Document of

The World Bank

FOR OFFICIAL USE ONLY

,(IJ 2 G3-2J- 7,tb

Report No. 5726-IND

STAFF APPRAISAL REPORT

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

September 30, 1985

Urban and Water Supply DivisionProjects DepartmentEast 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

Currency Unit = Rupiah (Rp)US$1 = Rupiahs (Rp) 1,100Rp 100 = US$0.09Rp 1 million = US$909.1

UNITS AND EQUIVALENLS

1 meter (m) = 39.37 inches1 kilometer (km) = 0.62 miLes1 cubic meter (cu m) = 35.3 cubic feet1 hectare (ha) = 2.47 acres1 liter per capita 0.26 US gallons perper day (L/c7d) = capita per day

1 liter per second (1/s) = 0.264 US gallons per secondor 15.8 US gallons per minute

FISCAL YEAR

Central Government: April 1 - March 31Water Enterprises: January 1 - December 31

ABBREVIATIONS, ACRONYMS AND INDONESIAN TERMINOLOGY

ADAB - Australian Development Assistance BureauBAPPENAS - National Development Planning BoardBNA - Basic Needs Approach (GOI water supply program for cities

with populations of 20,000 and above)BPAM - Badan Pengelola Air Minum - Temporary water entity operated

by CRCK - Directorate General of Human Settlements, Cipta KaryaDAB - Directorate Air Bersih - Directorate of Water SupplyDesa - VillageDDN - Ministry of Home Affairs (Departmen Dalem Negeri)cOI - Government of Indonesia (the Central Government)IKR - Ibu Kota Kecamatan, the principal city or town of a kecamatanKabupaten - A second-level administrative unit of local government; a

subdivision of a provinceKecamatan - A subdivision of a KabupatanKANWIL - Kantor Wilayah or Provincial Branch Offices of MPWKIP - Rampung Improvement ProgramKotamadya - A second-level administrative unit of local government; a

self-governing cityMHW - Minist.y of Public WorksPCK - Provincial Cipta KaryaPDAM - Perusahaan Daerah Air Minum - A semi-autonomous water

enterprise owned by a kabupaten or kotamadyaPIU - Project Implementing UnitPLP - Directorate Penyehatan Lingkungan Pemukiman - Directorate of

Environmental SanitationPHU - Project Management UnitProvince - The first-level administrative unit of local governmentPTU - Provincial Training UnitPWD - Public Works DepartmentPUOD - Directorate General of Public Administration and Regional

Autonomy in the Ministry of Home AffairsREPELITA - National Five-Year Development Plan (Repelita I, 1969-74,

Repelita II, 1974-79, Repelita III, 1979-84, Repelita IV,1984-89)

Water Entity - PDAM or BPAM as the case may be.

FOR OMCIAL USE ONLY

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

Loan and Project Summary

Borrrower Republic of Indonesia

Beneficiaries: Thirteen water enterprises located in the Province of EastJava, and Ministry of Public Works' Directorate General ofHuman Settlements (Cipta Karya).

Amount: US$43.3 milLion equivalent

Terms: Repayable in 20 years, including five years grace, at thestandard variable rate. ODI vill assume the foreign exchangerisk.

ReLending Terms: Part of the proceeds of the IBRD Loan (US$12.7 millionequivalent) would be onlent by the Governmnt to PDAMSurabaya, repayable in 25 years including five years ofgrace, at 11-12= interest.

ProjectDescription: The proposed project would benefit about 1.2 million persons

in a wide range of urban and semi-rural comu8itiesthroughout the East Java Province, with particular emphasison low income groups. It would support the Government ofIndonesia's water sector development and investment programin conformity with Repelita IV targets through: (a) provid-ing low-cost water production and distribution to about 75small and medium sized towns in the East Java Province; (b)expanding and rehabilitating the water supply system in theprovincial capital of Surabaya; (c) providing technicalassistance to new and recently established water entities forimproved operation and system expansion; (d) strengtheningprovincial level capability in planning and implementingwater supply investment programs, water pollution control,and monitoring and development of water entities'performance; and (e) providing technical assistance forpreparing future water supply projects and determiningappropriate water supply organization arrangements in threeprovinces.

Risks The primary risk is that a part of the revenue from smallerIKKs (population less than about 5,000) may be slow inmaterializing. However, (a) the volume of water and revenuesinvolved are very small and (b) the experience under theFirst East Js.va Water Supply Project (Loan 2275-IND)indicates t}at connections, water sales and revenues areahead of szhedule.

This documet ha a restricted distribution and may be used by recipients only in the performance ortheir oflfici dutie Its contents may not otherwise be discosed without World Dank authorizatn

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Estimated Costs:/a Local Foreign Total(US$ million)

Part A - BNAIIKK Towns 13.6 13.8 27.4Part B - Surabaya 8.4 8.6 17.0Part C - Institutional Development 2.5 5.0 7.5Part D - Technical Assitance 2.7 4.3 7.0Project Adnmnistration 1.6 0.7 2.3

Base Cost 28.8 32.4 61.2

Physical Contingency 3.2 3.4 6.6Price Contingency 6.9 5.7 12.6

Total Project Costs 38.9 41.5 80.4

Financing Plan:

IBRD 5.2 38.1 43.3ADAB - 1.5 1.5Government of the Netherlands - 1.0 1.0Covernment of Indonesia 29.0 0.9 29.9PDAX Surabaya 4.7 - 4.7

Total 38.9 41.5 80.4

Estimated Disbursements:

Bank FY 1986 1987 1988 1989 1990 1991 1992

AnnuAl 0.2 2.7 8.1 17.5 9.2 4.2 1.4cumulative 0.2 2.9 11.0 28.5 37.7 41.9 43.3

Rate of Return: llZ.Staff Appraisal Report: No. 5726-IND dated September 30, 1985.

