World Bank Document · CEO - Chief Executive Officer ERR - Economic Rate of Return EXCO - Executive...

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The World Bank

FOOt amciAL USE ONLY

Repift N 5743

PROJECT COMPLETION REPORT

INDONESIA - PRIVATE DEVELOPMENT FINANCE COMPANY OF INDONESIA (PDFCI)

(LOAN 1363-IND)

June 28, 1985

IDF DivisionEast Asia and Pacific Regional Office

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Currency EquivaLents

US$1 = Rp. 625 (Nov. 15, 1978 to Mar. 31, 1983)US$l - Rp. 1,000Rp I - US$ 0.0010Rp. I milLion US$1,000

PDFCI's Fiscal Year

January 1 - December 31

ABBREVIATIONS

ADB - Asian Development BankBAPINDO - Bank Pembangunan Indonesia (Development Bank of Indonesia)BI - Bank IndonesiaCEO - Chief Executive OfficerERR - Economic Rate of ReturnEXCO - Executive CommitteeFRR - Financial Rate of ReturnGDP - Gross Domestic ProductIDA - International Development AssociationIFC - International Finance CorporationKOF - Ministry of FinancePCR - Project Completion ReportPDFCI - Private Development Finance Company of IndonesiaPPAR - Project Performance Audit ReportRDB - Regional Development BankTA - Technical AssistanceWBG - World Bank Group

FOR OFCIAL USE ONLY


INDONESIA: PRIVATE DEVELOPMENT FINANCE COMPANY OF INDONESIA (PDFCI)

(LOAN 1363 - IND)

Table of Contents

Page No.

PREFACE ................................................................. i

BASIC DATA SHEET. ................... se.es.... ii

HIHL.ICHTS ......................................................... iii

Ir INTRODUCTION................................ee..........a. 1

Project History . .............. 1Evaluation of Results of Previous Bank Group Assistance ... 1

II. THE ENVIRONMENT ....................................... ...... 2

General .................................. ................. 2The Manufacturing Sector ....................... 2The Financial Sector ... ..................... ....... . 3

III. PDFCI's ROLE AND BANK LOAN OBJECTIVES ................ 3

Background and PDFCI's Role .. ........................ * ... 3Objectives of the Bank Loan ...... .. ....................... 4

IV. UTILIZATION OF THE BANK LOAN ........................ 4

Rate of Utilization ....... 4Subproject Characteristics ................................ 5Operational, Financial and Economic Performanceof Subprojects ...................................... 6

V. INSTITUTIONAL ASPECTS ....................................... 6

Overall Perspective . . . 6Management, Organization and Staffing .................... 7Appraisal Procedures and Standards . . . 8Project Supervision ............ . . 8Capital Structure .................. . 9Resource Mobilization .....................,..9........... 9Operating Strategey Modifications . . . 10Equity Investments ....... 10Money Market Operations ................................... 10

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Page No.VI. OPERATIONAL AND FINANCIAL PERFORMANCE ....................... 11

Operations ................................................ 11Financial Performance ..................................... 12FinanciaL Structure ....................................... 12Quality of Term Loan Portfolio ............................ 13Quality of Short-term Portfolio ........................... 14

VII. CONCLUSIONS AND RECOMMENDATIONS ............................. 14

ANNEXES

1. Projected and Actual Disbursements 172. List of Subprojects, Commitment Data and Disbursement 183. Agreements Reached During Negotiations 194. Sectoral and Geographical Distribution of Subprojects 205. Characteristics of Subprojects 216. Major Subproject Completion Delays 227. Financial Performance of Subprojects 238. Economic Performance of Subprojects 249. Board of Directors as of December 3, 1983 2510. Staffing as of December 1983 and 1984 2611. SharehoLders and Capital Structure as of December 31, 1983 2712. Resource Mobilization, 1973-83 2813. Projected and Actual Operations, 1977-83 2914. Characteristics of Commitments 3015. Projected and Actual Summarized Statements of Income, 1977-83 3116. Summarized Income Statements for the years ended Dec.31,1977-83 3217. Projected and Actual Summarized Balance Sheets 1977-83 3318. Summarized Balance Sheets as of December 31, 1977-83 3419. Projected and Actual Financial Indicators, 1976-83 3520. Analysis of Loans in Arrears, 1976-83 3621. Status of Portfolio as of December 31, 1983 3722. Collection Performance, 1977-83 3823. Loan Rescheduling, 1982-83 3924. Lending Rates 4025. Comments Received from the Borrower 41



(LOAN 1363 - IND)

Preface

This report reviews the achievements under Loan 1363-IND to thePrivate Development Finance Company of Indonesia (PDFCI) and covers PDFCI'sprogress and its relationship with the Bank Group, particularly during 1980-83. The period 1973-79, from PDFCI's inception uncil final disbursement andclosing of the first Credit (436-IND) to PDFCI was essentially covered by theprevious Project Completion/Performance Audit Report (No. 3862). The Bankloan was approved on January 25, 1977, declared effective on April 21, 1977and disbursed until April 30, 1982. The undisbursed amount of US$17,000 wascancelled. This PCR was prepared by the Industrial Development and FinanceDivision of the Projects Department, East Asia and Pacific Regional Office,based on a draft PCR prepared by PDFCI and file review. Comments receivedfrom the Borrower are reproduced as Annex 25.

This project has not been audited by the Operations EvaLuacionDepartment.

PROJCT COMPLETION lEORT BASIC DATA SHEET

INDONESIA - - PRIVATZzDKTELOT FINANCE COKPMI? OF DDONESIA (LOAN 1363-N)

zEf PROJE DATA

ApprAisa Aetul oreIt current est te

Retal Project coat (Ms millIom) N.A. About 27.0Ubdarrun or Overrun (c) - V.A.

1nanlCa ict Aent C(sS million) 15.0maborsed ) 15.0cancell ) 0.0 alapidd )to 31D lb 5.2Outataudt to ) XID 9.8

Date Physical Cepooests completed NA.Proportin Competed by Above Date (1) 100Proportion of Tie Overrun CZ) 201 fcFkanoic late of Return CZ) LFinancial Perforaece varldInstitutionl Performance lem tban expected

OTHEn PROJECT DATA

original Actual orIte_ P1i Rewialons fat. Actul

Firsr Mentton In Files or Timetable I I / I 061- 175overnent's Application JLA

Negotiations r _ JLU171J76Board Approval 17r J1/Z/177Loan Agreement De r 7 011281771ffectiveeas Date /_ __ J7_/ 04/21177O.osLng Date 06J30/8' 1V331/81 04/3082 /d

lorrouer Republlc of Indie-aElcting Agency PT Private Developoent Finanee Coup. of IndontoFiscal Year of Borroser Jan - Dec 31Follow o Project _s lone

Loan/Credit umber

Aoue (USS aillion)Loan/Credit Agreement Date

MISSION D

Sent No. of No. of Date oftem by Month, Year aedu Pero M-weeks port

Identificacton //Preparacton - - rPreappraiaal AEPID 07/75 2 1 2 07/17/75Apprai"al AEPID 07176 1.5 2 3.0 olro0777

Total 3.5 5.0 (01)

Supervision I AID 01/78 2.5 3 7.5 041 -/78Supervision II AEPID 09/79 2.0 2 4.0 10/3W079Saperviulon III AEPID 10781 1.0 1 1 -I -_ -Supervision V AEPID 08/82 1.0 1 1 11/01/82Superviaion V 7 J /Couplet ion AEPID - - - 01/3U85

Total 6.5 13 StlODT)

COUNTRY EXANGE RAES

Name of Cirrency (abbreviation) Rupiah RpYear:

Appraisal Tear Average 1976 Exchange Rate: OSSI - 415Intervening Years Average - US$1 'Cmletito year 1982 USS1 - 625

/a About S17.000 was cancelled.7W As of hy 31, 1985.7;7 Dkte of fiel disbursement vs. origina2 Closing Dsae.711 Final disbursument date.

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(LOAN 1363 - IND)

Highlights

PDFCI has been actively assisted by the World Bank Group since itsinception in 1973, and it obtained an IDA credit ($10 million) in conjunctionwith an IFC capital subscription, ($0.48 million) in 1973, a Bank Loan ($15million) and technical assistance in 1977. At its creation, it was intendednot merely to set up another financial institution, but one which wouLdintroduce innovative financial services and make significant contributions tothe Indonesian financial system.

PDFCI's principal objectives for the IDA credit were consequentlyvery broad. It was expected to influence Government policy related to thefinancial sector, particularly capital market development, in addition to theobjectives of mobilization and transfer of resources and institution build-ing. With hindsight it is now much more apparent that the unconducivefinancial environment in which PDFCI was operating made the achievement of thebroader term goals extremely difficult, if not impossible. In the second Bankoperation, these broader sector objectives were relegated to long-term goals,while special emphasis was given to sound development of Indonesian industryby providing funds on suitable terms and strengthening PDFCI as an institu-tion. Even so, the broader sectorial expectations for PDFCI were tooambitious (para. 3.02).

Regarding the narrower institutional objectives of providing soundterm financing to industry, PDFCI's performance has been mixed. PDFCI waslargely able to establish the necessary technical capacity for project evalua-tion, but was less successful in assessing the qualitative aspects of projectrisk, due to difficuLties in recruiting and keeping experienced staff(para. 5.06). This in conjunction with ineffective project supervision hasresulted in poor overall portfolio quality, high arrears and relatively poorloan collections (para. 5.07). The Bank loan proceeds, on the other hand,were transferred to relatively sound industrial projects, whose financial andeconomic impact were generally satisfactory (paras. 4.05-4.06). PDFCI'sequity financing program did not bear out expectations and was curtailed(para. 5.11). PDFC' was also not able to introduce innovative services suchas syndication and underwriting and raise any resources either in the domesticor international capitaL markets largely due to circumstances beyond itscontrol, however. It remained exclusively dependent on resources from BankIndonesia (BI) for its term lending operations (para. 5.09).

By and large, PDFCI has remained a small institution with a limitedcapital base, working from the head office in Jakarta without the support of abranch network, and an asset base not large enough to influence the financialor industrial sectors or make a significant impact on development banking. In

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view of these constraints on its development banking activities, PDFCI sawgreater potential for further growth and development in money marketactivities. These activities rapidly grew into PDFCI's mainstay and by theend of 1983 accounted for 56Z of total assets and 65Z of gross revenue, butwere not profitable particularly in view of the need for large write-offs andprovisions for potential losses (para. 5.12).

Lessons to be learned from the project are (para. 7.05):

- PDFCI's original objectives were too broad and ambitious in thelight of the environment in which it was operating and should havebeen further modified in the context of the second Bank operation in1977;

- PDFCI was organized as a predominantly private institution.However, it needed strong Government support in order to grow andprosper and after the Government's decision not to guarantee itsforeign borrowings from multilateral financial institutions, it wasunable to find other sources of external financing. StrongGovernment support is a condition sine qua non for the developmentof an institution of this type, particularly in the early stage ofdevelopment;

- a private institution like PDFCI is not likely to be able to play amajor role in mobilizing domestic resources, unless the overallpolicy environment and state of capital market development areconducive;

- a major involvement in short-term money market operations for arelatively inexperienced institution like PDFCI is inherently riskyand great prudence should be exercised and proper guidelines shouldbe in place before becoming involved in such activity on a majorscale; and

- while PDFCI has developed some project appraisal capability asevidenced by the relatively effective utilization of Bank funds, itneeded to give more attention to projects financed from othersources and to more systematic project supervision.

In addition to short-term measures to improve its operational andfinancial performance, PDFCI is faced with the major issue of whether tocontinue focussing on development banking given the constraints it is exper-iencing or broaden its scope of financial activities. Recent work done by theBank on the financial sector in Indonesia indicates that there is a need forspecialized development banks such as PDFCI to provide longer term finance. Amajor issue concerns the steps necessary to enable such institutions to reachgreater commercial scale either through adjustment of Government policy orthrough merger with other institutions faCAng similar problems (para. 7.07).



(LOAN 1363 - IND)

I. INTRODUCTION

1.01 Project History. The Private Development Finance Company ofIndonesia (PDFCI), incorporated in 1973, was sponsored by a group of leadingprivate Indonesian investors and Bank Indonesia, and actively supported by theBank Group which participated in its initial capitalization with an IDA Credit(Cr. 436-IND) of $10 million and an equity investment by the InternationalFinance Corporation (IFC) amounting to 8Z of PDFCI's original share capital.IFC was instrumental in organizing a group of foreign financial institutionswhich, together with its investment of US$482,000, brought foreign participa-tion in PDFCI's share capital to 40Z. In 1977, IBRD approved a Loan ofUS$15 million to PDFCI (Ln. 1363-IND) which became effective in the sameyear. Both the Credit and Loan were for the financing of industrial projectsand technical assistance to PDFCI. In line with the general guidelines, thisPCR covers the achievements under Loan 1363-IND, PDFCI's progress and itsrelationship with the Bank particularly during 1980-83 and focusses on theperformance of the subprojects financed under the Loan.

1.02 Evaluation of ResuLts of Previous Bank Group Assistance. A ProjectPerformance Audit Report (PPAR) (No. 3862), covering IDA Credit 436-IND, wasprepared by the Operations Evaluation Department in 1982, on the basis of aProject Completion Report prepared by the East Asia and Pacific RegionalOffice. The PPAR report covered in detail PiFCI's evolution, the relationwith the Bank Group and institutional developments from PDFCI's inceptionuntil late 1979. The principal findings and recommendations of this reportwere as follows: (i) the introduction of a western-style corporate managementstructure instead of the traditional collective two-board system impededrather than supported the management process and was not in consonance withthe cultural background, attitudes and the way business is normally conductedin Indonesia; (ii) PDFCI's set of corporate objectives, such as a pace-settingrole to influence financial sector policies and introduction of an array ofnovel activities, were far too ambitious in the light of the lack of thecaliber of staff needed and the long lead time to develop such expertise;(iii) in-house project supervision is a critical ingredient of developmentbanking and must not be commissioned out to a consulting firm which PDFCI did;and (iv) given the Indonesian interest rate regime at that time, PDFCI was notable to raise any domestic resources on its own to supplement those suppliedby BI. Moreover, the expectation that PDFCI would raise foreign currencyfunds abroad from comercial resources in addition to official resources didnot materialize and PDFCI remained a conduit for official resources. Afterthe Government changed its policy and decided not to issue anymore guaranteesfor the borrowing of private institutions (such as PDFCI) from international

institutions,!' PDFCI became exclusively dependent on the supply of long-termfunds from Bank Indonesia (BI) and the Government.

