World Bank Document · P3A Water user Association (in Bahasa Indonesia) PBB Property and Building...

Document of

The World Bank

FOR OMCIAL USE ONLY

Report No. 11416

PROJECT COMPLETION REPORT

INDONESIA

IRRIGATION SUBSECTOR PROJECT(LOAN 2880-IND)

DECEMBER 8, 1992

Agriculture Operations DivisionCountry Department IIIEast Asia and Pacific Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

At appraisal (9/87): US$1 - Rupiah 1,6501987/88: US$1 - Rupiah 1,6441988/89: US$1 - Rupiah 1,6861989/90: US$1 - Rupiah 1,7701990/91: US$1 - Rupiah 1,843

FISCAL YEAR OF BORROWER

April 1 to March 31

ABBREVIATIONS

APBD Provincial BudgetBAPPENAS National Development Planning AgencyBDP Bidang Diklat Pengairan (Education and Training Organization in DGWRD)DCFCA Directorate-General of Food-Crop AgricultureDGPUOD Directorate-General of Public Administration and

Regional Autonomy (within MHA)DGWRD Directorate-General of Water Resources DevelopmentDI Dairah Irrigasi (Irrigation Scheme)DPP Directorate of Planning and Programming in DGWRDEOM Efficient Operation and MaintenanceERR Economic Rate of ReturnGCC General Coordination ConsultantsOI Government of IndonesiaGON Government of the NetherlandsHYV High Yielding VarietiesINPRES Revenue Sharing Grant from GOI to Regional/Local GovernmentsIPEDA Land Tax (now replaced by PBB)ISF Irrigation Service FeeISSP Irrigation Subsector Project (Loan 2880-IND)ISSP II Irrigation Subsector Project II (Loan 3392-IND)KCI Potassium ChlorideM&E Monitoring and EvaluationMOA Ministry of AgricultureMOF Ministry of FinanceMHA Ministry of Home AffairsMPW Ministry of Public WorksmuV Manufactures Unit ValueNBB Needs-Based BudgetNTT East Nusa TenggaraO&M Operation and MaintenanceP3A Water user Association (in Bahasa Indonesia)PBB Property and Building TaxPBME Project Benefit Monitoring and EvaluationPCR Project Completion ReportPG Provincial GovernorPPW Provincial Public WorksPRIS Provincial Irrigation ServicesRepelita V National Five-Year Development Plan, 1989-1994SAR Staff Appraisal ReportSM Special MaintenanceTSP Triple SuperphosphateUSAID United States Agency for International DevelopmentWNT West Nusa TenggaraWUA Water Users' AssociationWUTP Water Users Training Program

FOR OFFICIAL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.S.A.

Otflce of Director-GeneralOperations Eveluston

December 8, 1992

MEMORANDUM TO THE EXECUTIVE DIRECTOR'o AND THE PRESIDENT

SUBJECT: Project Completion Report on IndonesiaIrrigation Subsector Project (Ln. 2880-JND'

Attached, for information, is a copy of the report entitled "Project Completion Reporton Indonesia - Irrigation Subsector Project (Loan 2880-IND)" prepared by the FAO/World BankCooperative Program on behalf of the East Asia and Pacific Regional Office, with Part II contributedby the Borrower. The report is informative and covers all relevant aspects.

The project aimed to strengthen and improve standards of operation and maintenanceover about 1.3 million ha of irrigated and swamp land. It achieved, or exceeded, most of its physicaltargets. It benefitted from strong govemment commitment, and was implemented in accordance withimproved policies for irrigation operation and maintenance. The reestimated rate of return comparesfavorably with the appraisal estimate. The project is rated as satisfactory and its sustainability aslikely.

The project was succeeded by a similar project covering the remaining irrigated areasof Indonesia but with greater emphasis on monitoring and evaluation of project costs, physicalachievements and benefits. A comparative audit of both projects is proposed on completion of thesecond project.

Attachment

This document has a restricted distribution and may be used by recipients only In the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

FOR OFFICIAL USE ONLY


INDONESIA

IRRIGATION SUBSECTOR PROJECT(Loan 2880-IND)

TABLE OF CONTENTS

Page No.

PREFACE .±...... . .. .. .. . .. .. .. . .. .. . .. .. . . .

EVALUATION SUMMARY ....... .. .. .. .. . .. .. .. .. . . iii

PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE . . . . . . . . . . . .

1. Project Identity . . . . . . . . . . . . . . . . . . . . . . . . . . .12. Background .1........................... . .3. Project Objectives and Description .1............... . .4. Project Design and Organization ................... . 35. Project Implementation . . . . . . . . . . . . . . . . . . . . . . . . 46. Project Re,ults . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47. Project Sustainability . . . . . . . . . . . . . . . . . . . . . . . . 78. Bank Performance .......................... . 89. Borrower Performance . . . . . . . . . . . . . . . . . . . . . . . . . 810. Project Relationships . . . . . . . . . . . . . . . . . . . . . . . . . 911. Consulting Services . . . . . . . . . . . . . . . . . . . . . . . . . . 912. Project Documentation and Data . . . . . . . . . . . . . . . . . . . . 9

PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE . . . . . . . . . . . 10

PART III: STATISTICAL SUMMARY . . . . . . . . . . . . . . . . . . . . . . 18

1. Related Bank Loans and Credits ..... .. ....... . . .. . . 182. Project Timetable .......................... . 193. Loan Disbursements ......................... . 194. Project Implementation . . . . . . . . . . . . . . . . . . . . . . . . 205. Project Cost and Financing ...... . . ........ . .. . . . 21

A. Project Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 21B. Project Financing . . . . . . . . . . . . . . . . . . . . . . . . 22

6. Project Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23A. Direct Benefits . . . . . . . . . . . . . . . . . . . . . . . . 23B. Economic Impact - ERR ........ .. ... .. .. ... . . 23C. Financial Impact ......... ... ... .. ... .. . 24D. Studies ....................... .... . 24

7. Status of Covenants .. 258. Use of Bank Resources . . . . . . . . . . . . . . . . . . . . . . . . . 26

A. Staff Inputs . . . . . . . . . . . . . . . . . . . . . . . . . 26B. Missions .26

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

ANNEX 1 Statement of Policies for Irrigation O&M . . . . . . . . . . . . 27ANNEX 2 Detailed Action Plan and Status on Completion (7/31/92) . . . . . 33ANNEX 3 Economic Analysis ..... . . .. . . . . . .. . . . . . . . . 42

Tables1. Inflation Factors, Exchange Rates and

Conversion Factors ..... . . . . . . . . . . . . . . . . 472. Financial an Economic Values ............... . 483. Derivation of Economic Prices ............... . 494. Cropped Yield Estimates and Cropping Patterns . . . . . . . . 505. Financial Crop Budgets Per Hectare . . . . . . . . . . . . . 516. Cropped Areas and Incremental Crop Production . . . . . . . . 527. Economic Analyses of Special Maintenance and EOM . . . . . . 538. Economic Analyses of Swamps and Ongoing Projects . . . . . . 549. Economic Analyses of Groundwater Projects . . . . . . . . . . 5510. Overall Project Economic Analysis . . . . . . . . . . . . . . 5611. ERR Sensitivity Analysis of SM/EOM . . . . . . . . . . . . . 57

Map: IBRD No. 20240R


INDONESIA


PREFACE

This is the Project Completion Report (PCR) for the IrrigationSubsector Project, for which a World Bank loan of US$234 million equivalent tothe Government of the Republic of Indonesia (GOI) was approved in December 1987.In addition, the equivalent of about US$15.4 million was provided bycofinanciers. The original Loan Closing date of March 31, 1991 was extendeduntil July 31, 1991. Approximately 96% of the Loan was disbursed.

The Preface, Evaluation Summary, Part I and Part III of this PCR wereprepared by a mission from the FAO/World Bank Cooperative Programme, and reviewedby the Agriculture Operations Division, Country Department III of the East Asiaand Pacific Regional Office. Part II was prepared by the Borrower. The PCR wasprepared in accordance with the guidelines for preparing PCRs, issued in June1989. The report is based on data provided by GOI, a review of World Bankrecords and the mission's visit to Indonesia in January and February 1992.

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PROJECT COIIPLETION REPORT

INDOFESIA


EVALUATION SUnIARY

Obiectives

The objective of the Project was to support the six basic goalsoutlined in GOI's Statement of Policies for Irrigation Operation andMaintenance (O&M), which are to: (a) ensure adequate and timely funding forefficient O&M (EOM), with expenditures in line with actual needs of eachirrigation system; (b) simplify O&M programming, monitoring and budgetplanning; (c) introduce direct cost recovery for O&M expenditures fromirrigation beneficiaries; (d) increase local revenue generation through landreclassification, valuation and training of assessors; (e) supportinstitutional development to enable a greater transfer of responsibility forO&M of main and secondary systems to provincial authorities and of smallersystems to Water Users' Associations (WUAs); and (f) rationalize expenditureprograms in the irrigation subsector. The Project was also to include: (a)special maintenance (SM), i.e. deferred maintenance essentially needed on manyschemes prior to introduction of EOM, on about 500,000 ha of irrigated landand reclaimed swamp; (b) introduction of EOM on 787,000 ha; (c) completion ofabout 40 high-priority ongoing projects (about 100,000 ha), selected on thebasis of agreed technical and economic criteria; (d) pilot groundwaterirrigation development (about 6,000 ha) through construction of tubewells inprimarily rainfed areas; and (e) institutional strengthening, technicalassistance and studies.

Implementation Experience

The Project, constituting a first subsector approach to an O&Mprogram in Indonesia, was implemented in accordance with the proposalsoutlined in the Staff Appraisal Report (SAR). There were substantialincreases in the area under EOM, indicating Government's strong commitment toimproved O&M. During the initial "learning period", EOM was begun on someareas before they were properly equipped for this, partly because sufficientspecial maintenance (SM) funds were not allocated and partly due to incorrectsequencing of SM and EOM activities. This made additional SM necessary onabout 28% of the EOM area after EOM had begun.

The actual project cost is about the same as the appraisal estimatewhen expressed in rupiah but, due to several devaluations of the exchangerate, the current estimate of US$340.8 million is only about 95% of theappraisal estimate in US dollars (see Part III, Table 5A). About 26Z of thetotal project cost was for Government of Indonesia's (GOI) recurrentexpenditure on O&M.

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Results

The Project has been successful in supporting a change in GOI'spriorities towards O&M, cost recovery and the privatization of small publicirrigation schemes, and helping commence redefinition of the roles of centraland provincial agencies in the O&M of the irrigation systems. These werefundamental changes in the irrigation subsector strategy, considering that inthe past the emphasis had been on expansion and rehabilitation, and neglect ofO&M. The progress on implementing the action plan has been satisfactory assummarized below:

* Policy 1: Funding of O&M. Recent annual budgetary releases forO&N and the area of irrigation turned over to WUAs have exceededthe SAR estimates. GOI's strong commitment to irrigation O&Mfunding has brought substantial improvement in O&M on a large area(para 6.1.a).

* Policy 2: Cost Recovery for Irrigation O&M. The amount ofproperty tax collected from rural areas is increasing faster thandomestic inflation. The area of mapping, reclassification andassessment for rural property tax has exceeded the SAR estimate(para 6.1.b).

* Policy 3: Irrigation Service Fees (ISF). ISF pilot schemes havebeen introduced in parts of four provinces and have been shown tobe an acceptable and feasible means of recovering costs of O&M forirrigation. The percentage of the assessed amount that is actuallycollected has declined recently partly because of the drought in1991 and perhaps due to lack of sanctions for non-payment of ISF(para 6.1.c).

* Policy 4: Institutional Development. The decentralizationstrategy of the project appears to have worked well, especially inJava provinces where Provincial Irrigation Services (PRIS) areoperating irrigation systems in a professional manner. Seven PRISshave been restructured. Extensive training was given to PRIS staffand members of WUAs (para 6.1.d).

* Policy 5: Budgeting and Programming for O&M. O&M funding wassimplified. Several provinces have established methods ofallocating local revenues to O&M of irrigation and swamps. AllEOM provinces prepare needs-based budgets (NBBs), which form thebasis of allocations among irrigation areas within an irrigationdistrict. The allocations from the center to provinces are made onthe basis of the EOM area and unit cost which are then prioritizedwithin provinces, and irrigation districts in line with the actualneeds.

* Policy 6: Rationalization of Investment Expenditures. Thefindings of an investment study completed in 1989 were not acceptedby GOI. A further study financed by the U.S. Agency forInternational Development is underway. Studies by the Food andAgriculture Organization (FAO) and the Government of the

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Netherlands (GON) and the Bank's agricultural sector review arealso under way. While the Repelita V gives a high priority to O&Mand completion of viable ongoing projects for full agriculturalutilization, it also emphasizes a rapid pace of expansion ofirrigation areas which appears questionable.

Completion of Ongoing Projects. Irrigation projects with anincremental area of about 58,000 ha (SAR estimate 70,000 ha) and about 30,000ha of swamp projects (SAR estimate 28,200 ha) and river projects protectingabout 21,000 ha have been completed.

Groundwater Development. About 2,500 ha (SAR estimate 2,650 ha) inSulawesi and East Java and about 1,600 ha (SAR estimate 1,130 ha) in a pilotprogram on Lombok are served by the project works.

Sustainability

With the assumption that needs based budgets will continue to berealistically prepared and EOM budgets provided at the needed level, there isa basis for optimism that SM and EOM areas and the completed ongoing projectswould continue to operate at the same level of efficiency, as originallydesigned and constructed. Sustainability of irrigation schemes turned over toWUAs would be achieved with a continued commitment of the WUAs and, in theevent of major emergency repairs being needed, with the capability of PRIS toarrange for the implementation of such work.

Findings and Lessons

The project has demonstrated that a direct approach (underpinned bya Subsector Policy Statement) to establishing satisfactory procedures,institutional arrangements and funding provisions for O&M as core projectobjectives can be more successful than treating these issues as secondaryobjectives under individual investment projects. The project attracted highlevel Government support during preparation and appraisal and this has beenlargely sustained.

