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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. P-2949-IND REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF INDONESIA FOR A TENTH POWER PROJECT February 3, 1981 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS Currency Unit - Indonesian Rupiah (Rp) US$1.00 Rp 625 Rp 100 = US$0.16 Rp 1 million = US$1,600 WEIGHTS AND MEASURES 1 metric ton n 1,000 kilograms (kg) 1 liter (1) = barrels 1 kilometer (km) = miles (mi) I kilovolt (kv) - 1,000 volts (V) 1 megavolt-ampere = 1,000 kilovolt-amperes (kva) 1 kilovolt-ampere - 1,000 volt-ampere (VA) 1 megawatt (MW) = 1,000 kilowatts (kw) 1 gigawatt hour (GWh) - 1 million kilowatt hours (kwh) ABBREVIATIONS GOI - Government of Indonesia IGGI - Intergovernmental Group on Indonesia MME - Ministry of Mines and Energy Newjec - New Japan Engineering Consultants, Japan ODA - Official Development Assistance OECF - Overseas Economic Cooperation Fund (Japan) PLN - Perusahaan Uuum Listrik Negara, the national electricity authority SBC - Special Board of Consultants PLN-S FINANCIAL YEAR (FY) April 1 - March 31 GOVERNMENT OF INDONESIA FISCAL YEAR April 1 - March 31

3 FOR OFFICIAL USE ONLY INDONESIA TENTH POWER PROJECT LOAN AND PROJECT SUMMARY Borrower: Beneficiary: Amount: Terms: Onlending Terms: Republic of Indonesia Perusahaan Umum Listrik Negara (PLN), the national electricity authority $250 million equivalent 20 years, including 5 years of grace, with interest at 9.60% p.a. The proceeds of the loan will be onlent from the Government to PLN on the same terms as the Bank loan; the Government would bear the foreign exchange risk. Project The project would utilize the hydroelectric potential Description: of the Citarum River to meet Java's growing demand for electricity; it is expected to provide the Java Grid with 700 MW of peaking capacity. The project will also assist PLN to expand its capabilities in the fields of construction, power market surveys, power system planning, and contract management. The project comprises: (a) construction of a storage dam, 97.5 m high, at Saguling on the Citarum River; a 6.5 km long water conductor system comprising tunnels, surgetanks, and penstocks; and a 700 MW power station (with 4 generating sets each rated at 175 MW) at Cipanas, with an associated 500 kv step-up substation; (b) provision of the necessary equipment for a PLN construction task force; (c) engineering of the Cirata hydroelectric project including detailed investigations and designs; and (d) consultancy services to assist PLN with: (ii) (iii) (i) power market surveys; power system analysis; and civil works contract management. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

4 - ii - The risks associated with the project include the uncertainties inherent in hydroelectric projects, such as possible geological problems, hydrological complexities, and similar matters. Appropriate measures have been taken to keep risks to a minimum, including the institution in 1978 of the Special Board of Consultants (SBC) which continuously reviews the investigations and design of the project to ensure that all aspects involving safety of structures are considered. The SBC will continue its monitoring throughout the construction stage. Estimated Costs Local Foreign Total $ million Base Costs Saguling hydro-electric project (700 MW)/a Construction equipment Engineering of Cirata hydroelectric project Selected consulting services Subtotal Contingencies Physical Price Total Costs Financing Plan: Source Local Foreign Total $ million IBRD OECF PLN/Government Total /a Cost totals include taxes totalling approximately 5% on the local component of the civil works contract.

5 - iii - Estimated Disbursements: Bank FY Annual Cumulative Rate of Return: 16% Staff Appraisal Report: No IND, dated January 16, 1981.

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7 REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF INDONESIA FOR A TENTH POWER PROJECT 1. I submit the following report and recommendation on a proposed loan to the Republic of Indonesia for the equivalent of $250 million to help finance a Tenth Power Project. The loan would have a term of 20 years, including five years of grace, with interest at 9.60% per annum. The proceeds of the loan would be onlent to Perusahaan Umum Listrik Negara (PLN), the national electricity authority, on the same terms as those of the proposed loan. The foreign exchange risk will be borne by the Government. Parallel with the Bank loan, the Overseas Economic Cooperation Fund of Japan (OECF) is providing $136.6 million to help finance part of the cost of the project. PART I - THE ECONOMY /1 2. A basic economic report, "Indonesia: Growth Patterns, Social Progress and Development Prospects" (No IND dated February 20, 1979), was distributed to the Executive Directors on February 26, An updating country economic memorandum, "Indonesia: Long-Run Development and Short-Run Adjustment" (No IND, dated February 20, 1980) was distributed to the Executive Directors early last year. Background 3. The Republic of Indonesia is an archipelago of more than 13,000 islands covering a land area in excess of two million sq km. With an estimated population of over 136 million, it is the world's fifth most populous nation. The population density exceeds 650 persons per sq km in Java, where 65% of the population live, but averages less than 30 persons per sq km in the rest of the country. Over 82% of the population live in rural areas and although agriculture only accounts for slightly over 30% of GDP, about 62% of total employment is still found in the agricultural sector. GNP per capita is estimated at about $ Over the last 13 years, Indonesia's economic, social and institutional development has surpassed that of most other heavily populated, poor countries. Although the new government in 1966 inherited a severely dislocated and bankrupt economy, it rapidly brought hyperinflation under control, established full convertibility of the currency and regained the confidence of western creditors. During the First Development Plan period, Repelita I (1969/70 to 1973/74), a major rehabilitation of the neglected infrastructure was initiated, the investment rate was doubled to 18% of GDP and an average real GDP growth rate of over 9% p.a. was achieved. During Repelita II (1974/75 to 1978/79), economic activity was fueled by a dramatic /1 Substantially unchanged from the President's Report on the Ulniversity Development Project (No. P-2873-IND), circulated under cover of R80-259, dated August 27, 1980, and approved by the Executive Directors on September 16, 1980.

8 increase in foreign exchange resources resulting from the world commodity boom, the quadrupling of oil prices and expanded public and private foreign capital inflows. Net oil exports increased from $640 million in 1q73 to $4 billion /1 in 1978, which enabled the Government of Indonesia (GOI) expenditure to increase by 20% annually and encouraged a 7% average annual GDP growth rate. Not all sectors have shared in this growth. In particular, the performance of nonextractive exports, with some exceptions, such as coffee and palm oil, has been disappointing; rubber exports, for example, have stagnated since 1971, and manufactured exports are only now giving any indication of sustained growth. In addition, there has been little evidence, despite increased foreign exchange resources, that the post-oil future of the economy has been assured through a broad-based expansion of the industrial sector. Social Developments 5. While there is general agreement that overall growth in the economy - an annual rate of almost 8% over ten years /2 - has been impressive, views diverge on the degree to which the poor have shared in this increased income. The National Household Surveys for 1970 and 1976 indicate that while overall income disparities almost certainly widened between those two dates, there was nevertheless a considerable improvement in the consumption of all income groups, with real consumption expenditure of the bottom 40% of the population probably increasing at between 3.5% and 5.5% annually. Growth in per capita income was generally higher in Java than in the Other Islands and higher in urban than in rural areas. 6. Employment growth has been rapid in the 1970s (an average of 4.7X p.a. between 1971 and 1976, compared with a total population growth of about 2%). However, it is likely that there has been a slight increase in the level of open unemployment due to a greater rate of growth of working age population than of total population and to increased participation rates (50% in September 1971, 55% in October 1976). Most (54%) of the increased employment during this period was absorbed in nonagricultural activities, resulting in a decline in the share of agricultural employment from 66% to 62%. Within the nonagricultural sector, employment increases largely resulted from proliferating small-scale enterprises in the manufacturing and service sectors, where productivity is generally extremely low. 7. GOI-sponsored programs deserve at least part of the credit for many of the major advances of the last decade. In particular, the rice intensification schemes and the public works programs have demonstrated the GOI-s capacity to marshal resources in pursuit of its social goals. Between 1971/72 and 1976/77 real expenditures increased at an annual average rate of 37% on health and family planning, 45% on education, and 31% on housing and water /1 Includes Liquified Natural Gas ($225 million). /2 Gross Domestic Income grew even faster, at about 9.5% p.a., due to improvements in the terms of trade.

9 -3- supply, resulting in the rapid development of social infrastructure. For example, Indonesia's health centers, which totalled 1,058 in 1969, were increased to 4,029 by 1977; between 1973 and 1978, 31,000 primary schools were constructed and primary school enrollment reached about 85% in 1979, up from 60% in Perhaps the most significant achievement of the First and Second Development Plans has been the success of the National Family Planning Program, established in 1970, in reducing the overall population growth rate. Pertility rates have fallen by almost 20% on Java and Bali, where some 37% of married women in the reproductive age group are practicing modern methods of contraception. 8. Despite these advances, however, the magnitude of the poverty problem and the inadequacy of basic public services remain overwhelming. In 1976, an estimated 50 million people, over one-third of Indonesia-s total population, spent less than $90 a year (at 1976 prices and exchange rate) and a large proportion of the labor force was seriously underemployed in both rural and urban areas. Moreover, the continued prevalence of numejrous debilitating diseases, which often stem directly from nutritional deficiencies and unsanitary living conditions, results in extremely low life expectancy at birth and a very high mortality rate. Life expectancy at birth in Indonesia is only 48 years (most recent estimate) compared with 60 years in the Philippines and 67 years in Malaysia. For the same countries, infant mortality rates are respectively 126, 65 and 35 per thousand. Every year in Indonesia approximately 600,000 infants die before attaining the age of one year. These statistics reflect both low incomes and the underlying inadequacy of basic public services. Over 100 million Indonesians remain without access to safe water or sanitary excreta disposal; there are only 6 physicians and 6 nurses per 100,000 of the population; and almost 40% of the adult population are illiterate. Development Strategy in the Nonoil Economy 9. The rehabilitation of infrastructure which has made possible the impressive growth rate over the last decade and which has underpinned past development policy must now give way to a new strategy as the task of rehabilitation is now essentially completed. GOI has recognized this in preparing its Third Development Plan, Repelita III (1979/80 to 1983/84). Three primary goals have been specified: a more equitable distribution of the benefits of growth, a high growth rate, and national stability. High priority must now be given to the industrial sector since neither agriculture nor services can be expected to absorb the large projected increases in the labor force (1.4 million p.a. up to the year 2000) and simultaneously ensure rising real wage rates. 10. The prospects for an outward-looking labor-intensive industrial development have been improved by a number of GOI policy decisions. The most dramatic of these was the devaluation of the rupiah from Rp 415 to Rp 625 per US dollar on November 15, Its purpose was to reverse some of the adverse relative price changes in the economy that had occurred earlier in the decade and thus encourage a shift of resources away from the nontraded goods

10 - 4 - sector towards labor-intensive import substitution and export industries. In support of the aims of Repelita III and the devaluation, GOI has also simplified the investment licensing process and exporting procedures and introduced a system of export certificates - tax rebates - to encourage exporters. A new corporation tax law was promulgated in March 1979 providing greater incentives to entrepreneurs, particularly those in smaller-scale ventures and those using the services of a public accountant. On the monetary side a start has been made in making the commercial banking system more responsive to the needs of small-scale enterprises. 11. A detailed industrial development strategy has not yet been articulated, although the Repelita III document acknowledges that private investment will be relied upon as the primary means of industrial job creation. Despite the improvements outlined above, it is not yet clear that private entrepreneurs will be able or willing to invest sufficiently in those sectors most conducive to job creation and income growth. In particular there are two issues that require urgent attention. First, although some improvements have been made, many entrepreneurs still complain about cumbersome administrative procedures and controls associated with the highly centralized government bureaucracy. Second, the high level of effective protection, which has increased over the last year, may encourage the misallocation of scarce capital and managerial resources. Indonesia's potential for manufactured exports is considerable but it is unlikely that these exports will ever provide the stimulus to growth that has been enjoyed by other smaller East Asian countries. In the medium term it is more likely that Indonesia's "engine of growth' will be its own large domestic market. However, it is important that barriers to trade be reduced in order to provide appropriate market signals and to encourage those sectors in which a genuine comparative advantage exists. The formal tariff structure is probably less significant than the high administrative costs and delays associated with importing. The important improvements made in exporting procedures over the last year have demonstrated that rapid changes can be made in this area. Similar advances on the import side would improve resource allocation by reducing the proliferation of domestic industries that have little prospect of ever attaining international competitiveness. In many countries devaluation has been accompanied by a rationalization of the tariff structure. Although this has not yet occurred in Indonesia, the recent increases in oil revenues have, by substantially increasing foreign exchange reserves, provided an additional opportunity. Short-Run Stability and Long-Run Development 12. Medium-term prospects for the balance of payments and the GOI budget have improved fundamentally in recent months. Three factors - the - devaluation, an improvement in the nonoil terms of trade, and the oil price rise - have been responsible. The effect of the devaluation on the external accounts is still not clear although there is some evidence of significant supply-side response in some sectors. The improvement in the balance of payments that followed immediately after November 1978 was due less to the

11 - 5 - commodities./l As a result, Indonesia achieved an external surplus of over $700 million in 1978/79. Most important, however, has been the increase in the export price of crude oil to $32 a barrel in January This is expected to generate additional oil and liquified natural gas export earnings of $3.1 billion in 1979/80. Budget revenues have also benefitted from these developments. Since over half of the GOI's revenues were denominated in foreign exchange, an immediate effect of the devaluation was to dramatically increase budgetary revenues in terms of rupiah. As a result of the oil price increases, budget revenues from oil and liquified natural gas are predicted to rise from $3.7 billion in 1978/79 to $8.9 billion in 1979/ These favorable developments, while clearly presenting a valuable opportunity to undertake development programs and stimulate private industrial enterprise, may also present serious problems of short-run price and monetary stability. This potential conflict could be seen, for example, in the measures taken by GOI to ameliorate the inflationary effects of the devaluation, which, while successful in keeping prices under control, sometimes tended to counteract the desired effects of the devaluation. Notable here was the tight control exerted over private sector credit creation which may have limited investment in those export sectors that the devaluation was designed to encourage. In addition, the increased foreign exchange revenue presents potentially difficult problems of monetary management. The manner in which Indonesia increases its capacity to absorb imports effectively will be a primary determinant of Indonesia's future growth prospects. Domestic Resource Mobilization and External Capital Flows 14. In the immediate future, the availability of foreign exchange will not be a constraint on development due to the increase in export revenues and the consequent improvement in creditworthiness. (In 1979 Indonesia's debtservice ratio fell from 18% to 16%)./2 In the medium and long run, however, the situation is less clear, due to uncertainty about how quickly Indonesia will be able to absorb its sudden increase in wealth, and because projections of future export revenues remain highly speculative. It is therefore important that increased efforts be made to mobilize domestic financial resources. The GOIs concern with this issue is demonstrated by its stated intention of eliminating budget subsidies on consumer goods. To this end, domestic prices of all oil products were increased by an average of about 40% in April and May 1979, although the budget savings have since been nullified by increases in international prices. On May 1, 1980, GOI therefore raised domestic oil prices by a further 50%, and this partially compensated for increases in international prices of oil. There is considerable scope for improving the nonoil tax base, which accounts for less than 45% of total revenues. For example, taxes on personal and business incomes amount to only 3% of GNP, and /1 The nonoil terms of trade improved by 42% between October 1978 and July /2 Ratio of debt service payments to commodity export earnings, with oil and gas on a net basis.