II. THE ENVIRONMENT

2.01 General. The period of project implementation was marked by politi-cal stability and economic growth. During the seventies, Indonesiaexperienced strong and diversified economic growth with GDP rising at a rateof almost 8% per annum. This was associated with rapid increases in publicexpenditures, total investment and savings. The dominant influence was thehuge expansion and large variability in foreign exchange from oil. Oilreceipts provided about 70Z of Central Government receipts and helped financethe sustained increase in demand via the budget. In 1982, however, there wasa sharp deterioration in the economic outlook with real GDP stagnating(showing a 0.1% decline in constant 1981 prices) - the worst performance in adecade. Total export revenues fell by 15%, while imports recorded an increaseof 9% over the previous year. The decline in oil prices in early 1983accentuated these difficulties. To address the balance of payment problemsand enable continued economic growth on a sustainable basis, the Governmenttook a number of steps: in March 1983, it devalued the Rupiah by 28% againstthe US dollar, in May 1983, it announced the rephasing of many projects toreduce imports and in June 1983, it deregulated the financial sect r byfreeing lending (except for selective priority programs) and deposit rates andeliminating credit ceilings.

2-.Ok The Manufacturing Sector. Following the 1973 increase in oilprices, the industrial sector, including mining and energy, became the fastestgrowing sector in the economy with an average annual rate of growth of 11% be-tween 1971 and 1980. It now accounts for 33% of GDP as compared with 20X in1970 and for 12Z of total employment, 80X of the Latter in small enter-prises. Manufacturing exports, which in the late 1970s and early 1980s grewrapidly from a very low base, now account for 14% of non-oil exports and about5% of total exports. The industrial and manufacturing sectors account forabout 12% and 9Z respectively of total employment. Small enterprises provideabout 80% of total employment, while medium- and Large-scale, capital-intensive enterprises, which employ only 132 of the labor force in the sector,contribute about 80% of the total value-added.

2.03 During the 1970s, industrial policies were inward-oriented. A highlevel of protection and quantitative restrictions favored import substitu-tion. The industrial sector which emerged from these policies did notgenerate sufficient employment opportunities or export revenues and is charac-terized by relative inefficient, capital intensive firms. However, the early1980s saw a policy shift and the Third Five Year Development Plan (1979180-1983/84) places greater emphasis on the manufacturing sector and focuses onstructural changes, employment generation, protection of fledgeling enter-

I/ PDFCI was precluded from approaching IBRD and ADB for new financing sinceabout 1980.

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prises, promotion of labor intensive manufactured exports and export financ-ing. In addition to the Rupiah devaluation, the Government introduced, overthe past two years, initiatives in the areas of export finance, guarantees,credit and insurance. Terms of payment for exports were liberalized andexporters' access to working capital eased.

2.04 The Financial Sector. The financial sector in Indonesia consists ofBank Indonesia (BI), the country's central bank, 5 state-owned commercialbanks, the state-owned development bank (BAPINDO), 79 private national commer-cial banks, 10 foreign banks, 3 development finance companies and 26 RegionalDevelopment Banks (RDBs). Despite the apparent diversity of financialinstitutions, the financial sector is characterized by a poorly developedcapital market, asset concentration (the five state-owned commercial banksaccount for almost 80% of the assets of all deposit money banks and BAPINDOfor 33Z of outstanding term loans to the industrial sector), and a dearth oflong- term credit. The degree of monetization is lower than that in compar-able LDCs and access to banking facilities outside urban areas is limited.Until recently, the sector was tightly controlled by BI with a regulatedinterest rate structure for both deposits and loans (with interest ratesgenerally being lower than prevailing inflation rates), credit ceilings andspecial rediscount windows for a number of Government-sponsored creditprograms which accounted for about 25% of credit outstanding. Although thissystem generaily satisfied credit demand and succeeded in channeling resourcesto priority sectors and programs, it depended on continuing windfall oil prof-its and did not provide incentives for mobilizing financial savings. In June1983, the Government introduced a far-reaching financial reform including theliberalization of interest rates for the majoricy of deposits and lending andthe discontinuation of credit ceilings. The scope of rediscounting facilitieswas reduced and rediscounting rates unified at 121. These moves resuLted in asharp rise in interest rates, an increase in time deposics of the bankingsystem and in substantial capital inflows. The Bank has agreed to aGoverament request to provide a financial sector mission which visitedIndonesia in May/June 1984 to review a number of financial sector issues.

III. PDFCI's ROLE AND BANK LOAN OBJECTIVES

3.01 Background and PDFCI's Role. While in the late 1960s and early1970s the financial system in Indonesia was able to provide short-term credit,almost no medium or long-term credit was available. The introduction of theINVESTASI program in 1969 was aimed at dealing with this constraint and makingmedium-term loans available to all sectors through the state-owned commercialbanks and Regional Development Banks (RDBs) with Bank Indonesia financing asignificant proportion of the program. Furthermore, Bank PembangunanIndonesia (BAPINDO) was also reorganized into a more active and effectivesource of industrial finance. At the same time it was recognized, however,that BAPINDO would only be able to service a limited segment of the industrialsector and that there would be need for other development finance institu-tions. Therefore, the Government and the World Bank Group (WBG) decided onthe desirability of establishing a predominantly private-owned developmentfinance company with the capacity to attract funds from various sources,finance private sector enterprises and provide them with a wide range of

financial and technical services. As a result of these considerations, PDFCIwas established (incorporated) in 1972 and started operations in 1974. Itspaid-in share capital of Rp 2.5 billion was owned by Indonesian shareholders(602) including Bank Indonesia, and foreign shareholders (40%) including IFC(para. 5.08). Total Bank Group assistance to PDFCI comprised the following:(i) an IFC subscription in 1973 of about $482,000 or about 8% of PDFCI'Scommon stock; (ii) an IDA Credit of $10 million, including $105,000 fortechnical assistance (TA) in 1973; and (iii) a Bank loan of $15 million,including $213,500 for TA in 1977. However, the Government decided in 1979 tochange its policies so that private institutions (such as PDFCI) could noLonger receive Government guarantees for borrowing from multilateralinternational institutions. The Bank was therefore unable to continue to workwith PDFCI in the context of new loans.

3.02 Objectives of the Bank Loan. PDFCI was originally created notmerely as another financial institution, but one that would make a significantcontribution to the Indonesian financial system. It was expected to: (i}transfer resources particularly to private sector enterprises; (ii) mobilizeresources on its own in the domestic and international markets, thus graduallyreducing its dependence on funds from official sources such as BI and theBank; (iii) provide a wide range of technical and promotional assistance; and(iv) introduce new financial services such as syndication and underwriting.rn addition, it was expected to influence government policies reLated to thefinancial sector and contribute to capital market development. At the timethe Loan was made, PDFCI had already made significant progress in resourceallocation and institution building, but further actions were needed totransform it into an efficient and innovative financial intermediary(paras. 5.01-5.02). Largely due to the unconducive environment, PDFCI wasLess successful with respect to the remaining objectives. However, under thesecond Bank operation the broad objectives were relegated to long-term goals,while specific emphasis was given to short-term objectives such ascontribution to sound development of Indonesian industry by providing financeon suitable terms and strengthening PDFCI as an institution. Even so, thebroader sectoral objectives were too ambitious given -he overall economic andpoLicy environment.

IV. UTILIZATION OF THE BANK LOAN

Rate of Utilization

4.01 PDFCI's projected and actual disbursements are shown in Annex 1.Commitments and disbursements under the loan were initially (1977/78) veryslow due to internal problems in PDFCI such as staff constraints, but pickedup from 1979 or.ward. The period for the commitment and submission of subloanshad nevertheless to be extended by 18 months (to December 31, 1980), while theClosing Date was postponed by six months (to December 31, 1981). A total of29 subprojects were financed under the Bank loan, 15 of which, accounting for77% of the total loan (Annex 2), were above the free limit (US$400,000) andconsequently fully revieuad by the Bank. The agreements reached duringnegotiations and PDFCI's compliance with them are shown in Annex 3.

Subproject Characteristics

4.02 Average subloan size was about $510,000 ranging from about $120,000to $1.8 milLion. No maximum loan size was set under the Loan. Most subloanswent to whoLly Indonesian-owned companies, except 5 subprojects which werejoint ventures with foreign partnership. Twenty five subprojects were jointlyfunded by Bank funds, domestic resources (Bank Indonesia's special funds), andowners' equity, while the remaining four were fully financed with Bank loanfunds and equity. In conjunction with loan financing, PDFCI also made threeminority investments in a joint venture and two indigenous firms. PDFCI'sloan financing accounted only for some 32Z of total project cost,- rangingfrom 0.51 to 93Z, of which Bank funds accounted for some 18%. The remaining68Z was contributed by financing from other institutions and owners' equity.The Bank loan had also a technical assistance (TA) component of $213,000 tocover the cost of the services of an expatriate technical expert until June1979.

4.03 The sectoral and geographical distribution of subprojects financedunder the loan are shown in Annex 4. The sectoral distribution of subprojectswas reasonably diversified. Light industries predominated, accounting forabout 34Z and 42Z by number and loan amount. The textile industry was next(14% and llZ), followed by metal products (10% and 19Z)and chemicals (10%each). Geographically, 79% of all subprojects were located in Java (59Z inWest Java, 3Z in Central Java and 17% in East Java), 14Z in Sumatra and 7Z (2subprojects) in Kalimantan. The skewed distribution in favor of West Java,which includes metropolitan Jakarta, partly results from PDFCI's operatingfrom its Jakarta head office without a branch office network (thecharacteristics of PDFCI's overall portfolio are dealt with in paras. 6.02-6.03). However, this geographical distribution is largely consistant with thegeneral pattern of industrial investment in Indonesia.

4.04 Cost and Time Variance of Subprojects. Of the 29 total subprojects,18 experienced cost overruns in excess of 10%, six of which in excess of 30%of the original cost estimates. The remaining projects have more or lessborne out appraisal expectations (Annex 5). Eighteen subprojects were notcompleted on schedule, of which 8 had serious delays of between 6-24 months.According to PDFCI, most of the delays were attributable to problems inobtaining government licenses, customs clearance, residual financing or theinability of the sponsors to raise the necessary equity funds on time (Annex6). However, only two of the subprojects with serious implementation delayswere also faced with serious cost overruns. On the whole, PDFCI's dataindicate that its project appraisals were apparently based on optimisticassumptions regarding investment cost estimates and implementation schedules.

21 Excluding one exceptionally large subproject (P.T. Semen Andalas). If itwould be included, the share of loan financing would only account for 8%of total project cost.

Operational, Financial and Economic Performance of Subprojects

4.05 The financial performance of subprojects is shown in Annex 7. Du/to the delays in project completion and start-up of commercial operations,-operational results were only available for some 55Z of all subprojects.Actual sales of these subprojects exceeded original appraisal estimates in502 of all cases, some by a considerable margin, another 23% were in line withoriginal estimates, while the remaining 27Z have failed to realize appraisalexpectations. On the whole, these results are satisfactory. PDFCI's profitprojections, however, turned out to be less reliable. About 70Z of thereporting firms have not achieved the original targets for the first year offull operation and two of them have even incurred losses in excess of 100% ofnet worth. About 50Z of all firms were on target in the second year of fulloperation. As of June 30, 1983, 8 subloans were in arrears for more than 3months, of which 5 were classified as serious problem cases while one subloanwas under foreclosure. Revised financial rates of return (FRRs) for a sampleof 20 subprojects yielded an average of 21.6% as compared with the originallyprojected average of 26.5Z for the same sample; revised rates ranged from 10-38Z.

4.06 Economic Performance. The economic performance of subprojects isshown in Annex 8. Twenty-four - of the 29 projects resulted in the creationof 6,983 new jobs at an average investment cost of Rp 26 milLion (about$26,000) per job, as compared with the original appraisal estimate of 6,183jobs from all projects at an average cost of Rp 24 milion per worker. Thenumber of newly created jobs is likzly to increase even further when all 29projects have come on-stream. Eighe subprojects were expected to export theirentire production, but only one had actual export sales at this time (76% oftotal sales). Actual value added bore out appraisal expectations in 7 casesout of 12 for which data are available. Revised economic rates of return(ERRs) for a sample of 20 subprojects yielded an average of 21.5%, rangingfrom 1OZ-40Z, as compared with the original average of 25.2:.

V. INSTITUTIONAL ASPECTS

Overall Perspective

5.01 PDFCI was established in 1972 in recognition of the need and scopefor an additional source of development financing in Indonesi:. However, thebasic objective was not merely to create another financial institution, butone that would make significant contributions to the Indonesian financialsystem in addition to the usual resource allocation, mobilization andinsitution building objectives. PDFCI's objectives are dealt with in detailin para. 3.02. However, the objectives set for PDFCI, even the longer term

3/ As of December 1983, six projects were under construction, while another5 were not yet fully operational.

4/ The remaining projects were not yet fulLy operational.

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objectives, proved to be overly ambitious, particularly in view of theunconducive financial environment in which it was operating. PDFCI could notmobilize domestic and foreign,resources, introduce a wide range of financialand technical serivces and fost-r capital market development without major andsustained Government support and major changes in the overall policyenvironment.

5.02 In retrospect, PDFCI remained a relatively small institution with anequity of some $6.5 million and asset base of less than $100 million, roughlya tenth of BAPINDO's size. PDFCI was nevertheless able to establish thenecessary technical capacity for project evaluation, but it was less success-ful in the quaLitative judgement of project evaLuation and projectsupervision. LargeLy due to circumstances beyond its concrol (seepara. 5.09), PDFCI has not been ab\e to raise domestic resources, except forshort-term interbank funds, nor tap'..international capital markets and hasbecome exclusively dependent on BI f%r its term resources. As a result ofthese constraints, PDFCI steered away from its original development task andventured into money market operations. These operations started as short-terminvestment of liquid funds, but have now become a major activity, accountingfor about 56Z of PDFCI's assets and 62X of its income. Initially, theseoperations were confined to the highly secured interbank market. However,PDFCI subsequently expanded into the more risky corporate sector withoutsetting-up strict internal policy guidelines and control mechanisms, whichresulted in a deteriorating portfolio. These shortcomings were dealt with :nconjunction with a supervision mission to PDFCI in August 1982.

Management, Organization and Staffing

5.03 PDFCI was established with a western-type corporate structurecomprising the Board, an Executive Committee and Chief Executive Officer (CEO)in deviation from the traditional Indonesian two-tier Board structure. Thecomposition of PDFCI's Board of Directors as of December 31,1983 is attachedas Annex 9. Since the Board structure proved unconducive for its development,PDFCI agreed in principle to the Bank's suggestion of adopting the two-tierBoard system and as a first step promoted two of its senior managers to theposition of Deputy Managing Directors. The understanding was that once theDeputy Managing Directors demonstrated their management capabilities, a fullmove towards the formation of a full Board of Managing Directors would bewarranted. In the interim, PDFCI continues with the current arrangement of aBoard of Directors, an Executive Committee and a CEO. lrhen PDFCI's CEOretired in 1982, the Chairman of the Board took over on an emergency basisuntil a new manager can be found. Since almost three years have passedwithout the identification of a new manager or a more permanent arrangementfor the present CEO, this issue should now be dealt with.

