Technical Assistance Consultant’s Report - Analisis Mengenai Dampak Lingkungan (see EIA) AP -...

Technical Assistance Consultant’s Report

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

Project Number: 38479 April 2010

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

Executive Summary

Prepared by MMM Group Ltd, Canada

In association with Pt Guteg Harindo & Pt Bina Karya (Persero), Indonesia

Preparing the Regional Roads Development Project – Final Report

CURRENCY EQUIVALENTS

(as of 26 April 2009)

Currency Unit – Rupiah (Rp)

Rp 1.00 = $0.000110497

$1.00 = Rp 9,050

ABBREVIATIONS

ACAP - Anti-Corruption Action Plan ADB - Asian Development Bank AMDAL - Analisis Mengenai Dampak Lingkungan (see EIA) AP - Affected Persons AusAID - Australian Agency for International Development BIMP-EAGA - Brunei Darussalam-Indonesia-Malaysia-Philippines – East Asia Growth Area

Summit CIQS - Customs, Immigration, Quarantine and Security CTC - Core Team Consultant DGH - Directorate General of Highways DOP - Subdirectorate of Planning DSC - Design and Supervision Consultant EA - Executing Agency EIA - environmental impact assessment EINRIP - Eastern Indonesia National Roads Improvement Project EIRR - economic internal rate of return EIRTP - East Indonesian Road Transport Project EMDP - Ethnic Minorities Development Plan EMP - Environmental Management Plan (cf UKL) EMoP - Environmental Monitoring Plan (cf UPL) FDI - Foreign Direct Investment FFA - Framework Financing Agreement FIRR - Financial Internal Rate of Return FMAP - Financial Management Action Plan GDP - Gross Domestic Product GoI - Government of Indonesia HDM4 - highway design and maintenance 4 HAHTP - HIV/AIDS and Human Trafficking Prevention Plan IEE - Initial Environmental Examination IHCM - Indonesian Highway Capacity Manual IRI - international roughness index (IRI m/km) JBIC - Japan Bank for International Cooperation JTS - Java Transport Study (proposed by this study) LARAP - Land Acquisition and Resettlement Action Plan MFF - multitranche financing facility MPW - Ministry of Public Works NGO - Non Government Organization NRSC - National Road Safety Council P2JJ - Perencanaan Pengawasan Jalan dan Jembatan PIU - project implementation unit PMM - Project Management Manual PMU - Project Management Unit PPJJM - Pembinaan Jalan dan Jembatan Metropolitan PPTA - Project Preparation Technical Assistance PRS - Poverty Reduction Strategy ROW - right-of-way RSAP - Road Safety Action Plan SDEA - Subdirectorate of Environmental Affairs SRIP - Strategic Road Improvement Project SRRP - Sumatera Regional Road Project UKL - Upaya Pengelolaan Lingkungan – Environmental Management UPL - Upaya Pemantauan Lingkungan – Environmental Monitoring

NOTES

(i) The fiscal year (FY) of the Government and its agencies ends on 31 December.

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


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CONTENTS

I. RATIONALE: SECTOR PERFORMANCE, PROBLEMS AND OPPORTUNITIES 5 A. Performance Indicators and Analysis 5 B. Analysis of Key Problems and Opportunities 6

II. THE PROPOSED PROJECT 10 A. Impact and Outcome 10 B. Outputs 11 C. Special Features 12 D. Cost Estimates 12 E. Financing Plan 15 F. Implementation Arrangements 16

III. PROJECT BENEFITS, IMPACTS AND RISKS 20 A. Economic Benefits 20 B. Social Dimensions and Poverty Reduction Impacts 21 C. Environmental Impacts and Mitigation Measures 23 D. Project Risks 24

IV. ASSURANCES 24


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Tables Table 1 Cost Estimates – Tranche 1 13