Adequate O&M is well worth the incremental cost if it sustains fullagricultural benefits and makes rehabilitation unnecessary. Government ismaintaining its commitment to adequate O&M.

To make schemes suitable for EOM, it is desirable thatrehabilitation and/or SM are completed before the introduction of EOM. Thiscannot be done if rehabilitation/SM is limited by a budget ceiling which istoo low to allow all needed work to be done. Budgets should, therefore, beadjusted to suit needs defined by agreed criteria.

ISF has been introduced in pilot areas without opposition, butcontinued high level Government support and possibly provisions for sanctionsagainst non-payment are needed to extend the ISF on a sustainable basis.

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The Bank's interest in limiting the construction of new irrigationto completion of ongoing projects meeting criteria approved by the Bank hasnot always been followed by GOI, due to its concern about employment, regionaldevelopment and rice self-sufficiency. This project, however, helped GOI toprioritize its "core" expenditure program, particularly with regard to O&M.


INDONESIA


PART I

PROJECT REVIEW FROM BANK'S PERSPECTIVE

1. Project Identity

Project Name Irrigation Subsector ProjectLoan No. : Loan 2880-INDRVP Unit East Asia and Pacific RegionCountry : IndonesiaSector : AgricultureSubsector : Irrigation

2. Background

2.1 Expansion of irrigation infrastructure in Indonesia made a majorcontribution to bringing the country to self-sufficiency in rice. HcGever,this successful expansion was not accompanied by sufficient effort toefficiently maintain and operate much of the 4.8 million ha of the publicirrigation systems. Consequently, many systems were poorly maintained. Ashift of national focus away from new investment towards operation andmaintenance (O&M) was needed to avoid a massive and much more costlyexpenditure in both financial and economic terms. The recognition of theimportance of O&M, coming at the same time as Indonesia was reaching riceself-sufficiency and facing severe budgetary constraints, led to a redirectionof Government of Indonesia's (GOI) priorities towards efficiently operatingand maintaining existing systems and the completion of priority ongoingprojects. Recognizing that this shift in focus was critical to optimizing thereturns from investments in irrigation and preventing a decline inagricultural yields, GOI in 1987 issued a Statement of Policies for IrrigationOperation and Maintenance, which enunciated and evolved six policies anddefined medium-term actions on subsector-wide O&M funding, institutionalstrengthening and cost recovery (see Annex 1).

2.2 The Project was designed to support the implementation of the PolicyStatement by improving the condition of irrigation systems so that they couldbe more effectively operated and maintained, ensuring that adequate funds wereavailable for O&M, improving the quality of O&M, strengthening institutionsinvolved with O&M, and transferring the responsibility of O&M of smallersystems to WUAs.

3. Proiect Obiectives and Description

3.1 Objectives. The Project was to be the first phase of a programaimed at supporting the six basic goals outlined in GOI's Statement ofPolicies for Irrigation O&M, which are to: (a) ensure adequate and timely

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funding for efficient O&M (EOM), with expenditures in line with actual needsof each irrigation system; (b) simplify O&M programming, monitoring and budgetplanning; (c) introduce direct cost recovery for O&M expenditures fromirrigation beneficiaries; (d) increase local revenue generation through landreclassification, valuation and training of assessors; (e) supportinstitutional development, particularly by strengthening provincial irrigationagencies, Water Users' Associations (WUAs) and farmers' groups to enable agreater transfer of responsibility for O&M of main and secondary systems toprovincial authorities and of smaller systems to WUAs; and (f) rationalizeexpenditure programs in the irrigation subsector and formulate a realisticirrigation investment strategy for Repelita V (1989 to 1994). Detailedpolicies had been formulated for each of these goals and a monitorable actionplan (see Annex 2) had been designed to implement the steps necessary toachieve them.

3.2 Project Description. The Project, which was to have beenimplemented over the 3-year period from October 1987 to September 1990, was toconsist of the following components:

(a) The implementation of special maintenance (SM) works,comprising deferred maintenance and minor upgrading on about400,000 ha of irrigated land and about 106,000 ha of reclaimedswamp land, where O&M had been so badly neglected that SM wasneeded prior to introducing EOM on these areas. About fiveriver-mouths were included for SM, on a pilot basis. Detailedpreparation and design work were to be carried out for about200,000 ha of irrigated areas and 55,500 ha of swamp requiringSM, to be covered in the first year of a subsequent project;

(b) Systematic introduction of EOM on about 700,000 ha of irrigatedland and 87,000 ha of swamp land;

(c) Completion of about 30 high-pri-ity ongoing projects (about100,000 ha), selected on the basis of agreed technical andeconomic criteria;

(d) Pilot groundwater development through construction of some900 tubewells for small farmers in primarily rainfed areas;

(e) Support for GOI's policy reforms in the subsector, includingprivatization of small public irrigation systems and a pilotscheme for introduction of direct irrigation service fees, andaugmenting the provincial/local revenues in lieu of continuedcentral Government subsidies via land reclassification andvaluation needed for large-scale introduction of the newproperty tax (PBB) in rural areas;

(f) Support for institutional strengthening and training, includingO&M manpower planning and development, strengthening of thecentral, provincial and district level institutions responsiblefor irrigation O&M and of WUAs; and

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(g) Technical assistance and studies in support of the abovecomponents.

3.3 The total project cost was estimated at appraisal to be US$359.1million, including about US$91.2 million for recurrent O&M of all GOI'sirrigation and swamps throughout Indonesia. This was to be financed by loansof US$234 million from the Bank and the equivalent of about US$9.4 millionfrom the Government of the Netherlands (GON) and grants of the equivalent ofUS$2.4 million from GON, US$3 million from the Government of Italy and US$0.6million from the Ford Foundation.

4. Project Design and Organization

4.1 Although the importance of adequate O&M was agreed and understood bythe Bank and GOI, there were some important differences of emphasis concerningthe Project that were not fully resolved. The Bank appears to have beenaiming for a statement of irrigation subsector policies (see SAR, para 2.2)and a redirection of GOI's priorities away from expansion and modernization ofirrigation systems (see SAR, para 1.1), whereas what was agreed for inclusionin the Project was a statement of policies for irrigation O&M andrationalization of expenditure program in the irrigation subsector withgreater emphasis on irrigation O&M. At negotiations for the Loan, the Banktried to persuade GOI to suspend expenditure on GOI-funded ongoing projects(apart from those selected for completion under the Irrigation SubsectorProject (ISSP)). Government resisted this and the Bank deleted the relevantclause from the draft Loan Agreement on the grounds that GOI had reduced thenumber of projects solely funded by GOI and that ISSP would include aninvestment strategy study, which would assess all existing and proposedinvestment projects in the irrigation subsector and formulate a realisticinvestment strategy.

4.2 The Project was unusual in that, because of GOI's highly constrainedbudgetary situation at that time, their total expenditure on O&M of irrigationand swamps throughout the country was included in the project cost.Incremental EOM, but not recurrent O&M, was financed by the Loan on adeclining basis to expire over a period of five years from the introduction ofEOM in a system. GOI committed to maintain the 1986/87 level of funding forthe annual national recurrent O&M budgets, and provide additional fundingneeded for incremental EOM.

4.3 This was a complex project involving four Government departments andat least eight directorates at central Government level, as well as thecorresponding agencies at provincial and district levels in 17 provinces. TheProject included nine components as well as studies and training. In general,roles and responsibilities were reasonably well defined but some readjustmentwas needed during project implementation (see para 5.2).

4.4 Consultants employed by GOI, financed under other Bank loans, wereused to prepare the components dealing with SM, EOM, ongoing and groundwaterprojects.

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5. Project Implementation

5.1 The Project was implemented in accordance with the proposalsoutlined in the SAR. The Loan became effective in January 1988 and closed onJuly 31, 1991; about 96Z of the Loan was disbursed. The total project cost inrupiahs was about the same as the appraisal estimate but, when expressed in USdollars (US$340.8), was only 95X of the SAR estimate due to devaluations ofthe Rupiah (see Annex 3, Table 1). There were substantial increases in thearea under EOM (45Z more than the SAR estimate for irrigation schemes and 71Xfor swamps). However, EOM was introduced prematurely, before the physicalconditions were adequate to introduce EOM, on about 280,000 (28Z of the finalEOM area). The incorrect sequencing of activities reflected, during the early"learning years", in part an attempt by some provinces to achieve annualRepelita V targets for EOM. This was also partly due to a thin spread of SMworks rather than completing SM on fewer systems. This made additional SMnecessary on about 28% of the EOM area after EOM had begun. These works havenow been completed under ISSP II (Loan 3392-IND). The PBB component went welland the area reclassified was about 30% greater than SAR proposals. The areawhich includes new groundwater facilities is about 9% greater than SARproposals.

5.2 Irrigation service fees (ISF) have been introduced in parts of fourprovinces and have been shown to be an acceptable and feasible means ofrecovering costs of O&M for irrigation. The area on which ISF are collected(48,836 ha) is less than the 125,000 ha estimated at appraisal (but close tothe revised target of 50,000 ha agreed between GOI and the Bank in 1989), dueto one-year delay in the start-up of the ISF program and the institutionalcomplexities in launching of the program.

6. Project Results

6.1 The Project has been successful in supporting the objective set outin the SAR, which was to change Government's priorities towards O&M, costrecovery and the privatization of small public irrigation schemes, and helpcommence redefinition of the roles of central and provincial agencies in theO&M of irrigation systems. In addition, completion of ongoing projects andthe pilot groundwater project have been successfully completed. The progresson implementing the action plan is shown in Annex 1 and summarized below:

(a) Policy 1: Funding of O&H. Recent annual budgetary releasesfor O&M1 have exceeded those estimated in the SAR. GOI'sstrong commitment to O&M funding has brought substantialimprovement in the physical conditions of many systems and

1 Total 0X1 allocations were:Year 1987/88 19S8/89 1989/90 1990/91 1991/92SARo/ 48.1 48.1 62.3 53.2 59.6 xleRpSARb/ 46.1 S0.6 56.4 69.1 68.6Actual 46.0 69.6 78.6 91.7 118.6a/ Annex 6, Table 7.b/ Adjusted for Inflation.Actual are DOI-I figuren and includo Jntiluhur and swamps. Soe Annex 1 for figures for

recurrent OhM as reported by the Detailed Action Plan Monitoring of 31 July 1991.

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their sustained EOM. The area of irrigation turned over toWUAs was 21,353 ha in 255 schemes, up to the end of March 1991(SAR target 20,400 ha on 200 schemes). A further 14,510 ha hasbeen turned over in 1991/92.

(b) Policy 2: Cost Recovery for Irrigation OWH. After a slowstart, the amount of property tax collected from rural areasincreased faster than domestic inflation during the sameperiod. Mapping, reclassification and assessment for ruralproperty tax have been completed on 522,000 ha (SAR target400,000 ha).

(c) Policy 3: Irrigation Service Fees. ISF have been introducedin four provinces and have been shown to be an acceptable andfeasible means of recovering costs of O&M for irrigation2.This is an encouraging achievement. Because of theinstitutional complexities in launching of the ISF program andabout one-year delay in the start-up of the program, the ISFtarget area was scaled down to about 50,000 ha (125,000 ha inSAR) during the project's mid-term review in 1989. The area(48,836 ha) on which ISF is collected is close to this. Thepilot program, a noteworthy feature of which is the farmers'participatory approach followed in the pilot areas, achievedsuccess in: clarifying the issues involved; conceptualizingthe framework for introduction of ISF; enactment of therequisite legal framework; and mobilization of WUAs and theirtraining. The ISF initially were about Rp 12,000/ha/annum atabout an average collection efficiency of 80Z. However, theactual cost recovery as percentage of the assessed ISF declinedto about 55Z on average during the last (1990/91 crop season)year. This is partly due to the effect of the 1991 drought andperhaps due to the lack of any sanctions against non-payment of1SF and poor services given in some areas. The sharp declinein ISF collection in two pilot areas8 gives cause of concern(see para. 7.4).

(d) Policy 4: Institutional Development. Seven irovincialIrrigation Services (PRIS) have been restructured. About 1,300staff have been transferred to PRIS in Java, North Sumatra andEast Nusa Tenggara. Extensive training has been given to alarge number of PRIS staff and members of WUAs, and amanagement information system survey has been completed. Thedecentralization strategy, strengthening of PRIS organizationand training of PRIS staff appear to have worked well. This isreflected in the Java Provinces in the professional way PRISsare operating the irrigation systems.

2 Tho ISF are based on actual O& cost (NBB + collection cost) reduced to take accountof l-vol of irrigation and drainage service provided and with an introduction factorwhich rises from 0.6 in Year 1 to 1.0 in Year 6. Initial ISF were in the region ofRp12,000/hs/year.

J 44X in Sidrrp (S. Sulawesi) and 36X in Nganjuk (E. Java).

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(e) Policy 5: Budgeting and Programing for O&M. O&M funding hasbeen simplified. EOM areas receive funds from national budgetsand non-EOM areas from provincial budgets (APBD). Funding forEOM after the Bank's contribution expires will be from APBD.Where ISF is collected, budgetary mechanisms have to be put inplace to use the collected fees for regular O&M. Severalprovinces have established methods of allocating PBB revenuesto O&M of irrigation and swamps. The contribution of PBBrevenues in the national recurrent O&M budget in 1991/92 wasabout 15Z of the total. Central Government allocations toprovinces are based on average unit cost per hectare. All EOMprovinces have prepared needs-based budgets (NBBs) for 1990/91and 1991/92 and allocations within the provinces and irrigationdistricts were prioritized on the basis of NBBs.

(f) Policy 6: Rationalization of Investment Expenditures. Thefindings of an investment study completed in 1989 were notaccepted by GOI. A further study, financed by U.S. Agency forInternational Development has begun. Studies by FAO and GONand the Bank's agricultural sector review are also under way.Although provision for O&M has increased (para 6.1(a)), andgiven highest priority in allocations, provision forconstruction of new irrigation have also increased i.e. from44Z of the Directorate-General of Water Resources Development's(DGWRD) expenditures in 1988/89 to 51? of the 1992/93 budget.

