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The World Bank

Report No. 13776-IND

STAFF APPRAISAL REPORT

INDONESIA

VILLAGE INFRASTRUCTURE PROJECT

FOR JAVA

APRIL 26, 1995

Infrastructure Operations DivisionCountry Department IIIEast Asia & Pacific Region

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CURRENCY EQUIVALENTS(As of January 1995)

Currency unit = Indonesian Rupiah (Rp)$1.00 = Rp 2,200

Rp 1 million = $454

WEIGHTS AND MEASURES

Metric Units

FISCAL YEAR

Government of Indonesia: April I - March 31

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

APBD 11 - Annual local government development budgetAPBN - Annual central government development budgetBAPPENAS - National Development Planning AgencyBAPPEDA I/II - Provincial/District Development Planning AgencyBPKP - Central Audit BureauBRI - Bank Rakyat IndonesiaBupati - Head of KabupatenCabang - BranchCamat - Head of KecamatanCAS - Country Assistance StrategyDATI 1/11 - Provincial/District level governmentDGBM - Directorate General Bina Marga (Roads), MPWDGCK - Directorate General Cipta Karya (Human Settlements), MPWDGB - Directorate General of Budget, MOFDPUK - Kabupaten Department of Public WorksDIP/DIPDA - Central/regional project budgetGOI - Government of IndonesiaINPRES - Presidential Instruction, including a class of GOI grantsIDT - Inpres Desa Tertinggal (Program for Villages left behind)ILO - International Labor OrganizationKabupaten - District (Level 11)Kecamatan - Kabupaten administrative subdistrictKepala desa - Elected head of village and of LKMDKPKN - Provincial office of National TreasuryLKMD - Village community groupMoHA - Ministry of Home AffairsMOF - Ministry of FinanceMPW - Ministry of Public WorksNGO - Non-governmental organizationOECF - Overseas Economic Cooperation FundPimpro - Project Manager from DPUKPMD - Directorate General of Village Community Development (MoHA)PMU - Project Management UnitPODES - Village surveyRepelita - Five-year Development PlanSPABP - Special grant fund channel from Central to Local GovernmentSOE - Statement of expenditureSUSENAS - National socio-economic survey

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INDONESIA

VILLAGE INFRASTRUCTURE PROJECT FOR JAVA

Loan and Project Sunumary

Borrower: The Republic of Indonesia

Beneficiaries: 1,200 poor villages on Java with some 3 million people

Amount: $72.5 million equivalent

Terms: Repayable in 20 years including five years of grace, at the Bank'sstandard variable interest rate.

Project Objectivesand Description: The proposed project aims at providing public infrastructure and

employment in 1,200 villages, the bottom 20% of the poorest or 6%of all rural villages on Java. It includes a 2-3 year pilot program toincrease government decentralization, transparency and villageparticipation. Main features are: a) empowering villagers to decide,with some economic criteria, priority uses of the village grant under theproject; b) creation of jobs paid in cash for poor villagers, especiallyin periods of underemployment; c) development of skills forconstructing small public works--engineering assistance would beprovided to villagers to help with subproject design and achieving goodquality works; d) channelling of village grants through subdistrictbranches of Bank Rakyat Indonesia; e) mobilization of localcontributions for the works; and f) a monitoring program to reviewprogress while the project is underway and overall results, expost.(OECF is helping finance an infrastructure project for poor villages off-Java).

Benefits and Risks: The project villages comprise on average more than 2600 persons,some 3 million in total. With incomes around $1 per day, benefitsfrom the creation of jobs and monetary liquidity are important andcould lead to higher standards of living; some 2,000,000 job-monthsmight be created and the project could set a precedent for more laborintensive works in future public programs. Economic returns to theproject infrastructure are expected to be high: currently many poorvillages are cut-off during the rainy season, making access to services,markets and jobs difficult, while they lack water in the dry season; theproject would help overcome these constraints. Provision of othersmall infrastructures chosen by the villagers would also have highreturns given that to be chosen the works have priority. A risk is alower absorptive capacity than expected, that could delay project

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implementation; for this event the project includes contingencies forextending technical assistance services. Another risk is impropermaintenance of assets to be created; under the project arrangementswould be agreed for subsequent maintenance, which should be a primeconcern to villagers for sustainability of benefits from theinfrastructures. A third risk is diversion of funds, but it should be lowas several layers of agencies are avoided and various monitoringsystems are introduced in the project.

Estimated Costs:

Description Local Foreign Total(US$ million)

Goods, Works and Services 59.0 6.5 65.5TA Implementation Support 10.0 1.0 11.0Increased Administration 3.3 - 3.3

Subtotal 72.3 7.5 79.8

Contingencies 3.8 0.2 4.0

Total 76.1 7.7 83.8

Financing Plan: Local Foreign Total %-------------------------- US$ million ---------------

GOI 11.3 - 11.3 13.5IBRD 64.8 7.7 72.5 86.5

76.1 7.7 83.8 100.0

Disbursements:-------------------------- US$ million -------------------

IBRD Fiscal Year 1996 1997 1998 1999

Annual 30 35 5 2.5Cumulative 30 65 70 72.5

Poverty Category: Program of targeted interventions for poor villages on Java.

Estimated ERR: Above 20% ERR, on account of the infrastructure deficiencies theproject would help alleviate.

Map: IBRD 26797: Village Clusters in the First Year Program.

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INDONESIAVILLAGE INFRASTRUCTURE PROJECT for JAVA

STAFF APPRAISAL REPORT

TABLE OF CONTENTS

1. Project Background ....................... ....................... IA. Poverty Trends ............................................. 1B. Past and Ongoing Poverty Related Programs ........................... 1C. Rural Infrastructure .......................................... 3D. Lessons Learned in Previous Bank Operations .......................... 4E. Bank Strategy for Poverty Reduction ............................... 6

2. The Project .................................... 6A. Project Origin and Formulation ................................... 6B. Project Objectives ........................................... 7C. Project Description .......................................... 7D. Project Costs and Financing ..................................... 11

3. Project Implementation .................... 11....................... 1A. Project Coordination and Monitoring ............................... 11B. Implementation Schedule ....................................... 12C. Implementation of Works ...................................... 12D. Procurement .............................................. 13E. Disbursements ............................................. 14F. Project Accounts, Reports and Audits ............................... 16G. Project Monitoring and Bank Supervision ............................ 17H. Land Acquisition, Resettlement and Compensation ....................... 171. Environmental Impacts ......................................... 18

4. Project Justification and Risks ...... ............. .................... 18A. Justification ............................................... 18B. Risks ................................................... 20

5. Agreements Reached and Recommendation ............................. 20

Annexes1. Some Characteristics of Java Provinces2. Villages Selected for First Year Program3. Grant Authorization, Funds and Reporting Flows4. Government Action Plan5. Optimal Yearly Schedule6. Contract Forms7. Performance Indicators8. Supervision Plan9. Guidelines for Compensation for Land or Asset Acquisition10. Sample Economic Returns11. Documents in Project File

Map 26797 Village Clusters in First Year Program

The report is based on the findings of a preparation mission in October 1994, and an appraisal missionin January 1995. The appraisal mission comprised Frida Johansen (Mission Leader) and Jacques Tollie(Engineer); ESIU provided support. Messrs. J.M. Lantran and E. Jimenez were peer reviewers. Mr.A. Khanna, Chief EA31N and Ms. M. Haug, Director EA3, have endorsed the project.

INDONESIA

VILLAGE INFRASTRUCTURE PROJECT FOR JAVA

1. PROJECT BACKGROUND

A. POVERTY TRENDS

1.1 Indonesia has been successful in reducing the incidence of absolute poverty. The percentageof the population living at or below the absolute poverty level was reduced from some 40% in 1976 tosome 15% in 1990. However, in view of the large population, about 185 million, the number of absolutepoor remains high: some 27 million people. These estimates result with an absolute poverty line definedas enabling personal intakes of 2100 calories per day and minimum non-food necessities. Povertyincidence is sensitive to the definition used, as many people still are just above the absolute line andwould be categorized as poor with less stringent standards. (Besides, there are many difficulties inmeasuring poverty--identifying and imputing values to non-traded goods, considering price leveldifferentials across locations; identifying differing needs by location, type of employment, age, publicinfrastructure availability, etc.; identifying pockets of poverty not apparent to outsiders from statisticalaverages for larger areas, and so on.) The average disposable household income is only about a dollarper day per person, even though the average GNP per capita has steadily grown to about $730 equivalent.

1.2 There is no doubt that poverty is an important rural problem. Poverty reduction has beenmost remarkable in rural areas, but still, some 18 million poor remain in rural areas, many on marginallands, uphill, water scarce or remote areas, or fishing villages, or areas too densely populated to enablea living from the resulting small farms, while alternative sources of income are still scant. Rapidurbanization has absorbed many rural poor and even so the estimated number of urban poor has decreasedsomewhat, to some 9 million in 1990. These numbers reflect a relatively similar urban and rural absolutepoverty incidence; other data, such as on infant mortality, suggest that the rural poverty incidence maybe higher and the urban, lower, emphasizing the problem in rural areas.

1.3 Java, with a population of 107 million of which only some 36% in urban areas (in 1990),has one of the highest population densities in the world, of about 8 persons per hectare (Java has some55% of Indonesia's population on only some 7% of the country's land area). In line with its share ofthe population, Java has the most poor, some 55% of the total, more than 15 million (of the total numberof poor Sumatra comprises 19 % or some 5 million, Kalimantan 8 %, Sulawesi 5 %, Bali 1 %, and the otherislands, 1-3%; these shares are lower even though poverty incidences are higher in some outer islandprovinces than on Java). Of Java's absolute poor, some 9 million live in rural villages.

1.4 The Bank has prepared two reviews of the poverty situation in Indonesia: "Strategy for aSustained Reduction in Poverty", in 1990, and "Public Expenditures, Prices and the Poor", in 1993. Thelatter report has been an input to the Government's current poverty programs, on which this proposedproject also builds on.

B. PAST AND ONGOING POVERTY RELATED PROGRAMS

1.5 No doubt steady economic growth, of 6% per year over more than a decade by now, hasbeen a main contributor to poverty reduction in Indonesia. In addition to growth, government goalsincluded--and continue to include--stability and equity. As part of its policy the Government emphasizedregional development programs, with focus on agriculture and food self-sufficiency; socially orientedprograms, such as universal primary education, family planning, community health and nutrition; publicinfrastructure development, including water supply, roads, electricity; village development programs,credit programs, and more. The programs aimed at providing basic levels of services for all, and were

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funded yearly through the central government budgets; international agencies provided assistance to someof the programs. Given the overall low income levels prevailing, the Government did not generally tryto "target" the poor; also, given the overall low technical skills, the Government kept most planning andimplementation in central agencies. While steps are being taken to improve planning and implementationof supply driven, basic standards, types of public programs that continue to be much needed, also, asboth incomes and income differentials have increased, new programs are increasingly targeted--such asurban poverty, kampung improvement programs (KIP), the integrated area development schemes (PKT')--and increasingly developed and implemented with local level agencies and community participation.Recent improvements in the national household socioeconomic survey (SUSENAS), incorporatingindicators of access to social services as well as consumption levels and representative at district level--earlier smaller sampling made results representative only at provincial level--will allow better design andmonitoring of targeted programs.

1.6 The Government has made further poverty reduction one of its main objectives in the FiveYear Plan (Repelita VI) that started in April 1994. It is concerned that the number of poor remains largeand wants to accelerate the process of reducing poverty; it aims at decreasing poverty incidence to 6%,less than 15 million persons, by the year 2000. The instruments foreseen to achieve this objective arean outward oriented, labor-intensive based economic growth (expected to generate more than 2 millionnew jobs per year), human resource development (especially expanded education and health programs),and a new program targeted to poor villages (IDT, literally, villages left behind) as it fears that traditionalpublic programs may continue to bypass those most in need and are taking too long in beingimplemented. and then, not always to desired standards and cost levels.

1.7 The Government launched its new IDT program, the Inpres Desa Tertinggal, in April 1994.It is funded domestically with $200 million equivalent per year for three years. This pilot program isinnovative in many ways. It is targeted to more than 20,000 poor villages (see para. 1.8) that eachreceived some $10,000 equivalent seed capital, for the poorer villagers. The poor get access to workingcapital, at low cost and in a simple and transparent way. Standard government agencies are bypassed but"facilitators" (community workers) paid by the Government are available to assist villagers inunderstanding the program, that has been widely publicised, and in defining "projects". Community self-help groups (POKMAS) including women's groups (PKK) are central to the IDT process. The villagersagree on who should be the beneficiaries of the funds, based on (low) incomes and proposed (productive)uses of the funds; the beneficiaries have to repay the "village", as the funds are intended to become arevolving fund for others to use subsequently. The subdistrict bank unit receives the grant from theGovernment in a village account and disburses against a minimum of documentation to the village headand the beneficiaries, and forwards records to the Government. The village heads also have to keeprecords of beneficiaries and activities pursued, repayments, etc., records that are consolidated at theprovincial level and forwarded to Jakarta. IDT results so far are positive. Selected villagers surveyedsay they value the initiative and villages not included in the program question the selection method.Funds are being used carefully--some villagers on Java bought cattle; the designated beneficiaries are ableto pay for the animal some months later by selling the offspring. Others bought sewing machines,weaving materials, and so on. Some misappropriations of funds by officials were reported, some of themvia the P.O. Complaints Box 5000, that is well known to the Indonesian population. Unusually strongaction--dismissal--was taken against identified offenders, that should discourage improper conduct.

1.8 The selection of villages for the 1994 IDT program was made by the Planning Ministry(BAPPENAS) and the Ministry of Home Affairs (MoHA) based on the 1993 PODES socio-economic

1 GOI's area development scheme (PKT) was undertaken during 1989-93 and covered for one year each a total of7,900 villages, nmainly for public infrastructure provision with village participation.

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survey by the Bureau of Statistics, that considered three basic indicators: village facilities and potential(10 variables), housing and the environment (8 variables) and population characteristics (9 variables).Of the 65,554 villages in Indonesia, 20,633 had at least 2 of the 3 indicators below the set povertythreshold and were thus defined as "poor". The large majority of these poor villages, 19,625, is "rural",and 14,117 of the rural poor villages are outside Java-Bali. The population of the poor villages is 33million, of which 18 million (55%) are in Java-Bali as the village size there (average 3,000 persons) is3 times the average village size elsewhere; the percentage is in line with the proportion of the poor inJava according to surveys of household expenditure (SUSENAS). The initial village selection had someflaws for identifying consumption levels--for instance, too much weight was given to infrastructuredeficiencies that do not always reflect lowest consumption levels--and thus the selection for the 1995program gave more prominence to expenditure levels; furthermore, villages in the 1994 program withless than 500 residents will not receive further IDT allocations. As a result almost a third of the villagesselected changed for the 1995 program.

1.9 Central government transfers to local levels will continue to be important for equityobjectives, because the central government has most tax bases (oil, gas, import duties, etc.). Mosttransfer categories are based on equal amounts per capita, per jurisdiction and per area size of thejurisdictions. Many of the transfers are earmarked for specific uses, such as civil service salaries, butone of Repelita VI's aims is furthering decentralization of functions, increasing participation in decisionmaking at local levels, and increasing targeting of programs by type and by region. As an example, asof 1994 the INPRES for roads was discontinued and the amount was included in the INPRES block grantthat provides, rightly, increased flexibility in the use of funds at the local level. Decentralization willcontinue as local agencies become more able; the central agencies are overwhelmed by the workloadsimposed by growing budgets and complexity that often result in delaying program implementationunnecessarily. The FY1994/95 budget for regional development was Rp.5,340 billion, comprisingRp.423 billion in transfers to villages (only Rp.6 million per village), transfers to kabupatens of Rp.2,418billion (of which Rp.968 billion for roads), transfers to provinces of Rp.1,219 billion, subsidies toprimary schools of Rp.498 billion, subsidies to health centers of Rp.393 billion, and the IDT programwith Rp.389 billion. At the same time, local revenue efforts are promoted as local needs exceed availablebudgets.

