ASIAN DEVELOPMENT BANK

Transcription

1 FI ASIAN DEVELOPMENT BANK RRP: INO REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE BOARD OF DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF INDONESIA FOR THE CORAL REEF REHABILITATION AND MANAGEMENT PROJECT PHASE II November 2002

2 CURRENCY EQUIVALENTS (as of 31 October 2002) Currency Unit - rupiah (Rp) Rp1.00 = $ $1.00 = Rp9,240 ABBREVIATIONS ADB Asian Development Bank AusAID Australian Agency for International Development BAKORKAMLA National Coordination Board for Sea Security BANGDA Ministry of Home Affairs BAPPEDA Badan Perencanaan Pembangunan Derah (Regional Development Planning Agency) BAPPENAS Badan Perencanaan Pembangunan Nasional (National Development Planning Agency) BPD badan perwakilan desa (village representative forum) BME benefit monitoring and evaluation CBM community-based management CBO community-based organization CRITC coral reef information and training center CRMP coastal resource management plan/coral reef management plan DGAF Directorate General of Aquaculture Fisheries DGCF Directorate General of Capture Fisheries DGCSI Directorate General of Coasts and Small Islands DGMRFC Directorate General of Marine Resources and Fisheries Controlling EA executing agency EIRR economic internal rate of return FIRR financial internal rate of return ha hectare HRD human resources development IA implementing agency km 2 square kilometer IDT Inpres Desa Tertinggal LCB local competitive bidding LIPI Indonesian Institute of Sciences MCSIS monitoring, control, and surveillance information system MMAF Ministry of Marine Affairs and Fisheries MOF Ministry of Finance NGO nongovernment organization NSC national steering committee NTC national technical committee PIU project implementation unit PMO project management office PROPENAS Program Pembangunan Nasional (Medium-term Development Program) RAC regional advisory committee

3 RPIU regional project implementation unit SOE statement of expenditure GLOSSARY OF TERMS bupati mayor desa village dinas Kelautan provincial/district Marine Affairs and Fisheries Service Dan Perikanan kabupaten district kepala desa village head pokmas village group perda village regulation punen religious/spiritual laws unit desa village banking structure NOTE In this report, "$" refers to US dollars. This Report was prepared by a team consisting of W. Zhou, Senior Agriculture and Natural Resources Management Specialist and Mission Leader; S. Sahajananthan, Environment Specialist; P. Spantigati, Project Economist; B. Alimov, Economist; A. Goswami, Senior Counsel; Y. Kobayashi, Senior Project Implementation Officer, IRM; and F. Ahmed, Financial Management Specialist, IRM.

4 CONTENTS Page LOAN AND PROJECT SUMMARY i MAP vii I. THE PROPOSAL 1 II. BACKGROUND 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Problems and Opportunities 1 III. THE PROPOSED PROJECT 3 A. Objectives 4 B. Components and Outputs 4 C. Special Features 9 D. Cost Estimates 9 E. Financing Plan 10 F. Implementation Arrangements 11 IV. PROJECT BENEFITS, IMPACTS, AND RISKS 15 A. Financial and Economic Analysis 15 B. Social Measures and Impact on Poverty 16 C. Environment 17 D. Risks 17 V. ASSURANCES 18 VI. RECOMMENDATION 20 APPENDIXES 1. Project Framework Sector Analysis ADB-Financed Loan and Technical Assistance Projects in the Sector Project Area Cost Estimates and Financing Plan Project Organization Project Implementation Schedule Indicative Contract Packages Outline Terms of Reference for Consulting Services Flow of Funds Financial and Economic Analysis Summary Poverty Reduction and Social Strategy Summary Initial Environmental Examination 46 SUPPLEMENTARY APPENDIXES (available on request) A. Project Area B. Coastal Resource Management Plan Formulation Process C. Community Development and Inputs Assistance Program D. Detailed Cost Estimates and Financing Plan E. Detailed Terms of Reference of Consultants F. Economic Analysis

5 G. Summary Poverty and Social Strategy H. Indigenous People s Development Framework I. Gender and Development Action Plan J. Summary Initial Environment Examination

