Document of

The World Bank

FOR OFFICIAL USE ONLY

AA/ 3J7 77

STAFF APPRAISAL REPORT

INDONESLA

&STERN INDONESIA KABUPATEN ROADS PROJECT

MARCH 1, 1993

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Infrastructure Operations DivisionCountry Department IIIEast Asia and Pacific Regional Office

This document has a restricted distribuon and may be used by recpients only iitheir official duties. Its contents may not otherwise be disclosed without World

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CURRENCY EQUIVALENTS(As of March 1993)

Currency Unit =Rupiah (Rp)Rp 1 million =US$48FUS$1.00 =Rp 2,050

GOVERNMENT OF NDONESLAFISCAL YEAR

April 1 - March 31

UNiTS OF MEASURES

1 meter (m) - 39.37 inches1 kilometer (kin) = 0.62 miles1 hectare (ha) = 2.47 acres

PRlNCIPAL ABBREVIATIONS AND ACRONYMS USED

ADB - Asian Development BankAADT or ADT - Average Annual Daily TrafficAMDAL - Analysis of Environment ImpactsBapped-' T --id 1I - Provincial and Kabupaten Development Planning AgencyBappt - National Development Planning AgencyCTC - Central Technical Consult.*tsDGH - Directorate General of HIghways (MPW)DGLC - Directorate General of Land Communications (MOC)DGRD - Directorate General of Regional Development (MHA)DPUK - Kabupaten Office of Public WorksDPUP - Provincial Office of Public WorksETA - Enviromnental hnpact AssessmentFCI - Field Consultants for ImplementationGOI - Government of IndonesiaInpres - Instruksi Presidern (m project context, a central government

grant program to local governments)IPJK - Inpres Peningkatan lalan Kabupaten (central government

grants for betterment of kabupaten roads)IRI - International (road) roughness indexKR3 - Third Kabupaten Roads Development ProjectP.T. Jasa Marga - Indonesia Toll Road CorporationMHA - Ministry of Home AffairsMOC - Ministry of CommunicationsMOF - Ministry of FinanceMPW - Ministry of Public WorksOECF - Overseas Economic Cooperation Fund of JapanPBPJK - Proyek Bantuan Penanganan Jalan Kabupaten (special

provincial road units for assistance to local governments)REPELITA - Indonesia National Five Year Development PlanREPPPROT - Regional Physical Planning Program for TraningrationRR2 - Second Rural (ICabupaten) Roads ProjectRUT - Road User TaxSOE - Statement of ExpenditureUSAID - U.S. Agency for International DevelopmentVOC - Vehicle operating cost

FOR OMCIAL USE ONLY

EASTERN INDONEWA KABUPATEN ROADS PROJECT

LOAN AND PROJECT SummARY

Borrower: Republic of Indonesia

Amount: US$155 million equivalent

Lending Terms: Twenty years repaylmet, including five years of grace, at thestandard variable interest rate.

Project Objectivesand Description: The main objectives of fte project are to enhce the capability of

GOI agencies hat manage the development of kabupaten roads, andtO improve the quality and capacity of the road networks inselected kabupatens in Eastern Indonsia on a sustainable basis.The project would lead to improved rural access to fte maineconomic centers in the largely agricultue depedent Kabupatensin Sulawesi, Nusa Tenggara, and Mlan Jaya that are among thepoorest provinces of Indonesia. Ihe project includes the followingmain components: (a) a road network inprovement component,subdivided into three subcomponents: (i) road works andsupervision for the maintnace of an increasing share of thenmalntaible part of the kabupaten road network as well asreblittation of selected roads in project kabupatens over threefiscal years startg in 1993194; (ii) workshops and laboratoriesupgrading and equipping; (iii) provision of equipment, spare partsand supplies; (b) a traiing component, including development andimplementation of priority parts of a nationwide training programfdr kabupaten road staff; and (c) tenical assistance and studiesfor strengthening systems and procedures for planning,environmental analysis, adaption and dissemination of better roadworks technologies, and for helping GOI agencies in theimplementation and monitoring of the project.

Project Benefitsand Risks: Rehabiliaton and better mnnance of roads will lead to

significant reduction of vehicle operatng costs in the kabupatens.In addition, the project will Increase GOI's capability to plan andimplement kabupaten road works programs efficiently in the entirecountry thereby reducing the costs of road provision and road use.Over time, lower road trnsport costs will Uanslate into loweragrclura costs, higher rural incomes, and a better integration ofthe Indnesan economy. Ihe main risks are related toimplemntion of the planning procedures, and the funding of

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclesed without World Bank authoriation.

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maintenance. To reduce tie risks, GOI's National DevelopmentPlning Agency. Bappenas, has already agreed to the itse ofInpre fimds for maintxe and will continue to play a strongcoordinating role in project planing and implementatont Also,the targets have been carefey designed and adequacyof ma_nonce will be for each kabupaten a condition ofpicipation the project's annual rehabilitation/iprovementprograms.

Estmated Costs: La Local Foreig TotalUS$ million - *_

A. Road network impovent1. Road works 166.8 79.4 246.02. Workshops, laboratories 2.5 3.9 6.43. Equipment 1.8 17.6 19.4

Subtotal 171.1 10. 27

B. Technology adaptatio 2.4 1.3 3.8C. Training 3.7 1.4 5.1D. Inst'l & tech. devlopment 2.2 2.7 4.9

Total Base Costs 1Ma

Physical CoingencIes 17.8 9.6 27.4Price Contingencies 12.2 6.0 18.0

Totl Project Costs a9 d.U

Fiac4n Pln:

GOI 176.0 0.3 176.3IBRD 33.4 121.6 155.0

Total Fancallg 209.4 121.9 331.3

La Inclusive of taxes and dutia amouiJng to US$30.1 million equivalent.

Note: Due to rounding, totals may not add.

Disbursements:

Bank FV FT%4 1Y9 FY6 FY97 FY9USS milon

Annal 20 44 57 30 4Cumulatve 20 64 121 151 155

Ecamic Rateof Rtrn: 34%

MaP: IBRD No. 24360

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INDONESIA

EASTERN INDONESIA KABUPATEN ROADS PROJECT

TABLE OF CONTENTS

Pae No.

1 TMETRANSPORT SECOR .................... 1A. Geographic and Economic Setting 1................ B. he TransportSysten ....................... 2C. Objectivesand ssues ....................... 2

2 THE ROAD SUBSECTOR ...................... 4A. Introduction ................. 4R. TheRoad Network ......................... 4C. KabupatenRoads .......................... 5D. Administrative Structure ...................... 6E. Road Transport ........................... 7F. Fmancing ............................... 9G. PlanningandBudgetng ........ .. ............ 10H. Expenditures .. 11I. Technical Aspect.......................... 13J. ConstructionIndustry ........................ 14K. Environental Aspects ...................... 14

3 PAST BANK INVOLVEMENT IN THE ROA.) SUBSECTORAND LESSONS LEARNED ..................... 16A. Past Bank Involvement ...................... 16B. MainLssons Leaned ........................ 17

4 TE PROJECT ............................. 19A. Objectives ......... ..................... 19B. Rationale for Bank Involvement ..... ............ 19

C. Project Desaiption ......... ................ 20D. Road Network Improvement andtne ..... .... 20

This report is based on the fidings of an appraisal mission which visited Indonesia inOctober 1992 comprising Messrs. Emmanuel James (Task Manager), Jacques Tollie(Senior Highway Engineer), and Jun Zhang (Economist). Messrs. W. Lane andD. Martin (Enviromnental Specialists), and W. Hardi (RSI) also assisted in projectpreparation. Peer Reviewers were Messrs. Yenny (economic aspects) and Sigfusson(tnical aspects). Ms. Haug, Director, EA3, and Mr. Khanna, Division Chief,EA3IN, have endorsed the project.

E. Techology Adaptato and Dsemnton....... . 23F. Trainig .............. ... . . . . . . . . 24G. Techncal Assistance for Instittona and

Tehic Developnent .. ..................... 24H. Cost EF _t s ............................ 25. Finang ............................... 26

J. p and Monitoin ..I...I........i.g ...... ... 27K. Pxcuumet ....... ............... 28L. Dsbmseaie .............. *.30M. Account and Audt ...s ...................... 32N. Retroactive Financing ... .................... 330. Envionena and SocWi hma ................ 33

s ECONOMUC EVALUATION .................... 36A. Subprojects Seleton . ................ 36B. Bereft and BeinflIad . ..s. . . 37C. EconomicReau and Senskd Teo ..... . .38D. Ris . ........................... . 39

6 AGREEMENTS REACHED AND RECOMMENDATION . 40

ANNEXES

1. Policy Stemet and Acdon Pan2. Review of Kabupatens' Expendius ad Revenus3. Summary Pannin Procedures and Ecotomic Evaluaon4. Road Mantenoan in Project K pan5. Technology Dissein6. Training C*mponent: Objedvs ad Mjo Feaus7. Teical Assistac8. Project ScpheentonS dule9. ReportiR remnt10. SupvisIon Pban11. Environmental Analysis12. Documents and Data Aalbl in the Project File

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TABLES

1.1 Statistcal Overview1.2 ORDP per Capita1.3 Populaion and Land Area1.4 Land use in E. Indonesia1.5 Land use by Region1.6 Forest Function Areas2.1 Road Network LIgth2.2 Road Pavement Classifcions2.3 Road Network Condition2.4 Kabupaten Roads Condition2.5 Project Kabupatens' Road " ;; orks2.6 Registered Motor Vehicles2.7 Registered Motor Vehicles by Region4.1 Design Standards for Kabupaten Roads4.2 Equipment Required4.3 Project Cost Estimates4.4 Estimated Disbursements

CHAS

1. Directorate Genera of Highways2. Directorate General of Regional Develpment3. Provincial Public Works Offices4. Kabupaten Public Works Offices

MAP IBRD No. 24360

1TE TRANSPORT SECTOR

A. GEOGRAPC AND ECONOMIC SE 1lIG

1.1 Straddling the equator, Idonesia extends some 5,100 km from east towest and 1,800 kan from north to south. Within this space lie over 13,000 islandstotalling a land area of about 1.9 million km2 and encompassing 2.9 nmllion knm of sea.Sumatra, Java, Bali and Nusa Tenggara form a continuous chain of islands with shortsea crossings between them. Ihis island arc accounts for about 64 percent of the totalland area and contains 88 percent of the population. The population of over 180 millionin 1990 was very unevenly distributed with extremes ranging from a density of over800 people/km2 in Java to less than 4 people/km2 in hTian Jaya. Despite high urbangrowth, about 70 percent of the population still lives in rural areas.

1.2 The nine provinces of Eastern Indonesia, located on the islands ofSulawesi, Nusa Tenggara, Maluku, Timor, and Irian Jaya, cover about 40 percent ofthe country's land area. They include about 13 percent (23.4 million) of the totalpopulation and have relatively low average densides of 30 persons/km2. Some43 percee of the nation's forest cover is located in the eastern region, though provinceslike Nusa Tenggara have only small forested areas. Although about 26 percent of thetotal land area is potentially cultivable, largely because of Irian Jaya, existing cultivatedand settled areas account for only 5 percent of te region's total land area.

1.3 Agriculture is still the key sector in the Indonesian economy. It accountsfor about 20 percent of GNP and 50 percent of non-oil exports (including timbr) andprovides employment to more than 50 percent of the population. The Indonesianeconomy has performed relatively well in the 1980s. For example, between 1985 and1990, real GNP grew at an average of 5.8 percent per annum. This period has beenmarked by a gLowing diversification of the economy as a result of GOrs effort atreducing internal and external imbalances and promoting private sector development.

1.4 Eastern Indonesia has a predominantly agricultural economy and on thewhole is the lesser developed part of the country. The average GRDP per capita of thisregion is about 60 percent of the national average, in nominal terms. The twoprovinces of Nusa Tenggara are the poorest in Indonesia, with per capita incomesreaching only 36 percent of te national average. Irian Jaya, though having a GRDP per

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capita close to the national average, is probably the least developed province in theregion. Further details are in tables 1.1-1.6.

B. TEE TRANsor SySrEm

1.5 In general, the transport system has been able to meet the rapidlygrowing transport needs of the economy at a reasonable financial cosi (as evidenced byprevailing fares) to users. Because of the vast size of the country and the unevendistribution of population, natural resources and economic activity, transport is ofspecial importance to the Indonesian economy and an extensive transport system hasbeen developed over time. All transport modes-road, rail, shipping, civil aviation,inland waterways, and pipelines-are represented in this system but road is thedominant mode accounting for an estmated 53 percent of medium- and long-distancefreight transport and 88 percent of passenger traffic. The modes tend to complementone another; only in Java and in a few corridors in other regions is there intermodalcompetition. There is scope for Improvement in the efficiency of the Indonesiantransportation sector. In she near future this, together with a mininum ofimprovements to access, will be the sector's main challenges if it is to satisfy therapidly growing and diversifying demands of the Indonesian economy.

1.6 Transport expenditures as a share of the country's developmentexpenditures have increased dramatically from about 12 percent in the mid-1980s toabout 20 percent in recent years, w1i-.:.h makes trasport one of the largest sectors inthe development budget. Allocations for maintenance, in particular for national andprovincial roads have received an increa j. - share of the overall transport sectorbudget. GOI has also taken actions to improve tse pricing of transport services and thesector's regulsory framework. In particular, prices for freight services for road,maritime and, to a large extent, rail transport, are now set by the market, and almostall regulations which were hampering developirer of maritime transport have beenremoved by two major packages of reforms in . - and 1988. Steps have also beentaken continuously to improve the operational efficiency of Public Enterprises (PEs),such as in the case of seaports, and the allocation of responsibilities to and withingovernmental agencies. Despite these achievements, nmch remains to be done. Theongoing Bank-financed Highway Sector, First Jabotabek Urban Development, andRailway Technical Assistance Projects are helping GOI address some of the key sectorissues (paras 1.8 and Annex 1).

C. OamnvEs AND IssuEs

1.7 For the 1990s, GOIs key objectives are to alleviate poverty, promoteagricultural development, foster regional equity, support the private sector, and sustainthe export drive by medium and light industries. Since transport is an input to theproducing sectors, GOI has placed emphasis on the transportation sector as a keymeans to attaining its objectives. Investments in transport will be geared to serving theneeds of the productive sectors and improving access in the isolated parts of thecountry. These objectives will be pursued through the funding of large expenditure

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programs, fuher improvements in pricing and regulations, and extensive institutionaldevelopment.

1.8 There remain many inefficiencies in the sector that have costly economicconsequences. These represent weaknesses in the incentive systems (for exampleinsufficient road cost recoveiy from truck transport), in the supply of infrastructure(especially, insufficient quality of construction and level of maintenance of manyficilities) and in the organizaton, mimagement, and staffing of government agencies andPEs. GOI has been swate of most of these shortcomings and has tzken substativecorrective measures in recent years, such as the impletentation of major deregulatIonpackages.

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2THE ROAD SUBSECTOR

A. IRODUCTION

2.1 in recent ytars, GOI has consisetly placed importance un thetrnportation sector as a key means of promoing economic growth and regionaldevelopment. Emphasis wihin the sector has in trn been placed on road transport.Illustrative of this is the fact tat in Repelia IV, 1984/85 - 1988/89, some 60 percentof the total transport sector investment budget of Rp 7.1 trillion was directed to roadand bridg4 programs. This has led to major improvements in the quality of the roadnetwork and in road transport services, albeit with some significant problems. A fulleraccount of the overall road subsector performance is detailed in Staff Appraisal ReportNo. 105't1-IND of May 1992 for the Third Kabupaten Roads (KR3) pnj,ect,Loan 3490-IN. Ihis report focuses on kabupaten roads, padrticularly in Easternlndonesia, but with reference to the road subsector as a whole in order to maintainperspective. It also includes a brief update (see Annex 1) of progress on theimplementation of the Policy Statemen & Ackon Plan that was fornulated under theHIighway Sect>r Project, Loan 3133-IND, and serves as the main reference for GOI'snkiiatives in the sector.

2.2 In view of the assignment of sector management responsibilities inIndonesia, Bank strategy in the road sector makes a distinction in the focus of lendingoperations for the prinary network (national and provincial reads) and those for thekabupaten roads. Projects that support development of the primary network attempt toimprove road transport incentives and regulations as well as address the more complextechnical issues. The focus under kabupaten roads projects is more on institutionaldevelopment, maintenance, and resource allocation at the local levels.

B. Th ROAD NETWORK

2.3 Indonesia's public roads network totals about 260,000 km and comprises17,700 km of national roads, 34,000 km of provincial roads, 176,700 Ian of kabupatenand kotamadya roads, 25,400 kn of other municipal roads, and 5,300 km oftransmigration roads. In addition there are unknown lengths of village roads and otherunclassified roads. Road density at 0.14km per km2 of land area is seemhigly very lowbut most (about 63 percent) of the network Is in the more densely populated areas.Road density is 0.33 km per km2 of cultivable areas or 1.4 m per inhabitant. Some90 percent of the national roads, 75 percent of the provincial roads, and 39 percent of

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the kabupaten roads are paved; this translates into about 48 percent of the total networkbeing paved. However, reflecting a tendency for inadequate maintenance, only45 percent of the national and provincial roads were considered to be in good conditionin 1991.

2.4 Eastern Indonesia accounts for about a quarter (69,000 Ian) of thecountry's total road network. The road service index is low at 3.0 km per 1000population but this is about twice the national average; on the other hand its roaddensity of 0.09 km per lakm is about a third below the national average. However, roaddensity in cultivable areas is 0.38 kn per km2 in Eastern Indonesia; this compares witha figure of 0.33 when computed on a similar basis for the rest of Indonesia. Thenetwork corresponds to the small, widely dispersed pockets of population to be foundin many provinces in the east, with a population density of 126 per hnm2, on thecultivable areas. Due partiy to its weaker institutions, the road network in the Easternregion is in generally poorer condition than that in Java and Sumatra and a lowerproportion is sealed. More details on the road network are in tables 2.1 -2.4.

C. KABUPATE ROADS

2.5 Within the road subsector, a major GOI objective is to achieve highercoverage of kabupaten roads and to raise the stable (good and fair condition) proportionof the network through a consistent annual level of funding and steady improvementsin the institutional and technical framework for preparation and implementation ofkabupaten road programs. GOI policy places more emphasis now on the outer islands,a region where the economic returns are lower but still acceptable. To this effect,substantial measures have been taken by GOI to increase the capacity and accountabilityof kabupaten goverments, and improve systems and procedures for road plannig,design, and implementation.

2.6 Unlike the national road system that has renained stable at about 50,000km, the classified kabupaten road network has been growing at about 7 percent perannum during the past 10 years and now totals more than three times the size of thenational and provincial roads network This growth resulted more from absorption intothe classified network of exisdng, unclassified roads rather than from construction onnew alignments. The latter has been limited in the last several years as the emphasis forall road classes has been on qualiative improvements through the various bettermentprojects.

2.7 Kabupaten roads are of lower quality than the national and provincialroads. It is estimated that only 39 percent are paved and that about 27 percent are ingood condition. The poor state of the kabupaten roads is of concern because of theresultant unnecessarily higher cost of transport in nrual areas where incomes are lowerihan in cities, and because of the adverse effects on local development and on personalmobility. Table 2.5 has further details on the lengths and condition of kabupaten roadsin the project area.

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D. ADNJSRTnE SUWCIU

2.8 Idonesia has a three-tier regional admnistrative system. The first level,referred to as Daerah Tingat I, conpists of 24 provinces and three special districts(Jakarta, Yogyakarta, and Aceh), each headed by a Governor. Each province issubdivided at the second level, or Daerah Ingat 11, into Kabupans (rural districts)that are headed by a Bupati, and Into Kotamadyas (municipalities) that are simflarlyheaded by a Walikota. These second level units in theory have autonomous budgets andtaxation powers but in pracice function as exons of the cetal or provincialgovernments. Further administrative subdivision continues along the two streams, urbanand rural. Ibe kabupatens are subdivided in -camnAans, or district administrativeunits, headed . a 1mat. The kecamatans are in turn further divided int Desas, whichare basicall v - and form the third administrative level, headed by a Kepala Desa.The paralkc- the urban side are the kelurahans, headed by a Lurah, and RukunTentaggas and Aukun Wargas, headed by community leaders. In 1992, the regionaladministration consisted of 243 kabupatens, and 55 kotamadyas, with Eastern Indonesiaaccounting for 77 of the kabupatens.

2.9 Most central government minities have branch offices at the provinciallevel (Kantor Wilayah Propinsi, KANWIL). The KANWILs are staffed by centralgovernment officers and their operations are financed by the central goverment budget.There is also the Proyek Bant Penangan Jalan Kabupaten (PBPJK) in mostprovinces, which is a special unit for providing assistance to local governments onroads.

2.10 The Directorate General of Highways (DGH) of the Ministry of PublicWorks (MPW) is the road agency at the central level (Chart 1), while agencies at lowerlevels are the Provincial Public Works Office (DPUP - Chart 3)1/ and the KabupatenPublic Works Office (DPUK - Chart 4). In principle, DGH, DPUPs and DPUKs areresponsible for national, provincial, and kabupaten roads, respectively. However, theplanning and implementation of maintnce of national roads is now delegated to theDPUPs. DGH retains responsibility for setting policies, procedures and guidelinesconcerning the planming and implemention of all rad progras and assisting andsupervising provincial and local agencies in their use.

2.11 The Diecate General of Regional Development (DGRD - Chart 2) andthe Directorate General of General Administration and Regional Autonomy (PUOD) ofthe Minstry of Home Affairs (MHA) also play a subsantial role in the road sector.With their corresponding agencies at provincial and kabupaten levels, DGRD andPUOD are, in particular, responsible for regulatng and monitoring the nontechicalasects of central government's grant programs (Inpres) to lower level governments.They are also responsible for regulating staffing and salaries, and for the appointmentand supervision of provincial and local governments' senior officials.

,I In som lar povics, epmas pvia agecies hae been establhd fir do vanouspublic wo sectors. In such ases, tetr is a sepamato povinc road dep_ (DBM).

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2.12 Central Governent activities at the lower levels are carried out byservice departnents or "dinas" under the administrative control of the Govemor or ofthe Bupati. Technical guidance to the dinas is provided by the next higher level ofgovernment - to the Dinas kabupaten by the Dinas propinsi and to the latter by DGH,in the case of roads. The Bupati exercises overall control of Government functions ina kabupaten, particularly the coordination of the work of tbe central and provincialagencies.

2.13 Staffing. DGH has about 5,000 permanent and tmporary staff, about1,200 of whom are engineers. Traditionally, many have been seconded to DPUPs.Recently, DGH has also stated to recruit young engineers and second them to DPUKs.This is important since DGH can recruit more appropriately qualified people than theprovincial and kabupaten adminons because of the better career prospects that itoffers. There is no reliable estimate of the number of staff working at DPUP andDPUK level on road works programs, but it is likely to be well above 15,000.

2.14 Training. Technical training of roads staff is mainly the responsibiltyof MPW's specialized roads training section, DIKLAT DGH, that has a close technicalrelationship with DGH and from which it receives part of its budget. Some non-technical training is also provided by MHA to DPUP and DPUK staff. As the roadagencies, under DGH's lead, are becoming more maure, manpower development isbeing given increasing attenion. In particular, a major step was taken recently with thepreparation of a five year Kabupaten Road Master Training Plan (KRMTP) which hasdefined trang activities tat are responsive to needs and also a detailedimplementation strategy. Implementation of the priority parts of KRMTP is acomponent of this project.

E. ROAD TRANSPORT

2.15 Vehice Fleet. Ihere were about 8.5 million motor vehicles registeredby the end of 1990 and about 32 percent (2.8 million) were four-wheel vehicles.Commercid vehicles-buses and trucks-accounted for 53 percent of four-wheel motorvehicles with cars and pickups making up the remainder. The fleet has grown rapidlyin the last 15 years, averaging around 11 percent growth between 1980 and 1990,however at 14.5 four-wheel vehicles per 1,000 population, it is still in the low range.There were also some 5.7 million motorcycles, as well as a large number of three-wheel vehicles. The use of motorcycles is widespread at about 32 per 1,000populaion.

2.16 Eastrn ndonesia accounts for about 8 percent (650,000) of the country'sregistered motor vehicles, implying an average of 4 four-wheel vehicles per kilometerof road compared with about 10 nationally. Trucks and buses, however, accouted foralmost 64 percent of the regional fleet. Further deis are in tables 2.6 and 2.7.

2.17 Traffic. During 1980-90, road traffic, excluding motorcycles, onnational and provincial roads grew by an average of six to seven percent per annum.Growth rates were lowest in Java and Bali (6.5 percent) witi higher rates in Sumatra

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(11 percent) and in parts of the outer islands. Traffic levels on most national roads arebetween 3,000 and 10,000 vehicles per day (vpd) while the majority of provincial roadscarry less than 3,000 vpd. Available data on traffic on kabupaten roads suggest greatvariability in the eastern region, with averages ranging by province from 50 to 200 vpd.In addition, the share of motorcycle and non-motorized traffic is higher than in otherregions.

2.18 Truddng. Road transport consists of public carrier 'for hire' services(30 percent) and own-account operations by private sector firms (45 percent) andGovernment corporations (25 percent). Trucks dominate freight transport in the easternregion; there is no railway there and ships are mainly used for inter-island transport.The majority of for-hire operators own from one to five trucks in the eastern region;these are typically 5-ton trucks. The ease of entry into the trucking market, therelatively flexible enforcement of regulations, and the relaxation of tariff restrictions afew years ago have generated conditions (in particular competition) such that the serviceto users is perceived as good and responsive.

2.19 Bus Services. Interurban bus services are mainly operated by the privatesector and are reasonably efficient. On the trunk routes, services are frequent and asfast as road conditions permit. There is justified concern, however, over safetystandards. Tariffs are regulated but this has generally not been a major problem andcompanies compete on quality of service. Bus services on kabupaten roads areprovided by privately owned minibuses. However, the majority of short distancetransport services are probably performed by three-wheeled vehicles (becaks).

2.20 Traffic Safety. Road traffic accidents are a serious socioeconomicproblem in Indonesia. The limited data available indicate about 11,000 fatalitiesannually and nearly 50,000 people seriously injured. Although fatality rates seem tohave been declining recently, they are sffll much higher than in most industrializedcountries and within the high range for developing countries. Studies financed underprevious Bank highway projects have identified the major causes as: inadequacies inlaws and regulations regarding vehicle standards and traffic, and deficiencies in thestandards and condition of roads. These problems are recognized and GOI has nowbegun to address the most critical road safety issues.

2.21 Road User Taxation. Indonesia applies all main forms of road usercharges and taxes: (a) purchase related (import duty, VAT and, in some instances,luxury goods sales tax on new vehicles, and ownership transfer tax); (b) ownershiprelated (annual registration fee); and (c) use related (import duty and VAT on spareparts, tires, and lubricants, implicit tax element on the pump price of gasoline, and tollfees). Total Government revenues from road users have not covered total expenditureson roads except in FY1986/87, despite the substantial level of revenues raised from carusers. Decisions on the structure and level of road user taxes have been made primarilyon grounds of resource mobilization, trade and industrial policy, price stabilizationpolicies and perceived ability to pay. An inmportant cause of this is that decisions onthe various road user taxes are made by different Government departments, each havingdifferent objectives. While progress has been slower than was projected in the Action

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Plan, significant steps have been taken recently towards implementing the relevantprovisions of the Policy Statement (see Annex 1).

F. FINANCING

2.22 A relatively large number of fumding programs are used to chann.Jresources to kabupaten roads. They may be funded through (a) earmarked centralgovermnent grants for road rehabilitation (IPJK), (b) block grants on a per capita basisreceived from central goverment (Inpres Dati 11), and (c) the local governments' ownresources. National and provincial budgets are mainly for betterment and maintenanceof national and provincial roads in kabupatens. Source (c) is often small, and in 91/92it nationally made up only about 0.6 percent of the total fnancing. Foreign aid ischannelled mainly through (a) for kabupaten roads. On an aggregate level, the centrallyearmarked and allocated IPJK as a source of kabupaten road fiancing has grown fromabout 30 percent in 84/85 to 55 percent in 91/92.