Table 2 Cost Estimates – Tranche 2 14

Table 3 Cost Estimates – MFF 14

Table 4 Financing Plans for MFF, Tranche 1 and Tranche 2 15

Table 5 Perceived Risks and Mitigation Measures 24

Maps Project Area

Appendices


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Annexes 1. Project Performance Monitoring

2. Project Implementation Plan and Financial Management Assessment

3. Technical and Design Summary

4. Comparison of HDM4 & IRMS

5. Assessment of Road Safety

6. Assessment of Vehicle Overloading

7. Poverty and Social Analysis

8. Draft Resettlement Framework

9a. Initial Environmental Examination

9b. Summary Initial Environmental Examination

10. Environmental Assessment and Review Framework

11. Economic Analysis

12. Generalized Scope of Consulting Services

13. Short Land Acquisition and Resettlement Plans and Due Diligence


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I. RATIONALE: SECTOR PERFORMANCE, PROBLEMS AND OPPORTUNITIES

A. Performance Indicators and Analysis

1. The Road Sector

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

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

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

4. Cargo transport by rail in Java and Sumatra has grown on average by about 6.3% during the period 2006-2008. During the same period passenger transport increased in the Jabotabek15

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


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region by about 10% per annum while growth in Java outside the Jabotabek are increased by about 16% per year.

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

2. Sector Policy Framework

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

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

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

3. Road Expenditure Management Systems

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

B. Analysis of Key Problems and Opportunities

1. Sector Problems, Causes and Impacts

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


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11. Access Constraints: In West Java and Banten provinces, the southern coastline is isolated from the northern prosperous areas by a range of mountains that can be accessed mainly by narrow provincial roads with restricted widths (5 m). There is a coastal road along parts of this but there is no continuous linkage to the central parts of Java. In East Java, there are few major towns along the southern coastline and as a result this area is relatively poorly developed and there is very little good road access through the coastal areas. In Kalimantan the remote areas are associated with those close to the international boundary with Malaysia where there are no through roads.

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

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

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

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

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

2. Road Connectivity and Poverty Reduction

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


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Kalimantan, West Java and West Kalimantan to 19-21.1% in the remaining Project provinces of Yogyakarta, Central and East Java.

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

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

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

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

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

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

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

16 ADB. 2000. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of Indonesia for the Road Rehabilitation Sector Project. Manila (Loan 1798-INO, for $190 million,

approved in December 2000). 17 ADB 2004c. Enhancing the Fight Against Poverty in Asia and the Pacific.


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25. Network extension projects provide improved access to markets that results in lower costs of transport and opportunities to develop unused resources (agriculture, forest products) in the remote regions. The reduced costs result in higher farm gate prices for crops and lower prices for consumer products. The improved access improves transport facilities and removes the constraint that saturates the market in the remote area. Further economic development will be stimulated by these changes and poverty will be reduced in the region. Improved access also increases access to health and education facilities.

3. Government and ADB Transport Sector Strategies

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

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

• MPW decree No. : 369/KPTS/M/2005 dated 18 April 2005 about National Road Network Master Plan with Annex II.13 including a map of the south corridor as strategic national road network and

• MPW decree No. : 280/KPTS/M/2006 about amendment of MPW decree No. : 369/KPTS/M/2005 about National Road Network Master Plan dated 24 July 2006.

28. These strategies are strongly supported by ADB, whose commitment to rural transport infrastructure and services has been reinforced by evidence that improved accessibility and more reliable and efficient services are critical prerequisites for rural poverty reduction.

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

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

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

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


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investment in the palm oil plantation industry clearly shows the level of cooperation and the intensity of capital movement.