6 LOAN AND PROJECT SUMMARY Borrower Classification Environment Assessment Republic of Indonesia Core poverty intervention Thematic: Environmental protection; human development Category B: An initial environmental examination was carried out during project preparation. The summary is a core appendix. Project Description The Project is the second of a three-phase comprehensive, 15- year program funded by several financing institutions for the rehabilitation and management of coral reefs in Indonesia. Incorporating lessons learned from Phase I, Loan 1613-INO: Coral Reef Rehabilitation and Management Project, the Project will adopt a holistic approach to the management of coastal resources, particularly coral reefs and associated ecosystems. The Project will focus on a few key provinces where the costs of delaying, and the benefits from expediting, such a project are greatest. The Project will follow a participatory process by which coastal communities will organize themselves, with the assistance of local governments and project facilitators; identify their specific needs; and plan and implement their community-specific resource management and livelihood programs based on their perceived needs. Rationale Indonesia s coral reefs form the key ecosystem on which the majority of the coastal inhabitants rely for food, income generation, construction materials, and coastal protection. The Indonesian coastal and marine sector is beset with a number of problems. Foremost among these are the two critical and interrelated issues of resource degradation and the pervasive poverty among coastal communities. A rapid social assessment of coastal villages in the targeted project districts found that 65 83% of the population in the proposed project sites live below the national poverty line and are deprived of basic social amenities and services like potable water supply, sewerage and sanitation, and health and education. In these areas, the extensive coral reefs and associated ecosystems are subject to continuing threats from natural processes and from human activities, including destructive and illegal fishing, sand mining, and coral mining. In addition, the coastal and marine sector continues to suffer from policy, legal, and institutional constraints. Phase I has successfully developed and established a comprehensive framework and program of national policy, monitoring, control and surveillance, public awareness, information and monitoring, and research in support of coral reef management and monitoring. The proposed Project will build on these and promote sustainable management of coral reef resources, and thereby reduce poverty.

7 ii Objectives Cost Estimates Financing Plan Loan Amount and Terms The Project will (i) enhance the national and local capacity to manage the country s coral reef resources and (ii) rehabilitate and effectively manage priority coral reef ecosystems, thereby helping raise income levels and improving living standards among poor coastal communities. The Project will be implemented in six districts in three provinces, namely (i) Kota Batam, Kepulauan Riau, and Natuna in Riau Province; (ii) Nias and Tapanuli Tengah in North Sumatra Province; and (iii) Mentawai in West Sumatra Province. It will comprise two major components: (i) institutional strengthening and project management and (ii) community-based resource management and development. The first component will comprise (i) strengthening of national and regional institutions in policy, strategy, and guideline formulation and resource planning and management; (ii) establishment and strengthening of a network of coral reef information and training centers (CRITCs); (iii) human resources development (HRD) and extension; and (iv) project management. The second component will involve (i) community empowerment, (ii) community resource management, (iii) community social services and infrastructure development, and (iv) community livelihood and income generation. The total project cost, including service charge and contingencies, is estimated at $41.25 million equivalent, comprising a foreign exchange component of $8.27 million (20% of total cost) and a local currency cost of $32.98 million equivalent (80% of total cost). The estimates include a provision for $0.92 million equivalent in taxes and duties. The Asian Development Bank (ADB) loan of $33 million equivalent (80% of the total project cost) will finance the entire foreign exchange cost of $8.27 million and a portion of the local currency cost amounting to $24.73 million (75% of total local costs). The remaining local currency cost of $8.75 million will be financed by the Government and project beneficiaries. The government contribution will come from the central Government and the governments of the three provinces and six districts. Beneficiaries contribution will be in the form of labor for community-based law enforcement, construction and improvement of various small-scale infrastructure facilities and access roads, and livelihood development activities. A loan of $33 million will be provided from ADB s Special Funds resources (SDR 25,004,000). The loan will have a 32-year term, including a grace period of 8 years, an interest charge of 1% per annum on principal amount disbursed during the grace period and 1.5% per annum thereafter, and such other terms and conditions set forth in the draft Loan Agreement.

8 iii Estimated Project Completion Date Implementation Arrangements Executing Agency Procurement 30 June 2009 The Project will be implemented by four directorates general under the Ministry of Marine Affairs and Fisheries (MMAF): (i) Coasts and Small Islands (DGCSI), (ii) Capture Fisheries, (iii) Aquaculture, and (iv) Marine Resource and Fisheries Controlling. A project management office (PMO) will be set up within DGCSI, with a qualified full-time project director, to oversee the day-to-day implementation of the Project. The Indonesian Institute of Sciences (LIPI) will be the national implementing agency for research, information, monitoring, and training on coral reef management. The PMO established in LIPI during Phase I Project will be converted into a national project implementation unit. Six regional project implementation units will be set up, one in each project district, to oversee and coordinate field-level implementation. An interagency national steering committee (NSC) will be established to guide the overall direction of the Project and ensure overall coordination of activities between the Project and other government programs and projects. The NSC will be supported by a national technical committee, whose chairperson will serve as NSC secretary. A regional advisory committee (RAC) will be established in each project province to oversee project coordination between various implementing agencies (IAs) at the local level and liaise with the NSC as required. Ministry of Marine Affairs and Fisheries (MMAF) All services, supplies, and equipment to be financed by ADB will be procured in accordance with the ADB Guidelines for Procurement. All goods to be purchased through local competitive bidding will be procured in accordance with Government procedures acceptable to ADB. Equipment and materials for packages valued at $500,000 or more will be procured through international competitive bidding procedures. Some supply contracts estimated to cost less than $500,000 and certain specialized items will be procured using international shopping procedures. Minor items of equipment and materials costing less than $100,000 will be procured through direct purchase. The civil works packages are estimated to cost less than $1 million each and will therefore be awarded on the basis of local competitive bidding procedures among prequalified contractors, in accordance with the Government s standard procurement procedures acceptable to ADB.