2.23 The improvement of kabupaten roads, including rehabilitation andbetterment works, is finar3ed mostiy from the IPJK amual allocations. Currently IPJK,which is allocated by the Deputy V Office (Regional Development) of Bappenas, is theonly development fund that can be provided (a) in adequate amounts and (b) with theyear-to-year stability that kabupatens can depend on. Part of the consideration inallocating the funds is to give a higher amount to the outer island kabupatens tocompensate to some extent for their low entitlement of Inpres Dati I grants. An outerisland kabupaten could receive Rp 6-7 billion annually from IPJK, while for a Javakabupaten it could be as low as Rp 1-3 billion. Bappenas therefore sees IPJK partly asa device to be used in helping to achieve regional equity (about 27 percent of the IPJKwas allocated to the Eastern Region in 1991/92).

2.24 The fimding of maintenance requirements, especially for routinemaintenance of kabupaten roads, is supposed to be met endrely from local government'sown resources (mostly Inpres Dati II). Inpres I)ati II is mainly an entitlement grant (@Rp 4000 per capita) that can in theory be allocated by kabupaten governments to anyitem in their budget. Typically, about 70 percent of Inpres Dati II is allocated to theroad sector for maint..nance and for betterment projects. However, maintenancefumding tends to be inadequate; this is probably due to the fact that allocations for itseem to be more often based on historic trends rather than on the needs of a rapidlygrowing network. In addition, in the eastern region persistent underfunding couldcontinue, due to the low population levels and consequently small Inpres Dati II funds.

2.25 001 has recognized this issue and has taken initiatives that are intendedto increase the funding, and improve the implementation (see chapter IV), of roadmaintenance. Currently Bappenas has permitted the use of IPJK for periodicmaintenance. During project preparation it was found that most kabupatens needed touse about 7 percent of IPJK funds to meet their man ce targets in 1993/94. ThisIs a stainable level of IPJK usage for mainean. In total for the Eastern Region in1992/93, IPJK accounts for about ree-quarters of the total allocation for kabupatenroads. ITis is appropriate as it represents the beginning of the treatment of IPJK as

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a sector fund that can be allocated for either road construction or mantance.Bappenas intends to explore this option further, as kabupatens develop the ability toplan and allocate funds efficiently. Further details on kabupaten roads financing andexpenditure allocations are in Annex 2.

G. PLANNG AND BuDGMG

2.26 The main characteristic of the planning, progrmmn and budgetnprocess in Indonesia is its consensus building approach. lhe budgedng process consistsof a set of bottom-up and top-dow, inter/intra governnent conferences (RAKORBAN,RAKORNAS, and RATEK). Annual road works programs and budgets are preparedthrough a series of meetings from about June to November each year at village,kabupaten, provincial, and national levels to review budget proposals. On this basis,the road components of the national development budget are prepared and budgetenvelopes are announced early January for each of the main fimding programs andsubsequently for each province and kabupaten. Coordination metings are then held tofirm up lists of approved road works. Annex 3 has firther details on the planningprocess.

2.27 Various methods are used to assess quanttatvely the economic priorityof proposed road works. The methods used for pron g mainnance,rhabilitation and improvement works on national and provincial roads include anextensive annual data collection and the application of computer programs based, inparticular, on the Bank's Highway Design Model.

2.28 On kabupaten roads, sytematic programming methods are in place onlyfor rehabilitation works. DGH, with Bank's assistance, bas developed a rural roadplanning-programming-budgeting system to accommodae the current GOI annualplaning and budgeting cycle. Road links are evaluated by local kabupaten planningteams 2X in accordance to stanrd guidelines and methodologies issued by DGH.The NPV is one of the main criteria used in detrmining a likd's funiing eligibility andimplementation priority. Tbis system was designed for use by kabupaten staff and hassufficient analytical rigor to ensure that projects selected are justified economically. Itwas first applied (stting 1988) to the 75 kabupatens included under the Bank-assistedSecond Rural Roads Development Project and was subsequently apphed (in 1990) tothe entire country.

2.29 A review of the application of ties planning procedures for the KR3first-year (92193) roads rehabilitaion program was conducted by the Bank in July 1992.Of the links eamarked for IBRD financing, or almost one-half of the reMibilitationprogram, close to 100 percent were properly evaluaed and hbA met the minimumeconomic return crteria. However, the same canmot be said about the quality of the92/93 rehabilitation progrm as a whole becas the data indicate that as much as

2I The kabate t1ems an made up of fior to eight staff dawn from Bappeda I, DPUK, andBasian Pembangu (te kbpe haisom unit with MHA). Team membets we given fourweek of ful Xm taUni as wel as occasoa on-the-job tainng.

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25 percent of the links were either not evaluated, or evaluated but not viable. Sdll, thisdoes Indicate that significant progress has been made because In the recent past little ornone of the road links would have been evaluated on a sound basis. Theimplementation of this system has altered the traditional practice in the sector by whichthe annual rehabilitation programs were primarily made up of l'ks that were selectedon ad hoc basis, unsupported by planning data and evaluation of alternatives. Muchsupport is still necessary, however, to assist kabupatens in their use and also DGH inits control and evaluation. Under the project, emphasis will continue to be placed onencouraging kabupatens to apply the planning procedures to all of their annual roadinvestment programs.

2.30 Until recently, methods used for preparing maineance programs onkabupaten roads were incomplete and, in any case, often not applied systematically.Partly for this reason, the funding of maintenance has generally been inadequate. Thesemethods have been improved under Rural Roads II and are ready to be applied in alarge number of kabupatens, which will be done as part of the project. It is expectedthat, as experience is gained, the current rudimentary prog ing of maintenance willbe improved. Under the project, refinements will be introduced to evaluate life-cclemaintenance strategies and to select the best alternatives. The performance ofkabupatens participating in Rural Roads I (Loan 2881-IND) showed that improvementsin both the planning and implementation of maintenance can be realized.

2.31 Also, given that different guidelines and types of control apply to thevarious funding sources for the program, there is a some risk of conflicting priorities.This risk is well addressed for national and provincial roads by the preparation of anintegrated draft work program (Satuan III) which deals with all types of road works,including maintenance, and all sources of funds. There is not such an integrateddocument as yet for kabupaten roads but it is scheduled for development by the CTCduring the implementation period of the proposed project.

H. EXPENDrIIRES

2.32 The expenditure program for the road subsector has reached close to20 percent ofthe total national development budget. Startng from aboutRp 827 billiona/in 1984/85, expenditures rose to about Rp 3,684 billion in 1991/92, an increase ofabout 23.8 percent per annum over the period in nominal terms. (See Table below).Expenditures on national and provincial roads have mainly been for rehabilitation andimprovement of the existing network and for mamce. Only a few links have beenadded to the national and provincial road network.

2.33 During this period, the expenditures on kabupaten roads have increasedfrom about Rp 267 billion in 1984/85 to about Rp 1.2 trillion in 1991/92, makdng upabout one-third of the total road expenditure. For kabupaten roads, most of theexpenditres have been for improvement of the network, including upgrading village

a1 Ecuding eXptur an toll rad.

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ROAD SCTR ExPENDrIt (84185-92193)(Current Rp billion)

Growth84/85 85186 86/87 87'88 88/89 89/90 90/91 91/92 92/93 Rate

(est.) (85-92)

Na'l & Prov'l Road 560 581 565 971 621 1,230 1,524 2,478 2,926 23.7%

District RoadsIPNK 80 88 130 130 222 294 454 691 827 36.1%Inrs Dad E 155 174 195 200 263 269 249 418 578 15.2%Odher Local Funds 10 8 2 1 4 3 6 7 2 -Foreign 22 22 49 54 47 83 43 90 76 22.1%

Totd iz m of m z L L 61$120%

Grand Total 3 A73 941 E iL 1a12 A.M* Lo L29 36 am3

roads and roads built under area development schemes (such as transmigration projects)into the kabupaten road network. The expenditure program for kabupaten roads isdriven by the sted objective of Bappenas to have 55 percent of the network in stablecondition (defined as kn of roads in good and fair condition) by the end of Repelita V.This is a re-asonable objective as, using Bank approved criteria, the rehabilitation ofabout 60 percent of the network could be justified. However, the stable proportion inKREI kabupatens is now 40 percent; at curent expenditre levels and inplemenaionrates, it seems doubtful that the stated objective will be attained.

2.34 The overaU expenditure program is of appropriate size, given institutionaland other constraints. The first year roadworks program of the KREI kabupatenscovers less than a half of the total links that are already evaluated as viable. Thekabupatens could implement the program, as it is withn their capabilities, but thecentral government lacks the capacity to moniftor and supervise them adequately in themedium term. A large proportion of the supervision and monitoring for the plaming,programming, budgeing, and implementation of the annual roadwork progran isundertaken by two major consulting groups. It is essential for DGH and kabupatenstaff to be able to perform as much of these functions as possible by themselves by theend of the project period. Hence the project places emphasis appropriately on buildingup instittional capacities at all levels.

2.35 In terms of composition, the expenditure progran still displays thegeneral pattern of kabupatens which is to spend overly on betterment, relative tospending on maintenance. This pattern of expenditure will not lead to sustainabledevelopment of road ntworks. One option for futre kabupaten road expendiures

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demonstrates that by pursuing a "maintenance-first" strategy kabupatens could achievea higher proportion of stable networks, for a given amount of funds. This strategy callsfor maintaining all the maintnable (or stable) roads in 4 years (by 1996). This canbe done by increasing steadily the maintamce share of the total road expendiure fromthe current 7 percent to about 20 percent to 25 percent, depending on the fundingavailability. By adopting this nmalntenance-first" expenditure strategy, at the end ofREPELITA VI 1998/99), the total length of stable networks would be longer than ifmaintenance were ignored. This longer stable network would result in VOC savingsof about Rp 330 billion during 1994-99, in terms of net presert values at a 10 percentdiscount rate. A more detailed analysis is given in Annex ̂

L TECNImCAL ASPET

2.36 Technologies and Design. There is a wide variety of technologies anddesign processes used in the road subsector in Indonesia, ranging from the most modernapproaches to obsolete techniques. In general, the approaches used on national andprovincial roads are sound and well adapted to Indonesia's capabilities in terms ofaministration, contrcting industry, and natural resources. The situation is a lot moreproblematic for kabupaten roads, where the choice of technology and the designs couldoften be much better. For example, penetration macadam overlays are used for sealedroads in general. This old labor-intensive technology is well adapted to availableresources in many parts of Indonesia but in most cases it is poorly implemented. Itshould be used in conjunction with more modern technologies (bitumen emulsious forexample) and better execution methods (regarding stone gradation in particular).

2.37 In general, moreover, designs are prepared on the basis of inadequatesurveys and are often not adapted to site conditions and available materials. Many ofthese problems have been taclced, however, and improvements are being implemented.In particular, detailed tedhnical guidelines for all engineering aspects of road works(including bridges) have been prepared by DGH and are being disseminated to allkabupatens. The PBPJKs are now assisting and checking the preparation of designs bystaff of DPUKs. In addition, specifications have been prepared for more moderntechnologies (such as bitumen emulsions) and private firms have been encouraged toinvest in production and distribution facilities whenever possible. Furthermore, a planfor technology development and dissemination has been prepared which will beimplemented under the proposed projec. (para. 4.12).

2.38 Implementation. Much progress has been achieved in the past ten yearsin this area for national and provincial roads. All periodic maintenance andrehabilitation/improvement works are now carried out by private contractors. However,the quality of construction still remains a concern, mainly because of the weakness ofthe contracting industry and inadequate quality control. Also, a 'quality culture' isonly now tking root thdoughout the road agencies. DGH is aware of these issues andis now addressing them. In this area as in the area of technology and design, problemsare a lot more acute for kabupaten roads despite commendable progress achievedrecently, in particular in the context of RR2. Most aspects of road worksimplementtion have serious weaknesses that too often result in a product of poor

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quality arnd short economic life. Tender packaging is not efficient: contracts are oftenfor very small works (with a cost below US$250,000) and of a short duration (ree tonine months in most cases). Also contractors are still too dependent on poor qualityequipment supplied by the public sector. Finally, supervision is inadequate and contractspecifications are often not adequaely enforced.

2.39 Thes problems are now being recognized, especially since DGH and theDPUPs have begun to play a more substandal role in the preparation andimplementation of kabupaten road works programs. As a result, improvements inhuman resources and organization at kabupaten level are beginning to be a priority, andthe need for assistance and supervision by DPUPs and DGH is now adknowledged.More specifically, the technical guidelines mentioned in para. 2.37 include guidelineson execution of works and quality control. Better procedures for contracting roadworks (including better contractor prequalification procedures and standard biddingdocuments) have also been fomulated. One of the main objectives of the project is tointroduce these improvements in the project kabupatens.

J. CONSMUCrION INDUSTRY

2.40 Although local capability has developed significantly in recent years, theindustry is on a whole weaker in the easten region, and especially so for the typicalkabupaten roads contractor. 001 has long recognized the need to improve thecapabilities of domestic contractors. Several studies carried out in recent years havehighlighted the sector's main weaknesses: (a) shortage of skilled manpower andinsufficient organization and technical capabilities of most contractors; (b) poorconactor selection, cont adn on and supervision procedures, in general, aswell as insufficient size and duration of contracts; (c) weak support institutions withinG01 and limited role played by the two main contractors associations; and (d) someinadequacies in the business environment (particularly in the areas of fnance, insurance,equipment, and standards). GOI has taken actions to address some of these problemssuch as setting up and delivering some training programs for the personnel ofcontractors and supervision consultants, providing technical assistance to comractorsunder several foreign funded projects, including road projects, and improving thesystem for licensing contractors. A more comprehensive approach is needed, however,and this has been the subject of a regular dialogue between GOI and the Bank, to whichthe associations of contractors have also contributed. In the short to medium term,step-by-step improvemens should be sought in the context of specific sectors. Theproposed project includes such improvements (para. 4.24).

K. ENVIRONMENTAL ASPt

2.41 Indonesia has established a significant body of laws and regulations forthe protection of the environment which provides a framework for specific guidelinesand istional development measures now being implemented by sector ministries.Of particular importance for the inuctre sectors are the regulations on the analysisof environmental impacts (AMDAL). In recent years, MPW has much developed itscapability to implement AMDAL reguladons with substantial assistance from the Asian

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Developme Bank (ADB) In particular. In 1989 and 1990, a series of guidelines anddirectives on the environmental evaluation and control of all types of public worksproject were developed in MPW. In 1991, deilled draft manuals for implementingthese guidelines, covering all pha of the project cycle, were prepared for the roadsubsector. In addition, substantial training of staff has been provided to MPW andDOH. As a result, a sound basis is now available to MPW and DGH for assessing andcontrolling the environmental Impacts of road works. Technical assistance will beprovided under the project to help DGR strengthen furlher its section for managingenviron_mel assessmen. Paras 4.33 - 4.39 have furter details on the environmentalassessment process followed in this project.

2.42 Vehicle emission control, including the setting of standards andimplementation of programs form part of GOI's general air pollution monitoring andcontrolefforts. With aste providedundertheBank-assisted FirstJabotabekUrbanDevelopment Project, monitoring of vehicle-related air pollution has been iniated and,on this basis, a naional strtegy for controling vehicle emissions is being developed.

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3PAST BANK INVOLVEMENT IN ThE

ROAD SUBSECTOR AND LESSONS LEARNED

A. PAsr BANK INVOLVEMENT

3.1 The Bank has had a substantial involvement in the transport sector ofIndonesia over the past two decades. It has fhanced four maritime transport projects(two shipping and two ports projects), two railway projects, two fertilizer distributionprojects, and twelve road projects. Bank involvement has been particularly importantin the road subsector, with total lending of abou+ US$1,800 million since 1969,corresponding, in particular, to disbursements of about US$1,200 million since the early1980s or about 12 percent of all GOI expenditures (from local and foreign sources) onthe road network. Nine of the road projects have been completed. The HighwaySector Project (FY90) and the Second Rural Roads Developmett Project (FY88) arestill ongoing, while the most recent project, KR3, has just begun implementation.PPARs have been issued for the Second and Third Highway Projects in 1980 and forthe Fifth Highway Project in 1989. PCRs have also been issued for the FourthHighway Project in 1985 and for the First Rural Roads Development, HighwayBetterment, Jakarta-Cikampek, and Highway Maintenance and Betterment Projectsbetween 1989 and 1991. The experience under the road projects is briefly reviewedbelow.

3.2 All road projects have had broadly similar objectives. They aimed at:(i) improving the quality of the network through road construction, improvement,

rehabilitation, and maintenance, with the emphasis during the past ten years being toa very large extent on the last two; (ii) developing the capability of road agenciesthrough technical support and training of staff as well as through improvements inplanning and progranuning systems, in technologies, and in procedures and guidelinesfor preparing, implementing and monitoring road works; and (iii) improving theincentives and regulations for road transport and their enforcement. The emphasisgiven to these objectives differed substantially between projects, however. The tollroad project (Jakarta-Cikampek Project) and the kabupaten roads projects (First andSecond Rural Roads Development Projects) focused on the problems of correspondingparts of the road network. Ihe other projects shifted gradually from a focus on nationalroads, civil works, and DGH organization to a broader concern for the entire nationaland provincial road network, detailed improvements in the functioning of all road

17 -

agencies, and to varying degrees, incentives and regulations pertaining to roadtransport.

B. MAIN LESSOMF LEARNED

3.3 Civi Works. In general, civil works programs have been implementedsatisfactorily in terms of timeliness but with uneven results In terms of quality ofconstruction. An obvious lesson has been that projects with road works well preparedand implementation initiated by the time of loan approval, have gone ahead about onschedule. On the whole, the major reason for delays has been that theplanning/programming anu engineering capability of DGH has improved only gradually.In the Second Rural Roads Development Project, annual planning/programming ofworks were initiated well ahead of time every year and aecisiors on priorities confinedto one main review in the context of the budget process (rather than spread over theentire year with no precise relationship to the budget process) and, as a result, projectimplementation has not lagged much behind original schedules. This will be replicatedin the proposed project.

3.4 Quality of construction has been poor in projects which included a largenumber of small contracts, coupled with weak implementation arrangements, as in theFirst Rural Roads Development Project and in the first maintenance component of theHighway Maintenance and Betterment Project. Experience in the two follow upprojects (Second Rural Roads Development and Highway Sector Projects) has shownthat with better implementation processes, including in particular intensive supervision,better results could be achieved. As a result, preparation of the proposed project hasfocussed, inter alia, on devising and agreeing with GOI on further improvements inimplementation arrangements. A main objective of the proposed project's supervisionshould be to ensure that these arrangements are properly applied by all kabupatens andthe results monitored and evaluated.

3.5 Through civil works programs as well as loan conditions for the projectsthat it supports, the Bank has also tried to steer GOI towards a greater funding andbetter execution of maintenance. Experience has shown that conditionality by itselfcannot work, mainly because of entrenched habits, especially among provincial andlocal governments, and the difficulty of preparing and implementing maintenanceprograms satisfactorily. Starting in 1987 with the Highway Maintenance andBetterment Project, the Bank, therefore, undertook to finance maincenance on nationaland provincial roads as well as the technical support a I the supervision needed tomake it successful. This helped GOI increase the funding of maintenance dramaticallyand obtain satisfactory results with it. Other factors contributing to success were thatthe previous project (as well as an ADB supported TA project) had helped set up betterprogramming procedures for maintece and that maintenance was the project's mainobjective and, therefore, received considerable attention. The experience with theSecond Rural Roads Development Project has confirmed this lesson. It has shown thatincreased funding is not sufficient to achieve success; procedures for preparing andsupervising maintenance programs adequately also need to be in place and maintenancemust be a priority of supervisory and kabupaten staff. The proposed project takes

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account of this experience: improved maintenance has been made the project's firstobjective (para. 4.1), satisfactory procedures are in place, and adequate technialsupport and substantial financing will be provided.

3.6 InstIttional and Technical Developments. fThough progress has beenslower than expected, most sector agencies are much more capable tay than they werein the early 1980s. The main lesson of experience has been that major improvementsof an institutional or technical naure require (a) considerable staff resources over a longperiod of time (from GOI and their consultants as well as Bank staf), (b) thepreparation of detailed implemeutation arrngements, (c) confinuous atention bydecision makers, and (d) a flexibie approach so that improvements take account of andare well integrated into 001's normal systems and procedures. Only a limited numberof objectives can and should therefore be pursued at any point of time and the Bankshould select very carefully the few institutional objectives under any single project.For this reason, the proposed project's institutdonal objectives have been limied asmuch as possible to a few key areas and adequate resources supplied for implementation(paras 4.154.16).

3.7 The development of human resources through training has been onlypartly successfiu. Trainig programs have been implemented, often with delays, butthe impact on the overall institonal performance has been unclear mainly because theselection of traning activities included in the projects as well as their content often didnot address many of the agencies' priority needs. This lesson has been taken intoaccount in the kabupaten projects. GOI has agreed to prepare a detailed analysis of thetraining needs of kabupaten road staff and to use the findings of this analysis forimnplementing a comprehensive training plan as part of the proposed project

3.8 Improvements in the Efficiency of Road Transport. Tere are manyparties and interests involved in and concerned with the required improvementmeasures. Progress is probably in part being slowed by the need for extensiveconsensus building. In view of this, there is a clear need for (a) one agency, probablythe Ministry of Communications, to take a lead role in preparing for and advocatingchange, in coordination and consultaaion with oher GOI agencies; (b) continued andfocussed attention on the subject from the Bank's side; and (c) clear understandingsbetween the Bank and GOI as to the long term objectives in this area and as toindicators of progress in attaining these objectives. The Bank intends to focus on theseissues during the preparation of the proposed Second Highway Sector Project.

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4PROJECT

A. OBIwcInV,

4.1 The principal objectives of the project are to improve the access to themain economic centers for the agriculture dependent rural population in 51 kabupatensin seven provinces (all provinces of Sulawesi, NTB, NIT, and Irian Jaya) and toconsolidate the current efforts to strengthen all agencies in the country dealing withkabupaten roads. More specifically, the project would increase the quatity and qualityof the kabupatens networks by: (a) improving systems and procedures for roadmaintenance and ensuring that the maitainable network of all project-assistedkabupatens (about 12,500 km) is satisfactorily maintained; (b) rehabilitating/improvingthe existing roads (about 3,000 Im); (c) improving the capability of staff involved inthe subsector nationwide at all levels; and (d) strengthening institutional arrangementsand improving the technical environment for planning and implementing kabupaten roadworks programs, including the adaptation and dissemination of more appropriate roadtechnologies. The list of 51 project-assisted kabupatens is in Table 2.5, with somebasic data on their road network. The kabupatens were selected by GOI in coordinationwith projects financed by other donors. In five provinces out of the project's seven,the Bank will be the oniy source of foreign funding for kabupaten roads and allkabupatens of these provinces will participate in the project. USAID is also providingassistance in the other two provinces.

B. RATIONALE FOR BANK INVOLVEMENT

4.2 Contued Bank support to the kabupaten road subsector is needed for thefollowing reasons: (a) good access is a requisite for most development activities inrural areas and is important to reduce rural poverty; (b) a sizable part of 001'sdevelopment budget is now aimed at improving kabupaten roads and it is important thatthese funds be used as efficiently as possible and that the environmental impacts beaddressed systematically; (c) the Bank cr-a provide key assistance to GOI in theformulation and implementation of institutional and technical improvements at subsectorlevel, especially in view of GOI's shortage of expertise; and (d) Bank's involvement canhelp GOI give high priority to road maintenance and less emphasis to meeting thephysical targets set in REPELITA V for rehabilitation/improvement of the kabupatenroad network.

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C. PtojCT DESCRwTON

4.3 The project will have the following main components:

(a) a road network improvement and maintenance component, comprising:(i) routine and periodic maintenance of the entire kabupaten road

network as well as rehabilitation/improvement of selected roads in the 51project-assisted kabupatens over three GOI fiscal years startIng in1993194; (ii) construction of, and equipment for, workshops andlaboratories; (iii) provision of equipment, spare parts, and supplies; and(iv) supervision of works;

(b) a technology adaptation and dissemination component, comprising (i)development and implementation of adapted technologies, processes, andproducts which have potential to improve the quality and the efficiencyand also help reduce the cost of kabupaten road works; and (ii)improvement in both the quality and efficacy of the labor-based methodsemployed in Indonesia, through continuation of the ILO Pilot Schemeinitiated under RR2;

(c) a training component (part of the Kabupaten Roads Master Training Planstarted under the KR3 Project), including detailed preparation andimplementation of priority parts of a nationwide training program forkabupaten road staff based on a comprehensive training needs analysis;and

(d) technical assistance and studies for strengthening further the systems andprocedures nationwide regarding planning, environmental analysis, andimplementation of kabupaten road works, and for helping GOI centralagencies in monitoring project execution.

D. RoAD NErwoRxK IMROvEMT M ANTEANCE

4.4 Maintenance. Road maintenance in Eastern lonesia is inadequate due'to insufficient planning and implementation capacity at local level, and the poor overalltechnical fwmework. It has been assessed during appraisal that the current level ofeffort is only about 25 percent of what would ideally be necessary to maintain thenetwork adequately. The Bank's past experience in the roads subsector has shown thatits involvement in all aspects of road maintenance can help considerably to bring aboutthe major changes that are required (para 3.5 above, and Annex 4, para. 9).Therefore, the project's civil works program gives priority to maintenance in order to:(i) ensure that the better procedures and guidelines which have been developed Liderthe Second Rural Roads Development Project and the Third Kabupaten Roads Projectare used early on a large scale and are well monitored; (ii) encourage kabupatens toincrease funding of maintenance (project funds would match their own financing); and(iii) concentrate the attention and support of the project's GOI staff and supervision

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consultants on maintenance. This priority can be measured in terms of the dramaticincrease in the level of effort required from GOI for maintenance activities (paras 4.5and 4.29). In order to meet these targets, road maintenance expenditures are expectedto increase from 4 percent (compared to 11 percent nationwide) of road expendiuresin 1991/92 to 20-25 percent at the end of the project (Annex 2).

4.5 The road maintenance component will comprise the entire annualkabupaten road maintenance programs in the 51 kabupatens over the years 1993/94 to1995/96. It will be carried out in accordance with the current road maintenancestrategy (Annex 4), which calls for intervention on the "good" and "fair" portion of thenetwork, termed as maintainable. The target to be reached by the third year of theproject is that 90 percent of the maintainable network, i.e., about 12,500 kan, shouldbe maintained. This target will be met gradually, by 50 percent for the first year and70 percent fGt the second year. Draft first year maintenance programs for each projectkabupaten were reviewed at appraisal; they are now further developed on the basis ofthe methodology presented in Chapter V and with reference to the above targets. Atnegotiations, agreement was reached with GOI that it would cause each projectkabupaten to (a) prepare its anmual road maintenance program for the fiscal years1994/95 and 1995/96 in accordance with a methodology and criteria agreed to by theBank (Chapter V), (b) submit this program for the Bank's review and comments beforeDecember 31, 1993, and December 31, 1994, respectively, and (c) finalize andimplement this Eprogram taking Into account the comments, if any, by the Bank.Agreement was also reached that GOI would select subprojects for the maintenancecomponent of the project in accordance with criteria and procedures satisfactory to theBank. In particular, subprojects would be included in a kabupaten road maintenanceprogram prepared as agreed, and designed in accordance with DGH's technicalguidelines. In addition, in order to give a strong incentive to project kabupatens tomeet the above maintenance targets, satisfactory preparation and implementation ofmaintenance programs will be a condition of each kabupaten's eligibility forreimbursements under the project's rehabilitation/improvement component (para. 4.7).hIplementation of the maintenance programs would be monitored through periodicreports on the basis of progress certification issued by the supervision consultants(para. 4.8).