6.2 Physical Components. Progress on physical components has generallybeen at or somewhat above the appraisal targets. The area of SM completed isclose to the target while the areas of EOM well exceeded the targets.Completion of ongoing projects was the largest component of the Project interms of cost at appraisal (33? of base costs). DGWRD seemed to placeparticular emphasis on this component. Some 26 irrigation projects with anincremental area of about 58,000 ha (SAR estimate 70,000 ha) have been fullyor partially completed for a cost of about US$1,200/ha. River projects haveprotected about 21,000 ha and improved irrigation to about 8,000 ha. About30,000 ha (SAR estimate 28,200 ha) of swamp projects have been completed at acost of about US$300/ha. About 2,500 ha of groundwater development inSulawesi and East Java (SAR estimate 2,650 ha4 ) are served by project worksat a cost of about US$3,000/ha. On Lombok, 116 schemes irrigate 1,575 ha (SARestimate 1,130 ha) at a cost of about US$4,800/ha.

6.3 The economic rate of return (ERR) estimates for various projectcomponents have been recalculated, making modest estimates of benefits andassuming that all irrigation systems would be properly maintained throughouttheir economic life. If maintenance is neglected, ERRs would dropsignificantly. In general, the reestimated ERRs, which are based ongeneralized estimates of incremental benefits, are similar to those estimatedat appraisal (see Annex 3 for details). Notable differences are for

Thero is some ambiguity in the SAR: pira 2.14 seems to say that the project includes4,670 ha In East Java and Sulawesi and about 1,600 he on Lombok but Annex 3, Tables 7*nd 8 make it clear that those are longer term targets.

completion of typical ongoing projects (PCR 37Z compared to 23Z in SAR5) andgroundwater projects, which the PCR shows as being economically unviable inLombok, largely due to the high investment cost (see para 6.2). The overallERR for the Project is estimated to be 29Z for construction, which drops to23Z when the costs of institutional strengthening and technical assistance areincluded.

7. Prolect Sustainability

7.1 The main objective of the Project was to make irrigation inIndonesia sustainable by ensuring that irrigation systems were maintained infull operating condition. Given that the O&M budgets are provided at theneeded (NBB) levels, there is a basis of optimism that SM and EOM areas andareas of completed ongoing projects would be fully sustainable. When the Bankfunds are no longer provided for EOM, the intention is that funding should befrom APBD. Careful monitoring of EOM systems in the future would be requiredto confirm that this funding is adequate. In order to ensure that systemsplaced under EOM are in good working order, the amount allocated for SM shouldbe tailored to the actual needs.

7.2 Sustainability of schemes turned over to WUAs would essentiallyrequire good maintenance of the systems by WUAs which will depend upon theability of farmers to pay their share of O&M costs. The self-management byWUAs and the importance of irrigation to an individual farmer's livelihoodprovide reasons to expect that most of the turned over systems would besustainable. However, the turned over systems are likely to requireassistance (technical and financial) from PRIS in the event of major emergencyrepairs becoming necessary. Arrangements exist in the budgetary system tosupport such repairs through provincial budgets, for farmer-owned and farmer-managed systems. Moreover, continued technical guidance (from PRIS) toexisting WUAs would be needed if they are to remain effective.

7.3 There is no reason to doubt that the improved collection of PBB willcontinue.

7.4 The percentage of the assessed irrigation service fee that isactually collected has shown a decline recently (para 6.1(c)) and this givescause for considerable concern. There is a strong risk that the initialmomentum established during the Project could be lost. The decree of theMinister of Home Affairs (MHA) concerning the ISF pilot scheme lapsed in April1992. This is in process of being extended and collections are still inforce. The Government is working on the legal framework for ISF and themechanism for collecting them for expanding the program on a sustainablebasis. The role of BAPPENAS in support of the Policy Statement and that ofDGWRD/PRIS on the provision of irrigation services are exceedingly importantfor the implementation of ISF. A Unit in MHA specifically responsible for ISFneeds to be established soon. Even if irrigation services improve, as ishappening, sustainable expansion of ISF on a national scale will require

6 For discussion of this, see Annex 3.

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strong political will and adequate sanctions against non-payment of ISF byfarmers. The latter is essential to provide an incentive to pay.

7.5 Groundwater projects are generally sustainable because of assuredwater supplies throughout the year for actual crop needs. However, thesustainability of any completed system will depend on the fees collected byWUA and the operational management it provides.

8. Bank Performance

8.1 The Bank performed well in identifying the need for this projectand, in collaboration with GOI, developing the new policies for O&M which arereflected in the policy statement. Some compromise was necessary to reachagreement on the policy statement and on the components in the Project (seepara 4.1). The Project was kept short so that lessons learned could beincorporated into the second phase project (ISSP II), appraised in 1990 andapproved in September 1991. These lessons, which are detailed in the SAR forISSP II (Report No. 681-IND), include the need for correct sequencing of SMand EOM, the need for simplified operating procedures and the need forflexible budgeting for SM. The supervision of ISSP II should pay moreattention to the allocation of budget and actual expenditures of GOI if arealistic picture of expenditure patterns is to be obtained.

9. Borrower Performance

9.1 Project preparation by Bank staff was based on work by consultantsemployed by the Borrower, specifically for the preparation of this project andprovided a satisfactory basis for the Project.

9.2 The Borrower has generally performed satisfactorily during projectimplementation. Adequate funds were available and no serious staff shortageswere reported. The Borrower employed General Coordinating Consultants (GCC)to coordinate and monitor progress of the Project and on the Action Plan.This was of considerable assistance to the Bank's supervision of the Project.The Borrower generally complied with the covenants of the Loan Agreementexcept that audit reports were often late.

9.3 Weaknesses in project implementation included incorrect sequencingof SM and EOM and variable construction quality, particularly in the outerislands, due in part to deficiencies in construction supervision.

9.4 Procurement of pumps and other equipment for the groundwatercomponent was unduly delayed due to lack of prompt decisions by the DGWRD,concerning award of contracts.

9.5 Part of the institutional strengthening included establishment ofproject benefit monitoring and evaluation (PBME) units at regional and centrallevels. The regional units appear to be functioning well, a sound M&E systemis in place and field data collection is satisfactory. However, coordination,analysis and reporting of the project data have not been carried out at thecentral level and much of the data collected remain unused and not easily

-9-

accessible. Emphasis on analysis and reporting of key indicators must begiven under ISSP II, as should more detailed recording of project costs andphysical achievements. Conclusions drawn from analyses of project data shouldbe disseminated to all levels, especially to the PBME units who collected thedata.

10. Project Relationships

10.1 Good relations were maintained between the Borrower and the Bankwith reasonable continuity of Bank staff involved with project supervision.Relationships with cofinanciers were satisfactory. The usual lack ofcommunication between Ministries involved in project implementation was to agreat extent overcome by having the GCC.

11. Consulting Services

11.1 Consulting services had a substantial role in all aspects of theProject. Eighteen consultancies, which cost about US$54 million, made up 16Zof project costs. Generally, consultants performed satisfactorily, butconsiderable effort was required from the Bank and GON to ultimately achieve asatisfactory result of the institutional strengthening study, which finallyturned out to be a very useful study, and the findings of the investmentstrategy study were not accepted by GOI. An unusual but a fruitful feature ofthe Project was the employment of GCC, whose duties included the thoroughmonitoring of the action plan.

12. Proiect Documentation and Data

12.1 The SAR provided a useful framework for the implementation of asubsector Project. The Action Plan, which was given in the SAR, was carefullymonitored throughout the Project.

12.2 Detailed data were not readily available for preparation of the PCR.Most costs in the PCR are approximate, but close to actuals, since it has notbeen practicable to reconcile data from different sources. Because adequateproject benefit monitoring data were not available (see para 9.5), the PCRanalyses are based on largely unsubstantiated mission estimates.

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PART II

PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

COMMENTS ON PART I

1.1 Project Design and Implementation. The Project's objectives have beento support the six basic goals outlined in GOI's Statement of Policies forIrrigation O&M. These goals are clearly stated in Part I and do not need to berepeated. However the complexity of the Project, as opposed to its objectives,has created problems when trying to link achievements under these objectives withthe implementation of the physical components outlined under the projectdescription. A case in point is that whilst over a third (34Z) of project costshave been attributable to completion of on-going projects and pilot groundwaterdevelopment they have only had an indirect impact in achieving the projectsobjectives. Apart from SM associated with the turnover programme, none of thephysical components of the Project were used as direct monitoring indicatorsunder the Action Plan. The project review does not attempt to address how theachievements under the various components have contributed to the Project'ssuccess in supporting and achieving GOI's goals for irrigation O&M.

1.2 To overcome the projects complexities Part 1 presents the results asa mix of both policy and physical achievements without defining their linkages.This makes it more difficult to put lessons learned and performance weaknessesinto their correct context and assess their impact on achievement of theobjectives. A further complication has been the need for 18 separate packagescovering the studies and technical assistance. Whilst the majority of these hada well defined scope that covered discrete components and policy objectives, someoverlapped and could not be adequately coordinated.

1.3 Allowing for the projects complexity, implementation went relativelysmoothly. Understandably because of the large number of agencies involved therewas, during the initial year, a need to clarify project objectives especially atthe provincial level, but SAR implementation targets were generally met and inthe case of EOM, substantially exceeded.

2. Project Impact and Sustainability

2.1 The Project has had a major impact on the goal of realising the fullpotential of Indonesia's irrigation systems. Through the introduction of EOM onnearly a quarter of the countries irrigated area (Policy 1), a large proportionof systems are now in better physical condition and have rationalised budgetingprocedures for O&M based on an assessment of individual system needs (Policy 5).The turnover of small irrigation systems to WUA (Policy 1) has prooved to be arealistic goal, and the pilot introduction of ISF has provided the groundwork fora country wide programme of phased introduction of cost recovery for O&M (Policy3).

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2.2 The recalculated values of ERR for the physical components are similarto those derived at project preparation and included in the SAR. However it isworth noting that the overall costs of special maintenance, and additional costof EOM, require only small additional benefits to produce such ERR. It isunlikely, in the short term, that any PBME system would be able to detect smallyield changes. It is also worth noting that average irrigated rice yields in Javaare already above the 5.1 t/ha used for the with project case. However in viewof the academic nature of the calculation of such ERRs the average values usedto reflect the results of the Project are considered reasonable.

2.3 The GOI's commitment to maintain EOM levels of O&M funding, even afterschemes are no longer eligible for receiving World Bank funds, has already beendemonstrated during 1992/93 through equivalent funding being allocated for theEOM area that has moved to full funding under APBD. This demonstrates thecommitment by GOI to ensure that project achievements are sustainable.

3. Technical Assistance

3.1 The General Coordination Consultant, through the General Expert,provided important support and assistance to the General Coordinator throughworkshops and seminars aimed at the coordination and dissemination of projectgoals and objectives to all concerned agencies. The methodology of such necessarycoordination was included in the GCC Inception Report combined with their secondQuarterly Report.

4. Lessons Learned

4.1 Problems during project implementation were, to some extent,inevitable and should not be seen as inherent weaknesses in Borrower performance.It is accepted that construction quality was variable and that insufficientbudget allocated for SM generated the need for additional SM to be undertaken onschemes already included under EOM. But these problems were identified andefforts were made to rectify them; there was no conscious effort on the Borrowerspart to implement the SM and EOM activities out of sequence. Lessons learnedfrom the first phase of the Project were discussed in great detail, during thepreparation for ISSP-II, to ensure that measures were put in place to build onexperience in project implementation.

COMMENTS ON PART III

5.1 The data contained in Part III is considered to reflect adequately theimplementation of the Project. Comments on the presented loan disbursement data,based on DGWRD information, together with a more detailed breakdown of theundisbursed amount, are included in Section 3.2. A considerable part of thesupporting data relates to the re-estimate of ERR and although the assumptionsare considered reasonable, these revised ERRs should not be seen as the onlymeasure of the Projects success (Para. 2 above).

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BORROWERS PERFORMANCE

6. General

6.1 The Irrigation Subsector Project was the first Sector Loan Project tosupport the GOI Policy Statement of 1987. As stated in the Loan Agreement andSection I, the Project consisted of several components, implemented by severalagencies spread over 18 provinces (see Table 3.1). Loan reimbursement was bySpecial Account procedures and new administrative methods from the World Bankwere required to implement this sector loan.

6.2 The Project was complex and the level of coordination needed, requiredstrong management. During the first six to nine months of project implementationWorld Bank RSI staff considered the Project to be unmanageable, but despite this,project implementation was largely well coordinated and managed.

6.3 To fully understand the content of the Project and activitiesundertaken, it needs the detailed study of all documents available. But asignificant problem was how to disseminate all of the issues covering allcomponents to all the agencies concerned, both at Central and Provincial levels.Such coordinated dissemination of information is an art, and the supporting roleof GCC consultants in this case was sound and effective. In general thecoordination of the Project between the agencies concerned (Bappenas, DGWRD,DGFCA, DGPUOD, DGTAX, DGA and BPKP) both at Central Government and ProvincialGovernment levels was excellently done and has provided a sound basis forimplementing similar projects.