9 iv Consulting Services Project Benefits and Beneficiaries International and domestic consultants will be engaged through an international consulting firm in accordance with ADB s Guidelines on the Use of Consultants and other arrangements acceptable to ADB for the engagement of domestic consultants. A total of 534 person-months of consulting services, consisting of 54 international and 480 domestic person-months, will be required for effective project implementation. The consultants will support the PMO and the project implementation units in two broad areas: (i) project management and (ii) technical advice in specific areas like coral reef management, community monitoring, control and surveillance, community development, policy planning, training and extension, database management, and public communications. The Project will benefit coastal communities in six districts through increased employment at the community and district levels and improved living conditions and standards of coastal residents. It will target, as its primary beneficiaries, those households composed mainly of small fishers, fish farmers, fish processors, and workers in the fishing industry and allied fields. Training of community-based organizations in better resource management will improve the productive capacity of the coastal communities, and transform the fishers among them into responsible resource users and managers. Local fishers will be provided with alternative income through specific fishery-related skills training, which will help prevent them from using destructive and illegal means of fishing. Increased income and greater access to basic social infrastructure facilities and services will improve health and nutrition and raise the living standards of the communities. As women will be involved in these various activities, the improvements will have a direct impact on their families socioeconomic status, health, and general well-being. The Project will result in substantial environmental benefits in the form of (i) an increase in live coral cover in areas previously bombed or mined and a resulting increase in the abundance of commercially important reef resources such as reef fish, turtles, bêches-de-mer, giant clams, trochus shells, pearls, and other mollusks such as cone shells and cowries; and (ii) a reduction in the extent of coral reef degradation. In addition, the Project is expected to produce nonquantifiable benefits arising from planning and policy development, institutional strengthening, and community resource management and development.

10 Risks and Assumptions The project risks that could adversely affect project implementation and the attainment of project objectives include: (i) the slow growth of corals that could delay the realization of project targets; (ii) institutional inadequacies in the Executing Agency and IAs, as well as community-based organizations and the communities themselves, for their roles in coastal resource management; (iii) uncertainties emanating from the evolving decentralization process and institutional arrangements at the provincial and district levels; (iv) persistence of nonadaptive, control-based attitudes on the part of national government agencies; and (v) government limitations in providing adequate financial and human resources for continued implementation of project activities and facilities beyond the term of the Project. Mitigating measures and specific assurances to address these risks have been included in the project design. v

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12 I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on a proposed loan to the Republic of Indonesia for the Coral Reef Rehabilitation and Management Project Phase II (the Project). 1 II. BACKGROUND A. Performance Indicators and Analysis 2. Indonesia is the world s largest archipelagic nation, with more than 17,000 islands and 81,000 kilometers (km) of coastline. Its coastal and marine waters cover an area of 5.8 million square kilometers (km 2 ), comprising 3.1 million km 2 of territorial and archipelagic seas and 2.7 million km 2 of exclusive economic zones. The coastal zone is a highly productive ecosystem that serves as an important base for the country s economic growth. Coastal habitats play an important role in the daily lives of the people in terms of livelihood, economic output, and food production. Over 55% of the national fishery harvest comes from capture fisheries in coastal areas. Some of the richest areas of biodiversity are found in the coastal zone of the country, and include coral reefs, mangrove swamps, seagrass beds, lagoons, and estuaries. Indonesia s coastal zone is home to 2,500 species of mollusks, 2,000 species of crustaceans, six species of sea turtles, 30 species of marine mammals, and over 2,000 species of fish. With its 70 genera and 450 species of corals covering 42,000 km 2 (or 16.5% of the global area of coral reefs), Indonesia is the coral biodiversity center of the world. 3. Indonesia s coral reefs form the key ecosystem on which the majority of the coastal inhabitants of the country rely for food, income generation, construction materials, and coastal protection. They are also of critical significance for science, education, pharmaceuticals, and global conservation and heritage. Healthy reefs can produce marine products worth $15,000 per km 2 per year, and are an important source of food and economic opportunities for about 67,500 coastal villages. Coastal and marine economic activities have been estimated to account for some 25 30% of Indonesia s gross domestic product and provide employment to about 20 million people. The reefs also play an important role in marine-based tourism and in providing white sand for beaches. The tourism value of coral reefs has been estimated at $3,000 per km 2 per year in low potential areas to $500,000 per km 2 per year in high potential sites. Fringing coral reefs also play key roles in dissipating wave energy, thereby protecting coastal lands from storms and wave erosion. The net benefits of coastal protection are estimated at $15, ,000 per km 2 of reef, depending on the value of the infrastructure. B. Analysis of Key Problems and Opportunities 4. The Indonesian coastal and marine resources sector suffers from policy, legal, and institutional constraints affecting resource management in the coastal areas. The National Coral Reef Policy drafted under Phase I Project is yet to be operationalized at the regional level. The Spatial Planning Act 24/1992, which provides the framework and legal basis for natural resources planning and resource allocation, needs to be amended for consistency with the provisions of recent laws on decentralization. Law 22/1999 on Regional Governance and Law 25/1999 on Financial Balance between the Central and Regional Governments have added new 1 The Asian Development Bank (ADB) provided funds to the Coral Reef Rehabilitation and Management Project Phase I (Loan 1613-INO) as well as an attached technical assistance grant (TA 3001-INO) to design the proposed investment project. The project framework for the proposed Project is in Appendix 1.