4.6 Road Rehabilitation/Improverent. This component is relatively limitedas a result of the project's emphasis on maintenance (para. 4.4). When equipment andfacilities for force account works are taken in consideration, a larger share of projectfinancing will go to road maintenance than to rehabilitation/improvement. The 3,000km of rehabilitation/improvement works will include several hundred sections of roadsin poor or bad condition. This amounts to about 20 km of major works per year perkabupaten, represening about 40 percent of their rehabilitation program. The roadswill be brought up to mininmm standards based on projected traffic volumes andtopography (Table 4.1); existing alignment will be retained to the exter. possible.Works will be designed for a ten year lifetime and will include, as required, rehabilita-tion of pavement layers, shoulders, side and cross drainage and bridges. Draft firstyear rehabiLitation/improvement programs for each kabupaten, prepared on the basis ofthe methodology presented in Chapter V were reviewed at appraisal. About 14 percent

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of works in the first year are expected to be rehabilitation of sealed roads. The balanceare existing gravel, stone or earth roads requiring betterment/upgrading to seal or gravelstandards. A sealed surface is proposed for about 60 percent of the program, the restare mainly earth/gravel roads with estinuted traffic potential of less than 100 ADTrecommended for graveling. Only 2 percent of the program would be built to pavementwidths of 4.5 m or more representing usually widening project for roads with morethman 500 ADT. Pavement width of 3.0 or 3.5 m are proposed for other projects basedon minimum standards for roads with projected traffic below 500 ADT.Implementation is expected to start during the second quarter of 1993.

4.7 At negotiations, agreement was reached with GOI that it would causeeach project kabupaten to (a} prepare its annual rehabilitation and improvement worksprogram in respect of the project for the fiscal years 1994/95 and 1995/96 inaccordance with a methodology and criteria agreed to by the Bank (Chapter V), (b)submit this program for the Bank's review and comments before December 31, 1993,and December 31, 1994, respectively, and (c) finalize and inplement this programtaking into account the comments, if any, by the Bank. Agreement was also reachedthat GOI would select subprojects for the rehabilitation/improvement component of theproject in accordance with criteria and procedures (including environmental assessmentand procedures for consulting with project beneficiaries and indigenous peoples -para. 4.37) satisfactory to the Bank. It was fiurter clarified that the following wouldapply: (a) the kabupaten in which the subproject is located needs to have submitted anacceptable annual maintenance program for the corresponding fiscal year, andimplemented satisfactorily its maintenance program in the previous fiscal year; (b) thesubproject is included in an anmual road rehabilitation/improvement program preparedas agreed, and has been designed in accordance with DGH's technical guidelines;(c) the subproject economic rate of return is at least 10 percent; and (d) the subprojecthas been submitted to an environmentl screening, assessment and review process,including consultation with the affected peoples for relevant subprojects, satisfactory toGOI and the Bank.

4.8 Road Works Programs Supervision. Techical quality of workimplementation remains a serious concern. Ihe project will provide full support to thedecentrlized units (51 DPUKs and 7 DPUP/PBPlKs) for the implementation 3f theannual programs of maintenace and rehabiltaion of kabupaten roads, includingenghiering preparation, conractor prequalification and tender evaluation, qualitycontrol and monitoring, and on-the-job trning of DPUKIDPUP staff in ese fields.GOI will employ foreign and local consultants for this purpose, some of whom will bestationed in the provincial centers and others in the kabupaten cenuers to work withDPUP and DPUK counterpart staff on a daily basis. To facilitate administration andcoordination, the services will be divided into two Field Consultants for Implemenation(FCI) teams for the Northern (Region D) and for the Southern (Region II) parts, whichwill act as the vengineerw fully empowered to supervise the contracts, includingcertification of works. The schedule of consltants services is based on (i) detailedestimates of annual worldoad (on average 1500 contracts per year based on a length of6km per periodic maintnance or beOtrment contract, and 10 km per routinemaintenance contract), and (ii) saffig requirements by type of works, including site

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inspection, travel time and office work. Based on the above, the services would includeabout 600 staff-montis of foreign and 12,400 staff-months of local consultants and theircoats would be about 9 percent of the total civil works cost. By category, fieldsupervision engineers would constiute about 23 percent of the total staff months,43 percent would be for master inspectors and lab technicians, with inspectors makingup the renminng 34 percent. These consultants should start to mobilize in early 1993to complete preparation of the first year program. Therefore, the terms of referencewere agreed during project preparation so that contracts could be awarded and startedin the first quarter of. 1993.

4.9 Worlkhops and Laboratories. New guidelines for workshop andequipment management call for major repair, servicing and prevendve maintenance tobe carried out in kabupaten workshops facilities. Such facilities, including laboratoriesfor basic testing of soils and materis, already exist in most of the project kabupatens,but they need to be repaired and/or upgraded by the kabupatens. Only then will theyreceive additional equipment and tools under the project. In addition, 15 newworkshops and 20 new laboratories will be provided in kabupatens where no suchacilities exist, and they will be filly equipped as summarized in Table 4.2.

4.10 Road Constructio and tenance Equipment. Kabupatenequipment fleets are used pardy to carry out road works by force account and partly tolease out to contcors who lack certain essential equipment. Performance of thesefleets has been unsatisfactory, mainly due to weak management A set of guidelines forworkshop and equipment management was prepared under the Second Rural RoadsDevelopment Project, providing a practical framework for more efficient management,including measures to ensure that rental rates of kabupaten equipment fully reflectownership and mainteance costs. GOI now intends to implement these guidelines inall kabupatens and ensure that kabupatens provide sufficient funding for the operationand mainece of their equipment.

4.11 As an alternative to continue providing equipment to the kabupatens, theProject attempts to create the conditions for a larger involvement of the private sector,e.g., lrger contract packages, multi-year contracts, improved procedures forprequalification and for enforcement of conta obligations, etc. However, this willnot be possible or sufficient in all the kabupatens, and some equipment is still neededfor carrying out expected works (in particular routine maintnance). Table 4.2 showsthe priority equipment and spare parts requred for some kabupatens, which will beprocured under the project. TIis list was confkmed at negotiations.

E. TECHNLOGY ADNAFAON AON

4.12 This component aims at introducing innovation in techniques and methodscurrently used in kabupaten road works (Annex 5). On the Nhifher end, technologiesproposed for adaptation and dissemination to kabupate include the use of biumenemulsions, softer grade bimen, graded aggregate paving materials, cold laid bitumenmixes, soil stabilization, and asbuton. The project will finance an average of about sixtrials per province inchlded in the KR3 and KREI projects. Criteria for selecting the

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technologies to be introduced in each province have been defined, and an action planfor this introduction including training and monitoring has been prepared ( see Projectfile) and will be implemented under the project. On the "softer" end, the project wouldsupport G01's effort to upgrade labor based methods, both quality-wise and cost-wise.The RD Pilot Scheme was started under RR2, and the proposed project would financeabout 50 percent of the IL0 contract which would remain to be completed at the endof RR2.

F. TRAINNG

4.13 A nationwide Kabupaten Roads Master Training Plan (atMTP) wasprepared recently by GOI (para. 2.14). Priority parts of KRMTP, started under KR3,will be pursued under the project. They include: (i) preparation of training programsincluding course design and materials development; (ii) provision of equipment andsupplies for training programs preparation and delivery; (iii) training of trainers; (iv)delivery of training programs, including in-house training as well as professional stafftraining programs which will be contracted out; and (v) strengthening of the institutionsinvolved in training, including the setting up of systems for training needs analysis andmonitoring and evaluation. The objective is to provide about 620 training sessions (or150,000 trainee-days) in about 25 priority subject matters to about 6,200 staff over afive-year period. The first three years of the component were included in the KR3project. The last two years will be included in the KREI Project. At negotiations,agreement was reached with GOI that (a) by December 31, 1995, and December31, 1996 it would prepare and submrit for the Bank's review and approval its annualprogram for in-house delivery of training, for the fiscal years 1996/97 and 1997/98,respectveiy; and (b) finalize and implement this program taking into account thecomments, if any, by the Bank. More details on this component are in Annex 6.

4.14 To assist in the implementation of the training component, GOI willemploy foreign and local consultants. The services will include about 300 staff monthsof foreign and about 1,400 staff months of local consultants (of which about 700 ofprofessionals and 700 of subprofessionals), and would start in early 1993 under theKR3 project. Only the last two years (1995 and 1996) of this contract would befinanced under the proposed project.

G. TECHNCAL ASSWrANCE FOR INSTIMIIONAL ANDTEC1 ICAL DEVELOPMFr

4.15 Concerned GOI central agencies need support to continue improving theinsdtutional and technical framework for preparation and implementation of kabupatenroad works programs as well as to guide and monitor project execution. Accordingly,the project would include: (a) technical support and liaison for engineering aspects,including evaluation of implementation of technical guidelines and specifications, andfor technical audits; (b) general assistance in planning, including further developmentof the planning methodologies, arrying out specia studies of road works needs inunderdeveloped areas, analyzing the current situation and issues regarding village roads,assessing the size of the road netwvrk that kabupatens can economially and financially

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maintain and rehabilitate, and assessing the long-term indirect impact of roadrehabilitation/improvement on the environment (for example, through land developmentand deforestation); (c) assistance in the monitoring and coordination of projectactivities, including the coordination of the separate teams of FCI and trainingconsultants, the monitoring of project environmental impact, and the preparation ofproject implementation reports; (d) support in the preparation of annual road worksprograms including, inter alia, the environmental screening of proposed subprojects, thecarrying out of site-specific environmental assessments when required, the systematicreview of subprojects' economic viability, and the extension of planning methodologiesto non-project kabupatens; and (e) support for the preparation of environmentalassessments for the proposed Fifth Kabupaten Roads project.

4.16 For the above purpose, GOI has appointed foreign and local consultantsunder a Central Technical Consultants (CTC) team, and assigned counterpart staff (asdescribed in the Terms of Reference) as an essential component of staffng to enableachievement of project objectives. The services, which cover both KR3 and KREI,would be fmanced by both projects (first two years for KR3, and then KREI). TheCTC services were awarded under KR3 to the consortium formed by Hoff & OvergaardA/S (Denmark) and the Indonesian firms PT Multi Phi Beta, PT Amythas, PT DeltaMarga Kreasi, PT Sigma Penta, and PT Yodya Karya. In addition the project willinclude technical assistance for strengthening environmental assessment (EA) capacityin the new DGH section and Biro KLH and at the provincial Bappedas in Irian Jaya andKalimantan (para. 4.39). The EA consultants wiU be hired by October 31, 1993.Further details are in Annex 7.

H. CosT ESmuIS

4.17 The total project cost is estimated at US$331.3 million, including taxesand duties of US$30.1 million equivalent. It includes: (a) physical contingencies of10 percent on the base cost of all expenditure accounts except for equipment where theyamount to 5 percent; and (b) price contingencies of 3.1 percent on the foreigncomponent and of 5.5 percent on the local component each year throughout projectimplementation. The foreign exchange component is estimated at US$121.9 million or36.8 percent of total costs. The project costs by component are summarized in the tablebelow.

4.18 The base costs including taxes are estimated as of January 1993. In thecase of civil works, estimates are based on updated and adjusted recent unit prices forsimilar works. Rehabilitation/improvement works are estimated to cost aboutUS$40,000 per km. Routine maintenance is estimated to cost about US$1,100 per km.Periodic maintenance is estimated to cost US$13,000 per km for sealed roads andUS$6,000 for gravel roads. A new workshop is estimated to cost US$170,000. Thecost of equipment for construction and maintenance operations (including vehicles tobe purchased under reserve procurement, para. 4.25), for workshops, and forlaboratories is based on recent bids. The cost of consultant services is also based onrecent contracts. Regarding training, the co~. is based on ongoing similar programs

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Project Cost Summary

Am" ak £ilion ...LSlmlilUL. ForozgnLocal Foa Tot Loc FoniP Total exchup

A. Road network impovmentRoad Wors 341.9 162.8 504.7 166.8 79.4 246.2 32Worksops, labortorie S.2 7.9 13.1 2.5 3.9 6.4 61Equipment program 3.6 36.1 39.7 1.8 17.6 19.4 91

Subtotal 3 am j WA =au 37

B. Tech. Adapt. & Dismin. 5.0 2.7 7.7 2.4 1.3 3.8 35

C. Training Componet 7.5 3.0 10.5 3.7 1.4 5.1 28

D. hWIt/Tech. Develop. 4.5 S.5 10.0 2.2 2.7 4.9 55

Totdal BASELINE COSTS WLA au3 aI 3724 & MAPhysica contingencies 36.6 19.6 S6.2 17.8 9.6 27.4 35Psice contingencies 36.8 19.2 56.1 12.2 6.0 18.1 33

Total PROJECTrS COSTS mu am auJ ad4 1L Wa

Note: Due to rounding, totals may not add.

both in-country and oveas. Further details on expendtus by comot ae inTable 4.3.

L F hNNCN

4.19 The proposed Bank loan of US$155 million would finaumn about47 percent of total project cost, or about 51 percent net of taxes and duties, represenig99 percent of foreign cost and 16 perCent of local coSt GOI would finance theremainig US$176.3 million equivalent, or about 53 percent of e total estmtedproject cost, mainly through anmual budgetay allocaon from the ceral governmengrant progrmsn, IPJK and Inpres Dati H. The financing of the proposed project isshown in the table below.

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PRoJECT FINANCING PLAN(US$ milLion)

Source of Fmance Local Foreign Taxes Total

GOI 145.9 0.3 30.1 176.3

Bank 33.4 121.6 - 155.0

Total 17&. L21 3L1 3

J. IMTE NrAIION AND MoNmTwrNG

4.20 The project's civil works will be implemented by the DPUKs in the 51project kabupatens, assisted by DPUP tchnical staff and technical assstanceconsultants. The other project components (provision of equipment, training,supervision of works, and technical assistance) will be inmplemented by DGH. Theproject is expected to become effective in July 1993, but the first contracts wereawarded in January 1993 (para. 4.32). Execution would be completed by December31, 1997, about 4 years after start-up. The loan closing date is scheduled for June 30,1998. The implementation schedule, as shown in Annex 8, was confirmed by GOIduring negotiations.

4.21 In addition to the direct implemeion responsibilities menioned above,the main agencies involved in the project are MPW for technical aspects, MHA foriniutonal aspects, Bappenas for development planning aspects, and MOF for financialaspects. The detailed responsibilities of these agencies and corresponding offices atkbupaten, provincial, and central levels have been defined (paras. 2.8 - 2.12). Theagencies would be coordinated by a committee at Director General level dhaired byBappenas. This comnittee would be assisted by a Project Secretiat in coordinatingthe preparation of actions to be taken by the agencies as part of project implementationand in monitoring the execution of these actions. The Project Secretariat would includeDirector level representatives of Bappenas, MPW, MHA, and MOF. GOI agreed atnegotiations to maintain the seat for the duraion of the project.

4.22 A Project Implemenion Unit (PU), located in DGH and supported byMHA (DGRD) for ahnistrative and insutional aspects, would also be needed toassist, and monitor progress, in project implementation, including preparation of annualprograms, procurement, physical achievements, and expenditures. Mondlly reportsprovided by the DPUKs through the Field Consultants for Implementon teams andthe CTC's and training consulnts' monthly reports will provide the basis formonitoring. Progress on the project will be communicated to the Bank by means ofperiodic progress reports, the first one to be due by October 1993. Ihese reports willinclude both consolidated information for the total project and individual reports for

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each province, to meet the reporting requirements as stated in Annex 9 includingspecific monitoring indicators. At negotiations the GOI agreed to maintain the PIU forthe duration of the project. The PIU will prepare a detailed project completion reportand submit it to the Bank not later t:ian six monihs after the loan closing date.Supervision plans showing Bank staff inputs as well as GOI contributions aresummarized in Annex 10. These plans were reviewed at negotiations.

K. PROCUREMENr

4.23 The project civil works are scattered over vast areas and although workswill be packaged as explained below (para. 4.24), the size of contracts is expected tobe too small (about US$300,000 on average for rehabilitation/improvement works,which are the most important) to attract foreign contractors. Civil works will thereforebe carried out by contracts awarded under local competitive bidding (LCB) proceduresacceptable to the Bank and open for participation by foreign contractors. Allcontractors will be subjected to prequalification under procedures satisfactory to theBank. Such procedures are being fmalized for use in the first year works progrmn.Standard bidding documents for civil works acceptable to the Bank will be used.

4.24 One of the means to improve quality of works is to increase theefficiency of the contracting process (para. 2.40). To this end, agreement was reachedat negotiations that civil works contracts would be packaged in accordance with criteriasatiifactory to the Bank. Arrangements described here below would be used in orderto (i) attract a maximum of Class A and Class Bl contractors, and (ii) give contractorsan incentive to invest in new equipment through the award of contracts of a longerduration (para. 4.11):

CONTRACT PACKAGING FOR REHABIUATION/IMOVEMENT WORKS

Minimum Proportion of Contracts(expressed as a percentage of

the value of all contracts)Year I Year2 Year 3

All Kabupatens (i) Contracts above 30% 50% 50%Rp 500 million

All Kabupatens (ii) Contracts with 0% 50% 50%construction overone fiscal year

Note: Categories (i) and (ii) above are not exclusive.

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(a) for rehabilitation/mprovuement works, a minimum number of allcontracts would be of a size of Rp 500 milUon (about US$250,000) ormore (so that they can be carried out by Class A contractors); aminimum would also be of contracts with a construction period over onefiscal year. Specifics are shown in the table below which defines fteminimum proportion of the value of aU contracts each year in akabupaten to be made of larger and of longer contracts. A first groupof provinces (North Sulawesi, Central Sulawesi, Irian Jaya, N.T.T. andN.T.B.), have already made substanial use of class A contractors, whichis not the case for the second group of provinces (South and South-EastSulawesi), which need more time to make the adjustment. Therefore forthe first group, the proportion will be calculated for each kabupaten,whereas for the second group, the proportion will be calculated as anaverage over all kabupatens of each province. All other rehabilitation/improvement contracts will be carried out by Class Bi contractors.

(b) for periodic maintenance works, packages will be valued above Rp 200million, so that they are carried out by class B1 contractors; and

(c) a maximum of 50 percent of all routine maintnce will be carried outby force account, up to a maximum aggregate amount of US$19 million.The balance by small private contractors.

4.25 Equipment, spare parts, and supplies will be procured in accordance withICB procedures, except for minor items or groups of items estimated to cost less thanUS$200,000 per contract, which may be procured on the basis of internationalshopping, after a minimum of three price quotations. Items estimated to cost less thanUS$50,000 per contract may be procured through off-the-shelf shopping. Themaximum aggregated value of contracts procured through international shopping wouldbe US$1 million and through off-the-shelf shopping US$0.4 million. Regardingvehicles (including motorcycles), the existence of import restrictions has led toconsidering the purchase of such items under the project as reserved procurement.Total project cost includes the estimated cost of required vehicles and motorcycles, butthey are to be financed exclusively with local counterpart funds. Hence, at negotiationsit was agreed that GOI would provide adequate budgetary allocations for the purchaseof the vehicles prior to initial disbursement under the project's road rehabilitationcomponent. Contracts for spare parts, up to an aggregate amount of US$0.3 million,may be awarded after direct negotiations with suppliers. Items should be grouped tothe extent possible. In bid comparison and evaluation under ICB, domesticmanufaturers may be granted a margin of preference of 15 percent or the prevailingimport duty, whichever is lower. Consultanu will be appointed in accordance withBank guidelines for use of consultants and on terms and conditions acceptable to theBank. Professional training as well as in-house training will be carried out underprocedures and conditions acceptable to the Bank.

4.26 Bank prior review will apply to the following contracts: (i) civil worksabove US$2.0 million, (ii) equipment above US$200,000, and (iii) all consultants'

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services and professional training. Other comracts will be submitted to post-review,This will result in a prior review of about 17 percent of all contracts in value or 31percert of the amounts fmanced by the Bank. To compensate for this relatively lowlevel of prior review, project preparation has put emphasis on improving the quality ofthe prequalification procedures and standard bidding documents to be used for e 11works. A systematic post-review of civil works will also be carried out on a randombasis during supervision. The experience of such post-reviews under the ongoingHighway Sector Project has been successful. Training delivery will be carried out Inaccordance with a detailed program and cost estimates prepared annually and submittedto Bank's prior approval (para. 4.13).

4.27 Procurement administration will mainly be the responsibility of theDPUKs for civil works and DGH for equipment, consultancy services, and training.Final decisions on awards will rest with the authority designated in the procurementregulations which define different levels depending on the contract value. DPUKs haveshown under the Second Rural Roads Development Project their capability to carry outsatisfactorily the procurement of works. They will also be assisted by the FCI and theprocurement process will be monitored by DGH and DCRD. During negotiations,GOI's agreement was reached on all of the above procuremet arrangements. The tableoverleaf gives a breakdown of procurement under the project.

L D m, tSM

4.28 Loan funds wiU be disbursed on the following basis:

(a) Civgl Works: 40 percent of net-of-tax expenditures, equivalent to 37percent of total expenditures;

(b) Equipment, Spare Parts, and Supplies: 100 percent of foreignexpenditures for directly imported items; or 100 percent of localexpenditures (ex-factory) of locally manufactured items, or 65 percent oftotal expenditures for other locally procured items;

(c) Consultancy Services: 100 percent of expenditures;

(d) In-house Trainng: 50 percent of total expenditures; and

(e) Professional Training: 100 percent of expenditures.

Disbursements under the project will be made against full documentation of expenditureexcept for the following items, for which disbursements would be on the basis ofStatements of Expenditures (SOEs): (i) civil works under US$2.0 million, (ii)equipment, spare parts, and supplies under US$200,000, and (iii) training delivery.Withdrawal applications will be aggregated in amounts of not less than US$100,000equivalent, prior to their submission to the Bank. SOE records would be madeavailable to Bank staff as required for inspection during supervision. The schedule ofesthnated disbursements, shown in Table 4.4, is based on the projected work program

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PxOCuusr ARANGEHEWII(US$

Prcuremnt method /a TotalProject element ICB LCB Odher cost

Road rehabilitationl - 143.0 - 143.0improvement (52.9) (52.9)

Road maintenance - 102.7 19.1& 121.7(38.0) (7.0) (45.0)

Workshops, laborares - 3.4 - 3.4(1.3) (1.3)

Equipment, spare parts & supplies 24.0 - 1.8l 25.8ffor road worss, workshops, (20.8) (!-5) (22.3)labs, & training

Consultancy services - - 34.1id 34.1(31.8) (31.8)

In-house an- - 2.9j& 2.9(1.5) (1.5)

Professional t- - O3/e 0.3(0.3) (0.3)

Total 2.(20.8) (92.1) (42.1) (155.0)

La Figures in pa hes are the repectve amouns financed by the Bank loan andinclude contngencies.

lF Force account.l International shopping, off4he-shelf shopping, and, for spae parts, direct

congtctg.Ld In accordance with Bank's Guideis for use of Consultants.L Under arrag ns satisfactory to the Bank.Lf Includes US$1.0 million in respect of vehicle purchases against which IBRD will

not disburse.

Note: Due to rounding, totals may not add.

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but the proposed profile has been smoothed somewhat. The disbursement profile differsfrom the standard one for highway projects (which require some six years forcompletion) mainly because the project is limited to three consecutive annual programsof road works in the project kabupatens. Disbursements are expected to be completedin about 4 1/2 years. The experience under previous projects has shown this scheduleto be realistic.

4.29 Bank disbursements for road maintenance expenditures would be at aconstant percentage (37 percent) rather than on a declining basis, mainly foradm;nistrative simplicity in a decentralized enviromnent. However, because of theincreasing annual targets for maintenance (para. 4.5), GOI's required funding ofmaintenance will double from about 25 percent of total needs in the project's first yearto 54 percent in its last. Bank's share of funding of incremental mnntenace willcorrespondingly decrease from 75 to about 50 percent. Because of the project's shortduration, and the current neglect of maintenance on eastern kabupaten roads, it wouldnot be realistic to aim at higher percentages. The Bank's disbursement share has in factbeen set at the minimum value expected to give an incentive to the kabupatens toincrease considerably their own allocation of fimds for maintenance as well as adoptbetter planning, programming and implementation methods, thereby creating theconditions for a sustainable effort.

4.30 In order to expedite and facilitate disbursenments, GOI intends to set upa Special Account in the Bank of Indonesia with an initial deposit from the loan ofUS$11 million (equivalent to four months' estimated average loan disbursements). Theaccount would be maintained in US dollars. Applications for replerishment of theSpecial Account would be made quarterly or whenever the Account is drawn down to50 percent of the initial deposit, whichever comes first.

M. ACCOUNm AND AUDS

4.31 The PIU will have overall responsibility for establishing and monitoringthe use of a uniform proJect accounting system. Financial records and accounts bysubprojects will be retained by the DPUKs based on copies of financial and supportingdocuments obtained from project managers and relevant agencies concerned with projectfunding, payment and reimbursement. The PIU will maintain accounts for equipmentprocured on behalf of the project and for training and technical assistance. The DPUKsthrough the Field Consultants for hnplementation will transmit up-to-date projectaccounts to the PIU on a regular basis. The PIU comptroller will consolidate allaccounts from the 51 kabupatens into a single project account on a quarterly basis formonitoring purposes, and amually for audit purposes. During negotiations, agreementwas reached with GOI that: (a) the project's records and accounts, including for theSOEs and the Special Account, will be audited annually in a timely fashion byindependent auditors acceptable to the Bank; and (b) it will submit to the Bank certifiedcopies of the consolidated audit reports starting December 31, 1994 for fiscal year1993/94, and subsequently no later than nine months after the end of each fiscal year.In the case of SOEs, the audit report will contain a separate opinion as to whether theSOEs submitted during each fiscal year, together with the procedures and internal

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controls involved in their preparation, can be relied upon to support the relatedwithdrawals.

N. REMoAcnvE FINANCING

4.32 Retroactive financing for essential consulting services and some civilworks, not to exceed US$15 million, would be provided under the project forexpenditures incurred after January 1, 1993, and before the date of the loan agreement.This advance procurement is considered necessary for the project to cover the frst yearprogram fully.

0. ENVROM TAL AND SOCaAL IMPACr

4.33 Background. The GOI has an environmental Impact assessmentprocedure known as the AMDAL process that is embodied in Public Law 29 of 1986.Ihis law mandated that an environmental assessment information report was requiredfor all new developments that would have an impact on the environment. The initialstage of this procedure includes a screening process that places projects into 4categories. Category 1 projects, e.g. toll expressways, deffnitely require a fullassessment; this is known as an Andal. Category 2 projects, e.g. new roads, roadupgrade and widening, require either a limited assessment (known as a Pil) or anAndal. Category 3 projects , e.g. upgrading without widening, require only a Pil, orare exempt from the process. Category 4 projects, e.g. road and bridge maintenance,are exempt fom the process. The screening procedures also try to cater for indirectimpacts, but given that road sections to be improved are in general less than tenkilometers long, the areas where indirect impacts may be felt are limited.

4.34 For KRET, a large number of subprojects fall into categories 2 & 3. Thetypical subproject proposal is small, averaging about 6km, and is primarily forqualitative improvements to existing pavements and will be of short duration. Theproject does not involve any resettlement or the building of new development roads.The local governments would, in keeping with MHA guidelines, be responsible forcompensating people for the minor bits of land that may be acquired if the need arises;based on the first year program these instances will be rare. The large number ofsimilar projects and their very small scale should be borne in mind when consideringthe nature of potential environmental impacts.

4.35 Impac Imssessment. The procedure followed was similar to that of theKR3 project. Due to the number of road sections involved, GOl decided to prepare asectoral environmental impact assessment (EA) for the project. This approach toscreening and assessment was considered the most efficient way to (i) concentrateproject assessment resources on the most enviromnentally sensitive, or fragile, projectareas; and (ii) help develop sector wide procedures and critera to be adhered to forEA purposes. The EA included a review of the legal framework for environmentalassessment in Indonesia and also an analysis of the major impacts to be expected fromproject works. It was concluded that the area and extent of impacts will be limited andthat on balance, the overall effect on the environment for projects not effecting "fragile

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areas" would be of minor significance. Fragile areas are defined on the basis of theREPPPROT maps, which are maps prepared between 1982 and 1988, for the planningof trausmigration projects. These maps cover all of Indonesia and are widelyrecognized as one of the best data sources on the natural environment of Indonesia.Fragile areas include in particular conservation areas, forest reserves, wetlands, coastalzones, and any area with potential erosion problems.