1.10 Given some evidence that incomes in rural areas are negatively affected by regulations andpractices restricting local trade and transport, the Government also endeavors to reduce such non-physicalrestrictions. In the past, Government reform programs have tended to focus on external trade or centrallyvisible constraints and less on what may seem smaller local level impediments, that however can havea significant impact on farmgate price levels. Financing was made available under the TechnicalAssistance Project (Loan 3385-IND) to identify non-infrastructure constraints to trade and transport andhelp define an improvement action program for the rural areas. Study results were taken into accountfor preparing a Government Action Plan, intended to reduce levies imposed on transporters at the districtlevel and to provide more information on producer prices to farmers (Annex 4). As part of itsdecentralization policy, the Government proposes to implement the Action Plan in parallel to the proposedproject.

C. RuRAL INFRASTRUCTURE

1.11 The Government has concentrated investment on infrastructure in projects of national,provincial and district level importance. Projects at these levels usually have a large number ofbeneficiaries and high economic returns. In the case of roads, such projects are necessary to improveor create basic networks that carry high traffic volumes, and thus normally have priority over subdistrictor village access roads. As a result the road network currently comprises some 260,000 km of whichsome 181,000 km of kabupaten roads--but access roads are not well developed, and given heavy rains

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and difficult terrain and clayish soils in many locations, many villages are cut off during the rainy season.Extending the road network to provide all weather though low standard access to villages is now apriority, but because of the large number of villages it is costly even if improvements are achieved atlowest possible costs. The road subsector already comprises some 20% of the development budget (someRp.5 trillion in FY95, almost as much as the whole regional development budget) and some reallocationsmay be warranted.

1.12 Infrastructure needs at the subdistrict and village level have been addressed with smallergovernment programs and with self-help. Since Pelita IV, the Government has classified villages in 3categories for assistance: the poorest, to which both housing and public infrastructure assistance aregiven; villages with potential, such as rural growth centers that need ad-hoc programs, and villagesalready developing, for which only housing assistance is provided. The Ministry of Home Affairs (anduntil 1993 also the Ministry of Public Works) helps implement the programs. By now about half thevillages have been provided some assistance; some 3,000/4,000 villages selected at the kabupaten levelare assisted every year. There have also been special programs such as the integrated area developmentscheme (mentioned in para. 1.5). Currently INPRES provides sorne Rp.50 million per kabupaten forvillage infrastructure. Most work is undertaken by the villagers, without pay or just enough to coversome training and food costs, so that more funds are available to purchase inputs, a site engineer, oftena consultant, is assigned for 2-3 months to a village to help with implementation, if needed. The Army's"corps of engineers" equivalent has also been active in improving small village infrastructures. Oftenvillagers improve infrastructure by themselves--under the "gotong royong" system all villagers mobilizeone day to accomplish a chosen task, or each villager is assigned responsibility for completing by acertain date a given sub-task, such as improvement of a small road section. But villagers usually cannotafford to buy any materials, such as stone, so that despite their efforts results are often of low standardsand short-lived. Thus, infrastructure service levels remain low. A 1994 study sponsored by OECFestimated that providing for basic infrastructure "needs" (access roads, piers, drinking water, sanitation)in all the poor Indonesian villages, at Ministry of Public Works unit costs, would cost Rp.2,757 billion.

1.13 Needs on Java are considerable. Java has 18,194 villages of which some 6,000 ruralvillages were classified by BPS in 1993 as "left behind", partly due to infrastructure deficiencies--inroads, health facilities, schools, telecommunications, water supply, sanitation facilities, markets, wastedisposal systems. The above mentioned 1994 OECF-financed study estimated that for Java some Rp.312billion were needed to provide facilities to 4,300 poor villages--or Rp. 174 billion for the poorest 765villages. The report indicates that some 4,200 poor villages need improved access roads, some 2 km onaverage per village, and that some 500 villages do not have clean drinking water. The cost of the neededroads, water, piers and sanitation facilities was estimated at some $33,000 average equivalent per village,based on MPW unit costs (average unit costs were $16,000 per kilometer of road (including bridgeneeds), $23,000 per water supply scheme and $3,000 per pier). However, the 765 poorest villages havecostlier needs, being less endowed in infrastructure and normally located in areas of more difficult access;their requirements were estimated at some $110,000 average equivalent per village--for an average 4 kmaccess road with bridge(s); a water scheme to tap rain, surface or ground water; and 300 piers, on riversor seashores, in 200 of the villages. (Annex 1, Tables 1, 2, 3). Even these needs, prior to including theneeds for other types of infrastructure, are unlikely to be met with current budgets (para. 1.9); so farfunds available for localized needs have not increased despite some increased decentralization. However,foreign agencies are assisting with several programs.

D. LESSONS LEARNED IN BANK OPERATIONS

1.14 Many ongoing Bank projects in Indonesia have components targeted to the poor--health,nutrition and family planning; education; agriculture; rural water supply; kabupaten roads; urban projects.Most of these projects are implemented by national government agencies and a few district level agencies

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following standard budgetary processes, overheads and budget cycles. Implementation takes normally5 or more years; the experience from several projects was reviewed for the proposed project: (a) theBank's 3 ongoing kabupaten road projects, each covering different areas of Indonesia (on Java, only WestJava), essentially seek to upgrade some 20 km of roads per kabupaten per year and to improve overallroad maintenance. The implementation record is good in terms of number of kilometers improved, butis behind expectations in terms of construction quality, unit costs (especially in Eastern Indonesia) andinstitutional development. The experience of a labor intensive pilot scheme being implemented on Javawith assistance from ILO under one of the kabupaten road projects was useful for the proposed project;(b) the Yogyakarta Upland Area Development Project (Loan 3305-IND, 1992), aims at improving theincomes and living standards of upland residents, mainly farmers, on a sustainable basis through betterresource management. Of interest to this project, is that the Yogyakarta project is also of a participatorynature and includes provision of infrastructure, and that the mid-term review in June 1994 revealed roadand bridge construction to be the most successful component, with physical targets achieved or exceededthrough considerable local contributions that stretched the project funds, even though cost-effectivenesswas not considered as good as achievable; (c) under the Water Supply and Sanitation for Low IncomeCommunities Project (Loan 3629-IND, 1993) communities should participate in deciding the type ofservice level they want within a village allocation, and have collected contributions to upgrade standardsof works the allocation could finance; however, the project had a slow start, and it is too early to judgeresults.

1.15 Experience with locally managed small irrigation works on Java is considered to be good:there was grassroot participation in planning, agreement on work details and schedule, and beneficiaryvillagers were usually hired as wage labor for construction. Works were undertaken mainly by smallcontractors; contractor capability for small works is good and competitive. Some works were constructedby villagers themselves, based on prevailing unit rates for construction items (not on a wage basis). Thedesign was handled entirely by provincial based consultants while overall supervision was by theprovincial level public agency. The irrigation schemes cost between $10,000 and $60,000 equivalent andwere on an annual construction basis. The experience in constructing village roads under ruraldevelopment projects and schools (with INPRES) is similar to that with irrigation schemes. Theseexperiences were good examples for the proposed project. The kampung improvement program is similarto the proposed project in providing small scale infrastructures and including poverty reduction objectives,but it benefits urban neighborhoods rather than rural villages; the program was already successful priorto Bank involvement and the Bank's various KIP projects are considered to provide an example of bestpractice.

1.16 The experience under poverty focused projects in other countries was also reviewed: suchas that for Sri Lanka and the Social Fund for Guatemala, and the successful Agetip program in Africa--under this program a non-profit organization employs small contractors to carry out publicly financedworks.

1.17 A general lesson is that for poverty reduction programs, involvement of the intendedbeneficiaries in program design and implementation, and contributions in kind or cash, are essential formore relevant subproject choices and sustainability. Also, multilayered top-down processes andcentralized approval requirements considerably slow processes down and add to overhead costs; however,central criteria and guidelines are useful, as is the availability of technical expertise and advise at the locallevel to improve understanding of choices and quality of implementation. The period of starting upactivities tends to be longer than planned, and programs need some flexibility in implementation time--unless the opportunity cost of their time is nil, people generally need time to choose and commit to a newactivity, and need some certainty about the sustainability of the initiative. Starting small and expandingprograms as demand for them increases at each location seems a safe way to proceed.

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E. BANK STRATEGY FOR POVERTY REDUCTION

1.18 The Bank endorses the Government's strategy for poverty reduction in Indonesia (para. 1.6).The proposed project is consistent with the 1995 Country Assistance Strategy (CAS) that was discussedby the Board March 21, 1995. Poverty reduction forms the central basis of almost two-thirds of theBank's lending program through efforts to improve the quality of basic social services, infrastructureprojects for roads, power transmission and distribution, water supply, agricultural support services andresearch. In order to target the projects better towards the poor, and to increase participation of the poorin the design and implementation of these projects, the Bank is increasingly moving away from large,national (in coverage), and centrally-managed projects to a multiplicity of smaller, regional and morelocally-managed projects, such as this proposed one.

1.19 In line with the 1994 CAS and a Government request, mid-1994 the World Bank madefinancing available under an existing Technical Assistance Project (Loan 3385-IND) to quickly helpBAPPENAS, the Ministry of Home Affairs and the Bureau of Statistics improve methodologies andprocedures to better select villages for the 1995 and 1996 IDT programs, and to develop systems tomonitor/supervise/evaluate the pilot towards improving future programs. Terms of reference for thetechnical assistance were also agreed. However, recruitment of experts was delayed and the Govermmentdid itself further work to improve village selection (para. 1.8). Furthermore, following a Bank request,Japan's Policy and Human Resources Development Fund approved in January 1995 a $2 millionequivalent grant for BAPPENAS to monitor/supervise/evaluate the IDT pilot during 1995-1997, usingthe systems to be developed under the Bank financed study. Experts to help design the monitoring systemstarted their assignment early April 1995.

2. THE PROJECT

A. PROJECT ORIGIN AND FORMULATION

2.1 The 1993 PODES survey helped identify poor villages for the 1994 IDT program; poorinfrastructure weighed heavily in the selection (para. 1.8). Early 1994 BAPPENAS/OECF engagedconsultants (Japan Development Institute and PT Intersys Kelola Maju) to survey IDT villages andestimate needs for access roads, piers, and drinking water and sanitation, both in physical terms and cost.On the basis of the consultant report (para. 1.12), OECF agreed to support an infrastructure project forselected poor villages off Java and Bali--implementation of the project started February 1995.

2.2 The Bank agreed mid-1994 to assist with a pilot village infrastructure project for Java,addressed to villages relatively underendowed with small infrastructures such as water supply, accessroads, drainage, bridges and jetties, markets, etc. Experience under Bank financed projects in Indonesiaand other countries, information gathered in visits to poor villages, the Javanese traditional ways andstrong grassroot institutions, were taken into account in the design of the proposed project; the experienceunder the Government's self-financed poverty and infrastructure programs was essential for the adoptionof the project features that are innovative for the Bank (para.2.6). The project was developed jointly bythe Bank and the Government. BAPPENAS, in particular its Bureau of Regional District and Rural.Development and the IDT Secretariat, suggested the basic approach and coordinated interaction with otherrelevant Ministries, in particular the Directorate General of Regional Development (Bangda) and theDirectorate General of Village Community Development (PMD) in the Ministry of Home Affairs; theDirectorate General of Human Settlements (Cipta Karya) and of Roads (Bina Marga) in the Ministry ofPublic Works; and the Ministry of Finance.

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2.3 The Government gives high priority to the project as a complement to the IDT program--indeed sees it as part of the IDT program. The project is expected to enhance the value of the IDT seedcapital villagers receive for productive purposes, and implementation will follow the decentralized IDTapproach--villagers are to select and implement the works that they consider to be of highest priority.In December 1994 the Government requested the Bank appraisal to take place as early as possible.

B. PROJECT OBJECTIVES

2.4 The proposed project aims at reducing poverty, providing village infrastructure andemployment paid in cash, and increasing decentralization, in line with the Government objectives. Morespecifically, the project is a pilot to test in 6% of the Javanese villages--the bottom 20% of the poorestvillages on Java--the following main objectives, with a view of applying lessons learned to futureprograms:

a) empowering villagers to decide priority uses of the grant funds available under the project fortheir village, and to implement the works;

b) providing public infrastructure needed in poor villages;

c) creating jobs paid in cash for underemployed villagers to construct the public works, especiallyin dry seasons--though fishing villages may differ from farming villages in terms of the best seasonfor works;

d) mobilizing village contributions towards the agreed public works; and

e) supporting the Government's decentralization policies, including its Action Plan to reduce non-infrastructure constraints to trade and transport in the rural areas.

C. PROJECT DESCRIPTION

2.5 In order to reach the above objectives, the proposed pilot project comprises a 2-3 yearprogram to assist some 1200 poor rural villages on Java improve their living standards while buildingpublic works--such as access roads, bridges, water supply schemes, sanitation facilities, drainage,markets, piers or other small infrastructures. The project would help finance (a) village works andemployment, up to an agreed allocation per village, and (b) technical assistance/engineering services, tohelp with design and implementation of the schemes at the village level and, at the central level, for theProject Management Unit (PMU) to coordinate activities, supervise project implementation and monitorand evaluate its impact, and if necessary, to help implement its Action Plan (Annex 4).

2.6 The project is innovative for the Bank in the extent of its decentralization/grassrootapproach: the villages selected are to decide the works they want and that comply with a simple economiccriteria; technical assistance is to be provided directly to village groups; financing will be provideddirectly through subdistrict bank units and be delinked from late budget releases. The focus is also onemployment: villagers doing the work are to be paid cash in proportion to work progress and works areto be organized seasonally or as convenient for labor availability. (As mentioned earlier, normally Bankinfrastructure projects in Indonesia are implemented via government agencies because the works are ofa large scale and complex; and while so far the Government has had some village programs implementedat the subdistrict and even village level, generally district or higher level agencies are fully in charge andvillage laborers are often not paid in cash but expected to contribute "free" labor.) The project modalitiesare described below.

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2.7 Selection of poor villages. Among the 18,194 villages on Java, in 1993 the Governmentidentified 6039 villages "left behind", or poor, largely based on infrastructure deficiencies (having at least2 of 3 indicators below the PODES poverty threshold, para. 1.8). Helping so many villages at oncewould be too daunting a task. The project is to assist some 1200 rural villages, the bottom fifth of theidentified poor villages including the 765 villages categorized as "extremely poor". The first yearprogram includes 415 villages, 120 in West Java, 145 in Central Java, 30 in Yogyakarta and 120 in EastJava. The IDT Secretariat first identified the kabupatens (districts) in each province with the highestconcentration of poorest villages: 23 of the 82 kabupaten on Java include about half of the "extremelypoor" villages. Because of the need to limit the time field engineers spend travelling between villages,villages were then selected in clusters of 5, each cluster including at least 3 extremely poor villages. Allselected villages have populations of at least 700 persons, to justify the infrastructure and the grant level.Thereafter, the bupatis (District Heads) of the 23 selected kabupatens (districts), in consultation withcamats (Subdistrict Heads) confirmed the IDT Secretariat selection, except for some 15 villages for whichsubstitutes were proposed and retained in the final village list (Annex 1 and Map).

