The World Bank Public Disclosure Authorized

Document of The World Bank Public Disclosure Authorized

Report No:ICR0000000103

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IBRD-46430) Public Disclosure Authorized ON A

LOAN IN THE AMOUNT OF US$200.00 MILLION

TO THE

REPUBLIC OF INDONESIA

FOR THE

Public Disclosure Authorized EASTERN INDONESIA REGION TRANSPORT PROJECT

December 19,2006

Transport Sector Unit

Sustainable Development Department

EAST ASIA AND PACIFIC REGION Public Disclosure Authorized CURRENCY EQUIVALENTS

( Exchange Rate Effective 07/01/2006 )

Currency Unit = ID Rupiah

ID Rupiah 1.OO = US$0.0001

US$ 1.OO = ID Rupiah 9000

Fiscal Year

January 1 - December 3 1 ABBREVIATIONS AND ACRONYMS AADT Average Annual Daily Traffic AMDAL Environmental Impact Assessment BAPEDALDA Provincial Environmental Agency BAPPEDA Provincial Development Planning Board BAPPENAS National Development Planning Agency CTC Core Team Consultant DGH Directorate General of Highways of MPW DGLT Directorate General of Land Transport DGRI Directorate General of Regional Infrastructure DSC Design and Supervision Consultants EIRTP 1 Eastern Indonesia Region Transport Project EIRTP 2 Second Eastern Indonesia Region Transport Project EMP Environmental Management Plan ERR Economic Rate of Return FY Fiscal Year GO1 Government of Indonesia IDR Indonesian Rupiah IIRMS Integrated Indonesian Road Management System Kabupaten Autonomous Level of Local Government KOta Autonomous Level of Local Government LARAP Land Acquisition and Resettlement Action Plan MOF Ministry of Finance MPW Ministry of Public Works MSRI Ministry of Settlements and Regional Infrastructure NPV Net Present Value PIU Project Implementation Unit PMU Project Management Unit RTC Regional Team Consultants TA Techcal Assistance

Vice President: James W. Adarns Country Director: Andrew D. Steer Sector Manager: Jitendra N. Bajpai Project Team Leader: Sally L. Burningham Indonesia Eastern Indonesia Region Transport Project

CONTENTS

Page No.

1. Basic Information 2. Key Dates 3. Ratings Summary 4. Sector and Theme Codes 5. Bank Staff 6. Project Context, Development Objectives and Design 7. Key Factors Affecting Implementation and Outcomes 8. Assessment of Outcomes 9. Assessment of Risk to Development Outcome 10. Assessment of Bank and Borrower Performance 11. Lessons Learned 12. Comments on Issues Raised by BorrowerIImplementing AgenciesIPartners Annex 1. Results Framework Analysis Annex 2. Restructuring Annex 3. Project Costs and Financing Annex 4. Outputs by Component Annex 5. Economic and Financial Analysis Annex 6. Bank Lending and Implementation SupportlSupervision Processes Annex 7. Detailed Ratings of Bank and Borrower Performance Annex 8. Beneficiary Survey Result Annex 9. Stakeholder Workshop Report and Results Annex 10. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 11. Comments of Cofinanciers and Other Partners/Stakeholders Annex 12. List of Supporting Documents MAPS 1. IBRD 31368 Overall Program 2. IBRD 3 1369 Kalimantan Barat 3. IBRD 3 1370 Kalimantan Tengah 4. IBRD 31371 Kalirnantan Timur 5. IBRD 3 1372 Kalimantan Selatan 6. IBRD 31 373 Bali 7. IBRD 31 374 Nusa Tenggara Barat 8. IBRD 31375 Nusa Tenggara Timur 9. IBRD 31376 Sulawesi UtaraIGorontalo 10. IBRD31377 Sulawesi Tengah 11. IBRD31378 Sulawesi Barat and Sulawesi Selatan 12. IBRD31379 Sulawesi Tenggara 13. IBRD 31380 Maluku 14. IBRD31381 Maluku Utara 15. IBRD31382 han Jaya Barat and Papua (Irian Jaya) 16. IBRD35139 Papua Poverty Map 1. Basic Information Eastern Indonesia Country: Indonesia Project Name: Region Transport Project Project ID: PO40578 LICITF Number(s): IBRD-46430 ICR Date: 1211 912006 ICR Type: Core ICR REPUBLIC OF Borrower: Lending Instrument: SIL INDONESIA Original Total USD 200.OM Disbursed Amount: USD 194.72M Comrnitment : Environmental Category: B Implementing Agencies

Ministry of Public Works Cofinanciers and Other External Partners

2. Key Dates Revised 1 Actual Process Original Date Process Date Date(s) Concept Review: 0911 312000 Effectiveness: 0312712002 03/27/2002 Appraisal: 0611 912001 Restructuring(s'): Approval: 1211 112001 Mid-term Review: Closing: 0613012006 06/30/2006

3. Ratings Summary 3.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Satisfactory

3.2 Quality at Entry and Implementation Performance Indicators Implementation Performance Indicators QAG Assessments (if any) Rating: Potential Problem Project at any No Quality at Entry (QEA): Satisfactory time (YesINo): Problem Project at any time No Quality of Supervision (QSA): None (YesINo): DO rating before Moderately Closing/Inactive status: Satisfactory 4. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 5 5 Roads and highways 95 95 Original Priority Actual Priority Theme Code (PrimaryISecondary) Decentralization Secondary Secondary Infrastructure services for private sector development Primary Primary

5. Bank Staff Positio~~s At ICR At Approval Jemal-ud-din Vice President: James W. Adams Kassum Country Director: Andrew D. Steer Mark Baird Sector Manager: Jitendra N. Bajpai Jitendra N. Bajpai Sally L. Hatim M. Hajj Project Team Leader: Burningham Sally L. ICR Team Leader: Burningham Sally L. ICR Primary Author: Burningham 6. Project Context, Development Objectives and Design (this section is descriptive, taken from other documents, e.g., PAD/ISR, not evaluative) 6.1 Context at Appraisal (brief summary of country macroeconomic and structural/sector background, rationale for Bank assistance)

The Project was appraised in June 2001 during a time in which Indonesia, after some 30 years of steady economic growth, was emergng from the severe economic and financial crisis of 1997-1998 and experiencing transition to democracy and an ambitious program of decentralization.

The Project was aimed at Eastern Indonesia region, considered as all of Indonesia except Java and Sumatra and spreading over a vast geographic area including the three largest islands of Kalimantan, Sulawesi, and Papua, together with the smaller islands of the Malukus, Nusatenggaras, and Bali. Eastern Indonesia is economically diverse, with many areas being rich in natural resources, minerals, forests, oil and gas, fisheries, and productive agricultural lands, and many other areas that include the poorest, least populated, and least developed parts of the country.

As a result of the economic crisis in 1997-1998 it was estimated that the regional economy of Eastern Indonesia contracted by around 8 percent. The impacts of the crisis were quite different within Eastern Indonesia. Kalimantan was the worst affected area, with the economy shnnking by close to 19 percent due to other compounding factors like forest fires and drought. By contrast, Sulawesi was little affected as the contractions in some sectors were offset by higher prices for exports from the agricultural and fisheries sectors.

In the late 1990s, the Government of Indonesia (GOI), by enacting Laws 22 and 25, decided to provide for increased regional autonomy and decentralized fiscal authority, including the decentralization of planning and programming for transport sector activities to the kabupaten and provincial levels. Therefore, the challenge of decentralizing administration and core management functions, including financing, planning, programming, and implementation to 15 provinces and about 130 districts was enormous, especially given the generally weak institutional capacity and changing structures at local levels.

At appraisal in June 2001, the overarching goal of the World Bank Group in Indonesia was to support the government's efforts to reduce poverty and vulnerability in a more open and decentralized environment. The Country Assistance Strategy dated January 4, 2001 (Report No. 21580-IND) focused on three broad priority objectives: sustaining economic recovery and promoting broad-based growth; building national institutions for accountable government; and delivering better public services for the poor.

Originally one project, Eastern Indonesia Region Transport Project (EIRTP) was split in two. This Project EIRTP 1 (Ln 4643, approved December 1l,2001), focused on national and strategic roads and the second complementary, EIRTP 2 (Ln 4744, approved June 22, 2004), included provincial and kabupaten roads. The Project was designed to contribute to achieving three Country Assistance Strategy objectives as follows:

1. Sustaining Economic Recovery and Promoting Broad-Based Growth. EIRTP 1 included the poorest and least populated parts of Indonesia and intended to accelerate their development by improving the condition and all-weather usability of existing national and other strategic road links; 2. Building National Institutions for Accountable Government in the Road Sector. EIRTP 1 was to support the effective and sustainable decentralization of responsibility and resources to local institutions in 15 provinces. These arrangements were designed to provide more efficient and transparent use of public funds for roads through better project selection, improved procurement and financial management arrangements, stricter management of quality, and more effective competition; and 3. Delivering Better Public Services for the Poor. Together, the two projects were to help improve access to employment opportunities, health, education, and to other social services and facilities, and generate employment in construction and maintenance activities including labor-intensive works.

The rationale for World Bank assistance was two-fold: i) to continue the role in institutional support the Bank had provided to the road sector for the past two decades; and (i) to support Indonesia in preserving, at a time of tight budgets, the huge investment it had made in roads in Eastern Indonesia.

6.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

The Project Development Objectives of the EIRTP 1 were to:

1. improve the condition of National and other strategic arterial roads so as to reduce transport costs and provide more reliable access between Provincial centers, to regional development and production areas, and to other key transport facilities; 2. support the effective and sustainable decentralization of planning and management responsibilities for works on all primary (National, Provincial and Kabupaten) roads to the respective provincial and kabupaten governments; and 3. improve the use of scarce financial and natural resources through increased efficiency, quality, and transparency in award of works.

The Key Indicators for the performance of the EIRTP 1 were:

1. for the first objective: (i) percent of road segments on the budgeted program which are recommended by the Indonesian Integrated Road Management System; and (ii) average condition of national roads and bridges; 2. for the second objective: (i) timeliness of the preparation of the annual work programs; (ii) activity of the Provincial Environmental Departments (BAPEDALDA) as measured by the number of provinces where BAPEDALDAs submit reports on environmental and social issues; and (iii) timeliness of the preparation of and submittal of reports on the planning, programming, and budgeting procedures technical assistance; and 3. for the third objective: (i) quality of engineering designs as measured by percent of sub-projects which meet the design criteria; (ii) number of independent technical audits carried out; and (iii) timeliness of the preparation of and submittal of reports on the quality assurance technical assistance.

6.3 Revised PDO and Key Indicators (as approved by original approving authority), and reasons/justification

The original Project Development Objectives and Key Indicators were not revised.

6.4 Main Beneficiaries, original and revised (briefly describe the "primary target group" identijied in the PAD and as captured in the PDO, as well as any other individuals and organizations expected to benefit from the project)

The total beneficiary population from the Project was estimated at about 22 million people, distributed among the 15 participating provinces. The beneficiaries were expected to be mainly the population living near the widespread sub-project areas of influence. These are mostly poor, given the higher percentage of poverty concentration in Eastern Indonesia, than in the rest of Indonesia. The direct benefits were to include lower freight and passenger transport costs, lower fares, and improved access to marketing of their products, as well as access to health and education services for the traveling public, agricultural and industrial producers, and consumers. The expected beneficiaries were not revised.

6.5 Original Components (as approved)

The US$262 million Project consisted of the following four components:

Component I. Road Network Preservation (US$225.22 million). This component included a program in Eastern Indonesia of periodic maintenance of about 1,000 kilometers (km), and betterment of about 1,250 km of national and strategic roads and replacement of bridges of about 5,800 meters.

Component 2. Accident Blackspots (US$2.0 million). This component consisted of the identification of accident blackspot locations, development of accident mitigation measures for the priority locations, implementation of the mitigation measures, and establishment of blackspot investigations units, monitoring of the accident blackspot program and related consulting services. The program planned to include the treatment of about 90 accident blackspots (at least three per province). Component 3. Implementation Support (US$24.46 million). This component covered consulting services required for the management of the Project, design and supervision of the works, and a small amount of equipment required to support implementation of the project as well as provision of funds to meet the incremental operating costs incurred by the implementing agency.

Component 4. Road Sector Support (US10.32 million). This component consisted of technical assistance and training to support the road sector, with emphasis on facilitating the ongoing decentralization process. The technical assistance sub-component included:

1. institutional strengthening comprising: (i) strengthening of road management (planning, programming and budgeting procedures) under decentralized operations; (ii) strengthening quality management for roads in Eastern Indonesia; and (iii) implementation of a demonstration provincial road hnd; 2. extension of the automated road monitoring system to provinces in Eastern Indonesia and to Aceh in Sumatra (not covered under the Second Highway Sector Project); and 3. improvement of the bid documents for roads and bridges to include environmental standard operating procedures under Institutional Strengthening of Environmental Management as well as safety considerations.

To support the decentralization process, training was provided to the national, provincial, and Kabupaten and Kota (autonomous levels of local government) staff involved in the road sector, as well as to the wider construction community through the construction industry training center within the Ministry of Settlements and Regional Infrastructure.

6.6 Revised Components

A single amendment was made to the Loan Agreement at the Government's request. In this August 11, 2005 amendment, the US$2 million originally allocated to the Accident Blackspots component was reallocated since the Government decided not to implement this component. Under the Road Network Preservation component, the target amount of periodic maintenance was increased from 1,000 krn to 1,500 km and the length of bridge replacement reduced from 5,800 m to 4,250 m. The amendment also introduced several adjustments to the Road Sector Support component by reducing the scope of the study on road funds and the study of the improvement of bid documents that was carried out outside the Project. A facility to finance the operating costs for the technical audits to be carried out by the Inspectorate General of the Ministry of Public Works (formerly the Ministry of Settlements and Regional Infrastructure) was introduced.

6.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations)

There were no other significant changes. 7. Key Factors Affecting Implementation and Outcomes 7.1 Project Preparation, Design and Quality at Entry (including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy ofparticipatory processes, as applicable)

The Project was well prepared, and the Project objectives and components were based on the lessons learned from previous Bank financing in the highway sector in Indonesia. Particularly useful in defining the Project scope and the institutional arrangements was the experience on the Second Highway Investment Project (Ln 37 12, closed December 31,2001) and the Sumatra Region Roads Project (Ln 4307, closed December 3 1,2005). In retrospect, the decision to split a single project into two (EIRTP 1 and EIRTP 2) facilitated the implementation of both projects. The Project objectives were consistent with the Country Assistance Strategy including in supporting Government of Indonesia's decentralization.

The EIRTP 1 Project was selected for inclusion in the FY02 annual Quality at Entry Report review by the Bank's Quality Assurance Group (QAG). A specific project reference was made as an example of good environmental work with QAG indicating a highly satisfactory operation with an "appropriate Environmental Assessment category and good Environmental Management Plan, proper implementation and institutional arrangements, consultation and disclosure".

The Government's clear commitment to the Project's Road Network Preservation component, and the complementary Implementation Support component, (together representing about 95 percent of the Project) led to well advanced project preparation with good quality feasibility studies, engineering designs, and economic analysis. Appropriate attention was given to the environmental, land acquisition, and resettlement issues. This allowed efficient start-up and implementation of the Project.

It is clear that there was significantly less commitment to the Project's Accident Blackspots component and to the Road Sector Support component (together representing about five percent of the Project). These components and their implementing mechanisms and responsibilities were not well defined. Risks were identified however insufficient attention was paid to the details of implementation mechanism to mitigate the risks although there had been previous experience of Government's reluctance to focus on key institutional issues.

The late introduction (at appraisal) of a novel anti-corruption action plan--focused primarily on procurement issues--was not well implemented or fully absorbed, even though the anti-corruption action plan itself was not complex.

During Project preparation, there was extensive consultation with local and provincial governments and NGOs on the arrangements for local disclosure and consultation on environmental and social issues with stakeholders. The resulting consultation process was clearly delineated and provided for consultation at all levels of Government, with NGOs and with local level institutions. An interesting feature was the inclusion of universities close to the Project areas to assist the consultation process and provide technical backup where necessary. Guidelines were also adopted to provide for full consultation and participation with isolated vulnerable peoples, including special meetings with women within affected areas and with tribal elders.

7.2 Implementation (including any project changes/restructuring, mid-term review, Project at Risk status, and actions taken, as applicable)

The Project was not restructured, was not subject to a formal mid-term review, and was not classified as a Project at Risk. The overall physical implementation of the Project was very significant with about 2,820 krn of key roads and bridges improved many of which were completed well before the Project closing date. These achievements can be attributed to strong leadership of the Directorate General of Highways (DGH) of the Ministry of Public Works, the continuity and efficiency of their Directorate of Planning and its Project Management Unit, and overall good performance of the consulting teams supporting implementation.

The Implementation Support component provided the design and supervision services for the works through 15 design and supervision consultants firms one based in each of the participating provinces and two coordinating regional consultants, one for the central region, and another for the eastern provinces. Using 15 consultants was intended to support the decentralization in 15 participating provinces but led to a complex structure of reporting and clearance and there is indication that these 15 consultants did not exercise sufficient control over the contractors. A simplified structure could have accelerated response time, and more importantly, could have further developed local human resources in the road sector. A revised structure of only three regional consultants is being used in the follow up on EIRTP 2. It is too early in implementation to see whether this will lead to improvements.

On the other hand, the Accidents Blackspots component was not implemented and the Road Sector Support component suffered from frequent delays chiefly due to differences of opinion between the World Bank and the Government of Indonesia on the selection of the studies and hiring of consultants. As a result, most of the recommendations of the studies were not implemented due to low Government ownership.

7.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

The monitoring and evaluation scheme was rather complex (see Annex 1) and there is little incentive on the part of the implementing agencies to collect this type of data since it is not part of their normal monitoring. The DGH does regularly collect traffic count and road roughness data, the key measures for road sector economic analysis, and is in the process of enhancing its capacity for doing so. The monitoring of implementation progress and physical output was well managed. 7.4 Safeguard and Fiduciary Compliance focusing on issues and their resolution, as applicable)

Safeguards. The safeguards policies on Environmental Assessment, Natural Habitats, Cultural Property, Indigenous Peoples and Involuntary Resettlement were expected to apply to the Project. An "Environmental Management Plan", a "Land Acquisition and Resettlement Policy Framework", and a "Framework for Treatment of Isolated Vulnerable Peoples" were agreed upon for the Project. There were no significant deviations or waivers from the Bank's safeguards polices and procedures.

The Directorate General of Highways (DGH) has an established Environmental and Social Unit which was developed with support fiom previous Bank operations. The unit covers both environmental and social issues. The safeguards policies and procedures had also been largely harmonized between the Government's and the Bank's policies. This unit played an active and successful role under this EIRTP Project and the Bank team received active cooperation fiom them. The safeguards policies were well implemented.

The screening process designed for the Project worked well and is an example of effective implementation of safeguards, even though only the first year work program was fixed at appraisal. It seems that the road sections selected for the Project included only those with limited safeguards impact and works types with limited impact, namely betterment and maintenance of existing roads and existing alignments.

The Environmental Assessment policy (OP. 4.01, BP 4.01, GP 4.01) was effectively implemented. EIRTP 1 was classified as Category "B". The sub-projects that required an environmental impact assessment (AMDAL) were considered as falling into Category "A" and were excluded fiom EIRTP 1. Sub-projects determined to require an environmental monitoring plan (UPL) or a site specific environmental management plan (UKL) were considered as Category B and were included. Any exceptions to this rule for "A"-versus-"Bt' decisions were treated as special cases in consultation between the environmental specialists of DGH and the World Bank. This policy was applied in two linked sub-projects in Bali, namely EIB-65 Tohpati-Kusamba and EIBR-23 Tukad Unda Bridge. The corresponding Environmental and Social Impact Assessments were prepared and accepted by the Bank, and the sub-projects were completed with fiequent monitoring by DGH and World Bank staff. The majority of sub-projects screened fell under a category of "standard operating procedures" whereby it was determined that there would only be impacts as a result of the construction process and these would be dealt with through the works contracts technical specifications and supervision consultants. There is some concern that this was less effective with the contractors not adhering sufficiently to the requirement and the supervision consultants not adequately enforcing contractor adherence. Discussions are underway in the Ministry to enhance this aspect.