4.36 For any specific element of the environmental assessment in which somepotential for an impact was identified, management and or monitoring measures wereincluded in the project design and specification documents. According to the EA, thispotential for an impact is expected to occur in less than 15 percent of all improvementworks proposed by the kabupatens for Bank financing. For those works, the EArecommends that site specific environmental assessments be prepared in accordance withGOI's environmental regulations. This would help to ensure the use of soundenvironmental practices at design and works implementation stages. The Bank hasreviewed the EA and found it to be acceptable.

4.37 Indigenous Peoples. As part of the preparation of the EA, GOI hascarried out a program of public consultations with the indigenous and other peopleslikely to be affected by the project. The consultation process involved the design andimplementation of a series of sixteen public meetings in project kabupatens; most of themeetings were held in Irian Jaya. The format of each meeting involved an outline ofthe project scope and objectives, using an appropriate link included in the project as anexample in most cases. The meetings.were anranged through the kabupatens andchaired by their senior staff. NGOs and local town and viliage peoples were invitedto all meetings and attendance and participation in the meetings was good; minutes ofthe meeting were made and a record of attendance was kept The responses at themeetings were documented and are set out in the EA report. The consultations werewell received by the local people and their questions were concerned mostly with directbenefits under the project, such as employment and the potendal for improving themarketing of surplus agriculture production. There was strong support expressed forthe project as people felt that it would be beneficial to them. The consultation processfollowed the requirements of 0D4.20 and it will continue to be carried out in future asthe relevant subprojects are being prepared. The GOI assured at negotiations that,consistent with the spirit of 0D4.20, it will continue protect the rights of indigenouspeoples affected by the project. GOI agreed also at negotiations to establish anindependent team by December 31, 1993 to monitor the effects of the project on theindigenous people; the composition and terms of reference of this team will besatisfactory to the Bank.

4.38 During project preparation, it was decided that there is no need at thispoint in time for an Indigenous People's Action Plan. This is mainly because (i) projectimplementation is not expected to adversely affect indigenous people; (ii) there will belittle or no contact with isolated peoples as the selection procedures tend to steerprojects toward the more built-up areas; (iii) again, due to the focus on using existingroad alignments, there will be minimal disruption of activities, and no restriction ofaccess to traditional lands; and (iv) GOI by including the consultation process in project

- 35 -

preparation has taken steps to incorporate the preferences of indigenous peoples into thedesign process. The DGH environmental section would be res,..onsible for theconsultation program as well as designing any action plans if and when the need arises.It was agreed at negotiations that the Bank would: (i) be kept informed continuously ofthe outcomes of this process as part of the normal reporting on subproject preparation(paras 4.5 and 4.7); and (ii) periodically review and comment on the design and on theresults of public consultation meetings that are to be held by DGH in projectkabupatens. The objective will be to ensure that the support and participation ofindigenous peoples is being actively pursued for the relevant road subprojects.

4.39 Institutional Strengthening. During project execution, Bank monitoringshould focus on the implementation of the institutional strengthening program as it isimportant that DGH itself be able to carry out and review EAs. Emphasis has beenplaced under the project on strengthening the procedures for EA, including consultationand the development of Action Plans, both in DGH and in the provincial Bappedas; thiswas agreed at negotiations. The project therefore includes adequate assistance to GCIfor contnuation of the EA task and also to strengthen the institutions involved. Termsof reference for this assistance have been prepared by GOI and are acceptable to theBank. Annex 11 has more details on tlie environmental assessment and also on theconsultation process.

4.40 Pinally, under the KR3 project, agreement was reached on severalenvironmental actions which have been repeated and consolidated with the KREIinstitutional strengthening focus. These include agreement that the criteria andprocedures on the basis of which rehabilitation subprojects would be selected wouldinclude the following: (a) road works in the draft program submitted annually to theBank wil be screened so as to identify those on road sections not previously open tofour-wheel traffic and providing access to fragile areas; (b) such road works will besubmitted to a site specific environmental assessment in accordance with GOI'senvironmental procedures; (c) only road works whose EAs have been found acceptableby both GOI and the Bank will be eligible for financing; (d) any road works financedby the Bank will be designed and implemented in accordance with agreed environnlcodes of practice and this will be regularly monitored; (e) no road works will beeligible for Bank financing if they provide access to conservation or forest reserveareas 4/ in any project-assisted kabupaten, or to protected forest areas in the 12kabupatens where induced development may have significant indirect impacts; such roadworks will be screened out as part of the annual program preparation procedures.

41 As defined by ffie REPPPROT maps.

-36 -

ECONOMIC EVALUATION

A. SuMOJECrS SELECrON

5.1 The project's methodologies and procedures in selecting subprojects arethe same as those used for KR3, the previous kabupaten roads maintenance andbetterment project. In accordance with these established methodologies and procedures,roadworks programs will be prepared annually by kabupaten governments andcoincident with GOI's budget preparation process.

5.2 Maintenance Works Program. Subproject selection guidelines forkabupaten maintenance works program were prepared in 1990. The technicalGuidelines are intended to help prepare maintenance programs in kabupatens. Theyinclude the following steps in each kabupaten: (a) updatng the inventory of thepotentially maintainable network, (b) p.eliminary identification of road sections thatrequire routine or periodic mahtnance, and (c) preparation of separate periodic androutine maintenance work programs and detailed cost estimates. These are then fed intothe budget decision making process. The Field Consultants for Implementation willassist kabupaten staff to prepare and implement their maintenance programs andDGH/DPUPs to monitor progress. The Central Technical Consultants will assist DGHto assess the quality of the guidelines and formulate improvements.

5.3 As most kabupatens have not given sufficient emphasis to maintenancein the past and are therefore not adequately prepared to efficiently implement the largemaintenance programs at are required on their networks, it has been agreed that themaintenance carried out under the project would be increased in three stages until90 percent of the maintenance needs (as defined by the use of the guidelines) aresatisfied by the project's third year. The agreed targets are appropriate and progressin achieving them will need continuous attention from both GOI and the Bank.

4

5.4 Major Works Program. As agreed between the Bank and GOI since1990, Kabupaten staff are required to complete a series of standard inventory, survey,analysis, and planning forms, which, in conibination with the use of tailor-madecalculation tables, would enable them to obtain the NPV/lun of each road workproposed for IBRD and IPJK financing (details are given in Annex 3). Only theproposals with a positive NPV at 10 percent discount rate are eligible for financingregardless of funding sources, a condition consistent with national planning guidelines.

- 37 -

5.5 In some cases where there is little traffic and population but whereagricultural and other development potential exists, use of the standard evaluationmodels becomes inappropriate. Special procedures have therefore been developedwhich combine some elementary regional planning with the use of a site specificeconomic evaluation. Such procedures may be used in a few cases (less than 10 percentof the project cost) during project implementation.

5.6 These selection methodologies and procedures, based on the pastexperience, are sound. These guidelines are simple enough for satisfactory andconsistent application by kabupaten staff but retain analytical rigor in ensuring thatselected projects are economically justified. Most kabupatens have been able to followthe procedures and complete physical surveys on a substantial part of their networks andprepare annual investment programs to a generally acceptable standard, though theyhave been supplemented by Consultants mainly to monitor the process and audit thedata. Further improvements will be needed in the area of better integration ofschedules and format of documents into the budget preparation process, incorporationof environmental assessment of a roadlink into the early plaming stages, and calibrationof planning and evahuation of maintenance works. Most of tnese improvements will becarried out over the course of this project.

5.7 Since kabupatens' capacity to follow the procedures and that ofDPUPs/DGH to assist and check the results still need to be strengthened, the projectwill provide local and foreign consultants to help at various stages, monitor progressand quality of output, fine tune the evaluation models and procedures, and help DGHtake full charge of the entire system. These services will be provided by the CentralTechnical Consultants.

B. BENEEIIS AND BENECIARS

5.8 The project is expected to reduce transport costs significantly in ruralareas in 51 kabupatens in eastern Indonesia. This is an area ffiat is characterized by itsextended territory, large development potential, and uneven distribution of population,resources, and economic activities. The project area in general is the poorest regionof Indonesia (para. 1.4).

5.9 The project would help mobilize rural trade, increase the pace of ruraleconomic growth, and promote equitable regional development. Its most directeconomic benefits include (a) savings in operating costs of motorized and non-motorizedvehicles; (b) savings in the personal time cost of travellers (20 percent of total VOCsavings on average); and (c) savings from modal transfers and generated traffic(12 percent and 8 percent, respectively, of the total traffic after road improvement).Private users such as individual car drivers and firms using transport on their ownaccount would capture these benefits directly. The benefits accruing to Indonesia'strucking and inter-urban bus industries, which are compeftiive, would be passed on toproducers and consumers through lower prices of goods and services.

- 38 -

5.10 The project would provide support for GOI's decentralization policy bystrengthening the in-house planning and implementation capacities of the kabupatens andof central and provincial agencies to assist and supervise kabupatens. The project will,in particular, (a) reinforce the planning-programming-budgeting system that has beeninstalled after Rural Roads II; (b) introduce measures to improve construction quality;and (c) institute road maintenance on a sustainable basis.

5.11 The project will continue the ILO Pilot Schemes initiated during RuralRoads II by improving the quality and efficacy of the labor-based methods employedin Indonesia. The project is expected to create about 4.7 million unskilled worker-daysper annum for various types of major works, another 1.5 million for routinemaintenance and 1.3 million for periodic maintenance. In all, the project will generateabout 22.5 million unskilled worker-days during its implementation. As a result, aboutRp 78.75 billion will be paid out in wages, much of which is expected to be earned bythe poorer section of the population.

C. ECONOMC RE NS AD SEIIVITY TEI

5.12 ITe Major Works Component. The first-year major works planningsurvey covered 2,089 km of roadlinks in 51 project kabupatens, of which 1,596 kn areevaluated as viable with an Economic Rate of Return (ERR) above 10 percent. Sincethe planning procedures have been applied by kabupatens in the past three years, a poolof viable projects, which, due to lack of funding in the past are yet to be funded, hasbeen created. Combining the viable links identified in previous years, the total lengthof viable links stands at 6,614 km, of which 1,271 kan (152 links) are proposed forIBRD fmancing.

5.13 The total ERR is calculated based on the project data of 152 individualproject proposals submitted to Bappenas and DGH by kabupatens. In each proposal,data on project length, cost, NPV per kn, among others, are presented. With thesedata, the present value of the benefit of each proposal was calculated and amordzedover 10 years (the assumed project lifespan), using a standard benefit growth rate thatwas used by kabupatens in calculating the NPV/Ikn (Java and NTB kabupatens:4.5 percent; other: 7.5 percent). The sumnarized cost and benefit streams ofindividual proposals are then used to calculate the ERR. Roadworks' construction costwas increased by 15 percent to reflect the cost of project supervision and technicalassistance. Although the ERR is estmated only for the project's draft first yearprogram and some changes may occur as data auditing and eligibility review are stillin progress, the high quality of the links proposed for the first year implemention canbe considered as a good indicator of the returns of the entire project.

5.14 The NPV and ERR and sensitivity tests of the project's first-year majorworks program are detailed in Annex 3. In the base case the NPV of vehicle operatingcost (VOC) and time savings is about Rp 65 billion, with an ERR of 22 percent. Theseestimates are sensitive to possible variations in the costs and benefits streams. If timesaving is excluded, the ERR will drop to 16.3 percent, and NPV of savings would only

- 39 -

be Rp 32.5 billion. If maintenance were ignored, the ERR would drop to 14.8 percent,while the NPV of savings would be reduced drastically to about Rp 10 billion.

5.15 The Maintehace Component. Since the economic evaluation of themaintenance works per link was not dstermined at kabupaten level, it was estimated byBank staff using a simplified evaluation model based on conservative assumptions. Themodel assumes that the average road roughness level (IRI) of the links proposed forroutine maintenance in year 0 is 8 and for periodic maenance is 9, and also thatperiodic maintenance would lower the roughness by 2 levels. Following a standardroad deterioration profile, a roadlink with no maintance would deteriorate to an IRIof 14 and thus need reconstruction in the 6th year. On the other hand, a link thatreceives periodic maintence every 4 years and routine maintenance in the interveningyears would on average last 15 years, as well as provide significant vehicle operatingcosts' savings to users. More details on the assumptions for roughness levels and VOCsavings are in Annex 3.

5.16 The benefits are the VOC savings associated with the difference of roadroughness based on ADTs observed. An annu traffic growth rate of 7.5 percent isused in the evaluation. In addition, standard costs for routine and periodic maintenanceand rehabilitation are used also ( see Annex 2). All the maintenance works costs areincreased by 15 percent to take supervision and technical assistance costs into accountfully.

5.17 At this early planning stage, detailed data were only available for about250 links (totalling 1,035 kIn) that were proposed for the Project's first-year periodicand routine maintenance program. These sample links repreknt about 25 percent ofthe links for first year periodic maintenance and 9 percent for the routine mainenance.Ihe NPV/kam was calculated on these sample links to serve as rough estimators of theeconomic viability of the maintenance component. The NPV/kn at a 10 percentdiscount rate for the 4 year cycle of periodic and routine maintenance is about Rp 50million. The rate of return is about 40 percent.

D. Rs

5.18 The main project risks are related to the implementation of the planningprocedures and the funding of mainenance. Pardy because of the limited capacity ofthe agencies in charge of assisting and supervising kabupatens the implementation of theplanning procedures is inconsistent in some kabupatens and road investments are notproperly prioritized. To reduce the risk, Bappenas would continue to play a strongcoordinating role and project implementation reviews would be held at regular intervals.As for maintenance, some project kabupatens may be reluctant to increase theirallocations of funds for maintenance as much as needed to fulfil project targets. Inresponse to this, Bappenas has agreed to the use of Inpres funds for road maintenanceif needed to meet a kabupaten's target. Also, project mantenance targets have beencarefully designed and annual eligibility conditions establihed for individualkabupatens.

.40 -

6AGREEMENTS REACHED AND RECOMMENDATION

6.1 Agreement was reached with the Borrower during negotiations that itwin:

(a) cause each project kabupaten to (i) prepare its annual road maintenanceprogram for the fiscal years 1994/95 and 1995/96 in accordance withmethodology and criteria agreed to by the Bank; (ii) submit this programfor the Bank's review and comments by December 31, 1993 andDecember 31, 1994, respectively; and (iii) finalize and implement thisprogram taking into account the comments, if any, by the Bank(para. 4.5);

(b) cause each project kabupaten to (i) prepare its annual rehabilitation andimprovement works program in respect of the project for the fiscal years1994195 and 1995/96 in accordance with methodology and criteria agreedto by the Bank; (ii) submit this program for the Bank's review andcomments by December 31, 199 and December 31, 1994, respectively;and (iii) finalize and implemc it this progran taking into account thecomments, if any, by the Bank (para. 4.7);

(c) select sub-projects for the maintenance and rehabilitation/ improvementcomnponents of the project in accordance with criteria and procedures(including those for the enviromental assessmnent and publicconsultation) satisactory to the Bank. (paras 4.5, 4.7 and 4.38);

(d) by December 31, 1994, and December 31, 1995, prepare and submit forthe Bank's review and comments its anmnal program for in-housedelivery of trahing programs for the fiscal years 1995/96, and 1996/97,respectively, and fialize and implement this program taking intoaccount the comments, if any, by the Bank (para. 4.13);

(e) maintain the project secretariat, established under KR3 for the durationof the project; (para. 4.21);

(t) maintain the Project Implementation Unit, established in DGHI, tomonitor progress in project implementation including preparation of

-41 -

annual programs, procurement, physical achievements, and expenditures(para. 4.22);

(g) package civil works contracts in accordance with criteria satisfactory tothe Bank (para. 4.24);

(h) allocate funds for the purchase of vehicles (para. 4.25);

(i) protect the rights of indigenous peoples, and establish an Independentmonitoring tm (para 4.37);

(j) strengthen DGH and Provincial environmental assessment capacity,including consultation with indigenous peoples (para. 4.39).

6.2 Prior to the initial disbursement for work's completed under the projectsrehabilitation component, GOI will provide adequate budgetary allocations for thepurchase of vehicles (para. 4.25). In addition, the satisfactory preparation andimplementation of maintenance programs will be a condition of each kabupaten'seligibility for reimbursements under the project's rehabiltaion component (para 4.5).

6.3 Based on the above agreements, the project is suitable for a Bank loanof US$155 million equivalent to the Republic of Indonesia for 20 years, including 5years of grace, at the Bank's standard variable interest rate.

-42- ANNEX 1

ISSUES, POLICY STATIEMENT AND ACTION PLAN

Subsector Issus

1. There are many interrelated institutional and technical weaknesses impairing theeffectiveness of public expenditures on roads. The following are below desired standards;(a) maintenance, especially for kabupaten roads; () selection, preparation, and implementationpractices for road works, which result in a product of poor quality and short economic life;(e) use of outdated road technologies, especially at kabupaten level; and (d) attention being paidto environment impacts in the planning and implementation of road works. Many of theseproblems, particularly at the kabupaten level, can be traceo to shortages of skilled technical staffand inadequate traiinig. In addition, although road transport is generally responsive to demand,there remains significant scope for improving the overa1l efficiency within the subsector and forraising the standard of road transport services, improving safety and reducing adveteenvironmental impacts.

Poricy Statement and Action Plan

2. In October 1989, the Government finalized a Policy Statement and Action Plan foiRoad Transport (PSAP) to provide a framework for progressively improving efficiency andstandards in the subsector. The Policy Statement addresses all key policy areas in the subsectotand set out adequate guidelines for reforming or further developing: (a) transport sector policyformulation and planning; O) laws and regulations on road traffic and transport; (c) road usertaxation; (d) control of vehicle weights and dimensions; (e) the main subsector institutions;(1) planning and execution of road works; and (g) road safety.

3. The associated Action Plan set out the detailed steps which GOI proposed to takein the following three years to implement the Policy Statement. These included: (a) finalizationand submission to Parliament of a new draft road traffic and transport law and preparation ofdraft implementing regulations; (b) decetalization to provincial and local governments ofresponsibility for adminisring and enforcing certain road traffic and transport regulations;(c) preparation of measures for the institonal development of DGLC and of regional,provincial, and local road traffic and transport units; (d) execution of various sector planningstudies, including conduct of a national origin/destination (OD) survey; (e) formulation of astrategy for reforming road user charges and the implea.iitaion of key first steps, particularlyfor the Motor Vehicle Tax; (t) preparation and implementation of new regulations on vehicleweights and dimensions and of measures to improve enforcement; (g) improvement of proceduresand guidelines for the planning, programming, design, implementation, environmenaassessment, and monitoring of works on national and provincW roads, and (h) preparation andimplementation of selected key measures to improve road safety.

-43- ANNEX 1

4. GOI has initiated action in all areas covered by the Plan and, although some ofthem require complex preparation and consultation, there have been some substantialachievements. First, progress has been made in establishing an improved regulatory framework.A new road traffic and transport law was signed in May 1992 and is expected to becomeeffective in September 1993, by which time the implementfng Government Regulations and keysubordinate decrees will also have been revised and finalized. In 1990, a GovermnentRegulation provided the legal basis for decentraizing responsibility for administering certainroad traffic and transport functions and the process of implementation has commenced.Improved regulations (in the form of a Ministerial Decree) were introduced in 1990 to enableroad transport of ISO containers to be conducted more efficienty and safely, and improvedgeneral regulations on vehicle weights and dimensios have been prepared for introduction underthe new road traffic and transport law. Measures for their implementation and enforcement arenow being formulated and progress has been made in defining a network of key "freight' routes.

5. Second, some progress has occurred, although more slowly than expected, in thearea of road user charges. The rates for the annmu motor vehicle tax were increasedsignificantly with effect from January 1992, although in real terms the increases were muchsmaller as the previous rates had applied since January 1988. Early in 1993, an inter-ministerialtechnical team completed and circulated for approval a draft decree-intended for issue by theMinister of Home Affirs-that provides for significant further increase in the rates forcommercial vehicles and, equally importanly, for efficiency-promoting improvements in thestructure of the tax. Moreover, since the Policy Statement was adopted, the Government hasthrice increased the prices of automotive diesel oil (ADO) and gasoline. Following the mostrecent increase (in January 1993), the pump price of ADO (Rp 380/liter) inclusive of VAT(10 percent) is approximately equal to its efficiency price (based on a crude oil price ofUS$18/bbl), while gasoline is now priced significantly above its efficiency price. Moreimportantly, the President, in presenting the 1993/94 budget, announced that the Governmenthad concluded energy should be treated as an ordinary commodity whose price should be set atinternational market levels and, in particular, t subsidies for oil fuels must be abolished.

6. Third, there has also been satisfactory progress as regards improving the planningand execution of road works. In particular, improved procedures and guidelines have beenintroduced for road works planning and programming and guidelines have been formulated forenvironmental impact assessments. Fourth, GOI has also taken or at least initiated action onother elements of the Action Plan. The national origin-destination survey has been carried outto acceptable standards and important studies regarding land transport plaming and theinstitutional development of DGLC are now nearing completion. In the field of road trafficsafety, substantial funding will continue to be provided in the budget to remove some of thecountry's worst safety black spots. In addition, a modern system for accident data reporting isbeing implemented and systematic proposals for implementng other road safety improvementsare now being prepared.

7. Since its Issue, the Policy Statement has been the main reference for GOrsinitatives in the subsector and it remains an adequate guide for continued progress in futureyears. Bank dialogue on it is being carried out primarily within the context of the preparationof the proposed Second Highway sector project. However, this project is consistent with theoverall objectives by its focus on institutional strengthening and on efficiency in the supply ofInrsructre.

-44 ANNEX 2

REVIEW OF KAUPATENS' REVENUAND ROAD EXPENDITURE

1. A typical kabupaten'sbudget could be summarized as shownin the adjacent Box. The percentage S D UU As U10201 anumbers in the table are the averages R WP

from a sample of 22 eastern _ _ Eldit_kabupatens, (see footnote 1). The cury-w*r 1.02

revenue of the kabupaten is derived Local 8aewu (PAD) 6.12 Aftru 0l

from two sources: Own Revenues, Srd TaxesIlevee 11.42

which consist of local revenue O,etO RtutU Subsidto* 40.02

("PAD") and shared taxes/fees Gt8 41.2 b w.OXtlug.. a1 I 1ox0("Bagian Bagi Hasil PajakfBukan Ztl sa. S

Pajak"), and Subsidies and Sub-tOtal I7Development Grants ("Sumbangan' TOtl 100.02 Total 100.02

and "Bantuan Inpres"). The Own lud0u4t S.02 9.0X

Revenues raised by kabupatenstypically account for 10percent to25 percent of the total for kabupatens in eastern Indonesia (the sample averages 17.5 peren).There is a long list of local/shared taxes/fees on kabupaten budgets (over 50 items), but noneis significant except the Property and Land Tax (PBB), which is a tax shared by kabupaten,province, and the Center with the sharing formula set by the Center and collecdon by theprovince.l/

2. Funds are provided by the Central government per authorized positions mainly tomaintain the kabupaten government apparatus. Sometimes provincial governments alsocontribute additional funds, such as "Governor's Instructions Grants", to kabupatens foradministration needs. Personnel and administrative funds make up about 40 percent of totalkabupaten revemle. President's Instructions Grants Cm the form of Inpres, such as Inpres DatiII and five to six sectoral Inpres), which are allocated by the Central government, make up mostof the rest of kabupaten rever.ue (41.5 percent). Inpres Dati II (or IK 2, kabupaten generaldevelopment fund) and IPJK (Inpres Peningataan Jalan Kabupaten, kabupaten road development

1,/ Detailed budgets of a saplo of 22 kabupatens in KalSel, NTl, and Irian Jaya, referred as "eastenkabupaens", were analyzed in dths reiew. The percentage figues cited are based on the avrageof two years data (91/92 and 92/93), in order to catch tho offect of difereco between the budgetedand acual amounts Less detailed data of 91/92 road expenditure in nine eastem provinceskabupates and that in all the kbupatens in Indonesia a also used in this analysiA ll the data usedare included in the poject files.

-45 - ANNEX 2

fund) are the dominating items of the Central Grants (18 percent and 54 percent respectively inthe Grant category).

3. Kabupatens are not encouraged to carry over a budget surplus (SIAP, which makesup just about 1 percent of the total budget). Normally any surplus on Centrally allocated fundsIs to be remitted to the Center. Kabupatens are not allowed to have a budget deficit; thus asgeneral practice kabupatens must use conservative revenue estimates to determine theirexpenditure in the beginning of a fiscal year. Later if collected revenue exceeds the originalexpectation, ths expenditure is then adjusted accordingly. At the year-end the kabupaten's budgetis still balanced, but both revenues and expenditure would be at a higher level. Although theamount of the Central and provincial administrative and routine subsidies may increase in themid-year, that of Centrally allocated development grants seldom change throughout the fiscalyear.

4. In addition to the above revenues, there is a small budget Item (equivalent to9 percent of the total kabupaten budget) called "In-and-Out" (U.P.K.), which is mostly pettycash collected from government officials (such as Association fees) for incidental and designatedexpenses, or "pass-through" development grants for projects managed by Central Ministries.Tbis account is balanced annually.

5. Most kabupaten revenues are earmarked for specific types of expenditure, withexception of the Own Revenues and Inpres Dati HI. Inpres Dati I is block grant allocated ona per capita basis annually. During the first four years of REPELITA V (89/90-93/94) this grantnationally has been increased 28.5 percent per anLum in nominal terms or about 20 percent inconstant terms; this year (92/93) it amounts to Rp 4000 (US$ 2.00) per person. This grant canbe used for routine and capital expenses in any of the 18 kabupaten sub-sectors. It, however,cannot be used for building monuments/stadiums, or for land acquisition, or for payment ofcommercial loans.

6. The Govermnent of Indonesia currently accords priority to development of the roadsector. Between 84/85 and 91/92 (REPELITA IV and first three years of REPELITA V), GOrsroad expenditure rose from Rp 826 billion to Rp 3,684 billion (excluding toll roads) at an annualrate of 23.8 percent, far outpacing the annual GDP growth of 13.4 percent and inflation of6.6 percent in the same period. As a result, the share of road expenditure as a percentage ofGDP has grown from 0.9 percent to 1.7 percent (see table on pg. 46).

7. Road development (betterment/rehabilitation) and maintenance consume a largeportion of the total kabupaten revenue. In the sample kabupatens, it accounts for 27 percent ofthe total kabupaten expenditure on administration, routine and development, or 53 percent oftotal development expenditure. The expenditure is financed mainly through three sources: IPJK(83 percent), Inpres Dati H (13.6 percent), and Own revenues (3.4 percent). Foreign aid roadprojects are normally channelled through the IPJK channel. Nationwide IPJK made up57 percent of the total kabupaten road expenditure, Inpres Dati H, 35 percent, and all the rest(Foreign aid plus own sources: 8 percent).

