor- tion of its funding in the form of GOI equity as it has done in the past. But PLN is currently well placed to increase its level of borrowing. Its balance sheet is sound and, given the low risk inherent in its near-term investments (para. 35), PLN should be attractive to lenders both inside and outside Indonesia. Therefore, its near-term objective should be to secure a significantly higher degree of leverage in its financing plan by increasing its long-term borrowing. A debt:equity ratio of at least 50:50 appears easily supportable even on quite rigorous assumptions as to terms of borrow- ing, and the Bank has therefore recommended to GOI and PLN that they should

/1 "Energy charge" is the charge per kWh based on metered consumption of electricity. "Demand charge" is the fixed component of a customer's bill which is designed to recover the "capacity costs" (e.g. depreciation, finance charges) of the capacity the utility must keep to meet peak demands. - 15 -

consider increasingPLN's leverage to this level. GOI has commissionedits financial advisers to examine and report on PLN's financialstructure in order to define a capitalizationpolicy for PLN and help the corporation prepare a financingplan.

40. PLN's Future FinancialPerformance. After financialrecovery in 1976, PLN agreed with the Bank to adopt cash generationtargets /1 as a measure of financialperformance. Targets for 1979/80, 1980/81 and 1981/82 were met. At negotiationsfor the Twelfth Power Project (Loan 2214-IND) in late 1982, a target of 20% was set to be reached in 1985/86, with interim targets for 1982/83 through 1984/85 of 10%. To preserve the stabilityof cash flow and facilitatesteady progress towards the pricing objectives,the cash generation percentage target for each year is subject to adjustmentto take account of revisions of the capital expenditureforecast or changes in fuel prices from the 1982 bases on which the targets were calculated. The latest financialprojections indicate that, with these adjustments,the present targets remain attainable by PLN provided tariffs rise to the level of LRMC as intended. They will be retained under the proposed project. (Section 4.05 of the draft Project Agreement).

41. The Bank has suggested that a rate of return approach would now be a more appropriatemeasure of PLN's financial performance,but GOI does not wish to reformulatethe corporation-sfinancial objectivesuntil it has received the report of its advisers on PLN's capitalization(para. 39). The Bank will accordinglypursue the suggestionin the context of future pro- jects. The objectives currentlyestablished for PLN and expressedin terms of the cash generation targets describedabove representa positive rate of return on revalued net operating assets, rising from 3% in 1983/84 to about 8% in 1985/86, and remainingat a level above 12% for the proposed project period (1988/89).

42. Existing debt limitation covenantsunder the ongoing Bank power loans based on the debt:equityratio and the debt service coverage ratio (on historical net revenue basis) will be replaced under the proposed loan by a new debt service coverage ratio covenant based on forecastnet revenues (Sections 4.03 and 4.06 of the draft Project Agreement). Under the new covenant debt shall be deemed to be incurred on the date of the agreement providing for such debt or guarantee, rather than on the date and to the extent it is drawn down. These changes reflect the growing recognitionthat the new covenant would suffice for PLN's prudent debt management and, at the same time, make allowance for the added revenue to be expected from an investment being financed by borrowed funds. The new definitionof the timing of debt incurrencealso gives a more practical applicationfor an

/1 The percentage of capital expendituresfor the target year plus the two preceding years covered by its net revenue plus depreciationretentions less debt service for the same three years. - 16 -

expanding entity such as PLN, which is expected to rely more on borrowings to finance its large investmentprogram over a long period. PLN's financial projection shows its debt:equityratio approaching50:50 by the end of the decade with debt service remainingcovered at least 3.0 times; this is satisfactory.

43. PLN's Overall Performance. Over the past ten years, particularly during the recent four years, PLN has grown impressivelyto become the larg- est infrastructureutility in the country. During these four years (1978- 82) PLN has connected new consumersat the rate of about half a million every year, and its sales increasedannually by an average of 22%. Access to service increased by about 50%. Performanceindicators such as the number of consumers per employee and the energy sold per employee improved. Transmissionand distributionlosses were reduced by 5% to about 20%, which would be further reduced to an average of 16% by the end of FY84/85 under the loss reduction program included in the Bank-assistedTwelfth Power Project. Standards of reliabilityof supply were improved. The growth of uneconomic captive plants in the country declined after 1977 and seems to have virtually ceased.

44. Inevitably,such rates of growth have been attained at the cost of considerablestrain on the management system. Key areas in which a need for strengtheninghas been recognizedas a condition of maintainingthe rate of growth may be summarized as follows:

(a) planning: development plans - now fairly refined - need supporting with financingand manpower plans to be fully credible;

(b) construction: problems of constructionslippage, which began to emerge as PLN tackled increasinglylarge and complex projects in the 1980s, have highlightedthe need to clarify and rationalize responsibilityfor project management and improve control of progress and cost;

(c) accounting: the company has outgrown its accounting and budgeting systems, which are now badly in need of overhaul;and

(d) manpower development: the shortage of techniciansand trained managers at all levels indicates that PLN must expand its in-house facilities for training and manpower development.

45. In all of these areas appropriate remedial technicalassistance has been devised in consultationwith the Bank, and in most cases is suppor- ted with Bank funds. In constructiona major consulting assignmentis already underway (Loan 1708-IND),and others are at an advanced stage of preparation in accounting (Loan 2056-IND) and training (Loan 2214-IND). Other smaller inputs of technicalassistance have been financed as needed both by the Bank and other lenders. As the results of these inputs materi- alize over the course of the next few years, gains in efficiency can be expected in the management areas affected. To maximize the gains, however, - 17 -

and to sustain the planned rate of growth over the next decade (20% per annum average in sales, 15% in facilities), PLN could with advantage now consider a new approach to general management, fostering a greater degree of delegation of authority and decentralization of decision-making and discour- aging rigid adherence to hierarchical lines of communicaticn. Such an approach could convey considerable benefits in efficiency and motivation, and the Minister has already initiated certain steps in that direction, including in particular a review of the job descriptions of all management positions in PLN, with the prime objective of rationalization.

46. Bank's earlier operations and PLN's performance. Since 1969, for a total of twelve projects, the Bank Group has provided $1,590 million for power generation/distribution facilities in and around Jakarta and in West and Central Java. Four distribution projects (Credits 165 and 334, and Loans 1259 and 2056) rehabilitated and expanded the distribution facilities in the greater Jakarta area. Eight power generation projects (Credits 399, and Loans 1127, 1365, 1513, 1708, 1872, 1950 and 2214) in West and Central Java were undertaken to help PLN expand electricity generation capacity in Java and provide a strong all Java 500 kV grid and to introduce a program of micro hydro development in Sumatra. A completion report on the first two projects (Credits 165 and 334) was issued in November 1979. The completion report on the third and fourth projects was prepared in 1981 and is still under review by OED. Lessons learned from all these operations have been applied to subsequent operations. They relate mainly to timely appointment of consultants, effective supervision, and lending as late as possible in the project cycle.

47. PLN's performance in implementing twelve Bank Group assisted power projects was uneven at first. The earliest generation project (Credit 399- IND) covering the first and second 100 MW units at Muara Karang thermal station was completed about two years behind schedule; the next (Loan 1127- IND) for the third 100 MW unit, had a delay of less than one year. The 2 x 200 MWJ extensions at Muara Karang (Loan 1365-IND) have just been completed, over a year late and are operating satisfactorily. The Semarang project (Loan 1513-IND) is about 18 months behind the appraisal schedule. The two projects at Suralaya (Loans 1708-IND and 1872-IND) are also about a year behind the original program. Physical progress of construction at the Saguling hydropower project (Loan 1950-IND) was poor at the start but it has since improved and is now proceeding fairly satisfactorily. Completion of the Saguling dam is expected close to the appraisal target date though the commissioning of the power station may be delayed by a few months mainly due to landslide problems in the power house area. Good progress has been made on procurement under the eleventh power project (Loan 2056-IND) with contracts for about 87% of the loan amount having been approved within six months of effectiveness of the loan. Under the twelfth power project contracts valued at about $40 million for urgently needed equipment were approved before presentation to the Executive Directors. The overall record of implementation of agreements reached in connection with these power operations has been satisfactory. - 18 -

PART IV - THE PROJECT

48. The Cirata hydroelectric project was identified in 1973 during a preliminary survey by the Japan International Cooperation Agency. The feasibility study funded under Loan 1365-IND was undertaken by New Japan Engineering Consultants (Newjec), who were also entrusted with detailed engineering and preparation of bid documents under the tenth power project (Loan 1950-IND). A Bank mission appraised the project in December 1992, and negotiations were held in Washington in April 1983 with the Indonesian delegation led by Abdul Kadir, Director for Power Industries, DGEP. Supplementary data are in Annex III. The Staff Appraisal Report (No. 4356-IND) is being circulated separately to the Executive Directors.

Project Objectives

49. The project to be located at Ci-rata - on the Citarum river down- stream of another Bank assisted Saguling hydroelectric project site (Loan 1950-IND) would provide 500 MW of generating capacity initially (1,500 MW ultimately) in Java, where electric power consumption is increasing rapidly and additional peaking capacity is vitally necessary to complement the steady growth of baseload coal-fired thermal generating capacity from lQ84 onwards. The project will also assist GOIs policy of economizing in the consumption of domestic oil by maximizing the use of renewable primary energy sources. It is on the least-cost path of electric power development for Java. It will further strengthen PLN-s ongoing institutional develop- ment through improved construction management and studies for further development of the energy sector.

Project Description

50. The project com,rises:

(a) construction of a storage dam, 125.0 m high, at Cirata on the Citarum river, a 1.0 km long water conductor system comprising tunnels, surgetanks, and penstock tunnels, and a 500 MW power station (with 4 generating sets each rated at 125 M4), with an associated 500 kV step-up substation and a 25 km transmission line to nearby Saguling, including engineering services;

(b) provision of construction machinery for a PLN task force; and

(c) support of the government-s energy sector program by providing technical assistance, studies and related equipment.

51. PLN has built up a small construction task force of its own, equipped to deal with emergencies - mainly on work being carried out by local contracts - to ensure that the construction schedule of the main - 19 -

project is not adversely affected by delays. Construction equipment required, estimated to cost about $1.2 million is, therefore, included in the scope of the project.

52. As GOI0s energy sector development program increases in size and complexity, a variety of technical assistance for specialized activities become increasingly necessary to sustain future overall sector growth. In the power subsector, while past Bank lending operations have provided substantial technical assistance for various needs including institutional development, financial provisions for this assistance are expected to be fully utilized in the next few years. In order to continue to assist GOI/PLN in these areas, the project includes an energy sector support component totalling $37 million. These funds would be utilized for consultancy services and related equipment to assist PLN, including, inter alia, (a) construction management of major complex hydroelectric and thermal power stations ($2.2 million); (b) pre-feasibility or feasibility studies of 26 future potential hydroelectric sites ($18.3 million); (c) feasibility study of a new coal-fired thermal station site in West-Central Java ($2.5 million); (d) engineering design for Salak geothermal station in West Java ($4.0 million); and (e) engineering for Paiton coal-fired thermal station in East Java ($7.9 million). PLN would retain these consultancy services in accordance with Terms of Reference satisfactory to the Bank.

Implementation

53. The project will be implemented by PLN. PLN has appointed a project manager who has experience in dam construction in Indonesia, along with an adequate complement of field staff. The project manager will be assisted by PLN's headquarters staff. However, in light of the complexity of the construction management involved in this type of major dam, PLN agrees with the Bank that expert assistance, including those of a civil works contract specialist on call and a full-time hydroelectric construction (dams and underground works) expert, would be required during the implemen- tation period; and funds are accordingly provided under the loan for the use of such experts by PLN. The construction organization and arrangements are appropriate for the nature of work involved.

54. Newjec of Japan is the consulting engineer and is responsible for design and construction supervision of the project. In addition, a Special Board of Consultants (BOC) which was originally appointed to review the investigations and design for the Saguling hydroelectric project, has been closely associated also with the Cirata project, reviewing the feasibility study and detailed engineering to ensure that due consideration was given to all aspects involving safety of the structures. The appointments of Newjec and the BOC members were made by PLN in consultation with the Bank. Con- tinued employment of consultants, including BOC, under terms and conditions satisfactory to the Bank is a condition of the proposed loan (Section 2.02 and 2.08(b) of the draft Project Agreement). - 20 -

55. Detailed engineering of the project was completed in 1982. Tender documents for main civil and metal (penstock) works were issued on November 1, 1982 and opened on February 1, 1983. Those for electrical and mechanical works were issued on December 1, 1982 and opened on April 2 and 9, 1983. A decision by GOI on award of the contracts for the former works is expected by June 1983, and for the latter works by August 1983. The following prepa- ratory works of the project are now in various stages of implementation: (a) construction of about 35 km of access roads, improvement,and upgrading of about 24 km of existing roads, three bridges and two main construction camps and 70/20 kV lines for construction power supply; and (b) relocation of about 22 km of roads and construction of several small bridges. The target is to commission the first two generating sets by November 1987 and the remaining two during April 1988. The construction program is tight but capable of being achieved. Crucial to its success is the award of the main civil works contract in time to enable the main contractor to mobilize and start work on the diversion tunnels for the main dam by July 1, 1983. PLN and GOI have reviewed their procedures for bid evaluation and approval of the main civil works contracts, which, if adhered to by all parties involved, could meet the project requirements. After commissioning of the project, periodic inspection and regular maintenance of the works will be essential; an assurance would be obtained that PLN would prepare such arrangements or programs satisfactory to the Bank, and implement them when the project becomes operational (Section 2.08(a) and 2.09 of the draft Project Agreement).