2.8 Some 800 other rural villages shall be in the second batch, 200 in West Java, 290 in CentralJava, 10 in Yogyakarta and 290 in East Java, bringing the total assisted in each province to the proportionof poor in each province. More kabupatens will be covered than in the first project year; nevertheless,some isolated extremely poor villages may not be included in the project if overhead costs of doing sowere too high; conversely, some poor villages but not in the lowest quintile, while not getting directassistance would however benefit from access roads and other schemes provided to the poorest adjacentvillages. The additional 800 villages shall have been identified from the established government list ofpoor villages and ratified by the respective Bupatis by September 1995. By December 1995 theGovernment and the Bank shall agree on the list of villages for the second year; if following review ofthe first year experience it is decided to proceed slower to ease implementation, then a shorter list willbe selected for assistance in 1996, leaving the remainder for assistance in 1997. An additional villagelist would also be agreed if the allocation (para. 2.10) turns out to exceed implementable needs of someof the 1200 selected poor villages.

2.9 Early April 1995 and February 1996 (and if the program is extended, February 1997), thecamats/bupatis have informed/will inform the kepala desas (elected Village Heads) of villages selectedand provide public information--a circular, radio announcements, etc.--with the rules to be followed underthe program, so that discussions in the villages selected gets underway.

2.10 Village grants. Each village allocation under the project should ideally reflect infrastructureneeds and labor availability. However, for simplicity and transparency, a standard Rp. 120 million (about$55,000 equivalent) grant per village is foreseen. This allocation is smaller than the needs of the"extremely poor" villages but larger than the average need because some of the project villages are not"extremely poor" (para. 1.13); because it is expected that most of the works, especially road works, willbe implemented with village labor and in surveys villagers have indicated willingness to work for someRp. 2,000/3,000 per day, a lower wage than that included in MPW cost estimates; and also because theabsorptive capacity to implement labor intensive works would be limited due to logistics involved. Ifsome village programs cost less than the allocation, then the balance would be available for more villagesthat would also be selected from the bottom of the government's list of poor villages (para. 2.8). Theallocations will be recorded in the kabupaten budgets but the funds will be channelled directly to villagesthrough the subdistrict units of Bank Rakyat Indonesia (BRI), outside the standard budget channel. Aflow chart is included in Annex 3.

2.11 Selection of public infrastructure subprojects. Kabupaten level staff of PMD (MoHA)routinely survey villages about their infrastructure needs and make the results available as a starting pointfor proposals by camats and in turn by bupatis (Bappeda II level) and by provincial governors (Bappeda

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I level), in the yearly bottom-up planning process for the budget. This planning consultation process willbe used by the project, but ending essentially at the camat level, in line with current decentralizationpolicies and to leave decision-making close to the village level for village works. The kepala desa headsthe LKMD (village community resilience institution) and leads discussion of village group representativesto agree on priorities; IDT program facilitators and other PMD local staff are available to help theprocess. Village proposals are submitted to the camat, for harmonization if necessary at the subdistrictlevel, and agreed programs are further checked to ensure that the proposals are not already covered inanother, funded program. Subprojects that would normally be included in standard budgets (INPRES)and normally larger than those envisaged here, should in principle not be financed under the project.Camats endorse the program, subject to a satisfactory technical review by the field engineers (see below);the approval should come no later than May 30, 1995 and March 30, 1996 (and 1997 if applicable).

2.12 Field engineers will assist the LKMDs. Field engineers (consultants) are to review thesubproject proposals approved by camats, starting as early as possible. They would discuss and makemodifications as may be needed for technical reasons, and either give their technical (final) approval, orif an alternative subproject were selected of a different type and cost estimate, then consult the camatagain about the alternative. The requirements for approval of a subproject by a field engineer areelaborated in the Project Manual; they are listed below and the specifics shall be recorded in each case,as follows:

a) the subproject must be a public infrastructure justified by the number of users and the cost peruser;

b) the funding available--the village grant and any village contributions--must be estimatedsufficient to complete the subproject;

c) land requirements will be minimized; for any required land or assets that would affect negativelya villager's income and require compensation, the village and the affected family would agree ona compensation that improved or restored their living standard, income earning or productioncapacity to pre-subproject levels; the field engineer will verify that all persons affected are satisfiedwith the compensation provided and if no agreement is reached, an alternative location orsubproject will be selected (the field engineer is also to verify that prior to the start of works, allpersons affected are satisfied with the compensation provided);

d) implementation/contractual arrangements and number of village laborers must be clear;

e) approaches to provide subsequent maintenance of the subproject must be agreed, includingassignment of responsibilities for maintenance works, training for maintenance designees, andfinancing, as necessary.

2.13 In line with decentralization policies neither the PMU nor the Bank require to approveindividual subprojects.

2.14 Engineering assistance. The LKMDs will be the implementing agencies of the project.The capacity of district agencies (Dinas PU TklI, DPUK) is rather limited and consultants are alreadyneeded for some ongoing programs. Therefore the DPUKs have designated "administrative" Pimprosfor the first project year, and shall designate Pimpros by March 31 every project year, while the projectprovides engineering services to assist directly LKMDs with subproject cost estimation, design,procurement, organization and supervision of work, reporting, administration and some training tovillagers (and perhaps local contractors) for the implementation of the subproject and subsequentmaintenance, in addition to the initial approval (para. 2.12). It is estimated that I field engineer

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consultant can assist 5 villages (1 cluster), assuming that each village would implement 1-3 subprojects--atotal of some 80 engineers for the first year villages and 120 or such number for the second year as maybe found necessary when the program is agreed. Field engineers would live close to their village clusterto reduce travel and would have at least a motorcycle for field visits.

2.15 In order to provide homogeneity across clusters, an engineering/management team of 4senior consultants has initially developed a simple Project Manual including guidelines with engineeringand environmentally sound standards for small public works, adopted from existing manuals (mainly fromMPW), simple compensation guidelines, procurement forms, procedures and reporting to be used byLKMDs, etc. The senior consultants have also assisted the IDT Secretariat in the selection of fieldengineers, in organizing a workshop for them (that took place in Bandung, April 24-28, 1995) to launchthe project, and will assist afterwards, in their supervision. The team leader and a counterpart with clearresponsibilities are based in Jakarta, to assist the PMU in overall management, but are expected to be inthe field most of their time. The other 3 senior engineers are based one in each province, to be closerto the project villages, and are also assigned a counterpart each, from Bappedas I, from the time theymobilized. A draft Project Manual and workshop program were reviewed by the Bank in early April1995, to enable the workshop to take place by late April 1995. The final draft Project Manual wasagreed during negotiations, April 18 to 21, 1995; copies of the Manual shall be made widely available.

2.16 Monitoring assistance The project also provides for the services of a team of experts toassist the PMU monitor project implementation and impacts. Monitoring will use participatoryapproaches to the extent feasible and will be coordinated with the IDT monitoring efforts. Some non-project villages will also be monitored to compare the results of various types of interventions. The termsof reference were discussed at negotiations.

D. PROJECT COSTS AND FiNANCING

2.17. The total cost of the project, summarized in Table 2.1, is estimated at Rp.184.2 billion($83.8 million equivalent). Technical assistance for implementation support is estimated to cost $11million equivalent or about 13% of the project cost. The direct or indirect foreign cost component issmall, estimated at some 20-30% and accounting for the foreign cost component of technical assistanceservices, including vehicles; equipment depreciation included in contractors' bills; and fuel and asphaltcosts. Direct labor costs would range from some 50% to 20%, depending on the works, though the shareof total labor costs (including labor in materials delivered) would be higher. The standard 10% valueadded tax will apply to works by contractors and supplier bills; the total tax amount under the project willdepend on the proportion of works done by the villages themselves. Increased administration costs areincluded at standard percentages (1% for central Government, 1% for provincial agencies and 3% forlocal level agencies, of the grant amounts). Contingencies have been included for technical assistancecosts to cover the event of implementation over 3 years rather than 2. Because of the programmaticnature, village allocations do not carry contingencies.

2.18 The Bank loan of $72.5 million equivalent would finance 86.5 % of project costs. The highfinancing percentage is on account of the poverty reduction objectives of the project and the fact that theGovernment is financing other poverty reduction programs on its own. The Government would cover10% of the village grants and the increased administration costs. The 10% value added tax on technicalassistance contracts has been waived in accordance with Kepres 13/95.

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Table 2.1: PROJECT COST SUMMARY

. ........... Rp billion .............. ............ $ million.Local Foreign Total Local Foreign Total % of

total

Goods, Works, Services 129.6 14.4 144.0 59.0 6.5 65.5TA Implementation Support 22.0 2.2 24.2 10.0 1.0 11.0Increased Administration 7.2 - 7.2 3.3 - 3.3

Subtotal 158.8 16.6 175.4 72.3 7.5 79.8 100Contingencies 8.4 0.4 8.8 3.8 0.2 4.0

Total 167.2 17.0 184.2 76.1 7.7 83.8

Table 2.2: PROJECT FINANCING

............ Rp billion ................. $ million .Local Foreign Total Local Foreign Total % of

Total

GOI 24.9 - 24.9 11.3 - 11.3 13.5IBRD 142.5 17.0 159.5 64.8 7.7 72.5 86.5

TOTAL 167.4 17.0 184.2 76.1 7.7 83.8 100.0

Note: Totals may not add up due to rounding.

3. PROJECT IMPLEMENTATION

A. PROJECT COORDINATION AND MONITORING

3.1 BAPPENAS, in particular its Bureau of Regional District and Rural Development, will bethe overall coordinating agency of the project. A Project Management Unit (PMU) has been establishedto oversee implementation and includes representatives of BAPPENAS, the Ministry of Finance, DGsCipta Karya and Bina Marga (MPW) and DGs Bangda and PMD (MoHA). The PMU has a Secretariat(IDT Secretariat) established to deal with the Government's IDT poverty program as well as relatedforeign-assisted village infrastructure programs. The IDT Secretariat will be strengthened under theproject with experts for socio-economic monitoring and the leader of the engineer/management team;also, a Japanese Grant will finance a team to monitor the IDT program itself.

3.2 The IDT Secretariat, with the assistance of experts, would monitor the impact of theprogram in selected villages during implementation and prepare an ex-post evaluation. Monitorers areexpected to be Indonesian entities such as Universities, NGOs or consultants. Furthermore, themonitoring to be done of the IDT program with the grant from the Government of Japan, possiblyincluding GIS, will be coordinated with the monitoring of this pilot project, and some villages includedin other programs or with no program will be monitored as well in order to ascertain differences. Termsof reference for the experts were discussed at negotiations and the project monitoring team should beselected by about July 1995.

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3.3 Bappedas level I (provincial) have provided counterparts to the senior engineers and willmonitor information about the project. Bappedas level II will ensure project coordination with othergovernment programs.

B. IMPLEN1ENTATION SCHEDULE

3.4 To achieve the objectives of the project, to maximize employment for cash of local villagersand provision of local public infrastructure, the works should be executed mainly during the dry season,from beginning of May to end September, which is when farmers are not fully employed in agriculturalactivities, when conditions are best for construction of public works, and when standard public workbudgets are not yet released. Therefore, yearly project activities are scheduled around the desiredimplementation season. An optimal yearly schedule is in Annex 5.

3.5 It is desirable that the subprojects in any village be completed in one year. to curtail the tineengineering assistance is needed. However, after the first project year, experience may indicate that avillage program should be allowed 2 years/seasons for completion--the proposed allocation is substantialfor many poor villages. A year extension could increase the share of engineering and monitoring costsin the project cost, up to some 18%, still considered an acceptable share given that a needed extensioncould allow a larger share of the village grant becoming villagers' incomes and reducing contractorsshares. However, a longer implementation period may reduce the intensity needed of engineeringservices, thus not increasing their cost. This flexibility is justified given that the project is a pilot andlessons should be useful for other programs. Thus, the objective is to complete the project in 2.5 years(allowing for ex post evaluation), but it may take 3.5 years.

C. IMPLEMENTATION OF WORKS

3.6 LKMDs will be the "implementation agencies" of village subprojects, following agreementssigned by the camat and field engineer. LKMDs will serve as contractors; they would either employvillagers directly and buy materials, rent equipment. etc. or if need be, contract work or expertise withlocal contractors. This procedure has already been used successfully in some cases. Normally the localimplementing agency is the DPUK but DPUKs generally have limited capabilities and would be unableto implement the proposed project with their current staff. Thus, the bupatis will authorize the DPUKPimpros to delegate to the consultant field engineer, and Pimpros assigned to the project will retain anadministrative role only; where DPUK engineers are able to help they would of course be welcome todo so.

3.7 The field engineers will assist the LKMDs design, cost, plan, implement and superviseworks and prepare reports. They are to certify payment documentation in accordance with progress ofwork. Field engineers will be trained in project specifics by the central team assisted by staff fromBAPPENAS, MoHA, MPW and MoF, at a workshop in Bandung prior to deployment. They have theProject Manual with guidelines for choice of unit price or lump sum contracts, preparation of bill ofquantities or set of unit prices (depending on direct labor or subcontract), technical specificationsincluding environmental guidelines to be enforced, quality standards, control activities and other aspects.Special care is needed in the costing of subprojects given that there are no funds to cover any costoverrun beyond the village grant. The project design foresees, perhaps conservatively, that each engineerwill be able to assist 5 villages; after experience is gained, it may be possible to assign more villages perfield engineer. A senior engineer from the core team is available to advise and to supervise progress inthe field.

3.8 Some 300 villagers or more may want to work on a subproject; in surveys villagers indicateda willingness to work for low "incentive payments" provided the works benefit their village and are seen

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as a public project; furthermore, they would incur no transportation cost nor costs for food away fromhome. Unskilled village labor would get a lump sum for the task, paid periodically by output; this shouldresult in some Rp.2,000/3,000 equivalent for a full day of work. The pay should not be so high as toattract laborers away from similarly paying activities they would otherwise undertake, since that wouldnot create employment; the wage should be low enough for the poor to self-select for the project works.If more villagers want to work than the works can absorb, an agreement has to be reached in the villageas to number of days each interested villager would work and when; the agreement would be reviewedby the field engineer for approval of the subproject. A village foreman (mandor) would be designatedby the LKMD for each subproject and be assisted by the field engineer; skilled labor will also be hiredas needed, at locally competitive wages. Organizing workers is an important part of projectimplementation; if found convenient, a contractor can be hired to oversee/manage the works and lessenthe load of the field engineer (para. 2.12).

3.9 Java has a large number of NGOs and many are present at the subdistrict and even villagelevel. NGOs are welcome to contribute to implementation of the proposed project; in particular, theycould assist villages with community participation, subproject selection, employment plans and otheraspects such as monitoring and evaluation. LKMDs can pay for desired NGO services from the villageallocation.

D. PROCUREMENT

3.10 Procurement under the project is required for goods and works and for consultant services.Procurement will be in line with Bank procurement guidelines and procedures ("Guidelines forProcurement under IBRD Loans and IDA Credits" of January 1995 and "Guidelines for the Use ofConsultants by World Bank Borrowers and by World Bank as Executing Agency" of August 1981).

3.lI The engineer/management team, field engineering services, and monitoring and evaluationservices are selected at the central government level. Consultant contracts with an estimated value of$100,000 or more for the engagement of firms, and $50,000 or more for the engagement of individuals.are subject to prior review by the Bank. Modalities and status are as follows:

(a) Engineer/management team. Terms of reference and a shortlist were agreed between the Bankand IDT Secretariat during preappraisal in October 1994, and a firm was selected in January 1995.The selection was based on submissions detailing the proposed management concept, informationsystem, qualification of experts, and costs/costs bases for the contract. The contract is financedinitially by the TA loan mentioned earlier, and later, under the project loan.