8. The IPJK grant is a road development fund allocated by the Central Govermment.During the first four years of REPELIIA V this fund has been increased at an annual rate of46 percent in nominal terms, or 38 percent in constant tems. This fund is designated primarilyfor betterment and rehabilitation, but kabupatens under the Third Kabupaten Roads Development

EXPDTR AND FINANCING SOURCES OF THE HIGHWAY SECWOR (1984/85-19923)(Currelnt Rp billion)

Grewt ltex --- ._1._-1984/85 1985186 19S6/87 1987188 1988/69 1989/90 1990191 1991/92 1992/93 (84/85 (86189 1964183 1986189 1991192_at .) .91r92) -91)92)

atouial I PrNoilal toadMat_tenane. 141.0 154.1 164.7 258.7 187.7 313.0 448.7 543.4 614.8 21.92 44.31 25.21 23.U 22.n1B ttemuent 218.0 176.0 146.9 380.1 210.7 558.0 650.7 1,066.0 1,412.8 25.51 71.71 38.92 45.42 43.01am ometruettoa 101.0 85.5 99.9 34.1 6.6 20.0 78.6 137.0 290.8 6.51 163.35 16.01 1.61 6.32aridg tplsoenet 30.9 40.4 19.9 63.2 38.5 158.0 140.6 260.7 237.6 37.11 93.92 5.52 12.82 11.32TAIS4. .up-./E yat.rtala 69.0 125.4 133.6 234.9 175.4 181.0 205.0 410.7 370.3 29.01 32.62 12.31 1U n 16.62

WB1 559.9 581.4 565.0 971.0 620.9 1,230.0 1,523.8 2,47.6 2,926.3 23.71 556X.Central G0M Poo (AMI) S49.6 308.1 164.0 140.0 100.6 361.9 675.5 1,101.5 1441.35 17.81 122.11 62.42 29.42 44.41ASD I 86.0 100.2 97.0 121.3 48.5 119.3 II1.S 168.6 168.0 9.71 51.51 15.7S 9.71 6.82Iip - 73.8 205.6 269.7 347.6 67.62 98.11 0.01 6.01 11.12rPPnw 122.3 173.2 304.0 709.7 471.6 673.0 524.9 917.9 1,249.1 35.42 24.82 21.62 54.91X 37.X

SUD?SL 559.9 581.5 565.0 971.0 620.9 1,230.0 1,523s. 2,477.7 2,926.2 23.71 56.62 67.n 65.42 67.32Distrit load*

iPJI 60.1 87.5 120.0 130.0 222.4 294.2 45S.7 691.3 626.5 36.12 45.n2 30.02 45.32 57.n2npree tati It 155.1 174.1 194.9 e00.1 262.5 269.2 248.9 411.7 577.6 s5.22 16.72 56.1x 41.41 34.62Other Local ruads 9.5 7.8 2.0 C.6 4.1 S.2 5.5 7.3 2.2 -3.7 21.22 3.62 0.52 0.62foefts 22.1 22.3 49.0 54.0 47.2 83.0 43.2 89.3 7.5 22.12 22.82 8.32 12.82 7.42SuTaL 266.S 291.7 375.9 384.7 536.2 649.6 751.3 1,205.8 1,U1.8 24.01 31.01 32.3S 34.61 32.72 1OS1

Grand Tta 826.7 873.2 940.9 1.355 1.15.1 1.69.6 2.751 S.6"3.5 4*408.0 2S3.6 47 10 1001 1002foralmn 144.4 19.5 353.0 763.7 519.0 75S.0 58.1I I. 00.4 1.324.6 32.02 24.n 17.52 40.32X 27.32

Tell load'Ceutral c001 und. 36.7 7.5 0.2 0.4 309.5 167.0 235.8 139.0 102.4Jas brpe 45.1 40.0 88.4 112.4 163.7 178.3 11.8$ 6.5 61.2lor.gn 36.1 28.2 46.0 121.4

SUBTOTAL 119.9 75.7 134.6 234.2 473.2 345.3 349.6 19S.5 163.o

Grad tOW 946.6 94.9 1,075.5 1,569.9 1,630.3 2,224.9 2,624.7 3,879.0 4,371.6 22.32 33. 10012 1o00 1001

Domestic 766.1 7 2 676.5 704.8 1,111.3 1,466.9 2,056.6 2,671.6 3,247.0 20.62 37.2t 0.92 65.92 74.01oreia £80.5 2; 7 399.0 865.1 519.0 758.0 56S.1 1,007.4 1,324.6 27.61 24.7 19.11 34.12 26.01

GIP 91,500 98,300 108,000 128s,00 147,400 172,100 196,000 221,30O 247, 500 13.41 14.52Road ft. as. Sbar of GDP 0.92 0.92 0.91 1.1% 0.86 1.11 1.21 1.n 1.82inflation (en) 3.62 3.72 8.82X 6.3 6.61 SS. 8.01 10.01 6.62

-47 - ANNEX 2

Project (KR3) are also allowed to use it for periodic mainten . The criteria for allocating thisfund are complex. It tries to take into account the existing road networks as well as developmentneeds of each kabupaten; but an overriding objective is to achieve horizontal equity: remoteand less populated kabupatens are given far more IPJK than the ones that are relativelydeveloped and have larger population bases (therefore they are entitled to more Inpres Dati IIgrants). On per capita basis the 92/93 IPJK ranges from below Rp 1,000 for kabupatens inLampung and Java Barat, to above Rp 10,000 for the ones in Kalimantan and NIT. Inparticular, Irian Jaya kabupatens received over Rp 15,000 per head.

9. Inpres Dadi II (K 2) is the second major source of fund for road development andmaintenance. It provides for only 14 percent of the road expenditure of the sample kabupatens,but this represents about 48 percent of the total IK 2 these kabupatens received. Nationally,however, kabupatens reported spending about 72 percent (91192) of the IK 2 on roads (rhereason the sample kabupatens spent lower poeuions of IK 2 on roads is that they are all largerecipients of IPJK). About 70 percent of it is used for road development, with the remaining30 percent for road maintance (similar to the sample kabupatens, 67 percent for developmentand 33 percent for maintenance).

10. Own Revenues generally are a marginal source for road expenditure. The nationaltime-series data indicated that this source has never exceeded 5 percent of the total kabupatenroad expenditure (consistent with the sample kabupatens of 3.4 percent). Some miscellaneousspending on roads is not included in the above figures, such as a ro2d built through aransmigration project, or an area development scheme. In general these miscellaneousexpenditures are small.

11. To complete the total picture of road expenditure in kabupatens, Central andprovincial governments' spending on national and provincial roads in kabupatens should becounted. Although the lengths of these roads are short compared to kabupaten roads, it shouldbe noted that these are all the major strategic links that are traveled most frequently and built tothe highest standards. The construction and maintenance of these roads are generally theresponsibility of provincial Public Works and its branches in kabupatens (Cabang Dinas), withthe Central Government controlling the planning and budgeting. Although kabupatens have littesay on Cabang Dinas' work,2/ the spending by national and provincia governments amountsto 54.6 percent of the total road expenditure within eastern kabupatens. IPJK, even after takdnginto account the spending of national and provicia govenments, stll provides for a large shareof road expenditure (40.7 percent). IK 2, however, descends to only about 5 percent (see tableon pg. 48). All the remaining sources, having taken into account of spending on national andprovincial roads in kabupatens, are too small to count.

12. Because of their small population, the combined IPJK and IK2 per capita spendingon roads in the eastern kabupatens is higher than the national average (Rp 9,532 vs. 5,568). Ontop of that, national and provincial governments add another Rp 12,052 per capita (spending on

ZI GOI has retly decided to downgtade Cabag Dinas, a stuctr unit in the govemment appara,to a funimonal uit that has only temponry atus. be itnion is in the futui Cabang Dias staffwill be re-assiged to kabuptns PUs and povinc PUs, and the contuctio of national andprovinci roaas will be undeak by ih povincip a PU, and ma ace will be done by kabupatens,with budget and tecimcal guideles pwovided by the Cane.

-48- ANNEX 2

TorAL RoADS EXPENDITURE IN KREI KABUPATENS91/92 (Rp mln)

Sote1 Roea 2EpiKaituraNattPro Roada inrtab 2 onRod .0alrovP./c iaPro sX.

TM cmim. Was" VW'% U&2=. Toz" &WV's U* . .

IN 21,707 14,107 13,601 6,844 4,771 2,093 13,391 20,255 18,142 2,093 47,962 32,268 13,694WT 2as493 21,093 7.402 4n778 3.2S2 1.523 34,316 39,094 37,566 1,532 67,389 38,662 8,9276u1Ut 32,663 18,023 14,638 3,458 2 095 1,563 18,1iM 21.589 20,226 1,363 54,252 38,251 16,001SulTaT 42,490 34,884 7,606 3,330 3,330 0 14,266 17,596 17,596 0 60,087 52,480 7,606PulTra 20,583 14,329 6.256 0 KA NA 18,624 18,424 18,424 PA 39,209 32,953 6,254SulSel 28,787 17,813 10,974 0 vA v 4S,199 46,199 46,199 NA 74,986 64,012 10.974Iran Jay* 71,737 60,583 11,154 3,389 2,437 952 43,550 46,939 45.987 952 118,675 106,569 12,106

TOTAL 253,464 180,833 71.631 21,819 15,885 5 934 188,477 210.296 204 362 5,934 462,760 383 195 77,56571.62 28.42 72.81 21.22 91.92 4.12 3.22 16.82

54.62 4.72 40.7S

ImONESIA a VA MA 420,784 297 029 123.757 691,370 1,112,156 968,399 123,757 NA Rh NA76.6S 29.42 88.92 11.12

Exhibits rotal 1.r eapit* ependiu on road. (eoludin satiallproviloid roads) Total g toPree.es 4 9,5321Total iudoa . a 4 5,568.

Total National Ipr a Dati II allocation of 91192: Bp 581,201 aillion;p.rott sieUt an roades 72n.4

national and provincial roads), to make the total road expenditure in these kabupatens Rp 21,584per head.

13. There are several emerging issues. Matching of development and maintenancefunds is a cause for concern. The IPJK grans are intended for development. Funds formaintenance, especialiy those for routine maintenance, are from Iopres Dati Il and kabupaten'sown resources that have little reflection on maintenance needs of the road networks. For equityreasons Bappenas wishes to give more funds to eastern kabupatens in order to compensate fortheir low Inpres Dati II entidement, but since this fund can only be used for development, manyeastern kabupatens that receive large IPJK fund may have difficulty matching the maintenancefunds with the rate of road development. Some reform on IPJK to make it a general sectoralfund seems to be desirable.

14. The KREI project financing in the 51 kabupatens will cause a net increase of theirroad spending by about 20 percent. In general these kabupatens should be able to absorb thisincrease of funds. The first year roadworks program of these 51 kabupatens can only cover lessthan a half of the total links that are already evaluated as viable, and about 60 percent of thenetworks in these kabupatens need to be rehabilitated. Moreover, since the establishment of thekabupaten road planning-programming-budgeting system, road planning and Implementationcapacities at kabupaten levels have been significantly strengthened. The real problem is notwhether kabupatens can absorb this increased funds, but whether they are willing to fully followthe new system for all roads regardless of funding source, and whether the central governmenthas the capacity to monitor and supervise the spending.

15. Currendy ir and KREI kabupatens a large proportion of supervising andmonitoring work on plaL _, programming, budgeting, and implementation of the annualroadwork program is undertaken by two major consulting groups (CTC and FCI), which woulddisappear if there is no follow-up projects once KR3 and KREI are completed. Most kabupatensoutside KR3 and KREI receive very limited technical support in establishing their planning-programming-budgeting and implementation systems.

-49 - ANNEX 2

16. Another Issue that needs attention is that only about 50 percent to 55 percent of theIPJK links in KR3 and KREI kabupatens have met standards agreed by IBRD (the links that havebeen surveyed and evaluated and have ERRs over 10 percent). The rest are either not studied(some of whicht may be obviously viable so that kabupatens skipped the survey and evaluation),or are evaluated as not viable. Links financed by other sources, especially by Inpres Dati 11, arelargely not studied. Granted that the planning system is still new to kabupatens and more effortsare needed to increase the proportion of links that are properly evaluated, it is still reasonableto expect a much higher proportion of the financed links should be "eligible."

17. Nationally kabupatens spent 90 percent to 95 percent of road budgets fordevelopment, and the residual for maintenance, a pattern that is similar to what was reported inRR2. This pattern of spending may not lead to sustainable development, because roads, due tolack of maintenance, faml apart almost as fast as the rate at which the new roads are built. Asimplified simulation model is used here to demonstrate that, under a fixed amount of budget,adequate maintenance spending could steadily increase the length of 'stable" network, withoutreducing the total length of the network (see table on pg. 51). To reduce the uncertainty, only6 years of road expenditure (until the end of REPEL1TA VI) is simulated. It assumes that,following historical trends, the total available funds for kabupaten roads would be the currentIPJK, plus 70 percent of Inpres Dati II, growing at a real rate of 10 percent per annum until theend of REPELITA VI (a sensitivity of 20 percent is also tested, see lower panel of the table onpg. 51). It futher assumes that a road with adequate maintenance will last for 15 years, withoutit 5 years. Two scenarios are simulated: (1) Development with adequate maintenance, or,"ma1ntenance-pfrst* development Scenario, following which the maintainable roads would befully maintained by year 4 (from currently 25 percent), and from the 5th year onward, availablefunds would be used first for routine and periodic maintenance; then, to maintain the networksgrowth at 1 percent per annum, i.e., about 1,800 km of new roads would be built each year, andall the remaining funds would be allocated for rehabilitation; and (2) Ihe status quo Scenario,in which case only about 25 percent of the maintenance needs would be met; then the use ofthe remaining funds would follow what is in scenario (1), i.e., to build 1,800 km of new roadsand all the rest for rehabilitation.

18. The road depreciation factor plays a major role in the final results. It is assumedthat the roads without maintenance would last about 5 years, then each year on average 1/5 ofthe stable roads would depreciate, yielding an annual depreciation factor of 0.2. The roads withadequate maintenance are assumed to last about 15 years, yielding a depreciation factor of 1/15,or 0.07. To be realistic, it is further assumed that the low level of depreciation rate of .07would only be reached gradually (in the third year), to take into account the fact that roads thatare not maintained properly in the past (before year 0) would fall apart sooner than 15 years.

19. Taking the same inital positions and with the same assumed amount of fundsavailable for the two contrasted scenarios, the simulation model demonstrates that by payingsufficient attention to maintenance, by year 6 (the end of REPELITA VI) the total stable roadswould make up 66 percent of the total network, about 10 percent higher than the without propermaintenance scenario (48 percent). In year 6 the total length of the stable roads in the"Maintenance-first" Scenario would be 125,000 km, about 18,000 km longer than that in the"Status quo" Scenario. These additional kilometers of stable roads would be achieved withoutadditional funds.

- SO - ANNEX 2

20. The benefits to the economy of the additiona amount of stable roads that wouldotherwise be In unstable conditions are significant. Given that the average VOC savings ofmajor works (which is essential to bring a road from an umstable to a stable condition) is aboutRp 83 million per km with a project lifespan of 10 years, the amorized annual saving would beabout Rp 13.5 million per km. The gains from the difference in the length of stable roadsbetween the two scenarios are calculated in the table on pg. 51; and for the first 6 years the NPVof the gain is about Rp 328 billion, or US$ 160 million in today's prices and exchange rates.

21. The savings of pursuing a "Maintenace-first" strategy result from two factors:(i) maintenance cost is far lower than rehabilitation and new construction [see assumption (3) ofthe table on pg. 511; and (li) short-lived roads are far too costly to replace. In the "Status quo'Scenario, given the assumed total funds, if roads can last only 5 years then the rate that roadsare falling apart would be almost as fat as the rate the roads are reabilitated. This is the mostdevastating cause that would greatly slow down the increase of the stable portion of the network.

22. Given the assumptions used, a sensitivity analysis is in order. If the lifespan of aroad with proper maintenance is only 10 years instead of 15 as assumed, the total benefit wouldbe halved, down by 23 percent to Rp 253 billion; this is still a sizable gain.

23. A different expenditure growth scenario (funds growing at 20 percent per annum)was also tested, and it yields a higher NPV of Rp 384 biDlion for 6 years. These simulationmodels demonstrate that in order to achieve a more efficient thereby sustainable development,adequate attentions must be directed to road mainea. By gradually raising the maintenacefunds share from current 7percent to about 20 percent to 25pacent of the total roadexpenditure in 95196, a large economic gain would be realized by Indonesia.

-S1 - ANNEL 2

ADEQUATE MAINTENANCE vS. CURRENT PRAmCrIE: NEr BEENnS(Constant Rupish)

Scerario 1: Scenario 2:Maintenance Driven Develomuent If Current Practice ContinuesC Rep.V 3 C REPELITA Vl 3 C Rep.V 3 l REPELITA VI 3T(92193) (94/95) (92/93) (94/95)

Exaenditure crows at 10: Unit YR O 1 2 3 4 5 6 TR0 1 2, 3 4 5 6

tStable Networks Length1- 000 KM 72 74 79 87 97 110 125 72 74 79 84 90 98 107lTotal Funds Availablel - Rp bIn 1482 1630 1793 1972 2169 2386 2625 1482 1630 1793 1972 2169 2386 2625

1. Maintenance Routine - 000 KM 29 52 71 87 97 110 18 19 20 21 23 24Rp btn 69 124 171 209 232 264 43 45 47 50 54 59

Periodic - 000 KN 6 10 14 17 19 22 4 5 5 5 6 6-Rp btn 126 227 314 383 425 485 98 102 108 115 124 135

[Funds Left for Bett.1 - Rp mIn 1435 1442 1486 1578 1730 1876 1489 1646 1817 2004 2208 2432

2. New Construction - 000 KM 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8- Rp btn 180 180 180 180 180 180 180 180 180 180 180 180

3. Rehabilitation - 000 KM 15 1S 15 16 18 20 15 17 19 21 24 26- Rp bIn 1255 1262 1306 1398 1550 1696 1309 1466 1637 1824 2028 2252

4. Road Deterioration:Stable =* unstable - 000 K 14 11 10 9 6 7 8 14 15 16 17 18 20 21Depreciation factor 0.2 0.15 0.12 0.1 0.07 0.07 0.07 0.2 0.2 0.2 0.2 0.2 0.2 0.2

EXHIBIT: C Rep.V 3 C Repelita VI I t Rep.V I t Repelita VI 3Maintenance Ueeds - Rp bin 195 351 486 592 657 749 141 147 155 166 179 194Funds for Msintenance - percent 12K 20K 25K 27K 28K 29K 9X 8X 8K 8K 7K 7XStable Portion - percent 40X 41X 43K 47K 52K 59X 66X 40X 41X 43X 45X 49X 52K 56X

................... ......................................... __....__..____.__......................._._........

Dif'ce of Stable KM - 000 KM 0.0 -0.6 0.8 3.1 6.2 12.2 17.9Net Gain: - Rp btn 0 -8 11 42 83 164 242NPV of Net Gain Years 1 to 6 (Rp bin): 328

Exienditure arows at 20X: Unit YR0 1 2 3.4 .| 6 R O 1 _ 2 4 5 6

CStable Networks Lengthl- 000 KM 72 76 85 98 116 142 173 72 76 84 95 110 128 151[Total Funds Availabite - Rp bin 1482 1M 2134 2560 3073 3687 4425 1482 1778 2134 2560 3073 3687 4425

1. Maintenance Routine - 000 KM 29 53 76 98 116 142 18 19 21 24 27 32- Rp bLn 69 127 183 236 279 342 43 46 50 57 66 77

Periodic - 000 KM 6 t1 15 20 23 28 4 5 5 6 7 8- Rp btn 126 233 336 433 512 627 98 105 115 131 151 176

[Funds Left for Bett.1 - Rp mtn 1583 1774 2042 2404 2895 3456 1637 1983 2395 2885 3471 4171

2. New Construction - 000 KM 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8- Rp btn 180 180 180 180 180 180 180 180 180 180 180 180

3. Rehabilitation - 000 KM 17 19 22 26 32 39 17 21 26 32 39 47- Rp bin 1403 1594 1862 2224 2715 3276 1457 1803 2215 2705 3291 3991

4. Road Deterioration:Stable > Unstable - 000 KM 14 11 10 10 8 9 12 14 15 17 19 22 26 30Depreciation factor 0.2 0.15 0.12 0.1 0.07 0.07 0.07 0.2 0.2 0.2 0.2 0.2 0.2 0.2

EXHIBIT: C Rep.V I t Repelita VI I t Rep.V I t Repelita VI 3Maintenance Needs - Rp btn 195 360 519 668 792 968 141 150 166 188 217 253Funds for aintenance -percent 11 17X 20K 22 21X 22K 8K 7X 6X 6K 6X 6KStable Portion - percent 40K 42K 46K 53K 62K 76X 91K 40K 42X 46X 51% 59K 68K 80K

Dif'ce of Stable KM - 000 KM 0.0 -0.6 0.8 3.3 6.8 14.2 21.9Not Gain: - Rp btn 0 -8 11 44 92 192 296Sun of Net Gain Years 1 to 6 tRp bin): 384

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

ASSUMPTIONS: (1) Road lifespan - With adequat maintenance: 15 yearsWithout adequate maintenne: 5 years

(2) Unit Cost (Rp mtn/km) - gg41jnm Periodic Rehab, New-2.4 22 85 0

(3) Adequate Maintenance - Periodic every five years, routine every year; and the fullmaintenance would be achieved in four years:year 1: 40KX year 2: 70K, year 3: 90K; and year 4: 100X

(C) Current Practice - Only 25X of the maintenance needs are met.

-52 - ANNEX 3

SUMMAlRY OF PLANNING PROCEDURES FOR ROADIMPROVEMENT AND ECONOMIC EVALUATION

1. Equipping kabupaten governments with adequate in-house technical capacity is acornerstone of GOI's decentralization strategy. In supporting this strategy, Bank has assistedGOI agencies in developing a kabupaten roads planning-programming-budgeting system (PPB)to coincide with the existing GOI budgeting process which is sequenced by a set of bottom-up/top-down inter-/intra-governmental conferences (RAKORBANG, RAKORNAS, andRATEK-see page 59 for the glossary of terms used in the planning and budgeting process). This systemhas two components: (i) simplified economic evaluation methodologies to enable kabupaten staffto do adequate planning surveys and link-by-link evaluation in preparing annual roadworkprograms; and (Hi) technical procedures/guidelines to carry out the project/program preparationwork. The system was intensively tested during the Second Rural Roads Development Projectand was nationally adopted since 1990. It was used in preparing amual roadworks programsof the Third Kabupaten Roads Development Project and this project (KREI).

2. The government agencies involved in executing the system are the kabupatenplanning teams within DPUKs, provincial project units (PBPJK) under DPUPs, and centralagencies such as DGH and MHA. The kabupaten team has four to eight part-time professionalsfrom Bappeda TK II and DPUK, with 15 staff-months anmually allocated to carry out basicplaming survey, engineering survey/design, and other work in formulating annual roadworksprograms. Most team members have been given a four-week off-duty training; on-the-jobtaining is also provided on an ad-hoc basis. PBPJK is a full-time project management unit,consisting of four to seven professional staff. It is intended to serve as 'project officer' and alink between the Center and kabupatens. PBPJK's role will be strengthened by gradually takingover CTC (Central Technical Consultants) routine supervision and monitoring functions (seebelow). Ihe focus of PBPJK's training is being shifted towards this end.

3. In view of the situation that the kabupatens's capacity to implement the proceduresand that of central monitoring capacity still needs strengthening, this project will continue toprovide local and foreign consultants (Central Technical Consultants - CTC and FieldConsultants for Implementation - FCI) to monitor the progress and supervise implementation ofworks programs, fine tune the evaluation models and procedures, and help GOI take full chargeof the entire system.

A. EVALuAnON MODELs Am PLANNG PROCEDuREs

4. A detailed description of the planning methodologies can be found in Annex 3 ofthe Staff Appraisal Report of the Third Kabupaten Roads Development Project (KR3). Thesimplified evaluation models contain the following components: (i) estimating the unit road usercost; (ii) assessing traffic composition and development; (Mi) determining traffic design class;

-53- ANNEX3

(iv) adjusting for maintenance requirement; (v) aggregating the results into "look-up tables"; and(vi) costing. At present only major works (betterment and rehabiitation) were evaluated bykabupaten staff. Economic evaluation of maintenance works per link has not been done atkabupaten level. The model is being developed by CTC.

5. A more detailed description of methodologies can be found in the project file"Planning Activities under IBRD Rural Roads 2: Methodology." In summary, the evaluationmodels have the following characteristics:

(a) discrete categories of road condition, each associated with roughness and speedassumption, are used to assess VOC/time (Sample VOC/Time saving table for lowterrain is shown in the table below);

ECoNOaIC ROAD USER Coms AmD SAviNGS

pick-up pick-up light mediumh car/ VeightedN3 kias.rshl bw truck Jak tukl vra

.......- VOC and Time Cost at Roughness 6, Terrain 0-3--------

VOC (exct. TC) 181.4 156.1 215.4 206.9 355.3 428.2 180.0

I'eCost 18.6 8.0 49.3 8.0 8.0 8.0 9.4vOC (inct. TC) 200.0 164.1 264.7 214.9 363.3 436.2 189.4TC/Totat VOC 9.3X 4.91 18.61 3.7X 2.2X 1.81 5.01 7.6"

OuterJsIstndsiWAHVSe Codst 29.5 12.7 78.1 12.6 12.6 12.6 14.8VOC (inct. TC) 210.9 168.8 293.5 219.5 367.9 440.8 194.8TC/Totat VOC 14.0X 7.51 26.61 5.7X 3.41 2.9 7.61X 11.41

.------- VOC and Time Cost at Roughness 14, Terrain 0-3--------

VOC (exct. TC) 511.4 428.8 677.9 638.3 1031.4 1228.1 479.4

#Wlm Cost 84.0 36.0 222.0 36.5 36.0 36.0 42.0VOC (inct. C) 595.4 464.8 899.9 674.8 1067.4 1264.1 521.4TC/Totat VOC 14.1i 7.7X 24.71 5.41 3.4 2.81 8.11 11.31

Outer Ilands-,Time Cost 133.0 57.0 351.5 57.0 57.0 57.0 66.5VOC (nct. TC) 644.4 485.8 1029.4 695.3 1088.4 1285.1 545.9TC/Totat VOC 20.61 11.71 34.11 8.21 5.21 4.41 12.2X 16.61

-- VOC and Time Cost Savings from roughness 14 to 6, terrain 0-3--Java:TlieSV 65.4 28.0 172.7 28.5 28.0 28.0 32.6VOC SV (icm. TS) 395.4 300.7 635.2 459.9 704.1 827.9 332.0TS/VOC SV 16.51 9.31 27.2X 6.2X 4.01 3.41 9.81 13.21

OWter Island:Time SV 103.5 44.3 273.4 44.4 44.4 44.4 51.7VOC SV (inct. TS) 433.5 317.0 735.9 475.8 720.5 844.3 351.1TS/VOC SY 23.91 14.0X 37.2X 9.3X 6.2X 5.3X 14.7X 19.2X

Exhibit:weight factor 0.5 0.2 0.1 0.2 0.0 0.0 0.1 1.0

V 0 -Vehicle Operating Cost; TC - Time Cost; SV - Savings; TS - Time Saving.

(b) standardized sumptions are used regardg (i) taffic composition and passengerload observed on kabupaten roads; (i) benefits from generated traffic and modaltransfer (8 percent and 12 percent, respectively); (iii) traffic growth by region

-54- ANNEX 3

(7.5 percent for outer islands, 4.5 percent for Java and NTB); and (iv) "with" and"without* proJect maintenance costs.

(c) savings to non-motorized traffic (such as pedestrians, bicycles, ox carts) areincluded by adjusting them to four-wheel vehicle equivalents;

(d) engineering costing is based on a model which takes account of the costs of localmaterials and labor. As a departure from the KR3 model, costs were increased by15 percent to reflect project supervision and technical assistance.

(e) two models, one based on traffic count method and the other on populationmethod, are used to estimate the economic benefts. The net economic benefits areexpressed in net present value/ldometer (NPV/km), with the assumption of 10years road service life and 10 percent opportunity cost of capital, cluding theresidual values, i.e., 20 percent of initial project investment.

6. Since the economic evaluation of the mince works per link was notdetermined at kabupaten level, it was estimated by Bank staffusing a simplified evaluation model(the development and validation of an adequate road maintenance evaluation model is part of theTORs of the CTC). The model assumes that the average road roughness (IR1) of the linksproposed for routine maince in year 0 is 8 and for periodic mantenance is 9, and also thatperiodic maintenance would lower the roughness by 2 levels. Following standard roaddeterioration profiles (see Chart below), a roadlink with no maintenance would deteriorate to anIRI of 14 and thus need rehabilitation in the 6th year. On the other hand, a link that receivesperiodic maintenance every 4 years and routine maintenance in the intervening years would onaverage last 15 years.

ROAD DETERIORATION PROFILE ASSUMPTIONS

Routine Malntenance in Year 0 PerlodIc Maintenance In Year 0

.~~~~~~~~~~~1 A A A

7. The following table illustrates the assumptions of roughness and VOC savings(Rplkm) used in evaluatig the benefit of mainteance that, for simplicity, is assumed to fall inoeither of the two types of cycles, i.e., starting in year 0 with periodic or routine maintnnce.The model assumes rehabilitation will beperfrmed whenever IRI reaches level 14, and it wouldbring IRI down to level 7.

