ASIAN DEVELOPMENT BANK PPA: INO 22264

PPA: INO 23212 PPA: INO 20104

PROJECT PERFORMANCE AUDIT REPORT

ON

THREE INTEGRATED URBAN INFRASTRUCTURE DEVELOPMENT PROJECTS:

SECONDARY CITIES URBAN DEVELOPMENT (SECTOR) PROJECT BOTABEK URBAN DEVELOPMENT PROJECT

BANDAR LAMPUNG URBAN DEVELOPMENT PROJECT (Loans 983/984[SF]/1077/1078-INO)

IN

INDONESIA

November 2000

CURRENCY EQUIVALENTS Currency Unit – Rupiah (Rp)

Secondary Cities Urban Development (Sector) Project (Loans 983/984[SF]-INO)

At Appraisal (September 1989)

At Project Completion (June 1996)

At Operations Evaluation (April 2000)

Rp1.00 = $0.0006 Rp1.00 = $0.0004 Rp1.00 = $0.0001 $1.00 = Rp1,785 $1.00 = Rp2,341 $1.00 = Rp7,877

BOTABEK Urban Development Project (Loan 1077-INO)

At Appraisal (November 1990)

At Project Completion (December 1996)

At Operations Evaluation (March 2000)

Rp1.00 = $0.0005 Rp1.00 = $0.0004 Rp1.00 = $0.0001 $1.00 = Rp1,875 $1.00 = Rp2,352 $1.00 = Rp7,412

Bandar Lampung Urban Development Project (Loan 1078-INO)

At Appraisal (November 1990)

At Project Completion (December 1996)

At Operations Evaluation (April 2000)

Rp1.00 = $0.0005 Rp1.00 = $0.0004 Rp1.00 = $0.0001 $1.00 = Rp1,875 $1.00 = Rp2,348 $1.00 = Rp7,877

ABBREVIATIONS

ADB – Asian Development Bank BOTABEK – Bogor, Tangerang, and Bekasi districts DGHS – Directorate General of Human Settlements EA – Executing Agency EIRR – economic internal rate of return FIRR – financial internal rate of return GLD – guided land development ha – hectare IA – Implementing Agency IUID – integrated urban infrastructure development IUIDP – integrated urban infrastructure development project KIP – kampung improvement program km – kilometer l/s – liter per second M&E – monitoring and evaluation MIIP – market infrastructure improvement program NPV – net present value O&M – operation and maintenance OEM – Operations Evaluation Mission PBME – project benefit monitoring and evaluation PCR – project completion report PDAM – local water enterprise PMU – project monitoring unit PPAR – project performance audit report TA – technical assistance UFW – unaccounted-for-water

NOTES

(i) The fiscal year (FY) of the Government and the Executing Agencies ends on 31 March. (ii) In this report, "$" refers to US dollars.

Operations Evaluation Office, PE-556

CONTENTS

Page

BASIC DATA ii EXECUTIVE SUMMARY 1 MAPS Error! Bookmark not defined. I. INTRODUCTION 1

A. Background 1 B. Basic Information on the Three Projects 1 C. Completion and Self-Evaluation 2 D. Operations Evaluation 3 E. Project Performance Audit Report 4

II. THEMATIC EVALUATION 5

A. Comparison of IUIDPs with Standalone Projects 5 B. Impact of the Economic Crisis on Project Sustainability 7 C. Measuring Efficiency of Urban Service Delivery 8

III. PERFORMANCE EVALUATION OF THE THREE PROJECTS 9

A. Planning and Implementation Performance 9 B. Achievement of Project Purpose 11 C. Achievement of Development Impacts and Goals 14

IV. OVERALL ASSESSMENT 15

A. Secondary Cities Project 15 B. BOTABEK Project 16 C. Bandar Lampung Project 16 D. Assessment of ADB and Borrower Performance 17 E. Lessons Identified 18 F. Follow-Up Actions 19

APPENDIXES 20

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BASIC DATA Secondary Cities Urban Development (Sector) Project (Loans 983/984[SF]-INO)

A. Project Preparation/Institution Building

TA No. TA Name Type Person-Months

Amount ($)

Approval Date

725a Technical Assistance

Program Loan TA Loan 25,000,000 18 December 1984

= not available; TA = technical assistance. a A subloan (No. 4: West Java and Sumatera Integrated Urban Development Project, approved on 6 June 1986, for $5.38

million) under this TA loan was used to finance the preparation of supplementary feasibility studies and detailed design.

B. Key Project Data ($ million)

As per ADB Loan

Documents

Actual Total Project Cost 150.21 166.93 Foreign Exchange Cost 62.70 67.09 Local Currency Cost 87.51 99.84 ADB Loan Amount/Utilization

983-INO 70.00 68.51 984-INO(SF) 50.00 54.29

ADB Loan Amount/Cancellation 983-INO 1.49 984-INO(SF) 1.47

C. Key Dates

Expected Actual Appraisal 24 May-8 Jun 1989 Loan Negotiations 9-11 Oct 1989 Board Approval 9 Nov 1989 Loan Agreement 16 Apr 1990 Loan Effectiveness 15 Jul 1990 21 Jun 1990 Project Completion 31 Dec 1995 30 Jun 1996 Loan Closing 30 Jun 1996 25 Mar 1997 Months (effectiveness to completion) 66 72

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D. Key Performance Indicators (%) Appraisal PCR PPARa Economic Internal Rate of Return

Drainage Kabupaten Karawang 43.5 15.9 Kotamadya Banda Aceh 18.0 30.1 Kotamadya Tanjung Balai 63.0 25.1 Kabupaten Deli Serdang 75.0 21.4 Kotamadya Bukit Tinggi 18.7 22.6

KIP Kabupaten Karawang 40.0 28.8 Kotamadya Banda Aceh 17.0 31.0 Kotamadya Tanjung Balai 47.0 26.0 Kabupaten Deli Serdang 55.0 22.0 Kotamadya Bukit Tinggi 22.7

Urban Roads Kabupaten Karawang 44.7 Kotamadya Banda Aceh 22.0 Kotamadya Tanjung Balai 34.0 Kabupaten Deli Serdang 60.0 Kotamadya Bukit Tinggi 354.1

Financial Internal Rate of Return

Water Supply Kabupaten Karawang 15.0 11.7 Kotamadya Banda Aceh 24.0 11.5 Kotamadya Tanjung Balai 16.0 11.3 Kabupaten Deli Serdang b 11.6 Kotamadya Bukit Tinggi 12.5

Sanitation Kabupaten Karawang 18.0 12.9 Kotamadya Banda Aceh 23.0 12.7 Kotamadya Tanjung Balai 16.0 12.5 Kabupaten Deli Serdang b 12.0 Kotamadya Bukit Tinggi 18.2 12.0

Solid Waste Kabupaten Karawang 14.0 10.9 Kotamadya Banda Aceh 32.0 11.1 Kotamadya Tanjung Balai 12.0 11.8 Kabupaten Deli Serdang 14.0 11.0 Kotamadya Bukit Tinggi 10.8

MIIP Kabupaten Karawang 3.0 12.8 Kotamadya Banda Aceh 11.6 Kotamadya Tanjung Balai 12.0 Kabupaten Deli Serdang 12.8 Kotamadya Bukit Tinggi 12.4

— = not calculated; KIP = kampung improvement program; MIIP = market infrastructure improvement program; PCR = project completion report; PPAR = project performance audit report. a The Operations Evaluation Mission did not estimate EIRRs as reliable information is unavailable. b FIRR was not calculated since this component was very small.

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E. Borrower Government of the Republic of Indonesia

F. Executing Agency Directorate General of Human Settlements G. Mission Data Type of Mission No. of Missions No. of Person-Days Appraisal 1 96 Project Administration

Special Project Administration 2 13.3 Review 7 69.8 Mid-Term Review 1 24 Project Completion 1 24 Operations Evaluationa 1 36

a The Operations Evaluation Mission evaluated two projects simultaneously: (i) Loan 1078-INO: Bandar Lampung Urban Development Project, and (ii) Loans 983/984(SF)-INO: Secondary Cities Urban Development (Sector) Project.

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BASIC DATA BOTABEK Urban Development Project (Loan 1077-INO)

A. Project Preparation/Institution Building TA No.

TA Name

Type

Person- Months

Amount ($)

Approval Date

574 West Java Urban

Development Project PP 250,000 23 December 1983

725a Technical Assistance Program Loan

TA Loan 25,000,000 18 December 1984

1471 BOTABEK Institutional Development

A&O 56 600,000 31 January 1991

1472 Urban and Regional Development of Eastern Islands

PP 60 600,000 31 January 1991

1473 Environmental Management of Urban Development Projects

A&O 40 500,000 31 January 1991

— = not available; A&O = advisory and operational; PP = project preparatory; TA = technical assistance. a A subloan (No. 7: West Java (BOTABEK) Urban Development Project, approved on 18 June 1987, for $1.944 million)

under this TA loan, was used to finance the preparation of a supplementary feasibility study and detailed engineering designs for the proposed project.

B. Key Project Data ($ million)

As per ADB Loan Documents

Actual

Total Project Cost 111.60 101.91 Foreign Exchange Cost 47.90 49.64 Local Currency Cost 63.70 52.27 ADB Loan Amount/Utilization 80.00 76.12 ADB Loan Amount/Cancellation 3.88 C. Key Dates Expected Actual Appraisal 30 Jul-14 Aug 1990 Loan Negotiations 21-22 Nov 1990 Board Approval 31 Jan 1991 Loan Agreement 01 Mar 1991 Loan Effectiveness 30 May 1991 11 Apr 1991 Project Completiona Mar 1996 Dec 1996 Loan Closing 30 Sep 1996 1 Dec 1997 Months (effectiveness to completion) 58 69 a Para. 13 of the PCR states “except for water supply in Tangerang district, however, all components of the Project were

substantially completed by 31 December 1996”.

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D. Key Performance Indicators (%) Appraisal PCR PPAR Economic Internal Rate of Return

Drainage (Overall) — — 15.7 Bogor 41.6 59.1 8.4 Tangerang 25.3 116.4 30.9 Bekasi 23.1 39.3 14.7

KIP/MIIP (Overall) — — 22.6 Bogor 50.8 115.5 19.2 Tangerang 24.5 212.3 26.1 Bekasi 24.5 250.7 27.7

GLD (Overall) — — 2.4 Bogor — — — Tangerang 51.5 136.8 -0.5 Bekasi 45.1 150.3 5.3

Urban Roads (Overall) — — 46.1 Bogor 29.9 48.8 45.0 Tangerang 207.1 59.7 62.9 Bekasi 44.3 41.2 39.0

Sanitation (Overall) — — 12.2 Bogor — — 15.0 Tangerang — — 13.0 Bekasi — — 9.4

Solid Waste (Overall) — — 17.8 Bogor — — 36.0 Tangerang — — 11.9 Bekasi — — 17.9

Water Supply (Overall) — — 22.0 Bogor — — 18.0 Tangerang — — 24.8 Bekasi — — 21.0

Financial Internal Rate of Return Water Supply

Bogor 22.0 7.7 — Tangerang 64.0 10.6 — Bekasi 12.0 7.9 —

Solid Waste Management Bogor 37.0 35.1 — Tangerang 12.7 14.5 — Bekasi 4.5 20.4 —

Sanitation Bogor 8.4 9.8 — Tangerang 24.9 10.6 — Bekasi 28.0 9.4 —

— = not available, not calculated; GLD = guided land development; KIP = kampung improvement program; MIIP = market infrastructure improvement program; PCR = project completion report, PPAR = project performance audit report. E. Borrower Government of the Republic of Indonesia F. Executing Agency Directorate General of Human Settlements

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G. Mission Data Type of Mission No. of Missions No. of Person-Days Appraisal 1 59 Project Administration

Review 7 85 Mid-Term Review 1 39 Project Completion 2 32 Operations Evaluation 1 24

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BASIC DATA Bandar Lampung Urban Development Project (Loan 1078-INO)

A. Project Preparation/Institution Building TA No.

TA Name

Type

Person- Months

Amount ($)

Approval Date

725a Technical Assistance

Program Loan TA Loan — 25,000,000 18 December 1984

1474 Bandar Lampung Water Supply and Sewerage Disposal Study

A&O 42 320,000 31 January 1991

1475 Bandar Lampung Urban Planning and Transport Study

A&O 59 440,000 31 January 1991

— = not available; A&O = advisory and operational; TA = technical assistance. a A subloan (No. 6: Bandar Lampung Integrated Urban Development Project, for $1.36 million) under this TA loan was used

to finance the preparation of a supplementary feasibility study and detailed design for the proposed project. B. Key Project Data ($ million) As per ADB Loan

Documents

Actual Total Project Cost 47.14 49.98 Foreign Exchange Cost 20.50 19.02 Local Currency Cost 26.64 30.96 ADB Loan Amount/Utilization 33.00 30.77 ADB Loan Amount/Cancellation 2.23 C. Key Dates Expected Actual Appraisal 11-26 Jun 1990 Loan Negotiations 21-23 Nov 1990 Board Approval 31 Jan 1991 Loan Agreement 01 Mar 1991 Loan Effectiveness 30 May 1991 11 Apr 1991 Project Completion Jun 1996 Dec 1996 Loan Closing 31 Dec 1996 22 Oct 1997 Months (effectiveness to completion) 61 69

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D. Key Performance Indicators (%) Appraisal PCR PPAR Economic Internal Rate of Return Urban Flood Protection and Drainage 33.7 13.3 — KIP 34.5 30.1 —

Financial Internal Rate of Return Water Supply 9.7 6.0 — Solid Waste Management 7.8 6.9 — Human Waste Disposal 11.1 6.7 — — = not calculated; KIP = kampung improvement program; PCR = project completion report; PPAR = project performance audit report. E. Borrower Government of the Republic of Indonesia F. Executing Agencies Directorate General of Human Settlements Directorate General of Highways Directorate General of Water Resources Development G. Mission Data Type of Mission No. of Missions No. of Person-Days Appraisal 1 60 Project Administration

Review 7 69 Project Completion 1 17 Operations Evaluationa 1 36

a The Operations Evaluation Mission evaluated two projects simultaneously: (i) Loan 1078-INO: Bandar Lampung Urban Development Project, and (ii) Loans 983/984(SF)-INO: Secondary Cities Urban Development (Sector) Project.

EXECUTIVE SUMMARY

This project performance audit report covers the first three integrated urban infrastructure development projects (IUIDPs) in Indonesia: Loans 983/984(SF)-INO (Secondary Cities Urban Development [Sector] Project), Loan 1077-INO (BOTABEK Urban Development Project), and Loan 1078-INO (Bandar Lampung Urban Development Project). The common objectives of the projects were to improve urban living conditions and enhance urban management capabilities in their respective local governments. The Secondary Cities Project was appraised in June 1989 and two Asian Development Bank (ADB) loans ($70 million from ordinary capital resources and $50 million from the Asian Development Fund) were approved on 9 November 1989. The Bandar Lampung and BOTABEK projects were appraised in June and August 1990, respectively; the two ADB loans from ordinary capital resources for $33 million and $80 million, respectively, were approved on 31 January 1991.

The Secondary Cities Project contributed to rehabilitating and constructing urban

infrastructure in 51 secondary cities in nine provinces of Sumatra and West Java; the BOTABEK Project covered eight towns in three kabupatens of Bogor, Tangerang, and Bekasi; and the third project focused on the city of Bandar Lampung. The three projects included eight similar physical components, namely water supply, drainage, sanitation, solid waste, kampung1 improvement program (KIP), market infrastructure improvement program, urban roads, and guided land development (GLD). The water supply component accounted for more than 30 percent of each project’s cost, followed by urban roads, drainage, and sanitation. The Executing Agencies for the projects included the Directorate General of Human Settlements (DGHS) of the Ministry of Public Works, Directorate General of Highways, and Directorate General of Water Resources Development.

The Operations Evaluation Mission (the Mission) undertook a thematic evaluation, in addition

to a typical audit of individual components under each project, focusing on common issues, to draw lessons for ADB operations in the urban infrastructure development sector. The Mission also reviewed experiences of other aid agencies in Indonesia.

A. Comparison of IUIDPs with Standalone Projects

IUIDPs typically comprise components covering many sectors such as water supply, sanitation, roads, and housing, while standalone projects upgrade municipal services in one or two sectors. ADB finances both types of project. The Mission identified, from the experiences in the three evaluated projects, the following advantages of IUIDPs vis-à-vis standalone projects.

(i) Flexibility in Responding to Changing Needs. Needs for improving various items of

infrastructure and services change as urbanization proceeds. Some needs may be identified or may evolve only after project implementation begins. IUIDPs allow objective-oriented modifications of project design and components in such a way that the objective is best attained using the synergy available among sectors. The Bandar Lampung Project was most successful in demonstrating this advantage.

(ii) Ability to Incorporate Social and Environmental Concerns. IUIDPs allow social and

environmental concerns to be more effectively incorporated into urban infrastructure

1 A kampung is a densely populated settlement on the margins of an urban area.

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improvements. A sense of community ownership and participation, successfully established through the KIP component in all three projects, efficiently supported the delivery of social services.

(iii) Opportunities for Improving Urban Management. IUIDPs provide opportunities and

means to improve urban management, which inherently involves many functions, sectors, and agencies. Although the three projects were centrally planned as initial IUIDPs, the enhancement of development planning and management capabilities of local governments was an explicit objective of each project. For subsequent ADB projects, the project management setup has been integrated in the respective local governments.

The Mission established that IUIDPs were most appropriate for project cities in the

population range of 100,000-500,000. The efficiency of service delivery could be further improved by demand-side management, especially for environment-related components.

B. Impact of the Economic Crisis on Project Sustainability

The three projects were completed in 1996 and their facilities were fully operating when the economic crisis occurred. All the project completion reports (PCRs), which were prepared after the onset of the crisis in 1998, were concerned about the impact of the crisis on the projects. The Mission assessed the impact of the crisis on the performance of individual components under each project and identified the factors that affected the operation and maintenance (O&M) and the sustainability of project facilities. The Mission concurred with the PCRs that the impact of the crisis was felt most in the water supply and sanitation components. As the tariffs could not be raised, O&M was affected. But the impact of slower economic growth on the other project components varied. For example, as a sense of community ownership and participation was good in Bandar Lampung, O&M for all the other components was practically unaffected by the economic slowdown; in the BOTABEK project, a similar effect was visible in the KIP and market infrastructure improvement program components. The Mission also estimated the impact of the crisis on the efficiency of performance of BOTABEK project components, measured in terms of the economic internal rate of return (EIRR). The estimates revealed that, due to a strong sense of community ownership and participation, the project facilities continued to be highly efficient, in spite of the economic slowdown after the crisis.

C. Measuring Efficiency of Urban Service Delivery

To maximize the developmental impact of IUIDPs, which involve many sectors, proper monitoring and evaluation of service delivery is essential. The three projects aimed to improve urban living conditions and enhance urban management capabilities. In the Secondary Cities and BOTABEK projects, local governments considered the projects as investments for improving the physical infrastructure rather than vehicles for supporting the long-term delivery of services. Consequently, in the project benefit monitoring and evaluation activities, the government agencies relied on data on physical achievements for the components. The Mission observed that the delivery of services was mixed in the BOTABEK Project. In the Secondary Cities Project, the improvements were difficult to measure in the cities visited, as project contributions were small when compared to the need for these services. In contrast, the Bandar Lampung Project demonstrated that performance monitoring could be effectively carried out only by substantial community participation. In addition, such participation in monitoring contributed to improving O&M activities by stimulating a sense of ownership among beneficiary communities.

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D. Performance Rating of the Projects

1. Secondary Cities Urban Development (Sector) Project

The Project was ADB’s first IUIDP in Indonesia. It was complex, involving many implementing agencies and 27 project implementing units. During project implementation, DGHS extensively modified the project components to the extent that the project components were only partly relevant to the original objectives. Decisions on project modifications were made mostly at the provincial level, while fund allocation was centrally controlled. In addition, efficacy (in terms of achieving the project purpose of improving living conditions) was only efficacious. Allocation under the Project (approximately $2 million-$3 million equivalent) in many cities was relatively low compared to each city’s overall development budget. Consequently, local government involvement was limited, and community consultation minimal. The local water enterprises generally supplied only clean water but not potable water. Public toilets ceased to function after a few years of use due to lack of water from their associated hand pumps, lack of organized maintenance, and low demand for public toilets as households built individual toilets and septic tanks. The Mission did not estimate EIRRs, as reliable information was unavailable. Based on estimates in the PCR, efficiency is rated efficient. Sustainability is rated less likely for all components due to lack of ownership at the local government level. The Project’s contribution to institutional development is rated negligible. The Project did not include an advisory technical assistance for capacity building. Overall, the Project is rated less than successful.

2. BOTABEK Urban Development Project

All components, except the GLD component, were relevant. Efficacy is rated efficacious as the project purpose was generally achieved. However, the unaccounted-for-water levels were not reduced in all project cities. The effects of GLD in Bekasi and Tangerang were so small as to make it impossible to distinguish them from development spilling over from neighboring areas. Most roads improved by the Project were well used or in fact overused in some sections, resulting in early degradation of surface conditions as maintenance was less than adequate. The Mission observed varying conditions of drainage. In Bogor, roadside drains that were provided as part of the road improvements were physically in good condition, but the maintenance of secondary drains was problematic due to limited local participation. In Bekasi and Tangerang, maintenance of urban drainage works was tied to road maintenance, and it was better in Bekasi. The KIP was highly successful with community participation. The reestimated EIRRs confirmed that the project components were highly efficient. Sustainability is rated likely for all components. The KIP in Tangerang now includes training for entrepreneurs. The Project’s contribution to institutional development is rated little. The transfer of responsibility from the project monitoring unit to the local government for ownership of O&M was insufficient. Overall, the Project is rated successful.

3. Bandar Lampung Urban Development Project

The Project was highly successful in attaining the objectives of improving living conditions and enhancing urban management. The project components were highly relevant. Efficacy is rated highly efficacious. Although the Project was centrally planned and controlled, the city government played a major role in implementing some components under a clearly defined division of responsibilities, and in training and community information programs, supported by consultants. The Mission accepted the high EIRRs reported in the PCR for all the project components. Efficiency is rated highly efficient. Tariff collection for water supply covered almost 100 percent of consumers after 1996. Flood control works were very well done, aesthetically as well as technically, and

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enhanced a sense of security and social cohesiveness of local communities. Solid waste was collected daily, covering an increasing population, with collection fees charged to households and commercial entities, and disposed of in a sanitary landfill. Desludging and sludge treatment were fully operational using the trucks and facilities provided by the Project, although demand for the service was not as high as expected. Project sustainability is rated most likely. The O&M of all project facilities was highly satisfactory. Urban roads, notably those supported by ADB, were generally well maintained. Kampungs that were improved under the Project were generally well maintained. The Project made a moderate contribution to institutional development. The Mission observed, during the meetings at the mayor’s office and the field visits, a strong sense of ownership among the local government and communities. Overall, the Project is rated highly successful.