12 - 6 - taxes on consumption, to 2.5% of GNP. Expanding the tax base, eliminating loopholes, and improving administration are the obvious means of securing a larger and more equitable tax burden. The mobilization of private sector financial resources is hindered at present by the absence of attractive long-term financial instruments, but GOI's encouragement of the fledgling Jakarta Stock Exchange will hopefully result in an important source of domestic funds in the medium term. 15. The Inter-Governmental Group on Indonesia (IGGI) remains the principal source of external capital, including Official Development Assistance (ODA), to the country. The Bank's 1979 basic economic report on Indonesia recommended that total ODA reach at least $1.93 billion in 1979, of which at least 70% should be on concessional and semi-concessional terms. This recommendation was achieved. The Bank-s economic memorandum on Indonesia (dated February 20, 1980) recommended a level of assistance of $2.1 billion for 1980, which would represent no increase in real terms over the recommended and actual amount of ODA for At the meeting of the IGGI in May 1980, the indication of probable commitments in 1980 made by bilateral and multilateral IGGI members amounted to almost this level. 16. In the past selective local cost financing of projects has been recommended since it was estimated that financing only the foreign exchange cost of projects would not suffice to meet Indonesia's long-term capital requirements. Since Indonesia's foreign exchange position has now improved local cost financing will, in the future, be limited to projects of key importance and where such financing is required to ensure a significant Bank contribution. PART II - BANK GROUP OPERATIONS IN INDONESIA /1 17. As of December 31, 1980, Indonesia had received 48 IDA credits totalling $931.8 million, and 53 Bank loans amounting to $3,147.0 million. IFC investments totalled $132.5 million. The share of the Bank Group in Indonesia's total (disbursed) external debt futstanding at the end of 1978 was about 8.3%, and the share of debt service atydut 3.0%. By the end of 1979, these ratios are estimated to have increasecl to around 9.5% and 4.8%, respectively. Annex II contains a summary of IDA credits, Bank loans and IFC investments as of November 30, 1980, as weja. as notes on the execution of ongoing projects. 18. During Repelita I, and in line with the objectives of this First Plan, a high proportion of Bank Group lending was directed toward the rehabilitation of deteriorated infrastructure and production facilities, /1 Substantially unchanged from the President's Report on the University Development Project (No. P-2873-IND), circulated under cover of R80-259, dated August 27, 1980, and approved by the Executive Directors on September 16, 1980.

13 meeting the critical shortage of skilled manpower, and technical assistance needed for preinvestment studies and project execution. As the focus of GOI-s policy shifted during Repelita II towards expansion of productive capacity in the agriculture, transportation and power sectors, as well as improvement in the quality and delivery of basic public services, the thrust of our lending changed to focus on these objectives. Given the critical importance of agriculture (including transmigration) for employment, food security and exports, over one-third of Bank Group-supported projects have been in this sector. In addition, loans and credits have been extended to virtually all other sectors of the economy, including fertilizer production and distribution, transportation, education, urban development, water supply, rural development, nutrition, industrial development financing (including small industry development), power, telecommunications, population and technical assistance. 19. Indonesia is currently in the process of implementing its Third Five-Year Plan, Repelita III. As noted in Part I above, this document, while stressing the need for continued high growth and stability, departs from previous Plans by placing special emphasis on income distribution and poverty alleviation. This focus, which is fully in line with the conclusions of the basic economic report, in turn requires greater attention to employment generation and improvements in basic public services. While GOI's agricultural programs are expected to generate significant employment opportunities, the long-term solution to Indonesia's employment problem is primarily dependent on the articulation and implementation of a coherent labor-intensive industrialization strategy. To support this effort the Bank plans to significantly expand its hitherto modest involvement in this sector. As part of this initiative, an operation designed to support several industrial DFCs through an umbrella institution (most probably Bank Indonesia) is at an advanced stage of preparation, and projects to support export processing zones and wood processing, and to further expand Bank assistance to small-scale enterprises are at various stages of identification and preparation. A comprehensive program of economic work in the industrial sector is underway to provide the necessary understandings and backup for this expanded operation. 20. Outside industry, no major shifts in the balance of Bank lending are expected. Given the importance of rice production, irrigation will continue to absorb a substantial portion of Bank agricultural lending; however, the Bank also plans to take further initiatives to promote secondary food crops. Continued support for provision of basic services (population, education, health, nutrition, urban development and water supply) as well as the traditional sectors (power and transport) is also anticipated. Since it is clear that the achievement of the GOI's employment and equity objectives will become increasingly dependent on the development of appropriate sectoral policy packages and strategies, institutions, and staff development, it is expected that the focus of the above operations will gradually broaden to a subsector and sector approach. The proposed sectoral approach is designed to enable Bank assistance to be responsive to these demands, and to continue its institution-building efforts in a broader context than has been done hitherto.

14 21. Both the Bank and GOI have become increasingly concerned about the level of disbursements, which has shown a declining trend in the past three years. Many of the problems appear to be related to GOI's cumbersome budgetary, procurement and payment procedures, including issuance of tender documents and opening of letters of credit. These problems are further compounded by the severe shortages of both managerial and technical manpower. A number of steps have been taken by GOI and the Bank to address these issues. Several special Bank missions have visited Indonesia to analyze the problems and make recommendations for simplifying budgetary and financial procedures. GOI and the Bank have also instituted formal and regular joint review procedures to identify general and project-specific problems and work out corrective measures. The first of these reviews was held in June 1979, and a second, more comprehensive one, in September In addition, a procurement seminar (planned to be the first of a series) was held in Jakarta in September As a consequence of these joint initiatives, over the past few months GOI announced several measures to streamline the more complex budgetary and financial procedures affecting project implementation. Finally, to reduce initial project implementation difficulties, many operations (this one in particular) are now being presented for Board consideration at a later stage in the project cycle. While it is still too early to assess the effect of these steps on project implementation, the indications are that improvements are now taking place. This was reflected in an increase in disbursements from $206.8 million in FY79 to $277.8 million in FY From 1968 until 1974, all lending to Indonesia was made through IDA. Due to the country's improved creditworthiness following the commodity and oil price boom in 1973/74, the bulk of the Bank Group's subsequent lending has been through IBRD loans, with a modest amount of IDA lending being justified primarily on poverty grounds, as the per capita GNP ($360 in 1978) was well below the IDA cutoff of $625. Given Indonesia's much improved balance of payments position, IDA lending was discontinued in FY The proposed project, which is consistent with the strategy discussed above, constitutes the third lending operation presented to the Executive Directors this fiscal year. Projects involving nucleus estates and smallholders, swamp reclamation and urban development are expected to be ready for presentation in the next several months. PART III - THE ENERGY SECTOR AND ELECTRICITY SUBSECTOR Energy Resources 24. Indonesia is richly endowed with energy resources including oil, natural gas, coal, hydropower and geothermal energy. Petroleum reserves have been exploited for some time, and petroleum now accounts for 90% of total commercial energy consumption. Reserves are estimated at about 50 billion barrels, but proven resources are between billion barrels. With production at around 1.6 million barrels per day, projected increases in domestic demand could rapidly reduce the surplus available for export and

15 - 9 - have serious consequences for the growth of the economy. GOI has therefore adopted a policy of promoting alternative indigenous energy sources for domestic consumption such as coal, hydroelectricity, natural gas and geothermal. 25. The estimated natural gas reserve is about 34 trillion cu ft, of which 5 trillion cu ft represents gas associated with oil production. The present production level is about 80 billion cu ft per year. Pipelines have recently been laid to steel and fertilizer factories and consumption is expected to increase at the rate of 15% per year during the next five years. Export of natural gas in the liquified form has commenced and is expected to grow rapidly. 26. Indonesia's coal reserves are conservatively estimated at 1.2 billion tons, 86% of which are in Sumatra and the balance in Kalimantan. Some estimates place the total reserves at as high as 15.0 billion tons. Production is currently running at about 250,000 tons per year, but in 1940 it reached a peak of 2 million tons. Consistent with GOI policy of increasing the utilization of nonoil energy resources, coal production is now to be expanded. To this end, a major project is being developed at the Bukit Asam field in South Sumatra. This project, which is being considered for Bank financing, would involve production of 3 million tons per year by 1985; most of its output will be used for power generation at the Suralaya thermal station in West Java. 27. The theoretical hydropower potential of the country has been roughly estimated at 31,000 MW. Although the distribution is not ideal (the greatest potential lying in Irian Jaya where electricity demand is smallest, while Java has the greatest demand and least potential), exploitation of this potential to the extent possible is also a central element of GOI energy policy. This proposed project is a major element of this strategy; other hydroelectric projects are under construction in Sumatra and at the planning stage in West and Central Java. While geothermal resources are known to exist in a number of observed fields, stretching from Sumatra to Irian Jaya, the exact extent is not yet known. Development is so far confined to a 30 1W first stage project at Kamojang, Java. 28. The potential for nuclear power generation in Indonesia as a means of oil substitution has been reviewed on a number of occasions; the latest is a recent study by the Italian Nuclear and Electricity Agencies which concludes that introduction of a nuclear power station would be justified by 1989/90. However, the presence of indigenous uranium has not yet been proven and the conclusions of this study are being carefully reviewed by GOI. 29. Besides promoting the exploitation of alternative commercial energy sources, GOI is also exploring possibilities of substituting charcoal for kerosene, particularly in rural areas. Indonesia-s forestry resources

16 are abundant, and since they represent renewable sources of energy, the country could derive considerable savings if appropriate technologies were developed to facilitate the use of firewood for energy. A USAID-funded study is shortly to be launched to shed more light on these and related renewable energy options. Energy Policy 30. The principal agency responsible for the implementation of GOI policies in the energy sector is the Ministry of Mines and Energy (MME). MME was established in 1978 to coordinate all activities in the energy sector and control the state enterprises responsible for the execution of GOI policies in the energy subsectors - oil and gas (PERTAMINA), coal (BATUBARA) and electricity (PLN). Other ministries and agencies are also involved in the sector; for example, Public Works supervises hydropower sources, Agriculture oversees forestry products, and the National Atomic Energy Commission is responsible for nuclear development. In order to ensure appropriate coordination of energy policy the President recently established an inter-ministerial National Energy Board to oversee sectoral development. 31. The general sector objectives expressed in Repelita III may be summarized as follows: (a) diversification of primary energy sources, particularly renewable sources; (b) improving the efficiency of energy conversion and utilization; and (c) expanding research programs. As the available statistics on both energy resources and consumption are limited the Bank Group has funded a number of studies on energy supply and demand: work on electricity demand in Java was financed under Credit 399; hydropower potential is being investigated under Loan 1365; and a sector management information system will be financed under Loan More recently, the Minister of NME asked the Bank to undertake a more comprehensive survey of the energy sector with a view to systematizing the data currently available, identifying the major deficiencies and assisting GOI to determine the best method of proceeding with sector development and policy formulation. It is intended that the sector survey should serve as a vehicle to identify ways in which the Bank may broaden its support for sector development and assist GOI in formulating a total strategy for energy exploitation; an initial mission visited Jakarta in November 1980.

17 Among the issues facing the sector is the system of energy pricing. Subsidized petroleum product prices have caused serious distortions in the economy by failing to reflect the value of these products to the economy as export goods. The effects of this have been to favor the use of oil over other competing fuels, the promotion of domestic consumption over exports, and, because the degree of subsidy between oil products is uneven, the distortion of demand between individual petroleum products. However, in recent discussions with the Bank, GOI has expressed its intention eventually to eliminate these subsidies subject to ensuring the availability of basic needs to the poor. In fact, a major step was taken in this direction in May 1980 when the price of gasoline was increased to the international level. However, while kerosene, diesel fuel and fuel oil prices were also increased, they remain substantially below world market prices. The ElectriTity Subsector 33. The electricity subsector is regulated by the MME through its Directorate General of Electric Power. The subsector comprises (i) PLN (discussed below in detail), (ii) captive plants installed by private parties for their own use, (iii) small municipal franchises, and (iv) a small number of cooperatives which were set up to provide electricity in remote rural areas. 34. PLN Backgtound. PLN is a public corporation (Perum) constituted under Presidential Decree No. 18 of 1972, with responsibility for the generation, transmission and distribution of electricity and the planning, construction and operation of electricity supply facilities. Until 1979 these responsibilities were exclusive to PLN, but in that year, with the objective of facilitating the exploitation of electric power, GOI enacted legislation allowing the intervention of private entities and cooperatives in the sector under license from MME; thus far, no such entities have been so licensed. 35. PLN is managed by a board of directors headed by a president director, who is appointed by the President and is accountable to the Minister of MME. The president director has authority for all day-to-day operations of PLN. The board currently comprises five other directors with functional responsibility for planning, construction, operations, finance and administration. 36. As PLN has experienced rapid growth since its organization structure and management systems were established in the early seventies, these have recently been subjected to a management audit sponsored by PLN. In this management audit, a large number of recommendations for improvement of PLN operations were developed. In response, the president director set up a working party to review these recommendations in detail; subsequently, a