Map: 19110-IBRD

/a Including taxes and duties equivalent to US$7.3 million.

NCONESIA: SECOND EAST JAVA WATER SUPPLY PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Page No.

I. WATER SUPPLY SECTOR ........................................ 1

A. Background ............................................. 1Population .................Administration ..........

Health 1................Water Resources 1... ... ...

Bo Sector Service Levels 1C. Sector Institutions .... 2D. GOI's Sector Development Poii c e s 3E. Experience with Past Bank Lending ...................... 4F. Urban Water Supply Objectives, Issues and Constraints 4

Issues and Constraints ....... 5Bank Role and Rationale for Involvement .... 6

II- THE PROJECT ......... 7

A. Background and Objectives .... 7Background .................... 7Project Objectives ..7...... o...................... 7

B. Project Description 7 ...... . ... .s... .. 77

Part A - BNAIIm Towns ........ o......... 8Part B - Surabaya ................ o................ 9Part C - Institution Developmnt .......... 0000O... 11Part D - Technical Assistance 12Status of Project Preparatione...... 13

C. Project Costs ...................... .14

D. Project Financing Ar ratgements 14

III. IMPLEMENTATION ARRANGEMENTS .......o....... ............. .... 16

A. Executing Agencies ................................ 16The Borrower ......... ..... ....... 16Cipta Karya and Directorate of Water Supply ......... 16The Provincial and Kabupaten Governments ......... 17Wiater Entities .... 0000*Oo..17

This report is based on the findings of an appraisal mission which visitedIndonesia during April 1985 and consisted of Ali Nawaz Nemon and Paul R.Stott. H.W. Barker and Roger Batstone also participated in the preparation ofthe project in the field and Aledra Allen and Rose Paratore assisted inWashington, D.C.

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Page No.

B. Project Organization and Management .................... 18Implementation Schedule ................... .......... 19

C. Procurement ............ ................................ 20D. Disbursements ...................................... 20E. Accounts and Audits .................................... 22F. Operation and Maintenance ............ ........ .... 22G. Monitoring and Evaluation.............o......... ......... 23

IV. FINANCIAL ASPECTS ......................................... 23

A. BNAJIKK Towns ............................................. ....00000 23Past Finances ........................................ 23Tariff Structure ..................................... 25Tariff Levels, Affordability and Willingness to Pay ... 25Financial Projections and Results ........ ............. 26Revenue Covenant ..................................... 28

S. Surabaya ......................................................... 31Existing Enterprise ... ................. .............. 31Past Finances ........................................ 31Tariffs .............................................. 32Affordability ........................................ 32Financing Plan ................................. 33Profit Sharing ...... o....o..... .. o.......... ....... 33Financial Projections ...o.. .. ........... o...o .o......... 33Revenue Covenant ......... ................................ 34

C. Other Financial Covenants for all PDANs o............... 35

V. ECONOMIC AND SOCIAL ANALYSIS ..... o... .o.o.. ................. 35

A. Justification ................... o.000000000000000....... 35B. Marginal Cost .o ...... .......................................... 36Co Rates of Return ........................................ 36D. Project Risk .. oo.o..o. .... o.o ... oo................................ 33E. Poverty Impact ...o...o ....o.......eo ..o..ooo..o.. oooo..........o.... 37F. Environmental Impact ..........o........o...........o... 38

VI. AGEEMENTS REACHED AND RECOMHENDATIONS o.................o.. 39

1. Sector Tables2. BNAIKK Water Systems and Demand Analyses3. Surabaya Water System and Demand Analysis4. Training Component5. East Java Provincial Monitoring and Development Unit6. Pollution Control in Kali Surabaya7. Project Implementation Assistance8. Detailed Cost Estimates9. Project Procurement and Disbursement Schedules

10. Project Implementation Arrangements11. Financial Projections12. Assumptions Used in Financial Projections13. Notes on Economic Rates of Analysis14. Monitoring Indicators15. Documents in Project File

FICURES

A. Ministry of Public Works and Cipta Karya Organization ChartB. Directorate of Water Supply Organization ChartC. PDAM Surabaya Organization ChartD. Organization Cbart for Typical PDAME. Implementation Organization

MAP 19110-IBRD

I. WATER SUPPLY SECTOR

A. Background

1.01 Population. Indonesia is the fifth most populous country in the worldwith more than 155 million people (1984) on 13,000 islands. The average popula-tion density is 83 persons/sq km, but in East Java (the Province in which theproposed Project is located) it is 657, one of the highest in the world. With30 million people, the province has 20Z of Indonesia's population and 2Z of itsland area. Indonesia's population is increasing at an average annual rate ofabout 2.1Z and in Java (excluding Jakarta) the rate is 1.92. About 22% of thenational population lives in urban areas which are growing at 3.7Z per annum.Eleven percent of East Java's population reside in the eight self-governingcities (Kotamadya). The largest of these, Surabaya, has 2.2 million people andis, after Jakarta, Indonesia's second largest city.

1.02 Administration. Indonesia has 27 provinces which are divided into 216districts (Kabupatens), and these in turn are divided into about 3,300 sub-districts (Kecamatan). There are 54 autonomous cities (Kotamadya), about 3,300district t,wns (Ibu Kota Kecamatan), and about 65,000 villages (Desa). EastJava Province has 29 Kabupatens, 8 Kotamadyas, 554 Kecamatans, and 8,260 Desas.