Costs and Financing

56. Total project costs are estimated at $625.7 million excluding interest during construction and the front-end fee on the proposed Bank loan. Of this, $346.3 million (55%) is in foreign exchange. The total financing requirements, including the interest during construction and the capitalized front-end fee, are estimated at $769.1 million. Physical con- tingencies have been provided for at the following rates: (a) electrical and mechanical equipment and metal - 5%; (b) preparatory civil works - 15%; and (c) main civil works - 12%. An additional physical contingency is provided for unforeseeable conditions specially expected on this project due to (i) complications of geology in the andesite quarry site; and (ii) potential landslides of volcanic breccia and mudstone zones. These have been assessed in rough detail and work out to about 10% of the base cost of the civil works. Physical contingencies represent 15% of base costs, which are at June 1983 price levels. Price contingencies were estimated as follows: for the local costs, 20% for 1983, 15% for 1984, 11% for 1985, and 7% thereafter; for the foreign exchange costs, 8.0% for 1983, 7.5% for 1984, 7.0% for 1985, and 6.0% thereafter. As a percentage of base costs plus physical contingencies, price contingencies represent 31% of the local component, 13% of the foreign component and. 20% of the total. The cost estimate for engineering covers 600 man-months- preconstruction design and 2,400 man-months for supervision of construction. The average man-month cost, including basic salary, overhead and fee, international travel, - 21 -

overseas allowance for resident field engineers and subsistence allowances for staff on short field visits, is about $10,400. In addition, local subconsultants will contribute about 700 man-months at an estimated cost of $2,600 per man-month.

57. The proposed Bank loan of $279.0 million, including the capital- ized front-end fee will account for 36% of the total financing requirements, and will meet 63% of the foreign exchange financing requirements. Specifi- cally the Bank loan will cover the foreign exchange costs of (a) the civil and metal works including preliminaries and environmental related works as well as construction machinery for a FLN task force; (b) engineering; and (c) energy sector support component. The balance of the foreign exchange requirements will be met by $68.0 million of export credits for electrical and mechanical works and $98.0 million from GOI/PLN sources for the interest during construction. Furthermore, part of the local costs will be financed by a $20 million loan from CDC; the entire balance of the local cost requirements will be met by COI/PLN. The Bank loan would be to the GOI, which will onlend the proceeds to PLN. The onlending interest rate would be equivalent to the variable interest rate charged on the Bank loan, plus a quarter percent for administration charges for a period of 20 years, includ- ing 5 years of grace. The foreign exchange risk would be borne by the GOI. Signing of the Subsidiary Loan Agreement will be a condition of loan effectiveness (Section 6.01(a) of the draft Loan Agreement).

Procurement and Disbursement

58. Procurement of the major civil works ($249.5 million), metal works ($20.8 million) and construction machinery ($1.2 million) whose foreign exchange components would be financed from the proposed Bank loan would be through international competitive bidding in accordance with Bank guide- lines. The civil and metal works bidders were prequalified by PLN, after due international notification, in consultation with the Bank. The electri- cal and mechanical equipment to be financed under export credits ($68.0 mil- lion) would be procured in accordance with GOI regulations. Contracts for minor civil works, such as site preparation and road relocation, would be awarded through local bidding procedures which were found at appraisal to be satisfactory to the Bank. In addition, minor equipment under the energy sector support component would be procured in accordance with GOI's local procedure up to the aggregate amount of $500,000 equivalent.

59. The Bank loan will be disbursed against the following items: (a) civil works - 71.5% of expenditures on main civil works;/l (b) metal works and equipment - 100% of foreign expenditures, 100% of the ex-factory cost

/1 The Bank's disbursement against main civil works will be equivalent to about 80% of the balance of the total value of the contracts after $20 million of CDC funds will have been first fully disbursed against the same contracts. - 22 - for locally vianufacutured goods, 65% of local expenditures for other goods imported locally; (c) consultant services 100% of expenditures; and (d) insurance - 65% of expenditures TIn order to lessen the burden of project firancing on the GOI budget during the next two years of critical resource constraint (para. 61) and in line with the Bank's Special Assistance Program, it was agreed that the percentage of disbursements under (a) above will be increased to 90% during the first t-wo years and subsequently reduced to achieve the above overall disbursement percentage. An amount of $6.2 million is expected to he incurred on consultant services prior to loan signing and will be eligible for retroactive financing0

Benefits and Risks

60o Using the tariffs currently paid by the consumers to be served by the project as a surrogate for the benefits they will receive, the economic rate of return to the project (ERR) is 14%o The project would, in addition to the benefit of power generation under the first stage, provide benefits of additional generating capacity (1,000 fW) in the ultimate stage. Furtk.er, it would afford downstream beneflits of municipal water supplies to greater Jakarta and/or irrigation extension; these have not been evaluated. The ERR of the project would be reduced to 12.3% if there is a delay in construction of 6 months combined with a cost increase of about 10%.

61. The rissks associated with the proposed project are the uncertainties inherent in most hydroelectric projects, such as possible geological problems, hydrological complexities, and similar matters. However, the thorough and competent preparatory work undertaken by PLN and consultants, as well as the precautions taken in establishing the BOC right from the stage of feasibility studies through detailed engineering, are expected to reduce the risks. PLN proposes to take out an umbrella type, all risk insurance on the same basis as for the ongoing Saguling project as advised by insurance experts. An additional physical contingency is provided for unforseeable conditions especially expected on this project due to: (a) com plications of geology in the andesite quarry site; and (b) potential land- slides of volcanic breccia and mudstone zones. A further risk is delay to the project as a result of scarcity of local counterpart funding resulting from the present recesssion. Tariff action by PLN to increase its self- financing ratio (para. 40) will red-ace its dependence on GOI budgetary contributions. The measure to increase disbursement percentage of the Bank loan against civil works during the first two years of project implemen- tation will also help reduce this risk (para. 59).

Environmental and Ecological Impact

62. Environmental aspects have been given due consideration from the initiation of the project investigations in 1980. There has been extensive ivolvement of environmental specialists in baseline and impact studies, design review, and implementation planning. The cooperation of project - 23 -

management and provincial and Kabupaten leaders has been commendable. The Governor of West Java and the Bupatis (District Chiefs) of three affected Kabupatens, have supported the project by issuing seven decrees to facilitate land acquisition, resettlment planning and resettlement implementation. In January 1983, the Minister of Environment, cleared the project for construction.

63. Compensation and resettlement of persons with homes or other major interest in the reservoir areas were the most serious environmental problems confronting the project. To resolve it, the following measures have been taken: (a) a two-year anthropological, socio-economic, and ecological base- line and impact study (including censuses and property inventories) has been completed; (b) practical alternatives to transmigration have been developed, scheduled, and evaluated for the 6,355 families residing in the reservoir area; (c) decrees freezing land transactions, creating a Resettlement Coordinating Board, stating resettlement policy, and creating resettlement implementation teams have been issued and are now in effect; (d) a direct- payment compensation system has been in satisfactory operation for more than a year; (e) a resettlement cost estimate has been prepared on the basis of recent experiences in land acquisition, compensation administration, access road construction and site planning and development; (f) high-level cross- sectoral mechanisms have been established since March 1983 to deal with the resettlement problems of people affected by large hydroelectric development schemes; and (g) adequate budgetary arrangements have been made for FY83/84 to permit prompt response to environmental problems at the provincial and local levels. Apart from the problem of optimizing the high water level of the reservoir and its design life, public health impacts, aquatic weed control, fisheries enhancement and drawdown agriculture were the main ecological issues; all of these have been the subject of investigation, and satisfactory arrangements to regulate each have been implementeed. Although considerable attention has been given to planning resettlement as above, in light of actual experiences of implementation problems gained in connection with the on-going Saguling project, assurances were obtained from GOI that it will continue to (a) carry out an environmental/resettlement Plan of Action satisfactory to the Bank; (b) monitor closely resettlement and environmental activities; and (c) furnish to the Bank quarterly reports on the progress and implementation of the Plan of Action and other aspects related to resettlement and environmental activities (Section 3.06 of the draft Loan Agreement).

PART V - LEGAL INSTRUMENTS AND AUTHORITY

64. The draft Loan Agreement between the Republic of Indonesia and the Bank, the draft Project Agreement between the Bank and Perusahaan Umum Listrik Negara, and the report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement are being distributed to the Executive Directors separately. - 24 -

65. The special features of the Loan and Project Agreements are referred to the Section III of Annex III. Special conditions of effective- ness of the Loan are that: (a) all conditions precedent to the effective- ness of the CDC Loan Agreement shall have been fulfilled; and (b) the Subsidiary Loan Agreement has been signed on behalf of the Borrower and PLN (para. 57 and Section 6.01 of the draft Loan Agreement).

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

PART VI - RECOMMENDATION

67. I recommend that the Executive Directors approve the proposed loan.

A. W. Clausen President

Attachments

May 11, 1983 Washington, D.C. ANNEX I - 25 - Page 1 of 5 pages

INDONESIA - SOCIAL INDICATORS DATA SHEET

INDONESIA REFERENCEGROUPS (WEIGHTED AVERAGES AREA (THOUSANDSQ. KM.) - MOST RECENT ESTIMATE) a TOTAL 1919.3 MOST RECENT LOW INCOME MIDDLE INCOME AGRICULTURAL 316.5 1960 lb 1970 /b ESTIMATE /b ASIA & PACIFIC ASIA & PACIFIC

GNP PER CAPITA (US$) 80.0 140.0 430.0 261.4 890.1

ENERGYCONSUMPTION PER CAPITA (KILOGRAMSOF COAL EQUIVALENT) 124.7 121.9 225.4 448.7 701.7

POPULATIONAND VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 94680.0 116143.0 146557.0 URBAN POPULATION (PERCENT OF TOTAL) 14.6 17.1 20.2 17.3 32.4

POPULATION PROJECTIONS POPULATION IN YEAR2000 (MILLIONS) 216.0 STATIONARYPOPULATION (MILLIONS) 376.3 YEAR STATIONARYPOPULATION IS REACHED 2110

POPULATIONDENSITY PER SQ. KM. 49.3 60.5 74.6 158.1 255.9 PER SQ. KM. AGRICULTURALLAND 355.9 378.8 452.4 355.9 1748.0

POPULATION AGE STRUCTURE(PERCENT) 0-14 YRS. 40.7 44.0 40.1 36.8 39.9 15-64 YRS. 56.2 53.4 56.9 59.7 56.8 65 YES. AND ABOVE 3.1 2.5 3.1 3.5 3.3

POPULATIONGROWTH RATE (PERCENT) TOTAL 2.1 2.0 2.3 2.0 2.3 URBAN 3.7 3.6 4.0 3.3 3.9

CRUDEBIRTH HATE (PER THOUSAND) 46.8 40.7 35.3 29.3 31.8 CRUDE DEATHRATE (PER THOUSAND) 24.5 17.2 13.3 11.0 9.8 GROSS REPRODUCTIONRATE 2.8 2.7 2.2 2.0 2.0 FAMILY PLANNING ACCEPTORS, ANNUAL(THOUSANDS) .. 181.1 2216.0 USERS (PERCENT OF MARRIEDWOMEN) .. 0.2 27.1 19.3 36.3

FOODAND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 93.0 102.0 113.0 108.1 115.6

PER CAPITA SUPPLY OF CALORIES (PERCENT OF 7 REQUIREMENTS) 86.3 93.9 101. /c 97.3 4 106.E PROTEINS (GRAMS PER DAY) 38.2 42.4 4 .8/c 56.9 54.4 OF WHICH ANIMALAND PULSE 5.6 6.2 6.67/ 20.0 13.9

CHILD (AGES 1-4) MORTALITYRATE 22.9 16.8 11.3 10.9 6.7

HEALTH LIFE EXPECTANCYAT BIRTH (YEARS) 41.2 47.3 53.1 57.8 59.8 INFANT MORTALITYRATE (PER THOUSAND) 149.9 120.9 92.7 89.1 63.7

ACCESS TO SAFE WATER(PERCENT OF POPULATIEON) TOTAL .. 3.0 12.0/d 32.9 32.0 URBAN * 10.0 35.o7T 70.7 51.9 RURAL *- 1.0 6.07- 22.2 20.5

ACCESS TO EXCRETA DISPOSAL (PERCENT CF POPULATION) TOTAL .. 12.0 15.0/e 18.1 37.7 URBAN .. 50.0 60.o07; 72.7 65.7 RURAL .. 4.0 5.0o7 4.7 24.0

POPULATIONPER PHYSICIAN 46778.7 26498.5 13674.6 3297.8 8540.4 POPULATIONPER NURSING PERSON 4517.0 7672.8 8871.6 4929.3 4829.4 POPULATIONPER HOSPITAL BED TOTAL 1360.3 1644.6 1609.9/d 1100.4 1047.5 URBAN 251.8 .. 699.0/d 301.3 651.6 RURAL .. .. 3166./-d 5815.7 2597.6 2 4 ADMISSIONS PER HOSPITAL BED .. .. 2 . /e ., 27.0

HOUSING AVERAGESIZE OF HOUSEHOLD TOTAL 4.4 4.8 URBAN 4.9 5.3 RURAL 4.3 4.7

AVERAGENUMBER OF PERSONS PER ROOM TOTAL 1.5 URBAN . . 1.6 . RURAL ' 1.5

ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URBAN .. .. RURAL .. .. - 26 - ANNEX I Page 2 of 5 pages

INDONESIA - SOCIAL INDICATORS DATA SHEET

INDONESIA REFERENCE GROUPS (WEIGHTED AV/ERAGES - HOST RECENT ESTIMATE)- MOST RECENT LOW INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b ASIA & PACIFIC ASIA & PACIFIC

EDUCATION ADJUSTED ENROLLMENTRATIOS PRIMARY: TOTAL 71.0 78.0 94.0 97.4 96.2 MALE 86.0 83.0 100.0 101.0 99.8 FEMALE 58.0 73.0 89.0 87.8 92.1

SECONDARY: TOTAL 6.0 16.0 22.0 53.0 37.6 MALE 10.0 21.0 27.0 63.8 41.1 FEMALE 3.0 11.0 18.0 41.3 34.1

VOCATIONALENROL. (X OF SECONDARY) 20.4 22.1 19.8 1.7 20.8

PUPIL-TEACHER RATIO PRIMARY 38.8 28.9 37.2 37.7 35.5 SECONDARY 14.0 13.1 17.0 20.2 25.0

ADULT LITERACY RATE (PERCENT) 39.0 56.6 62.0 52.1 73.1

CONSUMPTION PASSENGER CARS PER THOUSAND 3 POPULATION 1.1 2.1 .5/c 1.5 9.8 RADIO RECEIVERS PER THOUSAND POPULATION 7.2 22.0 41.9 35.4 116.5 TV RECEIVERS PER THOUSAND POPULATION 0.1 0.8 8.6 3.2 37.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION lL.O .. 17.7/d 16.4 53.7 CINEMA ANNUALATTENDANCE PER CAPITA 2.8 .. 0.8mT 3.6 2.8

LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 34791.4 41069.9 52582.0 FEMALE (PERCENT) 27.8 30.9 29.3 29.5 33.6 AGRICULTURE (PERCENT) 75.0 66.0 58.0 70.0 52.2 UNDUSTRY(PERCENT) 8.0 10.0 12.0 15.0 17.9

PARTICIPATION RATE (PERCENT) O0TAL 36.7 35.4 35.9 40.0 38.5 MALE 54.2 49.5 51.0 51.8 50.5 FEMALE 20.0 21.6 20.9 23.8 26.6

ECONOMIC DEPENDENCYRATIO 1.2 1.3 1.2 1.0 1.1

INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. .. 23.5/d HIGHEST 20 PERCENT OF HOUSEHOLDS .. .. 49.47. LOWEST 20 PERCENT OF HOUSEHOLDS .. .. 6.6/d LOWEST 40 PERCENT OF HOUSEHOLDS .. .. 14.47.

POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URRAN .. .. 136.0 133.8 194.7 RURAL .. .. 112.0 111.5 155.1

ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 119.0 .. 178.2 RURAL .. .. 98.0 .. 164.9

ESTIMATED POPULATION BELOWABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 28.0 43.8 24.4 RURAL .. .. 51.0 51.7 41.1

Not available Not applicable. NOTES

/a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries a.ong the indicators depends on availability of data and is not uniform.

/aa China included in total only.

/b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1978 and 1980.

/c 1977; /d 1976; /e 1975.

May, 1982 ANNEX I - 27 - Page 3of 5pages

DFyINtITINtS OF SOC1IALItNDICATORS

Note: Alhthogh she data are drat. ion .oer.e generallyjudged the motat- iain n eibe,i hudas be -noteoh.r ninel sy non. be ncs -aounly I.....rbrdaeo in doso n.adarind afloiloo an.d -rr-pte ead by 01fd esousist -ol1erina the dat. The data ar,noe thees eetl i desnb Ord_o of nageitde. irditoai trns,ad nbh-a-rnta -an-i maJor diff f.resoes betee

The efrenontrops ae I he sane nu try%u osheA sbj-ro .ountry and (2) atoo..ntry roPnisin soseuba highes -n-rg -n than the .. ountry group ofob ernnoutrhe letey fo "sgh Ingm otisotas fop here "Middle Inoott NrtLh Afntoa and Middle fans" Inninoant' ieteos nf iognr.

andnhier. 0 nut cauIon est in enrti-ed i,relaniroane--esI oseindinanor no another These anrge reoly usful In unprn lhe nalee nf

AhIA (tinouaend sqt.kI Poraftprfot Icfd-noa , -na,adrena - PopuIlar-u (total. Tul-TotalIurEntue I owsng -au aree anId inlad strs 1919 dent, urba, an,d ruth) d!iided inptheir eposr nbro iba albd bsneu -ure- EnomtI ci af ine1lsu1 ars used t-porailyeII pnrnoooty ant-ilbl Inn bini and yninat gaealad aP-i.alled hospital1 sdt- ion croo, pasue.- srk-c and kitnh-n nrdne or to lie fallon; i919 datazb. hehlatioonnere. Moeisa sm sthlof t -- -Isnaanl -saitd hy at leaston phsec -ltblisbhart pronidilog pr-oipe11yon- 1sF PERldlPIid(ll GNlP pot napl nlate tcratratryer. -deIur-r -ro niudd. Pea us- l.hora, nld h-alh nuand by sae- nesn nindu c1 aku ln(98f at) 198. ad ndnlcn nn p-rsenlly -naffd Op a nihyniriar (hut by 1970, sod I9WO dato,. _ndte anssta.s.. nurse ;.nidnfa , rsn.) intoi offer in-patien a... - 1 dation and p-indesI linIsad`rage of sedinal tartlines. F-or-sal tNRiMY CINSUMPIiON Pig CAPITA A.snoolnosuyn f n-nrrina -tegy moe ! tinna ltponon ute haspisals ilnldr WhiOl Pliinlpe iruea- hnnapitulIs and ltgiltr pe -nleun.-na Ita e- and hydro-. -oen- Osd geucihere a ir- and ena h.ylal, I In o ua1tegeoededoledsnni frotlnkbingrss of -oel ee-lnu ,n pen rapc-; 1960I, 1910 end 1979 orotrt -irotli-d inoyltl- rei-nluded only under- ea.

HSfree h-npiltel dleided by nine n-be of inede.

fotel Pooclaftco.Old-lear introadodo I - Os~~~~~~Aof Jely I; 1960, 1910. and 0980 flOOUSINI

do1 ... ntdfslicso oIhonarpo p ..o nop_nbij.. etyof dat an.d mhi Os-in -1at. A boerder or Ildgrmo or IyIoinn -nludad in emmtont 6aOIb.Ihil. andIdddtu thn h-unhold iof itlsnlpupne Popu.ation..co....;..e rerge_oI rrc.... nn o.-u....rr ...... , and. rui - nrgen

t--e Popelae to ege end ea ad their nut> l y ntlt ori eleg epe-euly.-n Dee I-err Io-ld enr-rsneIstetre n Otejontion iurpatonenert- eserfa let> resra eosnresn -'I titona leneicannon- ut'ntcfopln- yarnod IIIel,atdhtnat_ of_ enIrte,yeI_c-bl i_on neuts-7. hepaI -. - Cennlnllmo lllgatnaesleynlxoannonprefg na drnlo -arlllprteaennutlnoti 7nloeoonoel- rr itt I.ehn anttloolnarrneey farnoloep nrcruttonunocarlnrelndtuotineoyylcnreru-tnicr -anre satin Iacountr ntenaoteoef one of hno Ic"iItenraeatn entac PllOIO-t -- II - -l.g p it

saint nenstntnl'eocuacnennod oly alter lttoJit> ease d-cine no prli-uy noheni-aopuplele r -; lly includes hinlld- aged h-Il throplannooteneciuolneteprount;onan.oberao genratin yern ieccoenndrnrliferhslnrc-hfpynarednottonin. ciscornreyfatesltnnlienucnlp. Iheotoncone-_ yoyolacb_i_ oes_ _no__ _eso_s ocnnn ',dntfcrrlnn emnnln en

ihnar2000. andtIIner-cecfatni-ceoIot.tilitny-scttor-plan- Oeadrsiol-nalnladeeoio pe-d efa -n;srr-dar.y;

Irancuthnaty opeleclo er_a-nId - TIt fyar ste ---eteny nlainrm nr c Itealtprodsgneu,oototl-rocnfor pop beroanhed. ....alOyuflltoli yeor-ef.g,trepdtnooeargeeel

fenelarne; IdnI 110ad -)0Cas.p- loleote-nia,foenrel r fn pogrmehninierf,d-ed -Forc 19h0agruc7lt-d 19a9d.-Iepcdsuuofrgt l.rlocotyrsdyrsnstendt nc Tetlens.,

onl;lse 19010 ad 1919 dat. Pupil-teacher rats_n-prt and_--uno Ie-Totl d -ndsenrle In- yOe,Ulcnr.li In-ur (Torrent> - - - Aoltn(0-l letl.ar 0-o 1-pIayedennanInl d, olde ho1- -dser of reren Ind h

yna ppuocort l0n-h0.9 19h0-ih. and 1970-d0. Ponolatlen; len (percent>loceth - ethun - drone I gtoott tatece,'-T-o-I-nSiPTIcn ertan pope-

clnde Birein R-e (pr h--eud> - AIno-e ( -eo - Lh--e ouesoinolI'lleneil-pu Iees then -ghpentl oIdu uhlur harean 1o9lten0h, (910. en 11 lc. o tarpehe.Ic ColAn Druth here I(111p .. Iudl - On-oal d-ahn -n nhocsu,,d c idsy-pe 00Ice Orteer- n hnnn cltt Ali lypo ni -enthern foe .edt. yelnn 1960, 1971. sni980 dnt- 1 tecasuanripiltprnhund nipplcu;fn oe o

o.httt-tensoldrenen oderIspenr ol ntoonaIaanl- ylannc-IgroS ea... i,"II nO nhild-eerlngso(1011 yrrs( dr en htrnin;nnlrc I eneorstoineenyapa llrrelalon dyerthousand ep--i-con>d- ViYns the a-rage nut allnatrteloonencnnumoagainnnp nolatlonof"dally sInetl c.tn.. tntalr h,dtteaaprnla

Pebit-esio de...tsd prli-rly to -erd-en genera neat.- Iteinn--idnr-d yOooANp OOTOIPi`o t he "dap iP It appacr At -ler root rIs- a o-k1

prdoco o f all ted n~Ott ndncnnldsed enl feed d d clAs oddrostepe,lreot dlsoso ta-In Inemo

nioianRag .r....Ir Ili0 -Ngh-s 1961-hO, 1)0.1 and 198 dat. ItlLbor F-ru Icth-nne .. I - rsnll reepercs ot

t pm instleoltdon. spplIes nuprloe d--etl p-edn-to-n., o-sos-peste .qrb1, 1910, 1910 and 1980 dlet.

,InuntIniottedIn feudprutfstttg.aol Ico lotIndtsntlh tln. lean-Innotrprnt(-ieo Itom In. fees..... Infant», hunIng. and taserenIated hy Ph .hald -o phyntolol-e -edo for n -- io c-c- f-hhnogasptm faeoctatf linn- forte; 1961. 1970lad 1n980 dat. -yth-dio-lthnu-nid-eRInne- .r.... eftn_.. aute .hdyn-tghts.ege _InutylrntL-.a nrerrntn te-cg.oon---ti-tsnfatt and one dltih-nb-- i poycf--r and .1101-, 10 percen tu nst an-end en l p -tntadrnn pert-cg of total labor tome; hone ,diI), 1961-ct. 1900 a-e IPP dre 1160, 1910 and 1980 date. Perraptacnponrnool AOaspne-l-Poccet Ieoe. ... IenpnIacttpuIccnn ot I'llon- ItImonnunoIaatIiat nnsylynIfoed- erday Nnfn-cpylrcfntsnct ua Ru.- "Itineearntoeetlo.aaageollbroca qclnennnnor al coorte ctbched hy 031 pronedr fin -c -ne yn-r-ttg-nitne9 1 -ol and femal popolatlon of all cons -ep-otl-l; elfenurcetntbhoreneef f-eta.....e.n.erd.nnno,d 20te-m iant-l end 1960. 1 7 .anfl9d>es hsaeaeolLeprliolnae

AmdreO a;(it-h 1970 endO> dat -1 to theIIrota> lahotterceId

Wr-ndon -derS-ed trot1I6fe ne9ls Idh197 d--f -tp1t dt,o ,snhl

Inuinol -5 17 97 .- P010010~~~~~~~~~~~~~~~~~~~~~~~~~~~IINO PaSRIBTyIIOFN

onboh; O)9lP r IOtfdata, and shu,dhe Ioeeprtnd c-P npnldguh t nateot

uIflabi tth -9ean le Its;(it,>7 aol71980 daa. Oheolot - ond nty moose_~ _rn is that. bInosI ea ao iti t

her .... nter,andI.pe..a.(tnal. rnal> tIi'rasnene -tassnoi a-ffdordILin-le. aetnasep10 (ton f LtstOtdsufe aar ro ette h . un.t .. t-i-inted Esitnered atla to Fperrin InIone Len-llli)yyy -eylf) - lOanand tona -

of tiner- nyrto _oollnelone inan area pblin prsni Iten feIIIae...nty. Ibtr-on ane td-ri-d ftrm tint rena -Iutanrnedpusloc-r-dnnrmotnha- Uonnr tea naYSeIen -ethadj--tn fnctnhtineros of Ilcrcngi ttebatsnt

oreaonnhleuenrsoncele In ~lpb.hethe h-ene-fe or n-nnr of the h.usubed and -ere P--yrn of po`po,lei_o ehnedrrl b r auls

fesllc'n-etle."' aener - OI-ocl,nrna. ndreal Ouniero>nonuIcnnloine andtut'. Itor.> iOOOceteIarnolh nncruatthorsn,so uneec-OIrs opetlncl- lu eorealtteun,audueynsaY.etec-noe-e-ete-jmrs ondaanr-aecr tou tnrr-or--.oitnA-1ytnrellsttdnoatdp--. c-on conner-,d. leclote- b b p...... k- 98 - 28 - ANNEX I Page 4 of 5 pages

Population : 147.4 million (mid-1980) GNP per Capita: US$520 (1981 estimate)

INDONESIA - ECONOMIC INDICATORS

Annual growth rate (%) Amount (at constant 1973 prices) (million US$ at current prices) Actual Es1:imate Projected Indicator 1980 1975 1976 1! 2 1983 1984 1985

NATIONAL ACCOUNTS Gross domestic product /a 70,024 5.0 6.9 8.8 6.9 5.3 9.7 7.5 2.1 4.8 5.0 5.0 Agriculture 18,003 0.0 4.7 1.3 5.2 4.0 5.5 3.5 3.1 1.7 1.6 2.2 Industry 29,227 5.6 11.1 14.2 5.9 5.5 9.0 8.7 -5.5 7.0 10.0 6.0 Services 22,794 10.1 5.9 12.0 8.9 6.9 8.5 9.0 7.0 5.0 5.0 5.0

Consumption 48,976 6.9 6.4 7.9 8.5 9.9 11.6 6.6 10.3 2.3 2.4 3.6 Gross investment 15,176 14.6 6.0 16.0 15.0 4.4 17.8 23.0 6.3 1.0 -1.0 4.3 Exports of GNFS 21,365 -9.7 12.5 22.4 1.9 -1.0 -4.2 -10.5 -11.5 1.9 15.0 6.7 Imports of GNFS 15,494 7.9 8.1 22.2 15.6 13.9 13.6 6.0 8.0 -2.0 2.0 2.0