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Table 3.1: DISTRIBUTION OF PROJECT COMPONENTS AMONG PROVINCES

A B C D

gI.~~ ~~ ------- -I -I -I. A x. C

I c Efficit 0S X X X X X X X X X X~~~~~~~~~~~~~~c 0

I0 d Ir a S S1 S a X X

I. *MIAT* .n * S 4X

J.2Irri. Servie Fee 2 .p U X

Uoor * U 0 c -- t- U 3

b. Speci Ma 1 ib I nt_**ec X x. X X xA

J.d M 4 Staff Training* _ _ X X

S. RIVERSX

a. Ongoing Projects X X X X X KK K K K

b. R1ivr iouth X X X X X X _

4. GIRrUWASTER DEVEeQ X X X X

S. TRADa<S POM X X X X X X X X X X X _X

. Project. toa atowr

7 WO REciASSl FCATM X X X X x X x XPROGAMd I

4. E fIRfMTeL ST E X = X X

9.POECrIMITIN I E _ E E X - - X - - - X X_ XX

D. EST STa DY X X X X X X X X X X

11. RITVR lL S X XSTRENTSNt; uesr ___

X Projs Approved by thc Wrld E Existing Proja Mlealtorlng and Evalustlon.

b.RlverM.utha K K X K __ K X~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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7. Disbursement and Replenishment

7.1 World Bank Loan. The World Bank telex dated January 15, 1992 statedthat from the total Loan of US$ 234,000,000 an amount of USS 225,253,994.65 hadbeen disbursed. The undisbursed amount, cancelled as of December 11, 1991, wasUS$ 8,746,005.35

7.2 Analysis of DGWRD records however shows that the amount disbursed wasless than the amount eligible for disbursement by about US$ 4 million. Detailsare as follows:

* Total Special Account withdrawn US$161,388,629.00using replenishment procedure

* Total Special Account withdrawn US$28,992.932,23using reimbursement procedure

* Total Direct Payment US$42,886.723,23

Sub total US$233,268,284.40

* Payments by the Project that could notreimbursed by the Bank US$3,575,067.26

Total paid by GOI US$229,693,217.10

* Total disbursed by the World Bank US$225,253,994.65

* Difference US$4,439,222.45

The reasons for the difference between the GOI payment and the World Bankdisbursement are as follows:

I The supporting documentation for replenishment or reimbursement wasincomplete.

I The implementation of force-account budgets in the first and secondyears of the Project using the Kas Negara Account No 501 was not wellrecognized and it was only during the Project's third year that attemptswere made to re-collect missing supporting documents for replenishment.

* Implementation of contracts for EOM were sometimes delayed and thereforecarried over to the following year. This resulted in the EOMdisbursement percentage being lower then anticipated.

A detailed breakdown of the undisbursed loan by category is given in Table 3.2.

8. Cofinanciers Performance

8.1 The components under the Italian Government, for groundwater in Lombok,and the Ford Foundation for turnover of small irrigation schemes, were

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implemented excellently. The Italian Government and the Ford Foundationcofinancing was done directly to the Project.

The Government of Netherlands (GON) cofinancing however was done through theWorld Bank using the Special Account procedures. The total amount disbursed fromthe GON cofinancing was US$ 6,750,000 and this amount was not included in theWorld Bank US$ 225,253,994.65. The total allocation from the GON was US$9,750,000

8.2 Although no specific problems were experienced with the GON cofinancingit is thought that direct cofinancing, rather than through the Special Account,would have allowed more meaningful involvement of GON representatives in projectsupervision.

9. Fluctuation of the Exchange Rate

9.1 When the Loan was signed in 1987 the exchange rate was US$ 1 - Rp 1,650.At Loan Closing the exchange rate was US$ 1 = Rp 1,910. No detailed adjustmentsof the implemented program were made to cope with this large fluctuation inexchange rate.

9.2 From the experience of the Project it is suggested that the change inexchange rates should be incorp3rated into any ceilings for SM, EOM and theturnover programmes under ISSP-II. Approval may be required from the Bank to useRupiah created by such exchange rate fluctuations.

10. Irrigation Service Fee (ISF)

10.1 As stated in Policy 3 of the Policy Statement for Irrigation O&M, inorder to directly recover the O&M costs from irrigation beneficiaries, inrelation to the benefits they receive from a regular and assured supply of water,the Government will introduce a mechanism of collection from the beneficiarieswhich will be established after a 5-year pilot period. About 25Z of theirrigation schemes in Indonesia are inter-district systems and hold a strategicvalue in supporting the goal of self sufficiency of rice production in Indonesia.Three of the four pilot areas selected in 1987 were inter-district systems(Subang in West Java is part of the Jatiluhur system, Sukohardjo in Central Javais part of the Colo Kanan or Wonogiri system and Sidrap is part of the Sadangsystem in South Sulawesi). The total area selected from these four pilot projectswas 125,000 ha but during implementation the total area was reduced to about50,000 ha and the inter-district issues were therefore not well covered. Sincethe ISF collection for recovering the irrigation O&M costs should be based oncomplete irrigation systems these issue will need to be addressed during theexpansion/extension period under ISSP-II and an inter-unit working group, todirect the consultant, should be established under the chairmanship of Bappenasor DGPUOD, to expedite decision making and therefore improve the efficiency ofthe consultancy activities.

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11. Coordination

11.1 In general the coordination activities conducted by Bappenas, assistedby DGWRD and supported by the General Coordination Consultant, were conductedsuccessfully and included the implementing agencies of DGWRD, DGPUOD, DGFCA, DGTAX and the supporting unit of DGA and BPKP.

11.2 During the implementation of the Project, several Directorates involvedsuggested that the Coordination Group could also coordinate other loan projectswithin DGWRD. This issue was raised in 1991 during a joint meeting between theDirectorates within DGWRD, a World Bank review mission and an ADB review mission,chaired by the Director of Planning and Programming. No agreement was reached atthat time and a modified proposal was developed limited to all World Bankassisted projects within DGWRD, to be coordinated by the ISSP Coordination Group.At the start of ISSP-II this proposal was raised again. Based on past experiencethis proposal should be reviewed and further discussed with the World Bank.

BANK PERFORMANCE

12.1 Although the World Bank devoted adequate time and resources both duringproject preparation and implementation, the large number of technical assistancepackages, complexity of the Project, and the number of institutions involvedaffected the World Bank's ability to adequately monitor implementation andevaluate the achievement of project objectives.

BANK AND BORROWER RELATIONSHIP

13.1 The coordination between the World Bank and Borrower during projectpreparation and implementation was good. The Bank's Jakarta office (RSI) greatlycontributed to the excellent relationship between both parties. DGWRD as theliaison organisation provided a sound forum for exchange of views andadministration of the programme. The relationship with confinanciers is discussedin Para. 8 above.

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Table 3.2: Breakdown of the Undisbursed Loan 2880-IND by Category

Cate Description DGWRD Outside DGWRD Totalgory

1 Civil Works US$1,817,171.26 US$0 US$1,817,171.26other than PartB

2 Civil Works US$766,737.54 US$0 US$766,733.54Part B

3-A Equipment & US$175,467.54 US$0 US$175,467.54Materials

3-B Equipment DGWRD US$132,016.37 US$0 US$132,016.37

3-C Equipment IPEDA US$0 US$0 US$0

3-D Equipment DGFCA US$0 US$456,476.51 US$456,476.51

4-A Consultant US$510,370.13 US$0 US$510,370.13DGWRD

4-B Consultant US$0 (US$314,033.05) (US$314,033.05)IPEDA

4-C Consultant US$0 US$955,231.30 US$955,231.30DGPUOD

5-A Training DGWRD US$673,313.83 US$0 US$673,313.83

5-B Training IPEDA US$0 US$852,338.85 US$852,338.85

5-C Training DGFCA US$0 US$923,415.25 US$923,415.25

Uncallocated US$0 USRO US$800,000.00

Refund for all US$0 US$0 (US$2,500.37)categories

TOTAL US$837,428.86 US$2,873,428.86 US$8,746,005.53

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PART Dm[

STATISTICAL SUMMARY

1. Related Bank Loans and Credits

CredstfLoan No. Project Effective Date Comments

Credit 0127 Irrigation Rehabilitation 1 1969 PPAR, May 1978

Credit 0195 Irrigation Rehabilitation 11 1970 PPAR, December 1980

Credit 0220 Irrigation Rehabilitation m 1971 PPAR, December 1980

Credit 0289 Irrigation Rehabilitation IV 1972 PPAR, December 1980

Credit 0514 Jatiluhur Irrigation Extension 1974 PPAR, June 1987

Loan 1100 Irrigation VI 1975 PPAR, June 1987

Loan 1268 Irrigation Vn 1976 PPAR, October 1985

Loan 1434 Irrigation VIm 1977 PPAR, June 1987

Loan 1435 Irrigation DC 1977 PPAR, June 1987

Loan 1578 Irrigation X 1978 PPAR, June 1989

Loan 1579 Irrigation XI 1978 PPAR, June 1987

Loan 1645 Irrigation Xll 1981 PPAR, June 1987

Loan 1691 Lower Cimnnuk Flood Control (XIII) 1981 PPAR, June 1987

Loan 1811 Irrigation XIV 1980 PPAR, June 1989

Credit 0995 Irrigation XV 1980 PPAR, June 1989

Loan 1958 Swamp Reclamation 1 1981 PCR, June 1989

Loan 2118 lIrigation XVI 1982 PCR, November 1989

Loan 2119 Irrigation XVII 1982 PCR, June 1990

Loan 2375 Second Provincial Irrigation 1984 PCR , January 1990

Loan 2431 Swamp Reclamation n1 1984 ongoing

Loan 2543 Multipurpose Dam & Irrigation 1985 ongoing

Loan 2560 West Tarum Canal Improvement 1985 To close April 1992

Loan 2649 Central & West Java Provincial 1986 ongoing

Loan 3392 Irrigation Subsector L (O&M) 1991 ongoing

Loan Provincial Irrigated Agriculture Development 1991 ongoing

Loan 2816 Urban Sector Loan

Note: The mot recent and relevant Project Performance Audit Reports (PPARs) are Reports Noa. 6864" and 79562. In addition, there havealgo been two Project Completion Reports (PCRa)1 relevant to recent performance that have not yet been audited by OED and a report by theIntemational Irrigation Management Institute (IIMI) on Indonesian irrigation development.

"PPAR, Irrigation Projects VI, VII, IX, XI and XII, (Loana 1100, 1434, 1435, 1579 and 1691-IND), June 30, 1998, Report No. 6864.

2 PPAR, Irrigation Projects X, XIV and XV (Loana 1578, 1811 and Credit 995-lND), June 30, 1989, Report No. 7956.

v PCRs, Irrigation XVI Project (Loan 21 18-lND), November 27, 1989, Report No. 8199 and Second Provincial Irrigation DevelopmentProject (Loan 2375-IND), January 26, 1990, Repon No. 8336.

' Efficient Irrigation Management and System Tumover, IIMI, Colombo, Sri Lanka, December 1989, Report No. TA-937-IND.

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2. Project TimetableItem Date Planned Date Revised Date Actual

Identification October 1, 1986

(Executive Project December 18, 1986 January 14, 1987Summary)

Preparation February 1986 March 1986May 19, 1986

Appraisal Mission May 1986 February 1987 February/March 1987

Loan Negotiations January 1987 July 1987 September 15, 1987

Board Approval May 1987 November 1987 November 10, 1887

Loan Signature December 3, 1987

Loan Effectiveness February 1, 1988 January 28, 1988

Project Completion September 30, 1990 March 31, 1991

Loan Closing March 31, 1991 July 31, 1991

Comments:

1. At project preparation there was considerable concern that, since GOI had for many yearsignored covenants requiring adequate maintenance, simply laving a policy statement would notmake GOI change its attitude. Other points agreed within the Bank included: the Bank wouldnot press for PBB revenues to be earmarked for irrigation O&M; the ISF component should berestricted to a pilot programme; the policy statement need not stress that GOI was notconsidering recovery of the cost of capital investments from beneficiaries.

2. At appraisal, the realism of a three-year project for the ambitious programme proposed andthe justification of the large amount of consultancy were questioned. The World Bank was keenthat GOI should make investments to expand the irrigation system only through subprojectsunder the proposed project but GOI resisted this requirement which was dropped at negotiations.

3. Loan closing was delayed by six months so that more of the expenditure already incurredcould be processed for disbursement.

3. Loan Disbursements (US$ million)1988 1989 1990 1991 1992

Appraisal Estimate 30.0 110.0 190.0 234.0 234.0

Actual 15.95 93.16 173.45 205.47 225.25

Actual as % of Estimate 53 85 91 88 96

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4. Project Implementation (see also Annex 1: Policy Statement and Action Plan)Indicators Appraisal Estimate Actual or PCR Estimate Actual as

% of SARNo. Ha No. Ha

SPECIAL MAINTENANCE- Irrigation Projects 400,000 440,238 110- Swamps 20 105,550 96,610 92- Small River Mouths 5 5 100EFFICIENT O&M- Irrigation Projects 700,000 1,015,080 145- Swamps 12 86,800 148,860 171RECURRENT O&M 4,339,899 1/ 3,227,952 74

2/COMPLETION OF ONGOING PROJECTS- Irrigation Projects 34 70,000 26 57,795 83- Swamps 4 28,200 4 30,400 108- River Projects 4 4 100GROUNDWATEREast Java(i) DTW Drilling 40 79

- Production Well 40 69- Distribution System 40 1,000 51 1,203 120

(ii) S/ITW Drilling 3/ 60 83- Production Well 60 83- Distribution System 60 480 60 489 102

(iii) STW Drilling 300 180- Production Well 300 179- Distribution System 300 900 179 537 60

Central Sulawesi- Drilling 20 30- Production Well ITW 20) 28- Production STW )I- Distribution System 20 120 20 135 113South Sulawesi- Drilling 25 49- Production Well rIW 25) 24- Production Well MTW ) 20- Production Well STW )I- Distribution System 25 150 25 179 119West Nusateaggara (Lombok) 109 1,130 116 1,575 139Total Command Area 3,780 4,118 109TURNOVER PROJECTS 200 20,400 255 21,353 105IRRIGATION SERVICE FEE 4 125,000 4 48,836 39LAND MAPPING/RECLASSIFICATION ANDREVALUATION- Pilot Mapping 1 5,000 1 5,000 100- Reclassification/Valuation 400,000 522,000 131TRAINING- Short-term BDP 700 600 86- Diploma/Degree 98 98 100- Main System O&M Staff 24,974 26,167 105- Community Organizers 1,221 508 42- IPEDA Field Staff 4/ 360 0 5/ 0TECHNICAL ASSISTANCE/STUDIES- International MM (Consultancies) 1,671 (18) 6/

6/- Local MM (Consultancies) 3,944

1/ Project costs included all recurrent O&M cosu for all 001 irrigation and swamps throughout Indonesia. SAR, Annex 5,Table 7 shows total design area for O&M as 5,400,000 ha; actual area is shown in Tables 2 and 3 to be 5,126,699. The area shownhere is based on the latter.