13 2 dimensions to governance and natural resources planning and management. 2 The lack of institutional capacity and preparedness of many local governments for the required tasks could exacerbate the problems of resource degradation. 5. There is, thus, an urgent need to strengthen the institutional capacity of provincial and district governments in participatory resource planning and management to enable them to exercise their newly mandated authority and responsibility in resource management. The BAPPEDAs (regional development planning agencies), at the provincial and district levels, and other provincial and district agencies, need strengthening to equip them for their significantly greater planning functions and role. It is also necessary to continue support for national initiatives in sector planning, information management, networking, and intersector coordination. As the jurisdiction for marine waters beyond the 12-nautical mile boundary remains with the central Government, continuing technical and financial support needs to be extended to concerned sector agencies to enable them to carry out national-level sector planning and policy formulation for appropriate resource management. 6. As resource degradation is exacerbated by the extreme poverty of artisan (small-scale) fishers, who engage in fishing as a livelihood of last resort, it is necessary to improve their income-earning potential and retrain them to undertake alternative livelihood activities so that they avoid destructive fishing practice. Viable livelihood activities in coastal areas and small islands have to be developed/introduced specifically for small-scale fishers. Local resource rights also have to be strengthened to ensure that investment benefits flow to the communities. 7. To address the foregoing identified needs and constraints, the proposed Project will be implemented in three provinces 3 where areas have been identified as having high poverty incidence and high-priority coral reefs. The Project supports the Government s priority on poverty reduction in coastal communities and the shift in focus from resource utilization to resource protection, conservation, and sustainable management. Although the sector issues today are basically the same as they were when Phase I Project was designed, the environment for resource management and project implementation has improved significantly as a result of a number of recent developments, including (i) enactment of Laws 22 and 25; (ii) formulation of a National Coral Reef Policy and a supporting National Coral Reef Strategy under Phase I of the Project; (iii) creation of Ministry of Marine Affairs and Fisheries (MMAF); (iv) heightened public awareness of the importance and benefits of coral reef resource conservation; and (v) stronger political will on the part of public officials to address institutional, regulatory, and enforcement issues that plagued coral reef management in the past. 8. The Project will be the second of three phases of a multiyear initiative funded by multiple agencies 4 to strengthen the management and conservation of Indonesia s coral reefs and Law 22/1999 on Regional Governance calls for the devolution of jurisdiction over living and nonliving coastal resources out to the territorial limits of 12 nautical miles from the low tide line to provincial and district governments. Five other provinces have been provisionally identified for possible funding under a World Bank/Global Environment Facility loan, namely, Southeast Sulawesi, South Sulawesi, North Sulawesi, Maluku, and Papua. Phase I is cofinanced by the World Bank, Global Environment Facility, and ADB. Parallel financing is provided by the Australian Agency for International Development (AusAID), which joined the Project after the approval of the Project by the World Bank and ADB. The combined investment of these agencies in Phase I ( ) is approximately $23 million; the Government invested about $8 million. Phase I will be completed by October 2003.