5.04 In April 1982, PDFCI's revised its organizational structure: thefour Project Departments were merged into two larger Project Departments, oneeach for Eastern and Western Indonesia. Each new Project Department hasseparate units for project appraisal and supervision. Originally, projectappraisal and supervision units were jointly supervised by the two DeputyManaging Directors with some risk of overlapping of authority. In 1984, thisarrangement was changed. One Deputy Managing Director was assigned

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responsibility for a special group in charge of problem projects. BothProject Departments are now supervised by one Deputy Managing Director.Project supervision, originally assigned to an outside consultating firm:/requires further strengthening. PDFCI's management is considering theestablishment of a separate supervision department. The other features of the1982 reorganization were: (i) the separate Engineering Department was mergedwith the two Project Departments; (ii) a separate Research and Development andStaff Training Department was set up; and (iii) the separate Money MarketDepartment waas made a unit of the Accounting and Finance Department.

5.05 Staffing. Staffing has become a major problem. Due to Low staffmorale in view of PDFCI's unclear future and emerging competition particularlyfrom a large number of newly established leasing companies, PDFCI has had ahigh staff turnover, particularly in 1982 (182 as compared with 13.2% in1981). Although PDFCI has been able to increase its staff from 96 (1983) to101 (1984), of which 59 are professionals (Annex 10), current staff strengthis still inadequate both in terms of number and experience. PDFCI is findingit increasingly difficult to attract capable and talented staff.

Appraisal Procedures and Standards

5.06 As a result of the training provided by expatriate advisors duringthe early years, PDFCI was able to introduce project appraisal methodology anddevelop good analytical capabilities in its staff. It was less successful inthe qualitative aspects of assessing project risk due to difficulties inrecruicing and keeping experienced professional staff. The quality of PDFCI'sreports, which was varied at times, has generally deteriorated due to therecent high staff turnover and the recruitment of inexperienced staff.

Project Supervision

5.07 PDFCI discontinued its previous practice of using Panca Bina Esa, anoutside consulting firm, for supervision of its subprojects. Supervision isnow done by sep9rate units in the Project Departments, while problem projectsare referred to a special unit headed by a Deputy Kanaging Director. PDFCIhas taken a number of steps to streamline and improve project supervision:problem accounts are closely monitored and where necessary and feasible, legalaction is taken and efforts are made to comply routinely with the requirementsof project visits, progress report and monitoring. Moreover, PDFCI is cur-rently considering the establishment of a separate supervision department.These measures are affected, however, by lack of staff, both quantitativelyand qualitatively, and managers tend to give preference to making new loansover project supervision. PDFCI should take appropriate corrective steps toovercome these problems.

5/ This practice has since been discontinued (para. 5.07).

-9-

Capital Structure

5.08 PDFCI's authorized capital was increased in 1980 from Rp. 5 billionto Rp. 7 billion and its subscribed capital from Rp. 3.7 billion to Rp. 6.95billion. However, at that time PDFCI's Board decided to defer the calling ofthe capital. Subsequently, in 1983, two existing Indonesian shareholders (BIand AJB Bumiputera 1912) and the Chairman of PDFCI voluntarily paid inRp. 839 million against their uncalled share subscriptions, raising the totalpaid-in capital to Rp. 4,539.5 million. IC has since sold 25% of its orig-inal equity holding in PDFCI and did not exercise its subscription rights in1980. Consequently, its holding has been reduced from the original 8X to 2.2%of subscribed capital and 3.4% of paid-in capital. The original proportion ofdomestic to foreign holdings changed from 60:40 to 68:33 (Annex 11). As ofDecember 31, 1983, PDFCI's cotal equity stood at Rp. 6,871 million includingreserves and retained ernings of Rp. 2,238 million (originally projected Rp.6,942 millions).

Resource Mobilization

5.09 Resource mobilization in the domestic and international capitalmarkets was one of PDFCI's principal objectives, to reduce over time itsdependence on official funding from sources such as BI and IBRD. However, dueto circumstances beyond PDFCI's control, it continued to function merely as aconduit for official resources. The failure to mobilize any new resources onits own was due to the fact that until mid-1983, PDFCI's lending rates weredetermined by BI at a level not high enough to cover borrowing costs and allowPDFCI to earn an adequate spread. As a consequence, it was not feasible forPDFCI to depend on capital market resources even if it could have raisedthem. BI provided PDFCI with the needed funds at subsidized rates. Evenafter the liberalization of interest rates in June 1983, resource costs havebeen too high and the capital market too rudimentary for PDFCI to mobilizeterm resources through the issue of debt instruments. In addition to theconstraints in the domestic capital market, PDFCI has also not reached thenecessary size and financial stature which would enable it to raise foreigncurrency funds in the international capital market. Moreover, since 1979, ithas also been precluded from IBRD financing due to a change in Governmentpolicy, whereby private institutions such as PDFCI were not able to secureGovernment guarantees to support their borrowing from multilateralinternational institutions. Hence, PDFCI wiLl continue to depend on BI forits entire term resource needs, unless the financial environment changes. Byand large, however, BI has supplied PDFCI with adequate local currency funds.

5.10 Since inception, PDFCI obtained long-term domestic currencyresources of about Rp. 57.5 billion (outstanding 46.9 as of Dec. 31, 1983)from the Government including subordinated loans of Rp. 5.9 billion. BankIndonesia's special Funds, Liquidity Credits and Liquidity Credits for equityfinancing, carrying interest rates of between 3% and 11.6%, accounted forabout 71%, 24X and 5% respectively. PDFCI's foreign exchange resources camefrom the IDA Credit ($10 million) and Bank Loan ($15 million).

- 10 -

Operation Strategy Modifications

5.11 Equity Investments. PDFCI generally maintains equity options up to20% of all loan financing, but has not exercised them. However, PDFCI made 20direct equity investments in conjunction with loan financing, amounting toRp. 3.5 billion. About 80% of these investments were approved during 1980-82. Its total equity portfolio of Rp.2,936 million as of December 31, 1983,was invested in 15 companies. Most of these companies did not do well. Nineof them, accounting for about 50% of total equity investment, incurredlosses. PDFCI also absorbed substantial losses from the liquidation of onecompany and the restructuring of another. PDFCI's auditors estimated thepotential loss from equity investments to be in the vicinity of Rp. 800 mil-lion as compared with provision of Rp. 1,873 million including provisions forpossible loan losses (Rp. 1.6 billion). Owing to this unsatisfactoryexperience with its equity operations in the past, PDFCI decided to curtailthis activity and made only one small investment in 1983 (Rp. 80 million).

5.12 Money Market Operations. Money market placements, which started asshort-term investment of liquid funds, has now become a major activity ofPDFCI's for which it borrows in the market. Between December 31, 1979 and1983, total placements (maturities up to 6 months) jumped from Rp. 9.7 billion(39% of total assets) to Rp. 58.2 (56% of toal assets), while borrowings(mainly on the basis of promissory notes issued to banks) increased from Rp.5.4 billion to Rp. 42.3 billion. Initially, PDFCI's money market investmentswere confined to highly secured interbank operations which provided modest butsafe returns. SubsequentLy, lured by higher yields, PDFCI starteg,buyingpromissory notes from the more risky non-banking corporate sector- whichaccounted for 77% of total money market transactions as of June 30, 1982. Inexpanding its money market operations, PDFCI did not pay proper attention tosetting-up strict internal policy guidelines and control mechanisms to ensuregrowth of a sound portfolio. Consequently, PDFCI experienced a majordelinquency problem on its money market operations. As of June 30, 1982,money market advances amounting to Rp. 7.0 billion (32.90% of total) anduncollected interest of Rp. 2.0 billion were in jeopardy. As a consequence,the spread between the yield on advances and borrowing cost, which waspositive in 1979 (8.5%) and 1980 (4.8%) became negative in 1981 (-0.5Z) and1982 (-4.8%). On the basis of a rough estimate, write-offs of Rp. 1.4 billionwere expected for which provisions of only Rp. 589 million were available.

5.13 PDFCI's Board and management were aware of the alarming status ofthe money market operations and have taken the following remedial actions:(i) formation of a high powered task force to closely supervise salvaging of24 problem accounts; (ii) procedural changes in the approval process throughestablishing of an Investment Committee; weekly reviews of the entireportfolio and renewal of accommodations only after 2-4 weeks; (iii) efforts toimprove PDFCI's colateral position; (iv) more selective approach such as

6/ Approval by the Bank of these substantial changes was not formallysought, but all papers submitted to PDFCI's Board and Excom were alsocopied to us.

- 11 -

loans to be made to banks or against bank guarantees; and (v) strengthening ofPDFCI's legal position. The Bank's supervision mission which visited PDFCI in1982 (Report dated Nov.1, 1982) made the following additional recommenda-tions: (i) extensive training of staff involved in money market activities inIndonesia as well as abroad; (ii) hiring of a money market expert to assist intraining and organize operations on a more systematic basis; (iii) revision ofpolicy guidelines governing money maket operations which require updating;(iv) stipulation of ceilings for money market advances, strict criteria forplacements, specific minimum time hiatus between full settlement and renewalof facility; refusal of insecured placements and more frequent reporting toBoard/Executive Committee on status and compliance with guidelines.

5.14 The recommendations resulted in a noticeable improvement. As of Dec31, 1983, Rp. 9.61 billion or 16.5% of PDFCI's placements were past due (13%of which for more than 60 days) as compared with 26.1% in 1982. Provisions ofRp. 2.21 billion were available to cover possible losses (para. 6.08)

VI. Operational and Financial Performance

6.01 Operations. Although it was PDFCI's objective principally toprovide private enterprises with medium, long-term and equity financing, andtechnical and managerial services, money market and short-term lending opera-tions have become increasingly important for PDFCI, providing more than 60% ofits income. Equity financing, on the other hand, has remained very limitedand PDFCI has not been able to undertake other forms of financial servicessuch as underwritings and syndications.

6.02 Since inception (until 1983), PDFCI has committed Rp. 65.12 billionfor 117 loans and Rp. 3.44 billion for 20 equity operations (Annex 13). Newprojects accounted for about 56% of all loans. Geographically, PDFCI'soperations were heavily concentrated in Java, which absorbed about 82% oftotal assistance (by amount as well as by number). West Java alone (includingJakarta) absorbed about 55Z. Light industry received 22% and 27% of totalassistance by amount and number, followed by agribusiness (20% and 18%) andtextile industry (13% and 171).

6.03 Details of PDFCI's operations during 1977-83 are given inAnnex 14. PDFTI initially had a slow start and was affected by a high rate ofcancellations_ due to ill-puypared project proposals and constraints in itsorganization and procedures.- During 1979-81, a period of strong growthfollowed, but could not be sustained, due to PDFCI's running out of foreigncurrency funds (in 1982) although there were rupiah funds available. Actualoperations did not bear out original appraisal expectations and accounted for

7/ During inception until 1983, 23% (33 projects) were cancelled out of 145applications.

8/ Lack of understanding of and compliance with loan conditions by projectsponsors.

- 12 -

only about 78% and 67X of approvals and commitments, respectively, during1980-83. Foreign currency loans accounted for almost 34% during 1977-80 andabout 39X and 20% by number and amount since PDFCI's inception. As ofDecember 31, 1983, about 90% of PDFCI's approvals were committed and 94% oftotal commitments were disbursed, reflecting a very satisfactory rate ofproject assistance.

6.04 Financial Performance. PDFCI's projected and actuaL summarizedincome statements and financial indicators for 1977-83 are shown in Annexes15, 16 and 19. Total income during 1980-83 grew at a faster pace (about 43%p.a.) than originally expected (about 35% p.a.) due to PDFCI's increasedexpansion of its money market activities which contributed an increasing shareto PDFCI's gross income (64% in 1983). However, PDFCI's costs increased evenfaster (about 51% p.a.) during this period and particularly during the lasttwo years, when PDFCI's management decided to write off part of its short-termassets (Rp. 596.9 million in 1983) and provide adequate provisions forpotential losses from its long-term/equity portfolio and money marketplacemet:ts. During 1980-83, actual income and costs exceeded projections by42 and 13X, respect-vely. When the new CEO took over PDFCI's management on anemergency basis in 1982 (para 5.03), he introduced a new strategy which wasaimed at maximisation of profits from money market transactions to enablePDFCI to vet aside sufficient provisions to cover its potential losses fromthe portfoLio.

6.05 Although its provisions at the end of 1983 were not yet fullyadequate, PDFCl's profit performance showed signs of recovery in 1983 despitethe formation of large amounts of provisions for doubtful accounts. Netprofits which declined from 1.8% of total average assets in 1980 to 0.3% ini1982, recovered in 1983 to 0.6% (projected: 0.9%). Return to equity showed asimilar trend; declining from its peak of 13.8% in 1981 to 3.5Z in 1982,recovered to 9.2% in 1983. PDFCI's spreads followed a similar trend, but werestill ahead of the appraisal expectation.- Largely due to an increased assetbase, PDFCI's general and administrative expense decreased from 2.1% in 1980to 1.4 in 1983 (projected 1.6%).

6.06 Financial Structure. PDFCI's summarized projected and actualbalance sheets and financial indicators for 1977-83 are attached as Annexes17-19. %uring 1980, PDFCI's assets growth (about 39%) has outperformed pro-jections (about 16%), particularly due to its fast growing money marketoperations. Total assets were financed by short-term liabilities (43Z), long-term debts (52%) and equity (5%) as compared with a projected 33Z, 59% and8%. Although no dividends were paid during 1982-83, the growth of PDFCI'sequity base lagged behind projections particularly due to its rather poorshowing during the past two years. PnFCI's liquidity as welL as debt servicecover were satisfactory throughout.10 Although its equity base had grown inline with projections, PDFCI was nevertheless faced with gradually increasing

9/ Actual spread in 1983: 5.4% as compared with a projected spread at 4.6%.

10/ In 1983, PDFCI's debt service cover declined to 1.1.

- 13 -

leverage and its long-term debt/equity ratio stood at 4:2:1 in 1981. In viewof the management and financial problems, it might have been prudent for PDFCIto maintain its gearing ratio to a minimum. However, it seemed impossiblethat PDFCI could have convinced its shareholders or outsiders to contributeany additional capital. Moreover, a substantial part of PDFCI's long-termdebts came from BI on favored terms and therefore servicing of debts is not asmuch a burden as it would be if PDFCI were to borrow on market terms. Anotherimportant factor was that PDFCI had no foreign exchange risk exposure. Underthese circumstances the Bank agreed (in 1982) to the requested raise of thelong-term debt/equity ratio to 6:1. Its actual leverage stood at 3.7:1 as ofthe end of 1983, due to the capital increase and agreement with the Govern-ment, whereby the repayments falling1 due on the IDA credit and IBRD loan wouldbe converted into subordinated loan- repayable on a longer term. This isexpected to help PDFCI to remain within the approved 6:1 ceiling for some timeto come.