1.03 Health. As measured by standard indices, health conditions inIndonesia lag behind those in other countries at a similar stage of economicdevelopment. At the end of the 1970s, life expectancy in Indonesia was53 years, whiLe the average for other low and middle-income countries was 57 and61 years, respectively. The average infant mortality rate was estimated at 102per 1,000 births compared to about 55 in the Philippines and Thailand, and 32 inMalaysia. Endemic diseases, caused principally by poor water supply andsanitation, are major factors behind these statistics.

1.04 Water Resources. Indonesia is well endowed with rainfall and groundand surface water resources, but problems of distance, reliability, contamina-tion, excessive demand and conflicting uses hinder simple and rapid developmenton a wide scale. Because of population density, intensive agriculture and aboveaverage industrialization and urbanization, the water supply situation in Javais more critical than in other parts of Indonesia and the estimated 1990 demandrepresents 98Z of the available supply in Java. Household and industrial waterrequirements are about 10% and agricultural needs about 90Z of total needs.Exploitation of the remaining feasible surface water impoundments andgroundwater sources, together with improved irrigation efficiency, carefulallocation of supplies and enforcement of pollution controls are needed toconserve Java's water resources to serve future growth adequately.

B. Sector Service Levels

1.05 About 45% of the urban population had access to piped water supply in1983. Huch of this suffers from contamination, low pressure, and intermittentsupply. A considerable portion of the urban population is dependent on waterfrom vendors or from shallow wells, streams or rivers at considerable healthrisk. About a quarter (26%) of the urban and rural population is considered to

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have satisfactory sanitation facilities. Of the rural population, only 20X haveaccess to potable water from either piped systems, vells with handpumps, centralrainwater collectors or protected springs. The remaining 80Z obtain water fromunprotected streams, springs or wells. While the present situation isunsatisfactory, there has been considerable improvement in water supply over theperiod 1970-1983 during which the percentage of total population served hasrisen from 2.5Z to 26Z. However, due to population growth the absolute numberof people without access to safe water has remained almost the same at 118million in 1970 as against 117 million in 1983.

Table 1.1: WATER SUPPLY AND SANITATION SERVICE LEVELS,1970 to 1983

Water Supply Sanitation1970 1981 1983 1970 1981 1983

Total population (million) 121 152 158 121 152 158Population served (million) 3 35 41 18 35 46Population not served (million) 118 117 117 103 117 112Service level (Z) 2.5 23 26 15 23 29

Urban Population (million) 21 35 38 21 35 38Population served (million) 2 14 17 4 7 10Population not served (million) 19 21 21 17 28 28Served level (Z) 10 40 45 19 20 26

Rural Population (million) 100 117 120 100 117 120Population served (million) 1 21 24 14 28 36Population not served (million) 99 96 96 86 89 84Service level (Z) 1 18 20 14 24 30

C. Sector Institutions

1.06 Several ministries of the Government of Indonesia (GOI) are respon-sible for the water supply, sewerage and sanitation sector. The Ministry ofPublic Works (MPW) is responsible for development in urban areas and theMinistry of Health for water quality monitoring and for water supply in ruralareas. The Ministry of Home Affairs (Departemen Dalam Negeri (DDN)) by virtueof its responsibility for local government and local government enterprises, isindirectly responsible for overseeing operations. Water and sanitation systemsare owned aid operated by local governments, either as a department (a Dinas),or as a semi-antonomous water enterprise (Perusahan Daerah Air Minum (PDAN).The sector organization is shown in Figure A. Within the MPW, the responsibil-ity for planning and implementation of all water supply and sanitation projectslies under the Directorates of Programming (Bina Program) and Water Supply(Direktorate Air Bersih, i.e. DAB) in the Directorate General of HumanSettlements (Cipta Karya (CK)). During the period of construction the DAB andCK provide technical and managerial assistance to water supply utilities and

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temporarily operate them until they become PDAMs on achieving sufficientrevenues to cover cash operating expenses. At present they operate about 80such temporary organizations (known as Badan Pengelola Air Minum (BPAH)).

D. GOI's Sector Development Policies

1.07 During REPELITAs I and II (covering 1969-79), total capital investmentin the sector was close to Rp 182 billion. The initial emphasis was on waterproduction which increased from 9,000 litres per second (lIs) to 21,000 I/s. In1979, as EEPELITA II was drawing to a close, it was recognized that the pace ofdevelopment needed to be accelerated, and that for equity considerations thesmaller cities and towns and the poor of those places must be accorded prio-rity. Therefore, during REPELITA III (1979-1984) the government embarked upon a'basic needs' approach to projects which sought to provide essential servicerapidly, at low-cost. Under the impetus of the UN International Drinking Waterand Sanitation Decade overall service level targets were set by GOI in 1981 for1990 for urban and rural water supply to serve 70% and 602 of the totalpopulation, respectively. Two major programmes for urban water supply in the1980s are the Basic Needs Approach (BNA) programme for cities and larger towns(with populations 20,000 and up), and the Ibu Kota Kecamatan (IKK) programme forkecamatan headquarter towns with populations in the 3,000-20,000 range (Annex2). Investment during REPELITA III amounted to some Rp 360 billion, of whichRp 300 billion was in urban projects and Rp 60 billion in rural projects. Interms of water production, the REPELITA III targets were achieved; capacityincreased to over 30,000 l/s, however, the distribution network has lagged farbehind. The overall picture for the end of REPELITA III is presented in Annex 1Table A.1.5. REPELITA IV, which commenced in 1984, will continue basic BNA andIKK policies with special emphasis ra Category 4 towns (20,000 to 100,000population) as well as larger citie- . The preliminary investment programme forREPELITA IV amounts to some Rp 880 billion for water supply, representing about0.2Z of GNP per annum.