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

4. Road Sector Assistance and Lessons Learned

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

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

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

II. THE PROPOSED PROJECT

A. Impact and Outcome

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


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B. Outputs

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

1. Civil Works: Road and Bridge Rehabilitation

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

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

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

2. Support to Road Sector Policies

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

3. Capacity Building and Training

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

43. In addition, to improve the capacity of road safety engineers, a series of road safety initiatives are planned including a) development of a road safety audit manual for Indonesia b) a series of introductory workshops on road safety issues and c) a number of pilot road safety audits. In addition, train the trainer programs are planned for traffic police and a public awareness campaign. Participants at the NGO meeting, criticized the proposed project component of Capacity Building and Training by upgrading qualifications to master and doctorate level for Directorate General of Highway staffs. They stated that as this is a loan that would be paid by people, it is


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inappropriate if those staffs take the advantage for their personal benefit by upgrading the education level. This will need to be handled carefully by the government who have made concessions to this by proposing to choose people from each of the provinces being affected by the project.

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

C. Special Features

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

D. Cost Estimates

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

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


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Table 1 Cost Estimates – Tranche 1


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Table 2 Cost Estimates – Tranche 2

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

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

Table 3 Cost Estimates – MFF


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E. Financing Plan

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

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

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

Table 4 Financing Plans for MFF, Tranche 1 and Tranche 2


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F. Implementation Arrangements

1. Project Management

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

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

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

2. Project Readiness

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

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

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


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3. Implementation Schedule

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

4. Procurement

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

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

5. Consulting Services

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

6. Disbursement Arrangements

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

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


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

7. Accounting, Auditing and Reporting

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

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

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

8. Monitoring and Evaluation of Project Performance and Benefits

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


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

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

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

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

9. Project Review

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

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

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


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10. Anticorruption Measures

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

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

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

III. PROJECT BENEFITS, IMPACTS AND RISKS

A. Economic Benefits

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

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


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

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

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

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

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

B. Social Dimensions and Poverty Reduction Impacts

1. Poverty Reduction

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


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

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

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

2. Safety, Health and Gender Concerns

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

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

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

19 Although, West Java and Yogyakarta road improvements do not begin until Tranche 2, it is highly recommended that

the HIV/AIDS and Human Trafficking Prevention Plan begin as early as possible.


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3. Involuntary Resettlement

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

4. Indigenous Peoples’ Policy

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

C. Environmental Impacts and Mitigation Measures

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

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

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


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

D. Project Risks

97. The main risks to the Project and the measures taken to minimize them are presented in Table 5.

Table 5 Perceived Risks and Mitigation Measures

Project Risk Measures Taken to Minimize Risk Government fails to provide counterpart Funds

Related covenant

Bid costs are higher than estimates The preliminary designs for first-year program to be reviewed during detailed design before contract bidding

DGH fails to maintain the project roads once rehabilitated

Consultants will be appointed to help strengthen maintenance planning, funding, and implementation. The Government will assure availability of adequate funds.

Risk of spread of STDs and HIV/AIDS Contractors will be required to adopt strict controls over workers’ conduct. Workers will be required to attend awareness campaigns.

Environmental damage during or after construction

Contractors will be required to adopt environmental protection and comply with mitigation measures.

Project is not implemented in the projected 84 months

Consultant services and civil works contracts are procured in advance. Close monitoring and accountability measures Included. Ensure any LARAP studies are implemented.

Corruption in project implementation, particularly in procurement

Implementation arrangements designed in compliance with the ADB anti corruption guidelines

AIDS = acquired immunodeficiency syndrome, DGH = Directorate General of Highway, HIV = human immunodeficiency virus, STD = sexually transmitted disease, TA = technical assistance.

Source: Asian Development Bank. IV. ASSURANCES

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

(i) The Government will ensure that implementation arrangements of the Project, the provision of funds from loan proceeds, and the corresponding counterpart government contributions necessary for financing project activities are provided in a timely fashion throughout project implementation, including required expenditures for operation and management of weighbridges, in the manner agreed with ADB.

(ii) The Government and DGH will ensure that the fiduciary control, fraud, and anticorruption action plan is fully implemented as agreed.

(iii) The Government will ensure that the funds are available for the pre-loan preparation of the detailed design packages for Tranche 1 subprojects. They will also ensure that appropriate consultants are contracted to perform the detailed design works according to the Bina Marga standards. The ADB have agreed to supply through the RR2P an international independent audit facility to review designs and provide input.