E. Lessons Identified

Of the many lessons identified from the evaluation exercise, the important one was that potable water need not be distributed through a piped water supply. In the project areas, the local water enterprises produce only clean water, not potable water. People prefer to buy drinking water from vendors who tap the shallow-well groundwater with hand pumps. Most tropical areas of developing member countries are endowed with sufficient annual rainfall for shallow groundwater to be the most accessible and sustainable source. The fundamental problem is the pollution of this groundwater, due to inadequate sanitation practices. This problem cannot be overcome by extending piped water supply alone, which requires greater investment. Potable water, which is in smaller quantities, is better delivered when distributed in bottles, through public-private sector participation.

F. Follow-Up Actions

The Mission provided early feedback from the evaluation to ADB’s Projects Department and the Executing Agencies through several workshops. ADB and the Government identified actions pending since the PCRs; they also appropriately incorporated, under ongoing projects, the additional project-specific follow-up actions suggested by the Mission.

I. INTRODUCTION

A. Background

1. The Asian Development Bank (ADB) had approved loans and technical assistance (TA) for the urban development and housing sector in developing member countries amounting to $3,546.85 million for loans, and $67.12 million for TAs as of February 2000. Of these, 14 projects have been evaluated. In 1997, an impact evaluation study,1 covering 12 loans in four countries, underscored important issues. This project performance audit report (PPAR) covers three integrated urban infrastructure development projects (IUIDPs) in Indonesia (Loans 983/984[SF]-INO, 1077-INO, and 1078-INO) that were evaluated.2 2. The projects were evaluated together, focusing on the sector issues that they have in common. This evaluation report therefore concentrates on such issues. A thematic evaluation of IUIDPs focusing on the synergies among these sectors was undertaken in this exercise (para. 14).

B. Basic Information on the Three Projects

3. The three IUIDPs were accorded high priority in the Government’s Fifth Five-Year Development Plan. They had similar general objectives: (i) to improve urban living conditions, and (ii) to enhance urban management capabilities. The three projects included eight similar physical components: water supply, drainage, sanitation, solid waste, kampung3 improvement program (KIP), market infrastructure improvement program (MIIP), urban roads, and guided land development (GLD). The water supply component accounted for more than 30 percent of the project cost, followed by urban roads, drainage, and sanitation. The details of the rationale, formulation of main objectives, scope of activities, cost, financing, and executing arrangements for each project are summarized in Appendix 1. Each project is briefly described below.

4. Secondary Cities Urban Development (Sector) Project. The Secondary Cities Project was ADB’s first IUIDP in Indonesia.4 The Project was appraised in June 1989 and approved on 9 November 1989. ADB approved two loans to finance this project: $70 million from the ordinary capital resources (OCR) and $50 million equivalent from the Asian Development Fund. The Project contributed to rehabilitating and constructing urban infrastructure in 51 secondary cities in nine provinces of Sumatra and West Java.5 ADB adopted the sector lending approach and subprojects

1 IES: REG 97019: Impact Evaluation Study of Bank Assistance to the Urban Development and Housing Sector, December 1997.

2 Loan 983-INO: Secondary Cities Urban Development (Sector) Project, for $70.0 million, approved on 9 November 1989; Loan 984(SF)-INO: Secondary Cities Urban Development (Sector) Project, for $50.0 million, approved on 9 November 1989; Loan 1077-INO: BOTABEK Urban Development Project, for $80.0 million, approved on 31 January 1991; and Loan 1078-INO: Bandar Lampung Urban Development Project, for $33.0 million, approved on 31 January 1991.

3 A kampung is a densely populated settlement on the margins of an urban area. 4 Earlier feasibility studies were prepared for (i) West Java (by Louis Berger International [United States], in association with

P.T. Virama Karya [Indonesia] and P.T. Alfacon [Indonesia]); (ii) the five provinces of Sumatra, i.e., Aceh, Bengkulu, Jambi, Lampung, and Riau (by TPO’Sullivan and Partners [United Kingdom], in association with P.T. Hasfarm Dian Konsultan [Indonesia] and P.T. Lenggogeni [Indonesia]); and (iii) the remaining three provinces of Sumatra, i.e., North Sumatra, South Sumatra, and West Sumatra (by UNDP-financed consultants Hasfarm Dian Konsultan [Indonesia]). Under Subloan No. 4: West Java and Sumatera Integrated Urban Development Project, which was approved on 6 June 1986, for $5.38 million, supplementary feasibility work was carried out. This subloan was part of TA Loan 725-INO: Technical Assistance Program Loan, for $25.0 million, approved on 18 December 1984.

5 Bengkulu, D.I. Aceh, Jambi, Lampung, North Sumatra, Riau, South Sumatra, West Java, and West Sumatra.

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were formulated at the level of kabupatens6 or kotamadyas.7 The Directorate General of Human Settlements (DGHS) was the Executing Agency (EA) for the Project.

5. BOTABEK Urban Development Project. The BOTABEK Project was prepared by two ADB-financed feasibility studies8 and was appraised in August 1990. The ADB loan amounting to $80 million from OCR was approved on 31 January 1991. The Project covered eight towns in three kabupatens of Bogor, Tangerang, and Bekasi. DGHS was the EA for this project as well. Three TAs were attached to this: (i) TA 1471-INO: BOTABEK Institutional Development, for $600,000; (ii) TA 1472-INO: Urban and Regional Development of Eastern Islands, for $600,000; and (iii) TA 1473-INO: Environmental Management of Urban Development Projects, for $500,000. 6. Bandar Lampung Urban Development Project. The Bandar Lampung Project was appraised in June 1990.9 The ADB loan for $33 million from OCR was approved on 31 January 1991. The Project followed an integrated approach to enable cost-effective service provision, with due consideration to the “bottom-up” planning process. The EAs for the Project were DGHS of the Ministry of Public Works, Directorate General of Highways, and Directorate General of Water Resources Development. Two advisory and operational TAs were attached to this project: (i) TA 1474-INO: Bandar Lampung Water Supply and Sewerage Disposal Study, for $320,000; and (ii) TA 1475-INO: Bandar Lampung Urban Planning and Transportation Study, for $440,000.

C. Completion and Self-Evaluation

7. Secondary Cities Urban Development (Sector) Project. The Secondary Cities Project was complex, involving many implementing agencies (IAs) and 27 project implementing units. Following the sector lending approach, ADB appraised four pilot subprojects and the central Government approved the remaining 47 subprojects. The Project suffered from a start-up delay of nearly three years. The Project was nevertheless completed in June 1996, six months behind the original schedule. The total project cost was $166.9 million, 11.1 percent more than the appraisal estimate. The project completion report (PCR) was circulated on 3 December 1998. The PCR rated the project as generally successful, based on the review of physical achievement in three cities.10 However, the PCR did not present additional information and analysis for supporting the achievement of project purpose. In the three subprojects, the physical targets at appraisal were generally met (Appendix 2, Table A2.1a-A2.1f). The attainment of benefits in terms of target beneficiaries exceeded appraisal targets by 10 percent for solid waste management and market improvement components, while it ranged between 60 and 75 percent of appraisal targets for other components. Moreover, the PCR reported that there were problems relating to institutional capacity and coordination among various IAs and consultants but did not examine their impact on project implementation and performance. The PCR did not signal poor compliance with respect to covenants relating to institutional and financial aspects as a concern affecting operation and maintenance (O&M) of subprojects. The PCR

6 District: administrative subdivision of a province; rural in character. 7 Municipality: administrative subdivision of a province; urban in character. 8 An Asian Development Bank (ADB)-financed feasibility study (under TA 574-INO: West Java Urban Development Project,

for $250,000, approved on 23 December 1983) for urban infrastructure investments in five fast-growing towns in the three kabupatens of Bogor, Tangerang, and Bekasi (BOTABEK) was completed in early 1986. A supplementary feasibility study and detailed engineering designs were prepared through subloan No. 7: West Java (BOTABEK) Urban Development Project, for $1.944 million. This subloan was part of TA Loan 725-INO: Technical Assistance Program Loan, for $25.0 million, approved on 18 December 1984.

9 The Government prepared feasibility studies for the water supply of Bandar Lampung and other elements of urban infrastructure improvements needed in the city, including drainage and flood control, human and solid waste disposal, and kampung improvement. As these studies were found to be inadequate, ADB prepared a supplementary feasibility study, which was financed through subloan No. 6: Bandar Lampung Integrated Urban Development Project, for $1.36 million. This was part of TA Loan 725-INO.

10 Banda Aceh in Aceh Province, Bukit Tinggi in West Sumatra, and Karawang in West Java.

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also recorded that subprojects yielded lower financial and economic internal rates of return (FIRRs/EIRRs) than estimated at appraisal. The impact of the economic crisis on the allocation of funds for O&M was expected to affect the sustainability of the subprojects and consequently result in even lower FIRRs and EIRRs. The PCR included an action plan for outstanding issues emerging from the project, to be implemented under the follow-up projects (Loans 1383/1384-INO: Sumatra Urban Development [Sector]/West Java Urban Development [Sector] Projects, respectively). 8. BOTABEK Urban Development Project. The total actual project cost was $101.91 million equivalent, compared to $111.60 million equivalent at appraisal. The Project was completed in December 1996, except for one water supply component in Tangerang (Appendix 2, Table A2.2a-A2.2c). The overall completion was nine months behind the original schedule. The PCR, circulated on 4 December 1998, reported satisfactory performance of consultants and contracts. All covenants were complied with. The PCR identified the need for strengthening local governments in overall planning and management, and reported that the issue was being addressed under the follow-up project.11 The impact of the financial crisis on project achievement and O&M plans was acknowledged but not analyzed quantitatively. The PCR included a detailed list of future issues and actions taken/to be taken, covering design of urban development projects, local institution building, private sector participation, community involvement, and cost recovery, among others. The PCR rated the project and the attached TAs as generally successful. The FIRRs and EIRRs were reestimated along with relevant information on the methodology and assumptions. The Operations Evaluation Mission (the Mission) generally concurred with the PCR findings. 9. Bandar Lampung Urban Development Project. The total actual project cost was $49.98 million equivalent, an increase of 6 percent from the appraisal estimate. The Project was implemented close to appraisal schedule, and was completed in December 1996, six months behind schedule. Except for the installation of house connections and related distribution network under the water supply component, all works originally envisaged at appraisal were completed satisfactorily (Table A2.3). The PCR, which was circulated on 28 July 1998, was very well written. The Mission generally confirmed PCR’s key statements and the project performance rating. Both consultants and contractors performed satisfactorily. Major covenants were complied with. PDAM (local water enterprise) Way Rilau was unable to achieve the covenanted unaccounted-for-water (UFW) target of 25 percent. The PCR reported UFW at 37 percent in September 1997. The Project had positive environmental impacts. The city government of Bandar Lampung received two national awards: “cleanest city” and “traffic congestion-free city” (dates of the awards were not reported). The Project generally achieved its intended benefits. The PCR considered these benefits sustainable. The EIRRs and FIRRs were reestimated, and PCR estimates were lower than appraisal estimates. Overall, the Project and the attached TAs were rated generally successful. The PCR included an action plan with deadlines for improving UFW levels.

D. Operations Evaluation

10. The Operations Evaluation undertook a thematic evaluation, in addition to a typical audit of individual components under each project, focusing on common issues, to draw lessons for ADB operations in the urban infrastructure development sector. Three themes were identified based on the Mission’s judgment of their relevance to ADB operations. The themes also emerged from the conclusions in the PCRs.

(i) Comparison of IUIDPs with Standalone Projects. IUIDPs typically comprise components covering many sectors such as water supply, sanitation, roads, and

11 Loan 1511-INO: Metro BOTABEK Urban Development (Sector) Project, for $80.0 million, approved on 19 December 1996.

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housing, while standalone projects upgrade municipal services in one or two sectors. ADB finances both types of project. The Mission investigated the relative merits of IUIDPs when compared to standalone projects to assess the preferred approach for future projects.

(ii) Impact of the Economic Crisis on Project Sustainability. The three projects were completed in 1996 and their facilities were fully operating when the economic crisis occurred. The PCRs, which were prepared after the onset of the crisis in 1998, were concerned about the impact of the crisis on the projects. The Mission assessed this impact on the performance of individual components under each project and identified the factors affecting O&M and sustainability of project facilities.

(iii) Measuring Efficiency of Urban Services Delivery. The Secondary Cities and BOTABEK projects could not report on improvements in the delivery of urban services. The improvements were difficult to measure, especially for project components whose contributions were small when compared to the need for these services. The Mission evaluated the benefit monitoring and evaluation arrangements in these projects and assessed the preferred monitoring and evaluation (M&E) techniques for future IUIDPs.

11. The Mission visited Indonesia on 23-31 March 2000 (BOTABEK Urban Development Project) and on 26 April-5 May 2000 (Secondary Cities and Bandar Lampung Urban Development projects). The Mission organized workshops for representatives from ADB’s operations departments before field missions on 22 March 2000 and 26 April 2000 to collect relevant information on the individual projects, and after field visits on 15 May 2000 to provide early feedback. The Mission organized workshops for government agencies on 30 March and 27 April 2000 to review and assess the performance of the three projects and the actions taken with respect to the follow-up actions and recommendations in the PCRs. The Mission also held discussions with the representatives from the project implementing units, for ongoing ADB projects, and provided suggestions for improving the implementation of these projects.

E. Project Performance Audit Report

12. Report Organization. The themes are elaborated in Chapter II. The key points on performance evaluation of individual projects are highlighted in Chapter III. The details on the assessment of implementation and operational performance are in Appendixes 2-6. The conclusions, including overall assessment, lessons, and recommendations for the future, are presented in Chapter IV. 13. Report Finalization. The PPAR is based on a review of the appraisal reports, PCRs and materials in ADB files for the three IUIDPs; and discussions with staff from ADB’s Projects Department, Directorate General for Urban Development, PDAMs, Badan Perencanaan Pembangunan Derah (Provincial Planning Agency), Badan Perencanaan Pembangunan Nasional (National Development Planning Agency), the World Bank, provincial and local government officials, project management units (PMUs), consultants of ongoing follow-up projects, and project beneficiaries. Copies of the draft PPAR were sent to the Government, EAs, and ADB staff concerned for review and comment. Comments received were taken into consideration in finalizing this report.

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II. THEMATIC EVALUATION

A. Comparison of IUIDPs with Standalone Projects

14. IUIDPs comprise components covering many sectors such as water supply, sanitation, roads, and housing. For the purpose of this evaluation, standalone projects are defined as those which upgrade municipal services through investment in two or three sectors (for example, water supply, sanitation, and drainage).

1. Advantages of IUIDPs

15. The Mission identified, from the three evaluated projects, the following advantages of IUIDPs vis-à-vis standalone projects.

a. Flexibility in Responding to Changing Needs

16. Needs for improving various items of infrastructure and services change as urbanization proceeds. Some needs may be identified or evolve only after project implementation begins. IUIDPs allow objective-oriented modifications of project design and components in such a way that the objective is best attained using the synergy available among sectors. 17. The Bandar Lampung Project was most successful in demonstrating this advantage. The road component was modified with more widening and less maintenance of existing roads and improvement of five junctions originally not planned to achieve the full benefits as appraised. More kampungs were covered by the KIP component within the allocated budget. Moreover, the Government’s own programs were also implemented to complement the project, such as additional protective walling for flood protection and additional rehabilitation of roads.12 For the BOTABEK Project, strong economic growth and rapid urbanization during project implementation caused cost increases and necessitated modification such as the following:13 (i) decrease in demand for public pipes, (ii) increase in road improvement needs, (iii) relocation of GLD sites to fringes, and (iv) delay in land acquisition for sanitation and solid waste facilities. While these changes caused fund shortages and delays in implementation, overall project performance was not sacrificed as a result of complementary modifications.14

b. Ability to Incorporate Social and Environmental Concerns

18. IUIDPs allow social and environmental concerns to be more effectively incorporated into urban infrastructure improvements.15 One example is vertical integration of water-related project components such as water supply, sanitation, sewerage, and drainage. Location of septic tanks to avoid interference with shallow wells is another example. IUIDPs can also build in social concerns in

12 Loan 1078-INO: Bandar Lampung Urban Development Project, for $33.0 million, approved on 31 January 1991. 13 Loan 1077-INO: BOTABEK Urban Development Project, for $80.0 million, approved on 31 January 1991. 14 In the Secondary Cities Project, this advantage of flexibility was rather abused with extensive modifications. At the project

site level, it is difficult to see the correspondence between what was planned and what was realized, indicating that needs were ill identified at the beginning or the modifications were not objective oriented.

15 In Bandar Lampung, flood control measures contributed to enhancing a sense of security and social cohesiveness among residents in formerly flooded areas. The cross-subsidizing mechanism existed in some project areas, where the water supply for higher income groups provides partial support for other components under local government responsibilities. Incorporation of social and environmental concerns was not explicitly stated in any of the three projects evaluated.

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project formulation. One specific way is to build in cross-subsidizing mechanisms by which a more remunerative project component (in which users can be charged higher tariffs) is used to support more socially oriented components (focused on low-income groups)16 (Appendix 7, Figure A7.1). 19. Social and environmental concerns could also be incorporated in “soft” components such as training of local government officials for environmental management and environmental impact assessments, and information and education campaigns for sanitary concerns of local people.17 KIP/MIIP provides a successful model for improving urban living conditions by neighborhood unit. Its application should be expanded to cover not only more kampungs but also other sectors and subsectors. The economic sector is already incorporated in some KIPs in the form of training for entrepreneurship development (e.g., BOTABEK). Community ownership and participation, established through KIP implementation, supported the delivery of social services. In Bandar Lampung, one KIP area covers some 3 km2, encompassing part of the central urban area, while some urban roads, and water supply and major flood protection works covered the area as well as ordinary KIP subcomponents.18

c. Opportunities for Improving Urban Management

20. IUIDPs provide opportunities and means to improve urban management, which inherently involves many functions, sectors, and agencies. As urbanization is a dynamic and complicated process, future needs of various items of urban infrastructure and services cannot be accurately predicted. Continual improvements of urban infrastructure and services are necessary. In this regard, IUIDPs enhance the capacities of local governments to anticipate likely changes and to prepare for managing such changes. 21. All the three projects were centrally planned as initial IUIDPs, but the enhancement of development planning and management capabilities of local governments was an explicit objective of each project. Although PMUs were established at the provincial level, the degree of success in urban management improvement in the three projects depended more on involvement of local governments and community participation.19 For subsequent ADB projects, the PMU setup has been integrated in respective local governments for more effective capacity strengthening, particularly for O&M.

16 ADB’s Criteria for Subsidies (October 1996) states that, in general, cross-subsidies should be discouraged because they distort prices.

17 The Bandar Lampung Project seems most successful in this aspect with local government initiatives and consultant support for extensive training, and information and education campaign activities. The Mission heard a comment made by the Government representatives in North Sumatra related to the Secondary Cities Project that more public education should be provided for sanitation and environmental awareness to change some social habits of local people.

18 Also, more large-scale kampung improvement programs may be implemented where there exists sufficient institutional capacity. In some areas, it may effectively take a form of urban renewal, which may include bus terminals, markets, and possibly some high-grade facilities serving a wider range of people, as well as socialized housing and basic urban infrastructure.

19 For the Secondary Cities Project, decisions on extensive project modifications were made mostly at the provincial level without active involvement of local governments and minimal community consultation. For the Bandar Lampung Project, the city government was actively involved in implementation as described earlier. More extensive training and community information programs, supported by consultants, helped to institutionalize O&M through establishing ownership among the local government and communities. For the BOTABEK Project, sub-PMUs were created at the local level to coordinate and manage project implementation.

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2. Suggestions for Future IUIDPs

22. The Mission’s other findings and suggestions for the formulation and implementation of future IUIDPs are briefly described here; the details are presented in Appendix 7.

(i) City size and location are the most important factors affecting the success of IUIDPs. Other factors are urban dynamics, functions of agencies, and use and availability of land.

(ii) Water supply and sanitation constituted important components in these three IUIDPs.

While the projects included a water treatment plant, a piped water supply system, communal toilet facilities, family latrines, desludging trucks, and sludge treatment facilities for sanitation, they did not approach the fundamental problem of polluted shallow groundwater in an integrated manner.20 An alternative model (with the acronym WATER—see Appendix 7) is suggested by the Mission to address this problem in an integrated manner. Moreover, an integrated basin-wide approach to urban infrastructure development is possible in IUIDPs, though not attempted in the three projects evaluated.21

B. Impact of the Economic Crisis on the Sustainability of the Projects

23. The economic crisis that affected Indonesia in 1998 had a serious impact upon urban areas throughout the country, resulting in lost jobs and declines in incomes for urban workers. The local water enterprises suffered from declining revenues and became unable to meet their O&M costs. The PCRs, which were prepared after the economic crisis occurred, expressed concern about the sustainability of the projects, particularly the water supply component. The Mission concurred with the PCRs that the impact of the crisis was felt most in the water supply and sanitation components. As the tariffs could not be raised, O&M was affected. But the impact of slower economic growth on the other project components varied. For example, the O&M of the KIP, MIIP, and drainage components required basically good ownership and participation at community level, and no tariffs were collected. The Mission rated from field observations (i) the availability of funds for O&M, (ii) proper ownership and participation by beneficiaries, and (iii) their effect on benefits generated and the sustainability of facilities (Appendix 6).

1. Sensitivity Analysis on EIRRs

24. The Mission estimated the impact of the crisis on the efficiency of performance of project components, measured in terms of the EIRR. The precrisis situation was considered as the base case, signified by healthy economic growth and proper O&M. The second scenario was based on the PCRs’ prediction that the crisis would result in poor O&M and a shorter useful life for all components. It was assumed that O&M would not be proper for all components. Moreover, in the case of urban roads and KIP components, poor O&M was also assumed to result in a shorter useful life. EIRRs for all components were substantially lower than the base case. The third scenario was made up of the Mission’s observations. The Mission confirmed the PCRs’ prediction regarding O&M

20 Shallow groundwater, which is the most accessible source of water for the majority of people in tropical and subtropical Asia, is often polluted as a result of inadequate sanitation practices. This problem cannot be overcome by extending piped water supply alone, which requires a large investment and still does not assure the delivery of “safe” drinking water at affordable prices, for various technical and administrative reasons.