2/ Source: Final Report of Staff Training, EOM and SM for Irrigation, July 1991, Table 6,6. If this number were to be calculatedbased on SAR estimate, adjusted for new areas from ongoing projects less areas turned over, it would be 4,029,601 ha.

3/ Shallow and intermediate tubwells. 4/ IPEDA is a local land tax now replaced by PBB. 5/ Postponed due to PBB reorganization.6/ The SAR did not quote the number of separate consultancies. The PCR does not have an accurate estimate of the number of

man-months.

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5. Project Cost and FinancingA. Project Costs

SAR Estimates I/ Actual 2/ Actual as(US$ million) (US$ million) % of SAR

SPECIAL MAINTENANCE- Irrigation Projects 58.0- Swamps 19.5- Small River Mouths 3.0Sub-total 84.2 80.5 96EFFICIENT O&M- Irrigation Projects 22.0- Swamps 2.8Sub-total 18.0 24.8 138RECURRENT O&M 91.2 89.7 98COMPLETION OF ONGOING PROJECTS- Irrigation Projects 69.1- Swamps 8.9- River Projects 19.8Sub-total 119.4 97.8 82GROUNDWATER- East Java 7.2- Central Sulawesi 0.9- South Sulawesi 1.3- West Nusatenggara 7.6Sub-total 14.6 17.0 117TURNOVER PROJECTS 3.1 3.8 122IRRIGATION SERVICE FEE 3.1 2.9 94LAND MAPPING/RECLASSIFICATION AND 4.0 1.5 37REVALUATIONINSTITUTIONAL DEVELOPMENT AND 21.4 ,11.2 106TRAIINGTECHNICAL ASSISTANCE/STUDIES 3/ 11.6TOTAL 4/ 359.1 340.8 5/ 95

1/ Includes pro-rata distribution of physical and price contingencies.2/ Rupiah expenditure has been converted to US dollars at the exchange rates shown in Annex 2, Table 1.3/ TA which is not included in other items above. For SAR the cost is included in institutional

development and training.4/ Does not include land aquisition and administration costs.5/ Total project cost expressed in rupiah is Rp595,250 million or just over 100% of SAR estimate.

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B. Project Financing

Source Planned Actual Comments

IBRD Loan

1. Civil Works, excluding EOM 125.80 137.182. Civil Works for EOM 11.50 17.933. Equipment and Materials

(a) for groundwater 6.00 3.27(b) other for DGWRD 10.24 8.87(c) PBB/IPEDA 0.40 0.30(d) DGFCA 0.66 0.19(e) DGPUOD 0.00 0.00

4. Consultants Service(a) DGWRD 39.85 43.69(b) IPEDA/PBB 0.85 1.74(c) DGPUOD 1.86

5. Training, Mapping, Surveys(a) DGWRD 12.90 6.42(b) IPEDA/PBB 2.80 2.00(c) DGFCA 3.00 1.78

6. Unallocated 20.00

Sub-total 234.00 225.25 US$8,746,005.35 was cancelled.

7. Govemment of the Netherlands- Civil Works 9.40 11.30 20 million Dutch Guilders

converted at 1.77 Guilders/US$.- Training 2.00 ) 2.88- Institutional Study 0.40 )

Sub-total 11.80 14.18

8. Government of Italy- Consultants 1.40 3.00- Equipment 1.60 1.70

Sub-total 3.00 4.70

9. Ford Foundation 0.60 0.7210. GOI 109.70 95.95

Total 359.10 340.80

- 23 -

6. Project Results

A. Direct Benerits

Appraisal Estimate at Estimate at FullEstimate Closing Date Development

Incremental Production (tons)Paddy 653,068 620,000 620,000Maize 143,595 55,000 55,000Soyabeans 106,311 121,000 121,000Groundnuts 21,189 41,000 41,000Cotton 387 ni niIncremental Employment (million man-days) 135 20 20

Note: ni - no information.Based on areas, yields and cropping intensities shown in Annex 2.

B. Economic Impact - ERRAppraisal Estimate at FinalEstimate Development

(%) (%)Special Maintenance and Efficient O&M- Irrigation

Java 31 26Outside Java 26 29

- Swamps 20 21

Typical Ongoing Project 23 37 /2Groundwater- Lombok 23 3- Madiun, Surabaya 18 12- Sampean Baru 22

Overall Project-Case A 27 29- Case B I/ 21 23

1/ Includes costs of institutional strengthening and technical assistance.

2/ This estimate may be on the high side due to analyses based on a fewschemes and on projection of production at full development levels.

- 24 -

C. Financial Impact 1/

SAR Estimate 3/ PCR Estimate 4/Net Farn Incomes Per Hectare (Rp'000) 2/ Without With Without With

Project Project Project ProjectSurface Irrigation- Java n.a. 985 1,890 2,093- Outside Java n.a. 815 1,643 1,834Ongoing Project - - 1,717 2,275Swamps - - 1,426 1,609Groundwater- Lombok - - 984 1,659- East Java/Sulawesi - - 1,070 1,746

1/ For details see Annex 2.2/ Excluding off-farm incomes, assuming 30% hired labour.3/ Expressed in 1987 constant prices (multiply by 1.111 to convert to 1991 prices). Numbers shown

are from page 50 of SAR. Annex 8, Tables 1 and 2 showed Rpl,024 and Rp954 for Java andoutside Java respectively.

4/ Expressed in 1991 constant prices.

D. Studies

Study Purpose as Defined at Status Impact of StudyAppraisal

Institutional Strengthening To define changes and Completed A useful and comprehensiveStudy adjustments needed in view of study. DGWRD accepted the

redirection of expenditures recommendations many oftowards O&M. which are being implemented

under ISSP II.Investment Strategy Study Improve project selection and Completed The findings of this study were

assess viability of existing and not accepted by GOI.proposed investment Bappenas has recentlyprogrammes. commissioned another study of

this subject.Five Environmental Impact Assess impact of irrigation on Four studies Considered generally adequateStudies the population, health, malaria completed for assessment of impacts but

control programmes and weak on mitigation andintroduce safeguards to protect monitoring needed.irrigation and groundwatersupplies from contamination.

- 25 -

7. Status of Covenants

Loan Agreement Covenant Date Status

3.01 (a) Due diligence and efficiency. Complied.

Provide promptly funds, facilities. Complied.

3.01 (b) Carried out project in accordance with Complied.Statement of Policies and Action Plan.

3.02 Procurement in accordance with Complied.Schedule 4.

3.03 Training satisfactory to Bank. Complied.3.04 (a) Take appropriate measures for malaria Complied.

control.

3.04 (b) Furnish environmental impact studies. 31 March 1990 Complied, but late.3.05 (a) Maintain Coordinating Unit in Complied.

DGWRD.

3.05 (b) Cause Bappenas to coordinate In most provinces PRISmonitoring and reporting. coordinates.

3.06 Maintain in each province a PMU. Complied.3.07 Bappeda to coordinate project Mostly not complied.

implementation, monitoring and PRIS fulfilled this task.progress.

4.01 (a) Maintain records and accounts. Generally complied.

4.01 (b)(c) Audit. Complied, but often late.

Schedule 1Para 3(b)(i)(A) Budgetary allocations for 1988/89 for 30 June 1988 Complied.

O&M to maintain real levels of1986/87 and provide for EOM.

Para 3(b)(i)(B) Satisfactory expenditures for O&M in Complied.1987/88.

Para 3(b)(ii)(A) Budgetary allocations for 1989/90 for 30 June 1989 Complied.O&M to maintain real levels of1986/87 and provide for EOM.

Para 3(b)(ii)(B) Satisfactory expenditures for 1988/89. Complied.Para 3(b)(iii)(A) Budgetary allocations for 1990/91 for 30 June 1990 Substantially complied.

O&M to maintain real levels of1986/87 and provide for EOM.

Para 3(b)(iii)(B) Satisfactory expenditures for 1989/90. Complied.

- 26 -

8. Use of Bank ResourcesA. Staff Inputs (staff weeks)

Fiscal Year PreaDr;isal Appraisal Negotiationa Suoervision Other Total

1986 32.S 33.21987 60.3 70.2 3.2 133.71988 8 1 22.1 22.0 0.5 52.81989 86.5 86.51990 49.1 49.11991 34.1 34.11992 18.9 18.9

93 0 783 22.1 210.7 4.1 408.3

B. Missions

No. Days Special-Month/Year of in izations Performance Rating Status /6

Persons Field Represented

Available Project Development Overal CovenaFunds Management Impact Status

Through Appraisal Feb/Mar 86 2 27 2/ I,E

May/June 86 2 18 2/ I,EJuly/Aug 86 2 37 2/ 1Oct 86 1 17 ENov. 86 1 15 2/ E

Appraisal Feb/Mar 87 10 1,E,A,MAppraisal through June/July 87 3 11 1,EBoard ApprovalBoard Approvalthrough EffectivenessSupervision Mar 88 3 7 I,M 3/Supervision May/June 88 5 1,M,E,Inst 3/Supervision Aug 88 3 15 I,E 1 2 2 2Supervision Jan 89 3/ 1 2 2 2Mid-term Review May/June 89 10 27 1,E,M,A,G 4/ 1 3 2 3Supervision July 89 7 1,E,M,G 1 2 3 2 2Review of Progreu Oct 89 15/ 1 1 2 2 2 2Supervision Jan/Feb 90 5 25 2/ 1,E,A 1 2 2 2 2Supervision Sept/Oct 90 4 I,A 1 2 2 2 2Supervision Feb 91 3 l,A 1 2 1 2 2PCR Jan/Feb 92 2 I,E1/ M - Survey and Mapping Specialist; Inst - Institution Specialist; I = Irrigation Engineer; E = Economist;

A Agriculturlist; ( - Groundwater Engineer.2/ Includes other project.3/ The supervision report dated January 1989 summnarized earlier missions' aides-mdmoire. The PCR mission did not find

performance rtings for these.4/ Includes irrigation engineer on behalf of Dutch Government. Separate reports were issued for the mid-term review and the

July 1989 supervision. It is not clear whether these were overlapping missions or one mission.51 Only I person noted on Form 590. FTO refers to working on ISSP, together with the SSDP prepartion mission.6/ Performance Rating Status: I - No significant problems; 2 - Moderate problems - significant but not critical

deviations from project goal; 3 - Major problems - requiring special attention and intensive supervision.

-27 - ANNEX 1

Page 1GOVERNMENT OF INDONESIA

STATEMENT OF POLICIES FOR IRRIGATION OPERATION AND MAINTENANCE

I. BACKGROUND

1. Rice is the staple diet of the Indonesian population, and a largeproportion of the country's production of rice comes from irrigatedsawah areas. With a population growth rate of 2,. per annum andincreasing per capita incomes, the demand for rice as a primary foodcrop is expected to rise in the future.

2. Concerted efforts have been made on a continuous basis from thebeginning of the first five year plan (Pelita I) to meet the increasingnational requirements of food. Since 1985, these efforts havedecreased the dependency on food crop imports, especially rice.

The nation's production of rice comes from 5 million hectares ofirrigated fields, which grow two crops per year on average, and from2 million hectares of rainfed land, on which rice is generally plantedonce each year.

The increase in production has been achieved as a result of investmentsin agriculture such as the adoption of modern varieties; use offertilizers; weed and pest control; adoption of appropriate croppingcalendars; and investments in irrigation such as rehabilitation ofexisting irrigation systems and construction of new schemes.

3. Water resources development by the Government especially in the fieldof irrigation, both new construction and rehabilitation, within thecontext of increasing food production, has already been carried outwith satisfactory results. Such investments have primarily beenfinanced from the Government's rupiah budget and foreign assistance.

The completion of construction is followed by the next stage ofmanagement and care of the irrigation systems through what is commonlyknown as operation and maintenance (O&M).

Operation consists of activities to optimize the utilization ofthe irrigation infrastructure.

Maintenance consists of activities to care for the infratructure,so that it can function as designed, thereby sustainingthe effectiveness of the irrigation systems.

Both activities should be carried out continuously, and supported by anadequate budget, skilled personnel, appropriate procedu'res for planningand implementation and, proper facilities for their efficientimplementation, as well as to aim for increased quality of intensifiedagricultural food production.

-28- AMEX 1Page 2

Irrigation development during Pelitas I to IV concentrated onrehabilitation (repairs and improvements) of existing syscems andconscruccion of new schemes.

During this latter part of Pelita rV and approaching the beginning ofRepelita V, the time has come to give greater emphasis to O&iactivities.

4. According to Water Law No. 11/1974, Section 12 and GovernmentRegulation (PP) No. 23/1982, Section 35, para. (2), the budget for O&Mof irrigation networks and related structures and facilities should beborne by the Provincial Government. These laws also set out theintenc-on of asking beneficiary farmers to participate in O&M for mainsystems and have overall responsibility for tertiary systems.

Recognizing that Provincial Governments were still unable to providethe required budget for O&M, the Central Government has, since thefiscal year 1974/75 provided subsidies for irrigation O&M throughINPRES DATI I (APBD); since 1984/85 such subsidies have been increasedthrough project funding for O&M (APBN). Maintenance of O&M budgetlevels in the last two years, despite major cucs in total investmentexpenditures, reflects the Government's new policy approach andrecognition of the importance of O&M, and its commitment co increasedexpenditures on efficient and adequate levels of O&M in che future.Nevertheless, the average allocation per annum is well below actualrequirements.

The inadequate O&M Budget, personnel, equipment and facilities willlead to rapid deterioration of the condition of the irrigation systemsand affect their performance thus reducing food production, especiallyrice, and this is of increasing concern to the Government.

5. The problem which is now encountered is how to provide an adequate O&Mbudget in accordance with actual needs of each irrigation system; thiswill necessitate an increase in the budget to be provided for O&M.