(iv) The Government, through DGH, will establish baseline values at least 2 months prior to commencement of civil works in project provinces, for performance and benefit monitoring purposes, as to be agreed with ADB, and monitoring indicators will be measured each year and for 3 years after project completion.

(v) The Government will submit quarterly project progress reports and progress reports to ADB periodically on the revised PSAP and consult with ADB on further road sector policy measures, if and when available.


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(vi) The Government will keep ADB informed of all transport sector and road subsector studies undertaken in Indonesia and will provide ADB with copies of all available documents relevant to such studies, including consultants’ reports, and will ensure that ADB has the opportunity to comment on the recommendations contained therein.

(vii) The Government will assure ADB of availability of funding for regular maintenance and implementation, as required, of the national roads rehabilitated under the Project. Furthermore, DGH will ensure that annual road maintenance plans are prepared for the improved roads on the basis of the agreed-upon maintenance standards, traffic volumes, and assessment of needs.

(viii) DGH will ensure that road safety measures identified as needed during project preparation—including guardrails, road markings, and warning signs—and staff training in road safety and traffic engineering are incorporated in final designs for project-funded civil works and are implemented in accordance with designs.

(ix) The Government will ensure that all Project activities will comply with Government laws and regulations governing environmental and social impact assessment, ADB’s Environment Policy (2002) and all actions identified on SIEE and IEE will be implemented. The contract documents for all civil works under the Project will include specific measures as indicated in the SIEE and IEEs to mitigate negative environmental impacts caused by Project activities. Adequate environmental management plan and environmental monitoring plan will be implemented. The contractors engaged under the civil works contracts will be required to comply strictly with all environmental impact mitigation requirements to be set out in the contract documents, and the consultants engaged for construction supervision to monitor closely the compliance by the contractors with the environmental impact mitigation requirements. Semi-annual reports on implementation of the Environmental Monitoring Program as stated in the IEEs will be submitted to ADB.

(x) The Government will ensure that the civil works contractors comply with all applicable laws related to gender, labor, and workers’ safety, including ensuring that women are given equal pay for work that is equal to men.

(xi) DGH will ensure that civil works contracts will include appropriate clauses requiring contractors to allow their workers to attend planned campaigns on STDs and HIV/AIDS during construction and will maintain adequate sanitation and working conditions.

(xii) DGH will ensure that adequate drainage of project roadways is provided by appropriate Design and implementation of cross-falls, shoulder grading, crossdrains, culverts, and side-ditches.

(xiii) In the event land acquisition or resettlement is needed, the Government will ensure that a Resettlement Plan will be prepared for approval by ADB. The Government will ensure that all land acquisition and resettlement activities will be completed prior to the award of a civil works contract. All land acquisition and resettlement activities will be carried out in accordance with the Compensation Policy Framework and Procedural Guidelines (CPFPG) developed by DGH, the Government’s laws, regulations, and procedures, and ADB’s requirements as defined in ADB’s Policy on Involuntary Resettlement. In case of discrepancies between the Government’s laws, regulations, and procedures, and ADB’s requirements, DGH and ADB will agree upon a mutually acceptable resolution.

(xiv) The Government will ensure that, to the extent that any indigenous peoples are likely to be affected under the Project, the measures set forth in the CPFPG, the Government’s laws, regulations, and procedures, and ADB’s requirements as defined in ADB’s Policy on Indigenous Peoples shall apply. In case of discrepancies between the Government’s laws, regulations, and procedures, and ADB’s requirements, or to the extent there is an omission in CPFPG or a discrepancy with the ADB’s requirements, then DGH and ADB will agree upon a mutually acceptable resolution.


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Technical Assistance Consultant’s Report - Analisis Mengenai Dampak Lingkungan (see EIA) AP -...

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Transcript of Technical Assistance Consultant’s Report - Analisis Mengenai Dampak Lingkungan (see EIA) AP -...