21 The river basin would constitute a basic planning unit for water-related urban infrastructure including water supply, sanitation, drainage and sewerage, and solid waste management.

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for the water supply and sanitation components. However, as ownership and participation were good, O&M for the other components was virtually unaffected by the economic slowdown in Bandar Lampung; in the BOTABEK Project, a similar effect was visible in the KIP and MIIP components. For these components, the EIRR estimates in the third scenario were higher than the estimates in the PCR scenario. This revealed that in spite of the economic slowdown induced by the crisis, the project facilities continued to be highly efficient.

2. Suggestions for Improving Stakeholder Participation

25. The Mission reviewed the institutional arrangements in ongoing projects in Indonesia and identified possible variants for improving participation of stakeholders in future IUIDPs. For the Community and Local Government Support Sector Development Program,22 a working group was proposed under BAPPENAS to act as PMU to coordinate the investment project's day-to-day management, budgeting, and monitoring activities. This central control would be complemented with visits from the PMU to each of the districts to conduct public meetings and workshops with representatives of districts, subdistricts, villages, and civil society groups and organizations.23 This would enhance the accountability of project planning and management. Another proposal to enhance accountability was to pilot-test consultation procedures between local government and the community using provincial or local urban development coordination forums formed as umbrella units to support improved planning, programming, and monitoring of urban investment programs.24 Involving the private sector would also contribute to increasing urban management capacity and enhancing accountability. In a World Bank-supported project, each local government was requested during project preparation to identify subprojects, O&M activities, and other project actions, which could be implemented by the private sector.25 The possibility of separate sewerage enterprises, and of sludge collection and disposal services by private operators, was also suggested.

C. Measuring Efficiency of Urban Service Delivery

26. To maximize the developmental impact of IUIDPs, which involve many sectors, proper M&E of the delivery of services is essential. The three projects aimed to improve urban living conditions and enhance urban management capabilities. Local governments considered the Secondary Cities and BOTABEK projects as investments for improving the physical infrastructure instead of vehicles supporting the long-term delivery of services. Consequently, in the project benefit monitoring and evaluation (PBME) activities, the government agencies relied on data on physical achievements for the components (Appendix 2). The data were useful for the water supply components but not the others, whose impact could be measured only by indicators on the quality of the living environment.

1. PBME Arrangements in the Projects

27. Performance monitoring is essential to ensure that the facilities are actually used to deliver services. M&E in fact links facilities provision and services delivery. This element, however, was by far the weakest, and the covenant for preparing a PBME report one year after the PCR was met only in the Bandar Lampung Project. In the Secondary Cities and BOTABEK projects, where the PBME

22 Loan 1678-INO: Community and Local Government Support Sector Development Program Project Loan, for $120 million, approved on 25 March 1999, p. 21, paras. 79-80.

23 Op.cit., p. 27, para. 10. 24 Loan 1572-INO: Capacity Building in Urban Infrastructure Management Project, for $42.0 million, approved on 4

November 1997, p.7, para. 23. 25 SAR No. 15045-IND: Second East Java Urban Development Project, p. 27, para. 5.5. World Bank, 1996.

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activities were not properly undertaken, the delivery of services was mixed. Given the resource constraints, such performance monitoring could be effectively carried out only by substantial community participation. As observed in Bandar Lampung, M&E activities with the participation of target beneficiaries also contributed to improving O&M activities through establishing ownership among beneficiary communities. 28. For consistent and systematic M&E activities, an effective M&E system needs to be established, which would allow easy M&E by people. Monitoring should be conducted using indicators that are easy to understand and measure, and evaluation should not involve sophisticated analysis and complicated calculations. A sort of self-monitoring system based mainly on observations should be established initially to allow continuous monitoring at minimal cost. A self-monitoring system that can be used at the community level is presented in Appendix 7.

2. Demand-Side Management for Solid Waste and Sanitation

29. The efficient delivery of services can also be improved by demand-side management, especially for environment-related components. This has two aspects: demand suppression and demand development. For solid waste management, waste generation may be suppressed by encouraging recycling and other less resource-wasteful practices through proper incentives, as well as information and education campaigns. Demand for final disposal of waste may be reduced by introducing more environment-friendly intermediate treatment such as composting, as practiced in some secondary cities. Demand for piped water supply can be controlled by proper pricing and market segmentation.26

30. The Mission observed that demand for desludging services of human waste was still much lower than expected at appraisal in all projects.27 Demand should be developed for both the desludging service and compost by establishing a proper incentive mechanism. One way could be to provide the desludging service free of charge and operate the sludge treatment as a sustainable economic activity with compost sales. More advanced solid waste management practices could be introduced in future IUIDPs. Waste segregation and sorting and recycling at household or community level may be introduced first on a pilot scale.28

III. PERFORMANCE EVALUATION OF THE THREE PROJECTS

A. Planning and Implementation Performance

31. Formulation and Design. The designs in the three projects were relevant to the sectoral objectives and generally consistent with the ADB country operational strategy in Indonesia. All projects adopted an integrated approach with due consideration to cost-effectiveness in the delivery of services, and increasing financial and institutional capacities at the local level. The subprojects were formulated by local governments (kabupatens and kotamadyas) and approved by the central

26 Introduction of the alternative models described above may provide an effective tool for this. Given the wide variance in prices for bottled and piped water, ample room exists to rationalize water pricing in such a way to benefit low-income people, while discouraging wasteful use of water by large consumers.

27 In Bandar Lampung, only two out of nine vacuum trucks are operational and only one of three sludge treatment tanks provided by the Project is used. There are two reasons: limited willingness by residents to pay for the services, and some households selling human waste directly to farmers. For environmental sanitation, more households should be covered by the desludging service, and it is better to apply treated sludge as compost rather than applying human waste directly.

28 Bandar Lampung, with well-established ownership and institutionalized O&M, may be a good candidate to pilot-test the new practices. Alternative models may be experimented with to establish the most appropriate one through M&E.

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Government. Only in the Secondary Cities Project were the project components modified extensively during implementation to the extent that it was difficult to see the correspondence between what was planned and what was realized at the subproject site level. The Mission observed that needs were ill-identified in some subproject appraisal reports and that the modifications were not objective-oriented.29 The Mission concurred with the PCR statements on the satisfactory performance of consultants. Consultant support was particularly important for the preparation of local institutional development and revenue improvement action plans (Appendix 3, Table A3.2). 32. Cost and Scheduling. The actual costs of the three projects varied from appraisal estimates. The Secondary Cities and Bandar Lampung projects incurred overruns in local currency costs.30 The cost of consulting services and training in the BOTABEK Project increased by 19 percent due to extra work on institutional strengthening and benefit monitoring and evaluation. The Mission observed that the cost variances in the projects did not affect the economic efficiency of their respective outputs, which were properly utilized and maintained (Appendix 3, Table A3.3). All projects were completed six months behind their appraisal schedules. Being the first IUIDP in Indonesia, the Secondary Cities Project incurred substantial start-up delays due to delays in finalizing the subproject appraisal reports (paras. 14-19, PCR); some of the institutional support packages did not begin until three years after programmed

29 In the Secondary Cities Project, the adverse impact of the lack of proper coordination between the central level Executing Agency and the local governments on the project performance was visible. In hindsight, the need for an advisory TA was overlooked. The Government and DGHS made considerable efforts to improve implementation, speeding up contract awards and appointing an international consultant to coordinate the work of domestic consultants.

30 The total cost of the Secondary Cities Project was 11 percent higher than the appraisal estimate of $150.2 million. The local currency cost increased by 14 percent mainly due to increases in civil works costs for the expanded scope of work. The total cost of the BOTABEK Project was $101.9 million, 9 percent lower than the appraisal estimate; the decrease was due mainly to a smaller cost increase as compared to contingencies. The total cost of the Bandar Lampung Project was $50.0 million, 6 percent higher than the appraisal estimate; the local currency cost incurred a 16 percent overrun, due mainly to training programs carried out by IAs.

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start-up.31 Again, the Mission observed that none of the delays in the projects adversely affected the achievement of intended project outputs (Appendix 3, Table A3.4). 33. Procurement and Construction. Procurement of civil works was carried out essentially as appraised in all projects. The Mission concurs with the statements in the three PCRs on the satisfactory performance of contractors and suppliers. The quality of construction was highly satisfactory in the Bandar Lampung Project and satisfactory in the BOTABEK Project. In the Secondary Cities Project, limited coordination and exchange of information between DGHS and local governments sometimes resulted in poor quality construction for some components. 34. Organization and Management. The institutional arrangements were similar in the three projects. However, the performance varied. In the Secondary Cities Project, DGHS had difficulty coordinating the Project due to the complex arrangements involving many agencies from many cities, given the limited experience of its staff within PMUs and project implementation units. Additional emphasis on the capacity building of participating agencies, particularly at the local government level, was needed. This has been addressed in the ongoing projects (Loans 1383/1384-INO: Sumatra Urban Development [Sector]/West Java Urban Development [Sector] Projects), which have delegated more responsibility to the local governments. In the BOTABEK Project, the organizational structure for project implementation with PMU/sub-PMUs outside the permanent organizational structure of provincial and local governments did not prove to be conducive for a smooth transfer of responsibility for O&M. This has been corrected under the ongoing Metro BOTABEK Urban Development (Sector) Project (Loan 1511-INO). 35. Covenants. In all projects, compliance with covenants was generally satisfactory (Appendix 3, Table A3.5). The few covenants that were only partly complied with did not adversely affect project performance. However, in the Secondary Cities Project, local governments were unable to allocate adequate funds for subproject O&M.32

B. Achievement of Project Purpose

1. Operational Performance

36. The Mission visited five secondary cities in three provinces and updated the operational performance of components under the Secondary Cities Project (Appendix 2, Tables A2.1a-e).33 The Project did not achieve the physical targets in all components, except solid waste.34 The Project

31 The Project nevertheless was completed in June 1996, six months behind the original schedule. The BOTABEK Project started in May 1991, delayed by seven months due to delays in land acquisition and recruitment of consultants. All components of the Project were substantially completed by the end of 1996, except for water supply in Tangerang, which was delayed because of complications in implementing arrangements resulting from the establishment of the new Tangerang municipality. The Bandar Lampung Project started in January 1991 as scheduled, and was completed by the end of 1996 with a six-month delay caused mainly by a delay in the installation of house connections for water supply.

32 The situation would be worse, as local water enterprises (PDAMs) still continue to transfer a share of their net profit to local governments. PDAMs, which are autonomous, need not transfer their incomes to local governments. Moreover, PDAMs are unable to cover O&M expenses, as they have not been allowed to increase tariffs since the economic crisis.

33 The Mission visited kabupatens Deli Serdang and Rejang Lebong (Curup), city of Bandar Lampung, and Kotamadya Bengkulu. Additional information on other subprojects was collected from representatives of project implementing units at a meeting on 3 May 2000 in Jakarta, chaired by the Directorate General for Urban Development, the executing agency in the central Government.

34 In the water supply component, house connections largely reached targets, but some connections are inactive due to low pressure. Public taps reached only 30 percent of appraisal target. Unaccounted-for-water (UFW) was not significantly reduced, and in some cities UFW increased. The equipment for the solid waste component exceeded targets. Poor coordination between PDAM in charge of O&M of desludging trucks and Dinas Kebersihan (in charge of disposal) hampered sanitation operation (e.g., in Deli Serdang).

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could not establish adequate ownership at the local level, as most local governments were not actively involved in project planning and modifications, and community consultation was minimal. Consequently, the capacity of local governments for O&M was not substantially improved by the project, and the delivery of services was mixed (Appendix 4, Table A4.1). The Mission experienced difficulty in measuring the contribution of the Project to improving the living environment. In the cities visited, the investment under the Project components was small when compared to the overall need for services. 37. The BOTABEK Project was generally successful in achieving the physical targets for the water supply component.35 Appendix 2, Table A2.2 provides an update of the operational status of the project components. The water supply component was operating satisfactorily (Table 1). The high UFW ratios are the result of both technical and administrative problems; the latter include low bill collection rates, illegal connections, and defective meters. The sanitation and solid waste components were operating less than satisfactorily. Communal toilet facilities, desludging trucks, and sedimentation facilities were not well used and sedimentation facilities were not fully operational. The operational performance of roads and drainage improved by the project was good, but needed maintenance to ensure sustainability. In particular, the participation of local communities for secondary drains seems limited, while the main responsibility for this lies in the local governments’ public works division (Dinas PU). O&M of most KIP sites was largely under community responsibility, but the levels of community participation varied among the sites. Some KIP sites in Tangerang needed local government support for maintenance.

Table 1: BOTABEK Water Supply Component

UFW (%) House Connections At PCR Present At PCR Present Depok, Bogor 25 39 7,200 > 7,600 Tangerang 20 29 5,700 8,000 Bekasi 26 47 27,000 36,000 PCR = project completion report; UFW = unaccounted-for-water.

38. The Bandar Lampung Project fully achieved appraisal targets for all components. The city government played an active role not only in implementing solid waste management, sanitation, KIP, urban roads, and drainage components but also in extensive training and community information programs; the latter helped to establish a sense of ownership among the local government and communities. A summary of the current operational status of the project components is shown in Appendix 2, Table A2.3. After the PCR, the equipment and facilities for the solid waste component were increased. The original equipment provided by the Project is still fully used. The flood protection works under the Project were improved with an additional protective wall on the riverbank built under the Government’s own program. Similarly, the Government took responsibility for rehabilitation and maintenance of roads and used project funds for more road-widening works. The division of responsibilities was clearly established at the outset and followed at the local level the technical guidance, and direction on administrative matters of the EA and IAs.

35 Despite the fewer than targeted house connections in Bogor and Tangerang, water demand has been firm in all districts. In Bekasi, house connections increased steadily to exceed the appraisal target. Except for the solid waste component, the physical achievements exceeded targets at appraisal. However, UFW was not reduced, and remained at 29-47 percent.

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2. Financial Performance

39. In the Secondary Cities Project, fund management at the central level was satisfactory; however, when extensive project modifications were made (mainly at the provincial level), local governments were inadequately involved, and community consultation was minimal (Appendix 4, Table A4.2). In the cities visited, the PDAMs faced increasing financial problems, and community participation in O&M was generally less than expected. In the BOTABEK Project, PDAMs faced similar problems. Although tariff recovery was good, tariff levels were low and have not been revised. In the Bandar Lampung Project, PDAM Way Rilau exhibited sound financial performance, but was likely to face difficulties when O&M costs increased, unless tariffs were increased (Appendix 5).36 On the other hand, the Mission found that the financial performance of the local governments was generally sound in all projects. The audited financial statements submitted to the Mission reported revenues sufficient to cover both routine and development expenses.37

3. Sustainability

40. The sustainability of project components was not a problem in the Bandar Lampung Project, in which the Mission observed well-established ownership among the local government and communities.38 Except for the GLD component, sustainability was likely for all components in the BOTABEK Project, although the likelihood varied with the components.39 However, in the Secondary Cities Project, sustainability was less likely for all components due to lack of ownership at the local government level.40

36 The PDAMs in Bandar Lampung and Bengkulu have been experiencing financial difficulties, although both PDAMs have experienced an improvement in the recorded annual net loss for the past two years (Appendix 5, Tables A5.3 and A5.5). This improvement could be attributed to a faster rate of increase in revenues than expenditures. Both PDAMs have been operating at a loss at least for the last six years (except for 1996 when PDAM Way Rilau posted net income of Rp595 million). This is indicative of the need to review the present tariff levels.

37 The local government of the city of Bandar Lampung and district of Deli Serdang in Medan reported revenues sufficient to cover both routine and development expenses (Appendix 5, Tables A5.1 and A5.2). However, the financial performance of Bandar Lampung deteriorated in FY1999, although the city still managed to break even. This can mainly be attributed to the sharp increase in expenditures, particularly those for development purposes, as against the relatively slower rate of increase in revenues. The district of Deli Serdang, on the other hand, showed a marked improvement in its performance for FY1998/99 relative to the previous two years. FY1996/97 and FY1997/98 registered declines in net income as expenditures grew faster than revenues.

38 Sludge treatment facilities have excess capacity and could face degradation without proper maintenance and utilization by developing demand for desludging services and composting. Presently, PDAM Way Rilau’s water supply operation is sustainable. Nevertheless, financial problems foreseen for PDAM Way Rilau may undermine the future sustainability in the absence of a tariff increase in the immediate future.

39 Sustainability of facilities provided under KIP is most likely as ownership is well established. Communal toilet facilities within KIP sites are well maintained and will be sustained. Sustainability of solid waste and sanitation facilities depends on ongoing rehabilitation efforts and constant maintenance and supply of equipment. Further increases in input costs may undermine the sustainability of water supply operations, as financial performance of PDAMs is already marginal. Sustainability of GLD facilities would be unlikely where people move in only after the facilities are improved. This is particularly true for the GLD area in Bekasi, where facilities were constructed by contractors rather than through self-help efforts of local communities.

40 Sustainability of solid waste management and sanitation operations depends on constant maintenance and supply of equipment as the useful life of pushcarts, containers, and trucks is fairly short; local governments and community organizations may be capable of O&M but not of capital investment (Appendix 4, Table A4.5). The quality of some civil works is low and causes such problems as degraded surface conditions of roads, collapsed drains, and cracked retention walls; sustainability of these facilities is questionable. Some facilities without adequate ownership such as communal toilets may not be sustained as they are not well maintained, or even used.

14

C. Achievement of Development Impacts and Goals

1. Performance of Operating Entity

41. In the Secondary Cities Project, the Mission noted that the facilities were performing poorly and there was no reliable information on project benefits; therefore, reevaluation could not be attempted. The Mission conducted a detailed reevaluation of the BOTABEK Project and estimated the EIRRs for all components. The methodology used to recalculate the EIRR for each component/area was similar to that in the appraisal report and PCR. The assumptions on future performance were based on the Mission’s observations. The details are in Appendix 6. The Mission also simulated, for the purpose of the thematic evaluation, the impact of the economic crisis on EIRRs. The Mission observed that the Bandar Lampung Project’s facilities were performing well, as stated in the PCR. The Mission concurred with the PCR on the highly efficient performance of the Project. 42. On a per component or per area basis, the recalculated EIRRs were generally lower than appraisal and PCR estimates.41 The difference is due to larger capital costs, extended implementation periods, and delays in benefit realization. In all three projects, the high EIRRs confirmed the overall economic viability of the project components, except the GLD component.

2. Socioeconomic and Sociocultural Impacts

43. All projects improved living conditions, which benefited low-income people equally as these facilities did not exclude any users (Appendix 4, Table A4.7). Improved living conditions by the KIP component benefited more low-income people, including women.42 The improved living conditions benefited housewives more as most of them stayed at home and in the neighborhood longer than their husbands; better conditions such as paved footpaths and flood- free house compounds occasionally made cleaning easier. Increased solid waste collection generated limited livelihood opportunities at both transfer depots and disposal sites for waste recycling.

44. The water supply component might not have benefited low-income groups as much as expected because PDAMs provide only clean water, not drinking water, and low-income groups continued to rely on alternative sources for this most essential item. The firm demand for the water that the Projects provided came from high-income groups and other bulk water consumers as the service coverage is still generally low. Where the water supply was improved, women received incidental benefits from time saving; the real benefits from productive use of the time saved could not be quantified. The real benefits would be more for women in Bandar Lampung, as the city has more opportunities for economic activity, than most secondary cities.

41 Estimates for the drainage and KIP/MIIP at Tangerang, KIP/MIIP at Bekasi, urban roads at Bogor, and urban roads at Tangerang were higher than appraisal and PCR estimates.

42 Such benefits were not large in areas influenced by the megacity (Jakarta)—in the BOTABEK Project as more substantial employment opportunities in the megacity discouraged community-based socioeconomic activities. The improved living conditions also contributed to urban efficiency and promotion of various economic and livelihood activities, irrespective of income classes; this was particularly visible in Bandar Lampung, which had a strong economic performance after the ADB Project. At KIP sites, the Mission observed people gardening (mainly women) and arranging office plants (Appendix 4, Table A4.6).

15

3. Environmental Impacts

45. All projects aimed to improve living conditions. Although the improvements could not be measured, as discussed in the thematic evaluation, the environmental improvements were significant (Appendix 4, Table A4.4). In the Secondary Cities Project, the flood control and drainage facilities improved socioeconomic conditions of people in formerly flooded areas; further improvements are provided under the ongoing project.43 In the BOTABEK Project, increased solid waste collection has improved sanitary conditions, but substantial portions of solid waste are still uncollected, and, especially in suburban areas, are disposed of in situ in open dump sites. Sanitary conditions are expected to further improve in the future as the local governments are rehabilitating unused sludge treatment facilities. Any improvement of the urban environment by GLD was difficult to see as it was overwhelmed by the overall urban development of the various neighboring areas. In the Bandar Lampung Project, the KIP component was so successful in improving living conditions that even some large high quality houses were built and economic activity flourished.44

4. Impacts on Institutions and Policy

46. In the Secondary Cities Project, which was the first IUIDP in Indonesia, the need for TA was not foreseen and local governments lacked the capacities to operate project facilities and deliver urban services. In the other two projects, the institutional development impact was highly satisfactory. In the BOTABEK Project, the BOTABEK Institutional Development Study (TA 1471-INO) provided a comprehensive BOTABEK institutional development strategy and institutional action plans. The TA on Environmental Management of Urban Development Projects (TA 1473-INO) contributed toward the revision of relevant legislation and regulations governing environmental impact assessments, established a computerized monitoring system for such assessments, and provided operational guidelines and training for environmental management under urban development efforts. The outcomes of these TAs were satisfactory and these were reflected in subsequent DGHS projects. In the Bandar Lampung Project, the Bandar Lampung Water Supply and Sewerage Disposal Study (TA 1474-INO) specified future water supply components except source location, and identified a site for a future sewage treatment plant. The Bandar Lampung Urban Planning and Transport Study (TA 1475-INO) prepared an updated city spatial plan and a sector development plan, and analyzed the planning, operational, and financial performance of the public transport system. The TA results were used to revise the city master plan and improve the public transport system.