It is necessary to mobilize new sources other than the present CentralGovernment allocation, in the efforts to increase the O&M1 budget andeventually to reduce dependence upon Central Government budgetarysupport, namely:

5.1 From Land and Building Tax (PBB)This may not be a dependable source, because the revenues from PBBare required for regional and local development, especially inDaerah Tingkat II (level of Kabupaten).

5.2 From the beneficiaries of irrigation development in che form of an"Irrigation Service Fee," which should be related-to the qualityof service provided. The imposition of such a fee is in keepingwith Water Law No. 11/1974, Section 12 and Government RegulationNo. 23/1982, Section 35, para. (3). This is a more appropriateand dependable source since it will be collecced solely formeecing the O&M budget.

-29- ANEX I

Page 3

6. Besides mobilizing the sources mentioned in Section 5 above, especiallyfor smaller systems with an area of less than 500 ha, cheresponsibility for O&M will be entrusted to the Water User'sAssociation.

This is possible, because there are already a large number of suchschemes managed by the villagers, designated as village irrigacion orcommunal irrigation systems (INPRES 1/1969). In this way, theresponsibility assumed by the beneficiaries can be further developed,while reducing the number of schemes managed by the Government and moreattention can be paid to large and medium scale systems which cannot bemanaged by the beneficiaries.

7. The Government has formulated a set of policies which address sixfundamental issues related to the financing of O&M and otherexpenditure in the irrigation subsector, under the following topics:

1. 'Funding of Operation and Maintenance2. Cost Recovery3. Irrigation Service Fee4. Institutional Development5. ProgramLing and Budgeting for O&M6. Rationalization of Investment Expenditures

B. STATEMENT OF POLICIES

Policy 1: Funding of Oneration and Maintenance

After completing irrigation systems, Government recognizes that inorder to realize the full potential of irrigation systems and tomaximize the contribution of existing investments to agriculturalproduction goals, future policy should ensure expenditure on O&M thacshould be applied in line with che actual needs of irrigation systems.

Objectives:

1.1 To provide adequate and timely funding of O&M on all governmentcontrolled schemes throughout Indonesia at a level sufficient toensure efficient OM, and the introduction of efficient operationand maintenance on the entire Public Works irrigation systemwithin about 15 years. In order to accomplish this, the CentralGovernment will initiate a gradual increase in O&M funding throughmore allocation from the INPRES and DGWRD development budget.This increase in funding is required during the early years butwill decline as Provincial Government revenues and-irrigationservice fees as;ume a larger percentage of the total O&M costs.

1.2 To establish an agreed mechanism for ensuring that ProvincialGovernments take a gradually increasing financial responsibilityfor the O&M budget of main irrigation systems fr.om their ownrevenues.

1.3 To ensure that adequate funding is applied in line with the actualneeds of the systems in areas which have already been upgraded and

-30- ANNEX IPage 4

efficient O&M has been introduced, an increase of the presentlevels of O&M funding would be required. Also, that fundscurrently expended on areas on which efficient O&M has not beenintroduced will have their present allocations at least maintainedin real terms.

1.4 To give Water Users Association (WUAs) maximum responsibilitiesfor O&H, subject to the constraints imposed by their institutionalcapacities and the technical characteristics, size andadministrative boundaries in which irrigation systems are located.

1.3 Within about 15 years, to gradually turn over the Governmentirrigation systems of less than 500 ha each to the WUAs. As afirst step, over the period of Repelita V, most of the Governmentirrigation systems lesa than 150 ha in size would be turned overto WUAs. This figure is in line with the size of tertiary unitswhich, according to Government Regulation No. 23/1982, is nowlegally the responsibility of the WUAs.

Policy 2: Cost Recovery for Irrigation 0&M

The Government policy is that the beneficiaries will eventually financeO&M costs of main irrigation systems.

Objectives:

2.1 To implement a cost recovery system which will eventually financeall costs of efficient 0&M of irrigation systems through increasedcontributions from irrigation beneficiaries.

2.2 To improve indirect cost recovery and increase local governmentrevenue generation and their capacity for 0&M funding, through along-cerm program to raise PBB revenues on irrigated areas in allprovinces.

2.3 To expedite the conversion of the Land Tax (IPEDA) system to thenew PBB system through reclassification and reassessment of themarket value of irrigated properties, and to ensure that thesystem is implemented effectively and yields the expectedrevenues.

Policy 3: Irrigation Service Fees

In order to directly recover the O&M costs from irrigationbeneficiaries in relation to the benefits they receive from a regularand assured supply of water, Government will extend the collection ofirrigation service fees,from the beneficiaries in other areas after thePilot Scheme period. Since PBB may not be a dependable source, theimplementacion of direct cost recovery system, which eventuallyfinances all costs of efficient O&K of irrigation systems, should applyirrigation service fee. These fees are expected to gradually reducethe need for Government funding subsidies and become the main source ofefficient O&M budget for main irrigation systems.

- 31 - ANEX 1

Page 5

Objectives:

3.1 Starting from fiscal year 1988/1989, to introduce an irrigationservice fee (ISF) related to cropping patterns/systems in severalselected pilot scheme areas being taken up for efficient O&M. Theimplementation of the pilot scheme will also enable theestablishment and refinement of the necessary administrative andjudicial arrangements as well as institutional aspects, collectionmechanism and level of fees to be collected.

3.2 Based on the results of the pilot scheme, to gradually extend ISEto all provinces for irrigation systems where efficient O&M hasalready been introduced.

Policy 4: Institutional Develooment

Government recognizes the critical importance of effectively carryingout irrigation O&M, and will implement effective measures and reformsto strengthen O&M institutions at all levels. This will be done tocreate adequate institutional capacity for improving the performance ofthe existing irrigacion infrastructure and efficient utilization ofincreased O&M allocations, in order to continue to provide adequateirrigation service and reliable water supplies to farmers.

ObJectives:

4.1 To strengthen and where necessary to restructure theorganizational set-up of Provincial Irrigation Services (PRIS)dealing with O&M of irrigation systems, down co Ranting Dinas foruniformity, efficiency and effectiveness.

4.2 To clarify the roles and responsibilities of institutions dealingwith O&M by the end of fiscal year 1988/89. This would includethe redefinition of roles of DGWRD and PRIS in planning,organization, directing and controlling O&M activities, anddefining the organizational structure and staffing needs atvarious levels.

4.3 To design and implement a manpower development and trainingprogram for provincial O&M staff and other agencies' staff atvarious levels involved in implementing O&M policies and programs.It is anticipated that this activity will be implemented by theend of fiscal year 1989/90.

4.4 To strengthen the function of PRIS with regard to the managementof 06M through improved personnel management, and the developmentof appropriate management information systems (MIS) and monitoringand evaluation (M&EY systems.

4.5 To further develop and execute an integrated policy for thefunctioning and strengthening of WUAs following guidelinesestablished in INPRES No. 2/1984, and functioning of IrrigationCommittees in line with PP. No. 23/1982.

- 32 ANNEX 1

Page 6

Policy 5: Budgeting and Programming for O&Mi

Government will simplify and rationalize the present budget mechanismsfor O&M funding by reducing the number of funding channels andimproving O&M budget planning administration.

Objectives:

5.1 To introduce improved systems and procedures for O&M programming,monitoring and budget planning, by simplifying the present systemof allocations through both INPRES DATI I and DGWRD developmentbudget, changing to a needs-based system of allocation of O&Mfunds.

5.2 To establish sound criteria and procedures for allocation andmonitoring of funds to meet the actual needs for O&M of eachirrigation system, starting at each Ranting Dinas level.

Policy 6: Rationalization of Investment Expenditures

Government will rationalize expenditure programs in the irrigationsubsector, and formulate and implement a more realistic irrigationinvestment strategy for Repelita V.

Objectives:

6.1 To improve project selection criteria to be used and review thetechnical and economic viability, in the assessment of the tocalexisting and proposed irrigation investment programs, with a viewto rationalize investments.

6.2 To improve the formulation of priorities for irrigationinvestments and finalize preparation of a more realistic irriga-tion subsector strategy and investment program for Repelita V bythe end of fiscal year 1988/89, taking into account the likelyavailability of funds from different sources as well asimplementation capacity.

DETAILED ACTION PLAN AND STATUS ON COMPLETION AT JULY 31, 1992

IMIGATYIS SuSlTN t JET - PCULCI5. OJELTr' AND DTAILD ACTION PLN (AsTATUS Oli PIOJECT COAPtE11004 JULY 31 1991

rot ICY 1 FWbhGZ OF OP'EIIATlION11 MIOAtrTEIlANCE _________________Ol_____________Pe_________________

Pre1ty 34a Ud .- I.a eo1s.b1,l AcOon 1 moo"od I'll Keyr sl500 T1I-4ab1 U .340o1 Indl1-.ols Slabust {|) p} - - - -I ( is) ( (1) (a)

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lkondoiG k.m hI .a9lonSl UU1A. PAtM kcndbng 01 bdOQola4y 9/91 loloasos. 8/0V9: 0 blWi7C62.O0 hacmicg1, hp.o1 1,b oa IAOF 89abcons 66/90: 1I64 b"P/960.000 ha&-do l6.1180.so bok.9 90/91: 3.96 bIII10.2S7 000 haIslas IN we..so 0. 1lh F -0Y &CC-01oIShod060c40 O&M Is p7e1sf5-Ik.01V Imadmo.d.

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at 04as3 20-400 ha, 14 *00 "a )9/90 90/91: 49.722 ha

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sysigins.

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.ol. l TuIns. 35.05110 h,

1.2.3 "Ishiging431II1sbi 01A0A I.rA 1.10MA Planis. .. d--. "I 09rO S-I1 alias5 113.301d. ChIan3ak (-441 ha)lalKib. Ku.Ign3.

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16 Arao. rI 1.A, -. " p ,

IRWATION SUOSECTOR PPOJECT - POLU4ES. OBJECTIVES and OETAILEO ACTION PLAN (OAP) STATUS ON PROJECT COMfPLETICN JUL Y 31 '22l

POLICY 2: COST RECOVERY FOR IRRIGATION OU Page I of I PDIC 2

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s2 Esiabh hKwas.4 pIGS- s . t Puepre Galg any In- OAPPEtIAS Ps.Wa I P a..ndl wealera ikePnlia V p.eg.a puesededales himplamAl a mom.e ean.peaaeby lla end UPW.MOA Sa. b -.ialy Ajean mn l ucalaeia (lGPaaAV C alaM~~~IGOT ~~~~~~ ee 1948 ~~~~~~pieg..l. p,gAled. la OAM aePWNag. and ailAliAn

=leea r V. dg asti schommes. OGam

Rapoba V. lIes~~~~~~~~~~~~~~~~~~~~~~~~~~~~~allen by GN l.a-a k.CieaedWOld4AiAGy h FW regi V sa6pokdy I; :45190 owalSd).

*.3 espimeskpftil.I 1 e1 A b lnwoma mads BAPPENAS Red.Galz VZa Lie1p.e Rpuec Is Na-. 5wa In The abe mpanl.InI IeeenN4n prim1 unSM I. lel C- ed algi. pulel en-eing

rakM Ceo W kve_LWsheasv M 0 acnk JIDw oViadGchaije leN on-gaa SOL, acheomms.

P|..~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.

plawls.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t

tD

-42 ANNEX 3Page 1

ECONOMIC ANALYSIS

1. At appraisal, economic evaluation of the Irrigation SubsectorProject (ISSP) (Loan 2880-IND) was made using economic rates of return (ERR)for several of the separate project components. Not all components wereassessed because of insufficient data, particularly on the quantification ofbenefits. The Project Completion Report (PCR) has re-evaluated the Projectalong the same lines as those of the SAR, using all available actual costinformation. Little quantification of the project benefits was available fromproject monitoring data and many sources have been used to estimate thebenefits attributable only to the Project. The results of this re-evaluationshould be taken as indicative only.

2. The analysis has been made using constant 1990/91 rupiahs, withhistorical costs being expressed in 1990/91 terms through the use of MUV indexdeflators. The conversion factors applied are presented in Table 1 of thisAnnex. Financial and economic prices of inputs and outputs are presented inTables 2 and 3. Economic prices for traded commodities have been calculatedon the basis of the World Bank Commodity Price Forecasts dated October, 1991.Conversion factors supplied by the World Bank have been used to derive othereconomic values.

Agricultural Impact

3. The Staff Appraisal Report (SAR) (Report No. 681-IND) analyzedseparately the surface irrigation, swamps and groundwater components and adistinction was made between surface irrigation on Java and outside Java toaccount for higher labor costs and lower rice yields outside Java. The PCRhas repeated these analyses. On the basis of limited information to support adifferentiation, and for the purpose of this analysis, the same crop yieldshave been applied across the different irrigation systems. The SAR-identifiedcropping rotations were used.

4. Agricultural benefits from the project-supported improvements tooperation and maintenance (O&M) of irrigation systems and completion ofongoing projects arise from increased rice and palawija crop yields and highercropping intensities on command areas, which are assumed to remain the same.These benefits result from a more reliable and timely supply of adequateirrigation water following improved O&M; this permits a shift from rainfedlocal variety paddy to irrigated high yielding varieties (HYV) paddy andannual cropping patterns which include a second paddy crop, mostly HYV,followed by a palawija crop, rather than the dominant pre-project croppingpatterns of either paddy/palawija/palawija or paddy/palawija/fallow. Benefitsfrom project Special Maintenance/Efficient Operation & Maintenance (SM/EOM)are assumed to begin in the year following introduction of EOM.

- 43- ANNEX 3Page 2

- The SAR estimated that crop production intensification through theuse of HYVs and fertilizer had been adopted on 90Z of the irrigatedarea planted with rice in Java prior to the start of the Project.SAR estimates of with-project crop yields were mostly achieved andeven surpassed. Based on recent crop surveys and productionstatistics, the mission has re-estimated the without-projectyields. The SAR and PCR crop yields and increment estimates andcropping patterns used in the analyses are presented in Table 4.In estimating incremental crop yields, the PCR has taken intoconsideration only the increment attributable to project influencethrough improved water delivery. National statistics support thatthere has been an overall increase in average crop yields inIndonesia over the project period and project benefit monitoringand evaluation (PBME) data support that project yields are slightlyhigher than the national averages. The per-hectare crop budgetsused in this analysis are presented in Table 5. On the basis ofsimilar models and project records, these assume an average of 30Xemployed labor.