Gross national savings 17,576 -19.7 12.0 33.3 -2.1 37.1 -2.1 8.0 3.0 2.0 4.0 5.0

PRICES GDP deflator (1973 = 100) 166 190 214 237 311 400 440 493 542 591 638 Exchange rate 415 415 415 442 623 625 637 675 970 970 970

Share of GDP at market prices (%) Average annual increase (%) (at current prices) (at constant 1973 prices) 1960 1970 1975 1980 1985 1990 1960-70 1970-75 1975-80 1980-85 1985-90

Gross domestic product 100 100 100 100 100 100 3.9 8.4 7.5 5.0 5.0 Agriculture 54 47 32 26 22 17 2.7 4.1 4.1 2.5 3.5 Industry 14 18 34 42 44 46 5.2 12.0 9.7 5.5 6.5 Services 32 35 35 33 36 36 4.8 9.7 9.0 6.5 5.0

Consumption 91 89 79 70 74 74 4.1 8.4 8.9 5.0 5.0 Gross investment 8 14 20 22 26 27 4.8 18.3 11.7 6.0 4.5 Exports of GNFS 13 13 23 31 23 18 3.6 9.2 8.7 -2.4 1.8 Imports of GNFS -13 -16 -22 -22 -23 -19 3.2 22.1 14.0 2.5 3.5

Gross national savings 8 9 17 25 25 22 6.1 23.1 14.4 4.8 5.3

As % of GDP 1960 1970 1975 1980

PUBLIC FINANCE lb Current revenues 11.7 10.1 10.5 23.4 Current expenditures 14.0 8.4 9.3 13 3 Surplus (+) or deficit (-) -2.3 +1.6 +7.1 +10.1 Capital expenditure n.a. 5.0 10.7 13.5 Foreign financing 0.2 3.5 3.7 3.4

1960-70 1970-75 1975-80 1980-85 1985-90

OTHER INDICATORS Annual GNP growth rate (%) 4.5 7.6 6.9 4.9 4.8 Annual GNP per capita growth rate (%) 2.4 5.1 4.5 2.5 2.4 Annual energy consumption growth rate (2) 2.9 16.0 15.0 7.0 6.0

ICOR 2.2 2.2 3.1 4.5 4.3 Marginal savings rate 0.30 0.48 0.30 0.2 0.3 Import elasticity 1.2 2.8 1.9 1.2 0.7

/a At market prices.

/b Central Government only, on an April-to-March fiscal year basis.

East Asia and Pacific Programs March 31, 1983 Population : 147.4 million (mid-1980) - 29 - ANNEX I GNP per Capita: US$520 (1981 estimate) Page 5 of 5 pages

INDONESIA - BALANCE OF PAYMENTS, EXTERNAL CAPITAL AND DEBT (Millions US$ at current prices)

Actual Estimate Projected Indicator 1977 1978 1979 1980 1981 1982 1983 1984 1985 1990

BALANCE OF PAYMENTS /a 1. Exports 10,861 11,353 17,494 22,245 22,994 19,385 18,193 22,270 25,344 48,180 (a) Oil & LNG (gross) 7,354 7,374 11,323 16,661 18,824 15,631 13,893 16,979 19,004 31,759 (b) Nonoil 3,507 3,979 6,171 5,584 4,170 3,754 4,300 5,291 6,340 16,421 2. Imports (including net NFS) -10,686 -11,493 -14,035 -18,649 -22,096 -22,900 -21,472 -22,558 -23,740 -39,850 (a) Oil sector -2,909 -3,364 -4,348 -5,884 -5,407 -5,468 -4,617 -4,451 -4,467 -7,001 (b) Nonoil imports -7,241 -7,543 -9,028 -11,790 -14,022 -14,803 -14,388 -15,584 -17,029 -30,155 (c) NFS (net) -536 -586 -659 -975 -2,667 -2,629 -2,467 -2,523 -2,244 -2,694 3. Resource balance 175 -140 3,459 3,596 898 -3,516 -3,279 -288 1,604 8,330 4. Factor services -865 -1,015 -1,261 -1,205 -3,267 -3,772 -4,151 -5,004 -5,910 -10,245 (a) Interest public debt -441 -514 -772 -819 -840 -1,118 -1,319 -1,617 -1,953 -3,036 (b) Other (net) -424 -501 -489 -386 -2,427 -2,654 -2,832 -3,387 -3,957 -7,209 5. Capital grants 66 46 52 -76 67 100 100 100 100 100 6. Balance on current account -624 -1,109 2,250 2,467 -2,302 -7,188 -7,530 -5,395 -4,605 -1,915 7. Direct foreign investment 285 271 217 140 134 276 350 450 600 1,000 8. Public M & LT loans (a) Disbursement 1,956 2,205 1,865 2,536 3,203 5,180 5,920 6,684 6,673 7,091 (b) Amortization -825 -1,548 -1,329 -953 -1,001 -1,376 -1,770 -2,042 -2,440 -5,120 (c) Net disbursements 1,131 657 536 1,583 2,202 3,803 4,200 4,642 4,233 1,971 9. Other capital (net) -140 891 -1,261 -1,454 -1,172 874 2,050 156 -202 -10 10. Change in reserves (- increase) -651 -708 -1,690 -2,736 988 2,234 729 -55 -426 -2,231 11. Net official reserves 2,208 2,916 4,606 7,342 6,354 4,120 3,390 3,445 3,871 8,775

Reserves in months of nonoil imports + NFS 3.4 4.3 5.6 6.9 5.4 3.0 2.6 2.4 2.5 3.4

Memorandum Item Net foreign assets of the banking system /b - - 6,906 10,787 11,154 7,420 5,390 5,445 5,871 10,775 Total reserves in months of nonoil imports + NFS 3.4 4.3 8.6 10.1 9.5 5.4 4.1 3.8 3.8 4.2

EXTERNAL CAPITAL AND DEBT /c Gross Disbursements 1,956 2,205 1,865 2,536 2,356 Concessional Loans -42 44 679 8 Bilateral 381 448 399 631 729 IDA 49 29 30 42 68 Other 12 6 5 6 5

Nonconcessional Loans 1,514 1,721 1,432 1,858 1,552 Official export credits 218 271 61 25 154 IBRD 191 168 199 331 106 Other multilateral 16 12 46 52 86 Private - source 1,089 1,270 1,126 1,450 1,206

External Debt (fixed-term) Debt outstanding & disbursed Id 11,658 13,107 13,233 14,882 15,529 Official - source 7,077 8,390 8,434 9,400 9,746 Private - source 4,583 4,717 4,799 5,482 5,783 Undisbursed debt 4,475 5,839 7,932 9,454 11,288

Debt Service Total service payments 1,262 2,062 2,101 1,772 1,974 Interest 441 514 771 819 973 Payments as x exports /e 11.6 18.2 12.0 8.0 9.0

Average Interest Rate on New Loans (7) 6.3 7.6 6.6 8.4 9.1 Official - source 5.4 4.6 5.0 5.0 7.8 Private - source 8.6 10.2 8.6 12.8 10.4

Average Maturity of New Loans (Years) 20.5 18.7 19.1 19.0 15.6 Official - source 23.9 30.1 25.8 24.8 20.8 Private - source 10.4 8.6 11.1 10.0 10.7

As 1 of debt outstanding at end of 1981 Maturity structure of debt outstanding Maturities due within 5 years 30.9 Maturities due within 10 years 60.2 Interest structure of debt outstanding Interest due within first year 4.1

/a On an April-to-March fiscal year basis. 7b Includes foreign assets of deposit money banks in addition to official reserves. 77 Excludes private nonguaranteed loans. East Asia and Pacific Programs 7 At end of period. March 31, 1983 7e Oil exports treated on gross basis. - 30- ANNEX II Page 1 of 29 pages

THE STATUS OF BANK GROUP OPERATIONS IN INDONESIA

A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of March 31, 1983)

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

Twelve Loans and thirty-five Credits fully disbursed 559.3 521.5 -

400 1973 Smallholder and Private Estate Tea - 7.8 0.5 428 1974 Pulo Gadung Industrial Estate - 16.5 4.7 479 1974 Bali Tourism - 16.0 0.4 1100 1975 Sixth Irrigation 65.0 - 6.7 1179 1976 Agricultural Research & Extension 21.5 - 0.1 1197 1976 National Resource Survey & Mapping 13.0 - 3.0 1236 1976 Fourth Highway 130.0 - 6.9 1237 1976 Fourth Education 37.0 - 4.4 1250 1976 Second Shipping 54.0 - 1.8 1267 1976 National Food Crops Extension 22.0 - 0.2 1268 1976 Seventh Irrigation 33.0 - 6.3 1318 1977 Transmigration and Rural Development 30.0 - 0.3 1336 1977 Second Urban Development 52.5 - 5.1 1337 1977 Tanjung Priok Port 32.0 - 9.0 1365 1977 Sixth Power 116.0 - 28.4 1373 1977 Nutrition Development 13.0 - 2.8 1433 1977 Teacher Training-Fifth Education 19.0 - 7.2 1434 1977 Eighth Irrigation 63.0 - 28.8 1435 1977 Ninth Irrigation 35.0 - 4.4 1472 1977 Second Population 24.5 - 7.1 1486 1978 Non-Formal Education 15.0 - 4.0 1499 1978 Nucleus Estates and Smallholders I 65.0 - 23.9 1513 1978 Seventh Power 94.0 - 29.7 785 1978 Small Enterprise Development - 40.0 9.1 1578 1978 Tenth Irrigation 140.0 - 106.8 1579 1978 Eleventh Irrigation 31.0 - 14.0 827 1978 Rural Credit - 30.0 3.7 1604 1978 Nucleus Estates & Smallholders II 65.0 - 48.6 869 1979 Polytechnic - 49.0 24.1 1645 1979 Twelfth Irrigation 77.0 - 47.2 1653 1979 Third Urban Development 54.0 - 23.1 898 1979 Fifth Technical Assistance - 10.0 8.7 1691 19 79 Lower Cimanuk Basin Flood Control 50.0 - 29.6 1692 1979 Second Agricultural Training 42.0 - 13.2 1696 1979 Fifth Highway 123.2 - 74.8 1703 19 79 Fourth BAPINDO 50.0 - 9.1 31 - ANNEX II Page 2 of 29 pages

US$ million Loan! Amount Credit Fiscal (less cancellations) Number Year Purpose Bank IDA Undisbursed

919 1979 Transmigration II - 67.0 23.0 1707 1979 Transmigration II 90.0 - 88.1 1708 19 79 Eighth Power 175.0 - 77.5 1709 1979 Second Water Supply 36.0 - 24.2 946 1980 Yogyakarta Rural Development - 12.0 9.6 1751 1980 Nucleus Estates & Smallholders III 99.0 - 63.9 984 1980 Smallholder Rubber Development - 45.0 34.4 995 1980 Fifteenth Irrigation - 45.0 28.9 996 1980 National Agriculture Extension II - 42.0 36.4 1811 1980 Fourteenth Irrigation 116.0 - 84.0 1835 1980 Nucleus Estates & Smallholders IV 42.0 - 35.3 1840 1980 National Agricultural Research 35.0 - 35.0 1014 1980 National Agricultural Research - 30.0 24.4 1869 1980 Third Population 35.0 - 33.6 1872 1980 Ninth Power 253.0 - 203.6 1898 1981 Smallholder Coconut Development 46.0 - 40.6 1904 1981 University Development 45.0 - 43.9 1950 1981 Tenth Power 250.0 - 177.7 1958 1981 Swamp Reclamation 22.0 - 18.1 1972 1981 Fourth Urban Development 43.0 - 38.8 2007 1981 Nucleus Estate and Smallholder V 161.0 - 150.4 2011 1981 Second Small Enterprise Development 106.0 - 24.1 2049 1982 Jakarta-Cikampek Highway 85.0 - 85.0 2056 1982 Eleventh Power 170.0 - 167.8 2066 1982 Second Seeds 15.0 - 14.9 2079 1982 Bukit Asam Coal Mining Development & Transport 185.0 - 158.4 2083 1982 Rural Roads Development 100.0 - 98.9 2101 1982 Second Teacher Training 80.0 - 79.8 2102 1982 Second Textbook 25.0 - 25.0 2118 1982 Sixteenth Irrigation 37.0 - 36.1 2119 1982 Seventeenth Irrigation 70.0 - 66.3 2120 1982 National Fertilizer Distribution 66.0 - 64.1 2126 1982 Nucleus Est. & Smallholders VI 68.1 - 67.0 2153 1982 Coal Exploration Engineering 25.0 - 24.6 2199 1982 Central Java Pulp & Paper 5.5 - 5.5 Engineering Project /1 2214 1983 Twelfth Power /1 300.0 - 300.0 2232 1983 Nucleus Estates & Smallholders VII /1 154.6 - 154.6 2235 1983 Provincial Health /1 27.0 - 27.0 2236 1983 Jakarka Sewerage & Sanitation /1 22.4 - 22.4

/1 Not yet effective. -32- ANNEX II Page 3 of 29 pages

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

2248 1983 Transportation III /a 101.0 - 101.0 2258 1983 Public Works Manpower Development 30.0 - 30.0 Project /a

Total Bank loans and IDA credits 5,246.60 931.80

Of which has been repaid -200.11 -7.69

Total now outstanding 5,046.49 924.11

Amount sold to third party 28.24 Amount repaid by third party -27.21 -1.03

Total now held by Bank and IDA /b 5,045.46 924.11

Total undisbursed 3,082.70 207.90 3,290.60

/a Not yet effective.