(b) Field engineer services. A different firm was hired for each province of West. East andCentral Java. the latter including Yogyakarta needs, to provide field engineers (field engineerscould be subcontracted from other firms). Terms of reference were agreed at appraisal, as wellas 3 shortlists each comprising 5 firms. Indonesian firms were shortlisted by Bappedas I andforeign firms were also included in compliance with Bank guidelines. The IDT Secretariat invitedthe shortlisted firms to submit proposals in early March, and the selection for the first project yearwas completed in April 1995.

(c) Monitoring and evaluation services. Terms of reference for monitoring expertise werediscussed at negotiations. A final set of TORs and a shortlist would be agreed shortly thereafter.

3.12 Subprojects. It is expected that LKMDs will carry out most works by direct village labor(community participation) under implementation agreements with the DPUKs. LKMDs may also contractsupplies of materials, rental of equipment, and small works by local contractors following national

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shopping, procurement of small works or direct contracting procedures. No international competitivebidding is envisaged. Simplified implementation agreements and documentation for national shoppingand direct procurement have been agreed and included in the Project Manual (Annex 6). Nationalshopping will require 3 quotations for each proposed contract. No contract or agreement would exceed$55,000 equivalent (the village grant of Rp. 120 million) and most contracts are expected to be below halfthat amount. All works may be done by community participation; nevertheless, procurement undernational shopping or small works procedures may total up to some $5 million each, and direct contractingare also allowed for contracts up to $10,000 equivalent each, up to an aggregate amount of $10 million(see Table 3.1 overleaf). These procedures are in line with the Indonesian government procurementrules; under Kepres 16/94, Pimpros can approve, on their own, contracts up to $250,000 equivalent.Field engineers will help the LKMDs, as may be needed (i) organize village labor including pay setting,(ii) hiring equipment, (iii) purchasing materials and tools; or (iv) contracting out. Works would not startuntil any required compensation for land or assets in the village has been made as mentioned in Annex9 and the Project Manual. Contractors will be required to use village labor. The Bank does not requireprior review of proposed contracts, given their small amounts and their large number, the need for quickapproval, and the safeguards built-in in the project design (consultants will be in place to assist (fieldengineers) and to supervise (engineer/management team) the process, and further, audits and Banksupervision will be conducted, as well as random ex-post review of SOE documentation).

E. DISBURSEMENTS

3.13 Retroactive financing. As the Bank loan may become effective at the earliest in July 1995,in order to start field engineering services in April and village subprojects in May 1995, to take advantageof the dry season that is best suited for works, through a letter of the MoF dated April 17, 1995, theGovernment made Rp.20 billion prefinancing available in April 1995 and until proceeds of the proposedloan become available. The Bank proposes to provide retroactive financing for project relatedexpenditures incurred after January 31, 1995 and before loan signing, up to a maximum $7.2 millionequivalent.

3.14 Disbursements at local level. For reasons of cost efficiency, the project will pay for output(itemized works) against measured progress and prorated lump-sum contracts. Following the procedureadopted under the Government's IDT poverty program, by instructions of the Ministry of Finance theBank Rakyat Indonesia (BRI) unit closest to the village will be allowed to disburse the village allocation,against bills certified by the field engineer. The field engineer will forward the implementationagreements, certified by the camat, contracts and certified bills to the administrative Pimpro in DPUK,who in turn will forward a copy to the respective KPKN. LKMDs will be paid at the BRI units whenpresenting their bills certified by the field engineer, according to progress of works. Village laborers thuswould be paid in cash every 2 weeks or weekly. BRI has agreed to provide simple monthly statementsfor the LKMD accounts, inter alia to the field engineers. The fund flow is shown in Annex 3.

3.15 The Bank will not be involved in the approval process of every contract and disbursementat the village level, but will inspect contracts at random during supervision of the project. Theengineer/management team will supervise the subprojects while visiting every project village at least once,on behalf of the PMU.

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Table 3.1: PROCUREMENT ARRANGEMENTS(US$ million) a/

Expehditure Category Other b/ NBF c/ Total Cost

Goods, Works and Services under Grants 65.5 65.5

(59.0) (59.0)Consultant Services 15.0 15.0

(13.5) (13.5)Increased Administration 3.3 3.3

Total 80.5 3.3 83.8(72.5) (72.5)

a/ Figures in parenthesis are the respective amounts financed by the Bank.b/ Includes work by community participation (up to $65.5 million), national shopping and procurement of small

works (up to $5 million each), and direct contracting (up to $10 million), and selection of consultantsfollowing Bank Guidelines for the Use of Consultants.

c/ Not Bank financed.

Table 3.2: DISBURSEMENTS

Category Amount Disbursement Rate(US$ equivalent)

(1) Goods, Works and Services 59,000,000 90%(2) Consultant Services 10,000,000 100%(3) Unallocated 3,500,000

72,500,000

IBRD Fiscal Year 1996 1997 1998 1999

Annual 30 35 5 2.5Cumulative 30 65 70 72.5

3.16 Bank disbursements. The loan agreement includes 2 allocated disbursement categories, (i)for expenditures incurred by project villages for goods, works and services under grants, at 90%, and(ii) consultant services, at 100%. In order to facilitate Bank disbursements, the Government wouldestablish a Special Account up to an amount of $10 million in Bank Indonesia. This account should bemaintained by the Directorate General of Budget, MoF. All disbursements from the Bank loan wouldbe made through the Special Account. Since the majority of expenditures under the loan are small localcurrency payments, the 30 days advance from the SA facility will be used for this project. That is, theborrower can draw an amount from the SA sufficient to meet eligible expenditures for a period of less

16

than 30 days. After expenditures are incurred using the advance under the 30 days facility, the borrowershould submit a request for the replenishment using SOE procedures. A bank reconciliation statementshould also be attached showing inter alia, the deposit received from the Bank, the date on which eachadvance was made and the amount awaiting documentation from BRI. Replenishment applications to theSpecial Account will be made every two weeks or when 20% of the initial deposit has been used,whichever is first. The GOI has agreed to make available its Transition Account in support of foreignfinanced projects, to support also the proposed project in case the SA is temporarily short of funds.Statements of expenditure (SOEs) would be used for the technical assistance category, for all contractsfor consulting firms costing less than $100,000 and individual consultants costing less than $50,000.Documents supporting the SOEs would be retained by respective project implementation units and madeavailable for review as may be requested by visiting Bank missions. The loan will not fund any landacquisition. The disbursement schedule is shown above.

F. PROJECT ACCOUNTS, REPORTS AND AUDITS

3.17 The project allocation per kabupaten would be inscribed in the yearly local budgets,SPABP/APBDII, for recording purposes.

3.18 As described in the Project Manual, monthly project accounts will be provided throughvarious sources:

a) BRI units involved would prepare monthly statements covering monthly disbursements andcumulative totals for each project village, and give a copy to the village/camat and to the fieldengineer/Pimpro;

b) field engineers would prepare monthly statements on physical progress and value of works intheir village cluster, and disbursements based on the BRI units' statements, and submit them to thesenior engineer;

c) the IDT Secretariat/TA team would consolidate the monthly work-related statements bykabupatens every month and check with BRI statements for consistency;

d) DGB would provide periodically consolidated statements per kabupaten, province and total, forreimbursement by the Bank, copied to the IDT Secretariat for information; and

e) villages would keep track of their funds via the BRI statements posted at the offices of thekepala desas, camats, and BRI unit, and data also posted on employment, outputs and remunerationcompiled by the kepala desa/field engineer.

3.19 Periodic reports will be provided as follows:

a) the IDT Secretariat will prepare short quarterly reports and an annual report by end March,including progress per category (roads, water supply, piers, bridges, others; and labor, materials,contracts);

b) the DPUK Pimpros will keep copy of certified statements to account for expenditures relatedto the APBDK allocations and will compile an annual report for Bappedas 11; and

c) the IDT Secretariat would report annually on project progress and on implementation of theGovernment's Action Plan.

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3.20 Confirmation was obtained during negotiations that the above reporting system. as includedin the Project Manual, will be complied with. It was also agreed that the consolidated project accounts,including the Special Account and the SOEs, would be audited annually by independent auditors in amanner satisfactory to the Bank and that the audit report would be submitted to the Bank no later thanOctober 30, commencing in 1996. The audits will be joint responsibility of DG Budget (MoF) and IDTSecretariat. The Bank would have no objection to BPKP conducting the audits. Financial audits wouldbe conducted randomly, but should cover at least 2 subprojects in every kabupaten (10% coverage). Inaddition, assurances were obtained that independent auditors will be appointed for technical audits ofproject implementation aspects in a manner satisfactory to the Bank. The financial and technical auditswould be made simultaneously for the same subprojects, and start early to avoid bunching. Terms ofreference for the audits will be agreed with the Bank.

G. PROJECT MONITORING AND BANK SUPERVISION

3.21 Physical progress as well as other aspects of the project will be monitored following formsand indicators included in the Project Manual. The indicators to be used were agreed at negotiations,as part of the reporting/monitoring system. Participation of the poor--man-days of employment, averageand total pay to labor; physical works--such as kilometers of access roads built, effect on farmgate pricelevels -- public transportation costs. Any land and compensation matters, environmental effects, qualityof selection and implementation of works, are to be reviewed and reported on a sampling basis.Comparisons will eventually be made with costs/results of other types of interventions. The indicatorsfor monitoring the project were agreed at negotiations, and a sample is in Annex 7.

3.22 The IDT Secretariat would make available to the Bank the progress reports mentioned inthe preceding section. The Bank would supervise the project via 3 visits per year to selected villages,BRI units and other relevant agencies to review all aspects of progress, such as local employment, costsand progress of work and impact on beneficiaries/the village. The Bank and GOI would undertake anin-depth review after the first year implementation around February 1996; any adjustment deemednecessary will be made following the review. A Supervision Plan is included in Annex 8.

H. LAND ACQUISITION, RESETTLEMENT AND CONIPENSATION

3.23 No physical displacement is expected to take place under this project. Subprojects requiringdisplacement will be redesigned to avoid resettlement or alternative subprojects must be proposed. Theinfrastructure to be financed is generally of a small scale. Installations for a public source of drinkingwater, a tap or a pump, do not need much space; small pipes--may be no more than a hose--if neededto bring water from a natural source cause little disruption on land use. All weather access roads wouldnormally be built on existing access paths, and would be no more than 3 to 4 meters wide. This widthmay exceed an existing access by no more than a meter. Since houses are normally set back from roads,impacts would therefore be minimal. In those cases where houses are partially located within thewidening area, house owners normally agree to move them back because houses are normally temporary(bamboo) structures that can be moved relatively easily, and property values increase significantly onceroads are built--owners could sell the property later at a profit, as there is an active land market on Java.

3.24 Economic impacts caused by land acquisition are also expected to be slight for the samereasons. The Project Manual mentions the need to keep land acquisition to a minimum. Traditionalprocesses of voluntary contributions will be followed in villages where some land is unavoidably needed.To minimize peer pressure risk, however, where land needed exceeds for example 20% of a villager'splot, the affected villagers will be given replacement land, other equivalent productive assets or other in-kind compensation as negotiated during the village consultation meetings (normally common-tenure landis used for compensation). If a solid structure has to be demolished, the village would provide materials

18

and help build an equivalent structure. Subprojects that involve compensation of this nature for land orother assets will not be approved by field engineers unless adequate compensation arrangements have beenagreed by the villager affected and the LKMD, and compensation should have been made prior to thestart of work (para. 3.12). In the unlikely event that a larger number of persons were negatively affecteddue to a subproject (e.g. more than 200 each lost more than 20% of their land or assets) and the fieldengineer found no alternative that would reduce the number of affected persons, then Bank approval ofa related compensation/resettlement plan would be sought prior to proceeding with the subproject. Incase of disagreement, affected villagers can complain to their field engineer and camat. They can alsocomplain in writing to the P.O. Complaints Box 5000 instituted successfully for the IDT program (para.1.7). The criteria have been agreed with the Government as summarized in Annex 9; they are includedin the Project Manual. The above criteria are consistent with the Bank Guidelines for InvoluntaryResettlement (that include both physically relocated as well as only economically affected persons; theproposed project foresees only the latter) that require that negatively affected families have their standardof living improved or at least restored to pre-project levels.

1. ENVIRONMENTAL IMPACTS

3.25 The project has been classified in environmental category B. The scope of villagesubprojects will be relatively minor, as mentioned in para. 3.24. Access roads would be built withappropriate alignments, cross and longitudinal drainage and gradients to lengthen the road life andminimize erosion that higher standard roads may create. With an all weather access to each village, useof some alternative earth tracks may be reduced thus lessening erosion along the tracks. Better provisionof water in the project areas which are normally short of water in dry seasons should have a beneficialenvironmental impact and may even help grow vegetative contours. Overall the environmental impactis expected to be small and mostly positive. Given the progranumatic nature of the project and the smallenvironmental impact expected, no environmental impact assessment will be prepared up front. Progressreports would indicate any problems encountered and solutions adopted during implementation.

3.26 Standard designs and criteria have been prepared in the past by DG Bina Marga and DGCipta Karya for such small works; these designs incorporate environmental guidelines. Theengineer/management team for the project have reviewed the standard designs and guidelines andprepared a shorter Project Manual for easy reference in the field. The field engineers are to incorporatesound environmental criteria in designs of subprojects and verify their compliance during constructionsupervision. The draft final Project Manual was agreed by the Bank at negotiations.

3.27 Field engineers are also to explain to villagers the importance of maintenance and how tomaintain the infrastructures built under the project, for the works to last and environmental sustainability.A maintenance plan would be prepared in each village.

4. PROJECT JUSTICATION AND RISKS

A. JUSTIFICATION

4.1 The Government wants to accelerate poverty reduction in Indonesia and has assigned a highpriority in the Bank's lending program to assisting its poverty program. The project provides a directmeans to reach poor villages, potentially faster and enabling a higher share of the funds to reach the poor,as layers of agency involvement and supply delivery costs are reduced. By directing the funds tocommunity selected infrastructure projects likely to also be implemented with self-help, the communitysense and productivity of the poor is expected to increase and allow the poor to participate in economicgrowth while contributing to it. Also, the project focuses on infrastructure where implementationeffectiveness is generally higher.

19

4.2 Many ongoing programs already focus on the outer islands. Assisting poor villages in Javaimprove their infrastructure is justified; villages on Java have larger populations so that more people willuse and benefit from infrastructure there, and construction costs are generally lower on Java thanelsewhere--meaning that more can be achieved with a fiscal dollar targeted on Java. Furthermore, whilethe overall poverty incidence may be lower on Java than elsewhere, on Java the poor are more numerousand may be relatively concentrated in smaller areas that can be targeted and where the cash may be moreeasily used in a productive way than in remote, outer island villages. According to the SUSENASexpenditure surveys, some 9 million absolute poor live in rural areas in Java; and according to thePODES surveys, one third or some 6000 of the villages on Java are poor and comprise some 18 millionpeople. According to various sources, Java has a higher than average infant mortality and highmalnutrition. While not all the absolute poor live in the poor villages, addressing the needs of the poorvillages facilitates targeting.