1.08 Sector Financing and Cost Recovery. The investment required to meetthe 1990 urban water supply target for Indonesia is estimated to be about US$1.8 billion (1984 prices), or US$ 365 million per year for the remaining yearsof the decade. While the target is unlikely to be met because of implementationcapacity constraints, investment is still expected to be substantial. Due toits stringent resource position, GOI is giving increasing emphasis to costrecovery from users and has set a clear financing policy based on level ofservice. According to GOI policy, basic needs systems (defined as those wh4provide up to 60 l/c/d on average for up to 60% of the population) wctd befinanced by central government grants; systems providing 60-125 l/c/d, with amix of central government loans (current interest rate 12%), grants and internalcash generation; and systems for more than 125 I/c/d, by central governmentsloans and internal cash generation only. Based on this principle GOI requiresevery PDAM to at least generate funds for operations maintenance anddepreciation while maintaining affordability; and requires increasing self-financing from PDAMs providing higher level of service. This impliesprogressive cost recovery in the sense that as the consumption increases,contribution from beneficiaries will increase. Consultants engaged under Loan2275-IND, and Bank staff have been reviewing the Lurrent financing policy,including a national water rate structure, and have endorsed GOI's approach asrealistic in the present stage of development of water systems.

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E. Experience with Past Bank Lending

1.09 Experience with previous urban and water supply projects has been goodon balance. The Bank has made three loans to GOI for water supply projects,including two which cover a total of 12 cities and another for development of13 BNA and 37 IKK systems in Fast Java. As indicated in the Project CompletionReport for the Five Cities Water Supply Project (Loan 1049-IND), physicaltargets in most cases have been met generally within budget, although with somedelays, and CK is evolving to become a well-organized and forceful developmentagency; responsive to sector and project issues and forward looking. The mainproblems evident are (i) limited implementation capacity and (ii) weaknesses inlocal government organization and procedures, and scarce trained manpower andlocally generated financial resources, which have often lead to operationaldifficulties. Lack of monitoring of PDAM operations has been identified as akey problem. PDAH operations suffer in some cases from large proportions ofunaccounted-for-water, operating losses, poor collection of bills, largeaccounts receivable (particularly from Government agencies) and inadequateaudit. Resolution of such institutional problems is partly the responsibilityof DDN, itself a relatively poorly equipped organization for developmentpurposes. These problems are being addressed through the first East Java WaterSupply Project (Loan 2275-IND) and under the proposed project. Measures tostrengthen local government management and finances are being supported throughvarious Bank-supported urban projects.

1.10 Following experience with the logistical and management difficultiesof nation-wide projects, GOI has recognized the need for a more systematicapproach to matching of its considerable investment and institutional develop-ment requirements with the various financing and donor agencies capabilities.It therefore requested that the Bank should focus its subsequent attentioninitially on one province, East Java, with the objectives of (a) providing waterto all communities with a population of 3,000 or more; and (b) achieving aninstitutional development model for replication in other provincial and regionalwater supply schemes. The ongoing first East Java Water Supply Project istherefore mainly concerned with the planning, design and implementation of BNAand IKK water supply systems in East Java and with institutional development.Systems in 50 towns utilizing innovative technology, intended to provide lowcost, safe water supply to about 720,000 persons, are being implemented underthis project which is in its early stages and progressing satisfactorily.Institutional development under Loan 2275 includes the developing andstrengthening of project PDAMs, CK (including DAB and the water supply sectoraltraining programmes), and a study of water enterprise operations and finances.The institutional studies are being funded under a co-financing agreementbetween the Bank and the Australian Government.

F. Urban Water Supply Objectives, Issues and Constraints

1.11 The Government's urban water supply objective is to provide by 1990adequate water supplies to 70% of the urban population. It would do this bycontinuing the BNA and IKK Programmes (para. 1.07) and placing particular empha-sis on improving operational capabilities of the agencies concerned, throughtraining of water supply staff, public health education, and upgrading thecapabilities of local consultants, civil works contractors and suppliers.

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Issues and Constraints

1.12 Implementation Capacity. In common with many other GOI agencies, CKis experiencing increasing difficulties in implementing its groving developmentprograms on time. In CK's case, many of its difficulties stem from the logisti-cally complex nature of the sector irvolving numerous local authorities spreadover a wide geographic area, as well as restrictive central budgetary and pro-curement procedures and manpower shortages. As a result, CK is moving towarddecentralization of its project operations to provincial-level agencies, and hasrecently established project management units in East Java and elsewhere, withdelegated responsibility for many proj;ct preparation and implementation func-tions. Other functions such as planning and programming of CK activities arescheduled to be introduced at the provincial level shortly. The effectivenessof decentralization will depend, however, on the training of adequate manpoweras well as the development of appropriate systems, for which extensive consult-ant support is to be provided in the meantime.

1.13 Personnel Requirements for the Urban Water Programme. At the end of1982 the total staff of the 86 PDAMs in existence was about 14,400. A recentstudy of manpower and training needs predicts that by 1990 the total PDAM man-power must rise to 38,000 (Annex 1, Table A.1.6). The DAB has in progress ahuman resources development programme which was started in 1979 with theNetherlands government and Bank assistance. It has the objective of trainingmanagement, administrative and operating personnel for DAB and waterenterprises. PUOD also has recently introduced a one month course for PDAM-mnagers and a number of foreign-assisted projects have established their owntraining courses. As part of a broader effort to strengthen MPW staff training,CK is attempting to move more of the craining activities to the provinces. ForRepelita IV a 'Manpower Development Program' will be established with trainingaimed at six broad groups: government agencies, BPAM/PDAM's consultants andcontractors, suppliers and manufacturers, educational institutions and profes-sional organizations and non-government organizations.