/b Prior to exchange adjustment. - 33- ANNEX II Page 4 of 29 pages

B. STATEMENT OF IFC INVESTMENTS (as of March 31, 1983)

Fiscal Type of Loan Equity Total year Obligor business ---- (US$ million) ----

1971 P.T. Semen Cibinong Cement 10.6 2.5 13.1 1971 P.T. Unitex Textiles 2.5 0.8 3.3 1971 P.T. Primatexco Indonesia Textiles. 2.0 0.5 2.5 1971 P.T. Kabel Indonesia Cable 2.8 0.4 3.2 1972 P.T. Daralon Textile Manuf. Corp. Textiles 4.5 1.5 6.0 1973 P.T. Jakarta Int. Hotel Tourism 11.0 - 11.0 1973 P.T. Semen Cibinong Cement 5.4 0.7 6.1 1974 P.T. Primatexco Indonesia Textiles 2.0 0.3 2.3 1974 P.T. Monsanto Pan Electronics 0.9 - 0.9 1974 P.T. PDFCI Devel. Fin. Co. - 0.5 0.5 1974 P.T. Kamaltex Textiles 2.4 0.6 3.0 1976 P.T. Semen Cibinong Cement 5.0 1.5 6.5 1976 P.T. Semen Cibinong Cement - 1.1 1.1 1977 P.T. Daralon Textile Manuf. Corp. Textiles 0.4 - 0.4 1977 P.T. Kamaltex Textiles 1.3 0.2 1.5 1979 P.T. Daralon Textiles 0.9 - 0.9 1980 P.T. Papan Sejahtera Capital Market 4.0 1.2 5.2 1980 P.T. Indo American Industries Glass Dinnerware 11.1 0.9 12.0 1980 P.T. Semen Andalas Cement and Indonesia Construction Material 48.0 5.0 53.0 1982 P.T. Saseka Gelora Leasing Capital Market 4.0 0.3 4.3

Total gross commitments 118.8 18.0 136.8

Less: sold or repaid and cancelled 79.6 5.7 85.3

Total held by IFC 39.2 12.3 51.5

Undisbursed (including participant's portion) 16.7 - 16.7 ANNEX II Page 5 of 29 pages

C. STATUS OF PROJECTS IN EXECUTION /1 As of March 31, 1983

These notes are arranged by sectors in the following order:

Page No. Agriculture Irrigation (1100, 1268, 1434, 1435, 1578, 6-10 1579, 1645, 1691, 1811, 995, 1958, 2118 and 2119) Other Agricultural Projects (1707/919, 1499, 1604, 1751, 1835, 10-13 2007, 2126, 2232, 984, and 1898)

Agriculture Support Services (996, 1840/1014 and 2066) 14 Rural Development (946) 15

Agro-Business and Credit (785, 827 and 2011) 15-16

Education (869, 1237, 1433, 1486, 1692, 1904, 2101 and 2102) 16-19

Energy (1365, 1513, 1703, 1872, 1950, 2056, 2079, 2153, and 2214) 19-21

Industrial Development and Finance Industry (2199) 22 Development Finance Companies (1703) 22

Population and Health Population (1472 and 1869) 23 Health (2235) 23

Technical Assistance (898 and 1197) 24

Transportation Fertilizer Distribution (2120) 24 Highways (1696, 2049 and 2083) 25-26 Marine Transport (1250) 26 Ports (1337) 26

Tourism (479) 27

Urban Development (1336, 1653 and 1972) 27-28

Water Supply and Sanitation (1709 and 2236) 28-29

/1 These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II - 35 - Page 6 of 29 pages

C. PROJECTS IN EXECUTION

AGRICULTURE

Irrigation

Loan No. 1100 Sixth Irrigation: $65 Million Loan of April 10, 1975; Effective Date: June 20, 1975; Closing Date: June 30, 1984

The project is currently expected to be completed by March 1984, about two years behind the original completion date. This is mainly due to delays in the completion of bidding documents and land acquisition, delayed payments to contractors and the effects of the 1978 Rupiah devaluation. Another year-s delay has been added lately by the postponement of drainage works in both Rentang and Cirebon subprojects due to budget constraints. Disbursements at the end of February 1983 were about 89% of the appraisal estimate. Because of the continuing delays the Closing Date has been postponed by two years.

Loan No. 1268 Seventh Irrigation: $33 Million Loan of June 4, 1976; Effective Date: September 21, 1976; Closing Date: December 31, 1983

The main components of the project are tertiary development on an area of 100,000 ha served by irrigation systems rehabilitated under previous projects and the construction of 6,000 ha of a new irrigation system in the Sadang area of South Sulawesi. The construction of tertiaries has progressed well and gained such a momentum that the scope of work was increased to 115,000 ha. About 111,000 ha have been completed and the balance was expec- ted to be completed by early 1982. The construction of North Sadang has suffered a delay of about four years due to design revisions and late award of contracts. Completion of the project is expected by March 1984. Dis- bursements at the end of February 1983 were about 80% of appraisal estimate.

Loan No. 1434 Eighth Irrigation: $63 Million Loan of June 6, 1977; Effective Date: July 7, 1977; Closing Date: March 31, 1984

The main components of the project are rehabilitation of the Madiun Irrigation System (Stage I) serving an area of about 75,000 ha, including 30,000 ha of tertiary development, a pilot ground water scheme for 2,800 ha in the Madiun-Solo area and the improvement of flood control, drainage and road networks on 5,700 ha of coastal land in Ciujung. All of the stage I area (75,000 ha) has been completed. Only the drainage works and road improvement in both the Ciujung and Madiun subprojects are expected to be delayed due to budget constraints and lack of experienced staffing. GOI has mobilized additional engineers and foreign consultants for construction supervision ANNEX II -36- Page 7 of 29 pages

at Ciujung and has tapped additional sources of funds to keep the Madiun works on schedule. Disbursements at the end of February 1983 were 51% of the appraisal estimate.

Loan No. 1435 Ninth Irrigation: $35 Million Loan of June 6, 1977; Effective DBate: July 7, 1977; Closing Date: December 31, 1984.

The project includes (a) rehabilitation of 8,000 ha of irrigation system, drainage rehabilitation on 19,000 ha of the Sedeku area in Central Java; (b) new irrigation pumping system on 3,280 ha at Sungai Dareh-Sitiung (Stage I) in West Sumatra for transmigrants; and (c) feasibility studies of ten small to medium irrigation projects and of the Sungai Dareh-Sitiung (Stage II), with detailed designs. Delay in completion of the Sedeku irrigation drainage rehabilitation by about three years continues, compared to appraisal estimate. The Sungai Dareh-Sitiung (Stage I) construction has progressed well. Pumps were commissioned and trial runs made. The main and secondary canals are completed, the tertiary network is 95% completed. Land clearing and levelling is progressing satisfactorily and is about 60% accom- plished. Feasibility studies of ten small to medium irrigation systems have been completed. One of these schemes is now under execution with cofinancing from the Federal Republic of Zermany (KfW) assistance while detailed design of another (about 29,000 ha) is being financed under Irrigation XVII (Loan 2119-IND). Detailed design of Sungai Dareh Sitiung Stage II (about 8,800 ha) has been completed and its construction is being financed under Irrigation XVI (Loan 2118-IND). Disbursements at the end of February 1983 were about 87% of appraisal estimate.

Loan No. 1578 Tenth Irrigation: $140 Million Loan of June 6, 1978; Effective Date: August 16, 1978; Closing Date: December 31, 1984.

The project includes: (a) rehabilitation and improvement of about 34,700 ha of Kali Progo irrigation system; (b) improvement of about 19,900 ha of Way Seputih; (c) improvement and expansion of about 63,100 ha of Way Sekampung irrigation projects; (d) studies and detailed designs of two dams associated with (b) and (c) above; (e) studies of Dumoga and Gumbasa irrigation projects; and (f) consulting services for the above and also studies of two dams in the Kali Progo project area and extension of irrigation to Bekri, West Rumbia, Way Kandis and Way Ketibung in Lampung Province. Due to initial delays in survey and mapping of the Way Seputih/ Way Sekampung irrigation service areas, delay in deciding canal capacities till completion of the dam studies and staff shortage during the years 1979 and 1980, implementation is behind schedule by about two years. However, the field surveys and the dam studies have now been completed and the staffing situation has improved. Consultants have made substantial progress on the preparation of designs and tender documents for the project. Due to the GOI decision to defer construction of the Batutegi dam for 3 to 4 years, the scope of the project has been revised. Disbursements are currently - 37- ANNEX II Page 8 of 29 pages

about 35% of appraisal estimate. Studies of Dumoga irrigation project were completed and implementation of its works included in Irrigation XV (Cr. 995-IND).

Loan No. 1579 Eleventh Irrigation: $31 Million Loan of June 6, 1978; Effective Date: August 16, 1978; Closing Date: December 31, 1983.

The main part of this project, the Cipamingkis irrigation sub- project is progressing well. This will serve an area of about 7,600 ha. Its headworks with intake structure are completed while contracts for main and secondary canals will be completed only a little behind schedule. Tertiary design and construction are behind schedule but the project is currently estimated to be completed by June 1984, a delay of 18 months as compared to appraisal estimate. Feasibility studies including detailed designs of a new Glapan barrage and mid-Lusi river diversion irrigation system are underway. These replace the preconstruction work previously planned for the Jragung dam, which is now being deferred. The Hydrological measurement program is expected to be completed with a delay of about 18 months and will be completed in early 1983. Disbursements were about 58% of the appraisal estimate at the end of February 1983.

Loan No. 1645 Twelfth Irrigation: $77 Million Loan of December 29, 1978. Effective Date: May 10, 1979; Closing Date: March 31, 1984.

The project includes: tertiary development on about 186,000 ha of the Jatiluhur Irrigation System, W. Java; drainage improvement in the Cisedane irrigation area including upgrading of roads in W. Java; and studies of drainage and flood control in Pemali-Comal and Sadang irrigation areas; tidal and swamp lands development for about 350,000 ha in the Lalang and Mesuji areas of S. Sumatra, and the Sebangau area in Kalimantan; and detailed designs for reclamation of about 110,000 ha of swamp land in Karang Agung of S. Sumatra. The area of tertiary development has been increased to 205,800 ha. All the civil works contracts of Cisedane drainage and roads improvement are awarded, currently estimated to be completed by March 1985, a delay of a year over appraisal estimate. All studies are completed. Disbursements at the end of February 1983 were about 42% of the appraisal estimate.

Loan No. 1691 Lower Cimanuk Basin Flood Control: $50 Million Loan of May 7, 1979; Effective Date: October 16, 1979; Closing Date: March 31, 1984.

The main components of the project'are flood protection levees, bank stabilization and river training works on the lower Cimanuk river, widening of the Rambatan Channel and construction of a hydraulic control structure at Bangkir, the Cimanuk river estuary study and the flood control operating and flood forecasting study. Good progress has been made on the -38 - ANNEX II Page 9 of 29 pages

civil works and various studies. Civil works are expected to be completed by mid-1984. Disbursements at the end of February 1983 were about 43% of the appraisal estimate.

Loan No. 1811 Fourteenth Irrigation: $116 Million Loan of April 3, 1980; Effective Date: July 3, 1980; Closing Date: January 31, 1986

The main components of the project are construction and rehabili- tation of drainage and flood protection works on the Serang River to reduce flooding of some 61,000 ha of farm land, rehabilitation of the Madiun Irrigation System (Stage II) serving about a 65,000 ha area; and tertiary development serving a 120,000 ha area in the Pemali-Comal and Pekalen Sampean subprojects. Contracts for flood mitigation works for the Serang River have been awarded after one and a half year-s delay because of weak management and slow land acquisition. Works in the Madiun area and the tertiary development are progressing well ahead of schedule. Disbursements at the end of February 1983 were about 52% of appraisal estimate.

Credit No. 995 Fifteenth Irrigation: $45 Million Credit of April 3, 1980 Effective Date: July 3, 1980; Closing Date: January 31, 1985

The project includes: completion of the Kosinggolan Irrigation System on about 5,000 ha and construction of the new Toraut Irrigation system for 6,600 ha; catchment protection and establishing a nature reserve on an area of about 100,000 ha; institutional support through consultancy services and training; and studies and investigations of four irrigation systems. Construction of the Toraut headworks and the first 2 km of the main canal which commenced in January 1981 is progressing satisfactorily. Offices, staff houses, and a rest house at Menado have been completed. The award of two ICB contracts is behind schedule and project completion may be delayed to June 1985 (compared to mid-1984 in the appraisal estimate). With Bank agreement, GOI has expanded the nature reserve into a "Dumoga-Bone National Park" master plan covering an area of about 270,000 ha. Construc- tion of the park headquarters building has commenced and is expected to be completed by June 1983. Four studies included in the project have been substantially concluded and some additional work was recently added. Institutional support programs will continue up to June 1984. Disbursements at the end of February 1983 were about 55% of appraisal estimate.

Loan No. 1958 Swamp Reclamation: $22 Million Loan of March 31, 1981; Effective Date: July 9, 1981; Closing Date: December 31, 1986

The project includes reclamation of 9X000 ha of Karang Agung swamp area in South Sumatra province, construction of canals, land clearance, construction of 3,200 settlers houses with community facilities for trans- migrants from Java and Bali and studies for future swamp development, upgrading of existing swamp development area and ecological studies of swamp development. A civil works contract (ICB) for construction of canals, for - 39 - ANNEX II Page 10 of 29 pages

about $4.5 million, was awarded on January 22, 1982. Consultants for construction supervision were assigned in April 1982. Efforts are being made to improve both the progress for the work as well as coordination between the implementing agencies.

Loan No. 2118 Sixteenth Irrigation: $37 Million Loan of April 5, 1982; Effective Date: August 9, 1982; Closing Date: December 31, 1987.

The project will complete construction of the Sitiung Irrigation System (Stage II) in Sumatra to serve about 7,600 ha of transmigrant and local farmer lands; improvement of management information systems of the Directorate General of Water Resources Development (DGWRD); training and support for water users and their associations; expansion of DGWRD-s basic hydrological data network; and studies for development of the Cisanggarung River Basin and detailed design of the Jatigede Dam.

Loan No. 2119 Seventeenth Irrigation (East Java Province): $70 Million Loan of April 5, 1982; Effective Date: December 14, 1982; Closing Date: December 31, 1988.

This is the first irrigation project supported by the Bank to be concentrated in a single province and implemented through a provincial irriga- tion service. It will rehabilitate existing surface irrigation systems serving about 50,000 ha; develop groundwater irrigation systems to serve about 13,000 ha; upgrade operation and maintenance for about 140,000 ha of irriga- tion systems already rehabilitated; and strengthen the East Java Provincial Irrigation Service.