18 number have been implemented. The next major management development in PLN is likely to involve increased decentralization of responsibility, so as to strengthen regional and construction management and avoid the risk of headquarters becoming a bottleneck as the corporation grows. Steps towards greater regional involvement in facilities planning were taken during the 1981 planning cycle, and a series of management development courses has been initiated specifically for regional and branch managers. Extension of the decentralization policy to regional operation and construction units must naturally be undertaken slowly and carefully; to some extent it will be dependent on the introduction of improved and restructured information systems. 37. PLN's Market. Past records on PLN's market are limited to PLN's sales which, because of the very low levels of consumption and the severe restrictions and interruptions affecting service, reflect PLN's ability to meet supply rather than potential demand. A study to assess potential demand in Java was undertaken in by consultants financed under an early power project (Credit 399); this is currently used by PLN as the basis for investment planning in Java. It suggests that PLN's sales growth will be limited only by its own ability to supply until about 1986, when full market penetration will be achieved; thereafter, sales growth in Java will be delimited by growth of the market itself. Similar studies are currently in progress in Bali and Sulawesi, and one is planned for Sumatra. Thus, while market size is unlikely to be a constraint on growth within the lead times of the facilities PLN is currently beginning to construct, PLN must take steps to ensure that its future investment decisions are based on sound market knowledge. To this end it has been agreed GOI will provide energy resource data and policy guidelines to be used in establishing future power demand (Section 4.03 of the draft Loan Agreement) and that PLN will improve the capability of its power market survey units at Central (Pusat) and Regional (Wilayah) levels (Section 3.04 of the draft Project Agreement). 38. PLN has recently developed in-house capability for carrying out least-cost generation planning studies with computer modelling and this has been employed to arrive at the development plan for Java, which is expected to continue to account for about 80% of PLN's electricity sales through the s. GOI has agreed, through PLN, to review annually with the Bank change in demand growth in Java and consequent variations in PLN's development program there, and take steps to implement such a program (Section 4.02(a) of the draft Loan Agreement). Planning for the Other Islands, which typically require much smaller generating units because of their geographic dispersal, is carried out by less sophisticated methods. It was agreed that PLN will improve the capability of its central system planning unit to identify emerging bottlenecks, and ensure that power systems remain adequate as demand escalates (Section 3.04 (ii) of the draft Project Agreement). 39. Existing PLN Facilities. Until the early seventies, the expansion of PLN-s facilities was constrained by the foreign exchange shortages Indonesia faced. Accordingly, a crash program of development was instituted which resulted in gas turbines being preferred; these still comprise about

19 % of the total capacity. However, this imbalance in plant is being corrected; as part of its present program, 1,000 MW of new steam capacity will be commissioned by PLN by 1982 and a number of hydroelectric projects are under implementation. 40. PLN also operates over 4,000 km of transmission lines at 70 and 150 kv and about 45,000 km of distribution lines, the bulk of which are in Java. About 2,000 km of 150 kv transmission lines under construction are scheduled for completion by 1982; Java will have a fully interconnected grid at 150 kv by A 500 kv system covering West and Central Java will be commissioned by 1984 and extended throughout Java thereafter. 41. PLN's Development Plan. PLN follows the practice of preparing annually a ten-year development plan to cover the projected requirements of generation, transmission, distribution and other facilities. GOI has agreed through PLN to review annually with the Bank PLN's investment program for the next year (Section 4.02(b) of the draft Loan Agreement). The latest plan covers the development period FY81 to FY90. It has been formulated on the basis of the following objectives: (a) optimize domestic resource utilization by substituting use of oil by coal, hydro and geothermal resources for power generation and by reducing the use of fuel-inefficient installations; (b) realize economies of scale through larger sized installations; (c) achieve operational economy by coordinating the utilization of plants through interconnected operations; and (d) achieve and maintain acceptable standards of reliability of supply. 42. On the basis of the present knowledge of the market, the overall rate of growth of sales envisaged in PLN's plan is an average of 22% per year through 1983, falling to 16% by One condition for achieving these targets will be PLN's ability to implement an adequate connection program. To address this PLN has agreed to prepare and furnish to the Bank for its review its annual consumer connection program and thereafter implement it in a satisfactory manner (Section 2.10 of the draft Project Agreement). 43. PLN's development plan shows generating capacity increasing from 2,500 MW to over 9,300 MW by the end of the decade. The greatest part of the increase (4,300 MW) will be in the form of thermal plants; by 1990 they will contribute over half the generating capacity and all of those to be planned from now on will be coal-fired. New hydroelectric plants will add 1,500 MW, over 20%, of the additional capacity. Together with associated transmission and distribution facilities, the plan is estimated (at constant 1979 prices) to cost a total of $11 billion for the decade, of which $7 billion would be in foreign exchange.

20 PLN's Financial Results. PLN operated at or near breakeven in net income terms for four years through FY79 (ended March 31, 1979). A loss of Rp 22 billion reported for FY80 (subject to audit) is attributable to increased depreciation charges arising from a revaluation of assets carried out during that year. PLN's investment program began to accelerate rapidly in 1974/75 and by FY80 capital expenditure was running at over Rp 300 billion annually - more than twice sales revenue. With negligible net earnings, PLN's only sources of internal funds have been depreciation retentions and customers' connection fees, which amounted to 17% of capital expenditures over the last five years. GOI provided the rest of the funds required, mainly in the form of equity capital, though recently the onlending of funds from international lenders has formed an increasing proportion of GOI funding to PLN. PLN has agreed under past power projects that it would attain by FY86 a level of contribution to its investment program from internally generated funds of not less than 30% (this implies a rate of return on revalued assets of approximately 8%); this contribution target has been reconfirmed by PLN (Section 4.04 of the draft Project Agreement). Indicative target levels of contribution for the intervening years have also been adopted: 12% for FY81-FY82, 20% for FY83-FY84, and 25% for FY85. PLN achieved its indicative target in FY80, and on the basis of existing tariffs, is forecast to do so in FY81 and FY82. Attainment of the indicative targets for FY83 through FY85, and the covenanted level for FY86 and beyond, will call for a further tariff increase in due time. Since loan financing is a relatively recent innovation for PLN, its debt:equity ratio stands at the conservative level of 12:88. The current ratio is 4.3, and with assets including Rp 70 billion in cash, the company's liquid position is satisfactory. It has been agreed that PLN will maintain a debt:equity ratio of 60:40 or below and a debt service coverage of 1.3 (Sections 4.05 and 4.06(a) of the draft Project Agreement). 45. PLN's tariffs remained unchanged from FY76 until May 1, 1980 when a new tariff structure was introduced with the objective of better reflecting the long-run marginal costs of supply to various consumer groups. At the same time rates were revised upward, resulting in an increase in the average revenue for kwh from Rp 27 to Rp 42 (57%). In addition, the existing fuel cost surcharge was widened to allow all actual cost increases to be passed on to consumers. One problem which has affected PLN's financial performance has been the collection of bills from GOI departments and agencies. To address this, it has been agreed that all GOI bills will be paid by the 15th of each month and that by March 31, 1982, all GOI accounts will be current (Section 3.03 of the draft Loan Agreement). 46. PLN's Performance Under Previous Bank Group Lending. The Bank has provided $889 million through nine different loans and credits for power generation/distribution facilities in and around Jakarta and in West and Central Java. Specifically, three distribution projects (Credits 165 and 334, and Loan 1259) have been approved for the rehabilitation and expansion of the distribution facilities in the greater Jakarta area and six power generation projects (Credit 399, and Loans 1127, 1365, 1513, 1708 and 1872) in West and Central Java have been undertaken to help PLN expand the Java

21 network. Past loans and credits also provided funds for various consulting services for management studies, demand studies and feasibility studies. 47. Out of the nine projects four have been completed, two are nearing completion, and three are in the early stages of construction. PLN's performance in implementing these projects has been uneven but is now improving. The earlier distribution projects (Credits 165 and 334) were completed more than three years behind schedule. A Project Performance Audit Report on these two projects, which was issued in November 1979, concluded that despite the delay in project completion (which in large measure was attributed to the unfamiliarity of the Bank and the borrower/ beneficiary with each other's procedures) the projects had a significant beneficial impact on the beneficiary's administration and that the projects were sound, with advantages for power supply reliability and voltage stability. In generation, the earliest project (Credit 399) covering the first and second units at Muara Karang was completed about two years late; the next (Loan 1127) for the third unit, less than one year late. Subsequent generation projects at Muara Karang (Loan 1365) and Semarang (Loan 1513) are about 4-6 months behind appraisal schedule; two projects at Suralaya (Loans 1708 and 1872), although still at an early stage, are more or less on schedule. Presently, ongoing projects are free of major problems. 48. There are other quantitative indications of PLN's steady improvement in performance. Its system losses, as high as 27% on FY75, was down to 25% during FY79 and was less than 22% in FY80. The generation (MWHI) per employee increased from 240 in FY75 to about 340 during FY80. There is however still scope for improvement. > PART IV - THE PROJECT 49. The Saguling hydroelectric project was identified in the Java System Development Study carried out by Preece, Cardew and Rider, UV, in ; this work was funded under Credit 399. The feasibility study was undertaken by New Japan Engineering Consultants (Newjec), who have also been entrusted with detailed engineering and preparation of bid documents. A Bank mission appraised the project in September 1980, and negotiations were held in Washington in January 1981; the Indonesian delegation was led by Dr. Samaun Samadikun, Director General Power, MME. Supplementary data are in Annex III. The Staff Appraisal Report (No IND) is being circulated separately to the Executive Directors. Project Objectives 50. The project would provide 700 MW of generating capacity in Java, where electric power consumption is increasing rapidly and where additional facilities are vitally necessary to support economic growth. The project will also assist GOI's policy of economizing in the consumption of domestic oil by maximizing the use of renewable primary energy sources (paras. 24 and 31 above). At commissioning, Saguling would be the biggest hydroelectric power station in Indonesia and would increase PLN's hydropower generating capacity by over 50%. It is on the least-cost path of electric power development for Java.

22 Project Description 51. The project comprises: (a) the 700 MW Saguling hydroelectric power facility, including construction of a 97.5 m high rockfill storage dam on the Citarum river; a 6.5 km long water conductor system comprising tunnels, surgetanks, and penstocks; and a power station (with four generating sets, each rated at 175 MW), with an associated 500 kv step-up substation; (b) equipment for a PLN construction task force to ensure that the construction schedule of the main project is not adversely affected by delays. The required construction equipment is estimated to cost about $500,000; (c) detailed engineering of the Cirata hydroelectric project. PLN-s latest update of studies of the least-cost development sequence for Java indicated that the Cirata site -- on the Citarum river downstream of Saguling -- should be developed for hydroelectric power generation, with commissioning during 1986/87. Feasibility investigations of the site financed through Loan 1365 (Power VI project) are in progress and the draft report which was recently reviewed by Bank staff indicates that the project is technically, financially and economically viable. PLN intends to carry through with detailed design and engineering for this project and this proposed loan includes $7.5 million for the purpose; and (d) consultancy services to assist PLN with: (i) power market surveys; (ii) power system analysis; and (iii) civil works contract management.

23 Implementation 52. The project will be implemented by PLN. PLN has appointed a project manager who has experience in dam construction in Indonesia, along with an adequate complement of field staff. The project manager will be assisted by PLN's headquarters staff, who also have some experience in execution of smaller hydroelectric projects. However, as this.-- I be the first major dam contract which PLN will be involved in, it feels that expert assistance may be required on occasion during the implementation period; funds are accordingly provided under the loan for the engagement of such experts. The construction organization and arrangements proposed are appropriate for the nature of work involved. 53. Newjec is the consulting engineer and is responsible for design and construction supervision of the project. In addition, a Special Board of Consultants (SBC) was appointed early in 1978 to review the investigations and designs of the project and ensure that due consideration was given to all aspects involving safety of the structures. It has been agreed with PLN that the SBC will continue its monitoring throughout the construction stage. The appointments of Newjec and the SBC members were made by PLN, in consultation with the Bank. Consultants, including SBC, will continue to be employed under terms and conditions satisfactory to the Bank (Section 2.02 of the draft Project Agreement). 54. Detailed engineering of the project was completed during mid Final designs, including proposals for instrumentation, have been prepared and incorporated in bid documents for the main civil works (comprising the dam, water-conductor system, penstocks, power house and switchyards) which were issued on August 1, The final desians, as well as the bid documents have been reviewed by the SBC. The following preparatory works of the project are now in various stages of implementation: (a) construction of about 34 km of access roads, improvement and upgrading of about 17 km of existing roads, and two main construction camps; and (b) relocation of about 8 km of roads and construction of three new bridges. The target is to commission the first two generating sets by March 1985 and the remaining two during September The construction program is tight but capable of being achieved. Crucial to its success is the awarding of the main civil works contract in time to enable the main contractor to mobilize and start work on the diversion tunnels for the main dam by July 1, A failure to achieve this date would set back completion of the dam, and hence the commissioning of the project, by a whole year. Cognisant of the problem, PLN and GOI have reviewed their procedures and prepared a detailed working arrangement involving special procedures for bid evaluation and approval of the main civil works contracts, which, if adhered to, could meet the project requirements. After commissioning of the project, periodic inspection and regular maintenance of the works will be essential; at negotiations, PLN undertook to prepare such a program satisfactory to the Bank, and to implement it throughout the operational period of the project (Sections 2.08 (a) and 2.09 of the draft Project Agreement).