IV. OVERALL ASSESSMENT

A. Secondary Cities Urban Development (Sector) Project

47. The Project was ADB’s first IUIDP in Indonesia, and aimed to rehabilitate and construct urban infrastructure in 51 secondary cities in nine provinces of Sumatra and West Java. It was complex, involving many IAs and 27 project implementing units. During project implementation,

43 Some solid waste that is collected is disposed of improperly, e.g., burned at transfer depots or dumped into rivers. Further environmental education is considered necessary to change some undesirable social habits of people, e.g., the use of rivers to dispose of human waste. In Bengkulu, improved access to the solid waste disposal site stimulated housing development along the access road, preventing expansion of the disposal site.

44 Extensive training and public education programs raised environmental awareness and improved environmental management capacities of the local government. Solid waste is collected daily with collection fees charged to households and commercial units, and disposed of with soil cover, although this is not a sanitary landfill. Desludging, though only partially operational, and increased solid waste collection have improved sanitary conditions.

16

DGHS extensively modified the project components to the extent that they were only partly relevant to the original objectives. Decisions on project modifications were made mostly at the provincial level, while fund allocation was centrally controlled. In addition, efficacy (in terms of achieving the project purpose of improving living conditions) was only efficacious. Project allocation (approximately $2 million-$3 million equivalent) in many cities was relatively low compared to each city’s overall development budget. Consequently, local government involvement was limited, and community consultation minimal. For modified project components, little accounting of cost-effectiveness was warranted. PDAMs generally supplied only clean water and not potable water. People preferred to buy drinking water from water vendors who tap the shallow-well groundwater with hand pumps.45 Public toilets ceased to function after a few years due to lack of water from their associated hand pumps, lack of organized maintenance, and low demand for public toilets as households built individual toilets and septic tanks. The Mission did not estimate EIRRs as reliable information was unavailable. Based on estimates in the PCR, efficiency is rated efficient.46 Sustainability is rated less likely for all components due to lack of ownership at the local government level. The Project’s contribution to institutional development is rated negligible. The Project did not include an advisory TA for capacity building. Overall, the Project is rated less than successful.

B. BOTABEK Urban Development Project

48. All components, except the GLD component, were relevant. Efficacy is rated efficacious as the project purpose was not fully achieved. PDAMs generally supplied only clean water and not potable water. The UFW levels were not reduced in all project cities. The effects of GLD in Bekasi and Tangerang were so small as to make it impossible to distinguish them from development spilling over from neighboring areas. Most roads improved by the Project were well used or in fact overused in some sections, resulting in early degradation of surface conditions as maintenance appears to be less than adequate. The Mission observed varying drainage conditions. In Bogor, roadside drains provided as part of the road improvements were in physically good condition, but the maintenance of secondary drains faced problems due to limited local participation. In Bekasi and Tangerang, the maintenance of urban drainage works was tied to road maintenance; it was better in Bekasi.47 KIP was highly successful with community participation. The reestimated EIRRs above 12 percent confirmed that the project components were highly efficient. Sustainability is rated likely for all components. The KIP in Tangerang now includes training for entrepreneurs. The Project’s contribution to institutional development is rated little. The transfer of responsibility from the PMU to the local government for ownership of O&M was insufficient. Overall, the Project is rated successful.

C. Bandar Lampung Urban Development Project

49. The Project was highly successful in attaining the objectives of improving living conditions and enhancing urban management. The project components were highly relevant. Efficacy is rated highly efficacious. Although the Project was centrally planned and controlled, the city government played a major role in implementing some components under a clearly defined division of responsibilities and training and community information programs that consultants supported. The Mission accepted the high EIRRs reported in the PCR for the project components: efficiency is rated highly efficient. Tariff collection for water supply covered almost 100 percent of consumers after

45 The Mission was concerned that septic tanks and shallow wells were located too close to each other. 46 The Mission was unable to rate the Project as “highly efficient”, as these economic internal rates of return (all above 12

percent) represented facilities in only 3 out of the 52 cities included under the Project. 47 Drainage along a secondary road in Bekasi was poor in some sections, constrained by the road design itself with a

winding alignment and a small gradient.

17

1996. Flood control works were very well done, aesthetically as well as technically, and enhanced a sense of security and social cohesiveness of local communities. Solid waste was collected daily, covering an increasing population, with collection fees charged to households and commercial entities, and disposed of in a sanitary landfill. Desludging and sludge treatment were fully operational using the trucks and facilities provided by the Project, although demand for the service was not as high as expected. Project sustainability is rated most likely. O&M of all project facilities was highly satisfactory. Urban roads, notably those supported by ADB, were generally well maintained. Kampungs that were improved under the Project were generally well maintained. The Project made a moderate contribution to institution development. The Mission observed, during the meetings at the mayor’s office and the field visits, a strong sense of ownership among the local government and communities. Overall the Project is rated highly successful. 50. Following the guidelines for project performance audit reports, the project components were individually rated with respect to the five criteria: relevance, efficacy, efficiency, sustainability, and institutional development and other impacts. A weighted score was calculated to arrive at the overall performance rating. The individual ratings are summarized in Table 5. The details are provided in Appendix 8.

Table 5: Assessment of Overall Project Performance

Secondary Cities BOTABEK Bandar Lampung Criteria Weights

(%) Rating Value

Weighted Rating

Rating Value

Weighted Rating

Rating Value

Weighted Rating

Relevance 20 1 0.20 2 0.40 3 0.60 Efficacy 25 2 0.50 2 0.50 3 0.75 Efficiency 20 2 0.40 3 0.60 3 0.60 Sustainability 20 1 0.20 2 0.40 3 0.60 Institutional Development and Other Impacts

15 0 0.00 1 0.15 2 0.30

Overall Rating 1.30 2.05 2.85 LS S HS Assessment Ratings: Relevance: 3 = highly relevant; 2 = relevant; 1 = partly relevant; 0 = irrelevant. Efficacy: 3 = highly efficacious; 2 = efficacious; 1 = less efficacious; 0 = inefficacious. Efficiency: 3 = highly efficient; 2 = efficient; 1 = less efficient; 0 = inefficient. Sustainability: 3 = most likely; 2 = likely; 1 = less likely; 0 = unlikely. Institutional Development and Other Impacts: 3 = substantial; 2 = moderate; 1 = little; 0 = negligible. Overall Rating: HS = highly successful 2.5< HS < 3.0 S = successful 1.6 < S < 2.5 LS = less than successful 0.6< LS < 1.6 U = unsuccessful < 0.6

D. Assessment of ADB and Borrower Performance

51. ADB provided effective and timely guidance to project implementation. Efficient project management compensated for the initial start-up delays. However, more attention should have been paid to institutional strengthening, especially for the Secondary Cities Project, in which ADB performance is rated satisfactory. In the other two projects, ADB performance is rated highly satisfactory (Appendix 8, Table A8.4). 52. The performance of the Borrower and respective EAs varied in each project. It is rated less than satisfactory in the Secondary Cities Project, where DGHS had difficulty, in particular at the local level, due to complex implementing arrangements. In the BOTABEK Project, the performance is rated satisfactory; the Government’s inability to provide sufficient counterpart funds on time delayed

18

project implementation in some cities. In the Bandar Lampung Project, the performance of DGHS and IAs is rated highly satisfactory; the agencies (EAs and IAs) assessed the changing needs of the Project and made timely decisions to realize maximum developmental impact.

E. Lessons Identified

53. Common lessons identified in these three projects include the following:

(i) The integrated approach for urban infrastructure development allows objective-oriented modifications of project design and components, which is very effective for improving the urban living environment. IUIDPs are most appropriate for project cities in the population range of 100,000-500,000. For smaller cities, without strong urban dynamics, the sector lending approach could be applied, focusing on individual sectors. For larger cities and urban areas influenced by a megacity, standalone projects would be appropriate to affect urbanization patterns and have a measurable impact on urban living conditions.

(ii) Success in IUIDPs largely depends on how well the implementation arrangements

facilitate community participation for a sense of ownership and proper O&M. Strong local participation and ownership can alleviate the adverse impact of an economic crisis on IUIDPs. KIP and MIIP are successful models for improving urban living conditions through community participation, which is also the most effective way to ensure effective M&E and good service delivery.

(iii) Water of potable quality need not be distributed through a piped water supply.

Potable water from water treatment plants, as well as smaller quantities from shallow groundwater is better delivered when distributed in bottles, through public-private sector participation.48 Most tropical areas of developing member countries are endowed with sufficient annual rainfall for shallow groundwater to be the most accessible and sustainable source. The fundamental problem is the pollution of this groundwater, due to inadequate sanitation practices. This problem cannot be overcome by extending piped water supply alone, which requires greater investment.

54. Other general lessons for future IUIDPs include the following:

(i) IUIDPs should pursue further integration of project components involving the introduction of social sector components, such as community-based health care and environmental education.49 Involving the private sector and encouraging community participation should be actively pursued in future IUIDPs as both contribute to improving accountability in the delivery of services.

(ii) IUIDPs should envisage vertical integration of water-related project components

(such as water supply, drainage, and sanitation) and incorporate social and environmental concerns explicitly. Future IUIDPs and water supply and sanitation

48 Public-private sector participation (PPSP) should be encouraged not only for water supply but also for other urban infrastructure services. Current research indicates that such participation on a small scale is effective in providing basic municipal services including water supply, sanitation, and solid waste management. Community participation and ownership are key factors contributing to the success of small-scale PPSP. In this regard, TA 5926-REG: Public-Private Community Partnerships in Urban Services for the Poor will study the experience of selected cities in developing member countries to identify innovative approaches to promoting greater PPSP in providing and managing water supply, sanitation, and solid waste management so as to reach urban poor communities.

49 Strong multiagency coordination is a prerequisite for the implementation of this recommendation.

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projects should take a river basin-oriented approach to balance water quantity and quality. Potable water for drinking purposes should be distributed as bottled water, using public-private partnerships.

(iii) Demand-side management should constitute a more important part of future IUIDPs,

especially for solid waste and sanitation components. First, waste generation may be reduced through encouragement for recycling and provision of proper incentives for in-site waste removal. Next, offering these services free of charge could generate demand for desludging services of human waste. The treated sludge as compost may be sold to farmers to allow O&M of solid waste management in a sustainable manner. Large-scale KIP may be implemented under future IUIDPs where sufficient institutional capacity exists. This can include bus terminals, markets, and possibly urban housing improvements, contributing to effectively achieving urban renewal.

F. Follow-Up Actions

55. An update on the follow-up actions given in the three PCRs is in Appendix 9 (Tables A9.1-A9.3). The Mission likewise provides project specific and general recommendations for future IUIDPs (Appendix 10).50 The Operations Evaluation Office and ADB Projects Division will be responsible for monitoring their implementation.

56. Secondary Cities Urban Development (Sector) Project. ADB Projects Division is recommended to consider supporting capacity-building activities for local governments until December 2001. The Government needs to review as soon as possible O&M of facilities using ADB’s TA under the ongoing projects. Specific attention is recommended for water supply, sanitation, and urban drainage components. Project benefit monitoring reports should be prepared and submitted to ADB by June 2001. 57. BOTABEK Urban Development Project. The sanitation and solid waste components need the Government’s immediate attention. An adequate number of temporary disposal sites and trucks should be provided by December 2001. ADB’s Projects Department is advised to encourage local participation under ongoing Loan 1511-INO for transferring knowledge so that facilities constructed under the Project are also well maintained. 58. Bandar Lampung Urban Development Project. ADB’s Projects Department is advised to consider supporting, by December 2001, external assistance in Bandar Lampung, in the light of the observed rapid pace of urbanization. The central Government and the government of Bandar Lampung are advised to continue project benefit monitoring activities and submit annual reports to ADB, to monitor and evaluate the components’ highly successful performance.

50 Environment-related recommendations provided by ADB’s Environment Division are presented in Appendix 10.

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APPENDIXES

Number

Title

Page

Cited on (page, para.)

1 Rationale, Objectives, Scope, and Costs 22 1, 3

2 Physical Accomplishments 27 2, 7

3 Implementation Performance 38 4,12

4 Operational Performance 41 4,12

5 Financial Performance and Income Statements 48 4,12

6 Economic Reevaluation 52 4,12

7 Thematic Evaluation 56 6,18

8 Overall Assessment 66 17,50

9 Status of Follow-up Actions 69 19,55

10 Environment-Related Recommendations 74 19,55

Appendix 1, page 1

RATIONALE, OBJECTIVES, SCOPE, AND COSTS

Table A1.1: Secondary Cities Urban Development (Sector) Project (Loans 983/984[SF]-INO)

Item Description Rationale In the Fifth Five-Year Development Plan, the Government of Indonesia gave high priority to

the improvement of living conditions in the urban areas of the country. The Government also extended the undertaking of urban improvement projects to secondary cities (which included towns with populations from 5,000 to 500,000).

Formulation Earlier feasibility studies were prepared for (i) West Java (by Louis Berger International [United States]; in association with P.T. Virama Karya [Indonesia] and P.T. Alfacon [Indonesia]); (ii) the five provinces of Sumatra, i.e., Aceh, Bengkulu, Jambi, Lampung, and Riau (by TPO’Sullivan and Partners [United Kingdom], in association with P.T. Hasfarm Dian Konsultan [Indonesia] and P.T. Lenggogeni [Indonesia]); and (iii) the remaining three provinces of Sumatra, i.e., North Sumatra, South Sumatra, and West Sumatra (by UNDP-financed consultants Hasfarm Dian Konsultan [Indonesia]). Under Subloan No. 4: West Java and Sumatera Integrated Urban Development Project, which was approved on 6 June 1986, for $5.38 million, supplementary feasibility work was carried out. This subloan was part of TA Loan 725-INO: Technical Assistance Program Loan, for $25.0 million, approved on 18 December 1984.

Objective To improve the urban living conditions of low-income areas through basic urban infrastructure improvements.

Scope • Part A: Improvement of urban infrastructure and services (i) Water supply (ii) Sanitation (iii) Drainage (iv) Solid waste (v) Urban roads (vi) Kampunga improvement program (vii) Guided land development (viii) Market infrastructure improvement program

• Part B: Institutional development, preparatory and implementation support In view of the sector lending approach, subprojects for ADB financing were to satisfy the criteria for selection, design and appraisal. An initial group of four subprojects (Kabupaten Karawang in West Java, Kabupaten Deli Serdang and Kotamadya Tanjung Balai in North Sumatera, and Kotamadya Banda Aceh in Aceh Province) to serve as a sample, were appraised.

Changes in Scope

• Funds allocated for the communal toilet facilities and family latrines were diverted to sewerage treatment plants. The demand for individual in-house facilities replaced that for the public facilities provided under the Project as household income levels rose.

• In the guided land development, community construction of infrastructure was deferred in favor of contracted works.

• In the drainage component, funds were reallocated from tertiary to secondary drains. • In the urban roads component, funds were reallocated from roads to sidewalks.

Financing Two ADB Loans: $70 million from OCR and $50 million from ADF; Government: $30.21 million equivalent.

ADB = Asian Development Bank; ADF = Asian Development Fund; OCR = ordinary capital resources; UNDP = United Nations Development Programme. a A kampung is a densely populated settlement on the margins of an urban area.

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Appendix 1, page 2

Table A1.2: BOTABEK Urban Development Project (Loan 1077-INO)

Item Description Rationale The Bogor, Tangerang, and Bekasi (BOTABEK) area was seen to increasingly absorb the

Jakarta overspill, in terms of both population and economic activities. Several new towns and large industrial estates were planned in the BOTABEK area. The Project intended to support the development of critical infrastructure components.

Formulation An ADB-financed feasibility study (under TA 574-INO: West Java Urban Development Project, for $250,000, approved on 23 December 1983) for urban infrastructure investments in five fast-growing towns in the three kabupatens of BOTABEK was completed in early 1986. A supplementary feasibility study and detailed engineering designs were prepared through subloan No. 7: West Java (BOTABEK) Urban Development Project, for $1.944 million. This subloan was part of TA Loan 725-INO: Technical Assistance Program Loan, for $25.0 million, approved on 18 December 1984.

Objectives • To improve the living conditions in the immediate hinterland of the capital city of Jakarta in the kabupatens of BOTABEK through the improvement of infrastructure services.

• To improve linkages in the provision of urban infrastructure and services to the growth of industrial estates and new towns in the BOTABEK area.

• To enhance the institutional capabilities of the agencies involved.

Scope • Part A: Improvement of urban infrastructure in Kabupaten Bogor • Part B: Improvement of urban infrastructure in Kabupaten Tangerang • Part C: Improvement of urban infrastructure in Kabupaten Bekasi • Part D: Institutional support

Changes in Scope

• In the urban roads component, the focus was shifted to upgrading and expanding existing roads, rather than constructing new roads.

• In the solid waste management component, a number of originally planned temporary transfer sites had to be relocated.

• In Tangerang, the guided land development sites were relocated farther out to the fringe areas of urban communities, compromising accessibility.

Financing ADB Loan: $80 million from OCR; Government: $31.6 million equivalent.

ADB = Asian Development Bank; OCR = ordinary capital resources.

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Appendix 1, page 3

Table A1.3: Bandar Lampung Urban Development Project (Loan 1078-INO)

Item Description Rationale • The city of Bandar Lampung was earmarked as a priority area for the improvement and

development of basic urban infrastructure during Repelita V.

Formulation • The Government prepared feasibility studies for the water supply of Bandar Lampung and other elements of urban infrastructure improvements needed in the city, including drainage and flood control, human and solid waste disposal and kampung improvement. As these studies were found to be inadequate, ADB prepared a supplementary feasibility study, which was financed through a subloan of a TA Program Loan. Subloan No. 6: Bandar Lampung Integrated Urban Development Project, for $1.36 million. This was part of TA Loan 725-INO: TA Program Loan, for $25.0 million, approved on 18 December 1984.

Objective • To improve the urban living conditions of the city of Bandar Lampung through the improvement of basic urban infrastructure and services.

Scope • Part A: Water supply • Part B: Solid waste management • Part C: Human waste disposal • Part D: KIP • Part E: Urban flood protection • Part F: Urban drainage • Part G: Urban roads • Part H: Institutional development and training

Changes in Scope

• Designs for the installation of house connections were revised. • The KIP component was expanded at the request of Bandar Lampung government to

cover as many kampungs as possible. • The scope of the urban flood protection component was scaled down during the

detailed engineering design.

Financing • ADB Loan: $33 million from OCR; Government: $14.14 million equivalent.

ADB = Asian Development Bank; KIP = kampung improvement program; OCR = ordinary capital resources.

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Appendix 1, page 4

AmountComponent ($'000)

Water Supply 28,947 24.22Drainage 25,743 21.54Sanitation 3,436 2.87Solid Waste Management 8,692 7.27Roads 40,367 33.77Intersectoral (KIP, MIIP) 12,349 10.33

Subtotal 119,534 100.00

Institutional Development 13,942

Total 133,476

Source: Appraisal report.

Component Bogor Bogor

Water Supply 6,872 21,968 16,993 45,833 8.01 25.61 19.81 53.44Urban Roads 4,255 6,510 5,955 16,720 4.96 7.59 6.94 19.49Drainage 3,764 1,403 1,814 6,981 4.39 1.64 2.12 8.14Sanitation 940 1,591 2,070 4,601 1.10 1.85 2.41 5.36Solid Waste 1,559 2,179 2,860 6,598 1.82 2.54 3.33 7.69KIP/MIIP 670 526 903 2,098 0.78 0.61 1.05 2.45GLD 874 874 1,748 0.00 1.02 1.02 2.04

Subtotal 18,060 35,050 31,470 84,580 21.06 40.87 36.69 98.61

AOTAs 1,190 1.39

Subtotal 85,770 100.00

Institutional Development 7,285

Total 93,055

Source: Appraisal report.

Costs at Appraisal

KIP = kampung improvement program; MIIP = market infrastracture improvementprogram.

AOTA = advisory and operational technical assistance; GLD = guided land development; KIP = kampung improvementprogram; MIIP = market infrastructure improvement program.

BekasiPercent ShareAmount ($'000)

Bekasi TotalTangerang TangerangTotal

Table A1.4a: Secondary Cities Urban Development (Sector) Project

Table A1.4b: BOTABEK Urban Development Project

PercentShare

Cost at Appraisal

25

Appendix 1, page 5

AmountComponent ($'000)

Water Supply 10,370 32.29Solid Waste Management 3,060 9.53Human Waste Disposal 813 2.53KIP 1,289 4.01Flood Protection 1,848 5.75Drainage 5,344 16.64Roads 8,935 27.82AOTA 460 1.43

Subtotal 32,119 100.00

Institutional Development 4,422 Contingencies 5,803 IDC 7,641

Total 49,985

Source: Project completion report.

Table A1.4c: Bandar Lampung Urban Development Project Costs at Appraisal

AOTA = advisory and operational technical assistance; IDC = interest duringconstruction; KIP = kampung improvement program.

PercentShare

26

27 Appendix 2, page 1

Component/Item Unit OEM

A. Water SupplyHouse Connections no. 7,960.0 13,240.0 11,000.0 a

Public Taps/Water Terminals no. 50.0 11.0 11.0Pipes km 30.4 206.4 206.4Fire Hydrants no. 5.0 5.0 3.0

B. DrainagePrimary km 1.2 0.7 0.7Secondary km 3.5 2.7 2.7Tertiary km 7.8 0.0 0.0

C. SanitationCommunal Toilet Facilities no. 150.0 19.0 19.0Family Latrines no. 50.0 13.0 13.0Sludge Trucks no. 1.0 2.0 2.0

D. Solid WasteHand Carts no. 140.0 122.0 250.0Container/Temporary Disposal Sites no. 50.0 10.0 6.0Transfer Depots no. 28.0 18.0 9.0Final Disposal Site no. 1.0 1.0 1.0Trucks no. 10.0 7.0 6.0Heavy Equipment no. 1.0 1.0 0.0

E. KIPArea ha 130.0 58.0 58.0Location no. 16.0 2.0 2.0

F. MIIPArea ha 11.0 5.0 5.0Location no. 1.0 1.0 1.0

G. Urban RoadsLength km 117.0 65.3 65.3

ha = hectare; km = kilometer.

Note: Figures in bold highlight deviation from PCR status or underachievement of appraisal target.a Functional; not enough pressure.Sources: Appraisal and project completion reports, and OEM survey, 2000.