Other Agricultural Projects

Loan No. 1707 Transmigration II: $90 Million Loan and $67 Million Credit (Cr. No. 919) June 1, 1979; Effective Date: October 4, 1979; Closing Date: December 31, 1985

Given shortages in available land, in June 1982, the settlement component was reduced from 30,000 families to 20,000 families and funds were reallocated for site selection and evaluation for the GOI transmigration program as a whole. Land has now been identified for about 16,000 families under this project. About 1,100 families have been settled and 2,400 addi- tional families should be settled by mid-1983. Improved extension and support are required to ensure adequate food crop yields and a plan for the introduction of tree crops has been requested from the GOI. Disbursements as of February 1983 were 57% of appraisal estimates.

Loan No. 1499 Nucleus Estate and Smallholders I: $65 Million Loan of November 18, 1977; Effective Date: January 12, 1978; Closing Date: June 30, 1984

This is the first of a series now consisting of seven projects developing treecrops for smallholders, supported by Government Nucleus Estate -40 - ANNEX II Page 11 of 29 pages

Companies. Planting programs for 7,600 ha of rubber at Tebenan and for rehabilitation of 18,000 ha of estate rubber have been completed but develop- ment for smallholders at Alue Ie Merah (only 4,700 ha out of a 7,000 ha pro- gram completed) is well behind schedule. Three rubber factories and one palm oil mill have been constructed. Difficulties have occured in quality of rubber plantings, and currently with some trees now at maturity, attention needs to be given to improving tapping practice and rubber processing. Disbursements at December 31, 1982 were 62% of appraisal estimates and 92% of the latest revised estimate.

Loan No. 1604 Nucleus Estate and Smallholders II: $65 Million Loan of July 12, 1978; Effective Date: September 13, 1978; Closing Date: December 31 1983

After a slow start, this project has substantially speeded up its pace of implementation. New rubber planting for smallholders is now expected to be completed in March 1983 in Jambi (3,800 ha), one year ahead of schedule, and in 1983/84 in Riau (11,400 ha) on schedule. Following earlier problems, quality of plantings has improved. Rulbber replanting at Riau (3,000 ha) should also be completed during 1983/84 but the replanting component at Jambi (4,500 ha) has not been successful. The 3,500 ha Nucleus Rubber Estate at Riau although currently behind schedule is expected to be completed in time. More attention needs to be given to development of smallholders food crops. An extension of closing date to December 31, 1985, will probably be needed to accommodate an alternative program to the replanting at Jambi. Disbursements at end of December 1982 were 33% of the appraisal estimate but are expected to improve in coming months.

Loan No. 1751 Nucleus Estate and Smallholders III: $99 Million Loan of August 13, 1979; Effective Date: November 12, 1979; Closing Date: December 31, 1986

All implementing agencies have made good progress. Although some components are slightly behind schedule, the overall project is on or slightly ahead of schedule. About 7,500 ha of rubber have been planted, half of which is for smallholders. About 420 settler houses are occupied and garden lots established. In 1982, one of the estates, PTP I, was upgraded to take over responsibility for completing the Alue Iemerah smallholder component under NES I (1499-IND). Disbursements at the end of December 1982 were about 53% of appraisal estimate, and 90% of the latest revised estimates.

Loan No. 1835 Nucleus Estate and Smallholders IV: $42 Million Loan of May 16, 1980: Effective Date: August 11, 1980; Closing Date: December 31, 1986

Smallholder oil palm planting is on schedule and of excellent quality. Village layout, settler house construction, and road development are a little behind schedule due to problems of land availability. However, these problems are being actively addressed by the implementing estate (PTP X) and the Project Coordinating Committee, and project completion is likely by target date. Disbursements at the end of December 1982 were about 53% of appraisal estimate, and 64% of latest revised estimates.

,4 . ANNTFX II - 41 - Page 12 of 29 pages

Loan No. 2007 Nucleus Estate and Smallholder V: $161 Nilion Loan of June 26, 1981; Effective Pate: October 21, 1981; Closing date: June 30, 1988

The project would develop about 53,000 ha of tree crops (rubber, oil palm, coconuts), food crops and house gardens in West Java, 1,7est Kalimantan and Bengkulu provinces with public sector estates as implementing agents. The project has made a good start except that smallholder coconut development at Cimerak, West Java (3,000 ha) is behind schedule due to land use agreements needing to be finalized. The component to expand the Estates .Training Institute at Yogyakarta and to add another campus at Medan is proceeding satisfactorily. Disbursements are ahead of appraisal estimates.

Loan No. 2126 Nucleus Estate and Smallholder VI: 868.1 Million Loan of April 23, 1982; Effective Date: July 23, 1982; Closing Date: June 30, 1988

The project will assist the GOT's nucleus estates and smallholders development program by establishing 28,200 ha of tree crops (rubber and coconuts), food crops and house gardens in West Java, Bengkulu and Maluku provinces with public sector estates as implementing agents. The proJect implementing agencies PNP XXVIII and PTP XII face problems regarding local cost financing of smallholder development, management problems and severe labor shortage problems in Seram. PTP XII has however completed a difficult 26 km main access road over a short period. PNT XXVIII-s proiect implemen- tation is seriously delayed by lack of experienced senior and middle manage- ment, technical and administrative staff, labor cooperation and coordination with local government. GOI has been requested to urgently review this situa- tion with a view to strengthening management, relieve the labor constraint and improve local government's commitment to the proiect. PTP XYIII has made an excellent effort to overcome the land acquisition problems. Cooperation with local government and the local population is good. Rubber planting commenced in 1982 and standards attained are satisfactory. Planning and training programs for technical and administrative staff are well in hand and no serious problems are foreseen.

Loan No. 2232 Nucleus Estate and Smallholders VII: $154.6 Million Loan of February 18, 1983, Effective Pate: Nlot Yet Effective; Closing Date: June 30, 1989

The project would assist the GOIs nucleus estates and smallhold- ers (NES) development program by establishing about 59,000 ha of tree crops (rubber and oil palm), food crops and house gardens in East and West Kalimantan and South Sulawesi provinces. It would also support the institu- tional strengthening of the Directorate General of Estates and other agencies a,ssociated with tree crop development, marketing programs for smallholders, and provide funds for start-up activities of future NES pro4ects. ANNEX II - 42 - Page 13 of 29 pages

Credit No. 984 Smallholder Rubber Development: $45 Million Credit of April 3, 1980; Effective Date: May 23, 1980; Closing Date: March 31, 1986

Project implementation continues in a generally satisfactory manner with 17,300 ha of rubber planting (9% of appraisal target to that date) undertaken by the end of December 1982. At that time, disbursements had reached $9.8 million (85%) against an estimated $11.5 million. Although the project currently faces no major problems, continuing tardy GOI budget releases could soon become a critical factor. In order to ensure effective continuing operations, project management is to strengthen Project Management Units in some areas, undertake timely recruitment and training of staff at all levels and produce appropriate training and extension manuals. Bank Rakyat Indonesia and Agraria have been requested to play a more active role in-the land titling and loan conversion process. Revised versions of four studies under the project are now available and preparation of the proposed Second Smallholder Rubber Development Project is nearing completion.

Loan No. 1898 Smallholder Coconut Development: $46 Million Loan of August 25, 1980; Effective Date: November 25, 1980; Closing Date: June 30, 1986

Although the planting programs of tall and hybrid coconuts under the project seem reasonably on target, the results being achieved are generally not satisfactory. Problems relate to shortcoming in project management at Head Office, Provincial Offices (POs) and Coconut Working Centers (CWCs) regarding the selection of suitable planting areas and participating small- holders, technical control and supervision of planting and maintenance stan- dards, timely supply of seednuts and of essential inputs, and slow release of project funds, and thus a slow rate of withdrawal application and disburse- ments. At end-December 1982, 8,102 ha of hybrid coconuts (89% of appraisal target to that date) and 7,770 ha of tall coconuts (155% of appraisal target) had been planted while rehabilitation of 5,050 ha of tall coconuts (74% of appraisal target) had been undertaken. An in-depth review is being undertaken by the Resident Mission to ascertain progress already made by GOI in over- coming management and technical shortcomings at Head Office, Provincial Offices and Coconut Working Centers, and to pinpoint any necessary additional measures. To improve control of field operations, some restructuring of management is required as well as reduction and rationalization of the project area. GOI agrees in principle with these recommendations. Disbursements had reached $4.2 million (47%) against an estimated $9.0 million. ANNEX II - 43 Page 14 of 29 pages

Agriculture Support Services

Credit No. 996 Second National Agricultural Extension: $42 Million Credit of April 3, 1980; Effective Date: July 3, 1980; Closing Date: March 31, 1986

Good progress continues to be made with the construction program and the bulk of the Rural Extension Centers programmed under the project are expected to be completed in 1983. Staff recruitment has improved overall but there are still shortages in some Provinces and the problem of shortage of motor cycles for field staff continues. Active steps are being taken to improve extension in non-rice crops. Interest in working towards a unified extension service continues to be promoted. The project is making satis- factory progress.

Loan No. 1840 National Agricultural Research: $35 Million Loan and $30 (Cr. No. 1014) Million Credit of May 16, 1980; Effective Date: July 16, 1980; Closing Date: June 30, 1990

The project is the second phase in the strengthening of the overall institutional framework of the Agency for Agricultural Research and Development (AARD) for agricultural research in fruits, lowland vegetables, livestock, fisheries, forestry and estate crops other than rubber and industrial crops. The Project Implementation Unit (PIU) is functioning efficiently. Steady progress being made in civil works program although there are indications that this may slow down due to budgetary constraints. The fellowship program has fallen behind schedule but is likely to gain momentum following the production of a Manpower Development Plan which is nearing finalization. The project is progressing satisfactorily.

Loan No. 2066 Second Seeds : $15 Million Loan of January 15, 1982; Effective Date: March 11, 1982; Closing Date: June 30, 1989

This project provides for: establishment of 18 medium Seed Processing Centers (SPCs) for the National Seed Corporation, P. T. Pertani and Cooperatives; six small SPCs for Cooperatives; additional equipment and facilities for five Food Crops Research Institutes (FCRIs), Provincial Seed Farms and Seed Control and Certification Services; establishment of a diploma course on seed technology at the Bogor Agricultural Institute; and in-service training, technical assistance and studies for strengthening the institutions operating in the seed subsector. Project implementation has started slowly because the project implementing agencies are still reviewing administrative and working procedures. Preparation of tender documents for the procurement of equipment for seed is in hand. Participating agencies show willingness to cooperate and project implementation is expected to pick-up shortly. _44 ANNEX II Page 15 of 29 pages

Rural Development

Credit No. 946 Yogyakarta Rural Development: $12 Million Credit of August 13, 1979; Effective Date: December 5, 1979; Closing Date: March 31, 1987

The improving trend in overall project performance has continued. Activity targets are now being substantially met with the exception of the Small Scale Industries (SSI) and Village Health Components. The SSI is being vigorously monitored by the new Provincial Inspector for Industries especially with respect to technical assistance which is designed to -complement the SSI credit program. The School Health Program is progressing well and is now being complemented by the Village Kader Health program. Severe drought has delayed the Water Supplies construction due to shortage of water. The rigidity of GOI procurement regulations which do not permit forward purchase of cement also contribute to the delay in construction of tanks. The Roads Program is close to target achievement although high costs are still a cause for concern.

AGRO-BUSINESS AND CREDIT

Credit No. 785 Small Enterprise Development: $40 Million Credit of April 7, 1978; Effective Date: August 17, 1978; Closing Date: December 31, 1984

This project provides technical assistance to strengthen GOI's small credit programs, KIK/KMKP, and credit assistance to small-scale enterprises (SSEs) in West Sumatra and East and Central Java which account for about a third of countrywide KIK/KMKP loan approvals. Satisfactory experience with this first Bank-assisted pilot project has led to a nationwide SSE development project which is supported by the Second Small Enterprise Development Project (Loan 2011-IND). The credit component is fully disbursed, and the remaining balance of the technical assistance component amounting to $9.0 million is financing ongoing technical assistance under Loan 2011-IND (SEDP II).

Credit No. 827 Rural Credit: $30 Million Credit of June 23, 1978; Effective Date: November 3, 1978; Closing Date: March 31, 1985

This project provides long-term credit to about 40,000 small- holders, primarily for fisheries, perennial crops and livestock, and technical assistance to Bank Rakyat Indonesia for program development, training in term lending, credit procedures and accounting and management information systems. Due primarily to delays in obtaining consultancy services, the project is about nine months behind schedule. Following extension of the project to cover additional provinces and commodities, it is rapidly catching up. The project has been very successful in achieving objectives. ANNEX II - 45 - Page 16 of 29 pages

Loan No. 2011 Second Small Enterprise Development: $106 Million Loan of June 26, 1981; Effective Date: October 16, 1981; Closing Date: December 31,1984

From the three regions covered under SEDP I the project has expanded to cover all 27 regions in Indonesia where the Small Investment (KIK)/Small Permanent Working Capital Credit (KMKP) program is being implemented. The Bank-financed portion of the credit component of SEDP II was fully committed as of December 31, 1982, rapid expansion of lending under the project, however, seems to have been accompanied by a slight increase in arrears from 21% to 22% of outstanding loans. Bank Indonesia (BI) and handling banks are aware of this problem and have recently introduced a new reporting system to facilitate better collection and more up-to-date information. BI's progress in implementing the technical assistance components is also generally good, with the exception of the Regional Development Bank upgrading. This latter component is still beset with problems (lack of Regional Development Bank (RDB) counterpart staff, delays in obtaining operational data, weak consultant teams from BAPINDO). BI is evaluating consultant performance in the upgrading of RDBs. The Ministry of Industry has finally started implementing the Technical Services component with the recruitment of two consultants. As the entry of consultants was delayed, disbursement of loan proceeds is also delayed.