6.07 Quality of Term Loan Portfolio. Details on the quality of PDFCI'sterm loan portfolio (collection performance, analysis of loans in arrears,loan reschedulings and status of portfolio) are shown in Annexes 20 to 23.PDFCI is facing a high default rate on both its term loan portfolio and short-term placements. Arrears on term loans increased until 1981, when theyaccounted for 14.7X of loan portfolio outstanding. Thereafter they werebrought under better control and declined, partly due to an increase inportfolio, to 9.6% as of December 31, 1983 when some 18.3% of PDFCI'sportfolio was affected by arrears. The arrears relate to 24 accounts, or26.4% of total portfolio in terms of number. PDFCI considers 14 cases,accounting for about 132 of its portfolio, to be in the serious category.PDFCI has so far rescheduLed 24 (Rp. 11.7 billion) of its 91 accounts, 16 ofwhich (4.6 billion) were rescheduled during 1982-83. PDFCI's collectionperformance was mixed during 1980-83. After a decline from about 66% in 1978to 52Z in 1981, a drastic improvement was achieved in 1982 (71Z) but could notbe sustained in 1983 (64%). PDFCI's auditors have reviewed 10 of the largestarrears accounts, 4 of which agount for alm ,t 50% of total arrears. PDFCI'sprovisions for potential loan- and equityl- losses of Rp.1,873 million (end-83) were obviously still inadequate in view of potential losses in the vicin-ity of Rp. 2.4 billion as identified by PDFCI's auditors, who have not commen-ted on the adequacy of provisions. A combination of factors has contributedto PDFCI's high default rate. In addition to a difficult economic environmentand a depressed business climate, supervision needs to be improved and onlyrecently has PDFCI's management taken steps to remedy the situation. More-over, weaknesses in the legal arrangements have Led to disputes with

11/ PDFCI's subordinate loan stood at Rp. 5,859 million as of December 31,1983.

121 Potential losses were identified on the basis of collateral values; noloans were written off in 1983 (Rp. 154 million in 1982).

13/ Potential losses from PDFCI's equity portfolio were estimated (by PDFCI'sauditors) to be in the vicinity of Rp. 800 billion.

- 14 -

borrowers. Last but not the least, some of the portfolio problems areindicative of poor decisions made in PDFCI's initiaL phase, when bothmanagement and staff lacked experience and maturity. PDFCI is now trying totackle these problems and increase provisions so that they would adequatelycover potential portfolio losses.

6.08 Quality of Short-term Portfolio. The problem is even more seriouswith respect to PDFCI's short-term portfolio. Total arrears acounted for16.5Z (Rp. 9,607 million) of total short-term placements oustanding, of which12.9Z was overdue for over 60 days. On the basis of a portfolio review in1983, PDFCI's auditors have indentified potential losses of Rp. 2,687 millionover and above actual write-offs of Rp. 596.9 million. Total provisions tocover potential losses from money market operations stood at Rp. 1,911 millionas of the end of 1983. The auditors have not commented on the adequacy ofsuch provisions. The reasons which have led to this development and stepstaken to improve the situation are dealt with in paras. 5.12-5.14.

VII. CONCLUSIONS AND RECOMMENDATIONS

7.01 When PDFCI was created, it was intended not merely to set up anotherfinancial institution, but one which would introduce innovative financialservices and make significant contributions to the Indonesian financialsystem. The basic objectives for the IDA credit consequently were verybroad. In addition to the objectives of resource transfer and mobilizationand institution building, PDFCI was expected to influence government policyrelated to the financial sector and particularly capital market development.With hindsight it is now obvious that the unconducive financial environment inwhich PDFCI was operating made it extremely difficult, if not impossible, toachieve the broader goals. These expectations were only relegated to long-term goals. Special emphasis was given in the second Bank operation to sounddevelopment of Indonesian industry by providing funds on suitable terms andstrengthening PDFCI as an institutiond Nonetheless, the longer-term objec-tives for PDFCI were too ambitious.

7.02 Regarding the narrower institutional objectives of providing soundterm financing to industry, PDFCI's performance has been mixed. PDFCI waslargely able to establish the necessary technical capacity for projectevaluation, but was less successful in assessing the qualitative aspects ofproject risk, due to difficulties in recruiting and keeping experiencedstaff. This in conjunction with ineffective project supervision has resultedin poor overall portfolio quality, high arrears and relatively poor loancollections. The Bank loan proceeds, on the other hand, were transferreu torelatively sound industrial projects, whose financial and economic impact weregenerally satisfactory. PDFCI's equity financing program did not bear outexpectations and was curtailed. PDFCI was also not able to introduce innova-tive services such as syndication and underwriting and raise any resourceseither in the domestic or international capital markets largely due to circumrstances beyond its control, however. It remained exclusively dependent onresources from Bank Indonesia for its term lending operations.

- 15 -

7.03 Largely for reasons beyond its control, PDFCI has also not been ableto raise any resources on its own and has remained dependent on BI for itsterm resource needs. Until mid-1983, PDFCI's lending rates were determined byBI at a level not high enough to cover borrowing costs and allow PDFCI to earnan adequate spread. As a consequence, it was not feasible for PDFCI to dependon capital market resources even if it could have raised them. BI providedPDFCI with the needed funds at subsidized rates. Even after the liberaliza-tion of interest rates in June 1983, resource costs have been too high and thecapital market too rudimentary for PDFCI to mobilize term resources throughthe issue of debt instruments. However, BI has continued to supply PDFCI withadequate domestic currency funds. In addition to the constraints in thedomestic capital market, PDFCI was not able to develop into an institutionwhose magnitude and financial stature would enable it to raise foreign cur-rency funds in the international capital market. Moreover, since about 1979,it has also been precluded from IBRD financing due to a change in Governmentpolicy, whereby private institutions such as PDFCI became ineligible forGovernment guarantees.

7.04 All-in-all, PDFCI remained a small institution with a limitedcapital base, working from its head office in Jakarta without the support of abranch network and an asset base not significant enough to influence thefinancial or industrial sectors. In view of these constraints to its develop-ment banking operations, PDFCI saw greater potential for its further growthand development in money market activities. These activities grew rapidlyinto PDFCI's mainstay, and by the end of 1983 accounted for 561 of totalassets and 6OZ of gross revenue, but were not profitable particularly in viewof the need for large write-offs and provisions for potential losses.

7.05 Several lessons can be learned from the project:

- PDFCI's credit/loan objectives were too broad and ambitious in viewof the sectoral constraints such as the prevailing interest rateregime at that time, the shortage of the calibre of staff needed forsuch functions and the long lead time to develop such expertise.

- PDFCI was organized as a predominantly private institution.However, it needed strong Government support in order to grow andprosper and after the Government's decision not to guarantee itsforeign borrowings from multilateral financial institutions, it wasunable to find other sources of external financing. StrongGovernment support is a condition sine qua non for the developmentof an institution of this type, particularly in the early stage ofdevelopment;

- a private institution like PDFCr is not likely to be able to play amajor role in mobilizing domestic resources, unless the overallpolicy environment and state of capital market development areconducive to this purpose;

- a major involvement in short-term money market operatiozs for arelatively inexperienced institution like PDFCI is inherently riskyand great prudence shouLd be exercised and proper guidelines should

- 16 -

be in place before becoming involved in such activity on a majorscale; and

- while PDFCI has developed some project appraisal capability asevidenced by relatively effective utilization of Bank funds, someattention needed to be given to projects' financed from other asources and to more systematic project supervision.

7.06 The Role of the Bank. When the project was conceptualized, the BankGroup pursued a dialogue with the Indonesian Government on the rationale andneed for an additional, predominantly private-owned development finance com-pany. This dialogue eventually resulted in the creation of PDFCI which wasactively assisted by the Bank during its initial phase of establishment. TAwas provided under the IDA credit in 1973 and the Bank loan in 1977 andcovered the cost of several expatriate advisors for PDFCI. The institutionbuilding efforts were continued during the project supervision phase andthrough subproject reviews. However, it now appears that a fledgelinginstitution like PDFCI required more intensive Bank supervision, particularlyduring the earlier years of the Loan. It was rather difficult for the Bank tomaintain a high level of supervision particularly after 1980, when the Bankloan funds were fully committed and the Government had decided that it couldnot guarantee further World Bank loans Lo PDFCI.

7.07 Future Strategy: In addition to short-term remedies such as amoderate growth strategy, consolidation of its financial position and port-folio, greater resource allocation to supervision, intensification of train-ing, reduction of staff turnover and restriction of money market operations tomost secured transactions, PDFCI's management is faced with a major deci-sion. It has to determine whether it wants to focus on development banking ormoney market activities. Recent work done by the Bank on the financial sectorin Indonesia indicates that institutions such as PDFCI operate under seriousconstraints (e.g. they cannot accept deposits and operate at a suboptimalscale) and their asset base is not large enough to spread risks and keepintermediation cost at optimal levels. However, there is a need forspecialised development banks such as PDFCI at least for the rest of thisdecade to provide longer term finance. A major issue covers the stepsnecessary to enable such institutions tc reach greater commercial scale eitherthrough adjustment of Government policy or through merger with otherinstitutions facing similar problems.

-17 - ANNEX I



(LOAN 1363-IND)

Projected and Actual Disbursements(US$ million)

ActualProjected Quarterly Cumulative Cumulative

(as Z of total)

1977Second quarter - - -Third quarter 0.4 0 0Fourth quarter 1.1 0.8 0.8

Subtotal 1.5 0.8 0.8 5

1978First quarter 1.8 - 0.8Second quarter 2.4 0.2 1.0Third quarter 2.5 - 1.0Fourth quarter 2.5 1.4 2.4

Subtotal 9.2 1.6 2.4 16

1979First quarter 1.8 - 2.4Second quarter 1.1 1.5 3.9Third quarter 0.6 2.3 6.2Fourth quarter 0.4 1.8 8.0

Subtotal 3.9 5.6 8.0 53

1980First quarter 0.3 0.6 8.6Second quarter 0.1 0.7 9.3Third quarter - 0.4 9.7Fourth quarter - 2.5 12.2

Subtotal 0.4 4.2 12.2 81

1981First quarter - 0.7 12.9Second quarter - 0.9 13.8Third quarter - - -Fourth quarter - - -

Subtotal _ 1.6 13.8 97

1982 - 1.1 14.9

Tptal 15.3 14.9 14.9 99

AEPIDDecember 31, 1984

- 18 -ANNEX 2



(LOAN 1363-IND)

Ust of Subprojects, Commitment Date and Disbursement(US0)

CommLtment Disbursement(date) /b Z

"A" Subprojects /aA-OI PT Pakerin 06/27/77 957,956.24 6.39A-03 PT Sekar Laut 08/16177 383,995.78 2.56A-05 PT IKI Mutiara 02/10/78 960,575.00 6.41A-06 PT Sam,jra Palapa 03/08/78 988,975.96 6.60A-07 PT Calcite LT.dah 04/12178 246,376.88 1.65A-09 PT Susanti Negah 11/02178 774,648.40 5.17A-10 Pr PG Tjandi 11/14/78 392,785.57 2.62A-11 PT Alpha Austenlte 12/08/78 595,477.46 3.98A-12 PT Gumung Sakti 03/15/79 1.122.985.22 7.50A-13 PT lubo Ceramics 03/27179 1,042,416.90 6.96A-14 PT Kangar Consolidated 11/14/79 1,804,330.41 12.04A-15 PT Semen Andalas 09/29180 420,991.68 2.81A-16 PT Industri Tata Udara 10/01/80 481,483.31 3.21A-17 PT Cicero Indonesia 12J24/80 502,559.36 3.35A-19 PT Cnutng Gahapi I1 12130/80 864,001.98 5.77

Subtotal 11,539,560.15 77.02

"B" SubprojectsB-01 PT Naromatics 07/29/77 118,297.67 0.79B-04 PT Kamaltex I 08/01/77 333,000.00 2.22B-S05 PT Repro Multiwarna 1 12/02/77 220,000.00 1.47B-06 PT Expert Services RN Pigossi - 213,439.74 1.435-08 PT Chakra 07113/77 116,652.94 0.78B-09 PT Pembina 07/13/77 180,709.94 1.21B-13 PT Kayu Mahakam Kutai 12128/78 364,000.00 2.43B-20 PT Tlra Dian PrataMa 01O09/80 192,600.00 1.285-21 PT Mahogany Industry 03/11/80 240,000.00 1.60B-22 PT Satmarindo 04/25/80 188,800.00 1.26B-23 PT IUm1 Carmentex 06/10/80 238,500.00 1.59B-24 PT Sugizindo 06/10/80 187,491.92 1.25B-25 PT Indonesia Offshore Contractors 09/18/80 335,641.82 2.24B-26 PT Daisy Indah Wood Industries 10/28/80 392.000.00 2.62B-27 PT Newage Engineers Indonesia 12/18/80 121,870.26 0.81

Subtotal 3,443,004.29 22.98

Total 14,982,564.44 100.00

/a 'A' subprojects are those with subloan amounts in excess of the free limit(US$0.4 million).

/b Based on the conversion rate prevailing at the time of c itment.

AEPrDDecember 31, 1984

- 19- ANNEX 3



(LOAN 1363 - IND)

Agreements Reached During Negotiations

1. During negotiations PDFCI and the Bank agreed to the following:

(a) maintenance of a debt/equity limit at 3:1 (see para. 6.06);

(b) free limit of $0.4 million with an aggregate free limit of $4.0million (abided by); and

(c) consultation with the Bank prior to undertaking short-term moneymarket operations involving borrowings (see para. 5.12)

2. Understandings were reached on the following matters:

(a) employment by PDFCI of an expatriate advisor until June 30, 1979(complied with);

(b) Reorganization of PDFCI's project staff (see para. 5.04);

(c) discontinuation of financing of "blocked acccuts"' (complied with);and

Cd) coverage of PDFCI's short-term investment portfolio in the auditreports from 1976 onward (complied with, however, statement islacking whether provisions for doubtful accounts are adequate; seeparas. 6.07-6.08).

AEPIDJanuary 31, 1985

-20 - ANNME 4



(LOAN 1363-IND)

Sectoral and Geographical Distribution of Subprojects(US$'O00; Rp million)

SubprojectAmount

Number Z US$equivalent Rp Z

Sectoral DistributionAgriculture 2 7 509 317 3.6Textile 4 14 1,753 943 10.8Wood and wood products 3 10 996 622 7.1Pulp, paper and printing 3 10 1,681 835 9.5Chemicals 2 7 667 364 4.2Pharmaceuticals - - - - -

Rubber processingNonmetallic mineral products - - - - -

Metal products 3 10 2,582 1,644 18.8Light industries 10 34 6,058 3,702 42.3Tourism/services 2 8 524 328 3.7

Total /a 29 100 14,770 8,755 100.0

Geographical DistributionNorth Sumatera 4 14 2,648 1,683 19.2South Sumatera - - - - -West Java 17 59 7,563 4,474 51.1Central Java 1 3 333 208 2.4East Java 5 17 3,470 1,918 21.9Kalimantan 2 7 756 472 5.4Sularesi and Maluku - - - - -Nusa Tenggara - - - - -

Total /a 29 100 14,770 8,755 100.0

/a Excluding financing of TA (US$213,000).




(iLOAN 1363-lND)

CharacterLstica of Subproject.