4.3 Project beneficiaries would exceed 3 million. The population of the 415 villages selectedfor the first project year totals some 1.1 million--the villages average some 2600 residents, varying from700 to 10,000 residents, and the average area is 500 hectares; even though they are "rural", populationdensities are high in the villages: more than 4 persons per hectare in West Java, almost 7 in Central Javaand almost 6 in East Java--and not all the land can be farmed. The population of the 1200 poor villagesto be assisted under the project would total more than 3.3 million, living on some 650,000 ha (6500 kin2).Furthermore, poor laborers from outside the project villages will also benefit: materials such as stone,gravel and sand for road surfacing and works normally have to be procured from outside the villages,and it is normally poor landless laborers who work in quarries. The project cost per beneficiary is about$25 equivalent.

4.4 Employment and cash compensation to village laborers is an important feature of the project.Many villagers in the selected poor villages have just subsistence livelihoods, with a minimum of cashincomes that however are necessary to buy clothing, medicine, school materials, transport services andother necessities. Many are living with no more than $100 equivalent per year. The cash to be earnedunder the project should provide an important addition to the poorer household budgets; works can bescheduled so as not to interfere with other income earning activities. With the cash earned, villagersought to be able to improve their assets and current consumption. More of the funds would actuallyreach the poor villagers compared to funds under other targeted public programs with higher deliverycosts and less self-targeting.

4.5 Labor-intensive methods are also efficient for the public budget. Villagers are willing towork for the equivalent of about $1 per day, and at that cost labor intensive methods are competitive withcapital intensive methods for the simple type of works envisaged. The villagers will have to undertaketo maintain the village facilities to be built under the project; but having participated in the building, andbecause the infrastructure is for their own benefit, in surveys villagers have indicated that they would dothe maintenance, provided they are taught how to. If the project proves successful then some fundingunder current top-down programs could be reassigned in the future to similar local decision-making andlabor-intensive implementation projects--neglected kabupaten road maintenance and even improvementwould be a prime candidate for the shift toward a lengthman system.

4.6 In addition to employment benefits and reduced unit costs of works, the assets to be builtunder the project have high rates of return, exceeding 20%. A majority of the funds will likely be usedto build all weather access roads and bridges--many of the poor villages lack a good connection to theirkecamatan center; at some 2,500 persons per village paths have considerable traffic--several villages mayalso use a common access--and their upgrading to all weather passibility has good economic returns. Theprovision of drinking water, as demonstrated already in other projects, also has high returns. Examplesof the high returns to providing all weather access roads and bridges are illustrated in Annex 10. Field

20

engineers will verify that subprojects have a minimum number of beneficiaries and a maximum cost perbeneficiary.

4.7 It is hoped that villagers can gain some technical and administrative knowledge with theprogram; furthermore, villagers would be trained to undertake maintenance works, that have high returns,during the one year, perhaps two, that the experts will assist each village. As Java is densely populated,all weather access would make possible/affordable commuting from the village to nearby jobs and slowdown outright emigration from rural areas.

B. RISKS

4.8 Being an innovative pilot for the Bank, the project could be assumed to entail considerablerisk. However, the risk of "wrong" projects being chosen in villages seems small given that consultationsprocesses are involved anid it is in the interest of the village to do the most with its allocation. The riskof fund diversion seems to be small, given that funds will go directly to the beneficiary village, theprogram is transparent and controls are in place for uses within the village. The risk of using labor-intensive methods, generally more difficult than capital-intensive methods due to logistics involved, isworthwhile confronting in order to promote paid employment in poor rural villages deficient in smallinfrastructures. Self-help projects and small local contractors already often employ labor-intensivemethods, and the engineering inputs foreseen under the project should help enhance productivity levelsand improve quality of designs and works. A focus on quality output should hopefully give an exampleto follow subsequently in other works. Furthermore, cost savings would compensate risks of laborintensive works. There is also a risk that the project cannot be implemented as fast as scheduled due toabsorptive capacity constraints, but the project would allow extending the program implementation andthe technical assistance; the project also allows flexibility in adding villages if found justified. There isa risk of subsequent maintenance of the infrastructures being faulty; however, the villagers are the usersand the infrastructure sustainability will be of prime concern to them. The field engineers are further toimpress on villagers the low costs and high benefits of maintenance, maintenance practices, and asnecessary, identify sources for financing future maintenance. During project implementation, independentmonitoring, audits and supervision should all help identify problems and take early corrective action.

5. AGREENIENTS REACHED AND RECOMMENDATION

5.1 The following was agreed at negotiations:

a) Village coverage: villages for the second year program starting in 1996 shall be selected bySeptember 1995 and the village list (and an eventual third year list) will be reviewed with the Bankin December 1995 (para. 2.8);

b) Project information dissemination: villages selected for the program will be informed no laterthan April 1, 1996 and if applicable, 1997 and be provided with public information about theprogram (para. 2.9);

c) Government staff: Bupatis would designate Pimpros TkII in the selected kabupatens by March31 every project year (para. 2.14). Camats would endorse subprojects by May 30, 1995 andMarch 31, 1996 (and 1997 if applicable) (para. 2.11);

d) Project Manual: a Manual comprising implementation arrangements and procurement formatsand procedures (para. 3.12), reporting formats (para. 3.20), project performance indicators to beused for monitoring (para. 3.21), guidelines for compensating negatively affected persons (para.

221

3.24), environmental standards (para. 3.26), maintenance provisions (para. 3.27), and subprojectselection criteria (para. 4.6), was agreed; and

e) Audits and mid-term review: financial and technical audits would be conducted no later thanOctober 30, commencing in 1996 (para. 3.20), and a mid-tern review will be conducted aboutFebruary 1996 (para. 3.22).

5.2 With the actions already taken prior to negotiations and the above confirmations, the projectwould be suitable for a Bank loan of $72.5 million equivalent with a 20 year maturity including a 5 yeargrace period at the standard Bank's variable interest rate. The Borrower would be the Republic ofIndonesia.

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25

Annex 1

INDONESIA

VILLAGE INFRASTRUCTURE PROJECT FOR JAVA

Characteristics of Java Provinces

AbsoluteTotal Poor in Rural Villages Average

Population Rural Areas of which No. GDP/CAP.199213 1990 Total Poor extremely Kabupaten 1990

Province million million poor 000

West Java 36.4 2.4 6,645 1,555 212 20 790Central Java 29.0 3.3 4,180 2,427 282 29 685East Java 33.1 2.9 6,976 1,946 239 29 897Yogyakarta 2.9 0.2 393 111 32 4 653

Subtotal 101.4 8.8 18,194 6,039 765. 82 756

% of Indonesia 54.0 48.9 27.8 29.2 33.7 86.3Indonesia 187.8 18.0 65,554 20,663 243 876.0

Area Cultivable area Roadskm2 1992

000 % pop/lan2 km kM/kAM2 CUlt.

West Java 46.3 76 1,029 15,180 0.43Central Java 34.2 90 943 15,315 0.50East Java 47.9 81 847 17,042 0.44Yogyakarta 3.2 90 1,025 3,178 1.10

Subtotal 131.6 84 961 50,715 0.46

% of Indonesia 6.9 14 397.1 28.0Indonesia 1,909 41 242 181,266

a/ Rp 5.5 million per desa. including Rp I million to the KKP (women's group)

26

Annex I

Table 2: Access Roads, Piers and lDrilking Water Needs in Poorest Villages on Java j1

Ro,ads and Water Piers Tota

* No. in Roads Water b/ No. In No.Villages Dlstricts km bo RP bo Rp. VlUuage Districts Piers bo Rp. bo Rp.

West Java 212 19 1,076 37.7 9.6 76 1 1 ISO 0.9 48.2

Cenlral Java 282 27 1,370 48.0 14.6 31 13 S5 OA 63Yogyakma 32 3 143 5.0 1.8 2 1 2 0.0 6.8

East Java 239 27 1,233 43.2 11.8 69 9 92 0.7 55.7Total 765 76 3,822 133.9 37.8 178 34 299 2 173.7

% of all poor 13% 79% 16% 100%evillages

Source: OECF fimae study, 1994.

ui Exicemely and very poor.

b/ I scheme per villae - ram. surface or pound water.

Table 3.: Poor Villages on Java by Type of Access Road a/

NUMER OF POOR VILLAGESExtremely Very Moderate Potential Productive Total

Poor Poor Poor With........................... .t............ _ e9s rd ac s.

West Java 158 233 96 19 2 508Central Java 80 134 114 47 4 379Yogyakut 0 0 0 0 0 0East Java 127 246 177 44 7 601

Sub Total 365 613 387 110 13 148

_ . _ ..... wihi gravel roed access ..........

West Java 146 275 137 26 3 S87Central Java 239 566 450 129 9 1393YogyUuxta 4 15 18 11 4 52East Java 197 352 209 65 9 832

Sub Total 586 1208 814 231 2S 2864

Total. 951 1821 1201 341 38 4352Soiuo OECF flaed study, 1994aI Both ral md Uwbenvilag

27Annex 2

INDONESIAINFRASTRUCTlURE PROJECr ror POOR VILLAGES on JAVA

Proposed Kabupatens for First Year Program

Total Selected in ClustersPriority of which of which

Province Kabupaten DTs DTPs DTS DTPs

West Java 1,357 178 -Pandeglang 167 33 30 23Lebak 177 49 45q 41Sukabuni 58 10 5 3Cianjur 96 15 10 7Garut 60 8 10 6Indramayu 90 12 5 3Serang 140 13 15 9

Subtotal (7) 788 140 120 92

Cental Java 2,241 271 -

Banjamegara 101 18 20 14Kebumen 178 38 30 21Purworejo 150 25 20 14Wonosobo 108 12 10 7Grobogan 85 18 15 9Rembang 125 20 5 3Pati 84 22 10 10Batang 141 28 35 24

Subtotal (8) 972 . 181 145 102

Yogyakart 92 25 -Gunung Kidul 65 21 30 20

Subtotal (1) 65 21 30 20

East Java 1,737 210 - -Probolinggo 87 11 10 6Pasuman 103 16 15 10Nganjuk 85 8 .10 7Bojonegoro 147 25 20 14Bangkalan - 164 38 30 21Sampang 104 20 25 17Sumenep 118 25 10 8

Subtotal (7) 808 143 120 83

Total for priority kabupaten (23) 2,633 485 415 297Total for Java (82) 5,427 684

Soure; Bp ,m IIT Scctadalyr: por villaDTh. extmey poor vblae

28

WEST JAVA, VILLAGES IN FIRST YEAR PROGRAM(showing kabupaten. village name, population and PODES score)

KABUDATEN: PANDOGLANBS KAUPATEN: L2AMK . KIAIATEN: cIA5MM >I

KeCAUATAN OERA PINDOUK TOTAL KECAUATAN OwRA PENOULDUK TOTAL KECAMATAN DIsA PrNOUI TOTAL

PANISGO KIeTARATMARJA am 3 CPANAS LEBAK GEDONG nu1 4 KADLWANOAK PASNOALES 31 S3SUNJiL CfNANIO 3421 38 CPAANAS LISAKCrrU 2D4 41 KAOUPANDAK NEOLARAI 4432 32MLINJUL SIMLA (AAN 23 41 CrANAS LeBAK AmaKA 1e15 3Y KAOUPANDAK RIAJUK TA 7613 30SuILJL PAoAMClLVA 1m as CVANAR PASR HMALR 30m 36 KAOLWANOAK WARGA NMI 2n47 STSMiSu L PADAISAIG 1473 32 CPANAS R ONLAVA JD1s 37 KADUPANDAK SOJONOKA4 no 47

SIANJL PASO LANCAR S 32 SUNCANG CELESANG 16D7 3 CISEBER CeOKO? am 35SUWAS. 5INDANO REr 1W47 36 SUNCANG COtOPANG 125 38 CmEER SALAGROANG OI 47SWUIS PASIN OURUNOG tm 4a MUNCANG SUKAUAJU 2S76 34 CloeER hISIS.4YA 1431 38uwJu.L YAMU MALAn 1717 3Y MUNCANG SAJ"APAI 740 37 coaSER CISANGOU 4735 40

PAG.ARAN TURUS am 36 YUUNCANO 5 UKA4AYA 1873 37 CUEeRa RUKARAIARJA SW 41

PAGeLARAtN IOAMAN 154 3 MUNCANO ROSANG 3006 3y KAULATEN: GAauTPAaARAN CLAM tow 34 MUNCANG HMARING 2672 36PAGIARAN SILAGOR 2005 3y MUNCANO KARANG COSSONG 2307 33 KECASATAN OESA PENONUK TOTALPAGeLAAN SUAARTA 166O 3 MUNCANG PASEINANOKA 1870 34PAoILARAN HARAPAN KARYA 1310 36 YUNCANC CW.ARANG 3511 33 PAKENJENG NIGLAMI 3480 30

PAKINJENG WANGOWJAYA 3777 41PAOELAAAN RANAYU 1800 3D MUNCANG t UKANAGAARA 167 38 PAMLLI4HAN LINGGAAJA1An 3 34PAGELARAN CIKLUVA 2737 36 UUNCANG SINOANOWANOI 4330 31 PAMULIMAN OARUSUMLM 236 3PAGeLASAN TEOAL rPAPrAK te O CIMARSA MAPR ALUrU 4U 37 PASLLIHAN PANAWA 1104 4uPAGLARAN 9INANGSRI 141 Ys CIUARGA SANGMG JAYA 22U 37PASILARAN SINDANG LAVA 1ns 40 SAJtA CALUNGSUNGW 3738 3Y SINGAJAVA JaYAMtla 371 3

INGAJAYA GNUUKn 2te7 42SAVn CSIERANS AYA la" 36 CUARGA MAROATUTA 3474 42 RINOAJAYA 3UKAUILYA 5115 36

SAXLln RAWM NEQARA 17n1 3Y CISARGA GUNUNG A4TeN SON 40 3ANJARWANGI TALAGARMI 5140 41AKen KAOU HEMM to 41 CIS ARGA GIRISUIT 3467 3Y SANJARWANOI PACAIUMP 4844 36

IAK-n SANONIANaO 01EK lisi 34 C OIARGA TeN AYA n5161 3SAiETn CtLENTUNO 2g 42 CIMARGA KARYA JAYA 3477 37 KAILUATEN INOtAAAVU Y,'

SANJAR UKAS JAVA 18 * RANCKAS SWTUNG CLNOKAP 3010 35 KECAMATAN DORA PIDUDCIK TOTALNAN KAOUAANOKUNG 140a * RANOKAS SWTUNG SAN0IANG TANJUNO 23 1

SANAR MDONG 207 Al RANo rUNG PASRsE TANJUNG RO n L04SINER TAWANOSAR 141 34BANJAR RUKAULYVA 1242 S7 RANOKAS SWUNO SUKAUEKAItRRI gm 63 LONSENER CIDIMPET 151 48BAN JAR SANDUNG IsO Ys CISADAK TAUSAKSAYA 3364 33 SINOANO CANCKRSe 2n7 a

mOANO CANTIm KUON gig YRANGAIS 51TUNO KOLELET wMLAN 1r 37 IRNDANG CANTIU WETAN Sa8 lCUAGAK SALASAR 474 COADAK *oJoNORe nY6 3Y KA IPATEN: SERANU 4 tCOADAK CSANCU 1437 asCUACAK ASKE 3837 3 KCCAYATAN DeOA PENDutOLK TOTAL

AAA SeKARWANR21 2a1 35 SAR3OS UKAMINAK and aYAJA CLURU SWuNG 2430 Ss BAROS TAWaS 1m 1740 SMAJA C$IURUY 3182 41 BAtO CIURU A&U4 16 48MAJA MAYAK 170 36 BASOS SINDANG ANa 2 SAJA CLAYANG 3Y SAROS CSALAM 2