Natural Habitats (OP 4.04, BP 4.04, GP 4.04) and Cultural Property (OPN 11.03). The Bank's safeguards policies on Natural Habitats and Cultural Property were not mentioned specifically in the Environmental Management Plan, but both were covered under Government Regulation No. 27 of 1993, requiring environmental study of sub-projects affecting nature conservation or cultural heritage areas. Neither policy was found to be applicable to sub-projects chosen for implementation.

Indigenous Peoples (OD 4.20). Eastern Indonesia certainly has a significant number of indigenous people especially in Papua. However, the selection of national roads included a screening process that excluded any sub-project with potential negative impact on indigenous people. As a result, sub-projects financed by EIRTP 1 did not involve or affect indigenous people.

Involuntary Resettlement (OD 4.30). There were five sub-projects which involved land acquisition and resettlement with the impact limited to 19 households. Abbreviated Land Acquisition and Resettlement Action Plans were produced and the resettlement satisfactorily implemented.

Fiduciary. Given concerns about the governance environment in Indonesia at the time of the appraisal of the Project, the Bank team agreed on an anti-corruption action plan for the Project. These were early stages of developing such specific plans. The key part of the plan in the Project was a provision for technical audits to be undertaken by the Inspectorate General (IG) of Ministry of Public Works, the unit tasked with governance responsibilities in the Ministry. As of Project closing the IG had not yet delivered any such audits. There was an ongoing series of administrative reasons provided to the Bank for this situation and even the requested Loan amendment of August 2005 to allow for the IG's receipt of incremental operating costs still did not resolve the situation.

An investigation by the Bank's Department of Institutional Integrity (INT) into corruption claims on works contracts in the Sumatra Region Roads Project (the Bank subsequently declared misprocurement on 17 April, 2006 on 32 works contracts totaling about IDR 55,895,15 1,473 (about US$6 million equivalent)) picked up the case of the EIB-22 contract on this EIRTP Project. As a result, the contract went through several rounds of bidding before being awarded.

During another INT investigation, started in February 2005, this time into the preparation consultancy contract for the Strategic Roads Infrastructure Project (approved by the Board July 7,2006) the Bank found evidence that the same consulting company had been required to make illicit payments in respect of two consulting contracts financed under EIRTP 1. Consequently, the Bank informed Government of Indonesia on June 27,2006 of a finding of corruption under these two contracts and cancelled an undisbursed amount of US$1,097,998 and requested a refund of US$2,039,915 that had already been disbursed under these contracts.

As a result of these INT findings concerning projects implemented by the Ministry of Public Works, the Bank agreed with the Government of Indonesia on an enhanced Anti- Corruption Action Plan (ACAP) for EIRTP 2 including more civil society oversight, and during implementation has agreed on mitigation measures and rebidding for works contracts under the ongoing EIRTP 2 and on an enhanced ACAP for the new Strategic Roads Infrastructure Project (Ln 4834). 7.5 Post-completion OperationlNext Phase (including transition arrangement to post-completion operation of investments financed by present operation, Operation & Maintenance arrangements, sustaining reforms and institutional capacity, and next phase/follow-up operation, ifapplicable)

Most of the periodic maintenance and betterment works carried out on roads and bridges that were part of the first and second annual work programs have been in service for over one year and some since 2003. The construction defects liability period has concluded, and works are reportedly performing adequately. Their maintenance has been appropriate and the medium and long-term maintenance plans prioritize the resources required for proper continued maintenance with Ministry of Public Works maintaining its national road network in about 80 percent good and fair condition. The provincially located road staff have developed expertise on road asset management, thus increasing the prospects of sustainability. The ongoing Second Eastern Indonesia Region Transport Project (EIRTP 2) approved in June 2004 has, among its main objectives, support to the investment needs of all levels of road and continued strengthening of provincial and local institutional capacity. Therefore, the Government of Indonesia and the Bank will use EIRTP 2 to continue to monitor proper operation and maintenance of the assets financed by EIRTP 1.

8. Assessment of Outcomes 8.1 Relevance of Objectives, Design and Implementation (to current country and global priorities, and Bank assistance strategy)

The Government's decentralization efforts in the road sector that were supported initially under EIRTP 1, and later with EIRTP 2, have now shown some signs of progress, and even though there are significant shortcomings, the Government is committed to continue with this initiative. There has also been progress in the government's anti-corruption agenda that remains a central piece in establishing a competitive bidding environment in the road sector.

Transport demand has been growing faster than GDP growth during the last decade and the traffic levels have increased, making the road sector a key element for improving passenger and freight transportation. Therefore, the objectives, design and implementation of EIRTP 1 remain highly relevant in the current context and complements very well the Bank's assistance strategy focused on reducing critical bottlenecks in the national roads, and on providing a more competitive and transparent bidding environment.

The latest Country Assistance Strategy (Report No. 271 08-IND) discussed by the Executive Directors on November 25,2003 (and the update of September 5,2006, Report No. 36856-IND) proposed to assist Indonesia to overcome the low rate of investment and to improve the public service environment to reduce poverty. EIRTP 1 remains fully consistent with the Country Assistance Strategy priorities as it directly fosters a competitive private sector and supports Indonesia's infrastructure investment. 8.2 Achievement of Project Development Objectives (including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 4)

EIRTP 1 substantially achieved its Project Development Objective to stimulate economic growth and improve social welfare in the 15 participating provinces in Eastern Indonesia through improving access to road transport facilities, reducing road transport costs, and facilitating efficient use of resources. Therefore, the overall achievement of the Project development is rated satisfactory. The three specific objectives of EIRTP 1 were achieved and are rated as follows:

1. The achievement of the first objective, namely to improve the condition of National and other strategic arterial roads, is rated highly satisfactory. The condition of about 2,820 km of National and other strategic roads was improved; thereby reducing transport costs in the Project areas of influence. In addition, with the replacement of 4,466 meters of bridges, the Project beneficiaries have improved access to provincial centers, production areas, and other transport facilities. The failure of Government to implement the Accident Blackspots component is disappointing given the Government's expressed wish to address the road safety problem in Indonesia.

Work Type Appraisal Formally Actual I Estimate Revised * Periodic 1,000 km 1,500 km 1,111 km 1 1 Maintenance I I 1 1 t Betterment 1,250 km 1,250 km 1,705 km Bridges 5,800 m 4,250 m 4,466 m Blackspots 90 0 0 1 Total / 2.258 km 1 2.754 km 1 2.820 km I * Revised in Loan Amendment of August 11,2005

The achievement of the second objective, namely to support the effective and sustainable decentralization of planning and management responsibilities, is rated satisfactory. An effective and sustainable decentralization of planning and management responsibilities for works on national roads has been a valuable experience in the 15 participating provincial governments with the implementation of EIRTP 1. There is much work to be done in this area, as there are indications that the management of the national roads will be recentralized at the national level. However, this experience provides the foundation for further decentralizing responsibilities to provincial, Kabupaten and Kota government levels, which is expected to be implemented in EIRTP 2. 3. The achievement of the third objective, namely to improve the use of scarce financial and natural resources, is rated moderately unsatisfactory. Increased efficiency, quality, and transparency in award of works have been only partially achieved. Some technical assistance activities were not completed, such as the technical audits or the establishment of a Road Fund and a Road Board. However, the final outcome on the treatment of allegations of bribery and other anti- corruption actions as part of the Project has been generally positive and is worth highlighting.

8.3 Efficiency (Net Present Value/EconomicRate of Return, cost effectiveness, e.g., unit rate norms, least cost, and comparisons; and Financial Rate of Return)

The overall ex-post Economic Rate of Return (ERR) for the Project including all road and bridge investments and design, supervision and project management costs is estimated at about 40 percent. The Net Present Value (NPV) is estimated at about IDR 5,916 billion (US$623 million equivalent). These results exceed those projected at appraisal namely ERR of 3 1.5 percent and NPV of about US417 million.

The ERR of the periodic maintenance sub-projects is estimated at about 70 percent with a unit cost of about US$45,285/km equivalent and for the betterment sub-projects is estimated at about 50 percent with a unit cost of about US$85,596/km equivalent. The traffic levels recorded in the Indonesian Integrated Road Management System (IIRMS) 2003 database show an increase of almost 60 percent over the traffic in the 2000 database (used at appraisal) on the Project links, further increasing the returns.

These are national roads and typically have high traffic - sufficient to justify the investments. Further the approach of using road preservation - periodic maintenance and betterment - has been shown to be a cost effective investment with a high rate of return.

A limited number of sub-projects were not selected on the basis of optimum investments decision-making as generated by the IIRMS but were subject to political decisions such as the road linking the two parts of Timor-Leste which now is shown to have little traffic and a resulting low economic rate of return.

8.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs, and efficiency) Rating: Satisfactory First and most importantly, EIRTP 1 remains highly relevant in the current context. It has played a key role in supporting the Government's efforts to effectively decentralize, and it has provided the foundation to further increase the responsibilities of the provincial governments in the road sector.

Second, given the complexity and great number of limitations during the Project implementation period, such as the differences in capacity of the participating provinces and geographical coverage, the significant achievement in terms of physical outputs is worth highlighting. In addition, delivering most of the sub-projects within budget and completing them within schedule, were features absent in similar Bank-financed projects in Indonesia.

Third, the ex-post ERR and NPV are higher than the appraisal estimates. The delays on starting some of the road works and completing them reduced the economic benefits, but this reduction was largely offset by the additional benefits generated by increased traffic volumes.

Finally, there were only very few shortcomings, such as the failure to implement the treatment of accident blackspots, or technical audits that were not implemented. These, while important to the overall long term development of the sector, however represented about 5 percent of the projects investments.

8.5 Overarching Themes, Other Outcomes and Impacts ($any, where not previously covered or to amplzfi discussion above) (a) Poverty Impacts, Gender Aspects, and Social Development

Eastern Indonesia, home to 46 million people or about 20 percent of Indonesia's total population of 220 million people (2005) is the poorest, least populated, and least developed part of the country. About 75 percent of the population in Eastern Indonesia lives in rural areas, with an average population density of 35 per sq km, about one ninth of that of the western region (Java and Sumatra, which is 294 per sq km). There are great variations among provinces, as well as at district levels. Some provinces experience poverty rates as low as 16.9 percent (Bali) and others as high as 38.7 percent (Papua).

At Project appraisal, road networks were sparse and not well connected, especially in Kalimantan, Papua and the smaller islands where many important links had not yet been improved to all-weather standards. The average density (per 1,000 sq km) of primary roads was 90 km per 1,000 sq km, compared to 220 km per 1,000 sq km for western region. Due to low population, this amounts to higher per capita spending on roads for this region.

The table below presents the change in poverty levels and the distribution of EIRTP 1 investments by province. This is not intended to imply any causal link between the Project and the overall development of the region. However, EIRTP 1 is one of several investment Projects in Eastern Indonesia that contributed to poverty reduction to overcome the severe crisis that Indonesia underwent in the late 1990s. The overall level of economic growth in Indonesia is also likely the strongest driver of poverty reduction.

Gorontalo 835,044 872,000 32.9% 29.0% -3.9% 67% 97 $4,879,529 Maluku 1,205,539 1,172,000 55.8% 32.1 % -23.7% 39% 3 11 $26,024,973 North 785,059 780,000 44.3% 12.4% -31.9% 42% 126 $8,073,975 Maluku North 2,012,098 2,142,000 11.5% 8.9% -2.6% 71% 267 $1 6,225,4 14 Sulawesi Papua 2,220,934 2,518,000 52.5% 38.7% -13.8% 18% 274 $36,827,795 South 2,985,240 3,240,000 14.8% 7.2% -7.6% 57% 77 $4,472,093 Kalimantan South 8,059,627 8,494,000 18.8% 14.9% -3.9% 55% 344 $26,564,056 Sulawesi Southeast 1,821,284 2,086,000 28.5% 21.9% -6.6% 43% 127 $7,949,008 Sulawesi West Irian 800,000 38.7% 21% 17 $2,736,779 -Jaya ------West 4,034,198 4,394,000 27.4% 13.9% -13.5% 33% Kalimantan West Nusa 4,009,261 4,356,000 33.4% 25.4% -8.0% 77% 156 $9,632,295 Tenggara 1. Source: http://www.bps.go.idisector/population~tables.shtml 2, Investment amounts obtained from Annex 4 "EIRTP I List of Works Contract Packages"

The poverty rates for Indonesia decreased from 23.6 percent in 2000 to 16.7 percent in 2004 and those of Eastern Indonesia decreased from 26.7 percent to 18.2 percent during the same period. As a result, the disparity between Eastern Indonesia and the rest of Indonesia also decreased, and the gap was reduced by half. The allocation of the EIRTP 1 investments followed the poverty rate variations within the region. The provinces with higher concentrations of poor people also received higher investments. Papua, the poorest province, received the largest share of investment, and now has 18 percent of villages with paved roads (Please see map IBRD 35 139 which shows poverty distribution and sub-project locations in Papua). Moreover, this approach has been applied in EIRTP 2 where the allocation of project funds is closely linked to the poverty level of each kabupaten. A total of about 2,820 km of national roads were improved in EIRTP 1. The latest statistics indicate that about 55 percent of villages have paved roads for Indonesia and about 48 percent of villages in the Eastern Indonesia region have paved roads. While about 73 percent in Indonesia have access to asphalt roads, only 64 percent in Eastern Indonesia have access.

The Project was not designed with gender targeting or specific social development objectives.

In terms of social development, among the many key road links developed, the Project financed the vital road link in the Indonesia section between the enclave of Oecussi and the rest of Timor-Leste. This road was the subject of discussion between the Presidents of the two countries. As an important land link between Oecussi and Timor-Leste, the road will not only give an impetus to the movement of goods and services but will also help families that, at present, find the journey difficult to make. Observations at the border post indicate that at present traffic between the two border crossings has not quite increased, as visas are still required to transit through Indonesia, whereas no visa is required on the ferry service that links both parts of Timor-Leste. However, the portion of the road that links Atambua to the eastern border crossing shows increased traffic and activity.

(b) Institutional Changelstrengthening (particularly with reference to impacts on longer-term capacity and institutional development)

The Project had a substantial impact on the development of institutional capacity for implementation particularly at the provincial level.

The Implementation Support and Road Sector Support components undertaken under EIRTP 1 and complemented in EIRTP 2 provide a good basis for the implementation of key institutional reforms needed in Eastern Indonesian provinces. The final outcome was the improved quality of human resources in the road sector.

The environmental, quality control, and anti-corruption measures implemented under the Project were not only instrumental for the implementation of EIRTP 1, but also for the preparation of EIRTP 2, for the identification of other Bank financed projects like the Strategic Roads Infrastructure Project; and for projects in the province that used other financing sources. The introduction of an anti-corruption action plan, application of more transparent methodologies for contracting civil works, equipment and consultants were found useful at the provincial level. These procedures have been internalized and are being applied in other projects.

EIRTP 1 piloted several mechanisms and procedures that were later refined and successfully implemented in other projects. This was not only the case of the anti- corruption action plans and technical audits but also, the disbursement procedures and consultant arrangements. This unintended outcome took place during a period of aggressive decentralization that required testing new concepts and schemes to adapt to the constantly changing environment and institutional setting.

8.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes)

Not applicable.

9. Assessment of Risk to Development Outcome Rating: Moderate

The risk that the development outcome of the Project will not be realized is rated as moderate for the following reasons:

1. the quality of the works carried out is satisfactory and with routine and periodic maintenance should meet their life expectancy; 2. the increased transport demand, and higher than expected traffic volumes, are forecast to continue; 3. the social and economic benefits in terms of reduced transport costs and improved accessibility for Eastern Indonesian communities have already been achieved and should continue to increase; and 4. the importance and priority given by the Government and the 15 participating provincial governments to the assets financed in the Project, combined with the political commitment to fiuther decentralization are forecasted to offset the potential issue of scarcity of resources for preserving the roads and bridges improved with the loan proceeds.

The Ministry of Public Works maintains the national road network at about 80 percent in good and fair condition and there is evidence that routine maintenance activities have been initiated to preserve the Project assets. It is however, necessary to consolidate and continue supporting the institutional strengthening of the road agencies at the provincial level to enhance the sustainability prospects of the Project development outcome. It is also very important to sustain the efforts to combat corruption in the road sector to continue moving towards more transparent procurement processes at all government levels.

10. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues) 10.1 Bank (a) Bank Performance in Ensuring Quality at Entry (i.e.,per$ormance through lending phase) Rating: Satisfactory

The performance of the Bank during identification, preparation and appraisal is rated Satisfactory with preparation taking a little over a year from concept approval to Board approval. The Bank assigned a qualified team with an appropriate skill mix that delivered a well-designed Project. Based on the previous Bank experience in the highway sector in Indonesia, the economic, environmental and social aspects were properly appraised and the main risks identified correctly. The task team ensured that the Project objectives were consistent with the Government and Bank strategies and that the Project met the readiness criteria and allowed a prompt project implementation. An area which is considered unsatisfactory is the Road Sector Support component where implementation arrangements and terms of reference were not well defined.

(b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Satisfactory

The quality of Bank supervision is rated Satisfactory. The Project maintained consistency, with one Task Team Leader through project preparation, appraisal and substantial part of the implementation (a period of about five years) and the second, supervising for the final four months to closing and leading the Project evaluation. The task management transition process was performed smoothly and the Bank's policies and procedures were applied consistently.

The fiduciary policies required intensive supervision with the Bank prior reviewing a total of 64 contracts (35 of the 152 works contracts, all 6 goods contracts and all 23 consulting services contracts) which accounted for more than half of the investment (or about US$142 million equivalent prior reviewed). The Bank maintained a lead transport specialist as Task Team Leader and placed a high-level international consultant in the Jakarta office, as well as a locally recruited operations officer, resulting in high cost to the Bank with supervision cost reaching US$140,000 in FY03, well above the Bank average of US$92,000 in that year. This made a significant contribution to the quality of the designs and is considered a key part of the success of the physical components. The allegations of corruption were pro-actively handled by the Bank team.

The supervision of the safeguards policies worked well and the Bank's safeguards team actively monitored screening of the sub-projects and the resulting resettlement and the two Category A sub-projects. One area where there is some concern is on supervision of the sub-projects during implementation after the instruments of LARAP or AMDAL had been cleared by the Bank particularly on the majority of sub-projects where environmental mitigation of construction impacts was required.

The supervision of the Road Sector Support component is considered less satisfactory. More attention could have been paid to more active engagement and dialogue with the Government on the policy implications of some of the studies.

(c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The overall Bank performance is rated Satisfactory and is considered to have contributed to the success of the Project in particular the quality of the physical aspects. The Bank staff could have provided more timely attention to the Client requests while adhering to agreed procedures and maintaining good control of the Project and monitoring quality although this was made difficult by an ongoing problem with the quality of documentation sent to the Bank. New procedures have been put in place by the Bank team in 2006 and all requests are now responded to in a timely manner.

10.2 Borrower (a) Government Performance Rating: Satisfactory

Ministry of Finance, Bappenas, Ministry of Public Works (MPW); Ministry of Cornrnunications/Transport--DirectorateGeneral of Land Communications

The performance of the Ministry of Finance in timely release of funds and provision of counterpart funds is considered satisfactory. Bappenas could have played a stronger role in promoting institutional reforms in the sector together with the Ministry of Public Works. The performance of the Ministry of Communications/Transport is considered unsatisfactory with regard to the Accident Blackspots component.