14 3 associated ecosystems. 5 An independent evaluation of Phase I 6 showed that the Project had successfully developed and established a comprehensive framework and programs of national policy; monitoring, control, and surveillance; public awareness; information and monitoring; and research in support of coral reef management. Specifically, the assessment indicated (i) a very high level of community involvement in coral reef resource management in the project areas, resulting in a significant reduction in illegal and destructive fishing and coral mining in most of the project sites by more than 50% in some cases; (ii) greater public awareness of the importance of coral reef resource management; and (iii) stronger political will for coastal resource management and poverty reduction at all levels of government. 9. However, the limited geographic coverage of Phase I has resulted in limited impacts on altering coral reef use patterns or on improving institutional effectiveness to coordinate coral reef management. This is because of (i) limited resources available for community-based management (CBM) and alternative income-generating activities; (ii) the lack of a supportive legal framework and weak enforcement of regulations; (iii) fragmented field implementation due to lack of cohesiveness between project components; (iv) the lack of a strategic approach and capacity in local government agencies to meet their enhanced role under the Law 22/1999 for coastal resource management; and (v) inadequate provision of basic social services and few tangible returns to poor coastal communities. 10. Other lessons from Phase I include the following: (i) coral reef protection cannot be successful unless there is a strong legal and enforcement regime; (ii) a balance must be achieved between activities aimed purely at reef conservation and those targeting improvements in the quality of life of the communities; (iii) a broader ecosystem-based approach to address coral reef and biodiversity conservation is more effective than narrowly focused interventions; (iv) community improvement should emphasize sustainable socioeconomic activities that promote alternative livelihood, and social infrastructure projects should conserve resources, improve public health, or reduce pollution; and (v) considerable flexibility should be allowed in tailoring programs to the very diverse cultural, socioeconomic, and biophysical conditions in different localities in Indonesia. 11. Incorporating lessons from Phase I and other similar funding agency-assisted projects in the sector, 7 the Project will be cohesive in its design. The Project will adopt a holistic approach to coastal resource management and provide poor coastal communities with basic social services, social infrastructure, and income-generating opportunities to balance environmental and resource management with socioeconomic development. It will place heavy emphasis on the active participation of project beneficiaries, local government institutions, and nongovernment organizations (NGOs) in the planning and implementation of resource management programs. 12. The Project is in line with the Government s current Medium-term Development Program (PROPENAS) and the Guidelines of State Policy ( ). It will assist the Government s poverty reduction thrust, which gives priority to developing income-generating activities in the coastal zone and small islands, particularly for small-scale fishers. The Project The Project was planned for implementation in three phases over 15 years. Phase I, the Initiation Phase, consisted of intensive resource rehabilitation and management activities in four pilot sites (Riau, South Sulawesi, Irian Jaya, and Nusa Tenggara Timur) as well as national-level activities aimed at establishing a viable policy and legal framework and strategy for coral reef management. Phases II and III, each to be implemented over a 6-year period, are intended to be the Acceleration Phase and Expansion Phase, respectively. The International Union for the Conservation of Nature (IUCN) conducted the evaluation of Phase I in June See Appendix 3 for more information on recent external assistance to the sector.

15 4 likewise supports the overarching poverty reduction goal of the Asian Development Bank (ADB) and its country and sector strategies 8 and is complementary to ongoing projects funded by ADB and other external agencies aimed at benefiting coral reefs, either at the local or regional level. 9 It is also supportive of government-funded poverty reduction programs, including the Inpres Desa Tertinggal (IDT) 10 implemented in a number of coastal villages in the country. III. THE PROPOSED PROJECT A. Objectives 13. The proposed Project is the second phase of a national coral reef rehabilitation and management program whose overall goals are healthy coral reef ecosystems and prosperous coastal communities. The objectives of the Project are to (i) enhance the national and local capacity to manage the country s coral reef resources and (ii) rehabilitate and effectively manage priority coral reef ecosystems, thereby raising income levels and improving living standards among poor coastal communities. The Project will be implemented in six districts in three provinces. These districts are: (i) Kota Batam, Kepulauan Riau, and Natuna in Riau; (ii) Nias and Tapanuli Tengah in North Sumatra; and (iii) Mentawai in West Sumatra. These priority districts contain more than 300,000 hectares (ha) of inshore coral reefs, representing some 98% of the total reefs in the three provinces. They also have at least 450 coastal villages, of which about 87% have adjacent reefs and depend predominantly on fisheries for their livelihood. In each district, core sites for CBM will be selected, based on agreed selection criteria (Appendix 4). B. Components and Outputs 14. The Project will comprise two major components: (i) institutional strengthening and project management and (ii) community-based resource management and development. The first component will comprise (i) strengthening of national and regional institutions in policy, strategy, and guideline formulation and resource planning and management; (ii) establishment and strengthening of a network of coral reef information and training centers (CRITCs); (iii) human resources development (HRD) and extension; and (iv) project management support. The second component will include (i) community empowerment, (ii) community resource management, (iii) community social services and infrastructure development, and (iv) community livelihood and income generation. 1. Institutional Strengthening and Project Management 15. The Project will aim at (i) strengthening national and regional public sector institutions responsible for coral reef management in the areas of coral reef policy and strategy formulation and planning; (ii) supporting the establishment of a network of CRITCs that will enable 8 ADB s Country Strategy and Program ( ) for Indonesia includes environmental management and human and social development. Within this framework, ADB s assistance to the marine and coastal sector of Indonesia focuses on (i) resource evaluation, planning, and sustainable management; (ii) environmental protection and social development; (iii) human resources development; and (iv) support for decentralized resource management. 9 These include the (i) Coastal Community Development and Fisheries Resource Management Project (Loans: 1570/1571 [SF]-INO); (ii) Marine and Coastal Resources Management Project (Loan 1770 [SF]-INO); (iii) USAIDfunded Natural Resources Management Project; (iv) Strategy Study for Marine and Coastal Resources Use and Coastal Environmental Management funded by the Canadian International Development Agency; and (v) the Nature Conservancy-supported pilot project at the marine park within the Komodo National Park. 10 The IDT program for poverty reduction covers around 28,000 IDT villages and has funds amounting to about Rp520 billion per year.