PHYSICAL ACCOMPLISHMENTS

KIP = kampung improvement program; MIIP = market infrastructure improvement program;OEM = Operations Evaluation Mission; PCR = project completion report.

Table A2.1a: Operational Status of Secondary Cities Urban Development (Sector) Project:Kotamadya Bengkulu, Province of Bengkulu

Appraisal PCR

28 Appendix 2, page 2

Component/Item Unit OEM

A. Water SupplyHouse Connections no. 500.0 4,000.0 4,000.0Public Taps/Water Terminals no. 20.0 16.0 16.0Pipes km 17.5 23.8 23.8Rehabilitation l/s 0.0 1.0 1.0

B. DrainageSecondary km 3.0 4.3 4.3

C. SanitationCommunal Toilet Facilities no. 10.0 12.0 12.0Family Latrines no. 24.0 40.0 60.0Sludge Trucks no. 1.0 2.0 2.0

D. Solid WasteHand Carts no. 60.0 80.0 60.0Container/Temporary Disposal Sites no. 0.0 — 14.0Transfer Depots no. 4.0 4.0 4.0Trucks no. 4.0 4.0 3.0Heavy Equipment no. 1.0 1.0 1.0Tools l/s 0.0 2.0 2.0Supporting Construction l/s 0.0 1.0 1.0

E. KIPArea ha 40.0 65.0 65.0

F. MIIPArea ha 6.0 5.0 5.0

G. Urban RoadsLength km 12.0 54.4 54.4

— = na; ha = hectare; km = kilometer; l/s = liter per second.

Note: Figures in bold highlight deviation from PCR status or underachievement of appraisal target.Sources: Appraisal and project completion reports, and OEM survey, 2000.

KIP = kampung improvement program; MIIP = market infrastructure improvement program;OEM = Operations Evaluation Mission; PCR = project completion report.

Appraisal PCR

Table A2.1b: Operational Status of Secondary Cities Urban Development (Sector) Project:Kabupaten Rejang Lebong (Curup), Province of Bengkulu

29 Appendix 2, page 3

Component/Item Unit OEM

A. Water SupplyHouse Connections no. 1,000.0 — 1,332.0Pipes km 5.0 5.1 17.2Rehabilitation l/s 0.0 1.0 0.0

B. DrainageSecondary km 2.0 1.8 1.8

C. SanitationCommunal Toilet Facilities no. 9.0 8.0 8.0Family Latrines no. 24.0 17.0 17.0

D. Solid WasteHand Carts no. 40.0 18.0 6.0Transfer Depots no. 4.0 2.0 2.0Container/Temporary Disposal Sites no. 0.0 0.0 16.0Trucks no. 3.0 2.0 2.0Tools l/s 0.0 2.0 2.0Supporting Construction l/s 0.0 1.0 1.0

E. KIPArea ha 20.0 25.0 25.0

F. MIIPArea ha 5.0 5.0 5.0

G. Urban RoadsLength km 12.0 15.2 15.2

— = na; ha = hectare; km = kilometer; l/s = liter per second.

Note: Figures in bold highlight deviation from PCR status or underachievement of appraisal target.Sources: Appraisal and project completion reports, and OEM survey, 2000.

KIP = kampung improvement program; MIIP = market infrastructure improvement program;OEM = Operations Evaluation Mission; PCR = project completion report.

Table A2.1c: Operational Status of Secondary Cities Urban Development (Sector) Project:Kabupaten Rejang Lebong (Kapahyang), Province of Bengkulu

Appraisal PCR

30 Appendix 2, page 4

Component/Item Unit OEM

A. DrainageSecondary km 0.0 9.8 6.3Tertiary km 31.2 6.8 1.5

B. SanitationCommunal Toilet Facilities no. 0.0 13.0 8.0Sludge Trucks no. 1.0 2.0 2.0

C. Solid WasteContainer/Temporary Disposal Sites no. 0.0 8.0 1.0Transfer Depots no. 5.0 3.0 1.0Trucks no. 3.0 3.0 3.0

D. KIPArea ha 2.0 24.4 16.4

E. Urban RoadsLength km 11.1 26.6 17.2

ha = hectare; km = kilometer.

Note: Figures in bold highlight deviation from PCR status or underachievement of appraisal target.Sources: Appraisal and project completion reports, and OEM survey, 2000.

Kabupaten Deli Serdang (Sunggal), Province of North SumatraTable A2.1d: Operational Status of Secondary Cities Urban Development (Sector) Project:

Appraisal PCR

KIP = kampung improvement program; OEM = Operations Evaluation Mission; PCR = projectcompletion report.

31 Appendix 2, page 5

Component/Item Unit OEM

A. DrainagePrimary km 0.0 3.7 1.7Tertiary km 4.8 0.1 0.1

B. Solid WasteTransfer Depots no. 4.0 1.0 1.0Trucks no. 1.0 1.0 1.0

C. KIPArea ha 15.0 20.0 15.0

D. MIIPArea ha 1.0 7.0 5.5

E. Urban RoadsLength km 4.3 10.9 8.9

ha = hectare; km = kilometer.

Note: Figures in bold highlight deviation from PCR status or underachievement of appraisal target.Sources: Appraisal and project completion reports, and OEM survey, 2000.

Table A2.1e: Operational Status of Secondary Cities Urban Development (Sector) Project:Kabupaten Deli Serdang (Perbaungan), Province of North Sumatra

Appraisal PCR

KIP = kampung improvement program; MIIP = market infrastructure improvement program;OEM = Operations Evaluation Mission; PCR = project completion report.

32 Appendix 2, page 6

Component/Item Unit OEM

A. DrainageSecondary km 0.0 1.7 1.2

B. SanitationCommunal Toilet Facilities no. 0.0 8.0 1.0

C. Solid WasteTransfer Depots no. 14.0 1.0 0.0Trucks no. 1.0 1.0 1.0

D. KIPArea ha 25.0 33.0 24.3

E. MIIPArea ha 5.0 4.0 1.0

F. Urban RoadsLength km 2.1 2.1 0.5

ha = hectare; km = kilometer.

Note: Figures in bold highlight deviation from PCR status or underachievement of appraisal target.Sources: Appraisal and project completion reports, and OEM survey, 2000.

Table A2.1f: Operational Status of Secondary Cities Urban Development (Sector) Project:Kabupaten Deli Serdang (Sei Rampah), Province of North Sumatra

Appraisal PCR

KIP = kampung improvement program; MIIP = market infrastructure improvement program;OEM = Operations Evaluation Mission; PCR = project completion report.

33 Appendix 2, page 7

Component/Item Unit PCR

A. Water Supply1. Production l/s 65.0 150.0 150.0 2. Reservoirs + Booster Pumps no. 2.0 2.0 2.0 3. Pipelines (including tertiary) km 334.0 51.3 51.3 4. House Connections no. 7,670.0 7,200.0 5,500.0 5. Public Taps no. 30.0 14.0 14.0 6. Water Loss Reduction (UFW)

Depok, Bogor % 25.0 39.0 Tangerang % 20.0 29.0 Bekasi % 26.0 47.0

B. Urban Roads1. Road Improvement km 41.2 34.0 33.0 2. New Road km 15.8 12.2 12.2

C. Drainage1. Drain Improvement km 91.0 37.9 37.9 2. Rotary Drains no. 60.0 10.0 10.0

D. Sanitation1. Communal Toilet Facilities no. 160.0 50.0 30.0 2. Trucks no. 13.0 13.0 13.0

E. Solid Waste1. Trucks/Loaders no. 30.0 33.0 33.0 2. Hand Carts no. — 204.0 204.0 3. Temporary Disposal Sites no. 12.0 6.0 6.0 4. Final Disposal Sites/Workshops no. 2.0 2.0 2.0

F. KIP/MIIP1. Sites no. 16.0 16.0 16.0

no. 4.0 4.0 4.0 2. Area ha 115.0 160.0 150.0

ha 4.0 8.0 8.0

— = magnitude zero; ha = hectare; km = kilometer; l/s = liter per second.

Note: Figures in bold highlight deviation from PCR status or underachievement of appraisal target.Sources: Appraisal and project completion reports, and OEM survey, 2000.

Table A2.2a: Operational Status of BOTABEK Urban Development Project

Appraisal

Components in Bogor

KIP = kampung improvement program; MIIP = market infrastructure improvement program;OEM = Operations Evaluation Mission; PCR = project completion report; UFW = unaccounted-for-water.

OEM

34 Appendix 2, page 8

Component/Item Unit OEM

A. Water Supply1. Production l/s 570.0 570.0 300.0 2. Reservoirs no. 4.0 3.0 3.0 3. Pipelines (excluding tertiary) km 90.0 99.7 99.7 4. House Connections no. 18,100.0 5,700.0 5,700.0 5. Public Taps/Water Terminals no. 179.0 179.0 179.0

B. Urban Roads1. Road Improvement km 75.8 84.9 84.9 2. Intersections/Traffic Management no. 2.0 — —

C. Drainage1. Primary Drains km 4.0 9.6 9.6 2. Secondary Drains km 2.0 8.5 8.5

D. Sanitation1. Communal Toilet Facilities no. 60.0 70.0 70.0 2. Trucks no. 11.0 11.0 11.0

E. Solid Waste1. Trucks/Loaders no. 31.0 31.0 31.0 2. Hand Carts no. — 110.0 110.0 3. Temporary Disposal Sites no. 23.0 16.0 16.0 4. Final Disposal Sites/Workshops no. 1.0 1.0 1.0

F. KIP/MIIP1. Sites no. 5.0 7.0 7.0

no. 1.0 1.0 1.0 2. Area ha 46.0 66.0 66.0

ha 5.0 3.0 3.0

G. GLD1. Sites no. 1.0 2.0 2.0 2. Area ha 50.0 50.0 50.0

— = magnitude zero; ha = hectare; km = kilometer; l/s = liter per second.

Sources: Appraisal and project completion reports, and OEM survey, 2000.Note: Figures in bold highlight deviation from PCR status or underachievement of appraisal target.

Table A2.2b: Operational Status of BOTABEK Urban Development Project

Appraisal

Components in Tangerang

GLD = guided land development; KIP = kampung improvement program; MIIP = market infrastructureimprovement program; OEM = Operations Evaluation Mission; PCR = project completion report.

PCR

35 Appendix 2, page 9

Component/Item Unit

A. Water Supply1. Production l/s 160.0 260.0 820.0 2. Reservoirs no. 3.0 2.0 2.0 3. Pipelines (excluding tertiary) km 95.0 83.5 83.5 4. House Connections no. 16,000.0 19,000.0 36,000.0 5. Public Taps/Water Terminals no. 132.0 40.0 40.0

House Connections

B. Urban Roads1. Road Improvement km 35.4 59.6 59.6 2. New Roads km 7.5 7.1 7.1 3. Intersections/Traffic Management pkg 3.0 2.0 2.0

C. Drainage1. Primary Drains km 7.0 15.5 15.5 2. Secondary Drains km 6.0 3.5 3.5

D. Sanitation1. Communal Toilet Facilities no. 50.0 79.0 79.0 2. Individual Toilet Facilities no. 170.0 27.0 27.0 3. Trucks no. 6.0 10.0 10.0 4. Tertiary Drains km 5.0 4.5 4.5

E. Solid Waste1. Trucks/Loaders no. 38.0 52.0 24.0 2. Hand Carts no. 160.0 405.0 405.0 3. Temporary Disposal Sites no. 42.0 28.0 20.0 4. Final Disposal Sites no. 1.0 1.0 1.0

F. KIP/MIIP1. Sites no. 8.0 7.0 7.0

no. — 1.0 2.0 2. Area ha 95.0 110.0 50.0

ha — 2.0 2.0 G. GLD

1. Sites no. 1.0 1.0 1.0 2. Area ha 50.0 65.0 65.0

— = magnitude zero; ha = hectare; km = kilometer; l/s = liter per second.

Sources: Appraisal and project completion reports, and OEM survey, 2000.Note: Figures in bold highlight deviation from PCR status or underachievement of appraisal target.

GLD = guided land development; KIP = kampung improvement program; MIIP = market infrastructure improvementprogram; OEM = Operations Evaluation Mission; PCR = project completion report.

Table A2.2c: Operational Status of BOTABEK Urban Development ProjectComponents in Bekasi

Appraisal PCR OEM

Appendix 2, page 10

Component/Item Unit

A. Water Supply1. Pumps l/s 270.0 360.0 360.0 2. 500 mm Transmission Main m 1,400.0 1,043.0 1,043.0 3. Treatment Plant no. 1.0 1.0 1.0 4. Expansion of Main Distribution System km 40.0 30.7 30.7 5. Construction of Reservoirs

a. Reservoir 1 m3 2,400.0 2,000.0 2,000.0 b. Reservoir 2 m3 1,000.0 1,000.0 1,000.0 c. Reservoir 3 m3 500.0 500.0 500.0

6. Expansion of Reticulation System km 100.0 140.9 140.9 7. Installation of New Connections no. 13,300.0 9,765.0 12,978.0

B. Solid Waste Management1. Landfill Sites ha 12.0 13.0 13.4 2. Construction of Workshops no. 1.0 3.0 1.0 3. Waste Disposal Equipment/Vehicles

a. Container Trucks no. 24.0 22.0 17.0 b. Bulldozers no. 2.0 2.0 2.0 c. Pickups no. 2.0 2.0 1.0 d. Collection Plastic Bins no. 52,897.0 52,897.0 —e. Push Carts no. 282.0 480.0 659.0 f. Steel Containers no. 120.0 156.0 112.0

C. Human Waste Disposal1. Sludge Treatment Site and Facilities no. 1.0 1.0 1.0 2. Vacuum Trucks no. 9.0 9.0 2.0 3. Public Toilets no. 10.0 10.0 11.0 4. Rehabilitation/Construction of Public Toilets no. 11.0 12.0 11.0

D. Kampung Improvement1. Basic Infrastructure no. 15.0 23.0 35.0 2. Access Roads km 9.1 29.6 29.9 3. Footpaths km 8.8 12.6 21.4 4. Drainage km 11.3 24.9 67.9 5. Culverts m 200.0 457.0 174.0 6. Public Taps no. 10.0 3.0 52.0 7. Public Bath/Toilets no. 39.0 12.0 101.0

ha = hectare; km = kilometer; l/s = liter per second; m = meter; m3 = cubic meter; mm = millimeter.OEM = Operations Evaluation Mission; PCR = project completion report.Note: Figures in bold highlight deviation from PCR status or underachievement of appraisal target.Sources: Appraisal and project completion reports, and OEM survey, 2000.

Table A2.3: Operational Status of Bandar Lampung Urban Development Project

OEMAppraisal PCR

36

Appendix 2, page 11

Component/Item Unit

E. Urban Flood Protection1. Replacement of Vehicular Bridges and Culverts km 13.0 12.0 7.0

F. Urban Drainage1. Rehabilitation of Primary Channels/Drains km 16.6 9.2 24.9 2. Construction of New Primary and Secondary Drains km 6.3 6.6 5.4 3. Rehabilitation/Construction

a. Culverts km 1.6 1.0 0.0 a

b. Bridges km — 4.0 0.0 a

G. Urban RoadsCity Roads km 28.5 39.6 55.7

— = magnitude zero; km = kilometer. OEM = Operations Evaluation Mission; PCR = project completion report.Note: Figures in bold highlight deviation from PCR status or underachievement of appraisal target.a Negligible.Sources: Appraisal and project completion reports, and OEM survey, 2000.

Appraisal PCR OEM

Table A2.3: Operational Status of Bandar Lampung Urban Development Project (Cont.)

37

Appendix 3, page 1

IMPLEMENTATION PERFORMANCE

Table A3.1: Design Project Description A. Secondary Cities

Urban Development (Sector) Project

• The Project was formulated through separate feasibility studies for West Java, five provinces of Sumatra, and the remaining three Sumatra provinces; supplementary feasibility work was completed under an ADB TA loan; the sector lending approach was adopted, and subprojects were formulated by kabupaten/kotamadya.

• The Project consists of 27 subprojects in 51 secondary cities: the

common objective was to improve urban living conditions of low-income areas through bottom-up planning, enhancing financial capabilities of local governments and formulating financial and institutional action plans.

B. BOTABEK Urban

Development Project • An ADB-financed feasibility study, completed in early 1986, was

followed by a supplementary feasibility study and detailed design under a subloan of a TA Program Loan.

• The Project aimed to improve living conditions of people in five fast-growing cities in the three kabupatens of Bogor, Tangerang, and Bekasi, focusing on low-income groups, through improving linkages in provision of urban infrastructure and services and enhancing institutional capacities for urban management.

C. Bandar Lampung

Urban Development Project

• The Government prepared feasibility studies for water supply and other common elements of integrated urban infrastructure development, and ADB prepared a supplementary feasibility study under a subloan of a TA Program Loan.

• The Project aimed to improve the living conditions in the city of Bandar Lampung through the improvement of basic urban infrastructure and services. The integrated approach was adopted for cost-effective services with due consideration to bottom-up planning and increasing financial and institutional capacities at the local level.

ADB = Asian Development Bank; TA = technical assistance.

38

Appendix 3, page 2

Table A3.2: Performance of Consultants/Contractors

Project Description A. Secondary Cities Urban

Development (Sector) Project

• The performance of consultants, contractors, and suppliers was generally satisfactory.

• Consultants support was particularly important for the preparation of local institutional development and revenue improvement action plans.

B. BOTABEK Urban Development Project

• The performance of consultants, contractors, and suppliers generally met the expected standards. Implementation of physical works was faster than originally scheduled except for drainage works that were delayed in order to establish a clear demarcation with the road component in contract packaging.

C. Bandar Lampung Urban Development Project

• The performance of contractors and suppliers was generally satisfactory, and no major problems or delays in delivery of equipment and materials occurred.

• The planning and implementation advisory consultants for institutional development worked closely with the counterpart staff in the offices of local governments for satisfactory supervision and management of project implementation. Associated domestic consultants benefited from technology transfer, especially during engineering design and test runs of project facilities.

Table A3.3: Costs

Project Description A. Secondary Cities Urban

Development (Sector) Project

• The total project cost was $166.9 million, 11 percent higher than the appraisal estimate of $150.2 million.

• The local currency cost increased (14 percent above the appraisal estimate) mainly due to increases in civil works costs as a result of the expanded scope of work.

• About 35 percent of project costs were funded through loans to local governments and local water enterprises, and other locally raised funds.

B. BOTABEK Urban Development Project

• The total project cost was $101.9 million, 9 percent lower than the appraisal estimate of $111.6 million; the decrease was due mainly to a smaller cost increase as compared to contingencies, consisting of an increase in civil works and savings in equipment and materials, and the interest during construction.

• The cost of consulting services and training increased by 19 percent due to extra work on institutional strengthening and benefit monitoring and evaluation.

C. Bandar Lampung Urban Development Project

• The total project cost was $50.0 million, 6 percent higher than the appraisal estimate of $47.1 million; the local currency cost incurred a 16 percent overrun, while the foreign currency cost was lower by 7 percent.

• The increase in the local currency cost was due mainly to training programs carried out by implementing agencies.

39

Appendix 3, page 3

Table A3.4: Schedule

Project Description A. Secondary Cities Urban

Development (Sector) Project

• Being the first IUIDP in Indonesia, the Project incurred substantial delays as the Executing Agencies were unfamiliar with ADB procedures; some institutional support packages did not begin until three years after programmed start-up.

• The Project was nevertheless completed in June 1996, six months behind the original schedule.

B. BOTABEK Urban Development Project

• The Project started in May 1991, delayed by seven months due to delays in land acquisition and recruitment of consultants.

• All components of the Project were substantially completed by the end of 1996, except for water supply in Tangerang, while the original completion was expected by the end of 1995.

• The work in Tangerang was delayed because of complications in implementing arrangements resulting from the establishment of the new Tangerang municipality.

C. Bandar Lampung Urban Development Project

• The Project started in January 1991 as scheduled, and completed by the end of 1996 with a six-month delay caused mainly by a delay in the installation of house connections for water supply.

ADB = Asian Development Bank; IUIDP = integrated urban infrastructure development project.

Table A3.5: Covenants

Project Description A. Secondary Cities Urban

Development (Sector) Project

• While most covenants were satisfactorily met, there were shortcomings in compliance with financial and institutional covenants, in particular those related to local government responsibilities, including O&M of subproject components.

• Many local governments found it difficult to allocate O&M funds in their annual budget and to review their financial position by component under their responsibility.

• All income from water supply was expected to be retained by the respective PDAM, but most PDAMs still transfer a percentage of their net profit to the local governments.

B. BOTABEK Urban Development Project

• Most covenants were complied with, including financial and operational performance targets for local governments and PDAMs.

• The covenanted reduction of the UFW to 25 percent was met in Tangerang and Bekasi at project completion, but it increased thereafter.

C. Bandar Lampung Urban Development Project

• Most covenants were met satisfactorily. Exceptions are (i) submission of audited accounts and financial statements, (ii) updating of institutional and financial action plans, and (iii) reduction of UFW.

• Water tariff revenue has been sufficient to cover the operating costs including debt servicing and depreciation provision through initial operation after project completion, but financial problems are foreseen in a few years.

O&M = operation and maintenance; PDAM = local water enterprise; UFW = unaccounted-for-water.

40

Appendix 4, page 1

OPERATIONAL PERFORMANCE

Table A4.1: Physical Performance Item Description A. Secondary Cities Urban Development (Sector) Project

1. Water Supply

• Public tap installation reached only 30 percent of appraisal target; house

connections largely attained targets but some are inactive due to low pressure.

• UFW was not significantly reduced; it increased in some cities.

2. Sanitation • Low-cost sanitation components (communal toilet facilities) failed to attain the targets.

• Sewage treatment plants were provided in some cities instead of communal toilet facilities and family latrines.

3. GLD • Less than half the targeted area was covered. 4. KIP/MIIP • Fewer KIP sites but with a larger area were covered. 5. Solid Waste • Provision of equipment exceeded targets.

• Much smaller numbers of transfer depots and disposal sites were provided.

6. Drainage • Primary and secondary drains exceeded targets at the cost of a much shorter length of tertiary drains.

7. Urban Roads • Urban road construction was short of the target, while additional sidewalks

were provided. B. BOTABEK Urban Development Project 1. Water Supply

• This component, by far the most dominant in all the three districts in terms of cost, was generally successful in achieving physical targets, except UFW.

• Despite the smaller than targeted number of house connections in Bogor and

Tangerang, water demand has been firm in all the districts. In Bekasi, house connections increased steadily to exceed the appraisal target.