PDFCI ftnancin Progect completion dateNature of Project cost Domestic Total X of actual

Project nmnber/borro.er subprojects Estimat Actuna Overrun IlRD funds L project cost Estimated Actual Overrun---- (Rp wln) --------- S) --- (Rp ln) --- (months)

"A" SubproJectsA-01 PT Pakerin New 3,300 3,242 (58) 957,956.24 - 599 20 01/78 04/78 3A-03 PT Sekar Laut New 760 NA NA 383,995,78 163 403 NA 01/78 NA NAA-05 PT IKI Muttara Expanalon 1250 2,009 759 960,575.00 - 600 30 06/79 06/79 0A-06 PT Samudra Palapa Expansion 760 761 1 988,975.96 240 858 93 07/79 07/79 0A-07 PT Caleite Indah Nlew 680 671 (9) 246,376.88 238 392 51 07/78 12/79 18A-09 PT Susanti Magah New 1,509 1,536 27 774,648.46 152 636 42 01/80 03/5O 2A- 1) PT PG Tjandi Expdnston 3,630 3,595 (35) 392,785.57 455 701 19 01/8i 01/81 0A-li PT Alpha Austenite Nuw 640 1,017 377 595,477.48 27 400 39 10/78 01/79 3A-12 PT Gunung Sakti New 3,615 4,755 1,140 1,122,985.22 0 700 IS 06/80 01/81 6A-13 PT laiho Ceramic Co. Expansion 1,100 1,267 167 1,042,406.90 0 650 51 12/79 12/79 0 N

A-14 PT Kangar Consolidated Expansion 6,524 6,053 (471) 1,804,130,41 - 1,125 19 07/80 07/80 0A-15 PT Semen Andalas New 125,000 155,000 30,000 420,991.68 488 750 0.5 12/83 12/83 0A-16 PT Induatri Tata Udara New 1,400 1,710 310 481,483.31 400 700 41 07/80 01/83 18A-17 PT Cicero Exp. & modern. 1,225 1,845 620 502,!59.36 585 900 49 04/81 04/81 0A-19 PT Gunung Gahapi Exilansion 1,963 2,817 854 864,001.48 159 7n0 25 12/82 12/82 0

"B" SubprojectsB-01 PT Naromatics New 1,079 2,067 988 118,297.69 125 208 10 07/77 01/78 6B-04 PT Kamaltex Expanston 1,286 1,438 152 333,000.00 - 208 14 09/78 09/78 0B-05 PT Repro Multiwarna New 260 211 (49) 220,000.00 34 173 59 08/78 04/78 4B-08 PT Cakra Rehabilitation 350 406 56 116,652.44 128 200 49 04/79 07/79 3B-09 PT Pembina New 507 539 32 15n,709,88 187 300 55 01/80 01/82 24B-13 PT Kayu Mahakam Expansion 1,600 1,580 (20) 364,000.00 423 650 41 07/79 12/80 18B-20 PT Tira Garment New 1,158 1,292 135 192,600,00 280 400 31 07/80 09/80 2t-21 PT Mahogany New 1,000 1,39 392 240,000.00 350 500 36 01/81 06/82 18B-22 PT Satmarindo Expansion 424 424 - 188,800.00 276 394 93 02/80 06/80 4B-23 PT Bumi Garmentex Jaya New 1,80l 2,290 490 238,500.00 515 665 29 01/81 04/81 3B-24 PT Gizi Indonesla

(SuRizindo) NHa 780 R76 96 187,491.42 273 390 45 01/81 05/81 5B-25 PT IOG I ExpnnsLon 3,111 3,248 138 335,641.00 390 600 18 07/80 08/80 1 lB-26 PT Daisy Indah, Wood

Industries /b New 1,764 - - 392,000.00 455 700 - 07/81 - -B-27 PT Newage NUw 2,063 2,041 (22) 121,370.26 671 750 37 01I81 12/82 11

NA - Nrt avaIlable.

/a Excluding financing of US$213,000 for TA.7- Not completed yet,


- 22- ANNEX 6


IMDONESIA - PRIVATE DEVELOPfENT FINANCE COMPANY OF INDONESIA (PDFCI)

(LOAN 1363-IND)

Major Subproject Completion Delays /a

CompletionFirm Projected Actual Reasons

PT Calcite Indah 07/78 12/79 Delay in obtaining approvals/licen-ses from the Government (KPMD andCustoms).

PT Gunung Sakti 06/80 01/81 Problems in the clearance of im-ported machinery from Belawan (portof Medan).

PT Industri Tata Udara 07/80 01/83 Delay in delivery of importedmachinery and in obtaining addi-tional syndicated loan from a (state

PT Naromatics 07/77 01/78 Delay in clearance of importedmachinery from Tanjung Priok (portof Jakarta).

PT Mahogany 01/81 06/82 Delayed order for machinery (L/Copening) due to factory buildingconstruction delay. Difficulties inraising own funds.

PT N6wage 01/81 12/82 Delay due to change in ownership/shareholding and problems in obtain-ing approvals/licenses from theInvestment Board and Minister ofFinance for offshore loan.

PT Kayu Mahakam 07/79 12/80 Cost overrun due to 1978 Rupiahdevaluation and tine consuming pro-cess in obtaining syndicated loanfrom a state bank.

P.T. Pembina 01/80 01/82 N.A.

/a Delays of 6 months or more.


PROJECT COKPLETION REPO0!

INDONeIlIA - PALVATE uRVELOPHENT FINANCE COMPANY OF INDONE99A (PDPCI)

(LOAN t363-IND)

Financilo Pe forMence of SubprojectsURp nl)llon7

Net ernings as I of Profit before provistons an ITotal ales_ Ptofit (losea averae net worth of total avierae aseets

First year of Seeond year ot First yeAr ot Second yea. or First year of Second year of Pint year of Second year ottutl operotlon cullOperaton operations ul no ful f noerrtottone tull oerton tullop rett

SubproJect nLab r/borrwoer !tNM ne -t tu t 7C"t ht u41 -E-t. ctEA At. htunXI wAt kttuel 0tAtelEt At

-. M PTraetn 2,984 6,453 3,038 6,265 768 758 473 280 30 34 IS 10 22 1a 23 a

A-03 PT Sekar Leut 3,415 NA 1.435 NA 140 NA 147 NA 18 NA 16 NA 36 NA 34 NAA-05 FT 111 'utt4ra 969 1,227 972 1,764 231 45 246 39 21 6 la S 37 14 36 ISA-06 PT Sasudr4 Palap. 1,517 1,681 1,616 2,144 255 74 316 168 36 a 32 16 47 12 46 i5A-07 PT Calcite Indah /a 535 NA s4n 31. 119 NA I0 NA 29 NA 21 NA 42 NA S0 NAA-09 PI Sueanti 4egah 726 217 741 3S6 114 (9) 125 (35) 10 - 10 - 9 - 10A-10 PT Pabrik Oula Tiendi 1.261 3,491 1,261 NA 198 191 179 NA 1' l1 13 NA 214 14 29 NAA-1l PT Alpha Austenite 730 930 740 1,194 126 95 131 119 70 11 20 12 32 I5 30 17A-12 PT Cununs Sakti 5,23 2,892 5,234 11,277 321 8d 337 379 I8 I 19 11 12 2 12 a wA-13 PT Luho Caratai Company 1,265 NA l,588 NA 120 "A 191 MA 18 NA 28 MA 32 NA 43 NAA-14 PT Kangar Consolidated Industry 12,095 o,362 12,095 11,416 1,743 131,8 1,745 1,918 35 IS 35 33 16 16 i8 16A-IS PT Semn Andales /b 75,473 - 75,473 - 18,987 - 20,889 - 23 - 22 - 24 - 28 -A-16 PT Induetrl Tate Dare La 1,432 - 1,412 - 286 - 296 - 28 - 28 - 35 - 36A-17 PT CLearo /a 3,488 So0 13507 13163 357 75 364 218 24 12 22 33 37 5 35 11A-19 PT CunungiChapi 9,650 - 9,660 - 420 - 431 _ 32 33 - 21 - 20 -

B" 5ubP'° ""'*-01 P N tte4 902 417 917 aIl 167 (397) 366 (206) 22 (328) 20 (52) 24 (34) 24 (15)5-04 PT Kamltex 1,4531 7,175 1,460 6,718 263 775 260 (372) 13 18 12 (11) 17 13 36 (3)6-05 PT Repro lulttlerna 324 400 324 533 67 35 73 83 40 37 30 26 62 37 59 291-08 PT Cakre 379 506 419 479 60 1 63 (43) 20 0.3 24 (64) 33 0.2 33 (7)S-09 PT Psbina Peraga Pendidikan 1,855 274 1,869 - 241 20 239 - 2t 8 18 - 33 3 37b-13 PT Kayu Hohoam 2,645 NA 1,493 NA 251 NA 195 NA 11 NA S NA 29 NA 17 NAf-20 PT Tire Cermnt /a 3,595 1,100 3,656 440 394 (230) 360 (110) 35 (105) 30 (181) 26 (18) 268 (I)8-21 PT Nehoagny /b 1,370 13 1,376 - 346 (IS) 352 - 55 (3) 55 - 44 (1) 49 -S-22 PT Sat arindo 649 2,809 649 2,895 100 133 III 415 35 52 16 66 21 27 24 416-23 PT uoi Grtmnutex JAys 3,079 1,358 3,079 4,766 317 (414) 236 (631) 31 NA 22 NA 26 NA 29 "A*-24 PT Oail Indonesia (Sualaindo) /b 512 - 533 - 205 - 215 - 29 - 28 - 40 - 39 -

8-25 PT Indonesia offshore Contractor (IOC) 1,558 2,201 1,558 4,022 364 171 368 (502) 22 7 21 (18) 20 7.7 22 (5)B-26 PT Daisy Indoh Wood Industrtge /b 2,425 - 2,425 - 2I2 - 291 - IS - 14 - .41 - 458-27 PT NeaSs Indoneele m 2,462 - 2,399 - 399 - 569 - 19 - 25 - 27 - 33

NA * Not ava4Ilble.

H aUs not yet reached lull operatlonal tevel.Not yet in operation.

AtP IDbee_ber 31, 1984

PROJECT COIPLETION REPORT

INDONESIA - PRIVATE DgVILOPHENT FINANCE COMPANY OF INDONESIA (PDFCI)

(LOAN 1363-IND)

Economic Performnce of Subproetes

Eaports asI of Islas, Invenstent Flnan-

Exputts (Rp oilllon) first and Incremental per worker Value added cial rate keonomic rate7 eer Second year Eand eIr eplone Rp Ui1lon6 klp miiSon) of return lX) of returo (X)

Subproject nuwber/borro.ar Jt, Act UPl/a btt77 aktual bt ' 'A , ! f i.IAt lii, M I I Iua wItT0. Al tu I bt. Actt

"All 9IbprolactAI PT_ akIrin - NA - - - - 385 400 18.0 8.1 1,302 2,105 29 31 19 25A-02 PT Sbkair Laut 1,435 NA 1.435 NA 100 NA 500 NA 115.0 NA 331 NA 21 NA NA NAA-03 PT IKI Nuttar - - - - - - 214 200 5 e 30.1 584 204 32 10 31 12A-06 PT Sbmudra Plapa - - - - - - 93 24 8.2 29.0 838 389 - NA 11 11A-07 PT CalcIte Indah a - - - - - - 52 31 13.0 21.0 281 VA 29 NA 16 NAA-09 PT Sunanti Heaeh - - - - - - 138 137 11.8 11.2 314 76 17 14 18 16 iA-10 PT Pabrik Gu&l Tjandit - - - - - - 3.00 13800 2.3 0.9 - NA 21 IS 27 25A-li PT Alpha Auetenite - - - - - - 48 31 11.3 30.0 313 483 29 29 18 19A-1l PT Cunung Saktil - - - - - - 91 130 40.0 37.0 522 1,124 14 17 14 17A-13 PT Luho C raoic Company - - - - - - 128 NA 8.6 NA 502 NA 35 NA 34 NAA-14 PT Uangar Consolidated Industry - - - - - - 159 199 32.8 30.0 4,290 4,050 26 25 36 IfA-IS PT Sgmn Andalax .Lk - - - - 600 600 203.0 258.0 20,299 - 16 16 17 17A-1t PT Industri Tat. ieara - - - - - - 310 310 17.0 - 53 - 25 - 125 -A-17 PT Cicdro /a - - - - - - 60 60 20.4 30.8 813 250 33 12 20 10A-19 PT Gunung Cahapt - - - - - - 260 260 7.5 10.8 1,492 - 38 38 NA NA

is lubprolectad-OI PTW Nmosatsice 902 - 9? - IOct - 60 65 17.0 31.8 330 294 25 12 30 288-04 PT Kaultezx - - - - 70 146 12.0 9.8 229 NA 22 NA 10 NA8-05 PT Repro Multivarna - - - - - - 37 54 8.0 4.0 160 147 32 30 44 408-08 PT Cakrt 379 471 419 - 100 93 200 210 1.1 1.9 290 330 20 24 20 2S5-09 FT Pembina Feraga Pendidikan - - - - - - 191 200 2,4 2.7 627 - 36 17 35 258-11 PT llayu 4ahaka. 2,645 NA 1,495 NA 100 NA 60 NA 23.0 NA NA NA 22 NA 22 NA8-20 PT Tire Garment /n 3,595 - 1.656 - Ino - 300 279 3.8 4.6 841 - 28 15 28 18S-21 PT ?hogany Lb 1,370 13 1,378 NA 100 100 267 183 3.3 7.6 634 - 37 10 37 303-22 PT Satearindo - - - - - - 200 200 2.0 2.0 MA MA 20 20 23 23S-23 PT u.ni Garmentex Jdya 3,079 13173 3,079 3,637 100 76 345 1,500 5.2 1.5 714 1,105 24 21 24 213-24 PT Gist Indonesia (Sugtlindo) /b - - - - - - - -a-25 PT Indonesia Offshore Contractor (IOC) - - - - - - 13 40 50.0 55.0 NA NA 22 22 22 225-26 PT Daley Indab Wood Indistries Lb 2,425 - 242S - 3n0 - 73 - 2n.0 - 549 - 33 - 34S-27 PT Neagne Indonesia /a - _ _ _ _ _ 1i1 125 13.0 16.3 836 - 31 31 29 29

NA * Not available.

/a Has not lot reached full operational At level.75 Not yet In operation.7 Total estimated sales.

A PIDDeceaber 31, 1996

- 25 -ANNEX 9


INDONESIA - PRIVATE DEVELOPHENT FINANCE COMPANY OF INDONESIA (PDFCI)

(LOAN 1363-IND)

Board of Directors as of December 31, 1983

Name Representing

Mr. Sudiarso Bank Indonesia

Hr. Sujitno Siswowidagdo Bank Indonesia

Mr. Moh. Joesoef PT Gading Mas

Mr. Ismail Sofyan PT 1etropolitan Kencana.Bank Pembangunan Daerah Jakarta Raya.PT Intrada Ltd.

Wr. F. Sudiono MA AJR Bumiputera 1912

Mr. T. Surjawidjaja Panin Bank

Mr. J. Tahija Mr. J. Tahija.PT Samudra Indonesia.PT All Truba Inter.A. Bakrie

International Finance International Finance CorporationCorporation

The Nippon Credit Bank Ltd. The Nippon Credit Bank Ltd.Irving International Financing Corporation

Lloyds Bank Credit Lyonnais.Banco di Roma.Lloyds Bank.Union d'Etudes et d'Investissements

The Bank of Nova Scotia Bank of Nova Scotia.Schroder, Darling and Co. Holding Ltd.