AAJA CLANOKAP am 37 PANARAYAN KEON CAU 238 SSAJA PA5IN KACAPI 5017 37 PAMARAVAN PUOAR_AJA ClWnIN 1737 3Y PAMARAYAN PA I LUS 4616 0MAJA CIDADAP Cm Y PASARAYAN SANDER star 34SAJA TANJUNG SARI 2248 7 KOPO PASPETNo 4 4

KAauPATEN: SUK4AUYI PASIARAVAN PANANPSG 2JY4 3PAYARAYAN ANOUNG 4Y 42

KECASATAN OCSA PENOIOUK TOTAL PAMARAVAN SLOKANG 2 3PA&IARAYAN SASAKAN 1731 2

JAUPANGTENSA* CWTAJ4AJGO PAMARAYAN PRINS WLLUMa 242 30NYALINOUNG MEKARSARI 3812 38 k IS-twAl 16NYALINDUNO CISITU 3774NYALINOUNO SUKAMAJU 404 38NYALINOUNO WANOUNREJA son 48

29

CENTRAL JAVA, VIAGES IN FIRST YEAR PROGRAM

ZhUMPAMLwa; (showing kabuPaten village e, populaon and PODES score)

KASUPATEN: RANJARNUaArA .RA

KCCAMATAN OUSA PENDUOUK TOTAL KABlUPAT!N: PUSWORSEJo KASuPATSeI iiU*AII4Z

SAWANC OLDEN 2243 37 KECAMATAN OCSA PENDOUK TOTAL KECAUATAN DMS Pr6144 Tr

SAWANC LUSAK WANGI 364 30

SANJARNEOARA GUNUNG JATI l1 44 CRABAG UKit SR 12,11 SARANG IT"JO 1

SANJARNEIRA KESUTWI DUWUR 43 41 ORABAG KCRTO JAVAN 674 so ANG PLAN I

SANJARNEGARA PASANCKALAN am 36 0RA5AG DDUKULLON 7m 44 SARANG GLIB16o

GRASAG SAKU REJO 167t 4t SRANG SINWLS UD 16

*ANJARM4ANGU PRENDENGAN 213J * GRASA2 TR1ULYO *40 SPRANG AA StLYO 16

CANJARMANGU MAJATENGAN 7:2 23

KARANGKOSAR GUMELAR m 42 GRASAG SUUCCSR AGWOO a3m 44 KASURATCN: PATs

WANAVASA SUWIOAK Is" 24 GRABAG NAUSANGAN 66 0

WADAYASA KARANG TENGAH 164 Sy SRASAG SENOUNGAN 5 4a KECAMATAN OUSA P310434K T

SUTUM KEOUNG SIULYO 1U2 2

PUNOGELAN TLAA 416 3 SUTUN LANGOA SEJO 1317 so PUNCATKWANGI WATU MA 1617

KALIENING PANDAN AMUM 2136 41 FUNCAKWANG LLUSUBG MAS 31

KALSENING A53NAN UsO 36 PRIUfHL KALIJERING 1617 23 UNCAKWANSI SMIALYO am

KALEENING PASEQSSAN 5475 *7 PRTIRUH so0O GEDE 14" 3 PtUNCAKWANSI Ktlt. US

KALIDENING PINGfrLOR 2034 32 PITAUI4 KALIGONOANG 664 u PuNOCAKWANGI TrS lo61l1

PITUIUH KALI GINTUNIG 2116 2

PEJAWARAN SITING 1624 23 PrTUSUM SAWANGAN 1367 ST JAK3NAN SSUWMLGO 1746

PEJAWARAN TLAHAP 16 43 JANAN SOIANSSGKS 1o"

PEJAWARAN OARMAYASA 2l 4J KE4IM WONOSUKO t JAICNAN TLOGOR 1

PEJAWARAN SEUANOKUNG 1173 *3 KE4AI OLES 1 * JAKICNAN N UAST D 104

PEJAWARAN KARANOSARKI am 3 KEMPRI o'ro IW 4 JAKUENAN KARAN@OWD 766

BRUNO PR13O 3141 as

KASUPATEN: KEUMEN GUANIG KALICTENGKEK 11J7 KASUWATEN: RATANG

KECAMATAN DESA PENOUDUK TOTAL KASUPATEN: WOlOSORO KECAMATAN DMA PINUUUK T0

SUAYAN SIKAYU 4R J 1 KECAMATAN OESA PRNWOUK TOTAL WCNO TUNGOPO PUNANEAN S

UAYAN KARANOS3AI 1366 36k UG" M AA

SUAYAN ROGOWONO 274 J LENSOMO PLODONGa 1674 s TIL LAsS AM 61

SUIAVAN SEMAMPER 3142 41 LSICONC aUWI%WANGU 66? 23 TILES TIAINI 13n7

SUAYAN JOGOUULYO am 31 LEKIONO GARUNG LOR 1716 2 TI common 127

AumAL PLEMPUKAN KEMBARAN 104 4 LEKSONO SURA UDANA 3s * SANOM P5313K 4775

AuMAL KAISON PETAD4GKLtAN 1W n UANOAN slaw IS

AMBAL SLENGER WETAN 1W 32 LEKSONO KALSENING 146 2c SUAN PncALA IS

A . SLUENBER KMLON 23 41 WATUMALANQ WONOSAOYO 3617 S4 USAN AH1 3t46

AumAL SIESE WETAN 1814 so WATUMALANG SuSAAWANG MAIL #177 a SUSAN MUJNSON 1low

WATuMALANG BANYU KEMAR 8312 44

PSESUN SAMAYU 1347 n WATUMALANG WATUSALANG s 2 LAOO 757

PRESUN SINOANGDALEM 2301 SLADO A I _

ALIAN SOKA 24 3 KAiUwAeN: ROmsosAN *LADO cowo 1s61

ALlAN ILOGOONLUMO 1413 37 BLABO SISAM 1666

ALLAN KALiPUN 307 2J KDCAMATAN DESA PENBUOUIK TOrAL BLAOO 53A4N1 -ns

ALLAN FESALAKAN Sol 2 UN04An so 1112 K1OUMOJAT pj 3141 23 SUAN MOMT6 I70

ALLAN JATruRus 32 KEOUN TJAT NOOMAK 247S 42 ROSAN O5t3WAN gm

ALIAM LEREPKESUMEN Is" 27 KEWUNGJATI KENTEN3ASI 236 4a as"AN n065o 1

ALLAN SLATER 14739 4 KEOUMNJATI PANamO ai16 66 SAWANG PUANTU uP.4

KEsUMEN ROWOREJO 316 23 KEDUNM PAOAS n .2 * AWAN WKIUDSJO t

PEJAGOAN WATILAWANG 1l 27 KEUNaGJATn OUSAS m n SAWANG CANDI aGuR

KARANG GAYAM LOOANDU U 4J KEDUNGJATI KtITAN 4" 44 EAWANG PANSON 66

KARANa GAYAN KEsAKALAN 245 ST KEOUNGJATI KAULMAS 4m 34 QAWANG gm lm

KARANG GAYAM WONOThTO 25 42 KEDUNQJATl JUNO 2431 44 SAWANi GM

KARANG GAYAM KALEENING a 2 4 KCOUNGJATI WATES -m * AWANG AU

SRUWENG SIOOAGUNG "it 42 PENAWANGAN KARANQAWAOE 3113 2J LOPUNG KflA 134

SRUWENG DONOSARI 2ns 2 PENAWANGAN LEYANGAN 3440 36 LUSUN5 DUAS Is"

SRUWENG CONOG CAMPUR 124 2 NAWANGAN WAT PAWON 16 3 SUSAN KARANCGTOMSA a"

SRUWWNG PENUSUPAN 1306 42 PENAWANGAN TUNWGU 1SS6 41 SUSAN 1ama HASIJO am

KARANG ANYAR IRMUNNO 264 23 PFENAWANSA JANG g an JUAN a TIUIOLANA MARJUO 1SO

SUSAN KAN "a m2

SUSAH SAMPl PAVUNS amS

SUSAN ASSEUSO 2334TWL1. KaUSS S#W0N S742

'a-lt-Lwkt I

30

EAST JAVA, VILLAGES IN FIRST YEAR PROGRAM(showing kabupaten, village name, population and PODES acor)

KAALPATEN: PSOSOUcGOO "s x> x KASuPATEN: *OJONumOo KABUPATeS rA

KfCAMATAN OSA PENUOUCIK TOTAL KECASATAN DSA PENDUOUK TOTAL KECAMATAN DoA PolM IOTAL

ThMAL SIWALAN GUNUNG SfM 174 so SUG1WArAS NGLAJANG r sJ 44 TORJUN PANfLAMGM 1646T30AL .WALAN TEfALSONo 22" U 3 SUGIWARAS KEDUNGDOWO 1144 3 0 TORJUN PACAAAM 1449TIMIS RACEK "a so KEDUNGADOM SAgA J 71 37 TOrJUN OULAN gmrTM ReUaN 448 44 KIUNGACM PFJOK Re 37 TORJUN PATARONSA amTUE WEOUSAN 216 KEDUNGADEM GeGER 301s 37 TORJUN mimom Hor"L t1m

PAKUNNAN KUDUNGSUMt rD 7 31 SAURENO TANOUNIGAN 1401 a3PAKUNNAN KALIDANDAN 713 as UAURENO POIAAN m1 TOPrJuN SATAPA T SIPAKONPAN SUMBING 1177 36 . LEDAX2AA1S J T OR JUN urns aPAKIuHPAN PATEMON K*ON 014 A AURLENO KAOUNGREJO 344 TOR PAJUNIrAN ALASPANDAN 1754 BAUSENO PUCANQAtUu s s TORUN KASA -S a

T70JAM KARA 5665 3KAOLRATfN: rPAuSuiA SAHEN NGAOLLUNUS MI 42 SAMPANG PAIAKN 1ow a

ALEN KASUNAN 3244 1 SAPANG TAMAN SN _ aKfCAMATAN DESA PaCDUDu TOTAL KAr-AS St OGO GO 2US,1 3 SAMPANO Pre wOGA a a

KECAMATAN 0554 PENDUOUX ~~~~~~~KAASA 6000 1037 34 SAMPANG KAM60535 31 aUSPO JANJANO WULUNG 3471 34 KAKALAN 213 SAMPANG sAMIMA USW S

PUSPO PALANG SAI 1n6 34Pruro KEMISI zn J4 MALO DUKUH LOR low 35 KOUN10OUN0 om 4n TOSANI KANOANGAN 1107 3 A244 46 KRDUNU rASTOSARI MOROREJO I Q4 AL 1O3 5fTAK tJ7 as ROSATAL USRAN4

toLNfr 1040 44 ROSATAL TLANSA no 4PLEPO JISSARAN 3m 35 SUDAN 1365 s ROSATAL SUMATET am aPu ro KEOUWUNG lO041 J?PUSPO KUWUNG US KAIUPATEN:PUSPO ~~PUSUNG I4ALANG 2541 as KAOALNnoUaaaUm auras. EMa -~g aPURSPAN SAFULANTl 140e 4* ROATAL SWuLl am SLUSSANG WONORSEO 1473 44 KAfCAUATAN DeSA reNTALr USl 75136 am l

NWAPJ VAR SCU~~~~~~~ATAL 0filPAIREPAN GALIH 3114 40 KWANYAP OUWKE BUTfR 1022 as ROSATAL TRAS 9also 8PASREPAN P11UNG 3013 3 A PAORAN lnt 37PASPEPAN KLAJAH - 1017 40 KWAU YAR CUMUNGG AAtNl1 3474 * K .JUPATas SUUUi - 4SWVNONGAN 0400N3R 2244 *? oUNG 14ANO9 40 A7WINONGAN KEDUNG REJO 24U7 36 ODUNG GLISOM 1" 40 KECAMATAN DM P tU TOrAL

KASLPATEN: NHANJUK-; OLE" SATES iST TALA40O COMA O S 15110A KA4AN5 PANA AN r0 -44 s _

KECAMATAN D09A PENDOIUK TOTAL KARANaOIAGKA * t 4 TANAo P Om1 St aS

OGA ALASRAJA 42S4 r TALANGO PALA e 401 UGONDANG SUMSERJO 3J 37 SALl 3ALATEflW 11is 34 TALAN*0 t APURANA PU aaoNOANG NOUHGO 3l0 as

GONDANG MOJOSETO 1017 32 KONANG GAL4 OAYA 17UOONDANG PANDEJ low a3 GoaeG LEuPAK 4664 LErEQ K A ARAT 44

aofom KASOLUARG tm 4 tINTENG TANtOAW am6 41GOHOANO CAMPUS 477 *7 atoGGeATDA UNO4 94 44 f AIW 8 4

QONOANG 5 ENJAYAN Ils 44 SAWfUNPENO LACK 2 7 LEaNTNO AMIDEAS m 4*GONDANG KWUNG GLUGU 136 34 DAU is tSt IS oGONDANG JAAN 4145 34 KsMU.a 4144 6tNOLUYU LfNOKONG LOR 643 45 GALJ TAn. sm iSLEOKONa NHEUNO 14s1 37 GOAUt LANK5ART a 40PSOPNSI: JAWATIMLM GAm LANTEKTIMIS J47S

OALS DALEMAN US

TANAiH URAH PACfNTAN m6 6TANAN SASAN 5A9*AJUN. 4374 36TRAa" SAJEUAN 43 diTRAGAH TAM n4T SsTRAGAH DUKOTAIN r77 Ss

AROSSAYA PANOAN W41AN4 1067 25AROSSAYA SATONAONG 34 S

AROS AYA 0USL 2102 2AOUSAYA ALUNG 1344 SAROSIAVA KARANG DUWAK 1661 3

31

YOGYAKARTA, VIILAGES IN FIRST YEAR PROGRAM(showmg kabupaten, village nam, populadon and PODES swc)

YASUPATEN: GUNUNs mU ouit o

KECAMATAN DESA PENOUU TaTAL

PALWYAN KRAMUL SAWIr t1O7 4S

PALIYAN KANIGORO 46PALIYAN KVESK 476 aPALIYAN NOLOAO 367 45

TEPUS KEMAOANG 60

PALrYAN PLANJAN 357 47

PALN.AN MANOGOL 484 44PALrYAN GOING am 45PALrWAN 5000 416 46

TUPUS KEMtI 47, U

TIPUS SANJAREJO 50

TEPUS NOESTIEJO 6461 47

TEPUS TEPI55a 4TEPUS SUMBER WUNGU 63 45

TEPUS NANOOSAI U 4S

TEPUS PUN WODADI so" 47

TEPUS GOPANGUNNG SW7 40RONGKOP OALONG II 4IRONGKOP JPrrTu 3m 5

RONGKOP SOTODAYAKAN 511S 43

RONOKOP TLENG 4434 47

RONGKOP PUCUNG 343 45

RONOKOP SONGSANYU m7 n

RONOKOP JERUK WUDEL am 4*

RONOKOP NOLINOLU E61 44

PATUK LAMPANG n1se 8PATUK SEUT H466 47

OLlPARt WATU GAJAH 4773 47

NOLIPAR MENTELU 413 44NOAWEN TEOALReJo 1 *S

abl-Lwk 16 DES 13

33

Annex 3INDONESIA

VILLAGE INFRASTRUCTURE PROJECT FOR JAVA

Grant Authorization, Funds and Reporting Flows

- World Bank/RSI I

r ---------- = BAPPENAS MoF 1 BI | Pusat

IDT Secretariat SPABP -_ GOI SAConsultants financing-

copy F i

Engineers KPKN r BRI Cabang Province

copy copy

i- _ = - -- PIMPRO Kabupatencopy,

Field Engineers Camat BRI Unit/-LKMD Acct Kecamatan

- 10 ; - - - r i LKMD Desa

L Suppliers

STEPSI - - -- - - Infrastructure grant authorization for disbursement2 Fund flow prefinancing3 - - -- LKMD project assistance agreements4 - LKMD invoices (1st for certification, then to BRI Unit) for projects agreed5 --- BRI payments to LKMD/Suppliers6 - - - Disbursement reporting (every 15 days/monthly)7 -- -= MoF reimbursement requests w/SOEs8 WB reimbursements

34

Annex 4

INDONESIAVILLAGE INFRASTRUCTURE PROJECT FOR JAVA

Action Plan

Policy Outline Rationale Responsible Agency Date

The Government of Indonesia will take Many local Ministry of Home October 1995measures to ensure that the Laws and authorities/officials Affairs (in RakorbangDecrees concerning the payment of all local appear to unaware of (Dit.Jen.PUOD) process)levies, taxes and retributions on goods the national lawstransported are understood and followed by regarding "retribusi"local authorities. In particular, Home payments, particularlyAffairs Ministerial Decrees No. 48/1984 in relation toand No 29/1986 will be re-issued and transportation of goodsexplained to Province and Kabupaten between Kabupatens.Governments. Appropriate measures willbe undertaken in specific Kabupatens where The Ministerial Decreesthese Decrees have not been properly name a number ofimplemented and enforced. These two commodities for whichDecrees prohibit the imposition of any local inter-Kabupatentaxes or levies on a number of important transport levies shouldexportable commodities, many of which are not be paid, principallyproduced in poverty areas such as IDT in an effort tovillages. encourage exports.