-55- AANNEX 3

Periodlc Wainte2 a si ar .O Routine Maintenance in Year 0without With Unit VOC Without With Unit VOC

Year IBI VOC 1Il VOC saving I11 VOC IRI VOC 8aving

0 9.0 317 9.0 317 0 8.0 287 8.0 287 01 10.5 419 7.0 252 167 9.0 317 8.5 302 152 12.0 507 7.5 270 237 10.5 419 9.5 347 723 14.0 629 8.5 302 327 12.0 507 7.5 270 2374 7.0 252 10.0 376 -124 14.0 629 8.0 287 3425 8.0 287 8.0 287 0 7.0 252 9.0 317 -65

8. Only paved roads are evaluated, since the overwhelming majority of the earth roadsare not considered mainainable. The benefits are the VOC savings associated with thedifference of road roughness based on ADTs observed. An annual traffic growth rate of7.5 percent is used in the evaluation. In addition, standard costs for routine and periodicmainenance and rehabilitation are used also (Annex 1). Maintenance costs were increased by15 percent to take supervision and technical assistance costs into account.

9. Standard procedures are designed to generate basic input data and to carry out per-link planning and design work. The cycle of kabupaten road planning, programming, andbudgeting requires the following actions to be taken: (i) Basic Planning, to survey and identifylinks for the next year's roadworks program, which is carried out by a trained kabupatenplanning team in accordance with the procedures laid out in the *Technical Guidelines forPlanning and Preliminary Programming of Kabupaten Roads'; (Hi) Audit and follow-up, toensure the quality of survey and data analysis, which is done by PBP1K, currently assisted byC5C and its regional Field Planning Advisors (FPA); (ii) Design and DURP Preparation, toprepare detafled works program, which is primarily undertaken by kabupaten PU staff, assistedand checked by FCI and PBPJK; and (lv) Eligibility Review and Certifications, to ensure onlylinks that meet design and economic criteria are built, and to cerdfy the civil works bycontractors are properly performed, which are done by PCI and CYCC. In addition, Post-construction Monitoring, to assess road's beneficial impact and to evaluate the results of variousengineering treatents, is undertaken by CrC and PC.

10. Selection procedures were conceived for the use of kabupaten staff with checks andsupervision from DPUPs and DGH. They include the following main steps: (a) updating thekabupaten road inventory; (b) conducting basic traffic and road condition surveys on part of thenetwork; (c) analyzing data; (d) estimang the costs and economic benefits of each road worksproposal; (e) preparing a draft annual work program; and (f) deciding on the annual budget.Items (a) through (d) are undertaken by kabupaten teams, with assistance from DGH andDPUPs. Item (e) is for the local decision-makers (including the bupatis) to establish, with theeconomic iformation made available to them. Item (t) is part of the national budget process,with the RATEK - the national budget coordination conference, which takes place in January andFebruary each year - being the final step. About 13 to 18 months are required to complete a fullcycle of the procedures.

11. In some cases where there is little traffic and populaon but where greatagricultural and other development poteni exists, use of the standard evaluation models

-56- ANNEX 3

becomes inappropriate. Special procedures have therefore been developed which combine someelementary regional planning with the use of a site specific economic evaluation. Suchprocedures may be used in a few cases during project implementation.

12. Consultation with the kabupaten leadership constitutes a key component of theplanning process. Once the basic planning work is completed, a long list of candidate projectswould be presented to the bupati and his senior staff. They would rank the link according to thepriority as they see it, with full knowledge of the link's economic desirability in4;cated byeconomic rate of return (NPV/km). The long list would then be reduced to a short list, andform the basis for GOI's budget document D3.5 for discussing with provincial and centralgovernment for annual development funds. A cut-off point (positive NPV at 10 percent) is setby Bank for all its KR3 and KREI links, and this condition is accepted by GOI in allocatingother funds administered by it. A timetable that details the events and timeframe of the GOIbudgeting process is summarized in the table below.

TIMKErAKIE FOR CRIMCAL PLANNING AcrIONS

TIME ACTION OUTPUT TAKEN BY

Dec/Jan Framework and preparation studies Selection of survey Kl_____________ ______________________________________________ area/networkJan-March Basic survey on road conditions; speed; "k"- and "s"-forms K, aided by

l____________ traffic volume/population P/C

April-June Analysis and evaluation A1,AZ,A3; Manual P2 K, aided by

June IS Preliminary programming; ranking projects on Ranked manusl P2 at KmanuaL P2, and submitting it to PBPJK/CTC kabupatens II

June 30 CTC receives Masnual P2 Ranked Manual P2 at CTC PLate June Preparation of maoor works list for RAKORBANG Pre-RAKORBANG 03.5: P3 K

mfd-July PBPJK/CtC receive cog of formal 03.5/P3 Post-RACORBANG 03.5: P3 K/P

July-Sep Matching, checking, and auditing; Audited P2,P3; Blank PE1 CPreparation of PEI: Data processing l

August Pi to CTC Manual PI K/P

Sep-Nov Field audit and follow-up Further audited P3 C/P

Oct 1 P3 to Kabupaten to note "viable" projects Audited P3 in computer C/P

October Audited P1 to return to KabuPaten Audited P1 C/

Oct-Jan Design and OURP preparation OURP K/F/P

Dec 31 Ffnal P3 to JIRD with tentative funding Final P3 Sina Marga,sources _ aided by C

Jan 31 Eligibility review Completed PEI F/C

Before RATEK Summarizing certiffeation from PEI; Results P3 + Planning and Cto Bins Morge engineering eligibitity

Before Checking RPPIP2; Cancel projects not on Signed RPPIP2 CRPPIP2 Certification Table

After RPPIP2 Copy of RPPIP2 to CTC Final RPPIP2 Sine ar;ga

June 1 HR-1 to IBRO URI CTC

Agency key: K a kabupaten; P - PBPJK: C a CTC; F a Field Implementation Consultants

-57 - ANNIE 3

B. ASSESSMENT OF TEE APPLCATON AND FUURE IMPROVEMENS

13. The results from itroducing this PPB system to kabupatens are encouraging.Frequent field visits to kabupatens and close monitoring at the central level enable the Bank toconclude that the evaluation models and tecbnical procedures are sound. Ibis new system iseffectively replacing the traditional way kabupatens' annual roadworks programs were prepared,i.e., road links for betterment and maintenmce were selected bykabupatens mainly on an ad hocbasis, without support of any planning data and economic evaluation.

14. Although this PPB system has been used in the 243 kabupatens throughoutIndonesia, only about 150 kabupatens covered by KR3, KREI, and the proposed Fifti KabupatenRoads Development Project (KRS) are closely monitored. Analysis of three sets of planning dataof over 1,000 links submitted under KR3 (first and second years) and KREI (first year)kabupatens reveals a striking consistency among them. This indicates that the planningprocedures and methodologies used in this project and KR3 are in general applied ratherconsistendy by the kabupaten staff. The total ERRs, which are calculated from aggregated costand benefit streams of individual links based on the programs submitted by project kabupatens,are 24 percent, 25 percent, and 22 percent for KR3 Years I and 2 and KREI Year 1,respectively. Summaries of economic features of the major works programs are shown in thetable overleaf.

15. Further improvements will be needed in the areas of better integration of schedulesand format of documets into the budget preparation process, incorporation of environmentalaspects of a link into the early planning stage, and calibration of maitenance works planningand evaluation. Most of these improvements wiU be carried out over the course of this project.No major changes of th curret methodologies and procedures are foreseen.

16. There is a need for GOI agencies to take full charge of this PPB system. Totransfer the core evaluation technique to GOI agencies, CrC is required to pursue the agendaset in KR3. While stepping up training actviies, CTC would (a) further improve the soundnessof the methodologies and guidelines; (b) further simplify the evaluation model to such a levelthat updating can be mechanically carried out by staff in the provinces, to be checked andmodified by more sophisticated staff in the Center.

-58- ANNEX 3

PLANG AND ECONOMC FEATURE OFKRI Fsusr YEAR MAJOR WORn PROGRAM

U OF UNIT AVERAGELINKS KM Rp mtn COST ERR NPV/K"

TOTAL 152 1271 94,402 74.3 22.0X 67.4SEAL 106 76? 56,620 73.8 33.02 659.3GRAVEL 45 499 37,504 75.2 20.3X 30.1OTHER 1 5 278 52.5 55.1X 145.0

BRIDGES (motor) 160 1,668 S.837 3.5

FUNCTIONAL CLASSIFICATION OF ROADSLU :GeneraL Service Road 109 892 68,307 76.6 31.02 73.5JJS :Strategic Network 28 251 17,952 71.5 33.22 8.11NG .Non Oil Sector 6 43 2,281 52.9 24.S 32.6TR :Transmigration 3 30 2,711 89.5 19.81 61.0PAR :Tourist 1 1 83 83.0 20.6X 45.0PIR :Smatthotder Estate 2 26 1,556 61.0 22.3X 38.5KOTA:City 1 15 764 52.0 12.42 6.0JI :Irrigation 2 13 748 56.2 29.4X 82.4

PRIORITY ASSIGNED BY KABUPATEN GOVERNMEUTS1 42 392 29.651 75.6 25.8X 51.42 34 326 24,376 74.8 32.4X 82.23 25 208 14,228 68.4 29.5Z 74.54 15 94 6.692 71.6 34.0X 72.15 7 36 2.542 71.4 24.7X 35.76 8 44 3,510 80.0 31.8X 91.77 3 14 1,066 75.1 S2.3X 129.3,7 a18 158 12,337 78.1 24.9X 59.3

BASE ERR RCNGE10-20X 6 621 49089 79.120-30X 32 255 17203 67.S30-40X 19 158 10811 68.640-50X 19 150 10639 71.1

O-50X 18 88 6660 75.4

PROVINCENUSA TENGGARA EARAT 22 151 9,875 65.6 39.71 130.4NUSA TENGGARA TINIR 21 255 16,498 64.7 26.02 48.2SULAUESI UTARA 14 104 8,373 80.3 49.1X 154.9SULAWESI TENGAN 9 102 8,148 79.7 16.82 31.9SULAUESI SELATAN 56 304 20,195 66.3 30.2X 72.9SULAWESI TEUGGARA 10 97 5s572 57.7 18.4X 31.0IRIAN JAYA 20 258 25,741 99.7 16.7X 35.4

-59- ANNEX 3

KABUPATEN ROADS PLANNINGGLOSSARY OF TERMS

K-series Sheets Forms (K1-14) to contain basic dat and infraton on road network, cost,kabupate resowures (contractors, staff, maeials), pri (labor and materias),bridge, and socioonomic situations.

S-series Sheeb Forms (Sl-8) to contain annual survey reults, including traffic counts; speedand road surfce conditions surveys; socio.economic surveys.

A-series Sheets Forms (Al-3) to fcilitate the link-by-link ROR analysis and evaluatioa.

P1 Long-list of routine maintce wors, pr ed annualy pmarily by

P2 Long-list of major woks, pepared anuually primarily by kapatens.

P3 Short-list of major works, with prioty ranking by kabupaten leadeip;derived from P2. When adited it is terme the 'P3.2'.

PE1 Subproject Planning Eligibility Sheet, checded by FCI against the techmical andeconomic criteria set by GOTIBRD.

APBN Overall National Governmet Revenue and Expenditure Budget

DIP Approved budget document for p¢qects managed by secto ministries that areAPBN fimded.

D2 List of Inpres Dati U projects (for al infrastructure) proposed to the CenrlGovernment by the kabupatens.

D3.5 List of IPlK projects proposed to the Cental Govenme by the kabpates.

DUI3P Submitted budget summay, fom kabpte to Bppenas (in the case ofkaute road projects), befoe RATEK

SPABP Confirmed Budget Summary, after RATEL A key document when requestingdisbursement from MHAIMOF under tInDes funding.

HR1 Amnl budget data, sbowing ebility of proects in reation to planng data.

IK, Dati UY Kabupaten block grants, allocated primarily on a per capita basis by the CentrilGovernmenLt.

IPJK Earmked Central Govrmet grants itded pimarily for kaupate roadsbetterment.

IIRMS iter-urb road ms ystem, developed by DGH/IBRD.

RAKORBANG Provincial Tecbnical Coordination Conference

RAKONAS National Technical Coordination Conferance

RATEK Budget Finaliation C onfere

RPPIP2 Summary of approved (by Govemor) reiabilitation and betternt projects.

-60- ANNEX 4

ROAD MANTEANCE IN PROJECT KABUPA1ENS

A. RoAD AINmEANCE StATGY

1. The 'sttegic" issues as far as kabupaten road maintenance is concerned, addressedunder RR2 are: (i) the priority of maintenance vis-a-vis rehabilitation, improvement and newconstruction; (ii) delineation of maintenance responsibilities between rural roads agencies; (il)staff training programs; (iv) maintenance work methods; (v) the management of equipment (vi)maintenance funding. Answers given to these issues were embodied in a Road MaintenanceStrategy issued under RR2 and now applicable to all kabupaten roads. Implementation hasstarted under RR2 and KR3 projects. It is expected that this Maintenance Strategy will befurther refined during the implementation of the proposed project.

2. Experience so far with this staegy indicates the following topics to be of criticalimportance:

(a) Reliability of road inventories, impacting on the quality of assessment of the anmnalmainenance needs;

(b) Timing of maintenance surveys, to be consistent with timing of administrativeprocedures so as to produce the most effective programs;

(c) Technical guidelines and specificadons to be adopted by all kabupatens, includingquality control, work methods, organization and supervision of maintenance staff,meamuring and costing procedures;

(d) Monitoring and cost accounting, in particular monitoring of general productivityand efficiency to review work performance standards,and introduction ofcertification of quality of force account operaions as a criterion for payment; and

(e) Funding implications. This topic may have been overlooked in the past: thesimulation attempted in Annex 1 shows that the right level of effort is forkabupatens to devote 25 percent to 30 percent of their road funds for mantece,instead of 5 percent to 10 percent as is the current practice.

3. The above topics will receive special attention and focus under the project. Inaddition to the technical enhancement component (Annex 5), the project will mspport DHG'sefforts in two areas:

(a) Improving the methodological basis of the planning procedures, through inter alia(i) an eamination of how to increase compatibility between the planning systems

-61- ANNEX 4

for kabupaten roads and nationallprovincial roads (based on HDM3/IRMS),including possible adoption of HDM3 VOC and pavement deterioration modules;and (ii) calibration of the road roughness assumptions used in the generalizedkabupaten road planning system on the basis of sample road roughness surveys.

(b) Developing central macro-planning procedures for the whole kabupaten network.The obj(ctlve would be to provide an information system, not for detailed planningand programming by link, but to assist in developing road investment policy,including budget allocation by kabupaten, medium-term strategies, assessment ofoptimal treatment policy and priorities by works type.

The gap between the current maintenance management procedures and a more formal KabupatenRoad Management System would thus be narrowed (establishment of a KRMS on the model ofthe IRMS is considered premature in the present conditions of the kabupaten road network).

B. MA NNCE NEEDS AND TARGEIS IN KREI KABPATENS

4. Estimates of Maintenance Needs. Maintenance needs, as defined in the aboveRoad Maintenance strategy, are based on the length of the existing sealed and gravel roadnetwork in good/fair condition. Routine needs apply to the total length of the maitainablenetwork as defined above. Periodic needs are not condition-responsive, but scheduled on theassumption that one-fifth of the goodlfair sealed roads and one-third of the gravel roads, wouldrequire an overlay each year. Three potential sources of information were used here to assessneeds: the 1990 DGH Inventory (BMI); the *K1N road network master list compiled as part ofthe standard kabupaten road planning procedures; and the 1992/93 P1 " list of road ma_itenancecandidates, also prepared as part of the annual planning process. The result is the followingassessment of needs in 51 KREI kabupatens:

Maintenanceneeds Seal dGravelm Total

Total length 9,173 4,694 13,867Average/Kabupaten 180 92 272

The rest of the network, i.e. about 22,000 km in poor or bad condition, is candidate for futurerehabilitation or betterment (most of the 16,740 km of earth roads, or 47 percent of the KREInetwork as shown in Table 2.4, are in this category).

5. Budget needs have been esdmated based on the results of the P1 list which aimsto clarify each candidate road section by surface type, traffic level and age since the last majorworks. Costs per kilometer for each category are based on the cost matrix at mid-1992 pricesincluding tax. Kabupatens are grouped into one of six regional cost categories based onvariations reported by each kabupaten in unit costs of materials and labor. Average costs for51 KREI kabupatens work out as follows: (i) Routine: Rp 2.3 mn/km (ii) Periodic: Rp 20.1mn/km.6. Annual Targets. Targets based on the above existig 'needs' assessment areproposed as follows:

-62 - ANNEX 4

;yM Targe Roudne Periodic Toawkm Rp mn km Rp mn km Rpmu

1993194 50% 6,933 15,851 1,692 34,046 8,625 49,8971994/95 70% 9,707 22,192 2,369 47,665 12,076 69,8571995196 90% 12,480 28,532 3,045 61,284 15,525 89,816

Total needs (i.e. target at 100 percent) are considered to be attainable in year 4 of theproject. Ihese targets should be related to length rather than expenditure, with appropriatespecified minima for average kabupaten expenditure per kilometer on both routinemaintenance (Rp 1 mn/kn) and periodic maintenance (Rp 10 mn/km for seal and Rp Smn/knfor gravel).

7. Funding Implications. The Project Ffles contain detailed tables showing (C) thetotal GOI and IBRD funding requirements; (ii) the amount that would be available formaintenance from the per capita Inpres Dati 11 (K) fund assuming a limit of 30 percent ofactual 92/93 IK receipts; (Jii) the additional amount that would be required from IPIK tomeet the local component of these targets; (iv) the percentage reduction required in theperiodic maintenance target if IPJK fumds are not used for maintenance; (v) the proportion ofIK needed to meet maintenance targets if no use is made of IPJK funds, and (vi) theproportion of 1992/93 IPJK that would have been needed to meet these targets, assuming a30 percent limit on IK fund availability for mainteance. A summary of the above data is asfollows:

(a) at a global lvel:

Total funding needs to meet EREI targets (the breakdown assumes that IK shareis limited to 30 percent of total IK allocation, and that IBRD share represent40 percent of total cost net of tax):

1993194 19949S 1995/96Rpmn % Rpmn % Rpmn %

IK 20,285 40.7 21,587 30.9 22,081 24.6IPIK 11,468 23.0 22,868 32.7 35,075 39.1IBRD 18,145 36.5 25,402 36.4 32,660 36.4

TOTAL 49,898 100.0 69,f57 100.0 89,816 100.0

% of IPJK required 6.9% 13.8% 21.2%

(b) at dWual kabsqaen levek:

No. of kabupatens needing IPJKfunds with 30 percentIK limit 39 47 48

-63- ANNEX4

No. of kabupatens needing IPJKfunds for routine with IKlimit 1 6 12

No. of kabupatens needing morethan 20 percent IPJK withIK limit 3 9 26

Thus if globally the call on IPJK for the last year is quite reasonable (21 percent), somekabupatens may have to -djust more drastically by breaking the 30 percent limit on IK fundsand/or increasing the IPIK share for maintenace.

8. Ihe situation is less dramatic than the above figures would imply. The problemis not a shortage of funds (Annex 1 is quit clear on that statement); it is rather to get a shiftof funds from construction/tment to mntenance purposes, and hence to get enoughflexibility in GOI fimding mechanisms.

9. Past Peronnance. One can be reasonably optimistic when looking at theevidence from past maitenance performance, that can be drawn from the RR2 kabupatens,most of which are also in KR3. Average mintenance coverage and expenditure perkabupaten in seven RR2 provinces over three years of the RR2 loan and the budgetedprogram for the first year of KR3 are summarized in the table below:

AVERAGE MABUENANCE COVERAGE AND PER KABuPATEiN 112 PRoVIcEs

g9 .1 90191 91/92 92Mkm Ipmn km Ultp km Rpmn km Rpma km Rpmn

Averg 65 137 94 139 ISI 18 163 943 238 1,369

Indx 1.00 1.00 1.45 1.01 2.33 1.38 2.52 6.90 3.68 10.02Defited J 1.00 0.92 1.15 S.31 7.18

ta Deflated by BPS public woD cos index fir road and bfidges.

Average physical coverage rose strongly each year of 2 and was staied In general in1991/92 when there ws no IBRDfiudnng. The momentum is to be maintained in the firstyear of KR3. Maintnce expenditure rose more slowly, but increased sharply in 1991/92m&ily in West Java. A higher level of expenditure is to be extended in KR3 with muchgreater emphasis given to periodic overlay needs.

Another example relates to the four kabupatens of Cetral Sulawesi, included in RR2 and tobe included in KREI. The following reported evolution in maintenance performanceillustrates the impact of the IBRD project: maintenance coverage rose from about 15 percentof needs in year 1 of the RR2 (1988/89), to about 50 percent of needs in year 3 (1990/91).Thus these kabupatens are not expected to have any difficulty in meeting the KREI targets.

-64- ANNEX 4

AvERAGE MAINENNCEr COVERAGE AND ExEDITuREPEMR KADUATEN IN CENTRAL SULAWES

Km Rp mX

1985/86 1 61986/87 NA NA1987/88 NA NA19881819 43 1711989/90 213 1921990/91 236 314Estimated needsfor year 3 of EREI 412 1,419

* adjustd to 88/89 prices.

-65- ANNEX

TECHNOLOGY ADAPTATION AND DISSEMIATION

A. Backgound

1. Traditional methods are &ill widely used in Indonesia for construction andmaintenance of kabupaten roads and other small-scale public works. These methods have,however, remained basically the same for decades since few systematic efforts have been madeto improve them. As a result, the quality of construction and maintenance leaves much to bedesired, whether it is labor-based or equipment-based. For instance penetration macadams forpaved roads, and telford courses for gravel roads, usually use single-graded stones for each layerwhich makes them difficult to compact: as a result the pavements, even new, are generallyrough (thus reducing the savings expected on vehicle operating costs), and they are prone to amore rapid deterioration. A trial and demonstration component has therefore been included inthe project to adapt and disseminate improved techniques, supervision and organization forconstruction/improvement and maintenance of kabupaten roads. This will apply to theintroduction of more modem technologies (Section B) as well as to the improvement of labor-based methods (Section C). Other features are built in the project to promote technicalinnovation (Section D).

B. Introduction of Imnproved Tecbnologies

2. A study under RR2 ("Technology Adaptation and Dissemination", Project File)identified the increased efficiency, improved quality and overall cost reduction of kabupatenroadworks which should result from application of a number of existing technologies not yetwidely used at kabupaten level. The findings are summarized in the table below. So called"high technology" developments were not included: only those topics and techniques which havebeen tried and proven elsewhere are detailed. The six topics found mnost suitable are: bitumenemulsions, softer bitumen grades, graded aggregate paving materials, cold laid bituminousmixes, asbuton, and soil stabilization.

3. Prelirinary identification has been made of kabupatens to be involved by typeof technology, estimated volumes of works and costs associated, assessment of technicalassistance, training and equipment requirements. There would be about 90 field trials on KR3and KREI subprojects to test the technologies selected for implementation. Criteria for selectionof kabupatens include technical capabilities, location (for instance, for use of asbuton), specificlocal issues (for instance, kabupaten Merauke has no road building materials, and is thereforea poor candidate for promotion of lime stabilization).

4. The proposed implementation plan, to cover both KR3 and KREI kabupatens,call for Bina Marga to:

-66- ANNEX S

TECiNoA)GY DEvELopmENr-SummAxY OF RECommENATIONs

Topic Timescale CoDmmets Suitable

Bitumen Emulsions Process does not involve any new Yesa. For Hand Application 17 mnths kbupa tn mecihanical equipmenb. For Sprayed Application 2 yeas + Process involves new, and faily complex No

mechanical equipment. Considerablepreparatoy work is necessay.

Sprayed Surfaco Tretents 2 years + Process involves new, and fairly complex, Nomehanicd equipmen Considerablepreaatory work is necessary. Numberof kabuates in which initial intoductioncoud suoceed is limited. ntroductionbetter suited to a single specal project.

Softer Bitumen Grades 9 mondhs + lmmediate benefits at no extra cost. YesNo new equipmnmt involved.

Graded Aggregate Paving Matriasa. Cushed Graded Aggregates 9 months Limited cost reduction but better quality Yes

(denser and smoother) pavements shouldresult. No new equipment involved inRurl Roads 2 k.

b. Naurally Occurring Materials 23 months Reduton i costs. No new equ_ient Ye.involved.

Cold Laid Bituminous Mbies 14 months No naior cost svings involved. Ilprove- Yesments in quality of maintenance and ser-vice lives of pavements should result. Nonew equipment involved.

Asbuton 13 months Cost com v depends on (i) 001 Yespnce policy for natl rock-asphalt and(ii) distance of kabupaten from Butonisand.

Soil Stabilitiona. Stabilization of Subgmades 14 months No new kbupaten eqmupment is involved Yesb. Stabilization of Pavement 2 years + No new kabupaten equmet is involved No

materias but introduction to follow on fiom topicSb.

(a) Review the plan in the light of information received fiom the field after Projectcommencement;

(b) Review the guidelines and specifications which are now available for the selectedtechnologies, and adapt them for use by the kabupatens;

(c) Organize field trials on pilot projects;

- 67 - ANNEX 5

(d) Provide technical Input for traing modules for the selected technologies;

(e) Coordinate action to implement the selected tecnologies, including projectbudgeting, approval of guidelines, and progressive dissemination;

(f) Monitor the implementation and results of the selected technologies, and evaluatethe results for use in other provinces and kabupatens.

C. Labor-Intesve Pilot Scheme

S. At the other end of the technological spectrum, traditional labor-intensivemethods are used in most parts of Indonesia for public works. Reasons for this include theshortage of equipment and the difficulty in keeping equipment in working condition in the ruralareas as well as the ready supply of inexpensive labor. However, quality is not satisfactory andlabor-intensive construction is not as cost competitive with equipment as it coud and should beconsidering the low cost of mamnal labor. Experience from rural roads projects receivingassistance from the Bank and ILO in other developing countries suggests that considerablepotential exists for improvement in the quality and efficacy of the labor-intensive methodsemployed in Indonesia. The pilot scheme included in the project will develop and introduceimproved techniques, supervision and organization for labor-based constuction and maintenanceof district roads, with the intention of gradually replicating the results of the pilot scheme inother parts of the country. This component has started under RR2 (Annex 6 of the SAR for RR2has further description of the pilot scheme), and will be continued under KREI.

6. The main features of the pilot component are:

(a) experimntation and trials with alternative labor-based construction methods,improved hand tools, intermediate equipment and organization/supervision inconnection with the rehabilitation/improvement of about 80 km of district roads;the work will be implemented by force account in four districts; viz. Bogor andSubang in West Java province and Pontianak and Sambas in West Kalimantanprovince;

(b) trials with labor-intensive techniques and corresponding management andreporting systems for routine maintenance operations on about 100 km ofdifferent types and standards of kabupaten roads in the same four districts asmentioned above;

(c) provision of handtools and equipment for the experimental construction/improvement and maintenance works; these tools and equipment form anessential and integral part of the trials and the development work and fullflexibi'ity is therefore required in respect of design and specifications, before aswell as during the implementation. The International Labor Organization (ILO),who would be executing agency for the technical assistance, would assist thegovernment in the procurement of tools and equipment for the pilot component.

7. More specifically, the ILO technical assisace team would:

-68 - ANNEX 5

(a) plan, direct, monitor, evaluate and report on the experimental construction andmaintenance work;

(b) prepare detailed tools and equipment specifications and revise them as necessaryin the course of the implementation;

(c) study the local manufactring capability of tools and equipment and makerecommendations on how it can be increased and improved to raise the share oflocally manufactured hardware;

(d) carry out a comprehensive stdy of cost, output and productivity and qualitydata of different construction and m_ntence techniques including thosecurrendy used and those developed by the trial and demonstration program;

(e) provide on-the-job training to the concerned kabupaten staff in the planning andimplementation of labor-based work (this would be in addition to the trainingprovided under the main component of the Project) and organize an overseasstudy tour on this subject for senior staff;

(f) prepare an action plan for the Government's consideration on how and to whatextent improved labor-based techniques and related management systems couldbe suitably introduced on a wider scale on force account work as well as bycontractors.