24 Costs and Financing 55. Total project costs are estimated at $726.7 million, of which $386.6 (53%) is in foreign exchange. These costs include taxes totalling 5% of the local expenditures for civil works. Physical contingencies have been provided for at 5% for electrical and mechanical equipment, at 10% for penstocks and other metal works, and at 15% for civil works. Base prices are at September 1979 price levels. Price contingencies on the local currency portion have been estimated at 15% for FY80/81 and 10% thereafter. For electrical and mechanical equipment and engineering costs, (all OECFfinanced), foreign escalation has been based on an annual rate of 5%, reflecting the expected rate in Japan. Other foreign costs have been calculated at the following rates: 10.5% for FY80; 9.0% for FY81; 8.0% for FY82; 7.0% for and 6.0% for The cost estimate for engineering of the Saguling Project covers 740 man-months for construction design and 1,100 man-months for supervision of construction. The average man-month cost, including basic salary, overhead and fee, international travel, overseas allowance for resident field engineers and subsistence allowances for staff on short field visits, is about $11,000. Detailed engineering for the Cirata hydroelectric project covers the work up to preparation of bid documents, and is expected to take 20 months, involving about 500 man-months of expatriate effort, at an average man-month cost of $10, The proposed Bank loan of $250 million will finance 65% of foreign exchange costs, and will be allocated to the estimated foreign costs of the main civil works and penstocks, engineering of Cirata hydroelectric project, selected consulting services, and PLN construction equipment. The loan from OECF of $136.6 million would finance 35% of foreign exchange costs, covering the estimated foreign costs of the engineering and construction supervision of the project and the electrical, mechanical and hydraulic equipment. GOI and PLN would provide the remaining $340.1 million, all local costs. 58. As in previous operations, the proposed Bank loan would be to the GOI which will onlend the proceeds to PLN on terms equivalent to those of the Bank loan; the foreign exchange risk will be borne by GOI. Interest and commitment charges during the grace period of the loan would be capitalized and financed by GOI/PLN. Signing of the Subsidiary Loan Agreement will be a condition of loan effectiveness (Section 6.01 of the draft Loan Agreement). Procurement and Disbursement 59. Procurement of items to be financed under the proposed Bank loan would be through international competitive bidding in accordance with Bank guidelines. The civil and metal works bidders were prequalified by PLN, after due international notification, in consultation with the Bank. The items to be financed under the OECF loan would be procured through limited

25 bidding in Japan and less developed countries. Other local costs items would be procured, as hitherto, through local bidding procedures, which have been found to be appropriate. 60. The proposed Bank loan will be disbursed against the following items: (a) metal works - 100% of the foreign expenditures; (b) civil works - 61% of expenditures, (c) construction equipment - 100% of foreign expenditures for directly imported goods, 95% of the ex-factory cost for locally manufactured goods and 65% of the expenditures for imported goods procured locally; and (d) consultants services - 100% of expenditures. No disbursements will be made for expenditures prior to loan signing. Benefits and Risks 61. Projecting existing tariffs currently paid by the consumers to be served as a reflection of benefits (and assuming they will remain constant in real terms), the economic rate of return to the project is 16%. The project would, in addition to the benefit of power generation at Saguling, afford downstream benefits for further power generation (as at Cirata and Rajamandala sites); these have not been evaluated. The return of the project would be reduced to about 14% if there is a delay in construction of one year combined with a cost increase of about 10%. 62. The risks associated with the proposed project are the uncertainties inherent in most hydroelectric projects, such as possible geological problems, hydrological complexities, and similar matters. However, the thorough and competent preparatory work undertaken by PLN and consultants, as well as the precautions taken in establishing the SBC right from the stage of feasibility studies through detailed engineering, are expected to keep the risks to a minimum. Contractors have been directed to provide for conventional all-risk insurance as a separate item in their bids. Environmental and Ecological Impact 63. Environmental aspects have been given due consideration from the initiation of project investigations in There has been extensive involvement of environmental specialists both from Indonesia and abroad in baseline and impact studies, design, and implementation planning. The cooperation of project management and local leaders has been commendable: local leaders have supported the project by issuing five decrees to facilitate land acquisition, resettlement planning and resettlement implementation. In June 1980, the Minister for Environment cleared the project for construction. 64. Compensation and resettlement of persons with homes or other major interest in the reservoir areas was the most serious environmental problem confronting the project. To resolve it, the following measures have been taken: (a) a two-year anthropological, socio-economic, and ecological baseline and impact study (including censuses and property inventories) has been completed; (b) alternatives to transmigration have been developed, scheduled

26 and evaluated; (c) decrees freezing land transactions, creating a Resettlement Coordinating Board, stating resettlement policy, and creating the resettlement implementation team have been issued and are now in effect; and (d) a direct-payment compensation system has been in satisfactory operation for more than a year. In addition, the problem of optimizing the high water level of the reservoir and its design life, public health impacts, aquatic weed control, fisheries enhancement and drawdown agriculture were the main ecological issues; all of these have been the subject of investigation, and satisfactory arrangements to regulate each have been made. PART V - LEGAL INSTRUMENTS AND AUTHORITY 65. The draft Loan Agreement between the Republic of Indonesia and the Bank, the draft Project Agreement between the Bank and PLN, and the report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement are being distributed to the Executive Directors separately. 66. In addition to the special features of the Loan and Project Agreements which are referred to in Section III of Annex III, an additional condition of effectiveness of the Loan (para. 58 above) includes that the Subsidiary Loan Agreement has been signed on behalf of the Borrower and PLN. 67. T am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 68. I recommend that the Executive Directors approve the proposed loan Robert S. McNamara President Attachments February 3, 1981 Washington, D.C.

27 -21 ANNEX I Page 1 of 5 pages INDONESIA - SOCIAL INDICATORS DATA SHEET INDONESIA REFERENCE GROUPS (WEIGHTED AIERAGES LAND AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE)- TOTAL MOST RECENT LOW INCOME MIDDLE INCOME AGRICULTURAL lb 1970 /b ESTIMATE lb ASIA & PACIFIC ASIA & PACIFIC GNP PER CAPITA (US$) ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) URBAN POPULATION (PERCENT OF TOTAL) POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) STATIONARY POPULATION (MILLIONS) YEAR STATIONARY POPULATION IS REACHED 2155 POPULATION DENSITY PER SQ. KM PER SQ. EM. AGRICULTURAL LAND POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS YRS YRS. AND ABOVE POPULATION GROWTH RATE (PERCENT) TOTAL URBAN CRUDE BIRTH RATE (PER THOUSAND) CRUDE DEATH RATE (PER THOUSAND) GROSS REPRODUCTION RATE FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) USERS (PERCENT OF MARRIED WOMEN) * FOOD AND NUTRITION INDEX OP FOOD PRODUCTION PER CAPITA ( ) PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) PROTEINS (GRAMS PER DAY) OF WHICH ANIMAL AND PULSE CHILD (AGES 1-4) MORTALITY RATE HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) INFANT MORTALITY RATE (PER THOUSAND) ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL URBAN RURAL ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL URBAN RURAL POPULATION PER PHYSICIAN /c POPULATION PER NURSING PERSON POPULATION PER HOSPITAL BED TOTAL URBAN RURAL ADMISSIONS PER HOSPITAL BED HOUS ING AVERAGE SIZE OF HOUSEHOLD TOTAL URBAN RURAL AVERAGE NUMBER OF PERSONS PER ROOM TOTAL URBAN RURAL ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL.... URBAN.... RURAL.... * Estimate for 1979 is 27%.

28 ANNEX I Page 2 of 5 pages INDONESIA - SOCIAL INDICATORS DATA SHEET INDONESIA REFERENCE GROUPS (WEIGHTED A ER.AGES - OST RECENT ESTIMATE)- MOST RECENT LOW INCOME MIDDLE INCOME 1960 /'b 1970 /b ESTIMATE /b ASIA & PACIFIC ASIA & PACIFIC 7DZCAT MUM ADJUSTED ENROL;!ENT RAI-25 7R;"ART: TOTAL tale EE!LALE second2auy: IOTA. 6.0.L MALE ; FEMALE 'OCATIONAL ENROL. (5 OF SECONDARY) ,7 P''PIL-TEACHUR -ATIC PENM'ARY SECCNDARY ADULT Ll.ERACY RATE (PERCENT) CONSUMPTION PASSENGER CARS PER THOUSAND PCPULATION RADIO RECEIVERS PER THOUSAND POPULATION rv RECEIVERS?ER T!IOSAND POPULATION UNE'OSPRPER ("DAILY GENERAL INTEREST") CIRCDLATION PER THRLNAAD POPULATION CINEMA ANNUAL ATTENDANCE PER CAPITA 'ABOR FORCE TOTAL LABOR FORCE (THOUSANDS) FEMIALE (PERCENT) A5RTCULTURE (PERCENT) L.9 INDUSTRY (PERCENT) PAgTICIPAT'ON RATE (PERCENT) TOT'.L M!ALE S.5 FE!fALE ECONOMIC DEPENDENCY RATIO I.1 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS /d HIGhEST 20 PERCENT OF HOUSEHOLDS LOWEST 20 PERCENT OF HOUSEHOLDS d LOWEST 40 PERCENT OF HOUSEHOLDS ;. TOVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (USi PER CAPITA) URBAN /e RLRAL ESTIMfATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN..., /e RURAL ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN RURAL Not available Not applicadle. NOTES 'a The group averages for each indicator are population-weighted arithmetic meaas. Coverage of councries -nortg tne indicators depends on availability of data and is not uniform. /b Unvoss othereise roted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for M..t Recent Estomate, between 1974 and c 962; *d Income recipients; /e lost recent esti.mate of GNP per capita is for 1979, all other data are as of April, October, 1980