16 5 networking, information sharing/exchange, and technical direction and coordination across project sites, between the national center and the regional centers, and between the national center and other government agencies implementing similar projects; and (iii) equipping the project executing and implementing agencies, NGOs, and project beneficiaries with the skills required for effective project implementation. a. Strengthening of National and Regional Government Institutions 16. National, regional, and local government agencies will be assisted in the development of policies, strategies, guidelines, and regulations for sustainable coral reef utilization and management, particularly in light of the devolution of coastal resource management functions to the regional governments. At the national level, the Project will strengthen the policy-making, planning, and regulatory functions of MMAF and its concerned directorates. Training and technical support will be provided to other concerned ministries, such as Environment, Forestry, Home Affairs, Tourism and Culture, Education, and the Navy. It will also support policy development work in other sector agencies, including BAPPENAS (National Development Planning Agency), which has jurisdiction over marine parks. 17. The Project will support each target province and district government in the review and development of an appropriate regional policy and legal framework for sustainable coral reef use and protection. The regional CRITCs and regional project implementation units (RPIUs), will assist regional governments in (i) reviewing existing laws, regulations, and traditional rights and practices on coral reef management, (ii) determining the need to amend existing laws or relevant regulations to promote more effective enforcement or to enact new laws consistent with national guidelines on coral reef management and/or to recognize traditional rights, and (iii) drafting required legal amendments or enacting new laws for sustainable coral reef management. To improve law enforcement, the Project will assist regional governments in (i) developing appropriate mechanisms for interagency coordination, (ii) institutionalizing procedures and practices for transparency and participation in decision-making processes for resource allocation and management, and (iii) implementing regulatory and other related functions that have been devolved to them by virtue of Law Each participating district will formulate a marine action strategy and a corresponding coral reef management plan (CRMP) that will include a district spatial plan to guide the allocation of marine resources. 11 The marine action strategy and CRMP will be prepared through a participatory process that will involve the local communities and will be facilitated by NGOs, fishery extension workers, and other extension services. The planning process will be based on the findings of a prior rapid resource and ecological assessment conducted by the Indonesian Institute of Sciences (LIPI) or academic and research institutions. CRMPs will include pilot activities intended to address identified priority issues and opportunities, including community-based monitoring, control, and surveillance to address issues of destructive and illegal fishing. 19. The regional governments will be assisted by MMAF and project management office (PMO) consultants in the establishment of marine management areas and the conduct of community-based enforcement and compliance at selected sites in target districts. Marine management areas will be co-management areas aimed at a more effective management of issues common to neighboring villages as well as external issues such as sand mining, trawling, and biodiversity conservation. Marine management areas will encompass the local marine 11 See Supplementary Appendix B for the CRM planning process and plan framework.

17 6 areas of several villages and could extend to up to 25,000 ha. Marine management areas will be identified, delineated, and pilot-tested in each target district. Under the overall supervision of MMAF and the regional governments, with support from the sector agencies, regional governments will organize and manage the various activities involved in marine management area establishment and local enforcement and compliance. The MMAF and regional CRITCs will assist in the conduct of field assessment activities and liaison between the community, local government, and the communities. They will also assist in the conduct of marine management area training activities and provision of technical advice, and will organize co-management of local enforcement and compliance activities, including joint local patrols and reef watchers. b. Network of Coral Reef Information and Training Centers 20. The network of CRITCs established in Phase I will organize and link technical programs in support of coral reef protection and management and ensure appropriate technical direction, support, and integration of approaches and actions. The CRITCs will support each others programs by sharing resources and results, and by exchanging information and lessons as well as successful tools, strategies, and methodologies. 21. Research. The Project will provide funds for national and local research in support of coral reef management and livelihood development using research expertise available in the country. The national research program will be carried out by LIPI, MMAF, or other academic and research institutions, or consortia of public and private organizations under the overall direction and supervision of the national CRITC. At the regional level, research activities will be conducted under the supervision of the regional CRITCs with support from the national CRITC/LIPI, as required. Research studies to be commissioned by the national CRITC, through the project implementation unit at LIPI (PIU-LIPI), will include strategic studies of national significance such as those associated with policy development, biotechnology, climate change, fish stocks, trade in corals, trawling, biodiversity, and pollution. Research will focus on studies with practical application in CBM, including coral reef ecology, ecological surveys of project sites, and socioeconomic surveys of target communities. 22. Benefit Monitoring and Evaluation (BME). LIPI will oversee the extension of the BME system and the Coral Reef Spatial Information System developed under Phase I to the Phase II districts and target sites to facilitate the evaluation of project impacts/benefits. BME will focus on quarterly creel surveys, semiannual reef health surveys, and socioeconomic surveys conducted every 3 years, each providing feedback to communities and partner organizations on the progress of project implementation. The national CRITC will play a key role in aggregating selected data to provide a report card on the state of coral reef ecosystems and resource use activities every 3 years. The regional CRITCs will coordinate and maintain local information management systems required for BME with the participation of village groups/associations and in conjunction with local government agencies, research/academic institutes, and NGOs. They will also establish and develop BME for the Project s field operations and the associated Coral Reef Spatial Information System, and provide technical advice and training to local agencies in the use of these systems. 23. Information Management. The national CRITC will be set up as the national reference point or clearinghouse for up-to-date information on coral reef management in the country. It will provide technical support and guidance to the regional CRITCs in database development, maintenance, and reporting, and collaborate with them in the development of an integrated information strategy and system design that will facilitate the flow and exchange of information between project locations and programs and with partner organizations. At each regional