2. Roads • The length of road improvement exceeded the target.

• Most roads improved by the Project are well used; some sections are overused, resulting in early degradation of surfaces.

3. Drainage • Provision of both primary and secondary drains exceeded the respective

targets. • Drainage along a secondary road in Bekasi was found to be poor in some

sections, constrained by road design with a winding alignment and small gradient.

GLD = guided land development; KIP = kampung improvement program; MIIP = market infrastructure improvement program; UFW = unaccounted-for-water.

41

Appendix 4, page 2

Item Description 4. Solid Waste • The Project provided equipment and facilities as planned, except for fewer

temporary disposal sites, and the additional provision of hand carts originally not planned.

• There exists a mismatch between the number of temporary disposal sites and the number of trucks provided by the Project. As a result, some of these temporary sites are effectively working as final disposal sites, not served by trucks, although waste collection by local communities is generally done adequately.

5. Sanitation • Communal toilet facilities, desludging trucks, and sedimentation facilities were

provided as planned, but most of these toilet facilities are not well used and sedimentation facilities are not fully operational.

6. KIP/MIIP • The Project covered more KIP/MIIP sites with a larger total area.

7. GLD • The GLD was applied to existing communities in Bekasi as land acquisition

was difficult due to rapid urbanization. • In Tangerang, two sites in further fringe areas were used for the same total

area, instead of the original site with high land value.

C. Bandar Lampung Urban Development Project 1. Water Supply • House connections were fewer than planned due to the delay in construction

of a water treatment plant and three treated water reservoirs. • UFW was higher (35 percent) than projected at appraisal.

2. Solid Waste • Provision of equipment and facilities exceeded targets; 22 container trucks provided by the Project are still fully used, while some push carts and steel containers were abandoned.

3. Sanitation • Desludging and sludge treatments are operational with trucks and facilities

provided by the Project, although demand for the services is not as high as expected.

4. KIP/MIIP • More kampungs were covered with generally much greater improvements

than envisaged at appraisal.

5. Drainage

• The scope of the flood protection component was reduced; additional protective walling on the river bank was provided by the Government’s own program.

6. Urban Roads • The Project provided more widening and less maintenance of existing roads,

and improvement to five junctions that was not originally planned; additional rehabilitation of roads was provided by the Government’s own program.

GLD = guided land development; KIP = kampung improvement program; MIIP = market infrastructure improvement program; UFW = unaccounted-for-water.

42

Appendix 4, page 3

Table A4.2: Institutional Performance Item Description A. Secondary Cities Urban

Development (Sector) Project

• Fund management at the central level was satisfactory, under which extensive project modifications were made mostly at the provincial level.

• The Project could not establish adequate ownership at the local level, as most local governments were not actively involved in project planning and modifications, and community consultation was minimal.

• Poor coordination between the PDAM in charge of O&M of desludging trucks and Dinas Kebersihan in charge of disposal tended to hamper sanitation operations (e.g., in Deli Serdang).

• Many PDAMs were facing increasing financial problems.

• Community participation in O&M varied widely between components and cities, but generally much less than expected.

B. BOTABEK Urban Development Project

• The organizational structure for project implementation with the implementing units outside the permanent organizational structure of the provincial and local governments was not conducive to a smooth transition of the role of local governments from implementation to O&M. This has been corrected under the ongoing project (Loan 1511-INO: Metro BOTABEK Urban Development [Sector] Project).

• Maintenance responsibilities of drainage may not be adequately established. In particular, participation of local communities for secondary drains was limited, while the main responsibilities lie in the local public works department (Dinas PU).

• The high UFW ratios are the result of both technical and administrative problems; the latter include low bill collection rates, illegal connections, and defective meters.

• O&M at most KIP sites is largely under community responsibility, but the levels of community participation vary among the sites. Some KIP sites in Tangerang may not be sustained without local government support for maintenance.

C. Bandar Lampung Urban Development Project

• The division of responsibilities was clearly established at the outset and followed at the local level, under the technical guidance and direction on administrative matters from the Executing and Implementing Agencies.

• The city government played an active role not only in the implementation of solid waste management, sanitation, KIP, urban roads and drainage components, but also for extensive training and community information programs; the latter helped establish ownership among the local government and communities.

• PDAM Way Rilau exhibits sound financial performance, but may face difficulties in a few years as O&M costs increase and significant tariff increase seems difficult in the near future.

KIP = kampung improvement program; O&M = operation and maintenance; PDAM = local water enterprise; UFW = unaccounted-for-water.

43

Appendix 4, page 4

Table A4.3: Economic Reevaluation

Item Description A. Secondary Cities Urban

Development (Sector) Project • Economic reevaluation was not attempted as no reliable

data were available. Subprojects funded by the Project improved and rehabilitated the urban infrastructure in general. However, O&M of the project facilities was considered unsustainable. The EIRRs were much lower than estimates in the appraisal report and PCR. The Project is rated efficient.

B. BOTABEK Urban Development Project

• A detailed economic reevaluation, including a simulation of the impacts of the financial crisis and local ownership and participation, was undertaken (Appendix 6). Reestimated overall EIRRs confirmed the highly efficient performance of the Project.

C. Bandar Lampung Urban Development Project

• Economic reevaluation in the PCR was generally accepted as project facilities were performing well. A highly efficient performance was confirmed. The Operations Evaluation Mission did not attempt an economic reevaluation.

EIRR = economic internal rate of return; O&M = operation and maintenance; PCR = project completion report.

44

Appendix 4, page 5

Table A4.4: Social and Environmental Impacts

Item Description A. Secondary Cities

Urban Development (Sector) Project

• Desludging, although only partially operational, and increased solid waste collection improved sanitary conditions.

• Some collected solid wastes are disposed of improperly, e.g., burned at transfer depots or dumped into rivers.

• In Bengkulu, improved access to a solid waste disposal site induced housing development along the access road, preventing expansion of the disposal site.

• Further environmental education is considered necessary to change some undesirable social habits of people, for example, disposal of human waste in rivers.

• The KIP contributed to enhancing social cohesiveness of neighborhood units as well as improving living conditions.

• Flood control and drainage improved the socioeconomic conditions of people in formerly flooded areas; further improvements are provided for under ongoing projects (Loans 1383/1384-INO: Sumatra and West Java Urban Development [Sector] Projects).

B. BOTABEK Urban Development Project

• The water supply component did not benefit low-income groups as much as expected as the PDAMs provided only clean water, not drinking water, and the low-income groups continued to rely on alternate sources for drinking. High-income groups and other bulk water consumers contributed to the firm demand for water as service coverage was still generally low.

• Increased solid waste collection has improved sanitary conditions, but substantial amounts of solid waste are still uncollected, and, especially in suburban areas, disposed of in situ in open dumping sites.

• Sanitary conditions are expected to be further improved in the future as local governments have started to rehabilitate some unused sludge treatment facilities.

• KIP contributed to enhancing the social cohesiveness of neighborhood units as well as improving living conditions.

• Any improvement to the urban environment by guided land development is difficult to see as it tends to be overwhelmed by the overall urban development of neighboring areas.

C. Bandar Lampung Urban Development Project

• Desludging, though only partially operational, and increased solid waste collection have improved sanitary conditions.

• Solid waste was collected daily with collection fees charged to households and commercial units, and disposed of with soil cover, although a sanitary landfill was lacking.

• Extensive training and public education programs raised environmental awareness and improved the environmental management capacities of the local government.

• KIP was so successful in improving living conditions that some large houses were built and economic activity flourished.

• Flood control measures contributed to enhancing a sense of security and social cohesiveness among residents in formerly flooded old quarters and harbor areas.

KIP = kampung improvement program; PDAM = local water enterprise.

45

Appendix 4, page 6

Table A4.5: Sustainability of Facilities Item Description A. Secondary Cities

Urban Development (Sector) Project

• Sustainability of solid waste management and sanitation operations would depend on constant maintenance and supplies of equipment. The useful life of push carts, containers, and trucks is short. Local governments and community organizations are capable of O&M but not of capital investment.

• Some facilities without adequate ownership such as communal toilet facilities would not be sustained as they are not well maintained, or even used.

• The low quality of some civil works caused such problems as degraded surface conditions of roads, collapsed drains, and cracked retention walls; sustainability of these facilities is questionable.

B. BOTABEK Urban Development Project

• A further increase in input costs may undermine sustainable water supply operations as financial performance of PDAMs is already marginal.

• Sustainability of solid waste and sanitation facilities would depend on ongoing rehabilitation efforts and constant maintenance and supplies of equipment.

• Generally, sustainability of most communal toilet facilities is unlikely, except for those within some KIP sites which were well maintained.

• Sustainability of facilities provided under KIP was most likely as a sense of ownership was well established.

• Sustainability of GLD facilities was questionable. This is particularly true for the GLD area in Bekasi, where facilities were constructed by contractors rather than by the self-help efforts of local communities.

C. Bandar Lampung Urban Development Project

• Well-established ownership by the local government and communities confirmed the sustainability of most facilities provided by the Project.

• Financial problems were foreseen for PDAM Way Rilau. They might undermine sustainable water supply operations. A tariff increase was considered difficult to achieve in the immediate future.

• Sludge treatment facilities that had excess capacity might face degradation unless they are properly maintained or utilized through the development of demand for desludging services and composting.

GLD = guided land development; KIP = kampung improvement program; O&M = operation and maintenance; PDAM = local water enterprise.

46

Appendix 4, page 7

Table A4.6: Women in Development Item Description A. Secondary Cities

Urban Development (Sector) Project

• Where water supply was improved, women received incidental benefits from time saving; real benefits would derive from productive use of the saved time, which may not be realized without economic components to the Project.

• Improved living conditions benefited housewives more as most of them stayed at home and in the neighborhood longer than their husbands; better conditions such as paved footpaths and flood-free house compounds occasionally made cleaning work easier.

• In the kampung improvement program sites, gardening and potted plants were commonly observed, presumably done mainly by women.

B. BOTABEK Urban Development Project

• Generally, the comments that were made for the Secondary Cities Urban Development (Sector) Project apply.

• Benefits that women derived from time saving due to improved access to water are incidental, while real benefits obtained from productive use of saved time for various socioeconomic activities were minor in areas influenced by the megacity (Jakarta), such as BOTABEK since more substantial employment opportunities are found only in Jakarta, and community-based socioeconomic activities are more difficult to develop in such areas.

C. Bandar Lampung Urban Development Project

• Generally, the comments that were made for the Secondary Cities Urban Development (Sector) Project apply.

• Women in Bandar Lampung derived real benefits, more than in most secondary cities, from productive use of time saved due to improved access to water as the city had more opportunities for economic activities.

Table A4.7: Poverty Impact

Item Description A. Secondary Cities

Urban Development (Sector) Project

• Improved living conditions resulting from many project components benefited low-income people equally as project facilities did not exclude any users. The water supply component did not contribute directly to poverty alleviation.

• Increased solid waste collection generated limited livelihood opportunities at both transfer depots and disposal sites for waste recycling.

B. BOTABEK Urban Development Project

• The water supply component did not benefit the poor, who preferred to rely on alternative sources.

• Improved living conditions due to the kampung improvement program component benefited low-income people.

C. Bandar Lampung Urban Development Project

• Improved living conditions contributed to increasing various economic and livelihood activities, irrespective of income group. Bandar Lampung enjoyed a strong economic performance due to the Project.

47

Item FY1991 FY1992 FY1993 FY1994 FY1995 FY1996 FY1997 FY1998 FY1999

A. Revenues 17,952 24,009 40,478 43,289 50,984 61,660 71,196 71,230 113,2721. Surplus from Previous Year 988 647 469 327 1,737 2,963 2,446 1,164 3,3832. Local Taxes and Service Charges 5,617 5,717 6,401 7,591 10,142 12,840 13,625 12,091 12,5063. Land and Building Tax 1,325 1,685 2,177 3,186 4,932 4,865 5,229 5,765 5,5244. Other Assigned Revenues 246 1,262 1,389 2,201 2,626 3,541 755 604 855. Transfers and Grants - Central Government 9,363 12,306 28,160 26,968 31,149 37,451 46,158 48,944 88,6386. Development Loans - Central Government — — — 1,817 — — — — —8. Development Loans - IBRD (SLA TK II) 413 2,392 1,882 1,199 398 — — — —9. Nontax Revenues — — — — — — 2,983 2,662 3,136

B. Routine Expenditures 9,293 11,048 25,182 27,913 33,087 39,598 45,829 52,938 77,8301. Labor 6,448 6,342 19,628 21,181 24,275 28,466 33,902 39,900 61,3442. Equipment 1,322 2,371 2,548 3,204 4,409 5,504 5,830 7,363 8,8583. Operation and Maintenance 341 559 742 973 1,198 1,359 1,515 1,637 2,1664. Travel 113 182 314 191 369 397 340 294 3695. Others 503 915 1,024 1,305 672 1,335 2,515 1,680 2,5866. Debt Servicing — — — — 958 920 — — —8. Transfer to Lower Levels — 1 15 2 53 — 65 318 3719. Other Routine Expenditures 472 602 777 870 954 1,408 1,414 1,454 1,61210. Unclassified Routine Expenditures 94 76 134 187 199 209 248 292 524

C. Development Expenditures/Investments 7,819 12,491 14,966 13,640 14,933 19,615 24,204 14,910 35,442Total Routine and Development Expenditures/Investments 17,112 23,539 40,148 41,553 48,020 59,213 70,033 67,848 113,272

Surplus/(Deficit) 840 470 330 1,736 2,964 2,447 1,163 3,382 —

— = magnitude zero.IBRD = International Bank for Reconstruction and Development; SLA = subsidiary loan agreement.Source: BAPPEDA Bandar Lampung.

FINANCIAL PERFORMANCE AND INCOME STATEMENTS

Table A5.1: Revenues and Expenditures of the City of Bandar Lampung(Rp million)

48Appendix 5, page 1

49 Appendix 5, page 2

Item

RevenuesOperating Revenues 37,858 49,235 60,147 73,736 158,840Developmental Revenues 0 0 0 0 0

Total Revenues 37,858 49,235 60,147 73,736 158,840

ExpendituresRoutine Expenditures 16,303 22,324 26,461 29,152 111,917Development Expenditures 19,164 21,801 29,665 42,690 36,998

Total Expenditures 35,467 44,126 56,125 71,841 148,914

Net Income 2,391 5,109 4,021 1,894 9,926

Note: Numbers may not add up due to rounding.Source: BAPPEDA Deli Serdang.

Item 1995/1996 1996/1997 1997/1998 1998/1999

RevenuesOperating Revenues 30.0 22.2 22.6 115.4Developmental Revenues — — — —

Total Revenues 30.0 22.2 22.6 115.4

ExpendituresRoutine Expenditures 36.9 18.5 10.2 283.9Development Expenditures 13.8 36.1 43.9 (13.3)

Total Expenditures 24.4 27.2 28.0 107.3

Net Income 113.7 (21.3) (52.9) 424.0

— = ___________.Source: BAPPEDA Deli Serdang.

Table A5.2: Revenues and Expenditures of Kabupaten Deli Serdang(Rp million)

Revenues and Expenditures of Kabupaten Deli Serdang(Percent Change)

1994/95 1995/96 1996/97 1997/98 1998/99

50 Appendix 5, page 3

Item

A. Revenue 2,105 2,643 3,648 6,467 6,855 8,697 8,9741. Water Sales 1,832 2,336 2,977 3,741 4,771 6,833 7,6462. Connection Fee 257 274 632 2,628 1,460 1,378 1,0143. Other Income 16 33 39 98 624 486 314

B. Expenditures 2,129 3,046 3,655 5,872 8,534 10,132 10,3211. Personnel 253 363 374 529 658 1,016 1,2442. Chemical 337 341 591 1,199 240 1,072 6743. Administration 32 166 262 384 445 515 1,3134. Power 74 150 110 75 931 1,471 1,6515. Maintenance 48 81 145 127 226 162 4956. Interest Payments 541 659 946 2,197 2,334 2,107 1,4727. Provision for Bad Debts 57 85 91 (25) 0 95 128. Depreciation 784 1,198 1,135 1,383 3,700 3,694 3,4609. Other Expenses 3 3 1 3 0 0 0

C. Net Income (24) (403) (7) 595 (1,679) (1,435) (1,347)

D. Non-Operating Income 431 150 90 59 134 152 761. Non-Operating Revenue 431 150 90 59 134 152 762. Non-Operating Expenses 0 0 0 0 0 0 0

E. Total Net Income 407 (253) 83 654 (1,545) (1,283) (1,271)

PDAM = local water enterprise.Source: BAPPEDA Bandar Lampung.

Item

Current Assets 2,094 1,868 970 1,412 1,433 1,853 2,658Fixed Assets 7,306 11,221 10,913 12,572 28,723 29,948 28,584Work-in-Progress 11,937 9,529 14,947 23,093 0 0 0Other Assets 755 3,078 3,130 3,679 7,455 4,489 3,906

Total Assets 22,092 25,696 29,960 40,756 37,611 36,290 35,148

Current Liabilities 1,722 2,943 4,405 9,912 7,075 14,088 16,048Long-Term Liabilities 17,528 19,830 22,548 26,845 25,003 21,912 19,969Equity 2,842 2,923 3,007 3,999 5,533 290 (869)

Total Liabilities and Equity 22,092 25,696 29,960 40,756 37,611 36,290 35,148

Debt Service Coveragea 0.07 0.07 0.09 0.16 0.17 0.20 0.18Debt-Equity Ratiob 6.77 7.79 8.96 9.19 5.80 124.14 (41.45)Return on Net Fixed Assetsc (0.04) (0.00) 0.05 (0.08) (0.05) (0.05)

PDAM = local water enterprise.a Net income after taxes+interest on long term debt+depreciation/debt servicing.b Total debt/stockholders' equity.c Net operating income/average of net fixed assets in service.Source: BAPPEDA Bandar Lampung.

(Rp million)

1997 1998 1999

(Rp million)

1993 1994 1995

Table A5.3: Income Statements: PDAM Way Rilau

1993 1994 1995 1996 1997 1998 1999

Table A5.4: Summary of Balance Sheets: PDAM Way Rilau

1996

50 Appendix 5, page 3 0

Item 1994 1995 1996 1997 1998 1999

A. Revenue 25.6 38.0 77.3 6.0 26.9 3.21. Water Sales 27.5 27.4 25.7 27.5 43.2 11.92. Connection Fee 6.6 130.7 315.8 (44.4) (5.6) (26.4)3. Other Income 106.3 18.2 151.3 536.7 (22.1) (35.4)

B. Expenditures 43.1 20.0 60.7 45.3 18.7 1.91. Personnel 43.5 3.0 41.4 24.4 54.4 22.42. Chemical 1.2 73.3 102.9 (80.0) 346.7 (37.1)3. Administration 418.8 57.8 46.6 15.9 15.7 155.04. Power 102.7 (26.7) (31.8) 1,141.3 58.0 12.25. Maintenance 68.8 79.0 (12.4) 78.0 (28.3) 205.66. Interest Payments 21.8 43.6 132.2 6.2 (9.7) (30.1)7. Provision for Bad Debts 49.1 7.1 (127.5)8. Depreciation 52.8 (5.3) 21.9 167.5 (0.2) (6.3)9. Other Expenses 0.0 (66.7) 200.0

C. Net Income (1,579.2) 98.3 8,600.0 (382.2) 14.5 6.1

Item 1994 1995 1996 1997 1998 1999

Current Assets (10.8) (48.1) 45.6 1.5 29.3 43.4Fixed Assets 53.6 (2.7) 15.2 128.5 4.3 (4.6)Work-in-Progress (20.2) 56.9 54.5 (100.0) - -Other Assets 307.7 1.7 17.5 102.6 (39.8) (13.0)

Total Assets 16.3 16.6 36.0 (7.7) (3.5) (3.1)

Current Liabilities 70.9 49.7 125.0 (28.6) 99.1 13.9Long-Term Liabilities 13.1 13.7 19.1 (6.9) (12.4) (8.9)Equity 2.9 2.9 33.0 38.4 (94.8) (399.7)

Total Liabilities and Equity 16.3 16.6 36.0 (7.7) (3.5) (3.1)

PDAM - Local water enterprise.

Source: BAPPEDA Bandar Lampung

PDAM Way Rilau(Percent Change)

Income StatementsPDAM Way Rilau(Percent Change)

Summary Balance Sheets

Item

Operating Revenues 718 767 1,146 1,430 1,537 1,631 2,119 2,436Operating Expenses 1,060 1,259 1,478 2,072 2,414 2,758 2,917 3,031Income/Loss from Operations (341) (493) (332) (643) (878) (1,126) (798) (596)

Non-Operating Revenues 4 1 8 8 41 28 12 152Non-Operating Expenses 8 4 3 0 6 6 99 0

Unexpected Loss 0 0 0 0 0 12 0 0

Net Income/(Loss) (345) (496) (326) (635) (843) (1,116) (885) (444)

PDAM = local water enterprise.Note: Numbers may not add up due to rounding.Source of Basic Data: PDAM Kotamadya Bengkulu.