29 ANNEX I -23- Page 3of 5pages DEFINITIONi OF SOCIAL INDICATORtS Notjes:~ Al:1 f thndat rw fo ore esrlylde the ma aitboniarive oodj relible,_it shouldalso be noted that they nay sllt be internatioal occleocacftn ako nadnia dnl'tinioton andcnepesd...differet by custiie LIn n_loiag the data. The data are.. nne-. thelos, I1 no,t eucott ordai ol ag-touda, taditate trendn,..ad ohueacarlae- -tercal njor differnces bste-ennnust.rict.. of th0e aciuco anotfo lpta opc il ioyaat ", grop where "filddla Ioone fi-rh Africa and MIddle East" iteh.nen because of rae uncl-culin al ufinclua IctIc ctor-nno goon data the averges are popuilaion seigbced aefe sbidctrad -r.hei shun nllysbena 1-aa half f0 the ans nao'u -ue has duta don that indiut. S nc the rover.i of Itc...ies onen the lndtoas... depends sn the -avilability vf duno iu uc ad aniops. catuvi oust bocooreised inrla-.ingaeae fseidctr to anoher Theu. aveage are Iaty u-fuy in cuepaning the value of veidcatot a ta Inoas thn... uetny and refereace ges-pa. tanl AREA 'ihousod sq.n-f Ona in o elpnena-npaitabaiedb.sme ne peactionag phy- Tn-u - toca -aftfaara coup 1t-glad area and inlan-d enters, sinless qualified iron a edioul -nh-l at uotveestty lvl A -Inut raol - uti-,t of ugrln-lturl aeea used temporarily or pe-maeotiy ouaincnbeigprv Pepuletlan dis,ided by number of pvscticing duf r0 arcu,oretaddtce gadetr toiio fallow; 1977 data, sale and feaale graduatenus, pneclot ar- s Ied aasisr-tnus. Ponlstenrepfsaitl ad ttal uhsn ad raral -Popalatiea( fital, INP PERt PAPlT ff51 - GNP -r capita eaclstea at n crret market price, cal- urban, and rura) divided by their reapeetive s-ber of hepits1 beds ctlaedt tun c-_vni-t crotbo as dock Bank Atlaa ( bueta); 1960,.. oilable is public and peiv-te geseeal and speniali-ed hoepita1 and en- Elf. avl 1919 data. hah~~~~~~~.ilitatin.otera. fisepitale are ostablishnast penmanetly taf ad ELIRGI GOTTA CN~111TTIII A- P~ rgy.. l by an. le.a..n phyel.i.- fentsbiishmatm providing pisoipally _atudisi ElIfif COBAJBfPTIOI Pci CAPIA - Annua cosuptioofterilnrg (ca care are net ino1aded. Rural heepitais, b--ec, ino1ade health andmima ca ir It,puona, trlgnuan hydo- nu..a.r.ed ge.thernl ei-- ceters. sac pe setly stahffed byio phyiclis (hut by a medinalaesietent, unciy I. togsn f of qovlen e n pn;io,i1970, anl Iuff nuse mdwif, etn. wio offer n-phtient -caedatia aed proid data. l~~~~~~~~~imited rasge ef ed-los co Ftes.eas. isia tpoepae aeb_ heept- POPIIIATIPI.1150yIIdl. IOAIITICShospitl loam 1 or oral baspiala1 sd eina and -matrituy amea y10lpc 1.latloo,Oiid-'iap (niliuna) -As If Joly 1; 1960, 1970, and 1978 Adaisalun Pee H.Ifoe.1a Bed - Tnnst na1 a ofb adaissiaa no ar discharges data. fl.n hospttala divided by she samber of beds. Urban u lo (errtu oa)- Ratia of urban to total population; diffarcut defun1ti-un If nob- asarasny affect numpabsility of data HOUSING onuiaere;1960, 1970, oud 1976 data. A-e... lies of noumhold(eus eetoard -.tosla urhan. endessi Poyslatioc Profecilnus ~~A house.hold n-nisem. ofsgnpof Iidiiuash har livin quarters Populininalu yer00o - Curreoc papulatios pnojnr-iutm arm based Is 1980 safhi oe el.ahare rlde nay Ie ma rst ha innilded ia Fcte> toa ooainby ag.ad.e..d her o taiy.and fetlyeara.. the h..sebeld fur etatistinal purposes. Pnn)ecttu psroneara for oniuhia rae npriaao hc eesaaa vrs ubroyrvsprss Fsi uban, and rural - dooregeu.. atir eo.rus also ban Ithe leel asnuin dentlineto asouidpra Pahcoir sta assbignet on ofele ieonhnlon rmotl Cen antiaanal,.. dweligswih beeoe..t in. liig. aocorllat trends lfur ~. biilioth p.n..i.pspna.o tnl,ubn,ad aa dallingr npolep huntiocaropnrulatio-inanlatinory pepuactpe theey 1 D.eIgovaalllan ur.r.s atg m"lno una-co -thisi -is ach.ee.ol after feii p- ese danline te adutdielletrt theceis dien lve uf uit- net. re.du.tia ~fll ae l.i hnec genr le rimary anbuo - totl saean 1ehl - tcostan1, mtale sad fmi Ealhcote-0 the h..si.s of g ethe frtjhe.. osai-seistiatof tb rrlatlos piar non-g (ppatis;nelyinadahleaagdbi itioya- 7f,adtert of eclne fyertlit ste o rplnt-yeas un_dtue_ far difisrest lengths -tel pioy. eaats a east level. teb thiversah ldtnaioaleneellathn oolnteiee ma..emceed.1sfcpercen Tear citln-ry npthiin ia -eanhad -I Telay f- when iatiy scey ppolatie st areson puil Halfblaupaoenefiilsa lae aleo boa been macbed. Secoedar~~Pri-y school - natal, male ad female - Ctapalted a shone seoeadar Io s Ie ho i-erpplno it~f -Y.- e sqar bt-ilmetry f 101 bciaras of prnida g natiarsa. gel or tearhee rai.a pisatesoten If ora pupi 6dyat) andy. n000ired (65 yers n oar)1-i an penare of sidpea pupa denlto asdeatnt orif.seaadt lai_n 1960 iseinthifpisned. 190 e 90da ti.;f uu-ene ai ema.adsnnuy-tnl uet noldi Crudailc tisre,. (per ainsnd -. Aaelh liv. eabrths.pe thussa..d at scpi.id-yihne-r r- CdelohBat pea rhaad ema atsprthaedori-pe esae Cas(e aoaa p ei- opit:1j atia). tl Pases eeiarsoers oa popultina so data lof0. nna seaing esa_ha sigh pe -s.as;annlade enlnns hearse an.d. moss rprodotlueiateanaran numer o dasgteesaoaaewill anead mil tar..ehiqalee.atl.,fi.r.p.ydp-y bee kotsa reprdaotlv parsedtit she eqsimosprsntseapoi.t (0 h..r. ic Radio_iaeeo doer thousan... oav)-l npsofrosvrafr s sii an; anl Ieyererae ada s16,-9o n 97 hc dittssgrerl.bi.pe hhuandtofpopuai.tion; i...lode unli-3 PeiyPAnen ca ra, Anua Chblusands 0-1 yasal nubra atn Elised reeier In neies mad I per we 'agstiom of titdia e of devicea bircl-nuntal uder anspiass f nacienal fmily plannin pe..e. walnefn;dtafrrrs ee mynonr he comparable pinue ml.ast P.m. Ui hld-theratigae (I1--44 yesrm -b ass.. S-hirbnenal. dnvf tot id- pieneivmrs leervnasdeoolsdaa)d- d.l by receiver Ifo b-troadcstha allt nocie wf mes1in0a6 n age-70 grd190ap.. gaea purb..tign pee I tie 1med.1po ppslsti t; unldee aoinsadt'rael. "Id. th... Bi,th d) Rate - A... (p- aorer irnuatiei(pershossndtenulptrs)thbhow theaveraedcicuit prndncito nf all0 food, cumd197ia a. Prdaia nlue ed a ae e insindntdpiaiyn snfiggsrlnw.i scniee i Dtnr Ralendar r boom. thna -OA..dI idmnahm priaryt.. goads (e.g.. larea r"ail"ifi C appears ppleati) at- fea limes. a. weak patpsaaliarnag prda960 nraweghs;191-7,190 utd 1970dtdata...aud moie sen...t-egtpr..-1d hr. POrna.. tr aue y of calrtee (perent If rdsuireanrs) - iclpbtad inns.y-h.l he--iyquvant of net fod eipf asanih. l P inpri cutsnry parrnit if ladi POtRh.Al ' f" r f -j tiplnn.todoane n tc. anerageppl.ig B-- eucd animal fe7 d, 197ebdnnes sed, amd andt unemptlepd batheala ding bosanwl.ior students etc.- F oacdtly ordin.. modytr, pr.. 1(h od.iasas...r..ng In iarbat Ifn...qtira- Befsioa.. int vlnos neenri.e aed Lyeat. neaprabie; 1960, 197 sadi. Ifct estimted dsine A... pi.ed phyriootna If nnedy far. anemalat-. loib dat.ifft;dr l -y. -y-bi--t _iyuc eat osidnn envirnb-nnalnumparnurb,hvd wedights age P-tmalo (raronani fml as - aea pvao...tage of ota blahar. tac and tooi. ditlsuao uplra,adaligi enn farwasr agagicutur.(prtet)h.. b.. fd e nfrig aeny otn n F aoaoad ecor rninfrn a ar rti cneto e ianita ITdITapN (nerceni -. leabr. f. rns in tnin. cnti na,f. Lanuifonri net sopply of fond doy. imtr esn apyo 01~ edinl-difid an,pite, B-I an el nciny. asterl sndl gasl Id Pperentagad adh tetllao fvarna; lobalnacof if grams af total prt al endy n 1 ras9faioa and pariifac ae(eet oa,mi,an feae-ie islao pulee P fwic "oas, 10 P"d"t"' IPrld..ti.. gras should,,bed anymal.pentetn..- d Tb -d mae feel stand-% all li~atitityreneatanopuedl t an.tonal, male, oud labo tfemle fread ard ur yeartustur ofi. PTd gram of tria potei ad: 7 gra, f 'fa... t, pnetde b oif nitl mal andfeal pf sainofalaenepcley uinal. I.cgtlaa anit sarge fedi the wodnld,t pnpnse by PA in the Ibi 'i- 196,.100 Antd 1975 dana t.tee an a spattiptihnrttesrflnt... World.. fund Survey; , 1070 tau 191O5P data... 17O,d.bi.-i. e lut.faes -A h.nraiit ttanl.jpyritsueppdf - Annual. d-unbl peerlhuasmd. is Icth nlbae pfae afmf-ttit-a ratf. no nhlldrtnrin.thistage grasp furinest de_e_eiiagdnose crie lie doa intue tolet icu 191, 170 nd 177 ata.tocdsiiliti..ibf IOa..- ra7 l - -l;16,t t,hnfpcoc it yas Anenge. ntapen of yer dy life tremaiige F-prcnt nioas 12 perbet pfrlet 70 perc...t,g and poores A. peenant a tiei: 196, 107 andihi g duna,.brf 6, 90.d178d.. ofaer pe hsn aa inn i ipamrd bolt P anaci f-noe Leve 110$ ter utital - urban nd ua pe _ectgi of " the -rrepaifive psoltionper dan us urba area apuli iurerelation paverny-moans level -In.on-thid fci snrg per napp.ita foota- Inrno hpu thlucnrednetnbr1dtsu 7sf menpraftua-hbua maple petaaitmef - dcaur. Thnlvla eiedrsbe isall- huh tco nsl- toal or5 n sad rinf f.. served by a1enretedfel,,l vfituu aot rr wsewtriire-ot yim or th asspoithey190 ptu susilar inn cira end ;uassllaitcns. ~H-- f - '_: PP"". :f

30 A 24 - ANNEX I Page 4 of 5 pages ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1978 ja ANNUAL RATE OF GROWTH (%, constant prices) US$ Mln % GNP at Mfarket Prices 47, Gross Domestic Investment 10, Gross National Saving 9, Current Account Balance -1, Exports of Goods, NFS 10, Imports of Goods, lifs 9, OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1976 Value Added Labor Force /b V.A. Per Worker US$ Mln % Mln % US$ % Agriculture 11, Industry 12, , Services 13, Unallocated Total/Average 37, GOVERNMENT FINANCE CENTRAL GOVERNMENT (Rp Billion) % of GDP 1977/ / Current Receipts 3,535 4, Current Expenditure Current Surplus 1,386 1, Capital Expenditures 2,157 2, External Assistance (net) MONEY. CREDIT and PRICES (Million Rp outstanding end period) Money and Quasi Money ,452 1,978 2,631 3,131 3,809 Bank Credit to Public Sector , ,442 Bank Credit to Private Sector ,186 1,376 1,737 2,017 2,605 (Percentages or Index Numbers) Money and Quasi Money as % of GDP General Price Index (1971 = 100) Annual percentage changes in: General Price Index Bank Credit to Public Sector Bank Credit to Private Sector Note: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. /a Exchange rate of Rp 415 = US$1 up to November 14, 1978, Rp 625 = US$1, thereafter. /b Total labor force; unemployed are allocated to sector of their normal occupation. "Unallocated" consists mainly of unemployed workers seeking their first job. Not applicable East Asia & Pacific Programs June 30, 1980

31 ANNEX I Page 5 of 5 pages TRADE PAYMENTS AND CAPITAL FLOWS BALANCE OF PAYMENTS MERCHANDISE EXPORTS (Average ) US$ Mln x 1. Exports: 6,573 7,952 7,989 (a) Oil and LNG (net) 3,710 4,445 4,010 Oil and LNG (net) 4, (b) Nonoil 2,863 3,507 3,979 Timber Imports (incl. net NFS) -6,657-7,777-8,129 Rubber (a) Imports -6,167-7,241-7,543 Coffee (b) NFS (net) Palm Oil Resource balance Tin Factor services ,015 Manufactures (a) Interest public debt /a All others (b) Other (net) Balance on current account ,155 Total 7, Direct foreign investment Capital grants lo 8. Public M & LT loan /a EXTEiINAL DEBT - December 31, 1979 (a) Disbursement 2,334 1,955 1,627 Disbursed Undisbursed Total US$ million --- = (b) Amortization (c) Net disbursements 1,897 1, Other capital (net) Total External Public Debt 13,086 5,811 18, Change in reserves (- increase) -1, Net official reserves 1,557 2,208 2,916 DbiBT SERVICE RATIO Reserves in months of imports + NFS Public debt service as % of exports RATE OF EXCHANGE IBRD/IDA LENDING (November 30, 1980) (US$ million) IBRD August 1971 through November 14, 1978 Outstanding & Disbursed 1, US$1.00 = Rp 415 Undisbursed 2, Rp 1,000 = USS2.41 Outstanding incl. Undisbursed 3, Since November 1S, 1978 US$1.00 = Rp 625 Rp 1,000 = US$1.60 IDA /a Based on IBRD external debt data. East Asia and Pacific Programs January 16, 1981

32 ANNEX II Page 1 of 25 pages THE STATUS OF BANK GROUP OPERATIONS IN INDONESIA A. STATEMENT OF BANX LOANS AND IDA CREDITS (as of November 30, 1980) US$ million Loan/ Amount Credit Fiscal (less cancellations) Number Year Purpose Bank IDA Undisbursed Seven Loans and twenty-seven Credits fully disbursed Tea Population Fourth Agricultural Estates North Sumatra Smallholder Development Third Educaition Smallholder and Private Estate Tea Pulo Gadung Industrial Estate Fourth Technical Assistance Bali Tourism Fisheries Credit Jatiluhur Irrigation Extension Small Enterprise Development Project Rural Credit Polytechnic Fifth Technical Assistance Transmigration II Yogyakarta Rural Development Smallholder Rubber Dev. Project Fifteenth Irrigation National Agriculture Extension II National Ag. Research Project Five Cities Water Supply Sixth Irrigation Agricultural Research & Extension National Regource Survey & Mapping Fourth High4ay Fourth Education Second Ship?ing

33 ANNEX II Page 2 of 25 pages US$ million Loan/ Amount Credit Fiscal (less cancellations) Number Year Purpose Bank IDA Undisbursed Fifth Power National Food Crops Extension & Seventh Irrigation Transmigration and Rural Develpment Second Urban Development Tanjung Priok Port Second PDFCI Sixth Power Nutrition Development Teacher Training-Fifth Education Eighth Irrigation Ninth Irrigation Development Finance Co. (BAPINDO III) Second Population Non-Formal Education Nucleus Estates and Smallholders I Seventh Power S Bukit Asam Coal Mining and Trp. Eng Tenth Irrigation Eleventh Irrigation Nucleus Estates and Smallholders II Twelfth Irrigation Third Urban Development Lower Cimanuk Basin Flood Control Second Agricultural Training Fifth Highway Fourth BAPINDO Transmigration II Eighth Power Second Water Supply Nucleus Estates and S'holders III Fourteenth Irrigation Nucleus Estates and S'holders IV Nat. Ag. Research Project Third Population Project Ninth Power Project S-holder Coconut Dev. Project University Development Project /a /a Not yet effective.

34 ANNEX II Page 3 of 25 pages US$ million Loan/ Amount Credit Fiscal (less cancellations) Number Year Purpose Bank IDA Undisbursed Total Bank loans and IDA credits 3, less cancellations Total 3, of which has been repaid Total now outstanding 3, Amount sold to third party Anount repaid by third party Total now held by Bank and IDA /a 3, Total undisbursed 2, , /a Prior to exchange adjustment.

35 ANNEX II Page 4 of 25 pages B. STATEMENT OF IFC INVESTMENTS (as of November 30, 1980) Fiscal Type of Loan Equity Total year Obligor business ---- (US$ million) P.T. Semen Cibinong Cement P.T. Unitex Textiles P.T. Primatexco Indonesia Textiles P.T. Kabel Indonesia Cable P.T. Daralon Textile Manuf. Corp. Textiles P.T. Jakarta Int. Hotel Tourism P.T. Semen Cibinong Cement P.T. Primatexco Indonesia Textiles P.T. Monsanto Pan Electronics P.T. PDFCI Devel. Fin. Co P.T. Kamaltex Textiles P.T. Semen Cibinong Cement P.T. Semen Cibinong Cement P.T. Daralon Textile Manuf. Corp. Textiles P.T. Kamaltex Textiles P.T. Daralon Textiles P.T. Papan Sejahtera Capital Market P.T. Indo American Industries Glass Dinnerware P.T. Semen Andalas Cement and Indonesia Construction Material Total gross commitments Less: sold or repaid and cancelled Total held by IFC Undisbursed (including participant's portion)

36 ANNEX II Page 5 of 25 pages C. PROJECTS IN EXECUTION /1 These nc:es are arranged by sectors in the following order: Page No. Agriculture Irrigation (514, 1100, 1268, 1434, 1435, 1578, , 1645, 1691, 1811 and 995) Other Agricultur. Production (319, 358, 400, 480, , 1707/919, 1499, 1604, 1751, 1835, 984 and 1898) Agriculture Supp,rt Services (1179, 1267, 996 and 1840/1014) Rural Developmen (946) 13 Agro-Business and K'redit (785 and 827) 14 Education (387, 86', 1237, 1433, 1486, 1692 and 1904) Energy (1259, , 1708 and 1872) Industrial Develop ent and Finance Fertilizer Produvtion (1254) 18 Industrial Estates (428) 19 Development Fina:,ce Companies (1363, 1437 and 1703) 19 Population and Nut ition Population (300, 1472 and 1869) Nutrition (1373) 21 Technical Assistanze (451, 898 and 1197) Transportation Highways (1236 i'td 1696) 22 Marine Transport (1250) 23 Ports (1337) 23 Tourism (479) 24 Urban Development (1336 and 1653) Water Supply (1049 and 1709) 25 /1 These notes ara designed to inform the Executive Directors regarding the progress of pr.jects in execution, and in particular to report any problems whic. are being encountered and the action being taken to remedy them. They sh:)uld be read in this sense, and with the understanding that they do not ptrport to present a balanced evaluation of strengths and weaknesses in,roject execution.