18 7 CRITC, an information unit will be set up to house a library and documentation center. The regional CRITCs will coordinate and maintain local information management systems with an emphasis on collation, packaging, and dissemination of technical information to the managers involved in national and district-wide planning, pilot initiatives, and CBM. c. Human Resources Development and Extension 24. HRD and Training. The Project will develop an HRD program for MMAF, LIPI, and regional agencies (such as dinas Kelautan Dan Perikanan [provincial/district Marine Affairs and Fisheries Service] and BAPPEDA). The HRD program will be developed by senior management of MMAF/Directorate General of Coasts and Small Islands (DGCSI) and PMO with inputs from LIPI, the regional governments, and the RPIUs, and with the assistance of an international institutional development specialist. Districts with high degrees of ethnicity and remoteness will be given priority by the Project s HRD and capacity-building programs. The Project will support a wide range of national- and local-level training and village development. A master training plan will be drawn up by MMAF/PMO and LIPI/PIU to be implemented by concerned government agencies or contracted out to suitable local and international academic institutes, private consulting firms, or NGOs. Training contractors will be engaged by MMAF/PMO for sectorrelated training or by LIPI/PIU for CRITC-related training The local training programs will consist of short courses, training workshops/seminars, exchange visits or study tours, and overseas and in-country fellowships. Training will cover a broad range of subjects, including (i) management skills and systems, including participatory techniques, policy development, project planning and management, monitoring, recording and reporting, and database and information management; (ii) marine resource management, including legal and regulatory aspects, spatial planning, strategy development, CBM, environmental impact assessment, resource conservation and sustainable use, and species protection; and (iii) community and social development, including microenterprise development, financial management, and community empowerment. 26. Extension. The PMO will develop a comprehensive extension program to (i) equip local resource users and managers in coral reef management, (ii) strengthen coastal communities to master technical skills for livelihood development and income generation, (iii) disseminate the results of CBM activities undertaken by the Project in target districts, and (iv) promote and facilitate additional investment by the private sector in successful microenterprises pilot-tested at the core sites. The extension program, which will systematically target priority groups in each district, will be implemented in cooperation or collaboration with regional sector agencies or existing government extension programs in the project sites. The RPIUs will be responsible for coordinating the delivery of extension services by extension personnel from the dinas Kelautan Dan Perikanan and other regional government agencies, with the assistance of NGOs involved in community empowerment activities. d. Project Management Support 27. Management support will be provided to ensure timely and effective implementation of project activities, as well as the cost-efficient utilization of funds and other project resources. Project management support will comprise (i) operations of a PMO in MMAF, an NPIU in LIPI, 12 The training plan will include (i) areas for training, diploma, and degree programs to be selected; proposed institutions; and duration of training; (ii) the justification for selecting international institutions for short-term study visits and the proposed competitive selection criteria for local training institutes and international academic institutions; and (iii) trainee selection criteria and proposed trainees.