Westdeutsche Landesbank Deutsche Genossenschaftsbank.Girozentrale Westdeutsche Landesbank Girozentrale.

Deutsche Finanzierungsgesellschaft furBeteiligungen in Entuicklungslandern GmbH


PROJECT CONPL3TION REPtot

INDONESIA PRIVATE DEVELOPMENT FINANCE COMPANY OF INDONESIA (PDFCI)

(LOAN 1363-IND)

Staffini as of heioaber 1983 and 1914

Nonoy£ capital Reeearch Personnel

Projects urket and devel- LeAl F&A Internal & gineral TenhnicalHaNerent dpa frtent departeint Task fore. o" t deaertmnt dcegrtnont auditor admin advisor Total1981 U WH-W 1i1 3f, Ie ISl SS 19l 9t 193 19E TS81-19P 1983 1914 TS81 198 1983 IS84 T19e3 19a 1e3 19

Professional eLatE

Chlairn and chief executive I I -_ _ _ _ I I

Deputy managing directors 2 2 - - - - - - * - - - - - - - - - - 2 2

Senior managers - - I I 2

Hnnagers - - I I - - - I I - - - - - lb l/b I 1 4 4

Ating managere - - I I I I - - - - - - I I 3 3

Assiitant imnagers - - 4 4 - - - - - - I I - - - - - - - - S

Snior officers - - I I I - - - - * * 4 7

officers - - 21 20 3 3 2 2 - - 2 2 3 4 - - 2 4 - - 33 35

Subtotal 3 3 28 29 S 5 2 3 1 1 A 4 6 7 1 1 3 3 I I J 5e

Support Staff

Clirk/ad.iniBtrative assiatent - - - - 2 2 - - - - - - 7 7 - - I I _ 10 to

Secritsriee/receptionlste/typisti - - 4 4 2 2 1 1 - - I I I - - 6 6 - - IS IS

Others (janitors, drivers) - - - - - - 1 '7 1 7 17

Subtotal - * 4 I I _ I 1 1 e - 24 24 * 42 L2

Total 3 3 2 31 9 9 1 4 1 I 1 3 14 15 I I 27 29 I I 96 lOt

/a Concuraencly also supervising the Honey and Capital Market Department.

/b Doneurrently also Board Secretaryo

AIPIDDeceeber 31, 1984

- 27 -A.NE 11


INDONESIA - PRIVATE DEVELOPMENT FIRANCE COMPANY OF INDONESIA (PDFCI)

(LOAN 1363-IND)

Shareholders and Capital Structure as of December 31, 1983(Rp million)

SubscribediNo. of capital Paid-in capitalshares Amount Z Amount Z

Indonesian ShareholdersBank Indonesia 15,245 1,524.5 21.93 1,524.5 33.58Dr. Thbnu Sutowo 3,000 300.0 4.32 300.0 6.61PT Pan Indonesia Ban Ltd. 3,000 851.4 12.25 300.0 6.61PT All Truba Inter 1,050 487.8 7.02 105.0 2.32PT Intrada 800 149.8 2.15 80.0 1.76AJB Bdiputera 1912 5,000 994.6 14.31 500.0 11.02PT Samudra Indonesia 400 40.0 0.58 40.0 0.88Bank Pembangunan Daerah Jakarta Raya 600 111.9 1.61 60.0 1.32PT Metropolitan Kencana 600 111.9 1.61 60.0 1.32Mr. Julius Tahija 600 111.9 1.61 60.0 1.32Mr. Ahmad Bakrie 400 40.0 0.58 40.0 0.88Mr. Sudiarso 200 20.0 0.29 20.0 0.44

Subtotal 30,895 4,743.2 68.26 3,089.5 68.06

Foreign ShareholdersThe Bank of Nova Scotia 1,500 279.7 4.02 150.0 3.31Schroder, Darling & Co. Holdings Ltd. 1,500 150.0 2.16 150.0 3.31Lloyds Bank International Ltd. 750 139.9 2.01 75.0 1.65Credit Lyonnais 750 139.9 2.01 75.0 1.65Banco di Roma S.p.A. Rome 750 139.9 2.01 75.0 1.65Westdeutsche Landesbank Girozentrale 750 139.9 2.01 75.0 1.65Deutsche Finanzierungsgesellschaftfur Beteiligungen in Entwicklungs-landern GmbH 1,500 279.7 4.02 150.0 3.31

Irving International Financing Corp. 2,000 200.0 2.88 200.0 4.40The Nippon Credit Bank Ltd. 2,000 372.9 5.37 200.0 4.40international Finance Corporation 1,500 150.0 2.16 150.0 3.31Union d'Etudes et d'Investissements 750 75.0 1.08 75.0 1.65Deutsche Genossenschaftsbank 750 139.9 2.02 75.0 1.65

Subtotal 14,500 3,206.8 31.74 1,450.0 31.94

Total 45,395 6,950.0 100.00 4,539.5 100.00

/a Denomination: Ep 100,000.


-28 - ANNEX 12


INDONESIA - PRIVATE DEVELOPKENT FINANCE COMPANY OF INDONESIA (PDFCI)

(LOAN 1363-IED)

Resource Ibbillizatlon, 1973-83(tp billion and US$ million)

Terms Interest rateYear Source AImunt (years) Maturity (Z p.a.)

A. Domestlc

1973 GOI Sabordinated Loan I 2,075.0 30.0 11/03/1973-11/03/2003 4.00

1974 -

1975 Bank Indonesla (B}SF 1) 1,500.0 10.0 06/11/1975-04/01/1986 4.00-7.00

1976 -

&977 - - -

1978 Bank Indonesla (3ISF II) 2,500.0 10.0 07124/1978-04/01/1988 4.00-7.00

1979 Bank Indonesia (BISF III) 4,000.0 10.0 06/20/1979-04/01/1989 4.00-7.00

1980 Bank Indonesla (BISF IV) 8,190.0 10.0 03/13/1980-10/01/1990 4.00-7.00(BILC-SF 1) 3.210.0 10.0 03/14/1980-0410111992 S.00(BILC-EP I) 450.0 10.0 10/17/1979-10/01/1981 3.00(BILC-EP II) 640.0 10.0 03/14/1980-04/0111990 3.00(B3W-EP III) 475.0 10.0 1112/1980-O1/01/11"1 3.00

1981 Bank Indonesia (BISF V) 11.600.0 10.0 06130/1981-10101/1991 4.00-7.00(BILC-SF I1) 5,700.0 10.0 06/30/1981-04/01/l991 9.60(BIC-EP IV) 160.0 10.0 07/21/1980-04/Ol/1990 3.00(BILC-EP V) 150.0 5.5 07/11/1981-12/31/1986 3.00(BILC-EP VI) 95.0 10.0 06/02/1981-07/01/1992 3.00

1982 Bank Indonesia (BISF VI) 11,330.0 10.0 05/06/1982-04101/1992 4.00-7.00(BILC-SF III) 4,909.0 10.0 05/06/1982-04/01/1O 92 11.60(BILC-EP VII) 150.0 8.0 02/18/1982-04/01/1990 3.00(BILC-EP VIII) 187.5 7.0 04/01/1982-04/01/1987 3.00(BILC-EP IX) 115.0 6.0 06126/1982-10/01/1988 3.00(BILC-EP X) 80.0 6.5 10101/1982-04/01/1989 3.00

1983 - -

Total 57,516.5

B. Forelgn Currency

1973 IDA (Cr. 436-IND) 10.00 15 01/01/89 8.00-9.501977 IBRD (Ln. 1363-IND) 15.00 15 01/01/90 9.50-11.00

Total 25.00

Note: GOI Government of IndonesiaBISF : Bank Indonesia Special FundBILC-SF Bank Indonesia Liquidity Credit for Self-FinancingBILC-EP Bank Indonesia Liquidity Credity for Equity Participation




(LOAN 1363-IND)

Prolected and Actual Operations, 1977-83(Rp millon)

1977 1978 1979 1980 1981 1982 1983Projec- Pro jec- Projec- 'Projec- Pro jec- Projec- Projec-

ted Actual ted Actual ted Actual ted Actual ted /a Actual ted /a Actual ted /A Actual

ApprovalsDomeatic currency

Loans 2,197 1,699 2,133 3,153 4,416 4,374 5,733 10,465 17,320 9,138 18,000 12,491 6,866 9,742Fquity investments 720 158 600 75 1,200 695 1,300 1,101 2,325 1,055 1,500 212 43

Subtotal 2.917 1.857 2,733 3,228 53616 5,069 7,033 11,566 19,645 10,193 19,500 12.703 6.909 9,742

Foreign currency louns 4,395 1,853 4,267 2,690 5,184 2,331 5,967 1,032 - 571 - - - -

Total Approvals 7.312 3,710 7,000 5,918 10,800 ,400 13,000 12,598 19,645 101764 19,500 12,703 6,909 9,742

CommltmentsDomestic currency

Loans 1,995 1,295 3,295 2,381 3,985 2,811 5,255 5,522 16,147 11,947 17,718 8,831 17,044 11,647Pqulty investments 555 203 400 75 800 - 1,096 910 1,132 1,561 1,346 592 450

Subtotal 2,550 1,498 3,695 2,456 4,785 2.811 6,351 6,432 17,279 13,508 19,064 9,423 17.494 11,647

Foreign currency loans 4,655 940 4,712 1,731 5,245 2,160 5,469 2,234 864 1,527 - - -

Total Commitment. 7,205 2,438 8,407 4,187 10,030 4,97l l1,820 8,666 18,143 15,035 19,064 9,423 17,494 11,647

DlsbursementsDomestic currency

Loans 1,655 813 2,596 1,246 3,191 1,596 3,962 4,532 16,417 8,738 14,054 11,664 13,636 9,537FquLty Lnve,tments 588 184 200 59 658 313/b 977 910 1,500 1,193 966 648 197 80

Subtotal 2,243 997 2,796 1.305 3.849 1,909 4,939 5,442 17,917 9,931 15,020 12,312 13,833 9,617

Foreign currency loans 3,832 1,822 3,324 2,633 4,026 3,065 4,124 2,270 961 831 - 650 - I

Total Disbursementse 6.075 2,819 6.120 3j938 7,875 4,974 9,063 7,712 18,878 10,762 15,020 12,962 13,833 9,617

I/ Extended projections not contained in SAR I 293-1ND.7b Including disbursiement of Rp 208 million to PT James liardLe Indo,,otat thie status of which was In dispute and later cancel Led (1982).


PROJECT COHILgTION REPORT

INDOWNSIA - PRIVATE DEVELOPHENT FINANCE COMPANY OF INDONESIA (PDPCI)

(LOAN 1363-IND)

Charactrtistitc of CoauLtments la(Rp million)

IS74-81 1982 19S3 Total mines Inception of PDVCtLo`n 4utt total Loan E4!utY Total Loan uty Tetel Lon otael

No, Amount No, Amount No. Amount Amount Naot No Mo-unt go. rAount No.Amon No, Amount No Mount

Site Dlstrib,,ttonUp to lp 75 *tn 1 141 7 25d 10 399 _ - - - - 3 157 - 3 is? 6 298 7 258 13 556Rp 76 In to Rl 200 min 17 2,711 8 1,076 25 1,787 - _ 1 212 1 212 1 a5 - - I 85 is 2,796 9 1,285 27 4,084Rp 201 alm to Rp 500 *n 29 9,879 3 1,146 32 11,025 3 1,266 - - 3 1,266 1 500 - - I 500 31 11,645 3 1,146 36 12,791Rp 501 aot and over 42 30,722 1 750 43 31,472 12 10,659 - - 12 10,659 6 9,000 - - 6 9,000 60 50,381 1 750 61 51,131

Total 91 43,453 19 3.230 110 46,633 15 11,925 1 212 16 12,137 It 9.742 - I 9.742 17 65.120 20 3.442 137 68.562

TypesDoe stic currency 46 30,30 19 3,230 65 31,5S0 IS 11,925 1 212 Ih 12,117 11 9,142 - - 11 9,742 ?2 52,017 20 3,442 92 55,459Foreign currency 45 13,103 - - 45 11,103 - - - - - - - - - - - - 45 13,103 - - 45 13,103

Total 91 43.453 19 3.230 110 46,683 i5 11.925 1 212 16 12,137 II 9.742 - 1 94742 117 65.120 20 3,442 137 68,562

Name of Projects59 2S,43i IS 2,173 74 27,606 3 1,675 - 97 3 1,972 4 2,125 - - 4 2,725 66 30,035 15 2,270 eI 32,105 1

Expanslon, mdernization,balanctng 32 18,01S 4 1,057 36 19,075 12 10,050 1 IIS 13 10,165 7 7,017 - - 7 7,017 51 35,065 5 1,172 56 36,257

Total 91 43453 19 I.230 1I0 46.683 15 11.925 1 212 16 12,137 II 9.742 _ 11 9.142 1I7 65.120 20 3.442 137 68.562

Ce11jtr1hicalatDjtution5 2,S50 2 390 7 3,240 1 S 0- - I 800 I 2,000 - - 1 2,000 7 5650 2 390 9 6,040

South Suatera 2 622 1 4' 3 662 - - - - - 1 12- - I 12 3 634 1 40 4 674DKI Jakarta 29 12,662 8 2,030 37 14,692 2 1,119 1 115 3 1,234 4 2,545 - - 4 2,545 36 16,326 9 2,145 44 15,471ibet Jeva 22 11,995 2 87 24 12,052 5 5,244 - . 5 ,244 2 1,885 - 2 1,865 29 19,124 2 87 31 19,211Central Java 4 1,938 3 166 7 2,104 2 1,525 - - 2 1,825 2 1,600 - - 2 1,800 o 5,563 3 166 11 5,721fast Java 19 6,692 3 517 22 9,209 3 1,987 - 97 3 2,054 1 1,500 - - I 1,500 23 12,179 3 614 26 12,793Kalmtantan 4 2,426 - - 4 2,428 1 950 - - I 950 - - - - - 5 3,375 - - 5 3,373balwest and Miluku 5 1,266 - - 5 1,266 - - 5 1,266 - - 5 1,266Musa Tenggara I 1,000 - - I 1,000 - - - - - - - - - - - - I 1,000 - - I 1,000

Total 91 413453 19 3Z30 110 46,683 15 11,925 t 212 16 12.137 11 9L742 II 9,742 17 65.120 20 3,442 137 65,562

Sctot DletrlbutionPulp, paper and printing 9 5,020 1 25 in 5,045 I 50n - - I 500 - 10 5,520 1 25 It 5,545Textilee 10 5,719 I A1 11 5,800 3 3,950 - 3 1,950 2 1,585 - - 2 1,585 15 11,254 1 61 16 11,335Natal producta 6 3,350 1 a0 7 3,430 - - - - - - 2 2,075 - - 2 2,075 8 5,425 1 s0 9 5.5053edical, 2 6iO I 40 3 650 - - - - - - - - - - - - 2 610 1 40 3 650

Pharmacauticals 1 149 - - I 149 - - - - - - I 2,000 - - I 2,000 2 2,149 - - 2 2,149 3tLiht Induotrloe 20 12,503 6 1,146 26 13 649 5 3,662 - 97 5 3,759 1 1,650 - - I 1,650 26 17,815 6 1,243 32 19,056Agriculture and processing 23 7,668 1 101 26 7,771 3 2,194 - - 3 2,194 2 1,950 - - 2 1,950 28 11,812 3 103 31 11,915 aTourism/hotel 5 2,610 - - 5 2,610 1 950 - - I 950 1 400 - - I 4W 7 3,960 - - 7 3,960Nonrmtallic aineral products - - - - - - - - - - - - - - - - - - - - - - - -Servtcae 2 375 3 1,:20 5 1,495 - - - - - - - - - - - - 2 375 1 1,120 5 1,495Transportations 6 2,459 1 635 9 3,094 1 269 1 ItS 2 354 1 70 - - I 70 S 2,798 4 750 12 3,548Timber-based Industrles 7 2,990 - - 7 2,990 I 400 - - 1 400 1 12 - - I 12 9 3,402 - - 9 1,402

Total 91 43,453 1'9 3,I1 110 46,68 IS 11,925 1 212 16 12,137 11 9.741 -II 9.742 117 65120 20 3.42 137 68.562

/a Net of cancellations.