5. Analyses in the SAR assumed that cropping intensities in surfaceirrigation and swamp schemes would not change through the course of theProject and that cropping intensities would increase only under ongoingprojects and groundwater schemes. The PCR has re-assessed the project impacton cropping intensities, taking account of annual PBME and project surveys andrecent technical analyses of irrigated agriculture in Indonesia, as shownbelow.

SAR PCR

Irrigation System Z Z z zWith With With Without out

SM/EOM 175 175 190 200

Ongoing Projects 125 175 160 200

Swamps 150 150 150 160

Groundwater 117 285 180 280

6. Applying SAR cropping pattern assumptions and PCR estimates ofcropping intensity to the areas developed under ISSP, cropped areas with theProject have been calculated and are presented in Table 6.

Net Farm Incomes From Crops

7. Net farm incomes from crops under each project component areestimated to have increased as a direct result of the project activities.Impacts on farm crop incomes are estimated to be most significant in areas ofongoing and groundwater projects, reflecting a shift from rainfed to irrigated

- 44- ANNEX 3Page 3

cropping. PCR estimates of current average per-hectare net farm incomes fromcrops, with and without the Project, are presented below.

Net farm income from crops&/

Irrigation system Without WithProject Project Increase

(Rp'000/yr) (Rp'000/yr)(Z)

SM/EOM - Java 1,890 2,093 11

- Outside Java 1,643 1,834 12

Ongoing Projects 1,483 2,015 36

Swamps 1,426 1,610 13

Groundwater - Lombok 984 1,659 69

- East 1,070 1,746 63Java/Sulawesi

Derived from cropping patterns and crop budgets in Tables 4and 5.

These do not include O&M costs. (Without-project O&M costsabout Rp 17,000/ha. With-project EOM costs Rp 33,000/ha)

Economic Rates of Return

8. ERR calculations in the SAR were carried out in constant 1987prices. The PCR has re-evaluated these ERRs in constant 1991 prices over aproject life of 20 years.1 Local costs were converted to economic coststhrough the application of the conversion factors shown in Table 1; tradedgoods were valued on the basis of border price calculations (Table 3). PCRcalculations of each ERR are presented in Tables 7-10 and are summarizedtogether with the SAR estimates below.

9. If, for a scheme with a life of 30 years, rehabilitation every tenyears (costing Rp 2 million per ha) were avoided by doubling annual O&Mexpenditure to the optimum annual level of Rp 33,000/ha, the ERR would be over50z.

1 The projoct I itf was not stated in the SAR.

-45 ANNEX 3Page 4

Component Appraisa Estimate at1 Project

Estimate Completionl ______________________________ (Z ERR) (Z ERR)

SM/EOM - Java 31 26

- Outside Java 26 29

Swamps 20 21

Typical Ongoing Project 23 37

Groundwater - Lombok 23 3

- East Java & 20 12Sulawesi

Overall Project - Case A 27 29

- Case B/ 21 22

Includes costs of institutional strengthening andtechnical assistance.

10. The ERRs from investments in SM/EOM and ongoing projects areconsiderable. By investing only a relatively small sum per hectare, theProject has benefitted from the costs already sunk in these irrigation systemsand ongoing projects. For example, the average project cost of SM on onehectare of land under surface irrigation on Java was approximately Rp 200,000(about US$100). In the year following the SM/EOM the net incremental benefitfrom the one hectare was estimated to be Rp 203,000, thus giving an immediatepayback of the investment. Without annual EOM, crop yields could be expectedto decline over time as irrigation systems deteriorate. However, the benefitsfrom EOM through the prevention of a decline in yields have not been includedin the ERR calculations, which assume that without-project yields would remainat constant levels. If adequate maintenance of the irrigation systems werenot provided each year, the ERRs would fall considerably.

11. In calculating the ERRs for investments in SM/EOM and ongoingprojects, net incremental benefits have been assumed to derive from only aproportion of the irrigated areas. The conservative estimates of incrementalcrop yields (Table 4) and incomes employed in the crop models (Table 5) havebeen used to indicate the average impact of the Project on a farm household.However, these benefits would not apply in full to all land commanded by anirrigation scheme, but mainly to the tail-end areas. For SM/EOM on Java, theincremental benefits have been assumed to accrue to 15Z of the total area andfor both SM/EOM outside Java and for ongoing projects, benefits have beenassumed to accrue co 30Z of the areas developed within the Project. Theanalyses of ERRs are sensitive to the assumption of area benefitting from theProject. For example, if the analysis of SM/EOM was made using 20Z of thearea covered, the ERR would rise from 26Z to 41Z on Java. Similarly, ifbenefits from 20Z of the area were used, but only those benefits from yieldincreases were applied (excluding benefits due to changes in cropping

-46- ANNEX 3Page 5

intensity), the resulting ERR would be 12Z. The results of this sensitivityindicate that the changes in cropping intensity have had more impact onproject benefits than the changes in crop yields. This analysis is presentedin Table 11.

12. The Project completed, or partially completed, 26 ongoingirrigation projects of differing sizes and with diverse construction needs.Because of this, the ERR for a typical ongoing project has been estimated onthe basis of average costs per hectare developed.

13. The ERR of 32 for groundwater development on Lombok reflects thehigh investment costs incurred (US$4,800/ha) including the high cost oftechnical assistance associated with this pilot program. However, this ERRhas been calculated on the basis of unsubstantiated, but conservative,estimates of incremental benefits, site-specific information not beingavailable to the PCR mission. Furthermore, whilst all of the costs ofgroundwater development have been used in this analysis, it was not confirmedwhether the areas reported to the mission as having been developed includedall potentially irrigable areas, or only those irrigated to date. Because ofprocurement difficulties, several schemes have incurred infrastructure costs(well development), but are yet to irrigate land because of a shortage ofpumping equipment. This ERR analysis is very conservative.

14. Two calculations of the overall project ERR are presented, as inthe SAR. Case A differs from Case B in that the latter includes the costs ofinstitutional strengthening and training. At 29Z and 221, both these ERRsindicate that the Project has been a worthwhile investment.

-47 AMNEX 3Table 1

INDONESIA

IRRIGATION SUBSECrOR PROJECT(Loan 2880-IND)

Inflation Factors and Exchange Rates

GS-MLTV Deflator Exchange Rate 2/

Index 1/ (Rp to USS)

1987/88 100.00 111.1 1644

1988/89 105.18 105.6 1686

1989/90 106.11 104.7 1770

1990/91 111.10 100.0 1843

Conversion Factors 3/

Civil Works 0.85

Equipment 0.90

Consultants 1.00

Non-traded services 0.80

General costs 0.85

Labour - Java 0.80

- Outside Java 0.90

Source: 1/ World Bank October 1991 - adjusted to Indonesian fiscal year,April 1 - March 31.

2/ Average annual rate used by DPP.3/ World Bank office - Jakarta.

- 48- ANNEX 3Table 2

INDONESIA

IRRIGATION SUBSECITOR PROJECT(Loan 2880-ND)

Financial and Economic Values(Farmgate prices expressed in constant 1991 Rupiah.)

Item Unit Financial. Economic EconomicPrice Price Price(1991) (1991) (2000)

- - -- ---- Rpurit - -------INPUTrS

Paddy seed kg 400 410 l/ 375Maize seed kg 290 230 l/ 265Groundnut seed kg 900 1,580 l/ 910Soya bean seed kg 630 650 v 610Fertilizer

Urea kg 250 426 432TSP kg 310 405 475Ka kg 270 359 359

Pesticide 1 16,000 20,000 25,000Rodenticide kg 4,250 5,313 6,641Labour - Java day 2,500 2,000 2,500

- Outside Java day 3,000 2,700 3,375Oxen/animal traction day 6,000 6,000 6,500

OU'T'PUTS

Paddy kg 320 330 303Maize kg 230 185 212Groundnut kg 755 1,267 733Soya bean kg 510 523 488

1/ Seed assumed to command a premium of about 25% above output prices.

49 ~~~~~~~AiNNEX 3Table 3

INDONESIAIRRIGATION SUBSECTOR PROJECT

(Loan 2880-IND)

Derivation of Economic Prices(Ckonhlant L991 Ruipiah)

%2. 1-h- Pot 646how us" " j999 1393 1 ml 4 £ u U 2440 its49 3 39 Di £444

aUQ..VA44.-4 2I7 no itI 24 24" 244 233 -313 33 V7. u3 244 273 249 F.,Sm a i- d* 33 3s 33 is 33 33s 3

434 LOD -39RV4 3N A C 449 44 674 MD 423 34 324 Id* 34 $31 349 44 323 4as 431P. 4 . 9 . .. 3 4 3 34 v 34 3p 3' -Po a 7 2 24 3d 34 23

It- Vdw p- 4"- 3 437 43 J3 43 " 143 - 43 -43 33 43 3 4 33'1 43

c...-..4. 3444 43W 744 423 444 344 444 3S" 344 43 224 i93n 249 DI 34 237C-0 - 3 v a 23 3 20 v - v 31 31 3 a v

1.0 orLoowi 41101A 4$4 404 494 4949 41" 304 30344 34 349 90 49 n 3

F..4m .. W* la 23 30 20

V4119 Lao - RVp 0414 f.4K 24) 242 774 234 2U 773 234 3P34~ 473 340 loo 43 I7S 33 it3M 49..W444t 4440D40- Jo 32 3 id 3 32 id 31 - I0 V la V4 3 to

30'Vdo ~ d -- 1, 20 1 244, 1 - 30 44. 0

.4_3Go. F. ft9X4 24, LI 1421 ?. 4

1..... 4....~~~340440 444R. 4. 444 I"4 2 4 49" Ili 242 IVO _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _

Q-A".. ^A44. I -F" 7 3S4 732 44 SoI 433 Jo 347R... - 3444444...... c 0 15.. 34-44*73

01/7033ll 4334W 442 473 424 727 713 424 74 VW3 434 424 3S" 44 "I 344 I

P...44..34.j.3....L- .3% 43 44 4 72 49 44 34t 3 42 41 33 44 2 77 U1

.q.4.W443404UP484r I 34 38 31 3 30 31 is - 0 24 3 31 31 3

4994 4934 399W 3940 4994 1493 1494~~~~0 30 36 s R

SOA BS." loo4-o.Pom

0.444pA043313 _j -3W 24 3W "I I39 3 232 lid4

0F1Fo03 P3.. 413* 2 344 344 374 34 247 34,v=L4 * 44 PM4E 492 443 644 333 342 479 347