D. Quality Improvement

8. Two features are included in the KR3 and KREI projects to promote a positiveattude towards technical innovadon and improve quality of works. The first is related totechnical guidelines development. A significant body of technical guidelines for kabupaten roadand bridge planning, design, constuction and maitnance (as well as those for equipment andworkshop operations) has been prepared under RR2. The Government has already issuedinstuctions for nationwide application of these guidelines and specifications for preparation andimplementation of kabupatens roadworks (including maitenance). The objectives of theTechnical Guidelines Development subcomponent are to:

* Monitor and evaluate the implementation of technical guidelines andspecifications, as well as the experience of the use of the Invitation to Tenderersand General Conditions of Contract used under the Projects;

* Assist in the preparation of improvements to these Guidelines.

9. The second feature is related to post-construction monitoring. Experience underRR2 has shown technical audits to be instumena in showing evidence of serious andwidespread deficiencies in quaity and quantity of materis, and in workmanship, and to addressthese issues. DGH has expressed the intention to apply similar audit procedures in all provincesfor GOI-funded works, to be conducted by PBPIK staff. The main objective of post-constructionmonitoring including tedcnical audit is to provide feedback to the central government on qualityof work and thereby on the effectiveness of guidelines. It is also to be used for samplemonitoring of environmental impact to fulfill GOI regulations. The tasks involved inzlude:

-69- ANNEX S

* Continue post-construction monitoring begun under RR2, based on semi-annualinspections to be carried out by the respective FCI; and expand the sample ifappropriate to other projects and kabupatens under KR3 and KREI.

* Assist Bina Marga in further developing technical audit procedures for kabupatenroads.

* Carry out and analyze results of a technical audit of quality on a sample ofroadworks projects constructed under the KR3 and KREI Projects. A sampleof about 27 kabupatens would be selected each year so that each kabupaten issampled once over the duration of the KR3 and KREI services. One project perkabupaten should be sampled for subgrade and pavement tests, and one projectfor bituminous surface tests. Sampling and testing should be arranged throughan independent laboratory.

-70- ANNEX 6

DESCRIPTION OF THE KABlUPAN ROADSMASTER TRAINIG PLAN

The context and organization of manpower development in the public workssector is analyzed in detail in the Staff Appraisal Report of the Third Kabupaten Roads Project,Annex 2. The present annex focusses on the Kabupaten Roads Master Training Plan (KRMTP),part of which is to be implemented under the proposed project.

A. Introduction

The KRMTP is a five-year nationwide training plan. It has been designed tosystematically upgrade the technical knowledge, skflls and capability of DPUK and relatedagencies' key road sector staff in the use of Bina Marga's technical standards and guidelines forkabupaten roads, and in the management and administration of kabupaten roadworks activities.

The KRMTP design is based on a training needs survey and analysis (INA), ofa representative sample of 26 DPUKs throughout the country. This survey has ideified 78important training needs for about 27 jobs in the structural, functional and project organizationsof the DPUKs. Forty training courses have been selected for preparation to respond to these 78needs.

Training courses will be delivered nationwide in a sysmatic and uniform way.The benefits of training kabupaten roads work performance will be measured and the impact oftraining towards the Government's overall regional development objectives in the kabupatens willbe formally assessed on a regular basis.

B. Objectives

The main aim is to contribute towards the quality and sustainability of thekabupaten road network in the context of the Government's regional development planningobjectives. Specific objectives of KRMTP are:

* To establish nationwide, standardized approaches to kabupaten road sectortraing based on the real needs of DPUK staff and of other technical staff athigher levels of government.

* To progressively introduce a competency based method (CBM) of approach totraining delivery so that trainig outputs and work perfrmance improvement canbe measured to enable the benefits of training to be assessed from time to time.

-71- ANNEX 6

* To improve the effectiveness of training delivery and the quality of training bythe design of CBM course materials based on Bina Marga's technical standardsfor kabupaten roadworks and the training of competent CBM subject instructors.

* To improve and strengthen the training systems and resources at all levels tosupport the above aims and the Government's overall decentralization objectives.

C. Establishment of KRMTP

In order to accomplish the above aims and objectives the KRMTP includes:

* The establishment of a KRM`P Technical Review Panel to ensure that trainingcourses content is compatible with DHG's technical and Bangda's administrativeguidelines for kcabupaten roadworks. All course content will be approved by thisPanel before courses are prepared and presented. A preliminary organizationstructure for this Panel is shown in Fig 3.1 below.

* The establishment of a Human Resources Development Team and productionunit within Diklat DGH to:

- Train a core of provincial instructors in CBM delivery methods- Design and prepare CBM course modules from existing and new

materials- Program, implement, monitor, and evaluate training inputs and outcomes

and establish the systems necessary to accomplish this.- Establish or strengthen training relationships and linkages with the

DPUP training units (Pedikprop) and DPUK Persomnel and Bina Margasections for more effective training implementation and management.

* The programming, introduction and conducting of CBM training courses inprioritized order on a staged basis, at first in regional kabupaten groups, leadingto provincial groupings, with an ultimate goal, after five years, of conductingmost training at kabupaten level or as near to the workplace as economicallypossible in support of decentralization and to promote ownership of training bythe kabupatens.

D. Implementation of KRMTP

Because of the large magnitude of the needs of DPUK staff to be satisfied bytraining responses, and because of the somewhat new methods of training delivery (CBM) whichwill be introduced under KRMTP, a staged process of implementation, as mentioned above, willbe established from the beginning of the training Plan.

Over the five years of the KRMTP a staged approach to the establishment orsystems and the implementation of training will be taken to ensure that CBM and trainingsystems are properly established in all provinces and kabupatens. The need for this approacis also necessary to provide for the gradual build up of resources to support the Plan. Thus thanumber of trainees to be trained and the mmiber of CBM modules to be developed have beenscaled down from the original TNA report recomm ons.

-72 - ANNEX 6

During the five years period about 6,000 key DPUK and related agencies staff,out of the 14,000 originally identfied by the TNA, will be trained in regional and subsequendyprovincial groups in a set implementation sequence. Ihe preparation of CBM training moduleswill also be confined to about 25 priorit CBM training courses out of the 78 originalyidentified by the TNA. The modules will be designed and produced at first by the TA servicesand subsequendy by the Dilkat HRD Team assisted by TA.

E. KRMTP Expected Output and Costs

The table below shows the overall program and costs over five yeas for thepreparation and implemention sequence of the Plan. Also shown are anticipated output interms of number of sessions and trainees. The costs are to be supported by IBRD Loans for theThird Kabupaten Roads and the Eastern Indonesia Kabupaten Roads Projects together with GOIcounterpart funds under a declining cost sharing arrangement: in order to ensure a gradualtransfer of the financial burden to GOI, training delivery to be disbursed at 50 percent under theproposed project from a disbursement level of 75 percent under KR3.

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-75-ANNEX

I8f0NESIA

EASTERN INDONESIA KA3UPATEN ROADS PROJECT

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-76 - ANNEX9

REPORTING REQUIREMENTS

1. Various types of reports will be generated under the project to meet GOrsreporting requirements and feed into its monitoring system:

- monthly reports produced by the Field Consultants for Implementaton (FCls), theTraining Consulan, and the Central Technical Consultants (CTC), providing detailson the project, the contracts, implementation progress, and payments.

- quarterly reports prepared by the tame consultants and giving, in addition to aprogress summary, an evaluation of prblems encountered and proposed solutions.

2. The Bank's reporting requirements wiUl be a subset of the above information, inthe form of a quarterly package to be assembled by the Project Implementation Unit (PIU) andincluding: (i) the CTC quarterly report prepared in accordance with the sub-paras below, and(ii) the other quarterly reports as annexes to the CTC's one. This package should be sent to theBank by the last day of the month following the concerned quarter. The specific requirementsare as follows:

(a) Each report should not only record progress in project implemnation, but alsoidentify emerging problems and suggest solutions to tchieve project objectives.Special attention should be devoted to the aspects of construction quality.

(b) The CTC report should cover all aspects of project components. It shouldconsolidate and summarize the FCIs and Training reports, and elaborate more onthe other aspects: engineering, planning, environment, and special studies. Theinformation should be given in such detail as to permit an assessment of theperformance of each kabupaten.

(c) The basic data for the project, contracts, implementation progress and paymentsdetails are the same as the ones used for reporting on on-going projects, especiallythe Highway Sector Project.

(d) The consolidation of the FCIs reports will be done easily if all consultants areusing the same formats. It is proposed that the formats defined under KR3become the norm. Tnis will facilitate the timely release of the periodic reports.

3. In addition to the above reporting requirements, a set of performance indicatorshas been defned as follows:

- amount budgeted for roadworks annually broken down into (i) constuc-tion/improvement and (ii) mainenance, per kabupaten and per province;

-77. ANNEX9

- amount budgead annually for opeaton and maintnance of kabupaten equipmentand workawps;

- date of rdease of annual budget allocation for maint ce;

- mber of training package developed;

anmal number of trainees, training sessios, and trainee days under the trainingprogrm.

Tnese indicators, together with the physical aciememe compared to the targets, will bemonitored thoughout project super."on to allow for a periodic assessment of projectPefrac.

-78- ANNEX 10

SUPERVSION PLAN

1. Bank Supervision Input Into Key Activities

(a) The staff input indicated in the table below is in addition to regular supervisionneeds for the review of progress reports, prcurement actions, correspondence, etc.(estimated for this project to require four staff weels per year).

(b) Each of the seven provinces should be visited at least once during projectsupervision and two or three selected provinces should be visited twice. Given thegeographic dispersion of the provinces, supervision missions should focus in eachfield visit on only a few kabupatens which would be deemed typical because oftheir geographical ch cs and their performance, as shown by the progressreports.

(c) Staff from the Resident Mission will be involved to a large extent in thesupervision of this project, in particular (i) in the EA reviews and (ii) in therandom ex-post review of the large amount of LCB-procured civil works contractsand SOE documentation.

(d) Most of GOI's work for imp oving systems and procedures will be carried out inJakarta, and will therefore be supervised there by Bank missions. Closecoordination with KR3 supervision activities is warranted, in view of the numerouscommon objectives of both projects.

2. Borrower's Contribution to Supervision

(a) A Project Launch Workshop is to be organized by GOI. In relation with theadvance conting authorized under this project, this Workshop should be heldearly enough to coincide with detailed preparation of the first year program, i.e.around March 1993.

(b) Project coordination will be the responsibility of the Project Secretariat (PS). Inparticular the PS will be responsible for coordinating arrangements for Banksupervision missions. The Project Implementation Unit will be responsible forproviding information require by missions.

(c) Review meetings with the participation of the various project agencies will be heldnormally in February of each year, to discuss the previous year's performance andthe current year program. A mid-tem Ptoject Implementation Review would beheld in Sepember/October 1994.

(d) Progress reports are to be submitted quarterly, and their content should meet therequirements set forth in Annex 8.

-79 - ANNEX 10

BANK SUPERVISION IN INTO KEY ACnvmErs

Dates Skl Staff Inpu(month/year) Activity Needs (staffAveeks)

06-07/93 Supervion Mssion(to review initial projet arngements, HE, TE 3first year works contacts, andbriefing of consultants)

09-10/93 Supevision mission HE, TS 4(to review start-up of civil works ENVand consultancy svices, oraizationalarrangements, proges in planngand environmental studies for 1994/95proglam)

11-12/93 Asds in preparaion of 1994/95 HE, TE) 2program on the basis of experience ENV, TR)of 1993/94 program.

01-02/94 SupervWion Mission HBE, TE) 8(to disuss 1994/95 program propoas, ENV, TR)evaluation of performance of kabupatensin catrying out mintenane, environ-mena sreeing and EIAs)

05-06/94 Supevision Msio HE,TTE 4(to review, iter aia, second yearworks contacts and progres m progamof studies)

09-10194 Supwvion Mission HE,TE) 8(mid-tem PIR to review all aspects of ENV, TR)the prect, especially perfomceunder loan conditions, adequacy of projectorganizatonal arngemnts, quality ofconsultancy services and impat of theprQject on the performnce of road agencies)

11-12/94 Assist in preparaton of 1995/96 id. 2program

1995 Thre Supervision RMiions id. 16

1996 Three Supevion Misons id. 12

1997 Two Supervision Msions id. 8

1998 One Supervision Mssion HE, TE 5(preparation of PCR)

HB=Hghway Engineering, TE=Tn_po¢t Economics, ENV=Environment, TR=Training

- 80 - ANNEX 11

ENVIRONMENTAL ANALYS

A. Introduction

1. The KREI project is planned to start early in 1993 and be implemented overthree years and include 51 Kabupatens in eastern Indonesia. The typical subproject proposal issmall, averaging about 6 km for road works as well as individual bridge projects. Mostsubprojects involve qualitative improvements to existng pavements, though there will be minorwidening and some bridge rehabilitation. Emphasis in KREI will be placed also on fmancingroad maintenance works, such as periodic resurfacing of roads that are still in fair condition. Thelarge number of similar projects and their very small scale should be emphasized in order tounderstand the nature of potential environmental impacts.

B. Baseline Conditions

2. Indonesia has a tropical maritime climate that is influenced strongly by the Indianocean to the west and south, and the Pacific ocean to the north and east. The archipelago ischaracterized by a band of perhumid (ever-wet) climates, straddling the equator on the largerislands, bisected by a north south zone of seasonally dry climates that are influenced by the drysouthern monsoon that blows off Australia during the months of May to September. In the eastof the country, the rainfall regime is slightly seasonal to strongly seasonal with distinct dryseasons increasing in length and severity in an easterly direction.

3. There are considerable differences in the baseline conditions in the provinces ofeastern Indonesia. Sulawesi is characterized by rugged mountain chains generally running northsouth and by narrow coastal plains. Its shape leads to considerable differences in rainfall andtemperature. This island has been subject to the most population pressure within the KREIproject. About 61 percent of the island is classified as forested. The less stable soils ofSulawesi and in particular South Sulawesi can lead to more significant erosion problems and theneed for properly designed drainage and better slopes wiUl be particularly important forsubprojects in this area. Nusa Tenggara is the most arid region of Indonesia. Its two provincesare characterized by smal clusters of smaller island chains. For a large proportion of the islandsthere is little or no forest, population density is generally low, and cultivated land is notextensive. Lombok is an exception with its high rural population densities. Irian Jaya containsthe largest forest area in the country, accounting for almost 30 percent of Indonesia's forestestate. The province has 80 percent forest cover and many of the non-forest vegetation typesare typically associated with high mountains and/or dry climadc regimes.

-81- ANNEX 11

C. Screening and Assessment Methodology

4. The GO has its own environmental procedure (known as the AMDAL process)embodied in Public Law 29, 1986 which mandates that an environmental information report(PIL) is requifed for all new developments that will have an impact on the environment.Discretion is given to the relevant Miniswr (in this case the Minister of Public Works) to identfyactivities which should normally require the completion of detailed environmental assessmentreorts (ANDAL). The level of assessment would be determined by fcllowing MPW DecreeNo 531 (November 9, 1989) entitled "Guidelines for Screening of Public Works Projects." Afist stage screening puts projects into one of four categories as follows:

(a) Category i-Definitely require a full assessment (Known as anANDAL)-e.g., Toll Roadk

(b) Categor 2-Requr either a PLL mited asesment) or ANDAL (fulassessment)-e.g., New roads oter than toU roads, Upgrading of roads withwidening, and Bridges >20 M long.

(c) Category 3-Require either a PIL imited asssment) or are exnmpt fromthe proas-eg., Upgrading of roads without wening, and Bridges< 20 M long.

(d) Category 4-Eempt from the process-e.g., Road and bridge maintenance.

5. Due to very large number of KREI subprojects placed in categories 2 and 3, itwas decided to use a sectoral assessment approach. Ihis approach to screening and assessmentwas oonsidered the most efficient way to concentae project assmn resources on the faileareas encountered during the project, ensre compliance with GOI procedures, and keep theassessment task itself a manageable one for both consultants and GOI.

6. In order to establish areas that are oonsidered frale for road constructionpurposes, the EA used the RePPPrott mapping series at a scale of 1:250,000 for the entirecounty. Two sets of maps can be used-one based on land status and the other based on theForest function classification Ir1K which the GO has adopted in order to atempt to dealwith the use of land under the jurisdictdon of the Ministry of Forestry. For land status, land wasplaced in a protecdon category based on an Index made up of dommant soil type, slope andrainfl intensity. Also land was automatically placed in a protection category regardless of theIndex value if the slope was steep than 45 percent, soil class was highly erodible, altitude wasgreater than 2,000 m or the area was within 200 m of a spring. Protection forest (EL) areas forboth map sets were based on the same criteria.

7. All project roads were first checked to see if they provide access to Type Ifragile areas (Conservation forests or Nature reserves). Any project which provides such accessis automatically considered ineligible for IBRD funding. All remaining projects are thenseparated into six major categories as follows:

- 82 - ANNEX 11

Previous 4-Wheel Access (Direct Impacts Only)1. Road upgrading with widening (DW)2. Road upgrading without widening (DnW)3. Bridge construction (Db)

No prior 4-Wheel Acces (Both Direct and Indirect Impacts)4. New road construction (IDnR)S. Road upgrading with widening (lDw)6. Bridge construction (1Db)

8. For each of the six project types listed above, a sect type assessment wascompleted using a sample of similar projects from the Rural Roads H project and the first batchof projects for the KR3 and KRBI project. For each type of project, the environmental impactcriteria were scored on a rating scale in accordance with GOI standards. Based on this scoringsystem a determination of the significance of each type of project was made. For each projecttype, the scope of the assessment varied with the level of complexit of the project type. For'Dw' proposals, e.g., widening a road with existing 4-w access, the principal impacts identfiedwere associated with establishment of quarries during the preconstructionphase, clearing of land,drainage runoff effects during construction and minor impacts associated with increased accessduring operation. For "Dnw" proposals, no widening, the main effects were similar to Dwexcept that the impacts associated with increased access were considered of less significance.For "Db" proposals, e.g., bridges on roads with existing 4-w access, there were a number ofimpacts which were considered to be of minor significance. Further details are in theEnvironmental Assessment report in the Project File.

9. For all project types, the impacts wiUl affect relatively low numbers of people,the area and extent of impact will be limited, and the projects are small scale with low intensityand will be of short duration. On balance, the overall impacts on the environment for projectsnot affecting "fragile areas" were assessed as being of minor significance. For any specificelement of the environment in which some potential for impact was identified, management andor monitoring measures were included in the project design and specification documents (termed"environmental addenda").

10. Several provinces in astern Indonesia are considered to be fragile planning areasin part due to the cumulative effects of population growth, deforestation of steep lands and localroad improvements. Ihe contribution of local road hnprovements to this process is still notclear. Based on a statistical analysis, a more significant correlation wa found between ruralpopulation density and share of forest. A comparison of these indices formed the basis forranking the kabupatens involved in the KREI project as to the likelihood of being more affectedby cumulative impact. A small number mainly in Sulawesi and Nusa Tenggara were designatedas "fragile kabupatens" and subprojects for major works in these kabupatens were subjected toa more intensive screening process.

- 83 - ANNEX 11

D. Public Consultation Progam

11. Operational Directive 4.20 emphasizes the need to consult with affected groupsand non-government organizations concerning attitudes and perceptions about proposed projects.T'e public consultation process was designed using the IBID "Environmental AssessmentSourcebook' for guidance. It involved the design and implementation of a series of sixteenpublic meetings in three provinces from within the study area. Nine of the sixteen meetingswere held in Irian Jaya because of the high proportion of indigenous peoples in this province.There were five teams involved in the consultation program each consisting of a member of theconsultants staff, at least one member from the central goverment and one from the provincialgovernment. 'he meetings were arranged through the kabupaten and chaired by a seniorkabupaten representative. NGOs and local towp and village representatives were invited to aUmeetings and attendance and participation in the meetings was very good.

12. The format of each meeting involved an outline of the scope and objectives ofthe KREI project by the GOI representative. Specific local road links under consideration forIBRD financing were used in the meetings as examples in order to help local people to identifyand understand possible environmental effects as well as to express their choices for local roadprojects. Discussion was stimulated by a series of questions which raised issues that may beimportant for site-specific subprojects. The responses at the meetings were carefully documentedand are set out in full in the environmental assessment report (see Project File). Many of theissues raised were similar between locations and involved questions of a socioeconomic naturerather than concern about the physical environment, including concern about non-local laborbeing used for construction, compensation for any land or crops affected, positive effects ofbetter local access, and improving the agricultural viability of local towns.

13. The results indicated that an indigenous peoples acton plan is not needed now.However, GOI has committed to continuing the consultation program during subprojectpreparation and a further second stage consultation for specific subprojects that require ANDALstudies. A second stage consultation component for a subproject would be designed and includedin the Terms of Reference for the ANDAL which then must be approved by the CentralAMDAL Commission (Komisi Pusat) of the Ministry of Public Works. All issues raised bythese specific subprojects would be addressed as part of the detailed study with reporting backto the affected groups about the proposed mitigatir- . The DGH environmental section wouldbe strengthened under the project for these tasks.

E. Institutional Arrangenents and Monitoring

14. The GOI Pollution Control Agency (known as BAPEDAL) responsible forcentral policy direction on environmental impact analysis and pollution control was consulted onthe use of this sectoral assessment approach for this project and has given full support. Theapproach taken to the screening and sectoral assessment of subprojects which have no potentialto threaten "fragile areas" complies with IBRD operational directive 4.01 on environmentalassessment. In OD 4.01, sectoral assessments are discussed as the type of environmentalanalysis appropriate for the situation where there are many small projects which individually donot merit site-specific environmental assessments. The proposed use of a team of Indonesianenvironmental professionals assisted by foreign experts will assist in attaining the objective ofstrengthening environmental capability in Indonesia. The team would train and work with both

-84 - ANNEX 11

provincial and local personnel (PBPJK) to collect data for site specific assessments and facilitateenvironmental monitoring of other subprojects during and after implementation.

15. The project includes adequate assistance to GOI for continuation of the EA taskand to strengthen the institutions involved. Bank monitoring should focus on the implementatonof the institutional strengthening program as it is important that Bina Marga itself be able tocarry out and review EAs. The Bank should also review the results of selected publicconsultation meetings that are to be held by DGH when appropriate. The objective will be toensure that the support and participation of indigenous peoples is being actively pursued for therelevant road subprojects. Also, GOI requirements for an RKL (management plan) an RPL(monitoring plan) arising from the results of each sectoral project type PIL, are consistent withBank requirements.

85- ANNEX 12

DOCUMENTS AND DATA IN 1 PROJECT FILE

1. General Reports and Studies

(a) Study on Concor performance, USAJID and Associates in Rmal Development,December 1990.

(b) Rural Roads Man ce Systenu Project, Vols. 1-3, USAID and Associates inRural Development, March 1991

2. Project related documents

(a) Kabupaten Roads Master Training Plan (KRNTP) 1992/93 - 1997/98, ProjectManagement Unit, IBRD Rural Roads II project.

(b) Environmental Assessment Report, Vols. 1 - 4, September 1992.

(c) Planning Activities under IBRD Rural Roads 2: Methodology (Draft Chapters),PMU, July 1990

(d) Technical Guidelines for Planning and Programming, PMU, July 1989

(e) Special Area Study: Review and Proposed Procedures, PMU, Dacember 1991.

(f) First year civil works program:- Draft Maintnenace Program (P1)- Major works longlist (P2)- Major works shordist (p3.1)(PMU, October 1992).

(g) Technical guidelines for the preparation and implementation of kabupaten roadworks and for the management of equipment, GOL 1991 and 1992.

(h) Report on Technology Adaptation and Dissemination, PMU, April 1992.

(i) Estimated Requirements for Roadworks Equipment, Workshops and Laboratories,PMU, October 1992.

O) Note on Revised Assessment of Maintenance Needs and Proposed Targets, PMU,October 31, 1992

-86- ANNEX 12

3. Terms of Reference

(a) Central Technical Consultants, July, 1992.

(b) Field Consultants for Implementation, August 1992.

(c) Bina Marga Environmental Institutional Strengthening, November 1992.

(d) BAPPEDA Environmental Intitutional Strengthening, November 1992.

- 87 -

Table 1.1

INDONESIA

EASTERN INDONESIA KABUPATEN ROADS ]PROJECT

SrATIS'FCcAL OVEREW

92M9Kaluvoten Roads 1989 Xb_aten

4-whed Good&P Su&t F opu. Lawd GURDPcap Rdas.BWdgtvehicles Lenst copdton h Saead Orve lsaon Am Cndoex Rp bo.(1989) km km % km km '000 1,000/km' % Pok

KREIN. Sulawesi 43,598 4,729 2,109 2,191 5S6 2,040 26.6 34 273 58 28C. Sulawed 13,494 3,790 1,403 457 1,289 1,703 60.3 17 165 57 24S.Sulawesi 65,710 9,185 3,850 1,876 3,290 3,770 50.6 39 289 59 67SE. Sulbwesi 5,156 S,183 2,380 1,470 1,329 1,349 36.8 31 120 65 23Sulawesi 127,958 22,887 9,742 43 5,994 6,464 8,862 174.3 29 161 59 142

W. Nusa Tegaa 18,043 2,821 1,495 1,313 849 3,369 19.5 34 507 37 29E. Nusa Tenggara 14,875 7,692 2,278 790 2,744 2,499 38.6 28 253 35 47Nusa Teaggara 32,918 10,513 3,773 36 2,103 3,593 S,868 58.1 30 300 36 76

wlan Jaya 13,970 2,360 707 30 574 298 1,629 414.8 23 17 112 65

KREI KAupsiena 35,760 14,223 40 8,671 10,3SS 16,359 647.2Other la 6,189 3,003 2,085 1,834 4,418 19.6KREI Provine 174,846 41,949 17,226 41 10,75612,189 20,777 666.8 26 121 56 283

UMluk 8,151 2,S22 1,742 1,046 969 1,851 78.0 14 173 81 24_imor Timu 6,027 2,309 519 402 243 748 14.9 21 235 35 22

Eastem Indone 189,024 46,779 19,488 42 12,204 13,400 23,376 759.7 24 126 S7 329

C. Klinanan 5,705 2,868 469 341 241 1,396 153.6 44 20 104 31E. Kalimntan 39,138 2,619 1,197 S09 1,225 2,597 197.2 31 42 419 36S. Kalimaitan 24,892 4,323 1,819 1,100 1,291 1,87S 37.5 72 70 85 30W. Kalimantan 20,827 7,126 1,348 940 594 3,235 147.5 53 41 95 52Kalimantan 90,562 16,935 4,832 29 2,890 3,350 9,103 535.8 44 39 149

Sumatra 512,910 57,225 25,073 44 18,703 38,522 36,420 475.3 51 150 133 364

bvs/Bali 1,777,121 55,738 37,664 68 35,25420,484 110,295 138.5 83 890 80 481

hndonesia 2,569,617 176,677 87,057 49 69,05175,757 179,194 1,909.3 41 231 100 1,324

j *Olher inchldes road, populi and tota area data br kbupste and kotmadaya (ciles) located within KRtI1 provines butexcluded fom KREI pr"ewtL

lb Exc=ldes eCah roada.

Now: Al 1990 data unim aothein ated.

- 88-Table 1.2

BDONEIA

EASTERN INDONESIA KABUPATEN ROADS PROJECT

GROSS REGIONAL DoMEScC PRODUCr PER CAI¶TA, 1989(Current priegs RP '000)

Region/ Index TotalProvince Oil Non-oil Total (ind=100) (adjusted) La

Sumatra 452 767 1,220 133 901Jakarta 0 2,329 2,329 255 2,462Java/Bali (exCI. Jkt) 37 694 731 80 828Kalimantan 354 1,103 1,457 159 1,237

Subtotal 152 820 972 106 955

Sulawesi Utara 0 527 527 58 661Sulawesi Tengah 0 519 519 57 653Sulawesi Selatan 0 543 543 59 676Sulawesi Tenggara 0 594 594 65 727NTB 0 334 334 37 467NTr7 0 324 324 35 458Irian Jaya 182 841 1,024 112 975

Subtotal Krei Provinces 14 497 511 56 631

Maluku 8 730 738 81 864TimorTimur 0 318 318 35 452

SubtotalEastern Indonesia 13 510 523 57 644

Indonesia la 7 291 2I

Source: BPS.