19 8 and RPIUs in the six project districts; (ii) provision of specialist support through international consulting firms and associated domestic consultants; (iii) engagement of NGOs, local academic and research institutes, and other contractors to carry out various project activities; (iv) provision of equipment, vehicles, and supplies and materials; and (v) setting up of accounting, monitoring, and reporting systems. 2. Community-Based Resource Management and Development 28. Community Empowerment. The RPIUs will contract the services of NGOs and/or academic institutions to assist in organizing, training, and empowering the local communities at the project sites for coral reef management, and social and livelihood development. 13 The NGOs will carry out social preparation and community organizing activities and facilitate participatory planning and decision making at the village level within the framework of an overall marine action strategy to ensure the consistency of interventions with project goals. They will also assist the village government in establishing a village representative forum (badan perwakilan desa or BPD) or similar equivalent institutions, where none exists, and organize pokmas to serve as their counterparts in project implementation. Finally, the NGOs, jointly with government extension personnel, will provide training and technical/administrative support to the pokmas and other community groups to develop their capacity to organize, manage, and administer CBM and livelihood activities. 29. Community Resource Management. The Project will support local communities in the management and use of their natural resources through a series of activities in the implementation of CRMPs (para. 18). The CRMPs will be developed by the communities, with the assistance of NGOs and RPIUs, and will contain recommended site-specific resource management strategies and corresponding CBM programs. The CRMPs, once approved by the local government, will be implemented by the pokmas and other local stakeholders under the overall supervision of the BPD and with assistance from the concerned RPIUs. 30. Community Social Services and Infrastructure Development. The Project will provide selected villages with assistance for village and community development projects to improve community welfare, health and sanitation, and education. Potential village development projects include (i) basic services such as potable water supply, solid waste management and sanitation facilities, primary health facilities, and support to primary schools; (ii) basic infrastructure development like pathways, boat moorings, jetties, site and boundary markers, and village meeting places; and (iii) community environmental protection, rehabilitation, and enhancement projects such as soil erosion control, village tree planting, and mangrove restoration. The specific social services and infrastructure facilities to be provided to the target villages will depend on the identified needs of the local communities, as gauged through socioeconomic and needs assessment surveys conducted by NGO contractors Community Livelihood and Income Generation. NGOs and government extension staff will work closely with BPD and pokmas to assist the communities in upgrading their socioeconomic status. More specifically, NGOs and extension workers will (i) assist the 13 NGOs will be selected based on criteria including (i) geographic experience, (ii) work experience, (iii) technical and financial capacity, (iv) longevity, (v) recognition, (vi) gender orientation and experience in applying participatory approaches, and (vii) ethical practices. Out of two facilitators per village, one will be a woman. 14 As the envisaged social infrastructure facilities are of a small scale and will be established on public land, no resettlement problems are anticipated. Nevertheless, PMO will develop detailed selection criteria for the location and type of facilities or interventions proposed for establishment to prevent resettlement-related problems during project implementation.

20 9 organized groups or interested private individuals in identifying, developing, pilot-testing, and implementing microenterprises and other livelihood opportunities in the area; 15 (ii) provide the organized community groups with extensive technical support services, including skills training and extension, in particular, to transform them into microentrepreneurs; (iii) promote group savings mobilization; (iv) link potential borrowers to existing microfinancing schemes that could be tapped for identified income-generating projects; and (v) provide marketing assistance and linkages with input suppliers and output buyers. 32. NGOs or other training contractors will provide training to the organized community groups and interested individuals in credit management, entrepreneurial skills, and business management and operation. The NGOs will also disseminate information on existing microcredit schemes in the project provinces and districts to the BPD, pokmas, other groups and individuals, and assist them in preparing project proposals for funding through suitable microcredit facilities. 16 The Project will also assist small producers, processors, and other microentrepreneurs through an inputs assistance program to be operated using a part of the ADB loan proceeds. 17 C. Special Features 33. The Project will adopt a holistic approach to the management of coastal resources, particularly coral reefs and associated ecosystems. It will focus on few key provinces where the costs of delaying, and the benefits from expediting, such a project are greatest. The Project will be nationally coordinated but implemented under a decentralized management, with the bulk of its capacity-building efforts to take place at the district (kabupaten) level and, to a lesser degree, at the province level. Close coordination and effective linkages will be established between national, regional, and local governments within the context of their defined roles and responsibilities in project implementation. Finally, the Project will adopt a participatory process approach by which coastal communities will have the opportunity to organize themselves with the assistance of project facilitators, identify their specific needs, and plan and implement their community-specific resource management and livelihood programs based on their own needs. D. Cost Estimates 34. The total project cost, including physical and price contingencies and interest during construction, is estimated at $41.25 million equivalent, comprising a foreign exchange component of $8.27 million (20% of total cost) and a local cost of $32.98 million equivalent (80% of total cost). The estimates include the provision for $0.92 million equivalent in taxes and duties. The cost estimates are summarized in Table 1, and details are in Appendix Some 35 different types of microenterprises have been identified during the project preparatory technical assistance as having potential for development under the Project. These include, among others, brick making, backyard farming, poultry and livestock operation, goat fattening, fish processing (e.g., pindang, fish crackers), mariculture, seaweed farming, and ecotourism. 16 ADB-financed Rural Income Generation Project (Loan No INO). 17 Essential items of equipment will be allocated to qualified and approved candidates on condition that they return one set of the equipment (or products of equivalent value) for transfer to other beneficiaries. The items involved in this program will vary from one site to the other, but may include insulated fish boxes for fish transport, solar driers, pindang boilers, hand casts, pearl or seaweed rafts, and fish cages (Supplementary Appendix C).