Table A5.5: Summary Income StatementsPDAM Kotamadya Bengkulu

(Rp million)

1992 1993 1994 1995 1996 1997 1998 1999

Item 1993 1994 1995 1996 1997 1998 1999

Operating Revenues 6.7 49.5 24.7 7.5 6.2 29.9 14.9Operating Expenses 18.9 17.3 40.3 16.5 14.2 5.8 3.9Income/Loss from Operations (44.5) 32.7 (93.9) (36.6) (28.3) 29.2 25.3

Non-Operating Revenues (61.1) 466.2 (0.4) 414.1 (30.7) (57.8) 1,183.2Non-Operating Expenses (45.2) (41.8) (94.7) 4,162.7 0.9 1,608.6 (99.7)

Unexpected Loss — — — — 100.0 (100.0) —

Net Income/(Loss) (43.5) 34.2 (94.7) (32.8) (32.4) 20.7 49.8

— = _______.Source: PDAM Kotamadya Bengkulu

1992 1993 1994 1995 1996 1997 1998 1999

Operating RevenuesRevenues from Water 938 1,240 1,366 1,385 1,907 2,243Revenues from Non-water 208 190 171 246 212 193

Total Operating Revenues0 0 1,146 1,430 1,537 1,631 2,119 2,436

Operating ExpensesWater Source Exploration 262 6 5 3 2 3Water Treatment 494 553 644 931 927Transmission/Distribution 80 116 106 166 203Sludge Management — — 2 13 17Depreciation of Fixed Assets 551 877 1,070 1,093 1,118 1,052General and Administrative Expenses 615 671 909 685 829

Total Operating Expenses0 0 813 2,072 2,414 2,758 2,917 3,031

Income/Loss from Operations 0 0 333 (643) (878) (1,126) (798) (596)

Other Revenues 8 41 28 12 152Other Expenses 0 6 6 99 0

Unexpected Loss 0 0 12 0 0

Net Income(Loss) 0 0 333 (635) (843) (1,116) (885) (444)

PDAM Kotamadya Bengkulu(Percent Change)

Appendix 6, page 1

ECONOMIC REEVALUATION A. Methodology and Assumptions 1. The economic internal rate of return (EIRR) was recalculated for all the project components of the BOTABEK Urban Development Project. Actual data on capital as well as operation and maintenance (O&M) costs and benefits up to 1996 were taken from the project completion report (PCR). Figures from 1997 onwards were derived from data gathered during the Operations Evaluation Mission (OEM). All project costs and benefits were expressed in 1999 prices. The methodology and assumptions were generally comparable with those at appraisal and project completion. 2. Specifically, for urban roads, the economic benefits were based mainly on savings in terms of vehicle operating costs; drainage and guided land development (GLD), in terms of increases in property values; and the kampung improvement program (KIP)/market infrastructure improvement program (MIIP), in terms of economic benefits derived from induced economic activities (such as retail shops and house rentals). For the revenue-generating components, i.e., sanitation and solid waste, a standard conversion factor of 0.8 was applied to the financial revenues to estimate the economic benefits. 3. The OEM also conducted an economic analysis of the water supply component, which was not done at appraisal or for the PCR. The OEM made a conservative estimate of the EIRR. The water produced by the Project by and large replaced a portion of the nonincremental demand. The benefits were calculated from the consumer surplus, which is the difference between the actual price the consumers pay for the alternative water source and the average water tariff. People continued to buy water from water vendors, as the water supplied by the Project was not adequate. There are no reliable data on the water consumption levels before the Project to construct a demand curve and estimate incremental demand with the Project. As tariffs are low, the benefits from incremental demand would also be low. It was also assumed that there would be no improvement in the level of unaccounted-for-water. There are no details on the technical losses before and after the Project. B. Economic Performance 4. The recalculated EIRRs (which ranged from a low of 14.8 percent to a high of 46.1 percent) of the various components confirmed the overall economic viability (except for GLD which was 6.3 percent) as these were above the average cost of capital of 12 percent. The urban roads component posted the highest EIRR and net present value (NPV). On a kabupaten basis, Tangerang recorded the most impressive EIRR of 62.9 percent, slightly higher than the PCR estimate but still very much lower than that at appraisal. The difference could be attributed to larger capital costs, an extended implementation period, and delays in benefit realization. Overall KIP/MIIP EIRR was likewise impressive at 22.6 percent. The Tangerang KIP/MIIP showed the highest EIRR of 26.8 percent, which was higher than the appraisal estimate but much lower than the EIRR in the PCR. The very high EIRR calculated in the PCR could be traced to the use of the increase in land value as the sole basis in estimating benefits. Benefits at the time of the OEM were based on induced economic activities and these were not expected to accrue immediately after project completion. The revised OEM benefits were a few times larger than the benefits estimated at appraisal, resulting in a higher OEM EIRR estimate compared with that at appraisal. The following table provides a summary of the EIRR and NPV calculated for each of the project components.

52

Appendix 6, page 2

Table A6.1: Summary of EIRRs and NPV

Component

EIRR (%)

NPV (Rp million)

Water Supply 18.4 37,824 Drainage 16.6 6,345 Sanitation 14.8 2,513 Solid Waste 21.8 8,289 KIP/MIIP 22.6 2,867 Urban Roads 46.1 83,605 Guided Land Development 6.3 (1,350) EIRR = economic internal rate of return; KIP = kampung improvement program; MIIP = market infrastructure improvement program; NPV = net present value. C. Impact of the Financial Crisis 5. The PCRs, which were prepared after the financial crisis occurred, were concerned with the sustainability of the projects. As observed by the OEM, each of the various components in the different project areas visited, behaved differently. To determine the impact of the crisis on the availability of funds for O&M vis-à-vis the level of ownership and participation of the beneficiaries, an analysis of the effects of the crisis on the various components under the BOTABEK Project was undertaken. Three cases were compared: Case 1 was characteristic of a precrisis condition where economic growth was high and facilities were properly maintained. Case 2 was reflective of the concern that the financial crisis would have a negative impact on O&M, which would ultimately shorten the life of the project facilities. In Case 2, it was assumed that O&M for all components would be inadequate and that this would lead to a shorter useful life for the urban roads and KIP/MIIP components. Case 3 was characteristic of the OEM’s observations. The behavior of the various components with respect to the impact of the crisis can be seen in the following table which shows the annual rate of change in O&M costs and benefits, and in the length of useful life of the various components in the three scenarios.

53

Appendix 6, page 3

Table A6.2. Useful Lifea and Annual Rate of Change in O&M Cost and Benefits

Component/Case Case 1 Case 2 Case 3 Water Supply Useful Life 16 16 16 O&M 20 12 15 Benefits 15 5 15 Drainage Useful Life 20 20 20 O&M 0 0 0 Benefits 1.4 to 25 4 to 10 -3 to 17 Sanitation Useful Life 20 20 20 O&M 5 to 15 5 to 8 5 to 10 Benefits 13 to 27 8 to 27 10 to 27 Solid Waste Useful Life 20 20 20 O&M 10 5 to 8 5 to 10 Benefits 10 to 11 8 to 27 10 to 27 KIP/MIIP Useful Life 20 11 20 O&M 0 0 0 Benefits -17 to 25 10 -19 to 12 Urban Roads Useful Life 16 13 16 O&M 10 to 233 -30 to 10 10 to 133 Benefits -10 to 10 -40 to –3 -37 to 10 GLD Useful Life 20 20 20 O&M 0 to 15 0 to 11 0 to 11 Benefits 0 to 38 0 to 38 0 to 38 GLD = guided land development; KIP = kampung improvement program; MIIP = market infrastructure improvement program; O&M = operation and maintenance. a The useful life of each component is expressed in number of years. 6. As expected, Chart A6 shows that in both Cases 2 and 3, EIRRs for all components fell as a result of the financial crisis. The provision for O&M was relatively inadequate, resulting in lower benefits and even shorter life for some components (i.e., urban roads and KIP/MIIP) in Case 2. Nonetheless, in the three scenarios tested, EIRRs were above 12 percent for all components, except for GLD. The GLD component accounted for a small portion of the Project (only 2 percent of total project cost).

54

Appendix 6, page 4

7. A comparison of the three cases confirms the importance of the level of local ownership, particularly during an economic crisis. The drop in EIRRs was larger in Case 2 than Case 3 for all components. As demonstrated by the Bandar Lampung Project, the results in Case 3 confirm the OEM’s observation that for components where the level of beneficiary ownership and participation is high, the effect of the financial crisis on O&M (and therefore on the life and benefits of the component) was subdued. This was true particularly for the soft components such as the KIP/MIIP, where the influence of the level of local ownership and participation compared with the effect of the financial crisis on O&M was greater. In Case 3, the KIP/MIIP component registers an EIRR of 22.6 percent, very close to the base case EIRR of 23.6 percent (as against the 12.5 percent EIRR in Case 2). 8. Generally for the soft components, the recalculated EIRRs under Case 3 are closer to the corresponding estimates under Case 1 (Chart A6). However, for the water supply, sanitation, and solid waste components, the difference between the EIRRs in Cases 2 and 3 is relatively small. The estimates confirm the PCR’s assessment that the impact of the financial crisis was felt most by these “hard” components. As a result of the financial crisis, tariffs could not be increased, thus affecting the provision for O&M adversely.

Chart A6: Economic Internal Rates of Return in Three Different Scenarios

10.0

20.0

30.0

40.0

50.0

Water S

upply

Sanita

tion

Solid W

aste

Urban R

oads

Draina

ge

KIP/MIIP

EIR

R (%

)

Case 2 Case 3 Case 1 Cost of Capital (12%)

55

Appendix 7, page 1

THEMATIC EVALUATION A. Selecting Future Integrated Urban Infrastructure Development Project (IUIDPs) 1. Selecting project cities or defining project urban areas for integrated urban infrastructure development (IUID) should be closely related to defining project objectives as revealed in this thematic evaluation. For urban infrastructure projects, target beneficiaries are more easily and probably more meaningfully identified by geographic area rather than by income class or social group. In many cases, lower-income people or the socially deprived can be largely identified with specific geographic areas. On the other hand, taking the entire administrative area for IUID is desirable for management purposes. Therefore, geographic targeting at the district level (in line with government policy in Indonesia) and further targeting within each district for project formulation is a realistic approach.1

1. Defining Project Cities and Objectives 2. City size and location are the most important factors affecting the success of an IUIDP. Other factors that affect the applicability of the IUID approach are urban dynamics, functions, and use and availability of land. These are indicated together with corresponding examples from the evaluated projects, where possible, in Table A7.1. Bandar Lampung, due to its topography and the fact that it was established by agglomeration of three towns, has a few central urban areas and several suburban communities around each of them. Despite its sizable population (some 800,000 in 1998), Bandar Lampung in fact is a group of smaller, more cohesive urban areas. This condition, combined with lush green hills surrounding them, constitutes a positive factor for maintaining or improving the urban living environment. This is in contrast with BOTABEK, where people of different origins and backgrounds are well mixed, and do not necessarily identify themselves with the areas they live in. Considering other cities covered by the Secondary Cities Project, the most appropriate size of project cities for IUIDPs may be in the population range of 100,000-500,000. For smaller cities without strong urban dynamics and with limited functions, more socially oriented approaches may be relevant, taking in the surrounding rural areas as well.2 For larger cities and urban areas under the influence of a megacity, especially with limited availability of land for development, more focused approaches would be necessary to affect urbanization patterns and realize measurable improvements in urban living conditions.

2. Integrating Components 3. Two of the most important considerations in integrating project components for IUIDPs are institutional arrangements for project implementation and management, and delivery of expected services to intended project beneficiaries. Institutional arrangements for project implementation should be such that establishment of ownership and operation and maintenance (O&M) responsibilities can be facilitated through the implementation process. For this purpose, soft components and subcomponents should be well balanced with hard ones for institutional development, including enhancement of financial and administrative capabilities of local governments, involvement of the private sector, and community participation (Box A7.1, Table A7.2). As the expected benefits can be realized only through delivering services, IUIDPs should consider alternative models rather limiting to provision of traditional physical infrastructure (Table A7.3).

1 Loan 1677-INO: Community and Local Government Support Sector Development Program-Policy Loan, for $200

million, approved on 25 March 1999, p. 18, para. 65. 2 TA 3088-INO: Development of Rural-Urban Linkages Project, for $890,000, approved on 15 October 1998.

56

Appendix 7, page 2

Box A7.1: Balancing Soft and Hard Components – Public education for environmental awareness

The Mission heard the following typical comments relating to undesirable practices due to people's lack of environmental awareness: (i) people prefer to use rivers to dispose of human wastes rather than using public toilets (North Sumatra); (ii) septic tanks and shallow wells tend to be located too close to each other (Bandar Lampung, Bengkulu, North Sumatra). The general success of the Bandar Lampung Urban Development Project is due in part to extensive training and education for better environmental management. The need for intensifying a public education campaign to increase people's awareness of the importance of maintaining high sanitation standards was pointed out by the project completion report. Although the Mission could not confirm if this has been accomplished, observed conditions in the city indicated high environmental awareness among people.

B. WATER: An Alternative Model Integrating Water Supply and Sanitation 4. Water supply and sanitation constituted important components in these three IUIDPs. While the subcomponents included water treatment plant and piped water supply system and communal toilet facilities, family latrines, desludging trucks and sludge treatment facilities for sanitation, the projects did not approach the fundamental problem of polluted shallow groundwater in an integrated manner. The following problems, typically observed in Indonesia, would be common in the urban sector of many other developing member countries in tropical or subtropical Asia (Box A7.2).

Box A7.2: Typically Observed Problems in Water Supply and Sanitation

1. Water Supply

(i) Low levels of service coverage, (ii) Low tariffs undermining financial viability of water supply operations, (iii) High levels of unaccounted-for-water (iv) Inadequate quality of water at points of delivery–unfit for drinking, and (v) Lower-income people relying on alternative sources of water which cause

often hygienic problems.

2. Sanitation

(i) Inadequate sewerage facilities, (ii) Large percentage of population using unsealed septic tanks for human

waste disposal, contaminating shallow wells, and (iii) Desludging and sludge treatment largely lacking or not sustainable due to

low hygienic awareness of people.

5. The fundamental problem is that the shallow groundwater, which is the most accessible source of water for the majority of people in tropical or subtropical Asia, is often polluted by inadequate sanitation practices. This problem cannot be overcome by extending piped water supply alone, which requires large investments and still does not assure the delivery of “safe” drinking water at affordable prices for various technical and administrative reasons. This is the problematic structure of water supply and sanitation typical in tropical or subtropical Asia.

57

Appendix 7, page 3

6. An alternative model (with the acronym WATER) suggested here addresses the problem in an integrated manner (Figure A7.1). The focus is on promoting adequate sanitation practices to promote shallow groundwater as a viable option of water supply source for large numbers of lower-income people. This involves installation of sealed septic tanks combined with an information and education campaign for hygienic awareness, development of neighborhood water supply systems by the private sector or by community initiative with technical support, and enhanced monitoring and evaluation to ensure an adequate quality of shallow groundwater.

7. These measures are combined with a conventional piped water supply system with further refinements. Service coverage for piped water supply is expanded by extending the reticulation network with more watertight piping. It is important to ensure 24-hour continuous supply even at low pressure to avoid contamination by suction at old sections of the reticulation network. In addition, a small quantity of water would be further treated to ensure drinking quality and it would then be bottled for distribution. 8. Rationalizing pricing is very important for this entire water supply system. Prices of bottled drinking water should be set at such levels that are affordable to the majority of people, but yet high enough to ensure financial viability of the water supply operation as a whole. Such pricing, if successfully conducted, would have dual effects. First, it tends to suppress exorbitant prices of bottled water sold currently as commercial goods. Second, it would guide pricing of water from shallow wells, which may be supplied by the private sector.3 9. The model also emphasizes on proper balancing of water quantity and quality to be ensured by a river basin-oriented approach. Recharging basins, if properly located and sized, would help enrich groundwater resources, while providing adequate drainage in a cost-effective way. The drainage system, which often works as combined sewers, may be designed in such a way to reduce flood peaks during the wet season and to avoid concentrations of wastewater at limited points during the dry season. 10. Benefits and costs of different components for a typical $50-million model project serving 500,000 beneficiaries are summarized in Table A7.4. As seen from the table, most benefits are interrelated so that integrating these components would ensure longer benefits than in the case where each component is implemented separately. The model also underscores the importance of participation of local people and communities. C. Basin Approach to Integrated Urban Infrastructure Development

11. An integrated approach to urban infrastructure development involves both geographic or horizontal integration, and functional or vertical integration. Geographic integration refers to coverage of a geographic area such that related urban infrastructure facilities are naturally included together with their respective areas of services (influences). Functional integration represents inclusion of interrelated processes and activities (services) within a project package. Inclusion of the entire stretch of road linking two urban centers to be facilitated for transactions is a case of geographic integration. Inclusion of a sewerage system and a wastewater treatment plant is an example of functional integration.

3 In Indonesia, there exists a thousand-fold variance between the piped water supplied by local water enterprise and

commercial bottled water; private water vendors tend to exploit poor people with high charges for water. The model presented here contributes to rationalizing water pricing with market segmentation through establishing a new market segment of affordably priced bottled water only for most essential water use, i.e., drinking.

58

Appendix 7, page 4

12. For both geographic and functional integration, the river basin or subbasin generally constitutes the basic planning unit. The basin approach should be taken even for urban infrastructure, although transbasin or subbasin solutions are more common in urban areas, such as transbasin water diversion to supply a large urban demand center or regional wastewater treatment plant serving neighboring basins. 13. The integrated basin-wide approach is particularly applicable to water-related urban infrastructure, including water supply, drainage and sewerage, and sanitation and solid waste management (Box A7.3). As urban roads in more urbanized areas are provided with proper roadside drains and urban roads in suburban or semi-rural areas are planned more in line with topography, this component of IUID can also be more properly treated by the basin approach. While the basin approach is applicable to IUID, care should be taken of its implications for the social, environmental, and management aspects. Urban drainage presents a case in point. In many cases, drainage channels are used effectively as combined sewers. A basin-wide combined sewerage network developed by the basin approach tends to concentrate large amounts of discharge at a few locations, causing more serious pollution of receiving water.4

Box A7.3: Advantages of the Basin Approach

For water and sanitation related facilities, applicability of the basin approach is important to avoid typical problems such as the following:

(i) poorly-sited, designed, and constructed sanitation facilities (e.g., septic tanks) polluting groundwater;

(ii) discharge of wastewater, treated or untreated, threatening intakes for water supply downstream;

(iii) overextraction of water upstream and lack of sufficient return flow reducing water levels and increasing saltwater intrusion;

(iv) improper siting and sizing of drains inviting solid waste dumping; and

(v) leacheate from solid waste disposal sites polluting groundwater.

14. Drainage improvement serves a dual purpose: to reduce inundation by containing and swiftly discharging floodwater, and to protect roads (especially road shoulders) from erosion by stormwater flow. The relative importance of these two areas varies for different areas, typically urban, suburban, and semi-rural areas. In semi-rural areas, occasional inundation by larger storms is more tolerable, while constant maintenance and repair of an extensive road system covering a large area constitute a major challenge. Under such circumstances, provision of undersized drains for longer stretches of road may prove to be more cost-effective than full-size drainage to contain and carry the total volume of floodwater.5

4 For BOTABEK, drainage improvement areas are selected from those subject to once-a-year flooding at least, and

drainage works provided for a storm recurrence interval of once in two years (appraisal report, Appendix 6). No provision seems to have been made for design flexibility of drainage works serving suburban or semi-rural areas where storm hydrographs tend to be less pronounced and minor flooding is more tolerable. Accordingly, some mismatch seems to exist between the grade of suburban (or effectively rural) roads and the dimension of drains serving them.

5 Larger-size drains may invite more abusive uses (e.g., dumping of wastes), while its maintenance would be more involving. Smaller-size drains are easier to maintain by local residents, and may help to enhance public awareness for proper maintenance as effects of maintenance (or conversely negligence) are more visible.

59

Appendix 7, page 5

15. The integrated basin-wide approach is particularly relevant to drainage improvement, where the beneficiary areas and areas of functional drainage provision do not necessarily coincide (Figure A7.2). Large functional drainage facilities may be provided in small communities that are only secondary beneficiaries. Institutional arrangements for O&M of drainage facilities should reflect such a dichotomy. D. Self-Monitoring System at Community Level for Future IUIDPs 16. A self-monitoring system that can be used at the community level is presented in Table A7.5 with possible indicators to be used, evaluation by each indicator, and monitoring frequencies. Priorities for introducing different indicators are also suggested. Indicators of highest priority may be introduced immediately without any cost, except efforts necessary for organizing the community and establishing a reporting system. Other high priority indicators are more essential for evaluating the performance of various components of IUID. The water supply component is not included in the table as its M&E would involve extensive surveys of household water use by purpose, and willingness and ability to pay as related to income and other factors.

Table A7.1: Factors Affecting the Choice of an Integrated Urban Infrastructure

Development Project

Factorsa

Characteristics

Applicabilityb of IUID

Cities under Evaluation

1. City Size • Large (over 500,000

population) • B/Cc

• BOTABEK

• Medium (population 100,000-500,000

• A • Bandar Lampung,d few SCUDP cities

• Small • B • Most SCUDP cities 2. Location • Megacity-influenced area • B • BOTABEK • Regional center/subcenter

• A • Bandar Lampung, few SCUDP

cities • Local town • B • Most SCUDP cities 3. Urban Dynamics

• Rapidly urbanizing

• B

• BOTABEK, Bandar Lampung

• Stable/stagnant • C • Most SCUDP cities • Newly developed/developing • A • Few SCUDP cities 4. Functions • Multiple functions at higher

tier of urban hierarchy • A • BOTABEK, Bandar Lampung,

several SCUDP cities • Mostly rural service function • C • Many SCUDP cities 5. Land Use and Availability

• Land for development available

• A • Bandar Lampung, most SCUDP cities

• Areas of degrading urban environment included

• B • BOTABEK

IUID = integrated urban infrastructure development; SCUDP = Secondary Cities Urban Development (Sector) Project. Notes: a Noninstitutional factors only. b A = highly applicable; B = applicable with careful project formulation;C = less applicable. c Megacity itself. d Consists of several central urban areas.

60

Appendix 7, page 6

Table A7.2: Balancing Soft and Hard Components

Soft Components/Subcomponents Applicable Areas 1. Public education for environmental awareness Use of sanitation services and facilities Maintenance of solid waste transfer/disposal sites Maintenance of open channel drains 2. Demand-side management a. Demand suppression through IEC Solid waste collection and disposal b. Pricing (with market segmentation) Water supply Solid waste collection c. Demand development Desludging services Compost production and sales IEC = information and education campaign.

Table A7.3: Incorporating Alternate Models

Potential Benefits of Alternate Models Possible Application 1. Expanding opportunities for cross-subsidization Bottled drinking water Desludging and composting 2. Rationalizing pricing by market segmentation Bottled drinking water Neighborhood water supply Composting (solid waste) 3. Demand development Desludging and composting 4. More substantial/institutionalized community participation

Large-scale KIP

5. Private sector involvement Neighborhood water supply Bottled drinking water Composting KIP = kampung improvement program.

61

Table A7.4: Benefits and Costs of Integrated WATER Model

Component

Main Objectives

Private Sector/ Beneficiary Participation in

Investment and O&M

Benefits

Project Costsa

($ million)

Notesb

W: Welfare by bottled drinking water

• Drinking water at affordable prices. • People pay for the bottles.

• Management of tertiary treatment process.

• Financial management of PDAM operation as a whole.

• Savings in health costs. • Improved financial viability

of PDAM. • Improved UFW.

2 • Tertiary treatment unit process only.