1.14 Operation and Maintenance. Water systems, although generally built byDAB, are operated by the local government either as a unit of its public worksdepartment (Dinas) or as a PDAM. As a Dinas, staff and accounts are not keptseparate from other local government functions and water revenues flow into thelocal government's general fund. Each PDAM has a Board of Directors with repre-sentation from local government, charged with providing a public service througha financially viable, well managed organization. Newly employed PDAM staffrequire extensive training and accounting, management and operational systemshave to be developed. As part of this institution building function, on cen-trally funded projects DAB sets up PDAM management, operating and accountingsystems and trains staff in their use. The Directorate General of PublicAdministration and Regional Autonomy (PUOD) of DDN has the authority to super-vise and assist the PDAMs. However, for operations and maintenance, (afterproject completion), DAB has neither the power nor sufficient staff to continuethis assistance and control, nor does PUOD have the staff or qualifications todo so. Periodic review of operating results of PDAMs under the Bank financedprojects indicates unsatisfactory performances at many PDAMs. Review of staff-ing indicates several vacancies at senior levels; high incidence of existingstaff who are not permanent employees of the PDAMs and are frequently withdrawn;

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and lack of authoritative direction to support the organizational development ofPDAMs. Following a study of appropriate arrangements for the supervision ofPDAM's operations, DDN, MPW and Governor of East Java have agreed to assigndevelopment function to the Provincial Cipta Karya (PCK) in East Java whichwould monitor the performance and provide assistance to all water entities in asystematic and timely manner (para. 2.12).

1.15 PDAM Organization Structure. In view of the relatively small size andweak financial viability of many of the PDAMs, the Bank-finance first East JavaWater Supply Project (Loan 2275-IND) included a study of alternative organiza-tion structures. The consultants, who recently completed their draft report,examined several options and are recommending the establishment of an organiza-tion on a province-wide basis. Given the PDAM monitoring arrangements, a pro-vincial PDAM is not essential for East Java. However, in small provinces whereorganizational capacity at local level is weaker, the issue would be moreimportant. GOI is reviewing the merits of the proposed reorganization of waterenterprises and alternative solutions. In the meantime, the proposed projectincludes consultancy services for determining suitable organization structurefor the water entities in Irian Jaya, South Sulawesi and North Sulawesiprovinces. The studies are expected to be completed by November 30, 1986.

1.16 Water Resource Management. The growing scarcity of water supplies foragricultural, municipal and industrial purposes in Java highlights the need forincreased emphasis on water resource management and appropriate allocation ofsupplies. Few economically feasible new sites remain for large storage pur-poses, irrigation efficiency remains relatively low, dam operating rules are notalways optimized, and consequently, despite increasing use of groundwater,necessary supplies for the rapidly growing urban areas and industrial centersare restricted. Surabaya, the largest industrial city in Indonesia, has beenunable for many years to respond to demands for potable water due to raw watershortages in the Brantas Basin. The shortages arise partly because of incom-plete inventory of the region's surface and groundwater resources as well asindequate planning for their exploitation and conservation. Available suppliesare also being steadily degraded through pollution from point sources andresidential areas, and groundwater mining. An urgent need for a concerted waterresource management strategy exists, particularLy in East Java. GOI through itsDirectorate General for Water Resources Development of MPW, is reviewing, withJapanese Government assistance, aspects of this issue in the Brantas Basin butadditional studies are needed.

Bank Role and Rationale for involvement

1.17 The Bank's role and rationale for involvement in this sector ingeneral and this project in particular are to (a) support low-cost technologydevelopment through refinement of the innovative low-cost mass approachpioneered by GOI for water supply to semi-rural communities (IKKs); (b) streng-then the central agencies responsible for sector planning; (c) strengthenprovincial and local government capabilities to plan, implement and subsequentlyoperate and monitor services so that there can be increasing decentralization ofresponsibility; (d) support GOI's programs of physical development; (e) assistin manpower development; (f) improve resource mobilization through increases inlocally-generated funds and introduction of improved financial planning and

management measures in local government and water enterprises; and (g) helpidentify and draw attention to issues requiring resolution e.g. PDAM organiza-tion structure and water resource management. The Asian Development Bank andthe Australian and Netherlands Governments are equally committed to support ofthe sector and there has been good coordination and a useful exchange ofinformation between these and other external agencies and the Bank.

II. THE PROJECT

A. Background and Objectives

Background

2.01 To date, Bank water supply sector assistance focussed in East Java isexpected to benefit about two million of the Province's 30 million innabi-tants. Through earlier Bank-supported projects, water works will have beenfinanced in 14 of the 37 possible Kabupaten and Kotamadya PDAMs. As the nextstage similar BNA and IKK works in 75 towns serving over 800,000 persons havebeen proposed for implementation through this project covering 12 furtherPDAMs. In addition, a badly needed expansion of production facilities in theprovincial capital, Surabaya, deferred from inclusion in -he Fifth UrbanDevelopment Project (Loan 2408-IND), was further investigated and proposed forinclusion in the new project. Preparations for both these subprojects werecarried out by consultants funded through Loans 1709-IND and 2275-IND (para.2.18) and reviewed by several missions during 1984 and 85.