A&PIDVaceabur 31, 19S4


I1DONESIA - PRIV&TE DEVRLOPKENT FINANCI COMPANY OF INDONESIA (PDFCI)

(LOAN 1363-lND)

ProJected and Actual Summarized Statumonta of Income, 1977-83(Ep million)

1977 1978 1979 1980 1981 1982 1983Pro- ito- Pro' Pro- Pro- Pro- Po jected Actual jected Actual jected Actual jected Actual jected Actual jected Actual jected Actul

IncomeIntorest Income aon

Loans 5,'39 524 1,322 925 1,778 1,110 2,185 1,607 3,923 2,383 3,382 3,643 4,693 4,683Deposlts and short-term

Investment 542 563 220 404 676 1,080 1,660 2,750 3,644 3,753 4,763 3,652 S,409 8,305Dividend income - - - 2 12 12 49 19 34 40 119 t0 7 37Oomitcment and supervision fees 93 37 97 IeO 96 149 198 230 313 324 3187 145 103 340Other Lncoao - 3 - 3 - 19 - 16 - 14 - 27 10 102'

Total Income 1,674 1,127 1,639 1.434 2.569 2,S70 4,122 4.622 7.914 6.514 8.651 7,477 10.222 13.467

Inteeuat on borrving 763 462 845 657 1,495 1,347 2,350 2,646 4,785 4,110 5,248 4,882 6,561 8,466Personnel, admlnistrative and

general expenses 349 365 414 410 564 517 722 507 864 784 1,073 998 1,257 1,258Depreciation and aaottisation 66 46 61 40 56 30 71 S5 65 44 63 41 65 48ProvLoion for doubtful accounts 73 54 53 86 171 279 201 358 597 38 463 1,297 1,105 2,798

Total Rnu 1t!51 927 ±l.L7 3 1.193 2.286 2,173 3.344 3,669 6.311 5.321 6.8 47 7jj8 8.988 12.572

Pcorft sfo,ra Income Tax 423 200 266 241 283 397 778 953 1.603 1.193 1.804 259 1.234 695

Provtsion for eorporate income tax(45X) 190 87 119 105 127 107 288 359 659 467 749 68 493 329

Not Profit 233 113 147 136 156 290 490 594 944 726 1.05S 191 741 566

Dividends Se Wo1800 100 100 195 245 296 472 185 527 - - - RUnapproprLated retained earntngs 175 13 47 36 56 105 245 248 472 541 528 191 741 566

/a Unausdited.


-32 - ANNEX 16


INDONESIA - PRIVATE DEVELOPMENT FINANCE COOPANY OF INDONESIA (PDFCI)

(LOAN 1363-INn)

Summ2rized Income Statements for the Years Ended December 31, 1977-83(Rp million)

1977 1978 1979 1980 1981 1982 1983/a

IncomeInterest income on:

Loans 524 925 1,310 1,607 2,383 3,643 4,683Notes receivable 563 404 1,080 2,750 3,753 3,652 8,305Time and certificates of deposits - - - - - - -

Conimitment fees 16 14 26 25 94 73 35Appraisal and supervision fees 21 86 123 205 230 72 305Other income 3 3 19 16 14 27 102Dividend income - 2 12 19 40 10 37

Total iacome 1,127 1,434 2,570 4,622 6,514 7,477 13,467

ExpensesInterest and commitment charges 462 657 1,347 2,646 4,110 4,882 8,468Personnel expenses 278 317 384 454 586 771 924Other administrative and general

expenses 133 133 163 211 ;42 268 282Provision for doubtful accounts 54 86 279 358 383 1,297 2,791

Total Expenses 927 1,193 2,173 3,669 5,321 7,218 12,572

Income Before Income Tax 200 241 397 953 1,;93 259 895

Provision for corporate income tax 87 105 107 359 .7 68 329

Net Income 113 136 290 594 726 191 566

AppropriationsCash dividends 100 100 185 296 185 - -Appropriated to reserves - - - - - - -Unappropriated retained earnings 13 36 105 296 541 191 566

/a Unaudited.


- - MIIAEX 1733 U-1

PWI!CT COI2LEr1O1 31POW?

IUDcUESIA - PRIVAT DIY1.4N? 1I8AWZ COMPAN OF tNDEIA (FDFC)

(ThAW 13b3-3ND)

Projectod ad Actual S _marlzd lalauce Sheate. 1977-83(Ip .1131.)

1977 1978 1979 1980 1981 1982 1983Pro- Pro- Pro- PwP--pro- pro- 7s

jected Actual iected Actuat jected Actal jected Actul jectrd Actal jected Actual jected Actual

Cac AsCash and bak depolca 281 260 273 756 380 333 360 741 285 S76 225 1.022 110 721Suart-tere laweetaenre 2.850 3,098 150 3,84 6.250 9,66 12,000 17,025 27,300 19,b61 27.625 39,996 40.00 56,199Less: frt.wlson for doubtfLL

(56) (623 (3) (77) (125) (203) (240) (400) (663) OS51) (714) (695) (991) (2.2051Accounts receivable 154 354 641 361 705 740 1,284 794 927 1.468 260 1,326 69 1.433Other cuteCt assets 410 87 561 162 434 386 5 509 981 377 1.525 1,297 1.173 823

lbtal Owrant Aeets 3.639 3.737 .622 5.069 7 10,925 12,950 16.669 26.810 21,551 29,022 42.736 40.361 51.972

Las mnd nwe-st_eDoetf currency lo 2,727 1.24 4.564 3.451 6.931 4,465 8,746 8.525 z7,r.4 16.408 29.4^9 24.537 39.202 ?lbr. currcy loan 6,514 4.423 7.280 5.6S4 9.969 8.265 13.106 10,097 10,04 9,747 6.318 9,482 7.967 7Les: Provision for doubtful

accounts (185) (118) C237) (1880 (388) C341) (437) (502) (906) (735) (970) (985) C1,354) (1.871)qtty tnvestnt 62 224 746 263 1.006 596 1_'98 1.506 3.194 2.699 3.672 2.821 3.376 3.876

Toctal Loans and Ineenet 9.684 5.772 12,253 9.229 17.514 IZ&"5 23,013 19.626 40U048 28.119 40.469 35.855 49.191 "..529

Prerty. eqp-nrt and orgai-nation expan (set) 384 149 499 319 5Se 596 553 615 654 a8 600 5e8 572 557

Other at 108 68 70 113 385 368 418 437 419 426 396 476 S58 761

-ZL S* 13 9.S1 S.726 14,54 14.730 26.165 2 37.934 39.247 69.931 50,676 J0.4E 79.655 60.662 104,819

Libtl tc and EquiLtQarTrc Liablitles

cer-det i_come tax psy.ble 190 - 119 - 127 - 288 149 659 156 72S - 493 21ividnds payable 58 - 100 - 150 - 450 - 472 - 506 - - -

Short-term b.orrovin - 658 - 2.399 2.885 5.365 7.205 11.968 23.736 9.635 18.008 27.439 27.418 42.338Otbar current £sbilitins 292 255 346 233 385 416 389 1,019 588 1.338 1.351 1.545 1,677 2,689

hoIl Cateoz LimbiLtices 540 913 565 2,632 3.547 5,781 8,332 13.133 2S.455 11,129 20.580 28,981 29,58 45.058

toes-br. DebtIDA credit 3,759 2,795 3,430 3,247 3,373 3.771 3.433 3,538 3,198 3,339 2,40 3,057 2,569 1,191MRD to.. 2.755 333 3.850 1.001 6.596 4,2DI 8.193 6,56S 6.846 6,862 5,838 6.580 5.398 5,682Otber foralmn curency loom - - - - 300 167 1.780 187 343 18 187 187 187 187C_Iaw t subordinted loans 2.075 2,075 2.075 2.075 2,075 2.075 2.075 2.075 2.075 2,075 2,075 2.075 2,075 5.859lank Indoesa loan 1.500 511 1.5l0 2.361 4,000 4.240 7.880 6,824 26.827 21,625 33,754 33.307 43,903 40.991OCthr dostic currcy los - - - - 1.984 - 565 - - - - - - -

Total 1oe-Tre Debt 10.089 5.714 10.166 8.,84 18.328 14.474 J.3i926 21.183 39.289 34088 44.334 45,2Cb 54,132 52,890

Stockholbder' EquityCommo stock outstand1nt 2.600 2.500 2,500 2.779 3.750 3,700 6.000 3.700 2.700 3.7 3,700 3.700 3,700 4.539Asaevas and retained aar 686 s5 624 635 540 825 676 1.234 1.393 1."5 1.778 1,671 3,148 2.2381siaz1atioa ineranat on pro-

pety and equty - - - - - 94 - 94 94 94 94 94 94 94

Intel Stockholders' elty 3.186 3.099 3.124 3.41. 4.290 4.619 5.676 5.02B 5.187 5.459 5.572 5.465 6.942 6.871

TOTAL LIABrLIrI AM EDUM 13.815 9.726 14.54A 14.730 2t.165 24.874 37.934 39.347 69.931 50.676 70,486 79.655 20.562 106.Sig

/a Unaudited.

A1918Deember 31. 1984

-34-

Pf:r COCI.T1ON REPORT

INDONIA - PRVATE DEVELOMT FleAN COMPANY OF INDO6SIA (PDFCQ)

(LOAN 1363-IDW

S.mnrzled hIace Sheets as of December 31. 19.7-63(Uqp million)

1977 1978 1979 1980 1981 1982 19831a

AssetsCurrent Assets

Cah in hand and due fron banks 260 758 333 741 576 1,022 723Time and certtficates of deposit - - - - - - -Notes receivable 3.098 3.865 9,669 17.025 19,681 39.996 58.199Less: Provision for doubtful Rccounts (62) (77) (203) (400) (551) (895) (2.205)Accrued interest receivable 354 361 740 794 1.468 1.326 t,433Other current assets 87 162 386 509 377 1.287 823Current maturities of loans - - 2.139 3.485 5.778 7.2'3 9,904

TotaL Current Assets 3.737 5.069 !3,064 22.154 27.329 49,959 68,876

Loans and InvestmentsLoans outstandiLog 5,666 9.134 12,730 18,622 26,155 3-..019 42,526Less: Provision for doubtful sccount (118) (186) (341) (502) (735) (985) (1873)

Current maturities of loans - - (2,139) (3,485) (5,778) (7,221) (9,904)Equity Inventments and bonda 224 283 596 1.506 2,699 2h121 3,876

Tntal Loans and Inwvesments 5.772 9.229 10.846 16.141 22,342 28.632 34,625

Property and equipaent at cost. leasacc.umlated deprectation andanortitz cto 149 319 596 615 580 588 557

Other assets 68 113 368 437 426 476 761

TOTAL ASSETS 9.726 14,730 24,874 39,347 50,676 79,655 104,819

Liabilities and EqultyCurrent LiabtilitiesGorporate Licome tax payable - - - 149 156 - 21Deferred lncome 113 41 121 312 174 539 1.342Accrued expenses 142 192 279 479 796 940 1,170Short-teruhorroiLngs 658 2.399 5.365 11,968 9,635 27.439 42.338Other current tLabilities - - 16 228 368 66 187Current maturity of term debts - - 1,496 2,761 3.900 5,104 3,450

Total Current Liabilities 913 2.632 7,277 15,897 13.029 34.088 48,508

lAng-Term DebtCovernment subordinated loan 2.075 2.075 2.075 2.075 2,075 2,075 5,859rDA loan 2,795 3,247 3.771 3.538 3,339 3,057 1,191tURD Loan 333 1.001 4,201 6,559 6.862 6.S80 4.662JUNbP - - 187 187 187 187 187Bank Indonesia 511 2,361 4,240 8,824 21,625 33,307 40.991Less: Current nsturity of loans - - (1,496) (2.761) (3,900) (5,104) (3,450)

Total Long-Term Debt 5,714 8,684 12,97J 18,422 30,1*8 40.1nZ 49,140

Stockholders' EquityComon stock outstanding 2,500 2,779 3,700 3,700 3.700 3,700 4.539General reserves 486 499 535 640 938 1,w80 1,671Unapproprlated retained earnings 113 136 290 594 727 191 $67Ranaluation Lncremr t on property *ndequipment - - 94 94 91 94 94

Total Stockbolders' Equity 3.099 3,414 4,619 5,028 5.459 5.465 b.Jl

TOTAL LAUBILrrIES AND EQUITY 9,726 14,730 24.874 39,347 50,676 79,655 104,819

COnetlgent liabillties - - - - - 8,360 14,987

/a Unaudited.