The Government of Indonesia will To have the maximum by April, 1996reevaluate the existing scope of these impact on povertyabove mentioned Decrees. reduction, a new list of

goods which should beAdditional commodities such as sand, exempted will be 1996, as astone, albizzia, timber, coconuts and fruits prepared and result of abovemay be the subject of a new Decree by the appropriate steps taken. reevaluationMinistry of Home Affairs.

"Retribusi" paymentsPendampings for IDT will be informed as can cause serious price starting Junepart of their general training of the decrees distortions as low cost 1995in order to disseminate the information. goods are "taxed" at the

same rates as those ofhigher value.

Information on producer prices, market Currently, regular radio Ministry of Trade Preparationconditions and marketing channels will be broadcasts concerning (Dit.Jen Perdagangan starting Juneprovided to local radio broadcast stations, market prices are Dalam Negri) 1995to complement existing broadcasts on broadcast at the localconsumer prices. level. To these some & Ministry of Implementation

strategic retail prices Information starting April 1,should be added so as to 1996.inform - village levelproducers of the currentvalue of their goods.

Source: GOI

35

Annex 5

INDONESIAINFRASTRUCTURE PROJECT for POOR VILLAGES ON JAVA

OPTIMAL YEARLY SCHEDULE

Month Task Agency

July/August -1. Shortlist core TA firms and invite proposals - IDT Secretariat

Aug./Sept. -2. Received and evaluate proposals, select firm,sign contract. - IDT Sec./PMU

3. Preparation consultants to review suitability of - IDT Sec./Prepar. TAprocurement/contract forms of Dinas PU forcontracting at local level.

September -4. Select villages for project year - IDT Sec./PMU/Kabupatens

November -5. Core TA mobilize6. Local engineers/Pimpros shortlisted,

invited to submit bids and selected - Dinas PU/Core TA

December -7. Inform selected villages of the program - Camats8. Local engineers: contracts effective and

start their training - Core TA/Dinas

January -9. Villages present to camat and TA, sub-projectproposals and number of villagers and length oftime wanted to work - Villagers

-10. Continue training of local engineers - TA

February -11. Visit to villages to review proposals, cost estimates,procurement needs, implementation arrangements,etc. - TA

March/April -12. Designs prepared, procurement/implementationlaunched - Dinas/TA/villagers

May/Sept. -13. Works proceed - Villagers/contractors/TA/Dinas

October -14. Final report at village level - Village/Dinas/TA

Note: steps 1, 2, 3 and 5 apply to year I only and would be compressed if the works are to start in 1995.

Annex 6

INDONESIAVILLAGE INFRASTRUCTURE PROJECT FOR JAVA

AGREEMENT

BETWEEN LKMD AND FIELD ENGINEER ACTING FOR THE ADMINISTRATIVE PIMPRO

FOR THE VILLAGE INFRASTRUCTURE ASSISTANCE GRANT

TABLE OF CONTENTS

General Conditions of Agreement ........................ I

Sample Form of Agreement .. 2.....................2

General Specifications ..........................................................................................................................................(developed per nature of works in Project Manual)

January 1995

38

GENERAL CONDITIONS OF IMPLEMENTATION AGREEMENT

3.1. Duties of the Field Engineer (acting for DPUK pimpro)a. Verify subproject proposal and assist with preparation.b. Supervise implementation of works.c. Arrange payment documentation for work performed.d. Accept completed works.

3.2. Duties of the LKMDa. Implement the works in accordance with the specifications and Technical Guidelines for Works

in the Project Manual provided by the Field Engineer.b. Provide materials, equipment and personnel; unskilled personnel will have to be village labor

as per the Manual, in accordance with the agreement and Technical Guidelines.c. Provide local management (team leader, foreman, administration) and pay at appropriate cost

based on the agreement.

3.3. The works shall not be contracted without approval from the Field Engineer/Pimpro.

3.4. The LKMD must obey existing rules and regulations, and respect local customs.

3.5. Force Majeure is an event outside the control of the LKMD which obstructs or damages the work.Such an event must be reported to the Field Engineer within 7 days. The Field Engineer may agree tocosts resulting therefrom, and prepare a agreement addendum if needed.

3.6. Differences of opinion that may occur between the LKMD and the Field Engineer should be broughtfor discussion with the Engineer/management consultant immediately at the kecamatan. Settlement ofsuch differences shall be decided by the Engineer/management consultant and be based on factualevidence and the Agreement. If they entail costs justified in the opinion of the Engineer/managementconsultant due to changes of original specifications, then an Agreement addendum has to be prepared.

3.7. Non-compliance by the LKMDThe LKMD shall be judged negligent if it does not comply with clauses 3.2. or 3.4. or does not obeythe warnings of the Field Engineer. The Field Engineer shall give written notice to the LKMD of anynon-compliance and send copy to the Engineer/management consultant.

3.8. Sanctionsa. In relation to negligence of the LKMD under clause 3.7., payments to the LKMD shall be

postponed until the cause of negligence is corrected and accepted by the Field Engineer inaccordance with the Agreement.

b. If within 15 days of receiving a warning under clause 3.7. the LKMD leader takes no correctiveaction, then the Field Engineer may propose to the Pimpro to appoint an alternative leader or toappoint a third party to carry out the works.

3.9. Payment for the works shall be based on the amount of works certified by the Field Engineer inaccordance with the Agreement or addendum if any.

3.10. Reporting by the LKMDa. Weekly personnel records.b. Weekly equipment record.c. Weekly progress of works.d. Monthly cumulative progress.

Attachment I - Agreement Form

39LKMD:Address:

DIPDA No. , DateSPABP No. , Date

.... ... .... ... ... .... .. ..... ... ... .... ... .... ... ... .... ... .... ............................................... ... ........... ... ... .... ... ...

IMPLEMENTATION AGREEMENT No._for

_ WORK/SUPPLIES

IN KABUPATEN IN KECAMATAN VILLAGE

No.: / /199Date:Location:

A. We, the undersigned:

1. NAME:TITLE: Field EngineerADDRESS: JI.hereinafter referred to as the FIRST PARTY.

Authorized to act on behalf of the Government Dati II Kabupaten as Employer, by assignment letter datedNo.

2. NAME: (LKMD)TITLE: (kepala desa)ADDRESS: JI._hereinafter referred to as the SECOND PARTY.

B. Both parties agree:a. Type of Works:b. Location:c. Description:d. Value of Agreement: Rp.

(in words)e. Execution period: calendar days from the date of signing the agreement,

without warranty period.f. Payment: Up to 10% advance to be netted out of payments of the first 2 months. Payments

every 2 weeks proportional to physical progress as stated in bills certified by the FieldEngineer and the final hand-over.

h. Condition forExecution: As stated in the attached General Conditions of Agreement.

i. Miscellaneous: - 5 copies of agreement, 2 copies with Rp. 2,000 duty stamp.- Copy of contract shall be sent to Pimpro (DPUK).

SECOND PARTY FIRST PARTY Acknowledged by Acknowledge byHead of LKMD for Pimpro Camat Field Engineer

Pimpro

_ )L( (

40

VILLAGE INFRASTRUCTURE PROJECT

Documentation for Procurement of Small Civil Works/Supplies(for contract values between Rp. 10 million and Rp. 50 million)

TABLE OF CONTENTS

Invitation to Bid and Instructions to Bidders .............................. I

General Conditions of Contract ... 2...........................2

Samnple Form of Contract/Work Order ... 3...........................3

Sample Form of Quotation .............................. 4

General Specifications ................................................................................................................................(to be developed per nature of works in forthcoming Works Project Manual)

January 1995

41

1. INVITATION TO BID

1.1 Works: .

1.2 Kabupaten/Kecamatan/Village:SPABP Inpres ................................................Date . No.DIPDA Inpres ................................................Date . No.

1.3 Appointment Procedure

Activity Location Date Hour Remark

1.3.1. Collect Bid Document LKMD office Free of Charge1.3.2. Explain Documents idem Site Visit1.3.3. Submit Bid idem Duty Stamps

Rp. 20001.3.4. Evaluate/Negotiate idem1.3.5. Appoint Contractor idem1.3.6. Sign Contract idem Duty Stamps

Rp. 2000

2. INSTRUCTION TO BIDDERS

2.0. The contractor will be selected after review of 3 quotations from different sources for localshopping and I quotation for direct contracting, contract values cannot exceed Rp. 10 millionfor direct contracting and Rp. 50,000,000 for local shopping (Keppres 16/94).

2.1. Quotation Form attached.

2.2. Contract Form attached.

2.3. Attachment to the Quotation Form: Schedule of Activities and Prices

2.4. Contract Period: (3-6) months from the date of signing of Contract.

2.5. Type of Contract; Unit Price of Lump Sum, without escalation.

2.6. Payment for Achievement:

Semi-Monthly: After certification for works completed in 2 week period; the last payment,after issuing a Certificate of Hand-over.

42

GENERAL CONDITIONS OF CONTRACT

3.1. Duties of the LKMD Head (contract/owner)/Field Engineer (acting for DPUK)a. Supervise implementation of works.b. Arrange payment documents for work performed.c. Accept completed works.

3.2. Duties of the Suppliera. Implement the works in accordance with the specifications and Technical Guidelines for Works

in the Project Manual provided by the Field Engineer.b. Provide materials, equipment and personnel; unskilled personnel will have to be village labor

as per the Manual, in accordance with the contract and Technical Guidelines.

3.3. The works shall not be sub-contracted without approval from Field Engineer.

3.4. The Supplier must obey existing rules and regulations, and respect local customs.

3.5. Force Majeure is an event outside the control of the Supplier which obstructs or damages the work.Such an event must be reported to the Field Engineer within 7 days. The Field Engineer may agree tocosts resulting therefrom, and prepare a contract addendum if needed.

3.6. Differences of opinion that may occur between the Supplier and the LKMD should be brought fordiscussion with the Field Engineer immediately. Settlement of such differences shall be decided by theEngineer/management consultant and be based on factual evidence and the contract. If they entail costsjustified in the opinion of the Field Engineer due to changes of original specifications, then a contractaddendum has to be prepared.

3.7. Non-compliance by the Supplier

The Supplier shall be judged negligent if it does not comply with clauses 3.2. or 3.4. or does not obeythe warnings of the Contract Owner or Field Engineer. The LKMD or Engineer shall give writtennotice to the Supplier of any non-compliance.

3.8. Sanctionsa. In relation to negligence of the Supplier under clause 3.7., payments to the Supplier shall be

postponed until the cause of negligence is corrected and accepted by the LKMD/Field Engineerin accordance with the Contract.

b. If within 7 days of receiving a warning under clause 3.7. the Supplier takes no correctiveaction, the LKMD/Field Engineer may terminate the contract and appoint a third party to carryit out.

3.9. Payment for the works shall be based on the amount of works certified by LKMD/Field Engineer inaccordance with the contract or addendum if any.

3.10. Reporting by the Suppliera. Weekly personnel records.b. Weekly equipment record.c. Weekly progress of works.d. Monthly cumulative progress.

Attachment I - Agreement FormAttachment 2 - Bid Form

43ATrACHWENT 1:

LKMD:Address:

DIPDA No. , DateSPABP No. , Date

Implementation Agreement No. Date

CONTRACT AGREEMENTfor

WORK/SUPPLIES

IN KABUPATEN IN KECAMATAN VILLAGE

No.: / /199Date:Location:

A. We, the undersigned:

1. NAME:TITLE: Project Manager of the Works-LKMDADDRESS: Jl.hereinafter referred to as the FIRST PARTY.

Authorized to act on behalf of the Government Dati II Kabupaten as Employer, by assignment letterdated No.

2. NAME: (Supplier)TIT'LE: (Director)ADDRESS: Jl.hereinafter referred to as the SECOND PARIY.

B. Both parties agree to enter into Contract as the result of tendering:a. Type of Works:b. Location:c. Description:d. Value of Contract: Rp.

(in words)e. Execution period: calendar days from the date of signing the contract,

without warranty period.f. Payment: Up to 10% advance to be netted out of payments of the first 2 months. Payments

every 2 weeks proportional to physical progress as stated in bills certified by the FieldEngineer and the final hand-over.

h. Condition for Execution: As stated in the attached General Conditions of Contract.i. Miscellaneous: - 5 copies of contract, 2 copies with Rp. 2,000 duty stamp.

- Copy of contract shall be sent to Pimpro (DPUK).

SECOND PARTY FIRST PARTY Acknowledged bySupplier LKMD Field Engineer

44

ATTACHMENT 2:

...................................................................................................................................................................................

To: The Project Manager of

QUOTATION

I. Having examined the Quotation Documents, comprising the Invitation to Bid, the Instruction toBidders, the General Conditions and Technical Guidelines for Works in the Project Manual, related tothe following works:

Description :of :Works :

I/We the undersigned offer to implement the whole of the said works in conformity with the aforesaiddocuments for the sum of:

Rp (in figures)(in words) [-

As detailed in the Attachment to the Quotation showing schedule of Activities and Prices (form to bedeveloped in Manuat).

2. I/We undertake to commence the works on the date of signing the Contract and to complete and tohand-over the works comprised in the contract within the period stated in the bid document.

3. This Quotation is valid for one month from its date.

Date _

Supplier Name

Address

Supplier Signature

( Director )

45

Annex 7

INDONESIAVILLAGE INFRASTRUCTURE PROJECT FOR JAVA

Performance Indicators

Physical progress as well as other aspects of the project will be monitored and reflectedin a progress reporting system as included in the Project Manual.

Among the indicators that will be monitored periodically are the following:

Employment impactman-days of employment (on a 6 hour daily basis)% women,% young

average daily paytotal payments to labor

payments for material supplies

Subprojects

Completed:

kms of roadnumber of bridgesnumber of docks/pierssanitation facilitieswater supply subprojectsother;(specify)

Number of beneficiaries:

average per subprojecttotalcost per beneficiary (on sampling basis)

Less frequent reports, and in particular an evaluation report on broader impactmonitoring will also be prepared. Given the short project implementation period, of 2-3 years, itis not expected that broader impacts could be fully captured by the mid-term review in February1996.

