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The World Bank Document of The World Bank Public Disclosure Authorized Report No: 46825-ID PROJECT APPRAISAL DOCUMENT Public Disclosure Authorized ON A PROPOSED GRANT IN THE AMOUNT OF US $50 MILLION TO THE REPUBLIC OF INDONESIA FOR THE Public Disclosure Authorized ACEH - ECONOMIC DEVELOPMENT FINANCING FACILITY PROJECT December 5, 2008 Public Disclosure Authorized CURRENCY EQUIVALENTS (EXCHANGE RATE EFFECTIVE DECEMBER 1, 2008) Currency Unit = Indonesian Rupiah (IDR or Rp.) IDR 1,000 = US$ 0.102 US$ 1 = IDR 12,837 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AMDAL Analisa Mengenai Dampak Lingkungan or Environmental Impact Assessment BAPPEDA Badan Perencanaan Pembangunan Daerah (of Government of Aceh) BAPPENAS State Ministry for Development and Planning (of GOI) BPKP Financial and Development Supervisory Board (Badan Pengawasan Keuangan dan Pembangunan BRR Bureau for Rehabilitation and Reconstruction for Aceh and Nias CAS Country Assistance Strategy CQ Selection Based on Consultants’ Qualifications DIPA Daftar Isian Pelaksanaan Anggaran or Government of Indonesia annual budget allocation document EA Environmental Assessment EDFF Economic Development Financing Facility (The Project) EIA Environment Impact Assessment EMP Environmental Management Plan ESMF Environmental and Social Management Framework EST External Support Team FM Financial Management FMS Financial Management Specialist GoA Government of Aceh GOI Government of Indonesia IBRD International Bank for Reconstruction and Development (The World Bank) ICB International Competitive Bidding IC Individual Consultants IDA International Development Association IFR Interim Financial Report KPA Kuasa Pengguna Anggaran or Authorized Budget Holder KPDT Ministry for Disadvantaged Areas (of GOI) KPI Key Performance Indicator LGIP Local Government Annual Investment Plan MBD Model Bidding Documents MDF Multi-Donor Trust Fund for Aceh and North Sumatra MOF Ministry of Finance MoU Memorandum of Understanding MTR Mid Term Review NCB National Competitive Bidding NGO Non-Governmental Organization O&M Operations and Maintenance PGIP Provincial Government Annual Investment Plan OM Operations Manual PA Pengguna Anggaran or Budget Holder PMU Project Management Unit QBS Quality-Based Selection QCBS Quality and Cost Based Selection RFP Request For Proposal RKL/RPL Rencana Pengelolaan Lingkungan/Rencana Pemantauan Lingkungan or Environmental Management Plan /Environmental Monitoring Plan RPJMD Medium Term Development Plan of the Government of Aceh SA Special Account SBD Standard Bidding Documents SIE Sub-project Implementing Entity SOE Statement of Expenditures SP2D Surat Perintah Penyaluran Dana or Letter of Instruction for Disbursement (issued by KPPN) SPP-LS Surat Perintah Membayar Langsung or Letter of Instruction for Payment (issued by KPA) SSS Single-Source Selection TA Technical Assistance TOR Terms of Reference UKL/UPL Upaya Pengelolaan Lingkungan/Upaya Pemantauan Lingkungan or Environmental Management Efforts/Environmental Monitoring Efforts UNDP United Nations Development Program Vice President: James W. Adams Country Director: Joachim von Amsberg Sector Director/Sector Manager: Vikram Nehru/Tunc Uyanik Task Team Leader Thomas A. Rose INDONESIA ACEH- ECONOMIC DEVELOPMENT FINANCING FACILITY PROJECT TABLE OF CONTENTS Page I. STRATEGIC CONTEXT AND RATIONALE .............................................................................................. 1 A. COUNTRY AND SECTOR ISSUES ............................................................................................................................. 1 B. RATIONALE FOR MDF AND BANK INVOLVEMENT .................................................................................................. 3 C. HIGHER LEVEL OBJECTIVES TO WHICH THE PROJECT CONTRIBUTES....................................................................... 4 II. PROJECT DESCRIPTION.............................................................................................................................. 4 A. LENDING INSTRUMENT .......................................................................................................................................... 4 B. PROJECT DEVELOPMENT OBJECTIVE AND KEY INDICATORS ................................................................................... 4 C. PROJECT COMPONENTS......................................................................................................................................... 5 D. LESSONS LEARNED AND REFLECTED IN THE PROJECT DESIGN............................................................................... 6 E. ALTERNATIVE DESIGNS CONSIDERED AND REASONS FOR REJECTION.................................................................... 8 III. IMPLEMENTATION....................................................................................................................................... 9 A. PARTNERSHIP ARRANGEMENTS ............................................................................................................................. 9 B. INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS..................................................................................... 9 C. MONITORING AND EVALUATION OF OUTCOMES/RESULTS .................................................................................... 11 D. TRANSITION STRATEGY AND SUSTAINABILITY .................................................................................................... 11 E. CRITICAL RISKS AND POSSIBLE CONTROVERSIAL ASPECTS .................................................................................. 13 F. GRANT CONDITIONS AND COVENANTS ................................................................................................................. 14 IV. APPRAISAL SUMMARY.............................................................................................................................. 15 A. ECONOMIC AND FINANCIAL ANALYSIS ................................................................................................................ 15 B. TECHNICAL ......................................................................................................................................................... 16 C. FIDUCIARY .......................................................................................................................................................... 16 D. ANTI-CORRUPTION ACTION PLAN ........................................................................................................................ 18 E. SOCIAL ................................................................................................................................................................ 20 F. ENVIRONMENT..................................................................................................................................................... 20 G. SAFEGUARD POLICIES.......................................................................................................................................... 21 H. POLICY EXCEPTIONS AND PROJECT READINESS.................................................................................................... 22 LIST OF ANNEXES ANNEX 1: COUNTRY AND SECTOR BACKGROUND................................................................................... 24 ANNEX 2: MAJOR RELATED PROJECTS FINANCED BY THE BANK AND/OR OTHER AGENCIES 46 ANNEX 3: RESULTS FRAMEWORK AND MONITORING ........................................................................... 47 ANNEX 4: DETAILED PROJECT DESCRIPTION ........................................................................................... 55 ANNEX 5: PROJECT COSTS ............................................................................................................................... 64 ANNEX 6: CRITICAL RISKS, MITIGATION MEASURES AND RATING .................................................. 66 ANNEX 7: IMPLEMENTATION ARRANGEMENTS....................................................................................... 71 ANNEX 8: FINANCIAL MANAGEMENT ASSESSMENT ............................................................................... 90 ANNEX 9: PROCUREMENT ARRANGEMENTS ........................................................................................... 101 ANNEX 10: ECONOMIC AND FINANCIAL ANALYSIS ............................................................................... 117 ANNEX 11: SAFEGUARD POLICY ISSUES .................................................................................................... 119 ANNEX 12: ANTI-CORRUPTION ACTION PLAN......................................................................................... 127 ANNEX 13: COMMUNICATIONS STARTEGY .............................................................................................. 134 ANNEX 14: PROJECT PREPARATION AND SUPERVISION...................................................................... 138 ANNEX 15: DOCUMENTS IN THE PROJECT FILE...................................................................................... 142 ANNEX 16: STATEMENT OF WORLD BANK LOANS AND CREDITS..................................................... 147 ANNEX 17: COUNTRY AT A GLANCE............................................................................................................ 150 ANNEX 18: MAPS................................................................................................................................................. 153 LIST OF TABLES TABLE 1:
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