Project Objectives

2.02 In line with the Bank strategy, the objective of the proposed projectis to provide continuing support to GOI's water sector deveLopment and invest-ment program, specifically: (a) to substantially increase Low-cost waterproduction and distribution facilities throughout East Java Province in conform-ity with Repelita IV targets; (b) to provide technical assistance to forthcomingor recently established water enterprises in East Java for sounder operation andsystem expansion through introduction of and training in appropriate management,accounting, operating and maintenance practices; (c) to improve provincialgovernment level capability in: (i) planning and implementation of water supplyinvestment programs; (ii) monitoring and development of PDAM performance;(iii) provision of technical assistance and training to PDAMs; and (iv) waterpollution control; (d) to impLement improved financing policies; and (e) to helpin preparation ce other water supply projects.

B. Project Description

Summar

2.03 The proposed project would address water supply needs and deficienciesin a wide range of urban and semi-rural communities throughout East JavaProvince, with particular emphasis on low income groups, and would comprise:

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Part A: BNA/IKK Towns - provision of new water supplies totalling0.75 cu m/s to at Least 75 medium-to-small sized towns and developmentof 12 water entities in East Java;

Part B: Surabaya - major works including source development, treat-ment plant and transmission/distribution pipelines for a 1 cu m/sexpansion, as well as rehabilitation of the existing water supplysystem; and measures to abate water pollution in the Surabaya river,and reduce cost of water to low-income groups in the provincialcapital, Surabaya;

Part C: Institutional Development - provision of central and variousprovincial training facilities, equipment and tuition; andstrengthening of pollution control mechanisms and establishment of aPDAM development unit in East Java; and

Part DM/: Other Technical Assistance - provision of (i) advisoryservices and staff training in project implementation, management, andoperations for the purposes of Parts A and B of the project; and (ii)future project preparation studies.

Part A - BNA/IKK Towns

2.04 Part A of the proposed project would provide new water supply systemsfor at least 75 medium and small sized towns situated in 11 kabupatens and onekotamadya in East Java. Twelve of the towns are BNA Category 4 with populationsbetween 20,000 and just over 100,000 persons, while the remaining towns areCategory 5 (or IKK) with populations between 3,000 and 20,000 persons. Thebeneficiary cities and towns were selected by Cipta Karya in consultation withDDN, the East Java Provincial government and local governments on the basis ofsocial and economic criteria (see Annex 2). The town locations are shown on Map19110 and their names in Annex 1, Table 3. Although the numbers and locationsof the BNA and IKK towns have been established, allowance has been made to addor substitute a limited number at a later stage provided their replacements meetthe selection criteria and funds are sufficient.

2.05 Each town system would comprise an already proven spring or deepwellsource, transmission and distribution pipework, service connections (includingin-house storage in IKK schemes), public standpipes and office and workshopfacilities. 8NA systems also include standby wells, service reservoirs and fire

1/ For the purposes of project management and costing, the description ofPart D of the project given here differs from the description containedin the Loan Agreement by virtue of the explicit inclusion of projectimplementation assistance.

protection facilities.21 Details of the respective systems are given inAnnex 2.

2.06 Demand. The BNA/IKK town subproject would benefit about 800,000domestic consumers as well as government, commercial and industrial users, manyof whom would have access to piped water for the first time. Only 12 of theproject towns possess existing water supply systems; even those serving a smallpercentage of the project area population. Most households currently obtaintheir water from dugwells. However, these are difficult to find in the hillierareas and often contaminated in the lowland areas. Because of the availabilityof alternative supplies and the difficulty in providing coverage of sparselydeveloped fringe areas, GOI's service level policy provides for the demands of60% of the 1985 project area population in BNA towns and about 70Z of the 1995population in IKK towns. It is further assumed that house or yard connectionswould serve 50Z of the design population of BNA towns and about 70% of the IKKtowns. The remainder would be served by public standpipes. Average consump-tions of 120, 60 and 30 l/c/d are assumed at house, yard and standpipe connec-tions respectively. Although the GOI's design supplXes are unlikely to meet allthe water supply demands in many of the households,3 in most cases alternative,traditional sources are available for laundering, gardening and other non-personal uses. A typical demand analysis is shown in Annex 2.

Part B - Surabaya

2.07 Part B would provide an additional 1 cu m/s of treated water to thecity of Surabaya and assist in the rehabilitation of part of the existing dis-tribution system. Minor improvements to the Brantas Basin irrigation systemwould be funded by the project and are expected to yield about 1.1 cu m/s addi-tional raw water in the Surabaya River through lining of about 92 km of tertiaryand quarternary irrigation channels and reduction of excessive leakage throughcontrol gates on the river. A site of 9 ha has been acquired by PDAM Surabaya,sufficient for a plant of 5 cu m/s total capacity at Karangpilang, located on

2/ The chief difference between BNA and IKK systems lies in the physicaldesign of their source works and distribution systems. Unlike BNAsystems, which follow conventional water supply system design cLiteria inrespect to peak flow and system storage capacity, the IKK systems aredeliberately designed to minimize investment cos.ts by, among otherthings, adoption of average flow capacity standards and reliance on newand traditional facilities for household water storage and liraited publicstandpipe storage. This technique is made possible by means of a flow-limiting device which rations each household to its daily waterallotment. The trickle feed from the flow-limiter is provided constantlyover a full 24 hours and accumulated in a 300 liter capacity tank in thehousehold or a 3.5 cu m tank at standpipes. The flow can be shut off inthe unusual event of an overflow.

3/ Recorded water use patterns in East Java indicate average household..onsumption for all purposes to be 88 l/c/d, with an average householdsize of 7 in urban areas and 10 in semi-rural areas.