37 ANNEX II Page 6 of 25 pages C. PROJECTS IN EXECUTION AGRICULTURE Irrigation Credit No. 514 Jatiluhur IrriRation Extension: $30 Million Credit of October 3, 1974; Effective Date: January 10, 1975; Closing Date: December 31, 1982 Initial organizational difficulties, extensive changes in the design of project works and delays in awarding civil works contracts are expected to substantially delay project completion. Consequently, the closing date of December 31, 1980, has been postponed for two years to December 31, All major contracts for civil works have been awarded. The total project cost is currently estimated to be about 90% over the appraisal estimate. Loan No Sixth Irrigation: $65 Million Loan of April 10, 1975; Effective Date: June 20, 1975; Closing Date: June 30, 1982 The project is currently expectedjo be completed by March 1984, about three years behind the original completion date. This is mainly due to a delay of more than one year in the completion of bidding documents, followed by a delay of another year due to delayed land acquisition, delayed payments to contractors and the effects of the 1978 Rupiah devaluation. The total project cost is currently estimated at $227 million, which is 38% above the appraisal estimate. Disbursements are currently about 50% of the appraisal estimate, but are expected to significantly increase in FY80/81. All major contracts have been awarded and sufficient funds are allocated for the programmed construction this year. Loan No Seventh Irrigation: $33 Million Loan of June 4, 1976; Effective Date: September 21, 1976; Closing Date: December 31, 1981 Construction is underway in the North Sadang and tertiary development areas, and studies being funded under the project are expected to be completed shortly. The mapping progam is progressing satisfactorily. Disbursements are ahead of schedule. Loan No Eighth Irrigation: $63 Million Loan of June 6, 1977; Effective Date: July 7, 1977; Closing Date: March 31, 1983 The project is being implemented satisfactorily, although disbursements are currently about 80% behind the appraisal estimate largely due to

38 ANNEX II Page 7 of 25 pages delays in the Madiun rehabilitation and Ciujung drainage components, and partly due to late payment to contractors. Disbursements are expected to improve in succeeding semesters because of increased activity in these components. Loan No Ninth Irrigation: $35 Million Loan of June 6, 1977; Effective Date: July 7, 1977; Closing Date: December 31, After an initial slow start in the Sungai Dareh-Sitiung Irrigation System, which is to provide new irrigation facilities to transmigrants and local farmers over a 3,500 ha area, good progress is being made in awarding all major contracts, including the construction of a pumping station. The balance of the contracts are proposed to be awarded in FY80/81. When the pumping station is completed and plant installed, water can be supplied to part of the 3,500 ha area by December 1981, or at the latest by March The Sedeku Irrigation Rehabilitation and Drainage System is proceeding without the Iragung Dam being built. The Government decided not to construct major dams in Java, including the Iragung. This has required a review of the designs and a revision of cost estimates to be incorporated in continuing contracts and future works, thus causing further delays. Ten projects are included for feasibility studies: three appraised by the Bank in June 1979 and one recommended for financing by KfW. Studies of the remaining seven projects will be completed shortly. Because of the delays in project implementation, the project is expected to be completed by March 1983, a delay of 21 months, presuming no new constraints develop. It is expected the current closing date of December 31, 1981 will have to be extended. Loan No Tenth Irrigation: $140 Million Loan of June 6, 1978; Effective Date: August 16, 1978; Closing Date: December 31, Delay in implementation of the project components is about 12 months. Some delays have occurred in awarding contracts and the construction program will have to be accelerated to achieve the completion target. Progress of studies of dams and irrigation subprojects is behind schedule due to the late awarding of contracts for aerial mapping for the Kali Progo, Way Seputih and Way Sekampung areas. Progress on studies at Dumoga and Gumbasa has been satisfactory. The staff of the PIBD, the Executive Body for Major Irrigation Projects with World Bank Assistance, will have to be strengthened in order to cope with the increased construction program from FY80/81 onwards. Loan No Eleventh Irrigation: $31 Million Loan of June 6, 1978; Effective Date: August 16, 1978; Closing Date: December 31, Due to slow progress the project is currently estimated to be completed in March 1983, a delay of about one year. The Hlydrologic Measurement Program, after initial inaction on the consultants work program, and delay of one year in procurement of equipment, is now progressing well and

39 ANNEX IT Page 8 of 25 pages estimated to be completed by September Studies for a master plan for the development of the Cimanuk River Basin were completed in January 1980 and a final report is under preparation. Detailed designs of flood control works of the Lower Cimanuk, Cipanas and Ciwaringin Rivers have been completed and construction is proceeding under Loan 1691-IND. Due to unfavorable foundation conditions at the dam site and GOI's decision not to construct large dams on Java this component is indefinitely postponed and an alternative use of loan funds is under consideration. Loan No Twelfth Irrigation: $77 Mtillion Loan of December 29, Effective Date: May 10, 1979; Closing Date: March 31, The Jatiluhur Tertiary Development on an area of 186,000 ha is proceeding on schedule; construction on 50,866 ha has been completed and the balance of the area would be covered in three fiscal years 80/81 to 82/83. The Cisedane drainage works have not commenced due to a delay in the acquisition of construction to FY81/82, except one contract programmed to be awarded in FY80/81. Completion of this component of the project is currently estimated to be delayed by over one year subject to right of-way acquisition being completed early Consultants or studies of tidal swa areas and drainage blocks are engaged and expected to be completed by July 1981 with a delay of six to eighteen months compared to appraisal estimates. The project is currently estimated to be completed by March 1984, a delay of one year. Loan No Lower Cimanuk Basin Flood Control: $51 Million Loan of May 7, 1979; Effective Date: October 16, 1979; Closing Date: March 31, Initial progress is satisfactory. Consultants have been engaged for the construction supervision and studies provided under the project. The construction of river training works and flood protection levees under six on-going contracts is progressing well and on schedule. Land acquisition for the rights-of-way is being handled with the assistance of private land surveying companies which has significantly reduced the time to about six months. No further difficulties are foreseen for this aspect of the project. Loans No Fourteenth Irrigation Project: $116 Million Loan of April 3, 1980; Effective Date: July 3, 1980; Closing Date: January 31, 1986 This loan was declared effective on July 3, 1980.

40 ANNEX II Page 9 of 25 pages Credit No. 995 Fifteenth Irrigation Project: $45 Mlillion Credit of April 3, 1980; Effective Date: July 3, 1980; Closing Date: January 31, 1985 This credit was declared effective on July 3, Other Agriculture Production Projects Credit No. 319 Fourth Agricultural Estates: $11 Million Credit of June 28, 1972; Effective Date: January 30, 1973; Closing Date: June 30, The planting program under the project has been completed and the construction of processing facilities should be completed by the middle of Production, profitability and costs of PNP X continue to be satisfactory. PNP X has expanded its operations further under Loan 1499-IND (NES I), and its work on planting rubber for smallholders under NES I and under Loan 1318-IND (Transmigration I) is progressing well. Although there are some temporary difficulties relating to completion of the palm oil mill and rubber processing facilities, overall project performance remains very satisfactory. Credit No. 358 North Sumatra Smallholder Development: $5 Million Credit of February 14, 1973; Effective Date: August 13, 1973; Closing Date: December 31, The 9,000 ha planting program under the project is now completed. Rubber and oil palm continue to show very satisfactory growth with the 1974/75 plantings of rubber and oil palm coming into production. Control of weeding and general maintenance standards will require close supervision up to 1982/83 when all plantings reach maturity. Credit No. 400 Smallholder and Private Estate Tea: $7.8 Million Credit of June 22, 1973; Effective Date: November 30, 1973; Closing Date: March 31, 1982 The project provides credit through Bank Rakyat Indonesia and extension advice through a Project Management Unit for improvement of Indonesian smallholder and private estate tea. Of 13,200 ha, 60% was to be rehabilitated and 40% replanted. Participants have preferred more costly replanting and the target area has therefore been changed to 10,500 ha, and the proportions reversed. While production will not be adversely affected (replanting yields are higher), costs are estimated to exceed appraisal estimates by about 60% because replanting is more expensive due to inflation. The project has made a significant impact on the private sector of the Indonesian tea industry. The project training program is especially noteworthy having now involved more than 9,000 smallholders through practical village training schemes.

41 ANNEX II Page 10 of 25 pages Credit No. 480 Fisheries Credit: $6.5 Million Credit of June 14, 1974; Effective Date: January 8, 1975; Closing Date: December 31, Initial delays have put the project about 18 months behind schedule. The marine fishing complex at Ambon is completed, making a promising start with twenty fishing boats operating, ten by GOI's skipjack tuna enterprise and ten by a cooperative; two 100 gross ton catcher/carriers have been ordered and are due to be delivered early The quality of fishpond lending by Bank Rakyat Indonesia suffered early deficiencies, but is now completed; results are patchy and arrears excessive in some areas. Coverage is much less than appraisal forecast (31% of farmers, 60% of area) and details not yet available, but inflation and the inability of smaller owners to participate are probably the reasons. Loan No Transmigration and Rural Development: $30 Million Loan of July 21, 1976; Effective Date: March 30, 1977; Closing Date: December 31, 1981 Although the project is still about ei,hteen months behind schedule eue to early slippage in implementation, since last year performance has shown considerable improvement. To date about 2,760 families have moved into Baturaja, equivalent to 61% of the ultimate target. Construction of water supply reservoirs has accelerated and has reached 50% of target. Contracts for construction of the last three villages have been signed; the pasture development program is well established and cattle procurement has restarted. The rubber planting is proceeding well and the cropping systems trials are continuing satisfactorily. Funding is no longer a problem and disbursements are in line with the revised schedule and have reached 51% of the appraisal estimate. Loan No Transmigration II: $90 Million Loan and $67 Million Credit of (Cr. No. 919) June 1, 1979; Effective Date: October 4, 1979; Closing Date: December 31, 1985 There have been delays in the implementation of the project. Land clearing and road construction are now about six months behind appraisal estimates due to: (i) the rejection of large areas identified for site development in the appraisal report due to unsuitability for the agricultural development proposed; (ii) weak overall project organization and management; and (iii) delays in contractor-s and consultant-s engagement. More recently, significant numbers of unauthorized settlers have been found in areas presently identified for site development, and the GOI has proposed some changes to design criteria for the large areas already prepared. These matters are being reviewed with GOI but will likely take some time to resolve. Consequently, completion of project works and settlement of families are now expected to lag at least one year behind appraisal estimates. Loan No Nucleus Estates and Smallholder I: $65 Million Loan of November 18, 1977; Effective Date: January 12, 1978; Closing Date: June 30, 1982 The project-s overall planting program is ahead of schedule in PTP XI and in other estates almost on appraisal target. The conditions of the

42 ANNEX II Page 11 of 25 pages plantations are good and preparations for the completion of the remaining works well advanced. Construction of settler houses and roads is behind schedule although less settlers are on the sites than targeted at appraisal. In view of the recent amendments to the loan agreement, the managements of the nucleus estates are now fully in command and speeding up the construction of the houses for settlers. It is expected that the project will be completed about the end of 1982 or one year later than expected. Disbursements are below the appraisal estimate, but now acceleration is expected. The newly established "Team Khusus" (Special Team) in the Directorate General of Estates is of great assistance to the execution of the project. Loan No Nucleus Estate and Smallholder II: $65 Million Loan of July 12, 1978; Effective Date: September 13, 1978; Closing Date: December 31, 1983 Planting program is almost on schedule, but housing, roads and village development is delayed. PTP IV management is undertaking the acceleration of the civil works program. Tendering of main acess and primary village roads is in process and works executed and supervised by Bina Marga (Directorage General for Highway Construction) are expected to start early Upgrading of the Sungai Tiga Extension and Training Center is proceeding expeditiously. The new management of PTP IV is endeavoring to accelerate and improve project execution. Funds for executing the FY80/81 work program are available in the approved budget. Preparation of the FY81/82 budget is in process and its approval on time is expected. Loan No Nucleus Estates and Smallholders III: $99 Million Loan of August 13, 1979; Effective Date: November 12, 1979; Closing Date: December 31, 1986 The project is off to a good start. Reasonable progress has been achieved in the estate development components, and preparations being made to start implementation of the smallholder components this year should result in the planting of about 5,000 ha of smallholder rubber and the settlement of the first 600 participating settlers by March Loan No Nucleus Estates and Smallholders IV: $99 Million Loan of May 16, 1980: Effective Date: August 11, 1980; Closing Date: December 31, 1986 This loan was declared effective on August 11, Credit No. 984 Smallholder Rubber Development: $45 Million Credit of April 3, 1980; Effective Date: May 23, 1980; Closing Date: March 31, 1986 The project has got off to a satisfactory start in spite of late approval and release of the first year's budget. There are no major problems with the project at this stage and it is anticipated that about 75% of the

43 ANNEFX II Page 12 of 25 pages first year's planting program will be achieved. Disbursements in FY81 are expected to reach US$3 million equivalent. Loan No Smallholder Coconut Development Project: $46 Million LOaa of August 25, 1980; Effective Date: November 25, 1980; Closing Date: June 30, 1986 This loan has just been declared effective. Agriculture Support Services Loan No Agricultural Research and Extension I: $21.5 Million Loan of December 19, 1975; Effective Date: February 23, 1976; Closing Date: December 31, 1981 Overall progress is acceptable. Under the Agency for Agricultural Research and Development (AARD) civil works in Pangragajian have been completed, in Mlargahayu are ahead of schedule, in Baruajak (all highland vegetables) have been completed (slightly behind schedule), while in Sungei Putih, Sembawa (both rubber) and in Sukamandi (Phase I rice and paliwija crops) are behind schedule due to shortage of labor and difficulties in procurement. Tenders for Sukamandi Phase II have been issued and contracts have been awarded for field and workshop equipment, furniture and vehicles. Tenders for laboratory equipment and chemicals for Margahayu are expected to be issued shortly. In addition to 60 long-term fellowships abroad, 247 longterm domestic fellowships have been arranged. Under the Agency for Agricultural Education, Training and Extension (AAETE) most of the equipment, furniture and vehicles have been received and distributed to ten completed agricultural information centers (AICs). Extension materials are being produced and distributed from the AICs. Disbursements under the project are improving. Loan No National Food Crops Extension; $22 Million Loan of June 4, 1976; Effective Date: September 21, 1976; Closing Date: June 30, 1982 The project management unit has been strengthened by creation of new positions which brings the number of assistant directors to five, divisional chiefs to four and section heads to eight. Due to a dearth of suitable senior staff, one assistant director, two divisional chiefs and four section heads are working on a part-time basis. Vacancies in the posts of field extension workers (PPL) and subject matter specialists (PPS) in the Other Islands are proposed to be filled up by recruiting PPLs from Java and by upgrading suitable PPLs for appointment as PPSs. Construction of 165 new Rural Extension Centers (RECs) and renovation of 52 RECs out of a total of 645 for 13 provinces have been completed. Progress of civil works has suffered due to an initial delay in prefinancing, inflation and inadequate supervision. Most of these problems have largely been overcome and all remaining contracts