(b) Implementing Agency or Agencies Performance Rating: Satisfactory

Implementing Performance Agency The performance of the Directorate General of Highways (DGH) through its Directorate of Planning and its Project Management Unit is rated Satisfactory. Despite serious challenges posed by the design and the technical complexity of the Project, the overall support during the implementation was extraordinary resulting in good physical implementation with most road and bridge components completed well before the closing date. DGH had a strong leadership and consistently maintained its commitment to the Project. DGH was very responsive in taking corrective implementation measures, dealt effectively with some Ministry of Public Works very complex environmental, resettlement, and corruption issues, and complied with the high level of standards set by the Bank's policies.

The performance of the national and the 15 participating provincial governments during the preparation and implementation stage was Satisfactory. The staff and local counterpart team assigned to the Project were very committed and the set of procurement activities performed prior to loan effectiveness had a positive impact in accelerating the Project implementation. The participating provincial governments demonstrated a strong commitment to Project implementation as reflected in their forthright support to all Project components with the timely provision of fbnds required and compliance with loan covenants. Some local governments, for example in the case of Bali where there were two Category A sub-projects, took a very positive and proactive approach to the safeguards issues which were in many cases fairly new to them.

As highlighted before, the performance of the agencies in the implementation of both the Accident Blackspots component and the Road Sector Support component is considered unsatisfactory.

The overall Borrower performance is rated Satisfactory given that 95 percent of the Project was successfblly implemented.

11. Lessons Learned (both project-spec@ and of wide general application)

1. Designing and phasing projects to respond to political and technical realities leads to better implementation progress. Taking a pragmatic decision to split EIRTP into two phaseslprojects was the right decision. This allowed one project, EIRTP 1, to support implementation on national roads where the institutional environment was well established, and allowed the second project, EIRTP 2, to reflect the subsequent decisions on decentralization modalities and on-lending arrangements to local governments. Having kept them in one project would have delayed all the investments. 2. Implementing activities with multi-agency responsibility needs clear agreement on responsibilities and very explicit implementing arrangements, without which road safety activities remain a challenge. Even in this Project case, where the road safety component namely, Accident Blackspots improvement, was a purely "physical" component, which one would expect could be implemented fairly easily, proved to be difficult to implement due to the institutional barriers and various lines of responsibilities. 3. Working with governments to bring about institutional changes is a challenge and is likely to fail unless there is clear Government commitment and there is involvement from all Government ministries not just the implementing ministry. The difficulty is that there are clearly needs for institutional reform in many cases. In this case even purely technical reforms within the control of the implementing ministry such as improvement of their technical specifications for bidding documents did not proceed. Bank staff need to be much more involved in providing advice and engaging with governments as studies on institutional issues progress. 4. Empowering independent consultants is necessary ifthey are to carry out their responsibilities for supervision of the technical aspect of works. In this case the independent supervision consultants were to "assist" the provincial staff in supervising the works and were not assigned responsibility as Engineer in the contract due to the Ministries requirements in this regard. This does not work well and is not cost effective.

12. Comments on Issues Raised by BorrowerIImplementing AgenciesIPartners (a) Borrower/implementing agencies

With regard to the Government's comments on the technical audits, it was the Bank team's expectation that DGH would ensure that technical audits would be carried out on the Project and under their own budget. Whether these would be done by the Inspectorate General or other was not an issue, although it was DGH that then assigned these to Inspectorate General. It seems that it may be better in future to have these technical audits carried out directly under an independent consulting service as is normally done in projects.

With regard to the comments on the corruption findings, it is the preference of the Bank to have the investigation jointly carried out by the relevant Government authorities and the Bank and this has been done in other cases. In this case the Bank team did try to take this route however there was less proactive follow up on Government side and the Bank needed to proceed to ensure follow up on compliance with its fiduciary responsibilities.

(b) Cofinanciers

There were no cofinanciers.

There were no other partners or stakeholders directly involved. Annex 1. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document)

The Project Development Objectives of the EIRTP 1 were to:

The Key Indicators for the performance of the EIRTP 1 were:

Revised Project Development Objectives (as approved by original approving authority)

The original Project Development Objectives and Key Indicators were not revised.

(a) PDO Indicator(s)

Original Target -1ctual Value Forrnally Values (from Achieved at Indicator Baseline Value Rebiscd approval Complctiol~or Target \'slues docnnlents) 'Target Years

Improvement of national and strategic roads to reduce road transport costs and Indicator : provide reliable road access. Value This PDO is tracked (quantitative or using indicator 1a. Qualitative) and I b., below. Date achieved 1111 21200 1 Comments (incl. % achievement) Decentralized planning and management of roads to be operational and Indicator 2 : sustainable. Value Tbs PDO is tracked (quantitative orusing indicators 2-4, Qualitative) below. Date achieved 1111 21200 1 Comments (incl. % achievement) Improve use of scarce financial and natural resources through increased Indicator : efficiency, quality and transparency of implementation. Value This PDO is tracked (quantitative orusing indicators 5-7, Qualitative) below. Date achieved 1111 21200 1 Comments (incl. % achievement)

(b) Intermediate Outcome Indicator(s)

Original Target Formally Actual Value Achieved Baseline Indicator Values (from Revised Target at Completion or approval documents) Values Target Years 1a. Percent of segments on the budgeted road program which are recommended Indicator : by IIRMS lb. Network condition (national and strategic roads) Value (quantitative la: 62% lb: la: 85% 1B: 1.16 85% 74% or 1.37 Qualitative) Date achieved 11/12/2001 12/3 112005 1213 112005 1213 112005 Comments The "budgeted work program" consists of the dominant type of work under (incl. % IIRMS segmenting and programming rules. Thus segments "recommended by achievement) IIRMS" are not necessarily the highest priority works. Timeliness of annual work program: number of project provinces which have Indicator 2 : submitted a long list Annual Work Program. Value (quantitative 0 15 15 Not Applicable or Qualitative) Date achieved 1 1/12/2001 1213 112005 1213 112005 1213 112005 Comments This indicator was determined to be not applicable because the process that took (incl. % place had no real deadline (AWP were not annual) and the dates of submittal were achievement) not monitored. Number of provinces where BAPEDALDAs submit reports on environment and Indicator : social aspects of AWP to PMU. Value (quantitative 0 15 15 11 or Qualitative) Date achieved 1 1/12/2001 1213 112005 1213 112005 12/06/2006 Level of reporting by BAPEDALDA reflects more lack of legal requirement of Comments BAPEDALDA to report to PMU than lack of participation in monitoring. % Responsibility for implementation of environmental mitigation and management achievement) is wlprovincial works agencies. Indicator 4 : Reports from Planning, Programming, Budgeting Procedures TA Value (quantitative 0 Phase 2 report Phase 3 report Achieved or Qualitative) Date achieved 1 1/12/2001 1213 112005 1213 112005 1213 112005 Comments After a slow start, the March 2005 mission reviewed the status and agreed to a (incl. % revised focus and staff changes; then management produced an acceptable achievement) product in all areas on schedule in June 2006. Indicator 5 : Quality of Initial Design: Percent of sub-projects which meet design criteria Value (quantitative 28% 90% 90% 8 1% or Qualitative) Date achieved 1 1/12/2001 1213 112005 1213 112005 1213 112005 Comments The project set out to improve the quality of design by forbidding Simplified (incl. % Design with its minimal use of survey data. It was found that the bad habits of achievement) Simplified Design were hard for some design consultants to forget. Indicator 6 : Technical Audits Number carried out Value (quantitative 0 10 10 0 or Qualitative) Date achieved 1 111 21200 1 1213 112005 1213 112005 1213 112005 Comments (incl. % The technical audits were not completed. achievement) Indicator 7 : Reports from quality assurance TA are available Value (quantitative 0 Phase 2 report Phase 2 report Not achieved or Qualitative) Date achieved 1 1/12/2001 1213 112005 1213 112005 1213 112005 Comments (incl. % This goal was not achieved because the technical audits were not completed. achievement) Indicator 8 : Cumulative Kilometers of Betterment Value (quantitative Okm 1250 km 1250 km 1765 or Qualitative) Date achieved 1 1/12/2001 1213 112005 1213 112005 1213 112005 Comments (incl. % achievement) Indicator 9 : Cumulative Kilometers of Periodic Maintenance Value (quantitative okm Qualitative) Date achieved 1 1/ 1 21200 1 1213 1/2005 1213 It2005 1213 112005 Comments (incl. % achievement) Indicator 10 : c) Cumulative Meters of Bridge Replacement Value (quantitative okm or Qualitative) Date achieved 1 1/12/2001 1213 112005 1213 112005 1213 112005 Comments (incl. % achievement) Indicator 11 :Cumulative number of treated Accident Blackspots Value (quantitative 0 90 90 0 or Qualitative) Date achieved 1 111 21200 1 1213 1/2005 1213 112005 06130/2006 Comments As noted in the PAD, the safety component awaited piloting under SRRP (4307- (incl. % IND), including development of mechanisms. The accident blackspot sub- achievement) component was not carried out. Indicator 12 : Network condition: (a) Roads: International Roughness Index: Value (quantitative 7.0 6.5 6.5 6.0 or Qualitative) Date achieved 1 1112/200 1 1213 112005 1213 112005 1213 112005 Comments Overall road network condition improved over the Project life, but the indicator (incl. % included all roads. The sub-indicators for percentage of national roads in good, achievement) fair, poor and bad condition show the opposite trend. Indicator 13 :National roads in good condition Value (quantitative 6 1% 65% 65% 50% or Qualitative) Date achieved 1 1/12/2001 1213 112005 1213 112005 1213112005 Comments (incl. % achievement) Indicator 14 :National roads in fair condition Value (quantitative 33% 35% or Qualitative) Date achieved 1 111212001 1213 112005 Comments (incl. % achievement) Indicator 15 :National roads in poor condition Value (quantitative 4% 0% or Qualitative) Date achieved 1 111 21200 1 1213112005 Comments (incl. % achievement) Indicator 16 :National roads in bad condition Value (quantitative 1% 0% or Qualitative) Date achleved 1 111212001 1213 112005 Comments (incl. % achievement) Indicator 17 :Network condition: (b) Bridge: condition mark Value (quantitative 1.37 1.16 1.16 1.32 or Qualitative) Date achieved 1 111 21200 1 1213 112005 1213 112005 1213 112005 Comments Condition marks are measured on a scale of 0 = Excellent to 5 = Collapsed. (incl. % Average conditions deteriorated, but the number of bridges in the inventory achievement) increased by 29% over the period (12% by length). Annex 2. Restructuring (if any)

Not Applicable Annex 3. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Appraisal Estimate ActuaV1,atest Estimate Percentage of Components (usn AI) (usn M) Appraisal 1. ROAD NETWORK 194.80 PRESERVATION 2. ACCIDENT BLACKSPOTS 1.89 3. IMPLEMENTATION SUPPORT 4.ROAD SECTOR SUPPORT 8.90 8.27 PHYSICAL CONTINGENCIES PRICE CONTINGENCIES 22.40 TAX 0.00 Total Baseline Cost 262.00 Physical Contingencies 0.00 Price Contingencies 0.00 Total Project Costs 262.00 Front-end fee PPF 0.00 Front-end fee IBRD 2.00 Total Financing Required 264.00 262.14

(b) Financing

Appraisal ActilaVLatest Percentage Source of Funds T'pe Estimate Estimate (USD of l\ppraisal Cofinancing (usn RI) M) Borrower INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (c) Disbursement Profile

- Original ---- Form Revised -- Adual Annex 4. Outputs by Component

The US$262 million Project achieved the following outputs:

Actual Project costs by component (US$)

Project Component Actual Government IBRD IBRD Loan I I I Loan

1Costs I I I Road Sector Support Consultants' services 1 6,749,8 17 1 0 1 100% 1 6,749,817 I I I I Goods ( 1,520,295 1 1 100% 1 1,520,295

I Sub-total 260,136,300 67,414,223 192,722,077 Front end fee (1 %) 2,000,000 100% 2,000,000 pppp Total 262,136,300 67,414,223

Component 1: Road Network Preservation (US$225.22 million, PAD; US$232.0 million, ICR)

This component included a program, in Eastern Indonesia, of periodic maintenance of about 1,000 kilometers (km) and betterment of about 1,250 km of national and strategic roads and replacement of bridges of about 5,800 meters. The "other strategic" roads were provincial roads considered to have a strategic importance and such roads comprised about seven percent of the road length improved under the Project. The sub-projects were grouped into three annual works programs (AWP). The first AWP began in October 2001 and the last AWP began in October 2005.

A firm first-year annual work program and an indicative three-year work program of civil works was agreed upon at appraisal. Each finalized work program was subsequently reviewed by the Bank. A large number of the sub-projects initially selected in the three- year work program were eventually constructed. The program was selected on the basis of (i) the set of specific sub-projects programmed by the Directorate General of Regional Infrastructure (DGRI) and included in the FY 2001 budget and (ii) an economic needs-based analysis using the data in the current version of the Indonesian Integrated Road Management System (IIRMS-2000). The sub-projects included in the program were all economically justified. The allocations between provinces were set by national budget allocations.

The condition of about 2,820 km of national and other strategic roads was improved and 4,466 meters of bridges improved. Bridge replacement involved purchase of 77 steel trusses with a total length of 3,926 meters worth US$7.65 million for installation by civil works contractors.

Appraisal Estimate vs Actual

Appraisal Revised Cost Costslkm CostJkm 1 Work type estimate estimate* Actual (US$ million) (IDRIkm) (US$/km) Periodic maintenance 1,000 km 1,500 km 1,111 km 50.33 430,209,917 45,285 1 Betterment 1 1.250 km 1 1,250 km 1 1.705 km I 145.96 1 813,157,528 / 85,596

Total ( 2,256 km 1 2,754 km 1 2,820 km I 224.15 1 754,820,255 1 79,455 * Revised in Loan Amendment of August 11,2005

The average cost of periodic maintenance was about US$45,285 equivalent per km and the average cost of betterment was about US$85,596 equivalent per km. Costs varied due to geographic region as well as due to the complexity of some works for example the EIB-22 contract is effectively an elevated causeway construction, and the EIB-54 contract is a difficult steep road in Papua linking FakFak to Kokas.

The periodic maintenance program covered preventive resurfacing of links which had reached the end of their surfacing life and would have deteriorated rapidly if neglected for much longer. There was very little road widening in the program. The betterment program covered works on remote links in the national network which were in poor condition, or unpaved, with the result that the program contributed to improved connectivity and access between main centers in Eastern Indonesia. While traffic on many was low, there was assumed to be substantial suppressed traffic demand on most of the roads.

The works were executed through 152 civil works contracts, 120 of the 130 road contracts (2,601 km or 92 percent of the program length) and 18 of the 22 bridge contracts (3,648 m or 80 percent of the program length) had been completed by project closing date, June 30,2006. The remaining cost to completion of these contracts will be met by Government budget.

The detail of the works programs is given in final table in this annex where "EIP" indicates a periodic maintenance contract, "EIB" a betterment contract and "EIBR" a bridge contract. Various site visits by Bank staff indicate the quality of works to have been good and the subsequent required routine maintenance to be in place. The Ministry of Public Works maintains the national road network in 80 percent good and fair condition.

Extract from World Bank site visit report to Wamena, Kabupaten Jayawijaya, and Jayapura, Papua, September 17-20,2006

Wamena-Tengon EIP-20 is a sub-project covering 30 km along a national road that connects Wamena and Jayapura. A site visit included field inspection of the first 4 km of the sub-project, from Wamena to Tengon. The contract amount of this package was IDR 25,173,285,010 (about US$2.80 million equivalent) with the construction period of 720 days and was completed in November 2003. The road is still in a good shape and well maintained. No major damage was found and maintenance operation was found to be satisfactory.

Jayapura-SentaniEIP-40 is a sub-project along the same national road mentioned above. This sub-project is along the section of roadway that connects Sentani airport, located west of Jayapura, to the city center. The contract amount was IDR 14,208,655,539.00 (about US$1.58 million equivalent) with the construction period of 390 days and was completed in December 2003. The road has heavy traffic since it passes the city of Sentani, satellite city of Jayapura, where government offices, commercial areas, housing estate and university are located. The traffic is quite busy, estimated to be in the range of 8,000 to 10,000 vehicles per day. Main activity of the package was overlaying of 7 m width surface with asphalt concrete. Quality of the works is very good, no cracks or potholes were found. With the exception of a limited amount of traffic signs installed in a hilly part of the package, road accessories such as marlung, side ditches, guardrails and drainage were properly installed and are still in a good shape. Maintenance operation was also found to be satisfactory.

The one aspect of maintenance which appears to be an issue is the maintenance of the road marhngs. Responsibility is apparently transferred to the Ministry of Transport after construction is completed by Ministry of Public Works. Site visits indicate that the marlungs are not well maintained. Given the significant benefit of road marlungs towards traffic safety this is a serious concern.

Component 2: Accident Blackspots (US$2.0 million, PAD; US$O million, ICR)

This component was intended to consist of the identification of accident blackspot locations, development of accident mitigation measures for the priority locations, implementation of the mitigation measures, and establishment of the blackspots investigations units, monitoring of the impact of the accident blackspots program and related consulting services. The program was planned to include the treatment of about 90 accident blackspots (at least 3 per province). The works for the treatment of accident blackspots were not identified before appraisal, while preliminary designs were to be provided for inclusion in the roadway packages, as appropriate, to be financed under EIRTP or Government funds. Government did not implement the Accident Blackspots component and the allocation of financing for the component was reallocated in the Loan Amendment of August 1 I, 2005.

Component 3: Implementation Support (US$24.46 million, PAD; US$20.0 million, ICR)

This component covered consulting services required for the management of the Project, design and supervision of the works, and a small amount of equipment required to support implementation of the Project as well as provision of funds to meet the incremental operating costs incurred by the implementing agency. The consulting services included support to: (a) the Project Management Unit which was established in DGRI to manage the Project (referred to as Core Team Consultants); (b) the Eastern and Central Directorates of Infrastructure within DGRI to oversee the design and supervision of the civil works in the provinces (referred to as Regional Team Consultants); (c) the provincial agencies in the design and supervision of the preservation works in each province (referred to as Design and Supervision Consultants); and (d) the Directorate General of Land Communications in the conceptualization, design, implementation, and monitoring of the accident black spot program and the development of the terms of reference for the safety component under the proposed Second Indonesia Region Transport Project (referred to as Road Traffic Safety Consultants).

Equipment included office and telecommunications equipment to facilitate management of project implementation. The incremental operating costs included staff travel, per diem, communications, consumables, web page establishment and maintenance, advertising of bidding, publishing project information, and renting meeting facilities, but excluded staff salaries.

Core Team Consultant (CTC) (about US$4.11 million equivalent). A firm of consultants was engaged by DGH to provide management support to DGH, the Directorate of Planning and their Project Management Unit (PMU) in managing all components of the Project. The CTC was employed for four years (June 2002 to June 2006). Their team was enlarged for two years (January 2003 to December 2004) to assist DGH to prepare the EIRTP 2 Project. CTC monitored progress in project implementation and compliance with Bank safeguard policies, including environmental screening of annual programs, procurement, performance indicators, physical achievements and expenditures, and preparation and submittal to the Steering Committee and the Bank of project management reports as well as monthly reports project implementation, quarterly Project Management reports on financial status. CTC assisted DGH to conduct training in road safety audit and environmental aspects related to application of the safeguards to the Project. The road safety audit training was combined with an accident blackspots investigation of one road, replacing a provision for Overseas Study in the consultant's contract. (ii) Regional Team Consultants (RTCs) (about US$3.79 million equivalent). This consisted of two regional teams through two consulting contracts: one for the Central Region, mobilized in May 2002, which included the four provinces of Kalimantan; and one for the Eastern Region, mobilized in July 2002, which included the remaining 11 provinces. The RTCs were engaged by DGH's two Regional Directorates which also managed the 15 Provincial Works Departments and their functional agencies to assist in oversight of design and supervision of the civil works funded under the Project. As part of their oversight, the RTCs kept detailed records of financial data which was then assembled into Project Management Reports by CTC. RTCs also evaluated designs prepared for EIRTP 2 first year works by the regional governments or their consultants.