EDUCATION

Credit No. 869 Polytechnic: $49 Million Credit of December 29, 1978; Effective Date: May 11, 1979; Closing Date: June 30, 1985

The project objectives are to establish a new system for training engineering technicians, improve the quality of accountancy training and practices, and assist in strengthening education planning and management. The project would establish a Technician Education Development Center (TEDC), six polytechnics and four accountancy development centers and include technical assistance and associated studies. The project is making good progress and implementation is on schedule without a cost overrun. The TEDC building and four of the six polytechnics have been completed and construction of the remaining two is near completion. Equipment contracts for the TEDC and the six polytechnics have been awarded and over 70% of equipment ordered has been delivered. The expert services and fellowship programs are progressing satisfactorily. The accountancy component is also making good progress. Two of the five study contracts are still to be awarded. Operation has commenced in all six polytechnics since September 1982 but at 60% of full capacity. Disbursements at the end of February 1983 were over 100% of appraisal estimates.

Loan No. 1237 Fourth Education: $37 Million Loan of April 15, 1976; Effective Date: June 17, 1976; Closing Date: June 30, 1984

The loan is helping to finance physical facilities and related technical assistance for: (a) two faculties of technology at existing ANNEX II - 46 - Page 17 of 29 pages

teacher training colleges and four new centralized workshops for technical training for the Ministry of Education and Culture (MEC); (b) 17 new vocational training centers, an existing instructor training center and 25 mobile training units for the Ministry of Manpower (MOM); and (c) new premises for the National Institute of Administration (LAN), the country-s principal civil service training institution. The completed MEC subproject is problem-free and facilities are operating satisfactorily. The MOM subproject has made some progress but is about two and a half years behind schedule with a 16% cost overrun. Problems faced include poor equipment procurement management, shortage of funds, low utilization of completed facilities, poor quality of training (less than 50% of trainees placed in employment), and partial compliance on covenants. The LAN component has made no progress for three years and is now about three and a half years behind schedule, mainly due to the default of the civil works contractor for price escalation disputes with GOI. After retendering, a new contract has been approved recently and construction of the remaining unfinished portion of the building is expected to be completed by mid-1984. A second extension of the Closing Date to June 30, 1984 has been approved. Disbursements at the end of February 1983 were about 88% of appraisal estimate.

Loan No. 1433 Teacher Training: $19 Million Loan of June 6, 1977; Effective Date: July 7, 1977; Closing Date: June 30, 1983

The project is progressing satisfactorily. Approximately 88% of the civil works program has been completed. Phase I is complete and 90% of the construction in Phase II is finished. All furniture has been procured and installed; all equipment has either been procured and delivered, or contracts awarded and deliveries would be completed before closing date. Training courses for teachers and staff of SPGs and IKIPs have been comple- ted. A total of 6,100 persons have been trained. Project costs at comple- tion are expected to result in $2 million savings. Book procurement has been delayed due to ministerial procurement review procedures. This delay is expected to result in a need to extend the closing date by one year.

Loan No. 1486 Non-Formal Education: $15 Million Loan of September 14, 1977; Effective Date: November 4, 1977; Closing Date: June 30, 1983

The project aims at strengthening the Department of Education's nonformal education programs in seven provinces. Financing would cover: civil works to renovate two existing and establish four new provincial cen- ters, instructional equipment and vehicles, in-service training, materials development, a basic learning fund, and related technical assistance. Construction of the six Balai PENMAS (directorates for out-of-school educa- tion) centers, has been completed. All furniture and equipment are already on site. About 90% of the staff training program is meeting appraisal targets and production and distribution of pretested learning materials is - 47 - ANNEX II Page 18 of 29 pages

accelerating. The technical assistance program is on schedule; local staff have replaced foreign consultants. As of October 1982 estimated cumulative disbursements had reached a total of $10.1 million or 67% of appraisal estimates. Of the remaining loan funds it is estimated that US$5.45 million will be disbursed by June 30, 1983, the project closing date. Approximately $254,000 from unallocated category remains uncommitted.

Loan No. 1692 Second Agricultural Training: $42 Million Loan of May 7, 1979; Effective Date: July 31, 1979; Closing Date: June 30, 1985

The project constitutes the second phase of GOIs long-term strategy to improve the quality and supply of middle-level agricultural manpower. Good progress continues to be made. Disbursements at the end of February 1983 were 68% of the loan amount. The overall progress of the fellowships program has been good. The regular program and the short course program would be completed in December 1983 and the Ph.D. program at the University of Sam Houston, Texas, is exDected to be completed in June 1985. Progress in achieving educational objectives is generally satisfactory. In December 1982 the Bank agreed to the GOI's request to reallocate $4.2 mil- lion for preparatory studies and design work for the proposed Third Agricultural Training Project, and $2.8 million for improvement of Ketindam In-service Teacher Training Center (ISTC), additional boarding facilities at 17 existing ISTCs and upgrading the Ciawi ISTC.

Loan No. 1904 University Development: $45 Million Loan of November 13, 1980; Effective Date: January 22, 1981; Closing Date: December 31, 1986

The project is the first phase of a long-term university develop- ment program. Its main objectives are to increase the output of high level manpower and improve the quality of university education in the fields of engineering, science, agriculture, and economics (including business admin- istration and accountancy), as well as strengthen the management of the overall university system. The additional land required for the University of Gadjah Mada and the new site for the University of Andalas have been acquired. The campus master plan for the University of Indonesia (UI) has been completed and the Universities of Gadjah Mada and Andalas are expected to complete theirs by early 1983. The implementation of technical assist- ance provisions is about 22 months behind appraisal schedule. Pending the appointment of MUCIA to handle the fellowship program, the Directorate General of Higher Education has administered overseas fellowships, which as of December 31, 1982, totalled about 90 staff in the UK, USA, Australia, Belgium, Thailand and the Philippines. Training of master trainers in University Management and textbook editors is in progress in the UK; domes- tic training in University Management is scheduled to start in April 1983 after the return of master trainers. Work is in progress for establishing a Management Information System in the DGHE and in each project university. Plans are being finalized for the policy study on student admissions. Disbursements as of December 1982 were 40% of the appraisal estimates. ANNEX II - 48 - Page 19 of 31 pages

Loan No. 2101 Second Teacher Training: $80 Million Loan of April 5, 1982; Effective Date: May 24, 1982; Closing Date: June 30, 1988

The project would (a) construct and equip 60 preservice primary primary teacher training schools (SPG) and 10 primary sports teacher train- ing schools (SGO); (b) construct and equip 11 secondary teacher training colleges (IKIP); (c) improve and expand teacher training colleges for special education (SGPLB); (d) improve and expand inservice teacher training facilities (PPPG and BPG); and (e) establish a Center for Educational Adminis- tration (CEA).

Loan No. 2102 Second Textbook: $25 Million Loan of April 5, 1982; Effective Date: June 14, 1982; Closing Date: June 30, 1987

The project will support the establishment of the Integrated Text- book Project (ITP), a permanent organization to plan and manage textbook development activities; a Center for Curriculum Development (CCD), which would develop improved curricula for primary and secondary schools, and an improved national distribution system for all textbooks for primary and secondary schools. The implementation of the project is progressing satis- factorily. The site of ITP/CCD office building has been acquired. Selec- tion and acquisition of sites for regional warehouses and depots is in progress. Consulting architects and engineers have been appointed. Staff appointments at ITP are slightly behind schedule. Efforts are underway to implement a program of overseas training of staff contract managerial services for providing consultants and arranging foreign and local training programs.

ENERGY

Loan No. 1365 Sixth Power: $116 Million Loan of February 4, 1977; Effective Date: June 6, 1977; Closing Date: June 30, 1983

Construction work on the project has reached its final stage. The 200 MWUnit No. 4 was synchronized on November 26, 1981 and has been in corn- mercial operation since March 1982. Unit No. 5 went into commercial operation in August 1982. The associated studies have been completed.

Loan No. 1513 Seventh Power: $109 Million Loan of February 3, 1978 ($15 million cancelled November 30, 1980); Effective Date: June 30, 1978; Closing Date: December 31, 1983

All contracts were awarded at highly competitive costs with a sub- stantial reduction in foreign costs and, therefore, $15 million of the original loan of $109 million has been cancelled. The Bank also agreed to the inclusion of the following additional studies in the scope of the ANNEX II - 49 - Page 20 of 29 pages

project: (a) Sunda Strait submarine cable feasibility; (b) optimization of location of future thermal plants: (c) power sector management information system design. Construction work at the site has been delayed by about 21 months. Commercial operation of the 200 MW generating unit is expected early in 1984. Construction of the associated transmission lines is pro- gressing satisfactorily. The feasibility study of the East Java coal-fired thermal power station site has been completed and a site has been selected. Contracts for the studies (a), (b) and (c) mentioned above have been signed, and work is progressing satisfactorily.

Loan No. 1708 Eighth Power: $175 Million Ioan of June 1, 1979; Effective Date: November 5, 1979; Closing Date: December 31, 1984

The project encountered a number of problems and slipped nearly eleven months behind schedule by September 1981. However, progress since then has been satisfactory and the commissioning date for Unit No. 1 continues to be October 1984. Disbursements, though much lower than the appraisal estimates, are in line with the revised projections prepared in July 1981. The project cost is expected to remain within the appraisal estimate.

Loan No. 1872 Ninth Power: $253 Million Loan of June 13, 1980; Effective Date: October 24, 1980; Closing Date: September 30, 1985

This project is experiencing delays. However, the commissioning date of the second unit of Suralaya is now expected to be June 1985, i.e. six months behind schedule. The EHV project is delayed by almost one year due to delay in finalizing contract awards. All major contracts about 12-18 months behind SAR schedule, have been awarded and construction work has commenced. The commissioning of the lines is currently scheduled in Decemiber 1984.

Loan No. 1950 Tenth Power: $250 Million Loan of March 6, 1981; Effective Date: April 23, 1981; Closing Date: June 30, 1987

All major contracts for construction and installation of generat- ing equipment required for the Saguling hydroelectric project have been placed with an estimated saving in total project costs of about $99 million. Construction work started at the main dam site in August 1981, and encoun- tered problems in regard to timely completion of diversion tunnels. However, the river diversion was accomplished in January 1983. The contruc- tion program has been modified to ensure that original dam construction targets are met. Other project subcomponents are progressing with about 6 months delays. ANNEX II - 50 - Page 21 of 29 pages

Loan No. 2056 Eleventh Power: $170 Million Loan of November 16, 1981; Effective Date: April 15, 1982; Closing Date: June 3C, 1986

Implementation of the project is proceeding on schedule. Corr- tracts worth about $119 million have already been evaluated and approved by the Bank. PLN has already issued another invitation to bid for the balance of the distribution equipment estimated at $44 million.

Loan No. 2079 Bukit Asam Coal Mining Development and Transportation: $185 Million Loan of January 22, 1982; Effective Date: May 25, 1982, Closing Date: September 30, 1987

Project implementation has commenced. There are some delays in signing of main nine contracts. Out of a total of eight such contracts, five have already been signed and the remaining three are in final stages. The consultants- performance is satisfactory. Soil investigation and geological work is ongoing at the mine site. Although the turnkey contract for the Tarahan terminal was signed it is still not effective. The Tarahan Terminal remains on the project critical path and the best estimate is that the first coal can be shipped to Suralaya by April 1985 which implies an 8-month delay. During the initial start-up there were moderate problems in respect to project management ane concerns arose with respect to the procedure for procurement of packages not financed by the Bank. These matters received close attention from the Bank missions and the issue has now been resolved. Indonesia's constrained budget situation is likely to result in a substantial shortfall of funds for this project in FY83/84 and discussions with GOI are underway to determine how project construction can be rephased without a substantial loss of anticipated benefits.

Loan No. 2153 Coal Exploration Engineering: $25 Million Loan of June 14, 1982; Effective Date: March 1, V'q83; Closing Date: June 30, 1987

The project will evaluate coal reserves and assess the viability of specific coal deposits in South and West Sumatra and other promising areas in Indonesia. The project will be aimed at providing GOI and its agencies with a coal reserve inventory of its major coal bearing areas and feasibility/prefeasibility studies of attractive deposits, thus enabling it to establish investment priorities and define policies for its short, medium- and long-term strategy for coal production and coal use.

Loan No. 2214 Twelfth Power Project: $300 Million Loan of December 27, 1982; Effective Date: Not Yet Effective; Closing Date: December 31, 1988.

Implementation of the project is proceeding on schedule. Con- tracts valued at $36 million have already been approved by the Bank. PLN has already issued bid invitation for Kamojang 2 x 55 MW units and bids ANNEX II - 51 - Page 22 of 29 pages

are due to open on May 2, 1983. PLN is planning to issue another bid invi- tation in May 1983 for the mini-hydro equipments. PLN has also issued bid invitations for Suralaya Unit 3 boiler and turbine generator and bids are due to open in June 1983.

INDUSTRIAL DEVELOPMENTAND FINANCE

Industry

Loan No. 2199 Central Java Pulp and Paper Engineering: $5.5 Million Loan of November 18, 1982; Effective Date: May 2, 1983; Closing Date: September 30, 1984

The project would help finance the cost of: (i) basic engineer- ing, procurement assistance including the preparation of tender documents, preaualification, and hid evaluiation for the Central Java pulp and paper project; (ii) technical assistance in finalizing the wood supply arrange- ments for the Central Java project; (iii) training of the project staff; and (iv) a pulp and paper subisector study which would provide the basis for the restructuring of the industry.

Development Finance Companies

Loan No. 1703 Fourth BAPINDO: $50 Million Loan of June 1, 1979; Effective Date: September 25, 1979; Closing Date: September 30, 1983

BAPINDO has made good progress in committing proceeds of the Bank loan and in implementing its General Improvement Program launched in 1981. Judged on the basis of annual growth in lending operations (147% in 1981 compared with 89% in 1980) it appears the effect of major changes in organizational structure has been positive, but there is still some scope for improvements in term lending procedures and staff capbility to appraise and supervise larger, more complex projects. Term lending in local and foreign currency reached Rp 559 billion ($800 million) in 1982 or 43% over 1981. Strong investment demand from the industrial sector in 1982 underlies this sharp expansion. Full disbursement by the closing date of September 1983 is expected. -52 - ANNEX II Page 23 of 29 nages

POPULATION AND HEALTH

Population

Loan No. 1472 Second Population: $24.5 Million Loan of July 6, 1977; ($3.8 Million cancelled February 25, 1983); Effective Date: August 4, 1977; Closing Date: April 30, 1984

Progress on this project is generally satisfactory. About 90% of original project activities have been completed. The mobile service units provided under the project are making a significant contribution to the recruitment of contraceptive acceptors. Training and population education are substantially completed. The research components -the contraceptive raw materials study is about 90% complete, and the community incentive scheme is about 50% complete and both components should be satisfactorily completed before the revised closing date of April 30, 1984. As of February 1983, disbursements totalled $13.3 million, or 54%.