44 ANNEX II Page 13 of 25 pages are expected to be awarded by end Procurement of vehicles, equipment and furniture as well as in-service and overseas training are progressing satisfactorily. Credit No. 996 Second National Agricultural Extension: $24 Million Credit of April 3, 1980; Effective Date: July 3, 1980; Closing Date: March 31, 1986 The project is the second phase of a national program for strengthening agricultural extension services in Indonesia. The project would cover 26 provinces of Indonesia, proceeding on a phased basis to expand the food crops extension services to the 13 provinces excluded from the first phase, to introduce: (a) a unified extension service for transmigration areas; and (b) extension of technical recommendations covering smallholder estate crops, livestock, inland fisheries and soil conservation activities into the extension program developed heretofore for food crops. An implementation schedule for five years has been prepared. Standard bid documents for civil works and procurement are in the process of finalization. Loan No National Agricultural Research: $35 Million Loan and $30 (Cr. No. 1040) Million Credit of May 16, 1980; Effective Date: July 16, 1980; Closing Date: June 30, 1990 The project is the second phase in the strengthening of the overall institutional framework of the Agency for Agricultural Research and Development for agricultural research in fruits, lowland vegetables, livestock, fisheries, forestry, estate crops other than rubber and industrial crops. The Project Implementation Unit has been strengthened by appointment of four heads of the offices but one head of office and the project secretary are yet to be appointed. A Ministerial decree announcing the appointments of directors for the Central Research Institutes and Research Institutes and Centers already approved by the Minister of Agriculture, is expected to be published shortly. Implementation schedules for the next nine years have been prepared. Standard bid documents for civil works and procurement have been finalized. Tender documents for civil works in six location for which provision has been made in the budget of 80/81 are in the final stage of preparation and tenders are expected to be issued shortly. Rural Development Credit No. 946 Yogyakarta Rural Development: $12 Million Credit of August 13, 1979; Effective Date: December 5, 1979; Closing Date: March 31, 1987 Implementation of this project is behind schedule. The principal reasons for delays are (i) the late release of project funds, and (ii) the lack of appropriate salary scales conforming with government regulations.

45 ANNEX II Page 14 of 25 pages These factors have resulted in low morale of project staff and distrust on the part of some farmers. Disbursement conditions have not yet been met due to part-time rather than full-time project positions. AGRO-BUSINESS AND CREDIT Credit No. 785 Small Enterprise Development: $40 Million Credit of April 7, 1978; Effective Date: August 17, 1978; Closing Date: December 31, 1981 The project, which provides financial and technical assistance to strengthen Bank Indonesia's (BI) small credit programs, KIK/KMKP, became effective August 17, Despite start-up difficulties, BI has now established and staffed all project management units. The three field units in Central Java, East Java, and West Sumatra are developing new lending approaches and assisting handling banks in project promotion and preparation. The training and studies components of the project are progressing satisfactorily. Credit No. 827 Rural Credit: $30 Million Credit of June 23, 1978; Effective Date: Nlovember 3, 1978; Closing Date: March 31, 1985 This project provides long-term credit to about 40,000 smallholders, primarily for fisheries, perennial crops and livestock, and technical assistance to Bank Rakyat Indonesia (BRI) for program development, training, credit procedures and accounting and management information systems. Due primarily to delays in obtaining project consultancy, the project is about nine months behind schedule. EDUCATION Credit No. 387 Third Education: $13.5 Million Credit of June 1, 1973; Effective Date: August 29, 1973; Closing Date: December 31, 1981 This first textbook project is an ambitious undertaking under difficult circumstances. Since the start five years ago, over 150 million books have been printed, 120% of the appraisal target, and about 430,000 teachers have been upgraded, or 23% over the original target of 350,000. About 100 million books have been distributed to scqhools. Delivery of books takes about one month to a year depending on the location of schools. The Project Implementing Unit advises that the reoa_ining 50 million textbooks (grades 5 and 6) are expected to be printed and delivered before the present closing date. Project costs have increased due to the increased scope of the project and inflation since 1973.

46 ANNEX II Page 15 of 25 pages Credit No. 869 Polytechnic: $49 Million Credit of December 29, 1978; Effective Date: May 11, 1979; Closing Date: June 30, 1985 The project objectives are to establish a new system for training engineering technicians, to improve the quality of accountancy training and practices and to assist in strengthening education planning and management. The project would establish a Technician Education Development Center (TEDC), six polytechnics and four accountancy development centers and include technical assistance and associated studies. The engineering technicians (polytechnic) component is making good progress. Staff appointments follow the appraisal schedule. Site grading for the TEDC and the Bandung polytechnic (PT) has been completed. Construction of the TEDC and the six polytechnics has started. Equipment for the TEDC has been awarded. The expert services and fellowship program are progressing satisfactorily. The accountancy component after initial delays is now making good progress. Loan No Fourth Education: $37 Million Loan of April 15, 1976; Effective Date: June 17, 1976; Closing Date: December 31, 1982 The three subprojects under the Ministry of Education (MOE), Ministry of Manpower (MOM) and National Institute of Administration (LAN), are to provide buildings, furniture, equipment and technical assistance respectively for four Technical Training Centers (TTCs) and two Faculties of Technology in Teacher Training Colleges (FKTs) for MOE; 17 new Vocational Training Centers and 25 mobile training units for MOM; and the principal civil service training institute in Indonesia (LAN). The Project suffered initial delays due to slow site acquisiton and late contracting agencies. Additional delays due to slow awarding of contracts for physical facilities, late release of budget funds, late ministrial approval and slow settlement of contractors' claims to adjust contract prices for the 1978 Rupiah devaluation: all these reflect limited management capacity. As of now, the MOE component is nearly completed; all but one TTC are in operation and about $11 million of equipment (93%) has been contracted. The MOM component has progressed slowly, resulting in a 2-year delay. About 60% of civil works have been contracted and 31% of equipment has been awarded. The LAN's civil works are only 20% complete, and estimated to be completed by mid-1981, two and a half years behind the appraisal estimate. Procurement of furniture and equipment follow the civil works schedule. The technical assistance program for all project components is being satisfactorily completed. Loan disbursement has improved significantly in the last six months but overall delays required a postponement of the closing date by two years to December 31, Loan No Teacher Training: $19 Million Loan of June 6, 1977; Effective Date: July 7, 1977; Closing Date: June 30, 1983 The project is now progressing satisfactorily. About 35% of civil works have been awarded and 30% completed. Corresponding percentages for

47 & sqi' "- i Page 16 of 25 pages equipment are 40 and 28. Five more civil works c.jntracts are being awarced during July 1980, and the remaining six sites are being acquired. The staff training program is on schedule and development of new curricula and instructional materials is progressing satisfactorily. Special seminars and courses for administrators have been conducted and 60 members of the national team of 150 educators have been appointed as disseminators to overcome slow adjustment at the institutional level to new curricula and teacher training methods developed under the project. The technical assistance program is on schedule and successful. Despite earlier delays and low disbursements (35% of appraisal estimate), the project is expected to be completed on schedule. Loan No Non-Formal Education: $15 Million Loan of September 14, 1977; Effective Date: November 4, 1977; Closing Date: June 30, 1983 The project aims at strengthening the Department of Education's nonformal education programs in seven provinces. Financing would cover civil works to renovate two existing and establish four new provincial centers, instructional equipment and vehicles, in-service training, materials development, a basic learning fund, and related technical assistance. Of the six Balai PENM4AS (directorates for out-of-school education) centers, four have been completed. The extension to the existing Jakarta center is 50% completed and the Samarang center is 10% completed; both centers will be ready by the end of All furniture and equipment have been ordered; 10% is already on site and the rest is due to arrive later this year. About 80% of the staff training program is meeting appraisal targets, production and distribution of pretested learning materials have started, and 1,500 learning funds are being distributed to selected learning groups. The technical assistance program is on schedule; local staff are gradually replacing foreign consultants. Disbursements will increase substantially this year and are expected to reach $4.5 million or 72% of appraisal estimates. Loan No Second Agricultural Training: $42 Million Loan of May 7, 1979; Effective Date: July 31, 1979; Closing Date: June 30, 1985 The project constitutes the second phase of GOI's long-term strategy to improve the quality and supply of middle level agricultural manpower. It finances the renovation, furnishing and equipping, expansion and relocation of 26 existing agricultural development schools and 16 existing agricultural in-service training centers; and the construction and furnishing and equipping of 5 agricultural development schools and 7 agricultural in-service training centers. It also provides technical assistance for the improvement of curricula, education planning and evaluation. Physical implementation is generally on schedule. A number of problems affecting educational aspects are emerging; action is being taken to prevent them impeding project progress. The fully staffed Project Implementation Unit is operating effectively.

48 ANNEX II Page 17 of 25 pages Loan No University Development Project: $45 Million Loan of November 13, 1980; Effective Date: Not Yet Effective; Closing Date: December 31, 1986 This Loan has not yet been declared effective. ENERGY Loan No Fifth Power: $90 Million Loan of May 20, 1976; Effective Date: September 20, 1976; Closing Date: December 31, 1981 Disbursements on this project have been somewhat slower than anticipated due to delays in placing orders for the third lot of equipment. These orders have now been placed and on the basis of contracted deliveries, the situation is expected to improve. Physical progress has been satisfactory on extension of the 20 kv distribution lines, but very slow on the installation of the 20 kv stepdown cubicles. Delay is due to difficulties in acquisition of substation sites. The closing date has just been postponed from March 31, 1981 to December 31, 1981 in order that disbursements can be completed. Loan No Sixth Power: $116 Million Loan of February 4, 1977; Effective Date: June 6, 1977; Closing Date: December 31, 1982 Construction of the fourth and fifth generating sets (200 MW each) has been delayed. The fourth generating set is expected to be in commercial operation around May 1981, about 9 months later than the contract date, but only 3 months later than forecast at appraisal. Engineering of the Semarang 3 (Seventh Power) project and of the Java Interconnected system has been completed. Loan No Seventh Power: $109 Million Loan of February 3, 1978; Effective Date: June 30, 1978; Closing Date: December 31, 1983 All contracts have been awarded at highly competitive costs with a substantial reduction in foreign costs and, therefore, $15 million of the loan has been cancelled. Delays in award of contracts for civil works caused by introduction of new procedures for such contract awards by GOI have resulted in a three-month delay in the construction program. This will delay commissioning of the 200 MW generating set which is now expected in August 1982.

49 ANNEX II Page 18 of 25 pages Loan No Eighth Power: $175 Million Loan of June 1, 1979; Effective Date: November 5, 1979; Closing Date: December 31, 1984 Contracts for turbine generators, ancillary plants, piling work, and civil construction have all been signed. Bid documents for steelworks and cladding were issued in August and are being evaluated. The tender documents for marine works have been delayed due to a change in the design concept. The revision in the scope of the marine works will increase original appraisal estimates and final cost estimates are being worked out. Schedules are being revised in order to minimize delays. It is expected that the overall delay in the commissioning date for the first unit will be about three months. No delay is expected in the scheduled commissioning date of the second unit. Loan No Ninth Power: $253 Million Loan of June 13, 1980; Effective Date: October 24, 1980; Closing Date: September 30, 1985 This loan has only recently been declared effective. Tenders for EHV lines and substations were issued in July 1980; bid opening scheduled for November/December, The issue of the documents was about ten weeks behind schedule. Aerial survey has been completed. Profiling and tower spotting in the field have commenced. Land for substations at Suralaya, Ungaran and Gandul substations has been purchased. No delay is expected in the land acquisition for the other substation at Bandung and tower locations. Design and specifications for the Java control center are being finalized. Fertilizer Production INDUSTRIAL DEVELOPMENT AND FINANCE Loan No Third Fertilizer Expansion: $70 Million Loan of May 20, 1976; Effective Date: August 15, 1976; Closing Date: June 30, 1981 The project (PUSRI IV) was commissioned on November 26, 1977, about four months ahead of schedule. During 1978, PUSRI IV produced nearly 470,000 tons of urea, reflecting a capacity utilization of 83% in the first year of operation. Some auxiliary facilities are planned to be expanded in The project is not expected to show a cost overrun. The closing date of this loan has just been postponed by six months to June 30, 1981, in order that procurement under an existing contract can be completed.