(iii) Design and Supervision Consultants (DSCs) (about US$11.32 million equivalent) 15 consulting firms (one for each province under the Project) were engaged by each province in the Eastern Indonesia region to provide technical assistance to provincial government agencies for design and supervision of civil works funded under the Project. The services of these consultants were not available before October 2002 (Central Sulawesi) up to October 2003 (North Maluku). Consequently, the designs of the sub-projects in the first year annual work program were undertaken under the supervision of the consultants for the Eastern Indonesia Region Transport Planning Analysis Technical Assistance (EIRTPA TA) Consultants. To bridge the gap between signing of contracts with the contractors and the availability of DSC Consultants, the provinces provided temporary supervision for an average of 104 days per package.

(iv) The total cost of RTCs and DSCs of approximately US$15.11 million equivalent represents about seven percent of the cost of the civil works designed and supervised (about US$224.0 million equivalent worth of works). Of the 15 consulting firms in the provinces, 13 were domestic firms and 2 were international firms. These 15 contracts include costs for Interim Supervision of the follow on EIRTP 2 contracts, so overestimates the cost as a percentage of the EIRTP 1 works.

(v) Road Traffic Safety Consultants (RTSC) This service was intended to support the Accident Blackspots component. This consultancy was not procured because the pilot study under Sumatra Regional Roads Project was still under way and there was not sufficient time before the EIRTP 1 Loan Closing Date to complete the services. These services were to be included in the Second Eastern Indonesia Region Transport Project, but they were finally not part of EIRTP 2.

(vi) Equipment (about US$O. 157 million equivalent) A small amount of office and communications equipment was procured to support management of implementation of the Project by DGH. (vii) Incremental Operating Costs for DGH-PMU (about US$0.52 million equivalent) These costs included DGH staff travel, per diem, communications, consumables, advertisement of bidding, printing and publication of Project information, rental of meeting facilities, but excluded staff salaries, which expenditures would not have been incurred absent the Project. This provision greatly lightened the burden of prefinancing on implementation support consultants, who had borne such costs under previous projects.

Implementation Support: Design and Supervision Consultants' services (US$)

* US$ equivalent indicates the amount disbursed under the IBRD loan & excludes VAT which is paid by Government ** % indicates cost of services as % of the civil works designed and supervised

Component 4: Road Sector Support (US$10.32 million, PAD; US$8.3 million, ICR)

This component consisted of technical assistance and training to support the road sector, with emphasis on facilitating the ongoing decentralization process. The technical assistance sub-component included: (a) institutional strengthening comprising: (i) strengthening of road management (planning, programming and budgeting procedures) under decentralized operations; (ii) strengthening quality management for roads in Eastern Indonesia; and (iii) implementation of a demonstration provincial road fund; (b) extension of the automated road monitoring system to provinces in Eastern Indonesia and to Aceh in Sumatra (not covered under the Second Highway Sector Project); and (c) improvement of the bid documents for roads and bridges to include environmental standard operating procedures under Institutional Strengthening of Environmental Management as well as safety considerations.

To support the decentralization process, training was provided to the central, provincial, and Kabupaten and Kota staff involved in the road sector, as well as to the wider construction community through the construction industry training center, PUSLATJAKONS within the Ministry of Settlements and Regional Infrastructure.

This institutional strengthening sub-component comprised the following activities:

(i) Strengthening of Road Management (Planning, Programming and Budgeting - PPBP) under Decentralized Operations (about US$3.45 million equivalent): This activity was intended to: 1) strengthen central DGH capability for preparing, allocating and justifying National road budgets for approval by Parliament, for monitoring performance of the whole road sector, and for medium-term strategic planning; 2) establish at the Provincial level, planning programming and budgeting procedures under decentralized operation, with defined resources, methodologies and appropriate private sector participation; and 3) develop a local roads management system appropriate for Kabupaten and Kota, compatible with the national and provincial system (IIRMS), ready for adoption and implementation under future assistance. Within the three areas the Terms of Reference mentioned many specific requirements, including improvements to the Indonesian Integrated Road Management System (IIRMS), evaluation of contract management system and project management system concepts for possible integration with the planning systems, and institutional aspects. Mobilized on August 22,2003, it took time for the consultant to come to grips with the whole task. The March 2005 mission reviewed the status and agreed a revised focus and staff changes, and management effort then produced an acceptable product in all areas on schedule in June 2006.

(ii) Strengthening Quality Management for Roads in Eastern Indonesia (Technical Audits--about US$O.01 8 million equivalent): This activity was intended to: 1) establish improved quality assurance procedures and organization in Eastern Indonesia provinces; 2) improve monitoring of the quality of civil works in the Project area; and 3) provide new tools to help improve the management of quality in contract and project management, and asphalt paving. The Terms of Reference dated October 30,2001 detailed these themes, but DGH considered that there was overlap between the services and works supervision. In late 2003 the Bank proposed to apply the services to assist the Inspectorate General in technical and financial audits for sustainability of the Project and to address the audit targets, and technical proposals under ICB were obtained by October 2004. Two contracts were prepared, one for technical audit and one for financial audit. It was agreed that the consultants would assist the Inspectorate General who was considered an independent auditor, and for sustainability after the Project. After sorting out the mechanism for the Inspectorate General to be funded (incremental operating costs, see below), the audits were budgeted in 2006. It was then realized that the consultants appointed for audit of financial aspects were not familiar with engineering cost investigations but were accountants, so their contract was not signed. The technical audit started in April 2006 and about 50 percent of the audit was completed by June 2006, the remainder proposed to be funded under EIRTP 2 as the audits by the Inspectorate General are scheduled to continue later in 2006.

(iii) Implementation of a Demonstration Provincial Road Fund. Establishment of a Road Board and Road Fund (about US$O.803 million equivalent): This activity was intended to establish a Road Fund, to be financed directly from road user charges to be levied or allocated by Provinces, and managed by a Road Board including a cross-section of road users and representatives of the road sector. The principles, draft legislation and other preparations were identified under services performed during 2001 and 2002 in the TAP 41-2 funded study on Road Funds in Indonesia. The consultant mobilized in January 2004 and met resistance from Ministry of Finance and Ministry of Home Affairs to the concept of earmarking of fuel taxes or other revenues for road maintenance. It was concluded that a "road fund" as previously envisaged could not be set up under GOI's budget principles which strictly separate revenue from expenditure. The Terms of Reference were revised to address performance and governance reform of road maintenance, covering planning, programming, budgeting, accounting, auditing, training and implementation, and a Phase I report was issued in May 2005 under the title of Road Performance and Maintenance Financing Study. Because DGH considered it overlapped with PPBP, recommendations were not implemented.

(iv) Extension of automated road monitoring system (ARMS) (later: TRAMS and Traffic Counting Equipment--about US$1.52 million equivalent): ARMS was carried out in 2000-2001 in all provinces in EIR with the exception of Maluku, North Maluku and Papua. It was intended to extend it to those provinces and to the province of Aceh in Sumatra, to help in planning, monitoring, and design of roads and bridges. A Terms of Reference was prepared in January 2002 for Extended Road Monitoring Services as the fully automated ARMS approach was considered by DGH to be too expensive and inflexible. The task was to develop a hybrid approach with the current manual surveys and Krn posts which were the reference for planning and construction, and to revise survey manuals. In October 2002 DGH proposed to expand the scope to include an Automated Traffic Monitoring System. The title was revised to Traffic and Road Asset Monitoring System (TRAMS). Bids were received in January 2004 but a contract was not awarded after an extended period of evaluation and review of evaluation criteria between DGH and the Bank. In parallel, Traffic Counting equipment was specified and tendered in July 2004, and four contracts were let when it was accepted by the Bank that the equipment would be properly managed, two in September 2005 and two in March 2006. This equipment had not been identified separately at appraisal but will be an important asset in improvement of planning quality.

(v) Improvement of Bid Documents: It was intended that bid documents for works for roads and bridges should include environmental standard operating procedures (SOPs) for minimizing and mitigating common adverse environmental impacts, as well as recent advances in the safety area (both during construction and operation of roads), and in the specifications. Rather than award a separate contract, DGH included the tasks in CTC services to take advantage of environmental and contract management expertise. The outcome was application of the SOPs by RTCs and DSCs under EIRTP 1, including their review by Bapedalda, and preparation of a new set of standard bid documents by DGH by October 2004, and are being applied in EIRTP 2. There remain concerns that the bidding documents specifications are still not adequate and work is continuing under EIRTP 2 CTC to try to improve these.

Road Sector Support: Consultants' services (US$)

I Description US$ equivalent* 1 Road Planning, Programming, and Budgeting (PPBP) 3,445,550 2 Construction Services Technical Audit 18,159 3 Establishment of Road Board and Road Fund 802,636 4 DGRI Training 1,394,671 5 1 Construction Industry Training 1,088,802 I I TOTAL 6,749,817 *US$ equivalent indicates the amount disbursed under the IBRD loan & excludes VAT which is paid by Government

Training and Incremental Operating Costs. EIRTP 1 included training to the central, provincial and Kabupaten staff involved in the road sector (called DGRI Training) as well as support to the wider construction community through PUSLATJAKONS (the Construction Industry Training Centre), as well as incremental operating costs for carrying out technical audits.

(i) DGRI Training (about US $1.39 million equivalent). This TA was intended to strengthen the capability of Provincial, Kabupaten, and Kota manpower particularly for decentralization. It included a short study on organization structure and institutional 1inkages.fortraining management, expansion of earlier master plans (Kabupaten Road Master Training Plan- KRMTP and National and Provincial Roads Master Training Plan- NPRMTP) by adoption of technological advances in training development and delivery; identification of training needs of provincial and Kabupaten 1 Kota staff, and a plan to be implemented during the EIRTP 2 for the specific training interventions, numbers to be trained, costs, locations, and implementation schedule. Mobilized in October 2003, implementation was completed by April 2005, and was extended to December 2005 (Lump Sum basis, not Time-Based) to prepare materials and to run courses in project management (6 courses each of 3 days for 25 people).

(ii) Construction Industry Training (about US$].09 million equivalent). In order to support the wider construction community through the preparation of appropriate training, EIRTP 1 required the Construction Industry Training Center in the Ministry of Public Works to carry out a study on jobs and competences, a study on worker and team productivity leading to specification of relevant productivity improvement programs, and preparation of training modules for construction workers, including the updating of 32 existing modules and the development of 13 new modules. Mobilized in January 2003, the contract was completed in May 2004.

(iii) Incremental Operating Costs for Technical Audits: As a consequence of the decision mentioned in the previous section to involve the Inspectorate General in technical audit of EIRTP 1 works and services, the Loan was amended in August 2005 in part to include this item. The travel and other costs (not salaries) for the additional activities were financed. 8 BALI EIP-4 SIDAN 21-Nov-Ol 212,822 6.100 34.889 9 BALI EIP-5 SIDAN - KLUNGKUNG 2 1-Nov-Ol 303.993 8.700 34,942 10 BALl EIP-6 KLUNGKUNG - ANGENTELU 24-Nov-01 507.856 14.870 34.153 ------Sub-total 9,813,734 129,375 75,855 , CENTRAL BR' - K". 35 11 KALIMANTAN EIB-22 17-May-05 6,436.934 4,020 1.601.227 CENTRAL K"' 65 - 1 12 KALIMANTAN EIB-23 30-Jan-04 3.384.274 38.300 88.362 CENTRAL K"' 65 - - 13 KALIMANTAN EIP-2B 27-Oct-01 626,3 16 6.500 96.356 CENTRAL KASONGAN - KM. 65 14 KALIMANTAN -----EIP-22 (PUNDU) - 24-Mar-03 1.201.053 26.000 46.194 Sub-total 11,648,576 74,820

CENTRAL - LINGADAN 1.5 SULAWESI EIB-12 10-Apr-02 827.097 12.300 67.244 CENTRAL OGOAMAS - OGOTUA - 16 SULAWESI EIB-37 MALALA 08-Dec-03 1.451.35 1 40,500 35.836 CENTRAL SIBOANG - OGOAMAS 17 SULAWESl EIB-38 18-Dec-03 1.435.121 26.450 54.258 CENTRAL MALALA - SILONDOU - TOLI 18 SULAWESI EIB-39 TOLI 01-Jul-03 1,639,487 29.800 55.016 CENTRAL LEOK - BUOL 19 SULAWESI ElB-40 10-Dec-03 2,257,751 35,760 63,136 ' CENTRAL BUOL - 20 SULAWESI EIB-60 19-Aug-04 1.630.513 25.000 65.221 , CENTRAL , EIBR- , JEMBATAN PAKETI (8

I TOMATA - BETELEME - I I I i I

I I CENTRAL I I__- __....__...1A I 04-Dec-03 ( 695.783 1 20.000 1 34.789 I Sub-total I 1 17,957,946 1 356,609 1 50,358 EAST NUSA OESAPA - OESAO - 34 TENGGARA EIB-5 20-Nov-01 1.783.363 26.500 67.297 EAST NUSA ATAMBUA - 35 TENGGARA 519-6 687.614 11,000 62.510 - WOLOWARU -

EAST NUSA LAKAFEHAN - KELITING - 16-Aug-04 7.012.240 30.400 230,666 P EAST NUSA MALWATAR - LABUHAN 41 TENGGARA EIB-67 BAJO 17-Jun-05 EAST NUSA AEGELA-GAKo . 42 TENGGARA E1B68 17-Jun-05 1.389.272 13.000 EASTNUSA MAUBESI - NESAM - 43 TENGGARA EIB-69 ATAMBUA - MOTOAIN 17-Jun-05 1,009,857 7.600 132.876 EAST NUSA JEMBATAN WAE BOB0 cs ----44 TENGGARA EIBR-5 23-Dec-02 916,657 170 5.392.099 EAST NUSA JEMBATAN WATUNESO I11 cs 45 TENGGARA EIBR-6 23-Dec-02 604.102 80 7.551.278 EAST NUSA JEMBATAN NIAWULA I cs 46 TENGGARA EIBR-7 23-Dec-02 382,974 52 7.364.877 EAST NUSA KEFAMENANU - MAUBESI 47 TENGGARA EIP-9 1 1-Aug-01 845.369 22.000 EAST NUSA BTS. SEKSI MANGGARAI - 48 TENGGARA EIP-26 KM.210 11-Jun-02 679.843 15.000 45,323

25-Nov-02 699.931 15.000 46.662 EAST NUSA BATUPUTIH - SOE - NIKIKI 50 TENGGARA EIP-28 25-Nov-02 1.408.748 30,000 46.958 EAST NUSA LIANUNU - . 51 TENGGARA EIP-51 17-Jun-05 757.789 8.500 89.152 I Sub-total I ( 25,879,151 ( 274,642 1 94,229 1 t I I I I I I I I MOLINGKAPUTO - . 52 GORONTALO EIB-11 BULONTIO 23-Apr-02 931.325 12.000 77.610 53 GORONTALO EIB-36 BULONTIO - TOLINGGULA 29-Nov-02 777,401 16.000 48.588

MOLINGKAPUTO - BATAS EIB-11- ATINGGOLA - KWANDANG 54 GORONTALO EIB-59 10-May-04 1.618.481 31.000 52.209 55 GORONTALO E1p-31 MARISA - LEMITO 17-Sep-03 684.289 15.000 45.619 56 GORONTALO EIP-32 1SlMU - PAGUYAMAN 29-Nov-02 868.033 23.200 37,415 Sub-total 4,879,529 97,200 50,201 Annex 4. EIRTP 1 List of Works Contract Packages Page 3 of 6 Package Date of Contract Province No. Package Name Contract Value US$ meters USDlkm I I I I I I 57 MALUKU EIB-~~SALEMAN - BESI - WAHAI 12-May-03 4,960,097 70,020 70.838 58 MALlJKU ~1~-46SAUMLAKI - ARUIDAS 04-Dec-02 1.910.514 50,000 38.210 WAHAI - PASAHARI - 59 MALUKU EIB-62 KOBISONTA 1 18-Aug-04 3,452.710 45.270 76.269 60 MALUKU EIB-~~NAMLEA - MARLOSO 18-Mat-04 1.354.350 19.1 80 70.613 61 MALUKU ~1~71PASAHARI - KOBISONTA 15-Jun-05 2,902.255 23.700 122.458 62 MALUKU ~18-72 BESI - WAHAI 19-Ocl-05 2.029.199 11,600 174.931 63 MALUKU EIB77 SAUMLAKI - ARUIDAS 09-Nov-05 1.609.592 13.000 123.815 64 MALUKU EIBR-2 WAlTALA 28-Jan-02 760.053 150 5.067.020 1 65 MALUKU EIBR-9 WAY SAPALEWAcs 24-Sep-02 1,336.329 380 3.516.654 'IBR- WAY HATAE I1 cs 66 MALUKU 10 25-Sep-02 1.682.774 370 4.548.037 67 MALUKU EIP-18 WAISELAN - LATU 28-Jan-02 1.729.925 35.000 49.426 DURIANPATAH - LAHA - 68 MALUKU EIP-38 PASS0 - TULEHU 25-Nov-02 2,297,175 42,500 54.05 1 Sub-total 26,024,973 31 1,170 83,636 - NORTH EIBR- JEMBATAN PAKET I(6 69 MALUKU 18 BRIDGES) 25-May-04 1,359,359 385 3.530.802

NORTH SP. DODINGA - AKELAMO - 70 MALUKU ~1~-47PAYAHE 16-Dec-02 2.333370 36.030 64.776 NORTH BOBONEIGO - EKOR - ' 71 MALUKU EIB48 SUBAIM 16-Dec-02 2.386.166 ( 36.000 66.282 NORTH KAO - PODIWANG 72 MALUKU ElP-19 30-Nov-01 1.051.577 31.000 33.922 NORTH TOBELO - GALELA 73 MALUKU EIP-39 21-Nov-02 943.003 22.500 41.91 1 Sub-total 8,073,975 125,915

NORTH MANADO - TUMPAAN ------74 SULAWESI EIB-8 15-Apt-02 1.185.841 17.200 68.944 NORTH - LIKUPANG 75 SULAWESl EIB9 15-Apr-02 942.746 15,970 59.032 NORTH LIKUPANG - AIR TEMBAGA 76 SULAWESI EIBIO 15-Apt-02 904,509 12.000 75.376 NORTH DOLODUO - MOLlBAGU 77 SULAWESI EIB-33 02-Dec-02 932,036 15.000 62,136 NORTH KAIRAGI - AIRMADIDI; 78 SULAWESl EIB34 KAIRAG1 02-Dec-02 1,022.5 16 13.600 75.185 NORTH KAUDITAN - AIR TEMBAGA 79 SULAWESI EIB-35 10-Dec-02 1.889.105 16.000 118.069 NORTH WORI - LIKUPANG NORTH

83 SULAWESI 13 BRIDGES) 16-Sep-04 748.791 200 3,743.954 NORTH MOLIBAGU - MAMALIA 84 SULAWESI EIP-10 20-Dec-0 1 729.028 10.900 66.883 NORTH MAMALIA - TALUDAA 85 SULAWESl EIp-11 20-D~c-01 732.852 22.000 33.31 1 NORTH KAWANGKOAN - 86 1 SULAWESl I EIP-29 1 WOROTICAN I 12-Feb-02 I 681.796 1 15.000 1 45.453 NORTH MANADO - TOMOHON: MAN - WOR1 87 SULAWESl E1P-30 02-Dec-02 1,905.496 37.700 50.544 NORTH BIONTONG - ATlNGGOLA 88 SULAWESl E1P-48 29-Oct-04 842.179 25.135 33.506 NORTH WOROTICAN - POlGAR - 89 SULAWESl ElP-49 KAIYA 16-Sep-04 1.007.843 30,000 33,595 I Sub-total I 1 16,225,414 1 266,805 1 60,814 1 Annex 4. EIRTP