AEPIDDecmber 31, 1984

-3n- as1

roicrCiLc rz na

U06S4 - a'3296ftDsLHU vTa_c er63 0? 16sn (l

CLOWN 2363-131

W.3..t" ad.. fidetledw3.elI. z.iel.cre. 1916-SIet_~~~o _ A_ _ltora .1s

Ml6 t1977 397t gm _ _ _ t__2 193- Pm=- -IPr.- 11-F P..-Fw12..-

jactai 1e.m1 jc2.i A.em j.cced 6.2,.1 j..2d k2.1 sect"d Act."1 3622 fr2..1 3.22.6 h2.as j..t.d 1.1.z

bT.W AI....I.111t21- 30.6a7 1.0 13 w1as 9.726 I4*346 16.730 26.10 36.8326 93 39.31 69.931 10 626 901 79.633 96.36 36J.9

Low p.rupII. S.Its 3.102 9.816 3.-bia 11.60? kW 16.312 1216 21.413 16.260 1.634 ZS.62" 26.19 113.036 43.6tS 10a653O"sI1 lwa..... 2 0 .126 2:4 146 763 1.,.. "A6 a.5111 1.2 3.196 2.99 31.072. 7.2.8 3.VLr 6.614

11 .-ten. I.c.mt. S."& 3.256 *79& 3.36 41 3671O 6.123 9.*4 1.?.. 16.915 26.17 319.12 26.912 Hl.303 3W9.0 9 "2 .%t.m_-eftu Abhi 7.37 3.674 3069 53.734 10.09 ,."64 16.25 14.476 21.9 21.169 39.339 37.06 "4."3 63.26 54.132 62.169

ImaZ6M. e- *. I.. 4.56 a.160 S.3s 3.123 3.420 6.2 19.29 6.3SS 13.406 10.2J7 £0.16 30.16 *.5 9*."2 6.156 6.661i.wo.st sub"Tlmocel t3.. 2.07 t.660 1.e e 2.0n e 2.673 2.63 2.03 2.0 L 2.075 2.en 2.07 267 2.075 2.01 !.en1 %.85

56.k t.s6... 1. 730 I'm .66 511 1.5.0 2.361 4 0 4.w 7.Ja e .=6 2zmw 2n.7 S3.734 3.5or s3.903 0o.51266.: domtic emr.Te2 .6tt- - - - - -_ - 5 -

11_"Ity 2.974 2.907 3.186 3.069 1.124 3414 4.210 6.019 1.6n 3S0M S.17 1.659 S.372 ."1 *.942 &.6a

PI.....l I*rf.m--. - 5r.V..WAR. of'swerm 26261 ftoc1. grow 12.6 1. 37 11.1 13.6 31.1 1.6 I. 12.9 34.4 160 16. 2.3 31.S 12.7 14.62.l1mr3al.wo 4.6 6.2 6.2 3.3 6.0 3.8 7.3 6 7.3 9.2 6.3 9.3 7.3 7.3 6.3 *,z3. acme -pro (1-27 6 3. 7.5 6.0 5.6 6.3 5.3 6.2 3.6 1.2 3.3 5.6 6*8 4.0 6.6 3.64. Ads.t.t.. ._ 4.4 3.3 3.4 6.9 3.3 3.7 3.6 2.3 2.3 2.1 3.6 1.6 1.6 1.1 3.6 34.3. ft..l. Cm. f dbtfl L-. 0.7 0.7 0.4 0.6 0.3 0.7 0.a 1. 0.6 1.1 1.1 0.9 0.7 2.0 3.6 3.6. 19. 6.3w. pr.tt. .d to L. 6.3 4.1 2.9 2.3 2.6 2.3 3.4 . 4.61 .9 3.6 1.2 2. La ;A7. not p2e4t1 1.1 4.1 1.9 1.4 3.6 1.1 0. 1.S 1.5 L.6 1.7 1.6 1. 0.3 6.9 0.6

562 fictt. 2 . f A- . Met Ihrt 6.9 9.3 7.6 3.7 * r 4.2 4.2 7.2 9.6 33. 1.a0 13.6 19. 3.S 31.0 9.2

S. rN t_zoe _2 el ratw 1g22fou 2.0 2.0 1.9 2.e 3.9 2.0 2.2 2.4 1., 2.3 2.4 2.; 2.3 2.6 2 3.99. 565 i1ow Z f P.W _r_ 3e9.0 119.3 327.6 326.0 MA.6 322. 3166 324.1 2Ja.dS 31.9 14.2 347.S 110.6 367.-7 167.6 51-4

te. 6._w PM -*oc. CZ) 3.4 S1. 6.3 4.3 .9 4*9 42 7.1 9. 1sa 2M.s ZS.6 26.3 3.: 26.0 12 511. I2.ld.m PM _c. (2) 2.2 6.0 2.3 4.0 6.6 3.6 2.7 S 4.9 .0 12.8 3.0 14.21L am& p.F.m =CIO CZ) 19.6 26.9 26.9 r9cS 46.6 Ms 64.1 73.6 5 10. 3IL0 l.1 S 0. S"L3. 1Inee_ ptc 7mU lo p.L.OI1 - 2 QC

amw.e m l_w. p_.tso11 13.5 13. 34.0 1.e 12.6 34.1 12.6 31.7 ILl I.le 11.6 1:.- L0.2 36.6 1A.6 :3..14. Gt .1 tme 6t. 6. 2 of m.mr.m tm

d,,t. 7.2 6.9 8.7 8.2 6.3 7.3 0.6 7.3 7.3 7.1 6.2 7.1 6.s 1.1 6.6 .913. twr_c rctS. 1341 6.7 6.7 4.1 2.9 1.9 2.2 L. 1.7 1.4 1.1 1.9 1.4 1.3 1.4 3.314. 5662 _rvIc ... Its_) 2.9 3.0 3.6 1.7 3.3 3.6 1.6 L7 1.5 1.3 1.4 1.4 1.4 1.3 3.6 3.117. 12cm.g .c Lr"2. w cri ( ) 5 .3 3.2 .7 1.6 3. 1.6 1.3 1.3 1.6 1.3 1.3 1.6 1.A 1.3 3.4 *.A-1L Longte. da/qAfty r.tio 1.1 0.6 3. 0.7 1.7 1.2 2.6 1. 2.6 2.7 3.1 4.? 5.3S .7 3.J 3.7It. 27-t 6.hlq.12y ratte 3.1 0.6 1.6 0.9 3.2 1.7 3.1 2.7 3.9 .3 3.5 5.7 0.2 9.6 9.1 7.2

31. 196

ANNEX 2036 -


INDONESlA - PRIVATE DEVELOI'ENT FlNANCE COmPANY UF INDONESIA (PDFCI)

(LOAN 1363-IND)

Analysis of Loans ln Arrears. [976-83

197b 1977 1978 1979 1980 1981 1982 1983

Cltents in ArrearsTotal client portfolio 10 17 33 41 52 70 80 91

In grace period KA 7 13 12 12 12 16 NAIn repaymeat NA 10 19 27 36 57 62 NAUnder litigation - - 1 2 4 6 2 NA

Number of cLients in arrears under 3 months - 3 1 8 5 5 14 4As Z of total clients - 17.64 3.03 19.51 9.62 7.14 17.50 4.40

Number of clients in arrears for more than3 monts 1 2 4 6 10 13 15 24As Z of totaL clients 10.00 11.76 12.12 14.63 19.23 18.57 18.75 26.37

Total clients in arrears 1 5 5 14 15 18 29 28As Z of total clieats 10.00 29.40 15.15 34.14 28.85 25.71 36.25 30.77

Amounts in Arrears /aArrears of less than 3 months - 107 5 216 62 177 376 830

As Z of total principal outstanding - 1.88 0.05 1.69 0.33 0.67 1.11 1.95

Arrears of more than 3 months 76 292 95 248 119 163 351 1.503As 2 of cotal principal outstandtng 2.39 5.15 1.03 1.45 0.64 0.62 1.03 3.53

Arrears of more chan 12 months - 75 538 1,073 2.047 3,678 2.528 2,585As Z of total principal outstanding - 1.32 5.88 8.43 10.99 14.06 7.43 6.07

Total arrears above 3 months 76 367 633 1,321 2,166 3,841 2.879 4,088As 2 of total prIncipal outstanding 2.39 6.48 6.93 10.38 11.32 14.69 8.46 9.60

PracIpfal Affected by ArrearsTotal principal outstanding 3,167 5.667 9,135 12,730 18,622 26,155 34,019 42,613

In grace period MA 1.820 2,783 4,598 4,675 4.761 8,995 NAIn repayment NA 3,847 5,980 7,110 12,207 19,201 24,266 NAUnder litigatlon - - 372 1.022 1,740 2,193 758 NA

Principal affected by arrears of less than3 months - 650 140 2,507 2,270 1,637 5.534 2,284As Z of total principal outstanding - 11.47 1.53 19.69 12.19 6.21 16.27 5.36

Principal affected by arrears of 3-12 months 360 608 757 753 1,650 l,102 2.820 3.157As Z of total principal outstanding 11.36 10.73 8.28 5.92 8.82 4.18 8.29 7.41

Principal affected by arrears of more than12 months - 372 521 1.311 2,454 3,485 2.924 4,631As Z of total principal outstanding - 6.56 5.70 10.30 13.18 13.22 8.60 10.86

Total principal affected by arreare 360 1,630 1.418 4.571 6.284 6,224 11.278 10,072As Z of total principal outstanding 11.36 28.76 15.52 35.91 33.75 23.62 3. 15 23.63

Kestructured LoansRescheduled amounts - - 270 - 1,967 988 3,631 8,012

Number of loans rescheduled - - - - 4 4 9 16

Write-offsAmounts - -Number of loans - - - -

/a Principal and lnterest.


-37- ANNEX 21


IIDONESIA- PRIVATE DEVELOPMENT FINANCE COMPANY OF INDONESIA (PDFCI)

(LOAN 1363-1ND)

Status of Portfolio as of December 31, 1983

Projectsunder Projects in Projects In

construction inittal stage operation/stage of operations coopleted Total

No. Rp mln No. Rp mla No. Up aln No. Rp mln

Loan PortfolioServcling regularly 2 566 12 9,258 52 20.36-1 66 30,185

(Of which rescheduled loans) C-) ( -) (4) (3,592) (20) (4,004) (14) (7,596)Servicing irregularly 1 - I 763 1 634 Z 1,397(Of which rescheduled loans) (-) (-) C-) (-) (1) (634) (1) (634)

In arrears, but not In serious problems 2 901 1 550 6 1,656 9 3,107(Of which rescheduled earlier) t-) (-) (1) (550) (1) (117) (2) (667)

In arrears and in serious problems 1 429 3 1,387 10 3,429 14 5,245(of which rescheduled earlier) C-) ( -) (2) (1,106) (5) (1,734) (7) (2,840)

Total Loan Portfolio 5 1 896 17 11.958 69 26 080 91 39,934(Of whlch rescheduled) )Y) -U, 5248) (17) 76,489) (24) (11,737)

Equity InvestmentsProjects rith profitable operatton - - - - 3 970 3 970Projects under construction 3 535 - - - - 3 535Projects sufferlng losses - - 2 790 7 641 9 1,431

Total Equity Investments 3 535 2 790 10 1,611 15 2,936

DividendsTotal dividends received

during current fiscal year - - - - 2 38 2 38Total investment In companies

paying dividends - - - - 2 910 2 910


- !8 -

ANNEX 22



(LOAN 1363-IND)

Collection Performance, 1977-83

Amount falling dueduring the year Amount Collection as % of

and past due collected amount due

1977Principal 369 136 36.9Interest 628 387 61.6

Total 997 523 52.5

1978Principal 690 427 61.9Interest 1,160 785 67.7

Total 1,850 1,212 65.5

1979Principal 1,751 1,065 60.8Interest 2,162 1.311 60.6

Total 3,913 2,376 60.7

1980Principal 2,055 966 47.0Interest 2,746 1,607 58.5

Total 4,801 2.573 53.6

1981Principal 3,762 2,036 54.1Interest 4,675 2,383 51.0

Total 8,437 4.419 52.4

1982PrincLpal 3,868 4,136 70.5Interest 5,072 3,647 71.8

Total 10,940 7,780 71.1

1983Principal 6,703 4,004 59.7Interest 6,899 4,682 67.9

Total 13,604 8,686 63.8


- 39 -ANNE 23



(LOAN 1363-IND)

Loan Rescheduling, 1982-83(Rp billion)

Rescheduled once TotalNo. Amount No. Amount

1982 ReschedulingPrincipal 11 4,920 11 4,920

Interest

Total 11 4,920 11 4,920

1983 ReschedulingPrincipal 5 4,550 5 4,550

Interest

Total 5 4,550 5 4,550


- 40 -ANNEX 24



(LOAN 1363-IND)

Lending Rates(Z p.a.)

Interest rate and service feeEffective Jan. 1, 1978 Prior to Jan. 1, 1978Interest /b Service Interest Service

Size of loan rate fee /a rate fee /a(Rp million)

Category I Up to Rp 75 10.5 1.0 12.0 1.0

Category II From Rp 75 to Rp 200 12.0 1.0 12.0 1.0

Category III From Rp 200 to Rp 500 13.5 1.0 15.0 1.0

Category IV Above Rp 500 13.5 1.0 15.0 1.0

/a Service fee comprises a 1% appraisal and supervision fee. PDFCI also charges acommitment fee of 1% of the undisbursed amount.

/b For nonindigenous and joint venture projects, the applicable lending rate has beenbetween 14.5% and 18% since 1980.


41 ANNEX 25Page 1 of 2



(LOAN 1363 - IND)

Comments Received from the Borrower

WUI35346778 PDFCI IA

JAKARTA, APR 30, 1985NO. 13/473/TLX

TO : THE WORLD BANKATTN : MR. YUKINORI WATANABE, DIRECTOR OPERATIONS EVALUATION DEPT.FROM : PDFCI, JAKARTA

TrANKS FOR YOUR LETTER APR 31, 1985. W FOUND YOUR DRAFT PROJECT COMPLETIONREPORT (LOAN 1363-IND) SATISFACTORY AND HAVE NO COMMENT FROM OUR SIDE.

BEST REGARDS,

SUDIARSOCHAIRMAN-CHIEF EXECUTIVE

46778 PDFCI IA

183006 0912 30048501710171 353

=04300745

ALT RTD FROM: OEDM

NNNN

*" - 42 -

ZCZC DIST2296 WU1472 AIEX 25OEDOD Page 2 of 2REF : TCP D.S.

Comut. Received from the Borrower

WUI472 £

46415 DJMDN IA46415 DJMDN IA

WORLD BNK 64145

MR. YUKINORI WATANABE ,.tDIRECTOR OPERATIONS EVALIJArION DEPARTIENTTHE WORLD BANK1816 H STREET. N.W.WASHINGTON D.C. 20433-U.S.A.NUMBER : TLX-096/MD/1985 JAKARTA. JINE 13. 1985

DEAR MR. WATANABF P

REFERRING TO YOUR LETTER OF APRIL 2. 1985. HEREWITh I iNFDNt rOt,THAT:

AAA. THE WORLD BANK'S REPORT ON PT. P.D.F.C.T. TiJAT yn!! 5ilP.MITTFIETO ME HAS SHoWN ITS REAL CONDITION. SUCH AS THE FRUSINFSSACTIVITIES AND THF PROBLEMS WHICH HAUF-RFFN FrACrL BY r.r. F.D.F.C.I.

81*. IT IS CLEAR THAT THE GOVERNhENT OF REPUBLIC OF INDONESIA'SAND TltE WORLD BANK'S GUIDANCE IS NEEDEr BY P.T. . .F .C.liIN ORDER TO FULFILE ITS ROlE AND. WF iIOE', MFEH OUREXPECTAT IONS.

WITH BEST REGARDS.

YOURS SINCERELYMARZUKI USMAN

DIRFCTOR OF FINANCIALINSTITUTIONS.MINISTRY OF FTNANCE.

A-- DATE : JlUNE. 13. 1985 T TMF : '1.1.7 A.M.

46415 DJMDN IA

058995 0422 13068501710171 472

=06130723

ALT RTD FROM:nOaDh

NNNN

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