La Adjusted GRDP is based on realocation of total oil-based GRDP to aU provs. in line withprovincial population.

-89 - Table 13

IDONESA

EASTERN INDONESIA KABUPATEN ROADS PROJECT

POPTION, LAND AREA AND INDICATORS OF POpuLATION DENSRiy

Polaon PopuationEstiomd denst on sdimated denst on

Populaon % of aea n ander % of amea oulivableProvinoe/ Popubtion Land Am density under 40% 40% lopa cultivable eaRegion 1990 (no.) (sq kn) (no/sq kln) slope Li (no/sq lun) & (no./sgq In)

Sumata 36,4_ ,486 475,309 77 68 112 51 150Jakart 8,222,515 656 12,S34 100 12,534 n.a. n.e.Java/Bali 102,072,804 137,539 742 83 894 83L/ 890KaimantAn 9,102,906 535,834 17 64 27 44 39

Sulut 2,477,946 26,555 93 22 424 34 273sulteng 1,703,330 60,329 28 18 157 17 165Sulse 6,980,589 62,451 112 33 339 39 289Sultra 1,349,298 36,810 37 36 102 31 120NTB 3,368,699 19,537 172 41 421 34 507NTT 3,267,919 46,325 71 5S :28 28 253aian Jaya 1,629,087 414,800 4 47 7 23 17

Kiei Provinces 20,776,868 666,807 31 48 65 26 121

Maluk 1,851,087 78,019 24 43 55 14 173imti-n 747,557 14,978 50 56 89 21 235

E. Indonesia 23,375,512 759,804 31 48 64 24 126

Indonesia 179,194,223 1,909,142 94 60 157 41 231

Source: BPS, RePFFroT, NUDS.

/a RePPProT data in Dick J: Forest Land Us Zonation and Dorestation, Idonesa, 1991./ Based on RePPProt recommendations for TOHK foret fnimon areas for convetible forest and unclassified

land (includes edsting culivated ara).lo Exiting cutvated area fom BPS and esdmat of culivable area not in use from Nadonal Urban bedopmeat

Stategy (NUDS).

- 90 - Table 1.4

INDONESA

EASTERN INDONESA KABUPATEN ROADS PROJECr

LAND USE iN E. INDoNSA(sq km)

Region/ Bush/scrub Sbifting Cultivated Tree Settle- Mlsc/&Province Forest gassdand cult. ba crop. l ment no data Total

Si 'atra 233,235 104,343 34,286 38,631 35,504 13,592 15,723 475,314Java/Bali 13,459 16,976 2,943 S6,734 26,106 17,975 4,012 138,204Kalimantan 399,860 57,471 S4,596 9,335 6,190 1,288 7,098 S35,838

Subtotl 646,554 178.790 82= 104.700 67 32.85 26.833 1.149.356

Sulawesi Utara 15,537 2,972 352 2,149 3,054 535 1,957 26,555Sulawesi TenUa 43,591 6,616 1,569 2,489 1,677 431 3,956 60,329Sulawesi Selatae 28,792 15,712 2,161 9,389 2,889 1,462 2,046 62,451Sulawesi Tenggara 24,775 7,628 1,187 1,86^ 198 618 532 36,810NTIB 9,326 4,231 636 3,621 328 930 455 19,527NIT 9,794 25,147 3,235 3,823 349 724 3,256 46,328Irian Jaya 349,583 35,911 12,873 782 145 794 14,712 414,800

Subtotal 481.397 98217 22Q03 24.115 840 5.54 262914 666.Krei Provinces

Maluku 63,480 7,076 2,164 666 183 21 4,429 78,019Timor Timur 5,574 7,419 986 398 259 36 206 14,878

Subtotal 55.A.5 112.712 25.163 25.179 2 5.56 31.S49 759.697Eastern Indonesia

Indonesia 1L197.005 291 116.988 129.879 38.415 58.382 1.909Q9Q3

Source: ePPProt Reports based mainly an 1982/83 aedal photography.

/a Wetland and dryland crops excluding tree aops.Ib Including ago-forestry and refation./c Includig vegetated land, water and fisiponds.

- 91 - Table 1.5

IDONESA

EASTERN INDONESIA KABUPATEN ROADS PROJECT

SUMMARY OF BROAD LAND USE BY MoEmG3N(% of total ara)

Cultivated/ OtherForest Settled Ia Uses Lb Total

Sumatra 49 18 32 100JavalBali 10 73 17 100Kalimantan 75 3 22 100

Sulawesi 61 14 25 100Nusa Tenggara 29 15 56 100Irian Jaya 84 1 15 100Maluku/TimTim 74 2 24 100

Eastern Indonesia 72 5 22 100

Indonesia 63 13 24 100

Source: Previous table.

La Includes wetland and dryland crops, tree crops and settlement areas.tb Includes bush, grassland, shifting cultivation and miscellaneous uses.

-92 - Table 1.6

INDONESIA

EASTERN INDONESIA KABUPATEN ROADS PROTJEC

SUMMA:Y OF PRESE4 FOREF FUNCIION AREAS(sq km)

Pro- Ld. Nonral Con-Nature tetoc Prod Prod. verion Unclass-

Provincel Reserve Forest Forest Forest Forest ified /a TotalRegion (PPAIHSA) (IL) (HPI (PB/E) (HPK)

Sumatra 41,414 64,121 66,576 69,319 86,760 146,929 475,119lava/Bali na. na. n.a na. na. Ua. ua.KlWimnetan 36,386 65,471 118,266 132,246 115,316 68,591 537,276

Sulawesi 14,126 43,202 45,877 15,222 16,241 52,177 185,845Nusa Tenggpaa /b 3,499 16.172 ',913 5,527 17,144 30,315 80,770Irian Jaya 73,700 ',000 46,300 80,300 97,600 11,900 414,800

Kre Provinces /b 91,325 164,574 i00,090 100,049 130,986 94,392 681,41S

Maluku 4,534 13,309 16,426 8,524 34,638 504 77,93S

Eken Indonesia 95,859 177,883 116,516 108,573 165,623 24,896 759,350

Indonesia 173,659 307,475 301,358 310,1238 367,699 310,416 1,770,745

Source: RePPProT Reqnots.

/a Includes 5,617 sq km stae fiee forest OMIB) in Sumtra.lb Includes TimorTiur

Note: Inludes sume desigated fons functin aras not actually under finesL

- 93 - Table 2.1

MDONESIA

EASITWN INDOt;SIA KABUPATEN ROADS PROJECT

ROAD NErwoRK IENGr BY ROAD CLASS AND ISLAND GROUP

Javal ali Suia- Nun hian Maluu Eastean Total forRoad Chss Sumatra Dali mantan weal Tepggara Jaya ifmTin Indonesia Indonesia

National: Atal 4,901 3,094 1,931 2,426 1,369 434 273 4,s50 14,428Collotor 1,524 223 140 295 389 182 538 1,404 3,291

Subtotal 642S 3,317 2,071 2,721 1,758 616 811 S5,06 17,719

PwvlinciaL Aierla 120 11 1S 176 0 191 22 389 535Provincial 10,223 7,083 3,754 5,311 1,906 1,466 1,924 10,607 31,667Lcal 511 445 100 289 337 0 181 807 1,863

Subtotal 10,854 7,539 3,869 S,776 2j243 1,S67 2,127 11,803 34,065

Tol Roads 35 339 0 0 0 0 0 0 374

Kabupaten Roads /a 57,225 55,738 16,935 27,265 12,324 2,360 4,830 46,780 176,677

Urban roads 5,337 14,001 1,501 2,130 1,172 488 801 4,591 25,431

Tanmigration Roads 3,564 130 860 734 0 S8 0 792 S,346

Total gm U~3L am" 174 L1M £Jm I2at U2d

Ia Inchuing kobamadya toads.

Source: DGH: 1991192, exept kabupaton roads 1990 and taunmgration roads 1988.

ROAD PAVEMNT BY ROAD CLASS AND BLAND GROUP(percentage *. the road network in each category)

Java- Kali- Nusa hian Maluk EastemrRoad Class Sumatra Bali umanta Sulawesi Teggara Jaya Timortrmor ldones Idonesia

National: Paved 93 100 87 83 98 63 68 83 90Unpaved 7 0 13 17 2 37 32 17 10

Provicid: Paved 81 97 47 71 68 34 56 63 75 EXUnpaved 19 3 53 29 32 66 44 37 25

Kalbpaten Paved 33 64 17 28 20 24 30 26 39Unpaved 67 36 83 72 80 76 70 74 61

0Source* DOll 1991/92 (national and provincial roads) and 1990 (Kabupaten Roads).

0?

- 95 - Table 23

INDONESIA

EASTERN INDONESIA KABUPATEN ROADS ]PROJECT

CoNDmoN oF TE NATIONAL, PROVNCIAL AD KAUATEN ROAD NEWWRKS (M90)

Island Group: Percentage of the Road Network in Indkcated Condition

National and Provincdal RadsGoo2d 1Enk Nor ad

<6 6-8 8-12 > 12

Sumtra 50 10 22 18Java/Bali 65 19 14 2Kalimantan 32 8 16 44Other Islands (E. Indonesia) 32 14 28 26

Indonesia n U 2 2Q

Kabupaten RoadsGo Eair FPoor E"

Indonesia 2 12 21

Source: DGH, 1990 kabupaten roads inventory (adjusted on basis of planning surveys).1991 national and provincial roads condition survey.

-96- Table 2.4

]NDONESIA.

EASTERN INDONESIA KCABUPATEN ROADS PROJECT

1990 NATIONWDE KABUPATEN ROAD INVE rYSum OF ROAD LENGTs (Km) By SURACE Tym

FOR IBRD ftOJBCT KADUPATEN GROUIPS

Project Kab Sealed S% Gravel G% Earth E% Total

KR3 73 24,852 36 18,175 26 26,206 38 69,233KREI 51 8,668 24 10,352 29 16,740 47 35,760

1990 NATIONWIDE KABUPATEN ROAD INVENTORYSUM OF ROAD LINGTH OM BY SURFACE CONDMON

FOR IBD PRQOC KABUPATEN GROUPS

Project Kab Good/Pair % Poor/Bad % Earth % Total

KR3 73 31,733 46 11,294 16 26,206 38 69,233KREI 51 14,223 40 4,797 13 16,740 47 35,760

TaSo : 190 45.956 16.01 1 96 41 104.993

SOUrCe: DC"H 1990.

-97 - Tlo25

NDONESIA

EASTER INDONESIA KABUPATEN ROADS PROJECT

PRoJwr KABUIATENS AND THR ROAD NWTwoRKs

Length of Rods According to Condition % of total(kflometers) roads i

Province Seal Seal Gravel Gravel Earth Total good/fairGood/ Poorl (Good/ Poor/ Total cndition

Kabupaten fair bad fair bad seal gravel

West Nusa T_arLombok Barat 279 22 28 15 98 441 63 6Lombok Tengah 263 55 95 130 105 617 43 15Lombok lmur 248 17 94 77 185 621 40 15Sumbawa 126 73 42 98 126 465 27 9Dompu 30 26 117 58 59 289 10 40Bima 117 59 59 67 86 388 30 15

1g. LA Z A2ZJZ1 A d

East Nusa TenggSumba Barat 66 1 322 76 89 553 12 58Sumba Timur 51 4 248 84 490 876 6 28Timor Tengah Sel. 77 3 366 53 395 893 9 41Timor Tengah Ut. 60 0 255 113 242 670 9 38Alor 37 26 69 80 315 527 7 13Flores Tinur 88 16 67 140 473 783 11 9Sikka 131 4 27 139 134 434 30 6Ende 41 0 100 16 339 496 8 20Ngada 56 10 80 114 656 916 6 9Manggarai 77 44 61 337 1,025 1,544 5 4

Total KME I go 1.149 41S7 Lm 2 21

North SulawesiGorontalo 251 62 94 85 879 1,370 18 7Bolmon 331 36 136 32 341 875 38 15Minahasa 968 303 119 46 442 1,877 52 6Sangihe talaud 178 65 33 10 321 607 29 6

2AtAl LZ LU 17i 1 M fL7 aZ

Central SulawesiBanggai 57 19 469 215 782 1,542 4 30Poso 51 1 191 1 479 723 7 26Donggala 229 13 241 71 410 965 24 25Buol Toli Toli 86 0 79 21 374 560 15 14

T.n U auQa L H 3

- 98- TbOb2.5

Length of Roads According to Condition % or total(kIometers _ roads in

Pro-.ince Seal Seal Gravel Gravel Earth Total good/fairGood/ Poor/ Good/ Poor/ Total cndition

Kabupaten fair bad fiir bad seal gravel

South SulawesiSelayar 74 64 8 76 156 377 20 2Bantaeng 80 52 56 S0 95 334 24 17Gowa 181 23 199 77 197 676 27 29Maros 108 2 137 34 151 432 25 32Pangklene 97 41 7S "11 53 414 24 18Barru 126 7 67 32 126 357 35 19Soppeng 193 3 253 7 145 600 32 42Wajo 121 37 257 114 225 754 16 34Enrekang 19 15 131 29 213 407 5 32Luwu 136 14 490 78 894 1,610 8 30Tana Toraja 200 28 148 100 580 1,056 19 14Polewali 127 30 102 189 617 1,066 12 10Majene 72 3 74 26 291 466 15 16Mamuju 24 1 298 37 278 638 4 47

Total KRE:I 1aza 2 318 gjaL9 1 8S U

Southeast SulawesiButon 396 122 228 46 892 1,684 24 14Muna 334 5 414 59 318 1,130 30 37Kendari 192 21 323 75 546 1,156 17 28Kolaka 358 41 136 48 629 1,213 30 11

TM La in LM 0 ams i a Li

IRIAN JAYAMerauke 107 2 0 0 382 491 22 0Jaya Wijaya 18 0 29 35 312 395 5 7Jayapura 132 14 16 52 25 239 55 7Paniai 45 7 51 1 11 114 39 45Fak Fak 24 6 38 31 74 173 14 22Sorong 46 11 15 1 228 300 15 5Manokwari 40 3 1S 0 99 158 26 10Tel. Cendrawasin 97 1 6 1 172 276 35 2Yapen Waropen 20 0 8 0 187 214 9 4

TM aXm Q La m L.a90 P A

Total KME(51 "bs) L6Z La0 gm A M1 Zi ,Z W 1a

Source: DGH 1990.

-99- Table 2.6

IDONESIA

EASTERN INDONESIA KABUPATEN ROADS PROJECT

REGj1rEO MOTOR VEIUCLIS (1980-1990)

Cars &Year Pickups Buses Trucks ToWa

(numer of vehicles)

1980 639,464 86,284 473,832 1,199,579'1981 710,937 110,103 575,426 1,396,4661982 791,019 134,430 657,104 1,582,5531983 865,940 160,260 713,873 1,740,0731984 927,148 191,654 790,881 1,909,6831985 989,158 227,304 845,338 2,061,8001986 1,063,958 256,574 882,331 2,202,8631987 1,170,103 303,378 953,694 2,427,1751988 1,073,106 385,731 892,581 2,351,4181989 1,182,253 434,903 952,461 2,569,6171990 1,313,210 468,550 1,024,296 2,806,056

Grwt Rat M%

1980/81 11.2 27.6 21.4 16.41981/82 11.3 22.1 14.2 13.31982/83 9.5 19.2 8.6 9.91983/84 7.1 19.6 10.8 9.71984/85 6.7 18.6 6.9 8.01985/86 7.6 12.9 4.4 6.81986/87 10.0 18.2 8.1 10.21987/88 -8.3 27.1 -6.4 -3.11988/89 10.2 12.7 6.7 9.21989/90 11.1 7.7 7.5 9.2

Source: Biro Pusat Statistics-Figures are based on new vehicle regitration (without adequateallowance for scrappings).

- 100 - Table 2.7

WDONA

EASERN INDONESI KABUPATEN ROADS PROJECT

NUMER OF REGLERED MOTOR VEHCLES 1989 Y REGION

Cars & Total MotorRegion/Province Pick-ups Buses Trucks (4-whi) cycles

Sulawesi Utara 18,191 8,702 16,705 43,598 39,289Sulawesi Tengah La 3,946 1,701 7,847 13,494 40,633Sulawesi Selatan 19,096 9,216 37,398 65,710 226,073Sulawesi Tenggara lb 1,162 638 3,356 5,156 19,261NTB 7,077 1,167 9,799 18,043 47,251NTI` 6,940 3,018 4 917 14,875 27,138Irian Jaya 7,122 2,302 4,546 13,970 30,240

Subtotal KREI provinces 63,534 26,744 84,S68 174,846 429,885

Maluku 2,371 893 4,887 8,151 16,446Timor Timur 3,682 1,033 1.312 6,027 15,846

Subtotal E. Indonesia 69,587 28,670 90,76Ki 189,024 462,177

Klimaitan Barat 9,390 2,263 9,174 20,827 90,623Kalimantan Teagah 1,823 74 3,80T 5,705 26,367Kalimantan Timur 14,170 6,452 18,51k 39,138 89,743Kalimanun Selatan 14,662 950 9,280 24,892 114,035

Subtotal Kalimantan 40,045 9,739 40,778 90,562 320,768

Sumatra 196,329 80,155 236,426 512,910 1,266,810Jakarta 434,659 150,077 173,170 757,906 757,393Java/Bali 441,633 166,262 411,320 1,019,215 2,915,143

Subto.l Other Ptovinces 1,112,666 406,23 861,694 2,380,593 5,260,114

- aDONS Lia &zM 222la

Source: State Police of Indonesia.

La Some vehicle regiradons liklay to be included in Sulawesi Utara./b Some vehicle registrations likely to be included in Sulawesi Selat;n.

DESIGN STANDARDS FOR KABUPATEN RoADs AND BRIDGES

Road Cla8sificatio Clm MIA Cilm Bi Clm M B2 ci m c

Surface Type Asphalt Surface Asphalt Seal Gmvel Gravel/AWCAS

Traffic Volume: ADTCrtafti Deip Chus) >500 500-201 200-50 <50o

(4) (3) (2) (1)

Flat to Mount- Flat to Mount- Flat to Mount- Flat to Mount-Terrain Rolling Hilly ainous Rolling Hilly ainous Rolling Hilly ainos Rolling Hilly ainous

TrafficLanes 2 2 2 1+ 1+ 1+ 1+ 1+ 1+ 1 1 1

DedR« zbnm/Z Dulkabb 80 60 40 60 40 30 60 40 30 50 30 25Spei- ladm 50 40 30 40 30 30 40 30 30 30 50 20Gradia (3)M m 6 8 10 8 10 12 8 10 12 9 12 14(imting) Dedp 3 5 8 6 8 10 6 8 10 7 10 12

P _vma Deak 5.d 5.5 S.S5. 5.0 5.0 5.0 4.5 4.5 4.S 4.S 4.5 4.5 i! Widlt MinImm 4.5 4.5 4.5 3.5 3.5 3.5 3.5 3 3.5 3.0 3.0 3.0Shoulder Derb"l 2.0 1.5 1.5 1.5 1.25 1.6 1.5 1.0 i.0 1.0 1.0 0.7SWidh Wdm 1.5 1.25 1.25 1.25 1.0 1.0 1.0 1.0 1.0 0.75 0.75 0.75

Road Bed D elDde 9.5 8.5 8.5 8.0 7.0 7.0 7.5 6.5 6.5 6.5 6.5 6.0Width Minmum 7.5 7.0 7.0 6.0 6.0 5.S 5.5 5.5 5.5 4.S 4.5 4.5

I$b9 Dea&qnbb IsM 16M 16M 16M 0"lWay Minimum 16M 12M 12M 12M

Road 093nM P&WW3% 3% 4%-6%4%6Camber Shodder 4%.5% 5%66% 6%-7% 6

BR <MM TagetSndOverall Wi 7.0M 7.0M 7.0M S.SMID WAS Wid Wak m 6.OM 6.OM 6.0M 4.5M1G3E -

>,30 TasSmntdandO,eRVfid 7.OM 7.0M 7.0M S.SM3T Wdbowt de walk (i) 6.OM 6.OM 6.OM 4.SM

DAT 3.OM 3.OM 3.OMRDS 1:%:mDe4dUpl 1 70%BM 70%BM 70%BM 70%BM ("0% T_nkry)

Soarce DGH - Tchnical Guideies for Engineering Survey and Design of KabupaR t Roads, December 1991.

- 102 - Tabl 4.2

INDONESIA

EASTERN INDONESIA KABUPATE ROADS PROJECTEQUWW RBQUnWIs

Unit Pino Quantity Total Cost(USS) (USS)

(a) Roadwork EquipmentBulldozer + Ripper 110 HP 105,000 7 735,000Mtor Grader + Ripper 110 HP 75,800 16 1,212,800Wheel Loader 1.2 r-3 75,600 26 1,965,6003 Wbeel Roller 10 Ton 42,000 30 1,260,000Pedesktian Roller 500 Kg 11,500 37 425,500Mechanicd Plate Comp. 70 Kg 2,200 66 145,200Wata Pump 4 2,200 26 S7,200Concreta Mixer 250 lit 1,700 19 32,300Stone Crusher 20 TPH 122,000 39 4,758,000Dunp Trucks 3.5 Ton 22,000 96 2,112,000

itumnen spaye. hand 200 Lit 6,600 33 217,800Traier (towed) 1.5 Ton 2,40t 42 100,800Generator 30 KVA 7,500 22 165,000Air Compreor 125 CFM 12,000 23 276,000Radio SSB 2,300 31 ses 71,300

Subtotal 13,534,500Spare parts (15%) 2,030,175Distibution Cott (8%) 1,245,175

Total Roadwork Equipment 16,80U850

(b) Workshop Equipment 1,345,000

(c) Training Equipment and MateIals 500,000

(d) Laboratory Eqi60184DCP 600 14 8,400CBR Laboratory 2,775 24 66,600Compaction Set 750 23 17,250DYniD Oven 3,200 13 41,6005aid C=e8 300 57 17,100Liquid Limit Tedt 275 80 22,000PlStc limit TeSt 100 76 7,600Gradation 2,500 70 175,000Speedy Moistue 3,000 44 132,000Balance20kg x 1 2,500 28 70,000

2,600 gr x .1 750 19 14,250200 gr x 0.01 875 35 30,625

Los Angeles 6,750 51 344,250Concrete Block Tester 15,000 51 765,000Slump Cone 650 25 16,250OrgaC Imputies 1,100 43 47,300Moisture CorEteit 18 126 2,268Sand equivaleat SOO 37 18,500Concrete mold 10 455 4,550Fire extinguihr 125 102 12,750

Tot Laboratory Equipment 3293

(e) Vehiles LaPick Up I Ton 11,000 39 429,000Motor Cycle 125 CC 1,200 102 122,400SerVice Pick Up 1 Ton 12,000 42 504,000

TOWal VehilS LOS4M

Grand Totdal -2

La Tbese items will be purchased under reserved preumeL

INDONESIAEASTERN INDONESIA KABUPATEN ROADS PROJECT

EXPEx DrE Accoums BY CompomNms(Rupiah millon)

Road Network ImprovementRoad Technology lnsttutional PhysicalRoad Workshops Equtip Adapt. & Trainig and technical Contingece

Works & Labs Pogram Dissemin. Component Development Total % Amount

investment CostsA. Civil Works

Road Bettment 247,860.0 - - 1,500.0 - - 249,360.0 10.0 24,936.0Penodic Maint. (Seded) 107,856.0 - - 1500.0 - - 109,356.0 10.0 10,935.6Periodic Maint. (Gravel) 39,048.0 - - 9C0.0 - 39,948.0 10.0 3,994.8Routine Maintenance 66,976.0 - - 800.0 - - 67,776.0 10.0 6,777.6WorksopsConstruciton - 5,205.0 - - - - 5,205.0 10.0 S20.5 oLaboratories Construction - 820.0 - - - - 820.0 10.0 82.0Subtotal 461,740.0 6,025.0 4,700.0 - - 472,465.0 10.0 47,246.S

B. Equipment - 7,084.0 39,710.0 1,160.5 - 47,954.5 5.0 2,397.7C. Oveseas Training - - - - 100.0 - 100.0 10.0 10.0D. Local Professional Taning - - - 400.0 400.0 10.0 40.0B. Training Deiivery - - - - 5,005.0 - 5,005.0 10.0 500.5P. Consultants Services 43,000.0 - - 3,045.0 3,834.0 10,000.0 59,879.0 10.0 5987.9Total Baseline Costs 504,740.0 13,109.0 39,710.0 1,745.0 10,499.5 10,000.0 58S,803.5 9.6 S6,182.6

Physical Contingencies 50,474.0 956.7 1,985.5 774.5 991.9 1,000.0 56,182.6Price Contingencies 47,652.0 884.0 3,654.1 962.0 1,538.0 1,372.1 56,062.2 8.8 4,916.6Totd Project Costs 602,866.0 14,949.7 45,349.6 9,481.S 13,029.5 12,372.1 69,048.3 8.8 61,099.2

Taxes 54,800.5 1,359.0 4,122.7 861.9 1,119.0 1,124.6 63,387.7 8.8 5,548.0Foreign Exchang 193,107.6 8,851.1 41,226.9 3,323.2 3,623.9 6,777.1 256,909.7 8.3 21,210.2

- 104 - Table 4.4

INDONESIA

EASTERN INDONESIA KABUPATEN ROAS PROJECT

ESrMTED Dls %Mr SCHULE ag((s$ millon)

IBRD fisca year Cumultive Cumuliveand semester Disbursements disbursements percentage

1994

December 31, 1993 6 6 4

Jue 30, 1994 14 20 13

1995

December 31, 1994 19 39 25

June 30, 1995 25 64 41

1996

December 31, 1995 25 89 57

June 30, 1996 32 121 78

1997

December 31, 1996 20 141 91

June 30, 1997 10 151 97

19

December 31, 1997 4 155 100

/a Asmmes loan effectivens in July 1993, and use of reftoactive financing.

- - -

=

N. _ _1 .1

-_ _ _ ._

fLJ S

INDONESIA

PASTERN INDONESIA KABUPATEN ROADS PROJECT

Organization of theDirectorate General of Regional Development (DORD)

r~~~~~~~~~~~~~~~~~~~~Mnse _.1

NMa A#*$

Direcor _eneral G §Nncetr al H g Director Gee Detr Goo" f Gonrl AdmInItratonof S o aus I

sw" of

E t ; < < XabDn |~~~~7ws ~

r Economic SccIal&l Sac~~gkwari EaWlmomol__ Govt Mamuln~j C.li Ut8 _t Uan _wstvf &s

ru*9 ~ ~ ~~~A* & R1191 & _m ut _Reim &

f~~LLF] FK LI1 IF99 Strtrlt

SO MINISTER OFHOMEAFAIWECEnrmeno rIMrurs EnIrot LMiSOURCE: MINISTER OF HOME AFFAIRS' DECIk No.22 ol imZ

INDONESIA

.AS1TERN INDONEIISIA KABUPAlTER ROADS PROJECT

Oreanization of theP?ovincial Public Works Agencies (DPUP)

HEAD OF DPUP

|ADMINISTRATION|

PERSONNEL FINANCE LEGAL GENERALAFFAIRS AFFAIRS

._ .Li-__ I __ I__ _ i - _ 1

EQUIPMENTPLANNING IRRIGATION ROADS BUILDINGS &

SUPPLIES

IRRIGATION ROAD *1 FIRRIATOP R G A M .i __ _ _ _ _ _ _ _ _ _ _ _. L.__ _ . _

PROGRIGAMMIRRIGATION CONSTRUCTION REGIONAL EQUIPMENT

ROADS RIVERS BRIDGE BUILDINGS 1 F ROADSPROGRAMME & CONTRUTIO &EQUIPMENIT

[PROGRAMME SWAMPS CONSTRtION HOUSING L& SUPPLIES J

BUILDINGS OPERATIONS ROADPROGRAMME I& SNTTO OKHP

MAINTENANCE MAINTENANCE SANTION WORKSHOPS

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