POMAKO 11 100 PAPUA 1 1 15-Oct-02 1,377.203 170 8,101,192 1 1 EIBR- I JEMBATANPAKETl(3 I I I I 101 P APU A 19 BRIDGES) 25-Jun-04 1.297.766 130 9.982.814 EIBR- JEMBATAN PAKET 11 (2 102 PAPUA 20 BRIDGES) 08-Sep-04 3.190.004 280 11,392,871 EIBR- JEMBATAN PAKET 111 (3

( Sub-total I 1 36,827,795 1 273,999 1 134,409 I I I I I I I I I I I I I I SOUTH I SEI DANGU dan SE1 109 KALIMANTAN EIBR-4 TATAKAN 25-Mar-03 292,187 40 7.304.678 SOUTH SEI ANGKINANG 110 KALIMANTAN 12 14-Apr-03 293.537 60 4.892.277 MARTAPURA - SP.EMPAT; SP SOUTH - 11 1 KALIMANTAN EIP-3 12-Jul-01 486,499 11,000 44.227 SOUTH KP' - KINTAB 112 KALIMANTAN EIP-23 12-Jun-03 726.287 19.950 36.405 SOUTH HAMBAWANG - 113 KALIMANTAN EIP-42B 24-Dec-03 1,212.321 19.150 63.307 LG. ANGGANG - 1 SOUTH I I MARTAPURA; SP EMPAT - I I 1 I 1 114 KALIMANTAN EIP-46 RANTAU 54.935 I Sub-total I 4,472,093 1 76,800 1 58,230 Annex 4. EIRTP 1 List of Works Contract Packages Page 5 of 6 Package Date of Contract Province No. Package Name Contract Value US$ 1 meters USDlkm 1 1 .,.,".Q~TITU .. I I MAJENE - TAMERODO - BCD I 1 I 1 I 1---- 115 SULAWESI EIB-13 MAJENEMAMUJU 2.093.726 32.030 65.368 SOUTH KAROSA - BARAS - 1 116 SULAWESI EIB-I4 pASANGKAyU 27-Mar-02 2.150.674 26.550 8 1.005 SOUTH 1 PAKAE - PANGKAJENE K - 117 SULAWESI EIB-15 BARRU 02-Apt-02 1.837.986 24,250 75.793 I MAROS - BCD. BONE BARAT: i I SOUTH I I BCD. MAROS BARAT - U. I I 1 I 118 SULAWESl EIB-41 LAMURU 29-Nov-02 2,490.93 1 32.000 77.842 SOUTH U' - WATAMPONE 119 SULAWESI EIB-42 2 1-Feb-03 1.136.139 16.850 67.427 SOlJTH BARAKANG - TOPOYO - 120 SULAWESI EIB-43 KAROSA 29-Nov-02 1.726.027 27.000 63.927 TARUMPAKAE - BTS.LUWUK. BTS. WAJO - KM.325: SOUTH PANGKAJENE S - ANABANUA ! I21 SULAWESI LIB-44 26-Mar-03 3.815.279 48.000 79.485 SOUTH KAROSA- 122 SULAWESI EIB-61 30-Dec-04 688.407 15.000 45,894

MAROS - BCD. BONE BARAT; U. LAMURU - WATAMPONE: I I SOUTH BCD. MAROS - U. LAMURU SOUTH MAROS - BCD. BONE BARAT

SOUTH BCD. MAROS - U. LAMURU: SULAWESI EIB-76 WATAMPONE 1 ;:; 1 1 - - SOUTH S. RONDOMAYANG. CS SULAWESI EIBR-I SOUTH EIBR- JEMBATAN PAKET 11 (7 127 SULAWESl 17 BRIDGES) I I I SOUTH MAKALE - BCD. LUWU SULAWESI EIP-15 SELATAN - PALOPO 1 1 1 - - SOUTH MAKALE - ENREKANG SULAWESI EIP-35 SOUTH PASANGKAYU - SURUMANA 1 130 1 SULAWESI 1 ElP-36 SOUTH POLEWALI - MAJENE 131 SULAWESI EIP-37 SOUTH WATAMPONE - PEL. BAJOE 1 132 1 SULAWESI 1 LIP-44 I Sub-total I I I I

SOUTHEAST RATE RATE - KOLAKA I I33 SULAWESI ElB-16 26-Mar-03 4.576.612 54,000 84.752 SOUTHEAST S. RANTEANGM. S. LEMBO. 02-Dec-02 604.744 190 3.182.862 SOUTHEAST KOLAKA - WOLO ' 135 SULAWESI EIP-16 10-Dec-01 1.497.497 48,700 30.749 SOUTHEAST KENDARI - UNAAHA 136 SULAWESI EIP-17 10-Dec-01 1.270.155 24.260 52.356 Sub-total 7,949,008 127,150 62,517

WEST 1RIA.N EIB- FAKFAK - KO~S 137 JAYA 54A 18-Oct-04 1.698.259 7.750 219.130 WEST IRlAN SORONG - KLAMONO 138 JAYA EIB-74 04-Jul-05 1.038.521 10.000 103,852 Sub-total 2,736,779 17,750 Annex 4. EIRTP 1 List of Works Contract Packages Page 6 of 6 I Package Date of Contract Province No. Package Name Contract Value US% meters USDlkm I WEST SEI DURI - SMGKAWANG 139 KALIMANTAN EIB-20 24-Mar-03 1.135.043 15.430 73.561

PONTIANAK - TAYAN

WEST MEMPAWAH - SEI DURI: SEI 141 KALIMANTAN EIP-1 PENYUH - MEMPAWAH 0 I -Nov-0 1 978,463 35.000 WEST KM. 65 - ASAM BARU 1---- 142 KALIMANTAN EIP-O2B ---626,316 6.500 WEST SIDAS - TANJUNG 143 KALIMANTAN EIP-21 28-Nov-02 812.775 19.800 WEST TANJUNG - SANGGAU 144 KALIMANTAN EIP-45 21-Apr-04 874.312 19.430 Sub-total 8,385,150 121,435

WEST NUSA REMPUNG - LB. LOMBOK 145 TENGGARA EIB-4 22-Nov-01 635.614 11.300 56.249 WEST NUSA KOPANG - MASBAGIK 146 TENGGARA ElB-27 15-Nov-02 1.082,015 15.160 71.373 WEST NUSA CAKRANEGARA - MANTANG 147 TENGGARA EIB-28 15-Nov-02 1.703.504 22.680 75,110 WEST NUSA SUMBAWA BESAR - SP. 148 TENGGARA E1B-29 NEGARA 05-Nov-02 1.400.020 19.430 72.055 WEST NUSA CAKRANEGARA - MANTANG 149 TENGGARA ElB-66 18-Jul-05 704.016 5.380 WEST NUSA RABA - SAPE (LB. BAJO) 150 TENGGARA EIP-7 10-Nov-01 862.818 20.000 WEST NUSA DOMPU - SlLA; BIMA - 151 TENGGARA EIP-8 TALABIU 05-Dec-01 825.203 18.000 WEST NUSA BANGGO - DOMPU; TALABIU 152 TENGGARA EIP-24 - SILA; 06-Nov-02 980.737 16.920 57.963 WEST NUSA TALIWANG - SP. NEGARA ------153 TENGGARA EIP-25 08-Nov-02 675,086 15,230 44.326 WEST NUSA PAL. IV - KM. 70 154 TENGGARA EIP-50 15-Jul-05 763.282 12.000 Sub-total 9,632,295 156,100

I Total Works I 1 222,922,339 1 2,821,120 1 79,019 1 Annex 5. Economic and Financial Analysis (including assumptions in the analysis)

1. Overview At the time of project completion, the Economic Rate of Return (ERR) and Net Present Value (NPV) for the Project overall were re-estimated following closely as possible the methodology used at the time of Project appraisal, which was based on the approach embodied in the Economic Review Module (ERM) which is part of the Indonesian Integrated Road Management System (IIRMS). The IIRMSIERM model utilizes standard methods of comparing the "with" and "without" project cases, based on various input data related to traffic, user costs, and investments costs.

The output from the Economic Review Module (ERM) provides information on the Net Present Values (NPV) of any works other than routine maintenance based on estimates of the road condition, traffic and defined treatments. Routine maintenance is assumed on all roads as the 'without' case and is assigned a zero NPV. The lifetime of betterment works is assumed to be 10 years, and 5 years for periodic maintenance. IIRMS assumes that economic costs are 0.85 of the financial costs. The supervision costs were not included in the sub-project analyses but were included in the overall project analysis, as described below. The costs of technical assistance and other activities were included as separate cash flows to derive the total cash flow on which the overall economic analysis is carried out.

The ex-post ERR and NPV for the project overall were calculated to be 41 percent and US$623 million, respectively, exceeding the estimates made at the time of appraisal of 31.5 percent and US$417 million. The main factor influencing the increased ERR and NPV at completion were higher levels of traffic growth on the project roads than estimated at appraisal (around 15-20% higher) and lower than expected unit costs for civil works (around 10-15% lower).

Two types of works were supported under the project, betterment and periodic maintenance. Thus, a separate calculation was made at completion of the ERR and unit costs for each type. The re-estimated ERR for all periodic maintenance sub-projects was calculated to be 70 percent with a unit cost of about US$45,285/km equivalent For betterment works, the ERR was re-estimated to be 51 percent with unit costs of about US$85,596/km equivalent. The ERR for both types of works are higher than estimated at appraisal, while the unit costs on average were lower.

1.1. General overview of sub-projects At the time of appraisal, the sub-projects to be included in the first year work program, as well as indicative lists of sub-projects for the second and third year work programs, were prepared based on the Strategic Expenditures Planning Module (SEPM) of the IIRMS. The appraisal analysis which took place in 2001 identified the most urgent needs and took account of the proposals made by the provinces. At Pre-appraisal the Bank and Government agreed on a list of sub-projects, 62 percent of which were in the optimum IIRMSISEPM program defined at a budget constraint of IDR 580 Billion for National roads in Eastern Indonesia. The defined works (periodic or betterment) included about two thirds of the selected sub-projects on the IIRMSISEPM list of most needy projects.

Due to the programmatic nature of the project, at the time of appraisal only an indicative list of sub-projects to be financed under the project under the second and third years works programs had been identified. At completion, an analysis was made of the actual sub-projects implemented against the indicative list prepared at appraisal. This analysis found that the size of the civil works program actually implemented was larger than that prepared at appraisal by some 20% in terms of length (km) and 10% higher in numbers. It was also found that around 20% of the sub-projects originally envisioned at appraisal were never implemented in favor of others selected based on a subsequent annual screening/programming process which including an analysis of their likely economic returns. The results of the above adjustments to the annual work programs for the second and third year was found to have had an overall positive impact on the ERR and NPV at completion, as the revised work programs typically included sub-projects with higher rates of return. At completion, only three sub-projects (out of 128 implemented) had an ex-post ERR below 12%, representing less than one percent of the total road investment length (85 km out of 2,763 km).

1.2. Project Benefits At project appraisal, the main benefits of the project were expected to be (i) lower freight and passenger transport costs, and the reduction of transport bottlenecks; (ii) improved access to health and education services for communities (iii) improved transport services in Eastern Indonesia with significant impact on the poor; (iv) improved physical environment along project roads, and improved attention to environmental and social impacts of road works; (v) improved shoulders, planting, drainage, and accident blackspots; and (iv) more effective management and sustainable maintenance of national and strategic roads, including better utilization of existing traffic capacity, improved value-for-money of public spending on roads, and better connectivity of population, and economic and social activities to the road network.

At project completion, no formal social assessment or community impact analysis was done, so most of the expected project benefits envisioned at appraisal could not be assessed. However, an informal interview process was undertaken as part of the ICR preparation in order to partially assess the social and economic impacts of the Project. The results of the interview process are presented in Annex 8.

An economic analysis, which measures the net economic benefit and net present value of Project investments, was undertaken for the road and bridge works carried out under the Project. The results are presented below.

The benefits from the quality of life improvements and those from the institutional strengthening were not considered. 2. Approach for economic appraisal

2.1. General Assumptions

All of the sub-projects were on the National road network or on strategic roads identified to be upgraded to national roads as part of the 5-year investment plan of the Ministry of Public Works. The economic assumptions made at appraisal were based on the IIRMS model as it was in operation in 2001 at the time of project preparation.

2.2. Works Definition There were three types of investments considered as possible option under the project: (i) Betterment, defined as minor widening, pavement and drainage improvement, addition of shoulders, etc.; (ii) Periodic maintenance, defined as pavement overlays and strengthening measure applied within the existing road right of way; and (iii) bridge replacement or upgrading.

2.3. Pre-Project Condition and Status

2.3.1. Roughness and Road Geometry Road roughness values used for the economic analysis are taken from the IIRMS using 2000 data for appraisal and 2003 data (the latest available in the system) for post- appraisal analysis. Where the sub-project was implemented after 2003 and the recorded IRI was higher than in 2000, the higher figures were used. IRI was estimated taking account of the survey year and the link sections being implemented.

2.3.2. Traffic data The IIRMS database shows considerable variation for traffic on individual links. An analysis of reported traffic levels on links implemented under EIRTP 1 shows an average increase of around 60 percent from 2000 to 2003. Observations on a field visit to Maluku and Manokwari (Irian Jaya Barat) suggest that traffic has significantly increased since 2000 when Indonesia was still affected by the financial crisis. For the analysis performed for purposes of this report, the 2000 IIRMS data were used as the base case.

2.3.3. Assessment of Project Category The sub-projects were allocated to project categories based on the 2000 traffic levels and road geometry. Designs often incorporated several types of work and the resulting 'composite' project was sometimes difficult to classify--often including betterment and upgrading along the same road section. AADT and road width are the main criteria for classifying sub-projects into groups and unit cost was also used to help define widening projects.

2.3.4. Category ERM analysis One link from each category was subjected to an ERM analysis assuming a low IRI of 6.0 and high IRI of 10.0 to obtain cash flow data for these assumptions at the average traffic level for the category. It was assumed that the relationship is linear for roughness, but within the ranges defined by the category the error is small. Also the roughness progression is not influenced by traffic level within the category limits. Agency costs were adjusted by the length of road and investment costs scaled to reflect the actual costs at implementation discounted back to 2001 prices.

2.4. The Bridge Works program, the Accident Blackspot component and the design and supervision costs.

All bridge sub-projects were analyzed prior to implementation using the Bridge Management System (BMS). This analysis required detailed information concerning the bridge condition, its location and alternative routes. As this data was not available at project completion, no re-evaluation was done. The Accident Blackspot component was not implemented and not part of the analysis. Design and supervision costs have been excluded from the sub-project analyses so the actual costs of design and supervision have been estimated for inclusion in the overall Project analysis.

2.5. Overall Project Appraisal Having determined the component cash flows, the cash flows for each year have been aggregated discounting costs to constant 2001 prices. The Net cash flow has been determined for all components and this has been used to estimate the overall project Economic Rate of Return and Net Present Value.

3. Works Category and Sub-project Analysis

3.1. First Annual Work Program The appraisal was based on the sub-projects defined for the first Annual Work Program (AWP). The analysis was based on the defined categories and the resultant cash flows adjusted to give the same ERR as defined in the PAD (base case). The changes in costs at design and revised traffic data were then applied to the same models to assess the magnitude of changes resulting from the revised data. Table 1 shows the results of this comparative analysis.

Table 1 Comparative Analysis of Appraisal assumptions, actual implementation costs and post project AADT. (Cost Million IDR/km) PAD PAD PAD Post Post Project Province Imp Imp cost/km AADT ERR cost/km ERR AADT ERR East EIB-O a ' Kalimantan 1276 405 28% 1010 48% 477 56% East E1B-02a Kalimantan 1000 3 70 32% 789 44% 455 46% EIB-03a Ebantm1227 310 26% 1043 42% 757 83% EIB-05. 2 N:z 605 2175 53% 5 74 55% 13974 293% East Nusa E1B-06a Tenggam 562 752 60% 594 57% 3018 195% East EIB-07a Tenggam 596 549 29% 943 21% 1130 34% North E1B-08a ~u~awesi 610 10905 155% 607 155% 11375 155% North E1B-09a ~ulawesi 627 148 19% 519 23% 407 56% Cost/km AADT ERR cost/km ERR AADT North Oa ~ulawesi 848 465 16% I 66 1 15% 465 19% ~ EIB-1 la Gorontalo 847 3 00 16% 678 20% 757 39% EIB- 12, ~EE:~~ 585 752 23% 585 23% 2480 50% South ~ulawesi 563 543 32% 542 33% 944 50% South E1B-14a ~ulawesi 709 168 22% 674 33% 420 50%

The table shows that generally unit costs were reduced after detailed design and that this reduction increased the assessed Economic Rate of Return (ERR). 200315 traffic data shows considerable increases of about 60 percent in traffic level between 2000 and 2003. If these levels are discounted back to pre-project time (2000) the resulting ERR is again significantly increased on average by about 50 percent over appraisal. These significant increases in recorded traffic raise questions about the validity of the data or the traffic growth rate assumptions. The traffic levels recorded in the 2005 database are similar on average to those in 2003 but individual link data often varies significantly, both up and down. Given the significant differences in ERR due to traffic, all comparisons have been made with both 2000 and 2003 traffic assumptions.

3.2. Post Project Analysis (2003 data) As is expected, increasing the traffic levels significantly increases the Economic Rate of Return (ERR). If the 2003 data for traffic adjusted back to 2001 year is used the ERR of periodic maintenance sub-projects rises from 37 percent to 94 percent and the ERR for betterment sub-projects rises from 47 percent to 7 1 percent. It is noticeable that some of the changes in traffic between levels at 2000, and in 2003 and 2005 are negative. Some sub-projects which were viable using 2000 traffic data are found to be non-viable using lower traffic levels at 2003. 4. Analysis of Road Network Preservation component

4.1. Executed Sub-projects

4.1. Executed Sub-projects The sub-projects in each year are shown in Table 2 together with the resulting estimated costs at 2001 constant prices, and average statistics relating to the work. The first and second AWP had higher returns because they had been selected on the basis of higher viability. It is noticeable that the higher returns are associated with higher average traffic levels.

Table 2. Analysis by Work Type

Note: This table is for a sample of 128 sub-projects out of a total of 152 sub-projects

The rate of return on all sub-projects (excluding supervision and design) is estimated at about 43 percent.

4.1.1. Periodic maintenance sub-projects The average costh was IDR 327Milh (about US$36,300h equivalent), the ERR was 37 percent.

4.1.2. Betterment Sub-projects The average cost/km was IDR 556Milk (about US$6 1,800km equivalent), the ERR was 43 percent.

4.2. Distribution of Economic Rates of Return Table 3 shows the distribution of ERR for all sub-projects when considering 2000 data and 2003 data together with the numbers of sub-projects and estimated total costs of works in each band.

Table 3. Distribution of sub-projects by ERR band All Projects (2001 traffic data) All Projects (2003 traffic data) ERR No. Cost Length Costlkm No. Cost Length Costlkm 1 Range Proj Rp.M (km) (Rp.M) Proj Rp.M (km) (Rp.M) 1 The table shows that if 2003 traffic data is assumed the number of sub-projects below 12 percent increased despite the generally higher traffic levels. This is because some traffic levels associated with viable sub-projects fell in the 2003 data.

4.3. Distribution of sub-projects by Province The sub-projects were analyzed by Province to examine the specific characteristics of the sub-projects implemented.

4.3.1. Periodic maintenance sub-projects The breakdown by Province for periodic maintenance sub-projects is shown in Table 6. The highest returns were found in West Kalimantan (Kalbar) and Bali where periodic maintenance was done on high traffic roads (2000 data) and South Sulawesi (Sulsel). If 2003 traffic levels are assumed, only Irian Jaya, Maluku and NTB have low returns from maintenance. This reflects the generally lower traffic levels in these provinces.