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the river about 13 km upstream from its existing 3 cu m/s plant at Ngagel. Ariver intake and first-stage treatment capacity of I cu m/s would be constructedunder the project, comprising conventional sediment removal, clarification andrapid gravity filtration processes. A pumping station and 7.5 km long, 1,000 -diameter transmission main would also be constructed, which would connect to newdistribution mains to be provided on the western side of the city. A studyfinanced under Loan 2275-IND is intended to establish a loss reduction actionprogram which would attempt to reduce unaccounted for water to about 25Z ofproduction by 1991 through rehabilitation of existing mains, service connectionsand meters. Agreement by PDAM Surabaya to carry out the principle rehabilita-tion works commencing April 1, 1988 was obtained at negotiations.

2.08 Demand. Potable water supplies, amounting on average to 174,500 cum/d, are sold by the PDAM through an estimated 93,000 connections of which74,000 are for residential consumers (1983 PDAM data). About 1.1 milLion peoplerepresenting approximately 50Z of the Surabaya population, receive water eitherdirectly ox indirectly from the PDAM. The remaining 50% of the populationobtain their water from dug wells, rivers and canals. Existing sources of rawwater supply are polluted, of insufficient capacity to meet present demand andthe distribution network does not extend to all parts of the city, moreover,unaccounted-for-water losses have increased in recent years to about 37% ofproduction. The PDAM is currently implementing a program of reinforcement andextension of the distribution system, supported in part by the Second WaterSupply Project (Loan 1709-IND). However, demand is expected still to exceed theavailable supply on completion of the proposed project, mainly due to raw waterapply constraints. Development of additionaL raw water sources to provide atleast further 4 cu m/s is estimated as necessary to meet 1995 require-ments.& The proposed project is expected to p 2 vide similar levels of serviceas provided to curreut PDAM Surabaya customers - and is roughly expected toserve some &00,000 people through an additional 35,000 residential, standpipeand industrial connections as well as improve levels of service in areas of thecity with intermittent supplies. Detailed demand estimates are given inAnnex 3.

2.09 Desp.te considerable effort by PDAM Surabaya supported in part by theBank, to promcte supply of safe water to the poor, a large percentage of poorfamilies in Surabaya continue to rely on non-piped water for their drinking andbathing needs. The major constraints include: (a) the actual price of pipedwater; (b) the inadequacy of the distribution networks particularly the smallnumber or standpipes which results in the emergence of a vendor system which in

41 Surabaya's population is expected to be about 3.4 million in 1995. GOIis currently studying possible raw water sources with Japanese Governmentand ADB assistance. Pollution controls intended to protect existingsources would be strengthened under the project (para. 2.13).

5/ PDAM data indicate that average daily demant at residential, commercialand industrial connections during mid-1983 was 1.16, 1.83 and 6.24 cu mrespectively. The residential consumption is equivalent to about 200l/c/d.

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turn substantially increases the net price of water; and (c) high cost ofacquiring a house connection at about four times the actual cost ofconnection. In Surabaya the poor pay in some cases more than ten times thenormal rate to the water vendors, although of course they buy small quantitiesat about 20-40 llc/d.

2.10 In view of scarcity of water in the city and the large investmentahead of the PDAM, it has not been possible to fully implement GOI policy forlow-income group water supply in Surabaya at this time. It is expected thatthis problem will be resolved in the long term by introduction of substantialnew water supplies as planned under the proposed future project (para. 2.16) andby improving the distribution system. Nevertheless the following measuresintended to improve the water supply for the poorest have been agreed, and wereconfirmed during negotiations as part of the project:

(a) reducsion in the char e to standpipe, concessionaires from Rp 110-180/m to Rp 80-120/m under the PDAMs new tariff structure;

(b) controll-ng charges levied by the concessionaires to not more thanRp 300/mr (effective April 1, 1985);

(c) increasing the number of standpipe outlets under the KIP program 6/which provides about 170 new outlets per year, and 150 standpipesunder PDAM's own distribution program; and

(d) avoiding an increase in the existing level of connection fees for low-income properties and allowing low income co sumers to pay theconnection fee by six monthly installments.-

Part C - Institutional Development

2.11 Training. The training component of the proposed project would havethree objectives. First, in continuing to develop the training objectives ofthe first project, including the establishment of a permanent, regional trainingfacility, it would create training self-sufficiency in the East Java water

6/ The Kampung Improvement Program in Surabaya, supported since 1976 throughLoans 1336-IND, 1653-IND and 2408-IND, provides basic infrastructureimprovements in over 2,000 ha of high-density, low income areas andincludes about 1,300 standpipes funded partly by grants from GOI. If thenumber of standpipes continue to rise at the present rate, in 1990 some5,400 outlets would be able to supply about 38Z of the city's population(at 200 persons per outlet).

7/ Connection fees for Low income properties can be as low as aboutRp 120,000 while the average cost of making a connection, including a 25%allowance for profit, is about Rp 100,000. Credit terms will be extendedas soon as the water from the proposed project becomes available.

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sector. Second, it would develop the capacity of DAB's training facility atPejompongan, Jakarta, including its staff capability, to assume fully the roleof the National Training Development Center. Finally, it would assist thedevelopment of additional sector training capacity elsewhere in Indonesia, byfinancing the construction of a Provincial Training Unit at Semarang, and theupgrading of existing training facilities at Medan, Ujung Pandang, and Bandung,to full provincial level standards. A total of about 900 persons related to theproposed project would require training during the project duration. About 50formal and in-service training courses would be provided each year to senior-and middle-level managers, administrative staff and technical operators of theproject PDAM's, as well as CK, Provincial staff and contractors. Details ofCK's training strategy, project training objectives, and target audiences aregiven in Annex 4.