Mo444..S . L. 450W 23 33 3it 2 24 24 23

448494447.40 1 - 43 43~~~~~~~~2 432 43 3 43 4

- ~~~~~~ ~~~~ ~ " 4411

URNA 344% M) 5.9.40?...

1149 LUus"44 9.4 in 334 144 14 74 179 33

.44LODk R* 41.- V* 38 Jl 3S 34 M 34 34s

= t____ _ _________ 444 844 349 440 449 249 44

r nn.~~~~ 341rp3,p4J31..A.. ~~~~~~~1141 949 19443v= P0

F;,.W. So lm~~~ 4 43 3 43 4 43 43 4Cy4.4.... 33 480 214 301 434 174 214 22443334.44.RV4343 P`%4 ~ 349 'is 34a M9 44 443 439

T. 1..0.. 9b 31 *0 3W is *,

114 334 44 am4 499 431 *01

cly 1.0~~~~ VW3 I43 434 425 1442 3id 434 433PUU LO 3p to's RP4ft4 274 23M "I 33, 3, 311 N

'= - Id k.40 3 3 34 34 34 U4 34so-owT od14 . "od3 * 4 4 Is 43 43 43 43

II.4. 4 .041i. 3. 334 330 Is$ lot 234 33'l 3

-50 ANNEX 3Table 4

INDONESIA


Crop Yield Estimates 1/(Tonnes per hectare per crop)

Crop SAR SAR PCR PCR PCRPre and Without Forest Without With Incremental

Projeat With Project Project Proiea Yields

Paddy 2/-Java 4.5 5.0 5.0 5.1 0.1- Outside Java 4.0 4.5 4.5 4.6 0.1- Rainfed 3/ 2.5 4.5 2.5

Maize 1.4 3.0 2.0 2.2 0.2

Soya bean 0.8 1.2 1.0 1.2 0.2

Groundnut 0.8 1.0 0.8 1.0 0.2

Cropping Patterns(Percentages of Total Area Cropped 4/)

Crop Sufae IrniSbn O.a FProljau Swmp GrowmdhmawWith aM Wilt and

Without Without With Without Wittht With

Paddy 71% 80% 71% 660% 26% 17%

Maize 6% 4% 6%' 7% 44% 31%

Soya bean 17% 12% 17% 20% 19% 31%

Groundnut 6% 4% 6% 7% 11% 21%

100% 100% 100% 100% 100% 100%

1/ Based on PBME annual survey data, ISF Socio-economic survey and mission estimates.2/ Rice yields based on awrage of wet and dry season crops.3/ Rainfed rie moves to hrrated under the protec4/ SAR cropping pauerms.

-51- ANNEX 3Table 5

INDONESIA


Financial Crop Budaets Per Hectare(Rp 000-30% Hired Labour)

HYV RICE

Wet Sesso Dr SmonItam - UOit - uanty Jav Outi. Ihem, Unt Ountity Jav Outside

Yield t 5.1 4.6 Yield t 5.2 4.6

RCevca RD D000 1632 1472 RCwnue Rp OD0 1664 1472

Seed kg 30 12 12 Seed k4 30 12 12Frtiumr Fsr iw

Urc kg 200 50 50 Ur 4g 200 50 50TSP kg 100 31 31 TSP kg I0 31 31KCI kg 60 16 16 KO kg 60 16 16

Pmjdcide I 2 32 32 Pestedde I 2 32 32ROdenicide kg 2 9 9 ROdendcide kg 2 9 9Hired Labour day 45 113 135 Hired Labour day 45 113 135Oxen dra 15 90 90 OxeA das 15 90 90

Total COst RO 000 352 375 ToUt Cosu RD 000 352 375

Net Reama" RD 000 1290 1097 Net RCewna- Rp 000 1312 1097

MAIZE SOYA BEAN

Item Lhai Qumtry Jaw O Outaide. Itnm U- at.. :CUmwty -. Ja: U OutsC

Yield t 2.2 2.2 Yield t 1.2 1.2

RCVCue RD OOD 506 506 Reinue RP ODD 612 612Costs CosSeed kg 25 7 7 Seed kg 45 28 28Fwrtilizer Fertlizer

Urer kg 80 20 20 Uren kg 25 6 6TSP kg 30 9 9 TSP kg 50 16 16KC kg 20 5 5 KC kg 0 0

Pesiede I 0 0 Pmdtice I 1 16 16Rodeauicide kg 0 0 Rodenticide kg 0 0HirFed LbOur days 25 63 75 HredL abour day 25 63 75OXee ds 0 0 Oxen das 0 0

Total Cost Rp 000 104 117 ToUI Costa RD OO 129 141

Net RCwume RP 000 4O 3S9 Net Rew.,e RP 000 4C 471

GROUNDNUT

Itccl LUcit Qu&5tity JAva Ouxi;de

.-JaYield t 1.0 1.0

RCVenUe RP 000 755 755Cost&Seed kg 80 72 72FwuueUre kg 50 13 13TSP kg 10D 31 31KC kg 50 14 14

Pesdcide 1 2 32 32Radenticide kg 0 0Hred Labour da" 28 70 84Oxen da 0 0

TOUI Cmt RP OCO 231 245

Net RCwume RP 000 524 510

- 52 -ANNEX 3Table 6

INDONESIA

IRRIGATION SUBSECrOR PROJECT(Loan 2880-IND)

Cropped Areas(Hectares)

crop BEOM mlpiht EOM Swamp Ougojag Projects IV Gro.adwas.r

tWthout With Without With Without With Without With

Paddy 1,369,343 1,441,414 147,371 157,196 112,890 125.237 1,927 1.940

Maize 115,719 121,810 15,63D 16,672 5,644 1,58 3,261 3,574

Soya l 3Z7,71 345,127 44,65B 47,635 16,933 29.986 1,406 3,574

GMoundnut 115,719 121,810 15,63D 16,672 5,644 10,583 815 2,421

Total Qopped Am= 1,928,652 2,030,160 2Z3,29 2x176 141,112 176,390 7,412 11,530

Total Comnd AMg 1,015P06 1,015,060 14860 14,860 88,195 88,195 4,118 4,118

Intensity 190% 200% 150% 160% 160% 200% 180% 280%

1/ igati0 1and SWaMP.

Incremental Crop Production(T onnes/year)

Crop SAR PCR

Paddy 653,068 620,390

Maize 143,595 55,27

Soya bean 106,331 120,717

Groundnut 21,189 41,239

-53- . ANNEX 3

Table 7

INDONESIA

IRRIGATION SUBSECTOR PROJECr(Loan 2880-IND)

Economic Analyses of Special Maintenance and EOM

JAVA

YEA" CUMULATE PRJECT 1D0 0m ISCRMDrAL Mrfr CS NEIOM AREA 51111011 WITH WITHOUTr co1S 3IRPTTS UaZJAiyTAL

(KA) csT r121cr ManEcT v BEN1Prr--- (RP M ion)--

1987/88 197,865 13,439 1,420 12,019 0 (12,0191988/89 481,903 35,199 3,331 31,869 4,498 (27,3711989/90 688S50 12,427 7,48 5,080 12,648 7,5691990,91 824,295 23,534 10,930 12,604 22,709 10,1051991,92 824295 23,121 10,930 12,191 24,425 12,Z331992i93 824,295 23,121 10,90 12,191 24,887 126961993194 824295 23,121 10,930 12,191 24,87 12,6961994/95 824,295 2.3,121 10,930 12,191 24,87 12,6961995i96 824,295 23,121 10,930 12,191 24,87 12,6961996,97 824,295 23,121 10,930 12,191 24,887 12,6961997/98 824,295 23,121 10,930 12,191 24,87 12,6961998,99 824,295 23,121 1090 12,191 24,87 12,696

1999(2000 824,95 23,121 10,930 12,191 24,87 12,6962000-2007 824,295 23,121 10,930 12,191 24,887 12,696

ERR- 25.8%V/ Bcd on 15%otproject areareng iU benefiLso(O. it, incr3c in rice yiel, O.2 tba inem inpakhwijacop yieis and

10% incaea in cmpping intensity.

OUTSIDE JAVA

YEAR CUMULATVE PRJECT 34 O&M lCMEMOkMAL . NEr NurEON AREA SM10 wrrn WfhwIoulr as BEDEPTS INCtaBNrAL

(HA) s nRuECr FROMr v Bw Prn…- -------- (Rp Mflhion - -…

1987/88 0 4,538 0 4,538 0 (4,538)1988/89 82,076 12,506 0 12,506 0 (12X6

1989,90 156.119 6,072 1,667 4,4"4 3,357 (1,047)

1990/91 190,785 5,882 2,530 3,353 9,28 5,916

1991,92 190,785 5,352 2,530 2,82 10,286 7,4651992/93 190,785 5,352 2,530 2822 10,423 7,6011993,94 190,785 5,352 2,530 2822 10,423 7,601

1994.95 190,785 5,352 2,530 2822 10,423 7,601

1995,96 190,785 5,352 2,530 2, 82 10,423 7,601

1996,97 190,785, 5,352 2,530 2,8ZZ 10,423 7,601

199798 190,785 5,352 2,530 2,Z 10,423 7,601

1998/99 190,785 5,352 2,530 282 10,423 7,6011999QOOD 190,785 5,352 2,530 282 10,423 7,601

2000-2007 190,785 5,352 2,530 2,822 10,423 7,601

ERR- 28.8%I/ Bawdon 30%otp jatarc=ivnig bil beneelsoC02. thn inocmeinreyiel.2ub incmasciepasiijarop ytet ad

10* ie jDn opping intensity.

54 - ANNEX 3Table 8

INDONESIA


Economic Analyses of Swamps and Ongoinz Proiects

SPECLAL MAINENANCE AND EOM TO SWAMPS

YEAR cZflsULATm PRozur EOCU O*M DPCZflWAL HEr NWTIOM AREA SWOUm WIT wrTOUT ou m Bm Ns INcWdUrAL

(HA) cam FROM=C PROECr v B4PS

--- (Rp Million)- - _1987/88 12,500 1,324 90 1,234 0 (1U3451988/89 46,100 4,998 319 4,679 688 (3,991)1989,90 99210 11,303 1,060 10,243 2,364 (7,8801990,91 148860 16,155 1,974 14,181 4,784 (9,397)1991,92 148,860 4,176 1,974 2202 8,844 6,5421992/93 14880 4,176 1,974 2,202 7,752 5,5501993/94 148,860 4,176 1,974 2,202 8,091 5,8901994/95 148,860 4,176 1,974 2202 8,091 5,8901995/96 148,860 4,176 1,974 2,202 8,091 5,8901996,97 148,860 4,176 1,974. 2,02 8,091 5,8901997/98 148,860 4,176 1,974 2202 8,091 5,8901998/99 148,860 4,176 1,974 2,202 8,091 5,890

1999/2000 148,860 4,176 1,974 2,202 8,091 5,8902000-2007 148,860 4,176 1,974 2,202 8,091 5,890

ERR - 21.1%i1 Bed on 30% oproject area rceiving uai bencfiu oro.1 itAia nuce in nce yield, 02 tlt incresm in palawija crop yield and

10% increase in copping intensity.

COMPLETION OF ONGOING PROJECTS (Irrigation and Swamps)

YEAR aCUULATIVI nvR cr iOM o&u ItcaeurAL NHEr NIr

EOM AREA sWmU WITH WITHOUtr aoS BEHEFIM Z1CaBMSRTAL(HA) C061 PROECr PROJECT U BEw4EuS

1987/88 0 0 0 0 0 019898/9 29,398 38,602 566 203 38,964 0 (38,964)1989,90 58,797 38,273 1,292 628 38,937 10,956 (27,981)1990/91 88,195 36,555 2,031 1,169 37,416 31,963 (5,453)1991192 88,195 2,474 1,169 1,304 44,417 43,1131992,93 88,195 2,474 1,169 1,304 43,922 42,6171993/94 88,195 2,474 1,169 1,304 43,922 42,6171994/95 88,195 2,474 1,169 1,304 43,922 42,6171995,96 88,195 2,474 1,169 1;304 43,922 42,6171996Y97 88,195 2,474 1,169 1,304 43,922 42,6171997/98 88,195 2,474 1,169 1,304 43,922 42,6171998,99 8°,195 2,474 1,169 1,304 43,922 42,617

199912000 88,195 2,474 1,169 1,304 43,922 42,6172000-2007 88,195 2,474 1,169 1,304 43,922 42,617

ERR - 36.5%1V Bcd on project becfic uaumpptionof IA5 aincre in nrc yiel4 02 tilh incrrse in plawijacrop yels and 40% mcaea ia

cropping inaeasity.

-55 - ANEX 3Table 9

INDONESIA


Economic Analyses of Groundwater Proiects

GROUNDWATEPR DEVELOPMENT - LOMBOK

YE"R CmUULATriE PRJCECr BOUWxN OhM IcRIJArrAL Ner NW-

!OM AREA ca iLAtT WITH C aENEpr ICKMAL

(NA) v PrOJEcr 2/ amipns( Million)…---

1987/88 104 104 (1041988/89 525 4,585 4,585 (4,585)1989/90 1,050 5,428 5,428 303 (5,1251990/91 1,575 4,371 4,371 790 (3,582)1991/92 1,575 46 46 1,241 1,1941992/93 1,575 46 46 1,185 1,1381993/94 1,575 46 46 1,185 1,1381994/95 1,575 46 46 1,185 1,1381995/96 1,575 46 46 1,185 1,1381996/97 1,575 46 46 1,185 1,1381997,98 1,575 423 46 470 1,185 7151998/99 1,575 501 46 548 1,185 637

1999/2000 1,575 404 46 450 1,185 7352000-2007 1,575 46 46 1,185 1,138

ERR - 2.6%1/ 50%ofequipmoctcosts conted with SCFofO.9.2J Bacd on project benefit assumptions of 05 ua are sn nce yield, 0.2 tCa ine in polawija crop yields and cropping

intensty inae of 100% (180% to 280%D)

GROLUNDWATlER DEVELOPMENT - EAST JAVA & SULAWE-SI

Ye9<t ClndlnLATTE Frrsucr rMgnOWceT cwkm Dr-REbKTAL NLrr NLrEO RE o Ar=Mlr vMirr a os m9l BENEFrl IPrMTAL

(IL4) I/ ECrF V2ENEn

1987/881988/89 807 3,925 24 3,949 (3,949)19S9/90 1,749 4,009 52 4,()fi 4A7 (3,593)1990/91 2,543 3,926 75 4,001 1,313 (2,8)1991/92 2,543 75 75 2,008 1,9331992,93 2,543 75 75 1,919 1,8441993/94 2,543 75 75 1,919 1,8441994/95 2,543 75 75 1,919 1,8441995/96 2,543 75 75 1,919 1,8441996/97 2,543 75 75 1,919 1,8441997t98 2,543 854 75 929 1,919 9901998t99 2,543 872 75 947 1,919 972

1999/2000 2,543 854 75 929 1,919 9902000-2007 2,543 75 75 1,919 1,844

ERR- 123%1/ 50% of equipment cosu coavrnted with SCF of 0.9.

2/ Based on poje benefit assumptios of 0 tza increaein irice yieK 02 Ois irme in palawija crop yields and cropping

intenuty i-rae of 10D% (180% to 280%).

- 56 - ANNEX 3

Table 10

INDONESIA


Overall Proiect Economic Analysis

OVERALL PROJECr(Rp Milion)

YEAR PROCBCr moumurr ECU O*M INCaEMERTAL NET NETCam RnuLACWr Wil WTIUOUT cmTS BENETP INCRBMIlcAL

M _ " TA) PROJECT PRCJECT BENErS1987/88 19,405 1,510 17,895 0 (17,895)1988/89 99,815 590 3,852 96,552 5,186 (91,366)1989/90 77,511 1.343 10,703 68,152 30,095 (38,57)1990/91 90,424 2,1C6 16,603 75,927 70,828 (5,09)1991,92 35,244 16,603 18,641 91,220 72,5791992)93 35,244 16,603 18,641 90,088 71,4471993J94 35,244 16,603 18,641 90,427 71,7871994/95 35,244 16,603 18,641 90,427 71,7871995,96 35,244 16,603 18,641 90,427 71,7871996,97 35,244 16,603 18,641 90,427 71,7871997/98 1,277 35,244 16,603 19,917 90,427 70,5101998/99 1,373 35,244 16,603 20,013 90,427 70,414

1999/2000 1,257 35,244 16,603 19,898 90,427 70,5292000-W7 35,244 16,603 18,641 90,427 71,787

ERR = 28.9% - bac cme eucludiq institutional suengthening and technical asin.

ERR - 22.7% - hue ce including institutional stengthening and technical assistance.

- 5~7- - 57 - ANNEX 3Table 11

INDONESIA


ERR Sensitivity Analysis of SM/EOM 1/

Percentage ERR % ERR % ERR %of Area Without Without WithAssumed Yield Intensity Bothto Benefit Increases Increases Effects

JAVA

10% 6.9

12% - 15.4

15% - -0.4 25.8

20% -3.6 11.6 40.9

50% 43.0 61.7

OUTSIDE JAVA

12% - - 0.8

15% - - 7.5

20% - 1.4 15.8

30% - 13.3 28.8

50% 12.4 29.4 49.5

100% 35.0 59.4 89.5

1/ Based on ERR calculations presented in Table 7.

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