Table 6. Sumrnarv of ~eriodicmaintenance sub-~roiectsbv Province. < A L d lhalysis by Prownce Maintenancz 1 2000 data 1 2003 data

4.3.2. Betterment sub-projects The breakdown by province for betterment sub-projects is shown in Table 7. The highest returns were found in West Nusa Tenggara (NTB) and Bali where traffic levels were above AADT 3000. The provinces with average IRI greater than 10 are associated with category 1,2 and 3 sub-projects which have generally lower returns but higher roughness on unpaved or low standard roads. If 2003 adjusted traffic levels are assumed all returns are significantly increased. This demonstrates the importance of having reliable data if IIRMS or any other pavement modeling program (HDM-4). Small changes in the assumptions relating to traffic can have significant effects on viability. Similarly small changes in the average roughness assumed can greatly influence viability. Table 7. Summary of Betterment sub-projects by Province.

4.4. Evaluation of Sub-Projects with low ERR Table 8 demonstrates the key characteristics of sub-projects identified with low ERR. Care must be taken in analyzing individual sub-projects because pre-project conditions and traffic were not measured data but were estimated from IIRMS data. Actual conditions may have been different. The analysis is however useful to determine what characteristics make sub-projects less viable.

Tal ~le8. Project characteristics of sub-projects. (2000 data top - 2003 data bottol

The top part of the table shows sub-projects found to have low ERR using 2000 data. It can be seen that all have low traffic and relatively high costs compared with the average for the type of work. The table includes the traffic data for the analysis assumptions in the main table and that for the alternative year in the right-most column. This shows typical increases from 2000 to 2003 for individual sub-projects. The bottom part shows sub-projects found to be viable using 2000 data but which have low ERR using 2003 traffic assumptions. In all cases the traffic is significantly lower in 2003 and this emphasizes the importance of reliable data on traffic and roughness. 5. Bridges

No new bridge analysis was undertaken due to the lack of sufficient data concerning the pre-construction situation to use the Bridge Management System (BMS). The analyses carried out under the EIRTP 1 Project are used to estimate returns from bridges. Table 9 shows a summary of Bridge analyses carried out for the preliminary evaluation of AWP2 and preparation studies for AWP3.

The results suggest that most bridges are viable even when traffic levels are low. It is considered that the very high values of ERR are questionable but without information on the pre-project assumptions no revisions can be made. To allow bridges to be assessed in the analysis an average ERR range from 20 to 100 percent will be assumed. A representative cash flow has been derived to allow the assumed rate to be tested.

6. Basic Analysis for Whole Project

6.1. Cash Flows

Annual Cash Flows have been identified for all components considering the separate Annual Work Programs as described below. All cash flows are derived as constant 2001 economic costs. IIRMS assumes an economic cost equivalent to 0.85 of the financial cost. The constant 2001 values were obtained by discounting actual implementation costs by factors depending on the year of work based on inflation data.

6.1.1. Road Improvement The costs of construction are costs at 2001 constant economic costs excluding supervision costs. The factors used to discount actual costs back to 2001 prices are based on annual inflation statistics for construction as reported by BPS (National Statistical Agency). 6.1.2. Bridge Works Assumed Cost/ benefit Net Cash Flow stream. A representative cash flow has been derived to allow the assumed ERR rate to be tested based on a unit cost. Actual implementation costs are scaled by the same discount factors defined in Table 11 and these are used to define the cash flow using the representative cash flow stream. An average Economic Rate of Return of 20 percent is assumed for the base case.

6.1.3. Design, Supervision and Management Costs The costs of design, Supervision, Regional Teams and Project Management have been included in the analysis. The cost of the Core Team Consultant has not been included in the base case. The resources allocated to these components in the Project are summarized in Table 10. The equivalent Indonesia Rupiah values at 2001 prices is estimated to be about IDR 191 billion based on an exchange rate of IDR 10,00O/US$. Since all road benefits are derived from Road User Costs and largely relate to Vehicle Operating Costs, all benefits reflect the estimation of costs at the 2001 exchange rate.

Table mnCosts Gompone nt US$m. Desi anlsus 11.37 Reuion team 3.44 proiect Man 0.78 Total Sua 15.59 Phvsical cord 1.56

The supervision costs are mostly disbursed under a contract system which assumes a constant annual cost. To discount the expenditures back to 2001 prices a cost factor was applied.

6.2. Base Case Analysis

The base case analysis assumes the 2001 estimated traffic levels and the average bridge return is estimated at 20 percent. Table 11 shows a summary of the main cash flows for the first 5 years of the Project during the implementation period. The table shows the investment costs during the four Annual Works Programs relating to Roads, Bridges and Supervision. The total investment costs are also shown. The total benefit streams are shown by AWP year for Roads and Bridges separately. The Net Cash Flow from which the Project Economic Rate of Return (ERR), Net Present Value (NPV) and Benefit Cost ratio are derived is also shown. Table 11 Summary of cash flows during implementation period.

6.3. Sensitivity Analysis Table 12 summarizes the result of sensitivity tests.

Table 12. Results of Sensitivity tests.

6.3.1. Traffic Assumptions If the traffic level is increased the road user benefits rise proportionally. Some changes in the deterioration might be expected with high traffic roads which would reduce the increases but this effect would not be significant. It can be seen that changing the traffic raises the ERR to 46.8 percent at 20 percent higher levels and to 52.9 percent at 40 percent increase in level. The latter corresponds to the estimated 2003 traffic data adjusted for growth from 2000. A drop in the assumed traffic level by 25 percent reduced the ERR to 34.3 percent. The return is highly sensitive to traffic assumptions.

6.3.2. Bridge Assumptions The base case assumes bridge average rates of return of only 20 percent. If the returns for bridges are raised to 40 and 60 percent, the ERR correspondingly increases to 42.2 percent and 43.8 percent respectively. If bridges are left out of the analysis the return rises slightly over the base case to 42.4 percent. This is because the base case assumes a rate less than the overall ERR. The bridge component has only a marginal affect since it has a relatively small value compared to the road investment costs.

6.3.3. Supervision Assumptions The financial costs of the supervision are fixed but the assumptions about deflation can be tested. If no deflation and exchange rate fluctuation is assumed then the ERR increases marginally. If the supervision is not included in the analysis the ERR rises to 44.7 percent. If the core team is included in the analysis as part of supervision, the ERR drops marginally to 40 percent. The ERR is relatively insensitive to supervision costs.

6.3.4. Caveats There are several caveats to keep in mind with respect to both the economic analysis at appraisal and at completion. First, while an effort was made during project preparation to ensure the quality of the data in the IIRMS as part of preparation efforts (in particular, to update the user costs input data), the robustness the data at project completion was subject to only a partial review and the quality of both the road condition and traffic data in the IIRMS system has been an on-going concern of both the Bank and Government. Secondly, in order to estimate the ERR for particular sub-projects, the IIRMSIERM model must project road condition at both the time of investment (if the data is not current) and in the "without-project" case for 10 or 5 years forward. The results of the ERR calculation are thus highly sensitive to both the accuracy of the input data and the ability of the ERM to project future road condition. As with all predictive models, concerns have been raised as to the accuracy of the ERM model and further improvements and regular updating of the input data of the IIRMS is needed to ensure its accuracy. Annex 6. Bank Lending and Implementation SupportISupervision Processes

(a) Task Team members

Names Title Unit Lending Financial Management Novira Kusdarti Asra Specialist EAPCO Financial Management Robin C. Carruthers Consultant Quality Assurance Sector Manager, Social Maninder S. Gill Develop ECSSD Quality Assurance

Lead Transport EASTR Task Team Leader Hatim M. Hajj Specialist David Michael Hawes Consultant EASTR Economist Karin I. Nordlander Consultant LEGEA Legal Lead Infrastructure William D. 0. Paterson Specialist EASTR Engineer Yogana Prasta Sr Disbursement Off. EACIF Disbursements Isono Sadoko E T Consultant EASRD Social Safeguards Claude Isaac Salem Sr Projects Officer WBIVP Quality Assurance Robert Scouller Consultant EASPR Road Engineer Jacques M. Tollie Consultant EASTR Quality Assurance Thomas E. Walton Consultant AFTSl Environment Farida Zaituni Operations Analyst EASEN Environment Supervision/ICR Financial Management Novira Kusdarti Asra Specialist EAPCO Financial Management Road Management EASTR Christopher R. Bennett Sr Transport. Spec. Systems Steven Charles Senior Social EASSD Governance Burgess Development Spec Sally L. Burningham Sr Transport. Spec. EASTR Task Team Leader Indira Dharmapatni Sr Operations Off. EASUR Social Safeguards Alain M. Dube Sr Transport. Spec. EASTR Transport Engineer Mesra Eza E T Consultant EASTR Road Engineer Lead Transport Task Team Leader-to Hatim M. Hajj EASTR Specialist 2/06 Jerry A. Lebo Sr Transport. Spec. EASTR Economics Angus Mackay Consultant EASEN Environment Sulistiowati Urban Specialist EASSD Social Safeguards Nainggolan Lead Procurement Imad Saleh EAPCO Procurement Specialist Robert Scouller Consultant EASPR Road Engineer-to 1/06 (b) Ratings of Project Performance in ISRs Datc ISR Actual Disbursements No. IP Archived (USD M) 1 06/27/2002 Satisfactory Satisfactory 15.50 2 1 111 512002 Satisfactory Satisfactory 35.14 3 06/30/2003 Satisfactory Satisfactory 51.86 4 1211212003 Satisfactory Satisfactory 78.14 5 04/20/2004 Satisfactory Satisfactory 115.75 6 11/05/2004 Satisfactory Satisfactory 128.52 7 0611 312005 Satisfactory Satisfactory 149.70 8 03/21/2006 Moderately Satisfactory Moderately Satisfactory 168.81 (c) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project C>,clc US11 'I'housands No. of staff weeks (including travel and consultant costs) Lending FY 97 FY98 FY99 FYOO FYOl FY02 FY03 FY04 FY05 FY06 FY07 Total: SupervisionIICR FY 97 FY98 FY99 FYOO FYO 1 FY02 FY03 FY 04 FY05 FY06 FY07 Total:

59 Annex 7. Detailed Ratings of Bank and Borrower Performance

Bank Ratings Borrower Ratings Ensuring QualitY at Satisfactory Government: Satisfactory Entry: Implementing Satisfactory Quality of Supervision: Satisfactory AgencyIAgencies: Overall Borrower Satisfactory Overall Bank Satisfactory Performance: Performance: Annex 8. Beneficiary Survey Results (if any)

The EIRTP 1 project did not include any formal beneficiary survey. During preparation of this Completion Report, Bank staff conducted informal interviews during a site visit to Nusa Tenggara Timur (NTT) and Bali provinces in November 2006. These visits/interviews were conducted as part of a Transport Sector mission. As detailed in Annex 4, the Bank has financed several sub-projects in these provinces. The sub-project roads in NTT connect the two of the province's biggest districts, while those in Bali are critical freight links for freight transportation. Generally the social and economic impacts are:

Better access for commodity distribution. Sub-project roads connect three big seaports within a 50 krn radius in NTT; Tenau Seaport in Kupang, Wini Seaport in Kefamenau, and Atapupu Seaport in Atambua. On a recent site visit, several trucks were observed ferrying commodities along sub-project roads. Linking communities, families and countries. EIRTP 1 sub-project roads in NTT also connect Dili, the capital city of Timor Leste to Oecussi district, and the western part of Timor Leste. Goods traded between the two countries (Indonesia and Timor Leste) are distributed via project roads. Border police report that the number of people passing the border from Dili to Atambua has increased to around 100 persons per day. Reducing travel time and cost of travel/vehicle maintenance. Bapak David, driver of a rental car travels frequently between Kupang and Atambua, a distance of about 300 km. Due to the sub-projects, his travel time has been more than halved as he can now travel over 60 km/hr instead of 30 kmlhr, and is also able to save about 5 liters of petrol per trip. He also enjoys reduced maintenance costs as his tires do not wear out as quickly as before. Increasing access and mobility options. A small restaurant owner mentioned that before road improvements, well-off people preferred to travel by air between Kupang and Atambua, however the service is offered only twice a week. Now that the road has been improved, people have a choice to travel by road between Kupang and Atambua. Indeed, road travel is the choice of many in the local communities as it offers one the flexibility of traveling as frequently as one would like, and offers access to the less affluent. Providing job opportunities. The EIRTP 1 sub-projects have enabled local people to generate income as the sub-projects have utilized local labor. Around 300 local people were employed for one sub-project and earned about IDR 30,00O/day (approximately US$3.30/day), which is the minimum wage. In addition, one contractor also employed another 30 local staff at his base camp, where he also provided them with free housing and food. Small/micro business development. Along the sub-project roads it was observed that several kiosks have emerged. In addition, the increased number of cars, trucks and motorcycles means an increased demand for maintenance services. This has provided an opportunity for the development of micro business enterprises--individuals sell consumables while others have opened repair shops along sub-project roads.

The improvement of the road has not been followed by the enhancement of other public services and infrastructure. Along the road it is easy to find houses without electricity, for example in Maubesi village or in villages along Kefamenau to Soe. This might be because people lack income to pay for the cost of electricity or could be due to the inexistence of electricity service in those areas.

The benefit of the road improvement is also not enjoyed by all people in NTT. Some of them prefer to walk although the distance is far, including students. Although the cost of public transportation is fairly inexpensive at IDR 1,000 (about US$O.10) for students or IDR 2,000 (about US$0.20) for others, many can still not afford it due to lack of income. The Bupati of Kefamenau mentioned that he has invited private investors to work out a cooperative program to provide public transportation along the Atambua--Motoain road.

Specific examples highlighting benefits of the road sub-proiects: EIB 69 and EIB 6 Atambua - Motoain, NTT

A few traders were interviewed at the Motoain border post. They transport foam by bemo for export to Dili, Timor Leste. These traders use the local road so the impact of the sub-projects on national roads has been negligible for this group. Their travel costs and travel time remain the same. It costs them IDR 100,000 (about US$11.10) to reserve a bemo for their travel and goods transport. Though the condition of the local road (Atambua-Motoain) is much worse than the newly upgraded EIRTP 1 connection, the traders prefer this route as it is cheaper for them--the cost of bemo transport along the EIRTP 1 project (EIB 6) would be IDR 150,000 (about US$16.70). The traders as well as their neighbors (the local community) are happy with the sidewalk that was constructed as part of the project as there was none before. Though they report no safety concerns prior to construction of the sidewalk, they perceive the roadway to be safer and have noticed that vehicles slow down. Since these traders do not use the EIB-6 road, they feel that the direct impact is little to none. Their biggest concern for the community was the lack of water and electricity. The border post guards' office is powered by generator, the only one in the village. The nearest electrified town is Silawan, about 5 km away. Pak Rudi together with his wife Ibu Ratinem are originally from Central Java, but have moved to Atambua due to the difficulty of finding jobs in Java. They run a small food kiosk in Motoain, in front of the border police post. The kiosk was opened 15 years after they moved and has been open for the past 3 years. They generate about IDR 400,000 (about US$44.40) per day from the kiosk. Pak Rudi goes to Atambua by motorcycle, where he is able to buy vegetables, rice, and other food products for his family's consumption. He has benefited plenty from the road improvement; according to him, the road is not dusty anymore and as such he does not need to treat his motorcycle as often. In addition, due to increased border crossings, there are now more customers at the kiosk.

EIB 64 Lakafehan - Keliting, NTT

Maukita market: Local residents walk along the sub-project road to market. They go to Atambua by bus at a cost of IDR 7,500 (about US$0.85); by motorcycle the cost would be IDR 15,000 (about US$1.70), so most people use bus. It takes about half an hour to travel the 30 km. These villagers have noticed a direct benefit of the roadway as the travel time prior to the project was about an hour. They are not concerned about safety (though a public works official reported that there were crashes after project completion due to speeding). Before road rehabilitation bus availability was uncertain, so they were unable to make a roundtrip to Atambua within the same day--now they can--due to road improvements, bus service is now more regular and reliable. No problems were noted for the project. Some of the villagers also benefited directly in the form of employment. The villagers at this location also expressed that their district needs water and electricity. Local road at Manamas: An elderly lady, six children, three of whom are married the remaining three are still with her. One of the married daughters lives in Timor Leste, but comes to visit regularly with her family. They travel on foot to the border at Wini where they pay a border crossing fee of IDR 300,000 (about US$33.30) and continue on foot to Manamas--this trip takes about four hours. Two of the unmarried children live in Surabaya--one works there and the other is in university studying veterinary medicine. They last visited 5 years ago. Her youngest child, seventeen year old Angela, lives with her but goes to school in Kefamanau. Angela's mother rents a room for her with a local family in Kefamanau. The trip by small bus to Kefamanau costs IDR 10,000 (about US$l. 10) each way and is about 1 hour. This is Angela's last year in high school; she wants to continue to university to study law. Angela's mother has a farm where she grows rice and other vegetables--she sells these at market in Kefamanau once a week.

EIB 26 Mengwitani - Singaraja, Bali

Sri lives in hotel worker residences near Pucang Asri Hotel. She has been working at the hotel for 9 years. Her husband also works at the hotel. They have two sons. Sri's parents live in Denpassar so she travels there to see them about once a week. She makes this trip by motorcycle, it takes about one hour. Sri observes that her ride quality and comfort have improved since the EIRTP project was completed. Sri has not noticed any changes at the hotel and believes that the road project has had no influence on hotel operations. She has also not noticed any negative impacts. Sri goes to market by motorcycle--it is about 2 km north of her home. One of her neighbors has two daughters in 2ndand 6thgrades who walk to school about 10 minutes along the roadway (there are no sidewalks). The parents are concerned about their children's safety--many children from the neighborhood walk to school. There is truck traffic during the day, and they estimate seeing about 5 trucks every ten minutes. There are also several tourist buses. They rarely cross the road since they are concerned about safety (there is also little development on the east side of the road). One neighbor visits relatives in Singaraja every fortnight, the trip is about 1 hour by motorcycle. This neighbor feels that the road is much safer for him on his motorcycle since the Project included road widening from 6 m to 7 m. Annex 9. Stakeholder Workshop Report and Results (if any)

Not applicable. Annex 10. Summary of Borrower's ICR and/or Comments on Draft ICR

Document of Ministry of Public Works Directorate General of Highways BORROWER'S PROJECT COMPLETION REPORT (PCR) EASTERN INDONESIAREGION TRANSPORT PROJECT JUNE 30,2006 Executive Summary

Project Background In October 2000 the Bank and GO1 decided to accelerate preparation of part of the proposed Eastern Indonesia Regional Road Project (covering all road networks in Eastern Indonesia) so that procurement of the preservation of National roads and certain strategic roads (environmental category B) could be processed quickly as a first Eastern Indonesia Region Transport Project. The TOR for preparation was oriented towards strengthening regional planning and decentralization, integrated spatial and network planning of National, Provincial and Kabupaten roads including other transport modes using so-called integrative planning tools, as well as regional development and community empowerment, namely towards what later became the Second Eastern Indonesia Region Transport Project. Four Directorates General in the Ministry of Settlements and Regional Development handled different classes of roads, and borrowing arrangements were not in place for other than National roads, so the choice of National and strategic roads for the scope of EIRTP 1 was expedient. Preparation services EIRTPA were completed at the consultant's expense in March 2002 after the GO1 budget financed by three Japanese Trust Funds expired on December 31, 2001.

The key agency responsible for preparing and implementing the Project, the Directorate General of Regional Infrastructure Development (DGRID or DGRI) within the Ministry of Settlements and Regional Infrastructure (MSRI) was renamed and restructured in 2004 as the Directorate General of Highways (DGH) within the Ministry of Public Works (MPW). Unless they need to be distinguished, DGRIDIDGRI and DGH are termed DGH herein.

Brief Description of the Project Loan 4643-IND was negotiated on November 7-8,2001 and signed on January 22,2002. The loan became effective on March 27,2002 and closed on June 30,2006.