A: Alternate source of water

• Use of shallow groundwater as viable option for water supply.

• Undertaking by the private sector or the community initiative.

• Project provides technical assistance.

• Economic benefits from alternative water supply.

• Suppression of prices for bottled water.

1 • Water quality analysis and control.

T: Reticulated water supply system

• Supply expansion for various purposes.

• UFW reduction in new piped system.

• 24-hour continuous supply to avoid contamination by suction.

• Demand-side management (pricing)

• Private sector for production and distribution.

• People invest in extending the pipe to own yard.

• Low economic benefits from improved water supply would be acceptable.

• Full-cost recovery would be possible.

20 • $100/capita for reticulation only; 200,000 additional population coverage.

E: Environmentally safe sanitation

• Protection of shallow groundwater.

• Environmental hygiene.

• Production of compost.

• Private or public partnership.

• Desludging and sludge treatment operation (by the private sector).

• Demand development of desludging services and composting.

• Savings in health costs. • Compost sales.

25 • Sealed septic tanks at $500/unit.

R: River basin- oriented approach to water supply and drainage

• Balancing water quantity and quality in cost-effective way

• Community involvement in O&M of drainage facilities, etc.

• Savings in costs of extensive drains.

• Reduction in flood damage.

2 • Recharging basins.

Total 50 O&M = operation and maintenance; PDAM = local water enterprise; UFW = unaccounted-for-water. a For a town of 500,000 population. b Bases for cost estimates.

62 Appendix 7, page 7

Appendix 7, page 8

Table A7.5: Self-Monitoring System at Community Level with Possible Performance Indicators

Sector/ Monitoring Point/Level

Indicators

Evaluation

Monitoring

Frequenciesa

Priorityb Urban roads Road section Level of use Underused/adequate/overused O ** Junction Traffic count at peak hour # A * Peak hour D/W/M — Drains Dry period Water flow Stagnant/flowing/diverted O ** Wet period Water level Low/adequate/overflow O ** Flooding Extent of flooding Area O — Duration of flooding Minutes O — Flood damages Description O * $ A — Health Incidence of water-borne

diseases #

A

*

Drain Length of tertiary drains Km A — Area/population covered by

tertiary drains ha/# A —

Solid Waste Generation and collection

Collection frequencies # D/W **

Amount collected Ton M * Discharge methods Description

Individual house/collection O —

Point O — Temporary transfer depots

Amount of waste accumulated (end of day)

Little/small/excessive D **

Frequency of truck pickup # D/O ** Recycling Kind

$ O O

*

Scavengers # O — Sanitation Desludging Households covered # A * Amount collected # M — Sludge treatment Compost produced

Compost sold # $

M M

— —

Hygiene Quality of shallow groundwater # by indicator W/M * KIP/MIIP/GLD Community level Commercial units established # A — Land prices $ A — Household income $ A * # = number or count; $ = dollar value. GLD = guided land development; KIP = kampung improvement program; MIIP = market infrastructure improvement program. a A = annual; D = daily; M = monthly; O = occasional; W = weekly. b ** = highest; * = high; — = medium.

63

Appendix 7, page 10

Figure A7.2: A Conceptual Model for Basin-Oriented Approach

Urban roads

Drainage and flood

control

Solid waste

manage-ment

Sanitation

Water supply

Other new

compo-nents

KIP Local

ownership and

participation

65

Social Services Community-based healthcare Better hygiene practices Environmental education Private schools and hospitals

Appendix 8, page 2

Table A8.4: Performance of Asian Development Bank and the Borrower Project Description A. Secondary Cities

Urban Development (Sector) Project

• While ADB provided effective and timely guidance to project implementation through 12 review missions and two special project administration missions, project implementation could have been even better. The implementing capacity of participating agencies could have been better reflected in the project design. ADB’s performance was satisfactory.

• The Government and DGHS made considerable efforts to improve implementation, speeding up contract awards and appointing an international consultant to coordinate the work of domestic consultants. Borrower performance was satisfactory.

• Disbursements were generally in accordance with the schedule made at appraisal; no particular problems were encountered in the disbursement procedure of ADB.

• DGHS, the Executing Agency, had difficulty initially with project coordination due to complex implementation arrangements involving many agencies and limited experience of staff within the project management and implementation units, in particular at the local government level.

B. BOTABEK Urban Development Project

• ADB assisted in project implementation through eight missions during its 53-month period. Efforts were made to compensate for the delays that occurred at the initial stage, focusing mostly on project management without much attention paid to institutional strengthening. ADB performance was highly satisfactory.

• The financing arrangement for the Project, in line with the decentralization objective under which local governments would allocate funds from their own resources and borrow others, was achieved; in some local governments, however, implementation suffered from the Government’s inability to provide sufficient counterpart funds on time. Borrower performance was satisfactory.

C. Bandar Lampung Urban Development Project

• ADB reviewed the Project seven times during implementation. There were no procedural constraints on the part of either the Government or ADB that affected the action of ADB during implementation. Both ADB and Borrower performance were highly satisfactory.

• DGHS, the Executing Agency, and other implementing agencies assessed the changing needs of the Project occasionally as the city was undergoing a rapid development process, and made concerted efforts for timely decisions and realization of maximum benefits; their reassessment and proposed changes were reasonable.

• Coordination arrangements proved to be effective, particularly for physical works where the major focus and division of responsibilities were defined in detail at the outset.

ADB = Asian Development Bank; DGHS = Directorate General of Human Settlements.

67

Appendix 8, page 3

Table A8.5: Technical Assistance Item Description A. Secondary Cities

Urban Development (Sector) Project

• Feasibility studies were carried out separately for West Java and for the five provinces of Aceh, Riau, Jambi, Bengkulu, and Lampung on Sumatra under a subloan of TA Program Loan-Multisector Program (Loan 725-INO) for West Java and Sumatra Integrated Urban Development. For the three other provinces of North, West, and South Sumatra, UNDP-financed consultants were engaged for feasibility studies. Following these, supplementary feasibility work was carried out in 1989 by the ADB-financed consultants.

• Subprojects were formulated by local government (kabupaten/kotamadya) and appraised by ADB. Project components were modified extensively during implementation to the extent that it was difficult to see the correspondence between what was planned and what was realized at the subproject site level. The Operations Evaluation Mission observed that needs were ill identified by subproject appraisal reports or the modifications were not objective-oriented.

B. BOTABEK Urban Development Project

• ADB prepared initial feasibility studies, which were followed by a supplementary feasibility study and detailed design conducted under a subloan of a TA Program Loan. These were technically adequate, but assumptions on future tariffs and user charges for water supply and sanitation were optimistic.

• Two advisory TA grants were provided under the Project. The BOTABEK Institutional Development Study (TA 1471-INO) provided a comprehensive BOTABEK institutional development strategy and institutional action plans. The Environmental Management of Urban Development Project (TA 1473-INO) contributed toward revision of relevant legislation and regulations governing the EIA process, established a computerized monitoring system for EIAs, and provided operational guidelines and training for environmental management under urban development efforts.

• Outcomes of these TAs were reflected in subsequent projects of Directorate General of Human Settlements.

C. Bandar Lampung Urban Development Project

• ADB prepared a supplementary feasibility study and detailed design for the Project under a subloan of TA Program Loan–Multisector Program (Loan 725-INO, which provided generally sound technical input to the project appraisal, although the use of increase in land and property value directly as economic benefits of kampung improvement program, flood control and drainage is disputable.

• Two advisory TA grants were provided, attached to the Project. The Bandar Lampung Water Supply and Sewerage Disposal Study (TA 1474-INO) specified future water supply components except source location, and identified a site for a future sewage treatment plant. The Bandar Lampung Urban Planning and Transport Study (TA 1475-INO) prepared an updated city spatial plan and a sector development plan, and analyzed the planning, operational, and financial performance of the public transportation system. The TA results were used in the revision of the city master plan and in the improvement of the public transport system.

ADB = Asian Development Bank; EIA = environmental impact assessment; TA = technical assistance.

68

66 Appendix 8, page 1

InstitutionalDevelopment

Relevance Efficacy Efficiency Sustainability and Others WeightedWeights (%) 20 25 20 20 15 Rating

1. Water Supply 2 2 2 1 nr nr2. Drainage 1 1 2 1 nr nr3. Sanitation/Human Waste Disposal 1 1 1 1 nr nr4. Urban Roads 0 1 2 0 nr nr5. Solid Waste 1 1 1 1 nr nr6. KIP/MIIP 3 2 2 1 nr nr

Project Rating 1 2 2 1 0 1.35Overall Assessment Less Than Successful

InstitutionalDevelopment

Relevance Efficacy Efficiency Sustainability and Others WeightedWeights (%) 20 25 20 20 15 Rating

1. Water Supply 2 2 3 2 nr nr2. Drainage 2 2 3 2 nr nr3. Sanitation/Human Waste Disposal 2 1 2 1 nr nr4. Urban Roads 2 1 3 1 nr nr5. Solid Waste 2 1 2 1 nr nr6. KIP/MIIP 2 2 3 3 nr nr7. AOTAs 2 2 3 2 nr nr

Project Rating 2 2 3 2 1 2.10Overall Assessment Successful

InstitutionalDevelopment

Relevance Efficacy Efficiency Sustainability and Others WeightedWeights (%) 20 25 20 20 15 Rating

1. Water Supply 3 3 3 2 nr nr2. Drainage 2 3 3 2 nr nr3. Sanitation/Human Waste Disposal 2 3 3 3 nr nr4. Urban Roads 2 2 3 2 nr nr5. Solid Waste 3 3 3 2 nr nr6. KIP/MIIP 3 3 3 3 nr nr7. AOTAs 3 3 3 3 nr nr8. Flood Protection 3 3 3 3 nr nr

Project Rating 3 3 3 3 2 2.80Overall Assessment Highly Successful

Source: OEM estimates.

OVERALL ASSESSMENT

Table A8.1: Secondary Cities Urban Development (Sector) Project

Project Component

Table A8.2: BOTABEK Urban Development Project

Project Component

AOTA = advisory and operational technical assistance; KIP = kampung improvement program; MIIP = market infrastructureimprovement program; nr = not rated.

Project Component

Criteria

Criteria

Table A8.3: Bandar Lampung Urban Development Project

Criteria

STATUS OF FOLLOW-UP ACTIONS

Table A9.1: Secondary Cities Urban Development (Sector) Project Sumatra and West Java Urban Development Projects

Issue

Observations under the Follow-up Projects Update on Follow-up Actions

— Response from Projects Department • Further efforts toward

decentralization of governance are required in future projects.

• PUCFs/LUCFs were established. The Government plans to grant more autonomy to local governments, continue transfer of experienced central staff to them and further improve financial management. The Ministry of Public Works reorganization of 1994 further decentralized urban development functions requiring national and provincial agencies to provide technical support to locally planned and implemented activities. Central and provincial agencies are promoting a more participatory approach to encourage local ownership and increased resource mobilization.

• The design of the implementation arrangements of the follow-up project (Loan 1383-INO) had to be revised and redesigned to conform with the new initiatives embodied in laws 22/1999 and 25/1999. The decentralization initiatives in the design of the follow-up project were overtaken by the political and social events arising out of the economic crisis. The impact of the recent sociopolitical changes has not been fully realized and there is still substantial remodeling and institutional restructuring in the mechanism of programming, budgeting, implementation supervision, and accountability for infrastructure projects that remain to be resolved.

• In future projects, there is a

need for more private sector participation in urban infrastructure and service provision.

• ADB TA was included to translate proposals for private sector participation into investment projects for use by local governments to attract and negotiate with private investors. Under the projects, the government is committed to evaluate the potential for public-private cooperation for provision of selected services in each subproject proposal. The projects incorporated provision for public-private cooperation for bulk water supply through build, operate and transfer, build, operate and own, or concessions in large cities; UFW reduction; environmental sanitation collection and transport services; and solid waste management collection, transport, and disposal services.

• Substantial progress has been made. Under the TA for privatization of water supply, sanitation and solid waste components to selected local governments in Sumatera, selection of candidates for privatization has been completed. The TA is proceeding with the prequalification and tendering of a concession for the water supply of Pekanbaru and the preparation of other cities including Padang, Bandar Lampung, and Palembang. It is expected that one of these cities will be prepared for privatization within the scope of the TA.

ADB = Asian Development Bank; LUCF = local urban development coordination forum; PUCF = provincial urban development coordination forum; TA = technical assistance; UFW = unaccounted-for-water.

69 Appendix 9, page 1

Table A9.1: Secondary Cities Urban Development (Sector) Project Sumatra and West Java Urban Development Projects (Cont.)

Issue

Observations under the Follow-up Projects

Update on Follow-up Actions — Response from Projects Department

• Insufficient assistance was

given to operational and institutional improvement of the autonomous PDAMs, and the reduction of UFW.

• ADB focused on improving operational and service efficiency of the PDAMs through complete corporate planning, UFW reduction, economic pricing of water, and improved financial management. Under the projects, the PDAMs are encouraged to seek loan financing for system expansion; but grant financing is available to pay for UFW reduction programs.

• The weak financial condition of the PDAMs was exposed as a result of the economic crisis. Many of the PDAMs had committed to borrowing through the regional development account at levels that were difficult to support. In many cases, this made subsequent subsidiary loan commitments under Loan 1383-INO untenable. The need to focus on UFW is now only one of a number of areas of critical importance that needs attention.

• RIAPs, LIDAPs and

corporate plans were prepared for participating agencies, but there is a need to improve their acceptance and integration with other management tools.

• All participating local governments were required to update their RIAPs and LIDAPs. The PDAMs were required to include in their corporate plans: (i) regular tariff adjustments to cover operating costs and debt service, improvements in billing and collection, and a reduction of accounts receivable to not more than three months by 2001; (ii) implementation of UFW reduction programs to target a 20 percent reduction in current UFW over five years or achieve a 30 percent target; (iii) establish a leakage control unit where UFW exceeds 30 percent; and (iv) introduce a tariff monitoring system to ensure full cost recovery at or above the economic cost of water from industrial and commercial users.

• Unusually long delays were experienced in the procurement of the RIAP/LIDAP packages. One advantage of the delayed start-up of the TA was that the direction and focus of activity can be better directed to respond to the most critical areas during the present crisis. There is a need to achieve better coordination of this TA component since it was procured by the previous Directorate General for Public Administration and Regional Autonomy and it is now under the MeNeg Autonomy Daerah (State Ministry for Regional Autonomy). Early indications are that the TA implementation in the field is not coordinating with project implementation units of the local government.

• Institutional strengthening

was not as successful as the physical works. Increased emphasis on institutional development is needed.

• The Project provided substantial assistance in institutional support covering subproject preparation, design and supervision assistance, project management support, and institutional development assistance with the implementation of the RIAPs and LIDAPs of local governments, implementation of corporate plans of the PDAMs, training in Integrated Urban Infrastructure Development Program subproject preparation and implementation, assistance with public information campaigns, and assistance with public-private cooperation.

• The institutional strengthening component of the project was considered sufficient at the time of project preparation, but could not respond to the new Project implementation environment which substantially changed due to the recent socioeconomic changes brought about by the democratization initiatives and the impact of the law on regional autonomy.

ADB = Asian Development Bank; LIDAP = local institutional development action plans; PDAM = local water enterprise; RIAP = regional improvement action plan; TA = technical assistance; UFW = unaccounted-for-water.

70 Appendix 9, page 2

Table A9.2: BOTABEK Urban Development Project Action Taken/To be Taken Issue PCR PPARa

A. Private Sector Participation

• Participation of private sector where local governments are likely to be short of funds.

• Key role played by the private sector in the follow-on project.

• Promotion of private sector participation in the development and provision of urban infrastructure services as one of the major thrusts of Metro BOTABEK project.

• Potential involvement in leasing or franchising the O&M of transport terminals, markets, and solid waste collection and disposal.

• Need for transformation of private sector involvement in the project to be closely followed up and necessary changes made with Asian Development Bank intervention as needed.

• Development of PPPs has been rather slow and has not materialized so far due to the financial crisis.

• No agreed modality developed as to whether the PPPs would be through a concession, build-operate-transfer, build-operate-own, or contracting-out method.

• Need to address constraints such as (i) the lack of willingness of local water enterprises/local governments to contract out a function completely, and (ii) lack of a legal framework.

B. Operation and Maintenance Activities

• Need to be institutionalized O&M under integrated urban infrastructure development project.

• Methodologies may follow similar principles to those of the Performance Oriented Maintenance and Management System.

• Establishment of O&M cost estimates by local governments and the agencies made a condition for subproject screening in Metro BOTABEK project.

• Cost recovery to support O&M activities, among other things, envisioned through appropriate tariffs and mobilization of the private sector.

• Adequacy of current level of tariffs yet to be assessed.

• Planned mobilization of the private sector to improve cost recovery in O&M activities still in the development stage because of difficulties faced in forming PPPs under the current economic and social situation.

O&M = operation and maintenance; PCR = project completion report; PPPs = public-private partnerships; PPAR = project performance audit report.

a Based on response from Projects Department.

71 Appendix 9, page 3

Table A9.2: BOTABEK Urban Development Project (Cont.) Action Taken/To be Taken Issue PCR PPARa

C. Project Benefits

• Need for more output-oriented monitoring to reflect a service delivery focus, better baseline data, and regular follow-ups on the impact of the Project on its intended beneficiaries.

• Project monitoring to be based on, among other things, social benefits; monitoring programs to be comprehensive and tested from time to time.

• On ADB’s side, use of PPRs to help project implementation focus on ultimate project benefits.

• BME yet to be conducted. BME system would enable monitoring and evaluation of the technical performance, and social and economic benefits of the project. On ADB’s side, PPRs being used to monitor the progress in physical implementation and progress in the attainment of development objectives.

D. Implementation Arrangements

• Integration of implementation arrangements for future projects (to the degree possible) with organizational structure of local and provincial governments.

• PMUs part of the permanent organizational setup under current standard implementation arrangements.

• At the provincial level, the PMU and PUCF established for the Metro BOTABEK project (concurrently functioning as PMU and PUCF for Loan 1384-INO: West Java Urban Development Sector Project).

• Need for more active lead of local government in the preparation of RIAPs and LIDAPs.

• For follow-on project, PUCFs and LUCFs already established to involve provincial and local development planning agencies.

• Assistance to local governments, including RIAPs and LIDAPs, provided separately.

• At the local level, PIU and LUCF established.

• To-date, local governments and local water enterprises still to prepare the RIAPs and LIDAPs with the assistance of local consultants (still to be recruited).

• Need for local government commitment to the plans and for a change in their orientation from the product to the process.

• Change in project focus from the product to the process supported by emphasizing capacity-building aspects in recent ADB-assisted projects. Use of the project framework also facilitated keeping the project focus for longer-term impacts.

E. Complementary Programs for Water Supply

• Development of more complementary programs for the disposal of domestic liquid waste.

• Consideration of sanitation programs that are affordable and financially viable.

• Issue of increased wastewater already addressed in the follow-on project.

• On-site sanitation system adopted as technically acceptable and financially feasible alternative as of this time. O&M of these facilities may be concessioned to the private sector to help in cost recovery.

• On-site sewerage system adopted by the local governments through the use of desludging trucks and construction of waste treatment and disposal facilities. Partnerships with the private sector yet to be developed to provide for waste collection and operation of transfer stations and disposal sites.

ADB = Asian Development Bank; BME = benefit monitoring and evaluation; LIDAP = local institutional development action plan; LUCF = local urban development coordination forum; O&M = operation and maintenance; PCR = project completion report; PMU = project monitoring unit; PPR = project performance report; PPAR = project performance audit report; PUCF = provincial urban development coordination forum; RIAP = regional improvement action plan;

a Based on response from Projects Department.

72 Appendix 9, page 4

Table A9.3: Bandar Lampung Urban Development Project

Status Item/ Responsible Agency

Action Plan

Target Year PCR (1998) PPAR (2000)

UFW will be reduced to less than 25 percent of production.

2002a

37%

36%

More than 33,000 households will get service connections within the next 2 years.

Within next 2

years

9,765 households

(29.6%)

12,978 households

(39.3%) PDAM’s accountability will be improved for further water demand through tariff increases, accounts receivable improvement, etc.

2002a

—

—

Water meter: (i) replacement from class B to class C (at Teluk Batung); (ii) regular calibration; and (iii) installation of all main water meters.

—

In progress

Keep each zone independent — —

Water Supply/ PDAM Way Rilau

Leak detection survey will be implemented for other remaining block zones.

2002a

—

In progress

Solid Waste Management/ City Cleaning Office

All non-domestic refuse will be collected.

36% collected 32% collected

Human Waste Disposal/ City Cleaning Office

Institutional development, regulations and public campaign will be implemented for the full utilization of the facilities. There are 9 trucks.

3 trucks operational (33.3%)

2 trucks operational (22.2%)

Urban Flood Protection/ DGWRD, City Public Works Office

Annual flood losses to more than 1,700 new households will be reduced.

2002a

Partly achieved

Partly achieved

— = not available. DGWRD = Directorate General of Water Resources Development; PDAM = local water enterprise; PCR = project completion report; PPAR = project performance audit report; UFW = unaccounted-for-water. a Expected final year for the proposed Bandar Lampung and Surrounding Area Urban Development Project listed in ADB’s 1998 Country Assistance Program for Indonesia. Note: It is recommended than an update of the status of these follow-up actions be provided by year 2001/02.

73 Appendix 9, page 5

Appendix 10

ENVIRONMENT-RELATED RECOMMENDATIONS1

1. Economic policies can be a powerful tool for redressing environmental imbalance in urban areas. Accordingly, economic incentives are needed to reduce excessive reliance on regulations and investment programs. Such administrative measures as pollution charges, tax incentives, and targeted subsidies may be needed as well.

2. A balanced legal and regulatory framework is necessary to support investment programs and economic policy instruments. Environmental legislation may need to be updated in accordance with investment and enforcement capacity, as well as consultative mechanisms among the Government, business, and public.

3. Improved urban waste management is one municipal function that demands urgent attention. The potential role of the private sector in providing waste management services should be explored.

4. Environmental planning can be a useful tool for developing the overall urban planning process. It may help incorporate environmental information, policies, standards, techniques, and monitoring into coordinated strategic action planning at the city level.

5. Consciousness raising maybe achieved by disseminating information on environmental hazards and alternatives among those most affected by environmental degradation. Awareness can motivate affected groups to participate in the process of environmental management.

1 These recommendations were provided by Asian Development Bank’s Environment Division.

74