50 ANNEX II Page 19 of 25 pages Industrial Estates Credit No. 428 Pulo Gadung Industrial Estate: $16.5 Million Credit of September 14, 1973; Effective Date: November 13, 1973; Closing Date: December 31, 1982 The Pulo Gadung Industrial Estate is now scheduled for completion in Of 400 ha of raw land now earmaked for acquisition, 331 ha had been purchased as of early ha of the 270 ha of developed land reserved for factory use has been sold to 107 firms, with full capacity employment estimated at around 22,000. Slack sales and difficulties in land acquisition have reduced the amount of land planned for sale from 337 ha to 270 ha. Operations are profitable with a cash surplus and bank deposits of Rp 2,389 million over the past three years to the project owners, the Municipal Government of Jakarta and the Government of Indonesia. GOI has agreed to designate 22.5 ha of the Pulo Gadung industrial estate as an Export Processing Zone (EPZ) with PT JIEP as the sole administrator. The closing date of the credit was therefore postponed by two years to December 31, 1982 and the EPZ is expected to be completed within this period. Development Finance Companies Loan No Second PDFCI: $15 Million Loan of January 28, 1977; Effective Date: April 21, 1977; Closing Date: June 30, 1981 The project is proceeding satisfactorily. Loan No Third BAPINDO: $40.0 Million Loan of June 6, 1977; Effective Date: September 23, 1977; Closing Date: September 30, 1981 The project is being implemented satisfactorily. Loan No Fourth BAPINDO: $50 Million Loan of June 1, 1979; Effective Date: September 25, 1979; Closing Date: September 30, 1983 This project is being implemented satisfactorily. Population POPULATION AND NUTRITION Credit No. 300 Population: $13.2 Million Credit of April 20, 1972; Effective Date: November 2, 1972; Closing Date: December 31, 1981 The performance of the Indonesian national family planning program continues to show satisfactory results. Since 1972/73 the program targets

51 ANNEX II Page 20 of 25 pages have been fully achieved and, in some cases, exceeded. The implementation of the project is in its final stages. The construction of all buildings has been completed and furniture and equipment procured, offices in Jakarta and six provinces have been occupied and all provincial and subprovincial training centers and nine nurse/midwife training schools are in operation. Most of the population education activities have been completed and the remainder are expected to be completed this year. The production of films and procurement of a computer financed out of savings under this project is expected to be completed in Because of delays in the signing of the computer contract and in order to allow sufficient time for its purchase, installation and subsequent disbursement, it is now clear that final disbursements will not be completed until about mid-december The Closing Date has therefore been postponed until December 31, Loan No Second Population: S24.5 Million Loan of July 6, 1977; Effective Date: August 4, 1Q77; Closing Date: April 30, 1983 The implementation of the second population project is proceeding satisfactorilv. The construction of all buildings has been completed. The major issues outstanding are (a) expediting the implementation of the contraceptive raw materials study, (b) implementation of the community incentive scheme, and (c) acceleration of the rate of disbursement. Regarding the contraceptive raw materials study, the mission was assured that all obstacles will be overcome and progress should be faster in the coming months. The community incentive scheme has been redesigned and the National Family Planning Coordinating Board (BKKBN) undertook to prepare an operational plan for review. This is expected shortly and we expect implementation to start on schedule early Progress on these aspects, coupled with timely submission of withdrawal applications, should contribute to the acceleration of the rate of disbursement. The BKKBN is also reviewing the costs of the project in order to determine the extent of savings. We expect to receive the revised costs as well as proposals for utilization of project savings, if any, shortly. Loan No. 169 Third Population: S35 Million Loan of June 13, 1980; Effective Date: September 10, 1Q80; Closing Date: March 31, 1985 This loan was declared effective on September 10, 1980 and a smooth start to project implementation has begun. A Ministerial Decree establishing a steering committee and appointing a project coordinator has been signed. Civil works constitute the largest component of this project and considerable attention is being given to this component so that delays will not occur; the mission recommended that the staff entrusted with the handling of this project be brought to at least the strength of that provided for the second project (Loan 1472-IND).

52 ANNEX II page 21 of 25 pages Nutrition Loan No Nutrition Development: $13.0 Million Loan of March 14, 1977; Effective Date: March 31, 1977; Closing Date: March 31, 1982 As a result of recently strengthened management, the pace of implementation is beginning to pick up in most components. The new campuses of the Food Technology Development Center (FTDC) and the Center for Research and Development in Nutrition (CRDN) were completed and formally opened in December Consultants and equipment for these centers are arriving, but further FTDC procurement has been held up due to procedural complications in the Ministry of Education. New staff posts have been created and fellowships awarded, although both at a slower rate than foreseen at appraisal. Research projects are underway, but for CRDN a longterm research program remains to be formulated. Field activities of the Nutrition Intervention Pilot Project (NIPP) are underway in some 90 villages, but operations are hampered by lack of special equipment. Evaluations of NIPP process and impact are planned for late Their results will largely determine the extent of NIPP modification needed and the scope for (and pace of) NIPP expansion given the Government's current commitment for a massive extension of a simpler community nutrition program delivered through the National Family Planning Coordinating Board (BKKBN) and the Ministries of Health, Religion and Agriculture to cover 41,000 villages by early 1984 awith assistance from UNICEF and USAID. Anemia Control activities in plantations in East Java, North Sumatra and South Sulawesi are progressing as scheduled, and productivity resurveys are planned for September/October The home and village garden program exceeded the target coverage (by 72) of 108 villages, and will be expanded on the basis of a master plan currently under preparation. Nutrition communication materials are ready for reproduction and distribution; their effectiveness will be evaluated in mid Considerable savings are expected under the project; the Government has prepared a package of proposals in line with existing component objectives and activities. These proposals will be reviewed during the next mission. TECHNICAL ASSISTANCE Credit No. 451 Fourth Technical Assistance: $5 Million Credit of January 2, 1974; Effective Date: February 15, 1974; Closing Date: June 30, 1982 Progress under the project is satisfactory. Credit No. 898 Fifth Technical Assistance: $10 Million Credit of May 7, 1979; Effective Date: September 5, 1979; Closing Date: March 31, 1984 Progress under this project is satisfactory.

53 ANNEX II Page 22 of 25 pages Loan No National Resource Survey and Mapping: $13 Million Loan of February 5, 1976; Effective Date: April 2, 1976; Closing Date: December 31, The National Coordinating Agency for Surveys and Mapping (BAKOSURTANAL) complex at Cibinong is completed, and most of the cartographic, photographic processing, and printing equipment required to produce maps is installed. Resource evaluation activities, including the compilation of data for Southern Sumatra and a study for the Directorate-General of Estates of coconut lands to be replanted in Sulawesi and Lombok, are also proceeding in the new complex. Recruitment and training of new staff, particularly junior operatives, has accelerated. The new photography financed under the parallel Canadian project will shortly be available, by which time BAKOSURTANAL hopes to have installed color photo processing equipment and to have fully trained specialized teams of operatives in the various map production fields. Highways TRANSPORTATION Loan No Fourth Highway: $130 Million Loan of April 15, 1976; Effective Date: August 13, 1976; Closing Date: December 31, 1982 All key activities in the implementation schedule agreed with the Government are completed but with delays of about one year. Construction of 1,200 km are under way and the equivalent of 520 km were completed at the end of Some problems and delays in executing roads prevailed for contracts started in 1976; delays were also enqountered in awards of contracts scheduled for The 1978 devaluation also contributed to a slower apparent rate of disbursement as cost adjustments to Rupiah construction contracts are still in process. Remedial measures were taken in 1978/7q (and others are planned) which have much improved the rate of physical progress, particularly for a few contracts where performance was very slow; however, project completion is still forecast at about 18 months beyond the loan's present closing date. W4hile project costs in US$ are likely to be within appraisal estimates, Rupiah costs are up significantly due to the devaluation: local funds are available to finance these increases. The above delays have postponed overall completion of the project by two years and the closing date has just been postponed to December 31, 1982 to allow for completion of the project. Loan No Fifth Highway: $130 Mtillion Loan of June 1, 1979; Effective Date: August 28, 1979; Closing Date: December 31, 1984 Delays have been encountered in awarding contracts for about 500 km of road works which were tendered in mid-1979, somewhat behind the

54 ANNEX II Page 23 of 25 pages implementation schedule. The 300 km balance of road works was scheduled for tendering in May 1980, nearly 10 months behind the schedule. Preparation of development programs for eight provincial public works departments (DPUPs) has also fallen behind, and other project components closely linked to, or forming integral parts of, the DPUP programs, such as procurement of road maintenance equipment and construction of major support works, are now about one year behind schedule. Delays have occurred also in appointing consultants, but these delays are less serious. Marine Transport Loan No Second Shipping: $54 Million Loan of May 20, 1976; Effective Date: October 8, 1976; Closing Date: December 31, 1981 The project is part of the first phase of the Government's Inter- Island Fleet Development Program and is designed to modernize, expand and improve the efficiency of the inter-island fleet. Demand for general cargo ships in the Regular Liner Service (RLS) expected at appraisal was slow in materializing due to (i) slow scrapping of obsolete ships with consequent reduced replacement demand; and (ii) effects of the rupiah devaluation on the price of replacement ships. Conditions considerably improved in 1979 and 80% of the loan has now been committed. The project entity, P.T. PANN, is reasonably well managed; the operation and maintenance of its ships is being regularly monitored and no major financial problems exist in its Bank-financed operations. P.T. PELNI, the state-owned shipping line, accounting for about half of the RLS, continues to incur substantial losses. A condition of a recent subloan from P.T. PANN requires the early preparation by P.T. PANN of a financial recovery plan with consultancy assistance. The loan is expected to be fully committed by March 31, 1981, and the Closing Date has just been extended by one year to December 31, Ports Loan No Tanjung Priok Port Project: $32 Million Loan of November 4, 1976; Effective Date: March 3, 1977; Closing Date: December 31, 1981 Slow progress on the construction of Government-financed works has delayed construction of the first component, but progress is being made. The Government-financed works in Basin III, delayed due to the impact of the 1978 Rupiah devaluation, are 98% completed, and the Basin III civil works finance by the Bank loan, also delayed due to the devaluation, are 65% completed. Civil works financed by the Bank loan in the Regional Harbor, are 37% completed. The work is now three months in arrears and a revised construction schedule is being prepared. These delays will probably postpone overall

55 ANNL.( II - 49 Page 24 of 25 pages completion of the project to mid-1981 but it is too cir y to estimate tie full effect of delays on project cost. TOURISM Credit No. 479 Bali Tourism: $16.0 Million Credit of June 14, 1974; Effective Date: December 4, 1974; Closing Date: June 30, 1982 With the exception of the amenity core and the telephone network, infrastructure at Nusa Dua is complete. The hotel school and the practice hotel are operating. Final designs for village improvements in Bualu and for the new road from Bualu to Benoa are finished. The access road to Nusa Dua from the airport is finished and the Denpasar by-pass road is scheduled for completion shortly. The market for tourism to Bali has held up well in 1980; hotel occupancy in international standard hotels exceeds 75%. The final designs and tender documents for the first hotel at Nusa Dua to be built by the national airline (Garuda) are complete, and construction is scheduled to start shortly. The Bali Tourism Development Board (BTDB) is evaluating additional minor infrastructure investments at Nusa Dua and possible participation in several hotel projects to utilize the uncommitted portion of the Credit. URBAN DEVELOPMENT Loan No Second Urban Development: $52.5 Million Loan of November 4, 1976; Effective Date: March 28, 1977; Closing Date: December 31, 1981 The project consists of provision of basic infrastructural facilities including footpaths, drainage, water supply and human waste disposal to about 3,000 ha of densely populated areas in Jakarta and 374 ha in Surabaya. Community health workers are to be trained under a pilot program in both cities. Except for small carryover items (filter plant, deep wells and health clinics) and the conduct of a proposed urban transport study for Jakarta under the technical assistance component, the project progress is essentially complete. Upgrading costs for the program have been within the appraisal estimates. About 3,435 ha of kampungs in Jakarta and 441 ha of kampungs in Surabaya have been covered so far, benefitting a total population of about 1.4 million. About 180 community health workers in Jakarta and 88 in Surabaya have been trained and are working in the improved kampungs. Loan No Third Urban Development: $54 Million Loan of January 31, 1979; Effective Date: September 26, 1979; Closing Date: December 31, 1984 The project provides basic infrastructural facilities including roads, footpaths, water supply, and sanitation to impoverished, low-income kampungs (neighborhoods) in the cities of Jakarta (750 ha), Surabaya (580 ha) Ujung Pandang (375 ha), Semerang (310 ha) and Surakarta (170 ha), benefitting

56 ANNEX II Page 25 of 25 pages a total population of about 2.25 million. A comprehensive solid waste management program is also included in Jakarta and Surabaya, together with a drainage program in Surabaya. About 775 community health workers are to be trained in the above two cities to work in the improved kampungs. The loan became effective on September 26, The kampung improvement is proceeding satisfactorily in Jakarta and Surabaya but start-up delays of eight to ten months had been evidenced in the implementation of solid waste management and drainage programs. In the secondary cities, the kampung improvement program is now proceeding smoothly following a six to eight months start-up delay during the first year implementation period (April 1, 1979-March 31, 1980). WATER SUPPLY Loan No Five Cities Water Supply: $14.5 Million Loan of October 31, 1974; Effective Date: May 21, 1975; Closing Date: December 31, 1981 Due to administrative and managerial problems the project is now running 24 months behind schedule and the Closing Date has been extended by eighteen months. All equipment supply and all major civil works contracts, with the exception of pipe laying contracts (delayed because of slow procurement of pipe), are under execution. A cost overrun of about 30%, caused by increases in local costs due to project delays and devaluation, is expected. The reorganization of the Directorate of Sanitary Engineering has been completed, and the establishment and development of local water enterprises is proceeding satisfactorily. Also, disbursements are expected to accelerate now that contracts are signed and equipment and supplies are being delivered. Loan No Second Water Supply: $36 Million Loan of June 1, 1979; Effective Date: February 29, 1980; Closing Date: December 31, 1984 This loan was declared effective on February 29, 1980, five months behind schedule. The main project is about six months behind schedule. Design work is proceeding and procurement documents are being processed. Tenders were called for an initial purchase of pipe and fittings and these were opened in June Some other scheduled tenders may have to be postponed because the Directorate of Sanitary Engineering (DSE) failed to request sufficient government funds in the current fiscal year ending March 31, DSE is exploring an alternative funding source to circumvent this problem. DSE is overextended because of the extensive water supply activity in Indonesia and the numerous aid offers and foreign participation in the sector. It is at present in the process of increasing its staff by 160 persons and also recruiting the services of a Resident Management Specialist. It is to be hoped these two steps may help improve its internal efficiency.

57 ANNEX III INDONESIA TENTH POWER PROJECT Supplementary Project Data Sheet Section I: Timetables of Key Events (a) Time taken to prepare the project (b) Project prepared by : 3 years New Japan Engineering Consultants (Newjec) (c) First presented to the Bank March 1978 (d) Departure of the Appraisal Mlission August 1980 (e) Completion of Negotiations January 1981 (f) Planned Effectiveness April 1981 Section II: Special Bank Implementation Actions None Section III: Special Conditions GOI will: (a) assist PLN in improving its market surveys to establish future power demand by providing data on energy resources and policy guidelines (para. 37). PLN will: (b) improve the capability of its power market survey units (para. 37); (c) improve the capability of its central system planning unit at headquarters to identify emerging system bottlenecks in advance and to ensure that its power systems continue to be adequate as demand escalates (para. 38); and (d) before completion of the project, prepare a program of periodic inspection and maintenance of the project works which is satisfactory to the Bank, and implement it throughout the operational period of the project (para. 54).

58

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60

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