The Project improved National roads and a few Provincial roads in all 15 provinces of Eastern Indonesia. Although the loan became effective in March 2002, contract packages from Annual Work Plan I (AWP-1) began from October 2001 with financing of advance payments (about US$4 m) partly from the Second Highway Sector loan (IBRD 37 12-IND) which closed on December 3 1,2001. Loan 4643-IND was modified on August 11,2005 mainly to reallocate funds to civil works.

EIRTP 1 continued the preparation of the EIRTP 2 Project begun under EIRTPA, focusing on Provincial and Kabupaten roads and National roads in Kota in most of the EIR Provinces. Loan 4744-IND became effective on October 2 1,2004 but procurement of Supervision Consultants was delayed. While awaiting procurement, Supervision Consultants under EIRTP 1 were engaged for Interim Supervision of EIRTP 2 civil works, financed by EIRTP 1.

Project Component 1: Civil Works and Accident Blackspots Component la valued at US$ million net of tax(2 percent less than the PAD estimate) included periodic maintenance and betterment of roads and bridge replacement, comprising 145 contracts on National roads and 7 contracts on Provincial roads (i.e. other strategic roads). The first works began in October 2001 and the last began in October 2005, grouped into three Annual Works Programs (AWP), where each AWP included two or three batches. The program comprised periodic maintenance of 1,078.3 Km worth US$45.88 million (net of taxes), betterment of 1,761.4 Km worth US$136.83 million, and 4,574 meters of bridge replacement worth US$25.51 million, most procured in multi-year contracts. Bridge replacement included steel trusses worth US$7.58 million for installation by contractors.

A small Component lb covering treatment of accident blackspots was not included in the Project, as the related implementation support services were not procured.

Project Component 2: Implementation Support Component 2 valued at US$ million net of tax (1 lpercent less than the PAD estimate including contingencies) covered consulting services and a small amount of equipment required to support implementation of the Project. It included provision of funds for incremental operating costs for the Project Management Unit (PMU) and DGH.

Core Team Consultants (CTC). One team provided technical assistance for the Project Management Unit (PMU) and DGH in managing EIRTP 1, and to continue preparation of EIRTP 2.40 percent of the cost of services of US$4.38 million was used to prepare EIRTP 2, increasing the cost to 10 percent over the original contract value, or 1 percent under the PAD estimate.

Regional Team Consultants (RTC). Two regional teams (one for the Central Region which included the four provinces of Kalimantan and one for the Eastern Region which included the remaining 11 provinces), assisted DGH in oversight of design and supervision of the civil works. RTC also evaluated designs prepared for EIRTP 2 first year works by the regional governments or their consultants, and RTC Central oversaw Interim Supervision of EIRTP 2 works in their region. The total cost of services was US$3.82 million, an increase of 12% over the original contract costs, but 5 percent less than the PAD estimate.

Design and Supervision Consultant (DSC). 15 teams engaged by each province in EIR to provide technical assistance to provincial government agencies for design and supervision of civil works funded under the Project. DSC in 8 provinces were expanded to provide Interim Supervision teams for start-up of EIRTP 2 works from late 2005 to June 2006. The overall cost of DSC increased to US12.69 million including Interim Supervision, an overall increase of 34 percent over the total original contract value, but 2 percent less than the PAD estimate.

Road Traffic Safety Consultants (RTSC). This was intended to support the accident blackspots sub- component. Because the pilot study under SRRP was still under way, and the Terms of Reference provided for RTSC services of 30 months, it was agreed with the Bank Mission in September-October 2004 that there was not sufficient time before the EIRTP 1 Loan Closing Date to complete the services, and this consultancy was not procured.

Equipment. Office and communications equipment to support implementation of the Project by DGH was procured by National Competitive Bidding (NCB) because of its small size (US$O. 18 million, 13 percent less than the PAD estimate). The loan share was revised from 100 percent to 80 percent and Ministry of Finance rehded the 20% to the Special Account.

Incremental Operating Costs for PMU. IOC included DGH staff travel and other costs (not salaries) which would not have been incurred absent the Project. This is estimated to have cost US$0.53 million (not including the IOC for technical audits), 6 percent over the PAD estimate.

Project Component 3: Road Sector Support Component 3 valued at US$ million net of tax (17 percent less than the PAD estimate including contingencies) covered technical assistance, training and traffic counting equipment. It also included provision of funds for incremental operating costs for technical audits by MPW.

Adapting Road Planning, Programming and Budgeting Procedures (PPBP). Mobilized on August 22, 2003 PPBP was intended 1) to strengthen central DGH capability for preparing National road budgets, for monitoring performance of the whole road sector, and for medium-term strategic planning; 2) to establish at the Provincial level, planning programming and budgeting procedures; and 3) to develop a local roads management system for Kabupaten and Kota. The March 2005 mission reviewed the status and agreed a revised focus and staff changes, and management effort then produced an acceptable product on schedule in June 2006. The cost of services increased to USs3.49 million, an increase of 18 percent over the original contract value, and 32 percent over the PAD estimate including contingencies.

Strengthening Quality Management for Roads in EIR (Technical Audits). Intended to 1) establish improved quality assurance procedures and organization; 2) improve monitoring of the quality of civil works; and 3) provide new tools to help improve the management of quality, DGH considered that there was overlap between Quality Management TA and works supervision. The Bank proposed to apply part of the funds to assist the Inspectorate General in technical and financial audits for sustainability of the Project and to address the audit targets, and two contracts were prepared, for technical audit and for financial audit. Funding for the Inspectorate General was arranged in 2006. The audits started in April 2006 and about 50 percent of the technical audit TA was completed by June 2006, the remainder proposed to be funded under EIRTP 2. The financial audit consultants were not familiar with engineering cost investigations, so their contract was not signed. The cost of technical audit TA under EIRTP 1 was US$O.Ol million, 0.4 percent of the PAD estimate.

Incremental Operating Costs for Technical Audits. Staff travel and other costs (not salaries) for the Inspectorate General as a result of the additional work to audit EIRTP 1 works and services. This cost about US$O. I 1 million, and was not included in the PAD estimate. The Loan was amended in August 2005 in part to include this item.

TA for the Establishment of a Road Board and Road Fund. This TA was intended to establish a Road Fund to be financed directly from road user charges, and managed by a Road Board of a cross-section of road users. The consultant mobilized in January 2004 and met resistance to the concept of earmarking of revenues for road maintenance. A "road fund as envisaged could not be set up. The Terms of Reference was revised to address performance and governance reform in road maintenance, and a report issued in May 2005 as Road Performance and Maintenance Financing Study. Recommendations were not implemented due to perceived overlap with PPBP. The TA cost US$0.80 million, a reduction of 41 percent in the original contract value, and 15 percent over the PAD estimate.

TA for Extension of ARMS (later: TRAMS and Traffic Counting Equipment): ARMS (Automated Road Monitoring Services) was replaced by TRAMS (Traffic and Road Asset Monitoring System). Bids were received in January 2004 but was not implemented after short listing was delayed by Bank intervention, and evaluation of bids by DGH and the Bank was inconclusive. In parallel, Traffic Counting equipment was tendered in July 2004, and four contracts were let, two in September 2005 and two in March 2006, with total cost US$1.43 million. This equipment had not been identified separately in the PAD but will be an important asset in improvement of planning quality.

TA for Improvement of Bid Documents: Rather than award a separate contract for incorporating environmental SOPs into bid documents, DGH included the tasks in CTC services to take advantage of their environmental and contract management expertise. The outcome was the application of the SOPs under EIRTP 1, and preparation of a new set of standard bid documents by DGH by October 2004, which were accepted by the Bank for use in EIRTP 2. No additional cost was incurred, saving US$0.93 million from the PAD estimate.

TA for DGRI Training: Intended to strengthen the capability of Provincial, Kabupaten, and Kota manpower. It updated and applied earlier Master Training Plans for Kabupaten Roads, and NationaVProvincial Roads. Mobilized in October 2003, implementation was completed by April 2005, and an extension was approved to December 2005 to prepare materials and to run courses in project management. The cost of services was US$1.59 million, an increase of 24 percent over the original contract value, and 14 percent over the PAD estimate. TA for PUSLATJAKONS Training: In order to support the Construction Industry Training Centre, a study on worker and team productivity was done, and training modules prepared or updated for construction workers. Mobilized in January 2003, the contract was completed in May 2004. The cost of services was US$1.09 million, an increase of 7 percent over the original contract value, but 6 percent less than the PAD estimate.

Assessment of Achievement of Project Development Objectives Three Project Development Objectives (PDO) were identified in the PAD, as described in section 6.2 and Annex 1 herein. Achievement of the PDO was assessed by 9 key performance indicators. Achievement in terms of the indicators by the final year of evaluation, 2005, is summarized as follows:

Performance was above target or on target for two indicators. Performance was below target for six indicators. One indicator could not be measured.

Summary of Outputs by Project Components Achievement of the Key Performance Indicators of Output, updated to June 30, 2006 was as follows. Two indicators achieved the target, one indicator was just below the target, and one indicator was not achieved at all. (a): Cumulative kilometers of betterment: actual 1,765.0 km (including partly-completed subprojects) compared with target: 1,250 km. (b): Cumulative kilometers of periodic maintenance: actual 1,078.3 km (including partly- completed subprojects) compared with target: 1,000 km. (c): Cumulative meters of bridge replacement: actual 4,574 m (including partly-completed subprojects) compared with target: 5,800. (d): Cumulative number of treated blackspots: actual 0 compared with target: 90.

Ratings Summary Performance Rating by PCR Outcome: Satisfactory Risk to Development Outcome: Significant Bank Performance: Satisfactory Borrower Performance: Satisfactory

Project Context, Development Objectives and Design Context at Appraisal The relevant Country Assistance Strategy was dated January 4, 2001 (Report No. 21580-IND). At that time:

1. Indonesia was striving to emerge from a severe economic crisis, complete its transition to a democratic society, and embark on an ambitious program of decentralization. 2. The new Government of President Wahid inherited an economy with deep structural flaws, weak institutions, and an entrenched bureaucracy. Corruption was still rampant. Regional unrest, growing nationalism, and political and ethnic tensions threatened national unity. 3. Greater transparency was building pressure for reform. 4. Civil society organizations expressed serious concern with high levels of debt and corruption. They recommended the Bank to focus on poverty reduction through "bottom-up" community development, and to involve civil society more actively in future programs. In relation to the private sector strategy (distributed along with the CAS), they pointed out the main weaknesses in the investment climate in Indonesia, which were holding back recovery and job creation for the poor. 5. The overarching goal of the World Bank Group in Indonesia was to support efforts to reduce poverty and vulnerability in a more democratic and decentralized environment. The number of poor had fallen from crisis levels, but half of all Indonesians remained vulnerable to poverty. Accordingly, the Bank Group's strategy in general and the Project Appraisal Document for EIRTP 1 in particular focused on three broad priority areas: 1. Among others, this involved policies and public expenditures aimed at poverty reduction and human capital and infrastructure development. The PAD noted that the EIR includes the poorest and least populated parts of Indonesia. The EIRTP 1 Project would contribute to efforts to accelerate its development by improving the condition and all-weather usability of existing national and other strategic road links, and by their sustainable preservation, and support recovery and growth in those sectors dependent on transport. 2. Building national institutions for accountable government, which among others included civil service reforms, better public financial management and procurement and effective decentralization. The PAD noted that roads are vital and expensive public assets. EIRTP 1 supported decentralization of responsibility and resources for road management to local institutions in 15 provinces, provided for more efficient and transparent use of public funds for roads through better project selection, improved procurement and financial management arrangements, stricter management of quality, and more effective competition. In addition, it was intended to lay the foundation for a more self-sustaining basis of financing of road preservation and improvement works through a fee-for-service approach. 3. Delivering better public services to the poor, which among others involved support for improved public service delivery by sub-national governments, and selective assistance to post-conflict areas. The PAD noted that by reducing road transport costs, the EIRTP 1 Project would help lower input prices, raise output prices and increase the competitiveness of local products from affected areas.

Original Project Development Objectives (a) Improve the condition of National and other strategic arterial roads so as to reduce transport costs and provide more reliable access between Provincial centers, to regional development and production areas, and to other key transport facilities; (b) Support the effective and sustainable decentralization of planning and management responsibilities for works on all primary (National, Provincial and Kabupaten) roads to the respective provincial and kabupaten governments; and (c) Improve the use of scarce financial and natural resources through increased efficiency, quality, and transparency in award of works.

Revised Project Development Objectives Project development objectives were not revised during the Project.

Main Beneficiaries, original and revised The PAD noted that the principal direct beneficiaries would be the local population using the road networks. It was noted that the region also contained significant commercial enterprises notably in the forest products and plantation sectors that stood to benefit from improvements to specific sections of the network. The identification of the main beneficiaries was not revised during the Project. Original Components Original Project components were as below. Details are in Section 0.2 (Brief Description of the Project):

1. Component 1: Road Network Preservation 2. Component 2: Implementation Support 3. Component 3: Road Sector Support

Revised Components Project components were not revised during the Project.

Other Significant Changes There were no significant changes in design, scope and scale, implementation arrangements and schedule, or funding allocations during the Project.

Key Factors Affecting Implementation and Outcomes

Project Preparation, Design Stage, and Quality at Entry IIRMS programming guidelines for a link is based on the dominant type of work. Thus the lengths "recommended by IIRMS" are not necessarily the highest priority works. However, by obtaining the Bank's conditional approval of the 3 year program at the start of the Project, and then following that program (86 percent of the links in the original program in the PAD were later constructed), uncertainty was avoided.

Quality of planning data remained an issue throughout EIRTP 1. It is noted that more sophisticated models such as HDM 4 would not have produced a better result than IIRMS, due to database deficiencies, lack of sustainable updating tools, poor segmentation and lack of evaluation after design.

No instances of Quality of Life improvements, road safety remedial measures, or health and convenience measures were recorded by Regional Team Consultants, who found they had to focus on essential issues of pavement design and bridge design.

Implementation Stage Simplified Design was forbidden, all civil works subject to Detailed Engineering Design. This move greatly reduced the number of major design revisions (only 11, not counting extra lengths or added bridges) and was a success.

Independent preliminary engineering designs and cost estimates were done by CTC for comparison with DED and the Engineer's Estimates by the Province. This achieved savings of about Rp. 30 billion in the re-tender of EIB-22.

Monitoring and Evaluation (M&E) Design, Implementation and Utilization EIRTP 1 was the first Bank Loan to decentralize Loan administration to the provinces. The Bank itself was continually developing the PMR system and forms during the Project. Frequent changes of PMR format by the Bank created confusion in the Provinces. Decentralization actually creates a demand for more consistent and transparent action from those who set up systems at central level.

Safeguard and Fiduciary Compliance A satisfactory Safeguard outcome was due to wide application and monitoring of Standard Operating Procedures (SOP) for environmental aspects of road and bridge construction. This was despite some reluctance by BAPEDALDA, because SOP are not mentioned in Indonesian environmental law.

Sustaining Reforms and Institutional Capacity BAPEDALDA cannot change their organization structures at will to form groups responsible for road environment, and their priorities are hgher in other areas. The Public Works Agencies are legally responsible for this area. Focus on BAPEDALDA may have diverted attention away from improving contractors' and supervisors' awareness of environmental protection and mitigation.

Outcomes

Relevance of Objectives, Design and Implementation The PAD noted that "arterial road programs should focus primarily on periodic maintenance.. ." (p.7). EIRTP 1 programs covered 35 percent of the 8,122 km arterial roads in EIR over five years. This 35 percent represented only 7 percent of the network per year, leaving 93 percent to routine maintenance each year, whch was not treated as part of the Project, and not monitored at all. By ignoring works on 93 percent of roads, the Project Design ignored the key factor determining the improvement of road conditions.

Achievement of Project Development Objectives (PDO) All Provinces in EIR experienced a worsening of arterial road conditions from 1999 to 2003, based on available data. The Project began in late 2001, so the impact of the whole project is not yet reflected in the data. The achievement of PDO a) was therefore doubtful. Achevement of PDO's b) and c) was not measurable.

Efficiency The originally evaluated works achieved the expected returns, after discounting costs by inflation factors to obtain constant prices at 2001 values, and using original traffic. Cost/km in AADT in 2000 PAD Implemented EIRR with Actual Program PAD datab. EIRR Cost/km Costs Betterment 698 3353 48% 678 51% Periodic M. 397 1999 47% 385 70% Total 503 2477 47% 488 62 % The overall EIRR for the Project including all road and bridge investments and all design, supervision and project management costs is estimated at 40.7 percent. The Net Present Value (NPV) at 12 percent discount rate is estimated at Rp. 5,916 billion. These results are better than projected in the PAD.

Justification of Overall Outcome Rating I Rating: I Satisfactory The Project was carried out efficiently and on time, despite non-implementation of some sub- components which can be understood in relation to ongoing external delays (the accident blackspots) or misunderstandings (technical audit and the TA for quality management). The apparent lack of achievement of the key project development objective was also external to the Project, due to apparent lack of routine maintenance on the arterial roads not handled under the Project. The other project development objectives were most likely acheved in part, although not readily measurable.

Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Not relevant (b) Institutional Change/Strengthening Not central to the Project

(c) Unintended Outcomes and Impacts Dividing supervision consultants into DSC and RTC led to weakness in technical control of field supervision. This was an unintended negative outcome of the decision to decentralize contractual control over DSC to the provinces.

Lack of familiarity with contract law is a handicap for many BAPEDALDA. Relying on BAPEDALDA for environmental monitoring would introduce new and unintended risks into both contract management and environmental management.

Summary of Findings of Beneficiary Survey Questionnaires were distributed to all BAPEDALDA and Provincial Works Agencies at the end of the Project to gauge the effectiveness of all aspects of the Action Plan to strengthen BAPEDALDA and to improve the environmental management of roadworks.

Results: [to be inserted when received]

Rationale for Rating of Risk to Development Outcome Rating: I SigniJicant Development outcome for EIRTP 1 is measured primarily in terms of condition of the 8,122 km arterial road network in EIR. Shortcomings in project design (ignoring routine maintenance), and in implementation (lack of implementation of the TRAMS sub-component) mean that there is a significant risk that the condition of the network as a whole will worsen despite the Project's efforts, and that road conditions will not be monitored.

Assessment of Bank and Borrower Performance

Bank (a) Bank Performance in Ensuring Quality at Entry I Rating: r~atisfactory The Project design was simple and efficient, but did not anticipate externalities which would affect the achievement of project development objectives. Some objectives were not readily measurable. Some TA's were included which were not workable.

(b) Bank Performance in Supervision I Rating: I Satisfactory Supervision Missions reviewed all aspects, and continually set new deadlines for all aspects, especially those subject to slippage. The "Actions To Be Taken" appended to each Aide Memoire were the principle management tool. Bank supervision made particular efforts to improve engineering quality. Safeguard policy supervision was sensible. Fiduciary policy supervision could have improved in consistency in support of GOI's decentralization efforts.

Borrower (a) Government Performance:

- I Rating: I Satisfactoiy Despite annual budget delays which occurred in all sectors, the Project was well-supported, and sufficient resources were provided to implementing agencies. (b) Implementing Agency Performance: Rating: 1 Satisfactory/Highly satisfactory DGH performance was Satisfactory: the organization structure was significantly improved by the end of the Project, aiding implementation. Main shortcoming was a misunderstanding over the intent of the techcal audit performance indicator. PMU performance was Highly satisfactory: pro-active in setting and achieving targets and deadlines, cooperated with all agencies and the Bank in following up problems, using only a handful of staff to handle all issues.

Lessons Learned Many lessons were learned throughout the Project, arranged by functional area below:

Project Design

Planning and Programming

1. The IIRMS system is a good tool for screening of works programs, but data on traffic, road and bridge conditions, velucle operating costs and works costs need to be kept up to date. 2. The arrangement into annual works programs from the start of the Project provided a clear program which avoided uncertainty in project implementation. 3. Acceptance of projects with EIRR below 15 percent in the Eastern Indonesia Region is needed in order to establish road networks, as a basis for economic growth and traffic growth. 4. The response to poor planning data quality must be to simplify data requirements. The Bank is moving in the opposite direction, relying on improved resources and more sophisticated systems. 5. The packaging of maintenance works should be monitored carefully - to reduce overlay work on sections with low IRI and traffic. 6. Sub-project datasheets should be prepared and maintained with key information 1 assumptions on appraisal and design to allow pre- and post- project appraisal.