Loan No. 1869 Third Population: $35 Million Loan of June 13, 1980; Effective Date: September 10, 1980; Closing Date: March 31, 1985

Progress on this project improved significantly during the second half of 1982, largely due to increased attention to project implementation, particularly civil works components, by project management and the addi- tional staff assigned especially to help expedite this work. Population education has made some encouraging progress, as funds have been released to the provinces for expenditure on teacher training activities and detailed guidelines for implementation of population education activities have been issued by NFPCB. Contracts for procurement of audio-visual equipment have been awarded. The training of nurses, midwives, traditional birth atten- dants and health center staff has proceeded on the agreed-upon schedule. Disbursements, however, do not yet reflect the noted upswing in project activities.

Health

Loan No. 2235 Provincial Health; $27 Million Loan of February 18, 1983; Effective Date: Not yet effective; Closing Date: June 30, 1988

Substantial progress has been made in the initial implementation of the project. The FY83/84 project budget of US$10.5 million and work plan have been completed and approved by BAPPENAS. The sites for the first-year construction program are available and the architectural consultants have completed the preliminary drawings for two hospitals. Consultants (financed - 53 - ANNEXII Page 24 of 29 pages

by USAID) are now assisting in curriculum development and the training of trainers in support of the project. Arrangements for the procurement of DDT have been initiated and malaria consultants have already been identified and their availability ascertained.

TECHNICAL ASSISTANCE

Credit No. 898 Fifth Technical Assistance: $10 Million Credit of May 7, 1979; Effective Date: September 5, 1979; Closing Date: March 31, 1984

There still remains an uncommitted balance of about $5.0 million under this credit. Potential studies to utilize the remaining balance have been identified and it is likely that the closing date for the credit will be postponed.

Loan No. 1197 National Resource Survey and Mapping: $13 Million Loan of February 5, 1976; Effective Date: April 2, 1976; Closing Date: December 31, 1983

The National Coordinating Agency for Surveys and Mapping (BAKOSURTANAL) complex at Cibinong is completed, and most of the cartographic photographic processing, including color photo processing equipment and printing equipment required to produce maps, are installed. Computer equipment for resource analysis including a topographic data bank and flatbed plotter has been installed. Various resource evaluation activities have been undertaken using these facilities. Recruitment and training of new staff, particularly at junior and middle level has recently been accelerated. The new photography operation financed under the parallel Canadian Project was delayed as a result of which the Bank agreed to extend the Closing Date until December 31, 1983. The photography operation started in July 1981 is expected to be completed by the new Closing Date.

TRANSPORTATION

Fertilizer Distribution

Loan No. 2120 National Fertilizer Distribution: $66 Million Loan of April 5, 1982; Effective Date: September 27, 1982; Closing Date: June 30, 1986

This project will increase agricultural production in Indonesia by substantially expanding the capacity to distribute fertilizer to farmers. Funds are also provided for preparation of future maritime transport pro- jects, including master plans and detailed engineering for several ports. The project experienced delays in its start up phase. In particular, one of ANNEX II - 54 - Page 25 of 29 pages

the conditions for loan effectiveness was fulfilled with considerable delay, thus delaying project implementation by six months. However, PUSRI has taken steps to expedite project implementation although an extension of project completion by six months is likely. Total project costs are estimated to increase by about 10%-15%.

Highways

Loan No. 1696 Fifth Highway: $130 Million Loan of June 1, 1979 ($6.8 Mil- lion cancelled June 30, 1981); Effective Date: August 28, 1979; Closing Date: December 31, 1984

Project implementation, which started nearly three years ago, is still behind schedule. The project is about 40% completed compared to 75% scheduled. The causes for delay are: (a) the ambitious project objectives, which translate into program-type components and numerous consultancies; (b) organization and management problems in the provincial highway agencies; and (c) new development guidelines of the GOI under Repelita III emphasizing the spread of investments over a larger number of projects with reduced stand- ards. However, work is now underway on nearly all project components, and there is still a reasonable chance of completing the project with a total delay of about one year. The Prov4ncial Departments of Public Works programs of support works were started in January 1982 with mobilization of consultants, and after road maintenance equipment had been ordered. $6.8 million of the loan has been cancelled due to misprocurement of road maintenance equipment.

Loan No. 2049 Jakarta-Cikampek Highway: $85 million Loan of October 9, 1981; Effective Date: February 9, 1982; Closing Date: December 31, 1987

The project will increase road capacity between Jakarta and Cikampek (about 70 km to the east) by construction of a new toll road and by improvements to the existing highway. Consultants have been selected for construction supervision, and contract negotiations have been concluded. Bid opening for the four sections of road works took place in late May 1982, somewhat behind schedule. The project is about 3 months behind schedule. Consequently, disbursements are likely to fall behind estimated disbursement schedule, at least during the first one or two years. ANNEX II - 55 - Page 26 of 29 pages

Loan Nbo.2083 Rural Roads Development: $100 Million Loan of January 22, 1982; Effective Date: August 11, 1982. Closing Date: December 31, 1986

The project will improve rural road infrastructure in selected provinces by strengthening the capacity of the district public works agencies, implementing an expanded program of rural roads works, and supporting a rural road development program for a three-year period in five Indonesian provinces. The project also contains components for training and technical assistance. Construction of some workshops has begun. Contracts for all works equipment have been awarded. Progress under the project is hampered by inadequate organizational arrangements and shortages of qualified staff. Consequently disbursements have fallen behind appraisal estimates. The next supervision mission will review with GOI actions required to improve the rate of progress.

Marine Transport

Loan No. 1250 Second Shipping: $54 Million Loan of May 20, 1976; Effective Date: October 8, 1976; Closing Date: June 30, 1983

The project is part of the first phase of the Gbvernment's Inter- Island Fleet Development Program and is designed to modernize, expand and improve the efficiency of the inter-island fleet. All funds for ship procurement ($48.0 million) have been disbursed and the balance of funds for technical assistance ($6.0 million) have been disbursed or allocated. It is expected that all funds will be disbursed by loan closing date. The project is essentially completed.

Po rts

Loan No. 1337 Tanjung Priok Port: $32 Million Loan of November 4, 1976; Effective Date: March 3, 1977; Closing Date: June 30, 1983

All civil works under the project have been successfully comple- ted. All of the equipment has been procured and installed and is fully operational. As a result of the investments under the project, Tanjung Priok Port's performance has improved dramatically. Technical assistance, amounting to $4.7 million is being used to finance consultant services for preparation of the proposed Maritime Sector Development Program. The loan is expected to close by June 30, 1983. -56 - ANNEX II Page 27 of 29 pages

TOURISM

Credit No. 479 Bali Tourism: $16 Million Credit of June 14, 1974; ($1.4 million cancelled October 31, 1982); Effective Date: December 4, 1974; Closing Date: December 31, 1983

Infrastructure work at Nusa Dua has been substantially completed. The access road to Nusa Dua from the airport and the Denpassar bypass road were completed and opened for traffic in December 1980. The hotel training school was completed in July 1979 and has been in operation since then. The construction of a first hotel (450 rooms) by Garuda at Nusa Dua is progress- ing well with first phase completed in December 1982. Negotiations have been concluded with Club Med for a hotel investment with the Bali Tourism Development Corporation (BTDC) equity participation of $0.4 million. Out of the total credit of $16.0 million, $1.4 million has been cancelled but disbursements will continue up to December 31, 1983 against BTDC commitment of $0.4 million for Club Med.

URBAN DEVELOPMENT

Loan No. 1336 Second Urban Development: $52.5 Million Loan of November 4, 1976; Effective Date: March 28, 1977; Closing Date: June 30, 1983

The project aims at providing basic infrastructural facilities including footpaths, drainage, water supply and human waste disposal to about 3,000 ha of densely populated slum areas (kampungs) in Jakarta and 374 ha in Surahaya. The physical program has been completed with a coverage of about 3,434 ha kampungs in Jakarta and 441 ha in Surabaya. Supplementary technical assistance studies related to future project preparation are currently in progress.

Loan No. 1653 Third Urban Development: $54 Million loan of January 31, 1979; Effective Date: September 26, 1979; Closing Date: December 31, 1984

The project extends the slum (kampung) improvement programs (KIP) under the Second Urban Development Project (Loan 1336-IND) in the cities of Jakarta (750 ha) and Surabaya (580 ha), and also provides for similar basic infrastructural facilities in three additional cities -- Ujung Pandang (375 ha), Semarang (310 ha) and Surakarta (170 ha) -- with the KIP coverage in each city ranging between 15 to 37X of total kampung areas to be upgraded. Also included in the project is a comprehensive solid waste management program (SWIP) in Jakarta, and Surabaya and macro-drainage improvements in Surabaya. The KIP component is nearing completion in all cities with its actual coverage exceeding the target levels in Jakarta and Surabaya. SWIP _57 _ ANNEX II Page 28 of 29 pages

implementation is progressing well in Surabaya but has just started in Jakarta due to earlier start-up delays in pilot testing. The Surabaya drainage component which was beset with land acquisition problems (for canal dredging schemes) is now progressing satisfactorily. The overall project is expected to be implemented within the appraisal projected date of December 31, 1934. Disbursements at the end of March 1983 were about 65% of appraisal estimate.

Loan No. 1972 Fourth Urban Development: $43 Million Loan of May 8, 1981; Effective Date: September 9, 1981; Closing Date: September 30, 1986.

The project further expands Bank-s assistance to GOI's slum impro- vement programs (KIP) under the earlier urban projects to six nationwide provincial capital cities with a total target KIP area of 2,000 ha and with a coverage in each city representing about 15% to 33% of total KIP area to be upgraded. Sites and sevices schemes, aimed at providing affordable core housing units to the low-income population, will be developed for a total of about 11,000 plots in some six to seven cities. Sectoral programs compris- ing solid waste improvement and improved water supply, are also included in one of the project cities. A national urban mapping program covering 125 cities will be undertaken providing base data for future city planning, land registration and valuation programs. The development of the housing and mortgage financing institutions is a prominent feature of the project. Technical assistance for project management, training and feasibility studies to various urban authorities and agencies will be provided. The sites and services program is proceeding satifactorily. The start-up delays in the implementation of the KIP programs have been overcome and the pro- gress of these programs has significantly improved with the consultants appointments. All technical assistance programs are proceeding satisfac- torily. Disbursements at the end of March 1983 were about 33% of appraisal estimate.

WATER SUPPLY AND SANITATION

Loan No. 1709 Second Water Supply: $36 Million Loan of June 1, 1979; Effective Date: February 29, 1980; Closing Date: December 31, 1984

The project expands and improves existing water supply and distri- bution systems in the cities of Tangerang and Surabaya (both in Java), Jember (Sumatra), Pare-Pare (Sulawesi) and Ambon (Moluku), and provides for the construction of new systems in Klaten and Purwakarta (both in Java). The total increase in raw water yield in the cities as a result of the project is projected at 1,770 lit/sec and the total installation of transmission and distribution mains will amount to about 375 kms with house - 58 - ANNEX II Page 29 of 29 pages

connections targetted at a total of 40,000 in the project cities. The project is also aimed at establishing water enterprises (WEs) in the project cities and strengthening the skills of WE's staff, as well as the Cipta Karya (Housing and Urban Development) staff, in the areas of administration, financial and operational performance of the enterprises. After consider- able delays (up to 18 months) the award of most of the International Competitive Bidding procurement contracts for the supply of pipes and materials is now complete and deliveries are in progress. The construction of the civil works in the project cities is also underway. The organiza- tional and management training for the WEs has been underway since September 1981 and is proceeding satisfactorily. Disbursements at the end of March 1983 were about 28% of appraisal estimate.

Loan No. 2236 Jakarta Sewerage and Sanitation; $22.4 Million Loan of February 18, 1983; Effective Date: Not yet effective: Closing Date: March 31, 1988.

The project is the first step in developing a sewerage system in Jakarta and complements the public health measures carried out under previous Bank-assisted urban development projects. Its principal objectives are to (a) improve environmental conditions and public health, (b) establish an institution and sound financial policies for the operation and management of the Jakarta sewerage system and (c) demonstrate the feasibility of appropriate low-cost technologies. The project covers sewerage and sanita- tion improvements including (a) a basic water-borne sewerage system; (b) drainage improvements; (c) sanitation improvements; (d) staff training and fellowships; and (e) consulting services for project implementation and for technical institutional and financial studies and the preparation of future projects. Steps have been taken to establish the appropriate institutional arrangements for project implementation, terms of reference for the engagement of consultants have been agreed, and steps have been taken for procurement by ICB of pipes. ANNEX III - 59-

INDONESIA

THIRTEENTH POWER PROJECT

Supplementary Project Data Sheet

Section I: Timetable of Key Events

(a) Time taken to prepare the project: 2 years (b) Project prepared by: PLN with Bank and consultant assistance (c) First presented to the Bank: June 1980 (d) Departure of the Appraisial Mission: December 1982 (e) Completion of Negotiations: April 1983 (f) Planned Effectiveness: September 1983

Section II: Special Bank Implementation Actions

None.

Section III: Special Conditions

GOI will continue to:

(a) carry out an environmental/resettlement Plan of Action satisfac- tory to the Bank (para. 63);

(b) monitor closely resettlement and environmental activities (para. 63); and

(c) furnish to the Bank quarterly reports on the progress and imple- mentation of the'Plan of Action and other aspects related to resettlement and environmental activities (para. 63).

PLN will:

(a) complete by December 31, 1983 a study of its cost and tariff structure which would better reflect LRMC; design, after consul- tation with GOI and the Bank, a new tariff structure by March 1984, and thereafter implement the appropriate recommendations and update its analysis of LRMC annually (para. 38);

(b) retain consultants, including the special board of consultants, for the period of project construction (para. 54); and

(c) prepare programs of periodical inspection and maintenance of the project works and implement them (para. 55). I

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