47

Annex 8Page 1

INDONESIAVILLAGE INFRASTRUCTURE PROJECT FOR JAVA

Supervision Plan

Bank Supervision Input.

a. Regular supervision needs for the review of progress reports, procurement actions,correspondence, etc. are estimated to require four staff weeks per year. The staff inputindicated in the table overleaf is additional based on (i) the key activities mentioned inAnnex 5 (Optimal yearly schedule), and (ii) the assumption that a third year 1997/98 willbe needed to complete the civil works program.

b. Each of the four provinces should be visited at least once per year during projectimplementation. Given the geographic dispersion of the villages, each supervision missionshould focus on only a few clusters which would be deemed typical because of theircharacteristics and their performance, as shown by the progress reports.

C. Staff from the Resident Mission would assist in the supervision of this project, in particular(i) in the environmentaVsocial impact reviews and (ii) in the random ex-post review of thelarge amount of SOE documentation.

2. Borrower's Contribution to Supervision.

a. A Project Launch Workshop is to be organized by GOI, after full mobilization of the EMCand the Field Engineers, but before the start of the civil works period (May to September).

b. The IDT Project Secretariat is to be the responsible for project coordination, forarrangements for Bank supervision missions, and for providing requested information.

c. Review meetings with the participation of the various project agencies will be heldnormally in February of each year, to discuss the previous year's performance and thecurrent year program. The February 1996 will be a mid-term project implementationreview.

d. Quarterly Progress reports will report on physical progress as well as other aspects of theproject. A sample of the indicators to be used as part of the reporting/monitoring systemare described in Annex 7.

48

Annex 8Page 2

Bank Supervision Input into Key Activities

Dates Skill InputActivity Needs (staff-weeks)

04/95 Project launch workshop(to clarify project objectives/requirements) CE, ESI 2

06/95 Supervision Mission(to review initial project arrangements, E, ESI 2and start-up of first year works contracts)

09/95 Supervision Mission CE, E, 2(to review progress in civil works, ESIand monitoring activities)

12/95 Assist in/review preparation of 1996/97 CE, E 2program on the basis of experienceof 1995/96 program. Review reform action plan

02/96 Supervision Mission CE, E, 4(mid-term PIR to review all aspects of ESIthe project, especially performanceadequacy of project arrangements includingfor maintenance activities, quality ofconsultancy services)

06/96 Supervision Mission CE, ESI 2(to review, inter alia, second yearworks contracts)

09/96 Supervision Mission CE, E, 3(to discuss program performance ESIincluding reform action plan andmonitoring activities)

12/96 Assist in/review preparation of 1997/98 CE, E 2program

1997 Three Supervision Missions CE, E, 8(of which one for preparation of ICR) ESI

CE=Civil Engineering, E=Economics, ESI=Environment/Social Impact (RSI)

49

Annex 9page 1 of 2

INDONESIAVILLAGE INFRASTRUCTURE PROJECT FOR JAVA

GUIDELINES FOR COMPENSATION FOR LAND OR ASSET ACQUISITION

bjectives

1. Land acquisition will be kept to a minimum and no person will be physically displaced undersubprojects financed under the Project. Subproject proposals that would require demolishing houses oracquiring productive land should be carefully reviewed to minimize their impacts through alternativealignments. Proposals that require more than minor expansion along rights of way should be reviewedcarefully. Land or other assets may be acquired through

(a) Voluntary contributions. In accordance with traditional practices, villagers may elect to voluntarilycontribute land or assets and/or relocate temporarily or permanently from their land without acompensation;

(b) Contributions against compensation. A contributor considered "affected" will be eligible forcompensation.

2. These guidelines provide principles and instructions to compensate affected persons under 1.(b)above, to ensure that all such persons negatively affected, regardless of their land tenure status, will beassisted to improve, or at least restore, their living standards, income earning or production capacity topre-project levels. However, if acquired assets are less than 20%, the field engineer may dispense withthe procedural requirements delineated in para. 5 below.

Compensation Principles

3. The LKMD shall ensure that any of the following means of compensation are timely provided toaffected persons (the village grant cannot be used to pay compensation):

(a) replacement land with an equally productive plot or other equivalent productive assets;

(b) materials and assistance to fully replace solid structures to be demolished;

(c) replacement of damaged or lost crops at market value;

(d) other acceptable in-kind compensation.

Consultation Process

4. The LKMD will ensure that all occupants of land and owners of assets located in a proposedsubproject area, are consulted. There will be a village meeting to inform villagers about their rights tocompensation and options available in accordance with these Guidelines. The Minutes of the villagemeeting shall reflect the discussions held, agreements reached, and include the following:

(a) for any voluntary contributions, name of contributor and details about the contribution;

(b) for land/asset acquisition against compensation, names of affected persons and details about the natureand level of compensation.

50

Annex 9page 2 of 2

Summay AmountCo nsation Areeent reached

(1) agric. land (m2)

(2) plots:area affected (m2)houses/structuresto be demolished (units/m2)

(3) trees or crops affected

(4) signatures of villagers, kepala desa

(5) record of any complaints raised by affected persons

(6) map attached (showing affected areas and replacement areas)

5. The field engineer shall provide a copy of the Minutes to affected persons and confirm indiscussions with each of them their requests and preferences for compensation, agreements reached, andany eventual complaint.

Subprqject Approyal

6. In the event that a subproject involves acquisition against compensation, the field engineer shall:

(a) not approve the subproject unless a satisfactory compensation has been agreed between the affectedperson and the LKMD, as mentioned above;

(b) not allow works to start until the compensation has been completed satisfactorily to the affectedpersons;

(c) in the unlikely event that more than 200 persons were affected and required compensation in a village,a compensation plan has to be prepared, and approved by the IDT Secretariat, before the subproject canbe approved.

Complaints and Grievances

7. All complaints should first be negotiated to reach an agreement at the village level. If this fails,complaints and grievances about these Guidelines, implementation of the agreements recorded in theVillage Minutes or any alleged irregularity in carrying out the project can also be addressed by theaffected persons or their representative at the kecamatan level. If this also fails, the complaint may besubmitted to the Bupati for a decision.

Verification

8. The village Minutes and evidence of compensation having been made shall be provided to thefield engineer assisting the village, to supervising engineers, auditors and socio-economic monitorerswhen undertaking reviews under the Project.

51

Annex 10

INDONESIAVILLAGE INFRASTRUCTURE PROJECT FOR JAVA

SAMPLE ECONOMIC RETURNS TO VILLAGE INFRASTRUCTURE

I. In addition to employment benefits and reduced unit costs of works, the assets to be built under theproject have high rates of return. A majority of the funds will likely be used to build all weather accessroads and bridges. For instance, the kabupatens on the south coast of West Java have some of the lowestagricultural potential in the province: excluding the kabupaten Garut, 2 of whose kecamatan are covered byan ADB marginal farmer community development project, the other 6 kabupaten cover some 10,000 km2

transversed east-west by a mountain range with poor soils at mid altitudes, used for secondary growth andshifting cultivation that yield low incomes although they could be used for higher value, but capitalintensive, crops. The 6 kabupaten include 711 villages identified as poor for the 1994 IDT, distributed in 42kecamatans (averaging 15 poor villages per kecamatan--there would be more villages, non-poor, and notcounted here). Many of the poor villages lack all weather access to their kecamatan center; at an assumed2,500 persons per village (less than the average 3,200 for West Java) the poor village population would totalsome 1.8 million. Paths have considerable traffic--several villages may use a common access--and theirupgrading to all weather possibility has good economic returns. Access road and bridge examples canillustrate:

(a) The 500 family village Cidadap, in the kabupaten Lebak of West Java, has an average income perfamily of only Rp.150,000 per month. It also has a 5 km clayish surfaced access road that becomesimpassable for 4 wheel vehicles (even 4 wheel-drive vehicles) in the rainy season;

(i) The village has abundant rambutan trees, that produce more than 1000 tons of fruit per year.The fruits are highly priced in cities (Rp.700 per kg at the kabupaten capital) but they must beharvested and transported to markets in one peak week, during the rainy season. Due to the accessroad condition, only some fruit is hanged on sticks (pikul) and carried by porters to the asphalt road,at a cost of Rp.50 per kg, and the farmgate price is only Rp.400 per kg. With an all weather road,transport by van would cost about Rp.15 per kg instead of Rp.50 for the 5 km. Thus the roadimprovement, at a cost of some Rp.120 million, would allow an additional income per year fromrambutan alone of at least Rp.30 million (transport cost savings for some 800 tons). The rate ofreturn of the village grant would be more than 30% on this basis alone (the village porters couldbecome harvesters or packers and not lose income).

(ii) But the return is higher: the cost of transport of other products would also be reduced--onaverage per ton-km from Rp.10,000 by pikul to Rp.2,860 by van, or even less by medium sizedtruck; and

(iii) Passenger traffic, more than 10 vehicles per day in the dry season, could continue in the rainyseason. The cost per passenger-km in rainy seasons, more than Rp.500 by motorcycle (the localtaxi) would decrease to Rp.140, the rate by van in dry seasons--high school age children, whocannot afford the motorcycle from the village to the school in town, at Rp.5000 per day, or the costof staying in town, could attend school.

(iv) In all, the road improvement should have a return exceeding 40%.

52

(b) Other villages may not have such high value crops, but if a road improvement generates just 3 van retirntrips per day during the rainy season, then its cost could have a 10% rate of return (from savings comparedto the cost by motorcycle), and traffic generation is likely to be higher, given the large village populations.Thus overall and in particular when it makes access possible, road improvement has high returns.

(c) Java has numerous small and medium sized rivers that swell in the rainy season making boat passagevery dilficult. Small rivers usually span makeshift bridges that may not allow cars to pass and needimprovemenit or upgrading. Larger rivers sometimes isolate villages. isolated villagers would likesLIspension bridges that can carry pedestrians and motorcycles to render jobs, markets and schoolsaccessible. In one village a 50 meter suspension bridge had been built with Red Cross support of only$15,000 dollars equivalent for materials and with free labor provided by villagers (see picture overleaf); thisbridge had integrated the village with the "other" side. Thus the cost of such bridges is low and theireconomic returns are very high.

2. Additional supplies of drinking water is also a high priority of many villages. During dry seasonsmany villages relying on surface water for drinking water face shortages and villagers have to walk longdistances to fetch water from a natural source or have to pay for water delivery. Some other projects suchas the Bank's Water Supply and Sanitation for Low Income Communities (Ln. 3629) are already assisting inproviding drinking water, but they are not covering all the poor villages that need it. Provision of cleanwater has high returns, in terms of time saved and improved health standards.

3. Villagers may also choose to build sanitation facilities, storage sheds for agricultural produce,drainage improvemenlts or other small infrastructures that they consider to be of priority. The communalselection process, and the requirement of a minimum number of users per infrastructure/a maximum costper beneficiary (to be included in the Project Manual) should help guarantee that only justified projects areuLidertaken.

53

Annex I I

INDONESIA

VILLAGE INFRASTRUCTURE PROJECT

Selected Documents Available in the Project File

(a) Japan Development Institute, ECFA, Tokyo and PT Intersys Kelola Maju, Jakarta(1994) Rural Areas Infrastructure Development Supporting Data and Analysis of theFinancial Requirements for "Desa Tertinggal", Final Draft, prepared forOECF/BAPPENAS.

(b) Government of Indonesia (1994) Infrastructure Project for Poor Villages on Java,Progress Report.

(c) Roger D. Montgomery, Hunting Technical Services Ltd. (1995) Site Visits to WestJava and South Sumatera. Mid-term Report.

IBRD 26797I . I llro llr T '^ 4^~~~~~~~~~~~~~~~~~~~~IS.I

INDONESIA Th.e o un dares, olors,denmiatinsand any

ohrinformation showVILLAGE CLUSTERS IN FIRST YEAR PROGRAM imply onte hport noft

The World Sank Group.any judgment on the iegol

SUMATERA S h PROJECT KABUPATENS(DISTRICTS) nor ony endorsementor accptanc of such

* VILLAGES OF 5 CLUSTER boun,dries. oCL7 in o1

* NATIONAL CAPITAL

Se ~ KABUPATEN BOUNDARIES

PROVINCE BOUNDARIES

'A 7'.> D.IK./. 0 50 INTERNATIONAL BOUNDARIESD. K.I.t

JAKARTA--0 Java/20 - 0 50 100 150 200

IL JAKARTA 17 > ' KILOMETERS

3 *:gor 0 9 2 Magelong Surcr3 Bogor 116 15

11 G 2m~ Cirebon J12UMoiclk JAWA BATATE12NiiG>~AHkalongon , _M.a'.ulra'

I bkabumi- 21 29 28 27 26gw 2 4 21 -3217JAcoWA n4 Bcnjornegr BARAT 22 BoBndung 10 JAWA T In 16

1 PondegJang S 6 2 S g'2 Lebak 7 Wonosobo 25 Su3B Kogr 9 2 8 2 Sukra 216 15, 4 Skabody 8 1 1 Moiokeri 2Kn

I Cioniur 1 - -o o9suruan6Bondutg - --. 'Y ykarta 10 11 13 20 MadL 17 *rblin'~ ~

o TGsrkmnul W212 JA A TIMURKd 19 Ciamis 2NIN OC A I0 Kuningan YO YAb3 75 1 a g 7I1Cirebon JAWA TIMUR 9 Ils .~

12 maolankoaA ATEG H131 Sumedong JAWA T 18 Pocitan 19 Modiun ci

14 Incramayu 1 Cilocap 19 Kudus 2 Ponorogo 20 Mageton15 Subang 2 Bonyumas 20 JIeporo 3 Trenggalek 2 1 Ngawi-1 6Purwakarta 2 Purbolingga 2 1 Demnak 4 Tlulngagung 22 Boionegora1 7Korswong 4 Banjarnegara 22 Semorang 5 Blitar 23 Tuban18aBekasi S Kebumen 23 Temonggung 6 Kediri 24 Larnongan19

Tonggerong 6 Puroorejo 24 Kendal 7 Malang 25 Gresik---M) iLPN5

20 Seroeg 7 Wonsosbo 25 Beotng 8 Lumajeng 26 Bongklceln .j 71 Kodye Sager 8 ~Magelaeg 26 Pelkalongon 9 Jember 27 SompengA

72 Kodya Sukabumi 9 Boyolali(-73 Kodya Bandung 10 KIaten 27 Pemelong 10 Boinyuoongi 28 Pamekasan--

74 Kedya Cirebon 1 Sukolsarjo 28Tegal 11 Boncdoooso 29 Sumenep

12 Wonogiri 29 Brebes 1 iuod 1 KdcKdr D.I.YOGYAKARTA 13 Koranganyar 71 Kodya Magelang 13 Probolinggo 72 Kodyo Blitar .,-

13 Kaangayor 7 Koda Maglang 14 Pesuruan 73 Kodyo molong-14 Stagen 72 Kodyc Surakcarta 15 Sidoarjo 74 Kodys Probolinggo *JO- -

IKulon Progo 5Geeo 73 Kedya Scatibga 16 Moiokerto 75 Kodyo Pasuruan Si. 2 Bantul 16 Blors 74 Kodys Semerong 17 Jombetg 76 Kodya Mojoketlo

3Gunung Kid.1 17 Ren,bang 75 Kodya Pekalongon 18 Ngenjuk 77 Kodya Madiun e _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _i v4 Sleman 18 Pet, 76 Kodys Tegal 78 Kodya Surabaya

71 Kodyo Yogyokarts ________________ ________________

MARCH 1995