Design

1. (DED) must be checked thoroughly because some designers copy parts from similar sub-projects without referring to survey data. 2. Slufting from Simplified Design to DED resulted in a reduced number of major design revisions. 3. Some DED used temporary marks as location reference points for stationing instead of Km posts. The Km posts should be relocated where errors are large. 4. Strip maps showing treatments on different segments of links should be prepared and used in planning and in management of maintenance. 5. Assessment of roughness and confirmation of traffic data should be made during design surveys to allow revision of the economic appraisal.

Procurement

1. Post-qualification of bidders for smaller works enabled speedier procurement and allowed wider competition. 2. Most ICB packages were not of interest to international fms. The Bank should increase the ICB threshold to US10 million. 3. Bulk procurement of bridge trusses should be preceded by a preliminary design check, and a field should be added to the BMS database for an initial estimate of proposed replacement bridge lengths.

Implementation

The advisory period of 6 months after "Project Completion" and before the Loan Closing Date in the Loan should be made mandatory and reduced to say 3 months, to avoid risks related to rushing of works to completion. Design reviews still occur, sometimes greater than 10 percent by value. The reasons are not well documented. A similar problem is noted with Contract Change Orders. Many supervisors do not understand the Terms of Reference. Very often they only watch the works but do not take appropriate action on sub-standard works. Supervision teams need clearer delegation of authority from the Project Manager. If possible automatic delegation should be mentioned in the General Conditions or Special Conditions of Contract, or the cases where the Project Manager can intervene should be defined more narrowly. Output quality should be reflected in the Chart of Accounts, which is presently focused on input categories (resource use) only. Output-based accounting is important because what is measured is what is managed. Contract documents should be revised to remove ambiguities and gaps in the provisions for price escalation, using guidelines developed on this Project. In order for technical audit to be effective and independent, it should not be linked with payments for work done. Technical audit guidelines should be revised to strengthen audit of performance. 95 percent of the Audit Decree No. 3 10/KF'TSIM/2002 deals with inputs, the last 5 percent with outputs, outcomes and impacts. The last 5 percent of the guideline in the Decree is not in a usable format and has never been used. Dividing supervision consultants into DSC and RTC led to weakness in technical control of field supervision. Field supervision should be integrated with central management and oversight. A disbursement administration period after the Loan Closing Date should be specified in the Loan Agreement, binding on both Borrower and Lender. Otherwise it may be subject to an administrative policy and expire at the Load Closing Date.

Action Plan for Improved ProcurementJAnti-Corruption

1. Provinces with high risk at procurement such as Central Sulawesi, Central Kalimantan, Papua and West Irian Jaya should be monitored very closely for pre-arranged bidding, as well as coercive, collusive and fraudulent practices. 2. A detailed evaluation of the Bid Documents and Bid Evaluation by experienced engineers can provide an early indication of the presence of fraud and corruption. Ths was implemented by PMU and CTC. 3. Post Bidding occurs after bid opening if there is not a requirement for bid documents to be sent to the PMU within 24 hours after the bid opening.

Environmental and Social Aspects

1. The screening procedures in the EMP were effective, but for bridge sub-projects need to be followed up with site survey of whether land acquisition is required. 2. The Standard Operating Procedures for environmental actions were often neglected by Contractors, Consultants and PIU in the field. Strong wording needs to be included in the Special Conditions of Contract and Standard Specifications including application of penalties if the parties breach the contract. 3. The format for LARAP was not clear, and the threshold between Simple LARAP and Full LARAP was subject to differences of opinion within Bank staff. Long-term sustainability of environmental protection in road works is better ensured through the provincial works agencies rather than BAPEDALDA. It should be considered a normal engineering supervision task.

Project Management Report (PMR)

PMR format should be determined once, and only revised if essential. Frequent changes of PMR format by the Bank creates confusion in the Provinces. Approval for disbursement and replenishment based on the PMR should be done fully by the Bank's Office in Jakarta (WBOJ). The involvement of WB HQ adds 1-2 months to replenishment and leaves insufficient budget in the special account. Decentralization of the PMR should have included on-job training in provinces, not just classroom training in Jakarta. GO1 (MOF and BI) and WBOJ staff need to become more consistent and less error-prone, and more willing to admit errors. Disbursements against erroneous but valid Loan Numbers (such as EIRTP 2 expenditures charged to EIRTP 1) were not resolved by WB internal procedures.

Technical Assistance (TA)

TA is driven by the World Bank, and the resulting lack of motivation causes delays and misunderstandings which nullify the expected benefits. Only TA's which are high priority with the Borrower should be included. The added value from many TA's is not felt by DGH, and perhaps is part of the Bank's own agenda. TA's which are proposed by the Bank should be financed by Trust Funds and managed by the Bank. The Bank gives too much advice on shortlisting and on technical evaluation which can be categorized as Bank interference or conflict of interest (e.g. TRAMS). Budgeting for 100 percent Loan-financed TA by GO1 was delayed between 4 and 5 months every year (9 months in 2005) so invoices were not paid. The linkage with Rupiah budgets should be removed.

Training

Annual training should be carried out in Procurement, the Project Management Manual, the Financial Management Report, Environmental and Social Management and Quality Assurance.

Project Management Manual

The Manual provided effective guidance for related institutions (PIU, PMU and DGH), and minimized disputes and gray areas.

The World Bank's Level of Service

The Bank took an average of 12.29 workmg days to respond to letters from PMUIDGH. The Bank should inform whether documents are in process by the Task Team Leader or have been approved. World Bank should ensure better cooperation and coordination between its staff. MINISTRY OF PUBLIC WORKS DIRECTORATE GENERAL OF HIGHWAYS DIRECTOlRATE OF PLANNING JI. Patimura No.20 Keb. Baru - Jakarta 121 10 Telp.(021) 7200281,7393928, Fax. (021) 7201760

Our Ref. : %ow%/ 9-fil 77 A Ia6 Jakarta, December 08,2006 Enclosed : 1 (one) sheet

Ms Sally Burningham Senior Transport SpecialisKlTL-ElRTP2 Transport Sector Unit World Bank Office, Jakarta

Subject: IBRD Loan No. 4643-IND, Eastern lndonesia Region Transport Project (EIRTP-1)- Implementation Completion Report (ICR)

Dear Ms Burningham,

Referring to The World Bank letter dated November 24, 2006 re: Eastern lndonesia Region Transport Project (EIRTP-1) loan IBRD 4643-IND Implementation Completion Report and Results Report, herewith we would like to submittal our comments for the above ICR. We hope that with inclusion of DGH comments in ICR will provide comprehensive information and will give positive impact in The World Bank future loan.

Thank you for your kind attention and cooperation.

Sincerely yours,

Sri Apriatini Soekardi Director of Planning Cc: 1. Director of General of Highways, MPW (as a report) 2. Secretary Directorate General of Highways, MPW 3. Director of Technical Affairs, DGH, MPW 4. Director of Roads and Bridges Eastern Region, DGH, MPW 5. Messrs Mesra Eza and lmad Saleh WBOJ 6. Chief of Sub Directorate of Program and Budgeting, DGH, MPW 7. PMU ElRTP IBRD 8. File DGH, MPW Comment on ICR for ElRTPl IBRD 4643-IND November 23,2006

1.Page 9, Section 7.4, Fiduciary, para 1 of ICR: Comment based on PAD dated November 12, 2001: The lnspectorate Gemral was only given responsibility for technical audit after the Loan Amendment on August 11, 2005. The IG was not part of the original plan for technical audit. The PAD included the "number of independent technical audits carried out" as a key performance indicator (pages 2 and 46). The only other reference to technical audit was on page 70 of the PAD: "Gol has agreed to ..... Strengthen the quality assurance and technical audit systems to minimize the risk of misprocurement." This implied that the TA for Strengthening Quality Management was intended to do technical audit.

Task 83 of the TOR of those services (30 October 2001) was to 'Develop Procedures and Review Implementation of Technical Audits", but the TOR did not specify who would do the independent audits. The QM TA was not implemented, and this gap was not identified.

The PAD only mentioned the Inspectorate-General on pages 26 and 67: ("the Minister has established an anti-corruption unit within the lnspectorate General department").

The late implementation of technical audits could therefore be ascribed to a shortcoming in Project Design.

2. Page 9, second para of ICR: Should be year "1999.

3. Page 9, last para of ICR:

We understand that the Bank has a responsibility and right to investigate suspected cases of fraudulent practice and declare misprocurement. However to maximize the benefits of these investigations, we would prefer that the Bank and GO1 jointly find solutions and agree on outcomes prior to the Bank taking its own actions. This would ensure that the solutions and outcomes address current problems and also find solutions for the future.

Following up INT investigation, the Government through lnspectorate General MPW, BPKP and KPK still carry out investigation to seek clarity and evidence for the problem in proportional way. DGH also had made several efforts by improving the capability for Procurement Committee, more transparency for the process including civil society oversight and adoption of semi e-procurement system as well.

4. Page 12, second para of ICR:

The project of Timor-Leste was initially requested by The World Bank Jakarta and Timor Leste through an email dated August 27, 2002 and The World Bank letter dated December 16, 2003. The first phase with total length 30.40 Km, contract value IDR 23,879,918,938 and construction period from August 16, 2004 to November 30, 2005. The road link name is Lakafehan-Keliting-Wini-Sakato (total length 53 Km) and Atambua-Lakafehan-Motaain (total length 33.5 Km)

The World Bank inform to DGH in a email dated September 22, 2005 that there is a meeting between the President of Indonesia and the President of the World Bank on September 14-15, 2005, " President of Rol also reflected on the problems with Timor-Leste and the Oecussi-Ambeno enclave and asked The World Bank President to support in construction of a road that would bridge the enclave and the rest of Timor-Leste and contribute to breaking the poverty cycle of the enclave. President of WB indicated he was pleased to look at the road proposal, and that the Bank's Country Director would look into it."

With the above information, DGH proposed the remaining segment that connects both side of Timor Leste and total revised effective length 75 Km with total cost IDR 66,616,284.000.

5. Page 30, second para (iv) of ICR:

TRAMS was not awarded and implemented under EIRTP-I due to reasons such as different perceptions on aspects of evaluation, and excessive involvement by the Bank in the evaluation process: This is best demonstrated by lots of request from the Bank in Supervision Mission and World Bank letters for re evaluation for the technical evaluation and combine technical and financial evaluation.

6. Page 34, no. 41 of ICR: Replace 30.40 Km to be 75.00 Km Annex 11. Comments of Cofinanciers and Other Partnerslstakeholders

Not applicable. Annex 12. List of Supporting Documents

1. Monthly Progress Report No. 46 of Core Team Consultant, dated June 20,2006. 2. Strategic Road Infrastructure Project, World Bank, Project Appraisal Document, June 2,2006, Report Number 36 122-IND. 3. Consulting Services for Regional Team Consultant (Central Region), IBRD Loan No. 4643- IND. Final Report June 2006. 4. Consulting Services for Regional Team Consultant (Eastern Region), IBRD Loan No. 4643- IND. Final Report June 2006. 5. Consulting Services for Core Team Consultant, IBRD Loan No. 4643-IND. Final Report on services for EIRTP 1, June 2006 6. Consulting Services for Core Team Consultant, IBRD Loan No. 4744-IND. Final Report on services for EIRTP 2, June 2006. 7. Summary of Key Performance Indicators as presented in the Report "Performance Indicators for EIRTP-1 for 2005", dated April 2006. 8. World Bank supervision mission aide-memoires, January 16-27, 2006; March 3-24, 2005; September 21 -October 8,2004; March 18-31,2004; October 22-November 7,2003; June 2-13, 2003; September 30-October 10,2002; and May 16-June 6,2002. 9. Eastern Indonesia Region Transport Project Loan No. 4643-IND. Reallocation of Loan Proceeds and Amendment to the Loan Agreement, August 11,2005. 10. Second Eastern Indonesia Region Transport Project, World Bank, Project Appraisal Document, May 18,2004, Report No. 28071-IND. 11. Country Assistance Strategy at the time of project completion, October 29, 2003, Report No. 27108-IND. 12. Quality at Entry in FY02 (QEAS), A QAG Assessment, April 8,2003, Quality Assurance Group. 13. Progress Report on Country Assistance Strategy, July 25,2002, Report No. 24608-IND. 14. Technical Assistance for Eastern Indonesia Region Transport Priorities Analysis Study (EIRTPA). Final Report. Volume 1. Preparation of EIRTP-1, March 3 1,2002. 15. Eastern Indonesia Region Transport Project Loan No. 4643-IND. Loan Agreement between the Republic of Indonesia and International Bank for Reconstruction and Development, January 22,2002. 16. Eastern Indonesia Region Transport Project, Project Implementation Plan, January 18, 2002. 17. Eastern Indonesia Region Transport Project, World Bank, Project Appraisal Document, November 12,2001, Report Number 22273-IND. 18. Country Assistance Strategy, January 4,2001, Report No. 21 580-IND. ° This map was produced by 120 the Map Design Unit of The CAMBODIA INDONESIA World Bank. The boundaries, colors, denominations and PACIFIC any other information shown VIETNAM PHILIPPINES EASTERN INDONESIA REGION on this map do not imply, on OCEAN the part of The World Bank TRANSPORT PROJECT Group, any judgment on the Gulf of legal status of any territory, or any endorsement or Thailand ROAD PRESERVATION PROGRAM acceptance of such boundaries. Sulu 16 PROJECT PROVINCES THAILAND Sea

Banda Aceh L A Y A S BRUNEI 1 M Talaud Medan Natuna I Celebes Is. INDONESIA Besar A Tarakan Sea Pematangsiantar Anambas Simeulue For detail, see 24 IBRD 31376R Morotai 19 ° 2 For detail, see Manado 135 SINGAPORE 23 IBRD 31371R Nias Batam Tanjungpinang Pekanbaru 25 Ternate Halmahera ° Gorontalo For detail, see Waigeo 0 3 Pontianak 20 26 0° Lingga KALIMANTAN Samarinda For detail, see IBRD 31381R Manokwari For detail, see Biak Padang Balikpapan Palu IBRD 31377R 30 Sorong M IBRD 31369R Siberut 4 Peleng Obi e Jambi 21 Yapen n 5 Bangka SULAWESI ta Palangkaraya Misool 32 Jayapura w Pangkalpinang Sula Is. For detail, see a SUMATRA 27 i Mamuju Ceram IBRD 31382R 9 Belitung For detail, see 22 Is Palembang IBRD 31370R Amahai Fakfak . 6 For detail, see 29 Kendari Buru 7 Bandjarmasin IBRD 31378R Parepare PAPUA Bengkulu Ambon Timika For detail, see 28 For detail, see (IRIAN JAYA) 8 IBRD 31372R IBRD 31379RMuna Kai Bandar 11 Makassar Banda Is. 33 Enggano Baubau 31 Lampung JAKARTA Aru Serang Sea For detail, see Cirebon INDONESIA Is. Bogor 12 Semarang Madura IBRD 31380R

Java Sea PAPUA 10 Bandung 13 JAWA Wetar Cilacap Surakarta Surabaya Babar Tanimbar INDIAN OCEAN 16 Alor Moa Yogyakarta Malang Lombok Sumbawa Is. 15 Bali Raba Flores Merauke NEW GUINEA 14 Dili 0 200 400 600 Denpasar Mataram Ende 17 Waingapu TIMOR-LESTE For detail, see 18 Sumba KILOMETERS IBRD 31373R For detail, see Timor Arafura Sea ° IBRD 31374R 105 For detail, see Kupang IBRD 31375R PROVINCES: 1 NANGROE ACEH DARUSSALAM 12 JAWA BARAT 23 KALIMANTAN TIMUR 2 SUMATERA UTARA 13 JAWA TENGAH 24 SULAWESI UTARA MAIN ROADS 3 RIAU 14 D.I. YOGYAKARTA 25 GORONTALO SELECTED CITIES AND TOWNS 4 SUMATERA BARAT 15 JAWA TIMUR 26 SULAWESI TENGAH 5 JAMBI 16 BALI 27 SULAWESI BARAT PROVINCE CAPITALS Gulf of IBRD 31368R DECEMBER 2006 6 BENGKULU 17 NUSA TENGGARA BARAT 28 SULAWESI SELATAN NATIONAL CAPITAL Carpentaria 7 SUMATERA SELATAN 18 NUSA TENGGARA TIMUR 29 SULAWESI TENGGARA 15° PROVINCE BOUNDARIES 8 LAMPUNG 19 RIAU KEPULAUAN 30 MALUKU UTARA 9 BANGKA-BELITUNG 20 KALIMANTAN BARAT 31 MALUKU INTERNATIONAL BOUNDARIES 10 BANTEN 21 KALIMANTAN TENGAH 32 IRIAN JAYA BARAT AUSTRALIA 11 D.K.I. JAKARTA 22 KALIMANTAN SELETAN 33 PAPUA (IRIAN JAYA) 120° 109° 110° 111° 112° 113° 114° 2° Liku Merbau 2°

Sajingan MALAYSIA

Kartiasa Sejangkung

Bts Serawak Sambas

Tebas Seluas Tj.Kerja KALIMANTAN Lubokantuo Bn.Martinus Bts Serawak Lanjak TIMUR ° Sanggauledo ° 1 Singkawang Ledo Badau Kerian 1 Batangsibau Putussibau Bengkayang Entikong Ng.Kantuk EIB-20 009 Sp.Ng. Bika Nanga Era Simpang Tiga Balaikarangan Merakai Karangan Serimbu Sipiluk Ng.Merakai puas Menarin SeiDuri Semuntai Balaisebut Ka Semitau 009 EIP-21 Sidas 008 Anjungan Ngabang Nangasemangut Mempawah Bonti Sosok Sejiran Sibadau Jempo EIP-45 EIP-1 Sei Pinyuh Sejiram Nangatepuai Tanjung Mianas 003.1 Sanggau Sintang Sekadau ° PONTIANAK 003 Bongkon ° 0 Sei Kakap Tabelian 0 Tayan Meliau Rawak EIB-21 Nangamau Sei Durian Nanga Taman KALIMANTAN Teraju Nanga Tebidah TENGAH Rasau Ng.Mahab Nangapinoh Nanga Serawai Jaya Nangaela Menukung Balai Bekuak

Manungkung Kotabaru Padangtikar Aurkuning INDONESIA Island Teluk Batang ° ° 1 Nangasokan EASTERN INDONESIA REGION 1 Maya Island Sandai TRANSPORT PROJECT Siduk ROAD PRESERVATION PROGRAM Sei Keli Nangatayap KALIMANTAN BARAT Karimata ke Kudangan Island Tumbangtiti PROJECT: MAIN ROADS Sei Melayu Tayan 2 EIB-20 BETTERMENT OF ROADS SECONDARY ROADS Ketapang Menawa EIP-21 PERIODIC MAINTENANCE AIRPORTS Pelang Tanjung 2° Riam 2° PORTS

009 LINK NUMBER DISTRICT (KECAMATAN) CAPITALS 0 20 40 60 80 100 REGENCY (KABUPATEN) CAPITALS Pesaguhan Marau PROVINCE CAPITAL KILOMETERS Mendawai REGENCY (KABUPATEN) BOUNDARIES IBRD 31369R DECEMBER 2006 This map was produced by the Map Design Unit of The World Bank. Kendawangan PROVINCE BOUNDARIES The boundaries, colors, denominations and any other information Sukaraja shown on this map do not imply, on the part of The World Bank Manismata INTERNATIONAL BOUNDARY Group, any judgment on the legal statu