2.12 Monitoring and Development of Water Entities. GOI has agreed toassign development function for monitoring and providing assistance to East Javawater entities to East Java PCK whose functions would be to: (i) providetechnical and financial guidance and related implementation support to waterentities; (ii) supervise the operational, financial and management performanceof water entities; and (iii) assist in preparation of investment plans andtariff adjustments. A building will be provided (at the Wiyung complex)together with equipment and technical assistance and the government has agreedto provide adequate staff and operating budget for the unit. Agreement wasreached at negotiations on the staffing and implementation arrangements.Details of the unit are given in Annex 5.

2.13 Water Pollution Control in East Java. The GOI has agreed to carry outmeasures intended to abate pollution in the Surabaya River (para. 5.11)including short-term actions to reduce industrial and residential waste dis-charges and longer-term institutional development of the East Java Governor'sOffice in carrying out its water pollution control responsibilities. On thebasis of recommendations made in a study carried out under Loan 2275-IND,consultants will assist in the design and implementation of organizationalimproveents, monitoring and supervisorv systems, and technical advisoryservices. Further details of the pollution control action program are given inAnnex 6.

Part D - Other Technical Assistance

2.14 The project would include technical assistance to: (a) facilitateimplementation; and (b) prepare future water supply projects in East Java andelsewhere. Details of the required assistance are given in Annex 7 andsummarized below. Terms of reference and short lists for the various assign-ments, many of which are similar to assignments funded under Loan 2275-IND, werediscussed at negotiations.

2.15 Project implementation assistance for Parts A and B of the Projecttotalling 18 and 144 man-months of foreign and local consultants respectivelywould incLude:

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(a) engineering and management advisory services to the PMUs and PIUs; and

(b) PDAM institutional development including setting up of management,accounting and personnel services.

2.16 Preparation of (a) a proposed Third East Java Water Supply projectintended to complete coverage of all remaining communities deficient in watersupply in East Java; (b) a second Surabaya water supply expansion projectintended to increase treatment and distribution facilities from Karangpilang by2 cu m/s and (c) water supply organization structure recommendations for theprovinces of Irian Jaya, North and South Sulawesi (totalling 165 and 750 man-months of foreign and local consultants respectively).

Status of Project Preparation

2.17 Feasibility studies, detailed designs and procurement documenp havebeen completed for Parts A, B and C of the project by CK's consultants._Studies and final designs for a total of 25 BNA subprojects were prepared underthe Second Water Supply Project (Loan 1709-IND). However, prior to thenegotiation of the first East Java Water Supply Project Lcan 2275-IND, it wasdecided that 12 of these towns had lesser priority for development and implemen-tation was held over until the proposed Project. Further preparation to updatecost estimates to current levels and some design revision for these towns wastherefore carried out (under Loan 2275-IND) together with preparation of thesubprojects for the 64 IKK towns. Land for Part A consists of numerous smallplots which would be acquired during the project, as in the first East Javaproject. Land acquisition for Part B has been completed. All proposed sourcewells have been drilled, tested and lined.

8/ Consultants for the project are as follows:

Part A - feasibility studies and detailed engineering BNA/IKK towns:Principal Consultants Sir M. MacDonald and Partners (United Kingdom) inassociation with Deserco Development Services (Indonesia) and SGVConsultants (Philippines) and Local Counterpart Consultants CiriajasaConsulting Engineers (Indonesia);

Part B - feasibility study and detailed engineering Karangpilang watertreatment plant: Sir M. MacDonald and Partners and P.T. Encona(Indonesia);

Part C - institutional development program: W.D. Scott (Australia)(funded by the Australian Development Assistance Bureau) in associationwith Deserco, PT Relevant Development and Unisystems (Indonesia); andDHV/IWACO (Netherlands) in association with Deserco.

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C. Project Costs

2.18 The total project cost is estimated to be 88.5 billion Rupiah(US$80.4 million equivalent) of which the foreign exchange element (both directand indirect) is estimated at 52% or about 46 billion Rupiah. Taxes and dutiesare estimated at about 7.3 billion Rupiah. Suimmary cost estimates are given inTable 2.1 below and detailed cost estimates are given in Annex 8.

2.19 Project costs were estimated by CK and their consultants and Bankstaff on the basis of detailed engineering designs or, in the case of Part B,advanced preliminary engineering, and include land acquisition, construction,materials, equipment, vehicles, and physical and price contingencies. All basecost estimates are expressed in June 1985 prices. Physical contingencies of 10Zof base costs have been allowed in all cases except Part D Technical Assistance,where an allowance of 5Z has been made. Price coutingencies for local currencycosts are based on expected increases in construction costs of 8.0% in 1985 to1990 and 5Z per annum thereafter. The corresponding rates for foreign costs are5% in 1985, 7.5% in 1986, 8% in 1987-90 and 5X per annum thereafter. Theoverall price contingency amounts to about 20% of base costs. Technicalassistance costs included in Parts C and D total US$11.9 million equivalent.

D. Project Financing Arrangements

2.20 The proposed Bank loan would finance about 60% of total project costnet of taxes, duties and reserve procurement. The loan would be made to theGoverrment of Indonesia for a period of 20 years incLuding five years of graceat the standard variable interest rate. The loan would be passed to thebeneficiary PDAM's as a grant, excepting Surabaya PDAM in which case the loanproceeds would be onlent at 12% interest for a period of 20 years including5 years' grace.

Table 2.2: SOURCES OF PROJECT FUNDS(Billion Rupiah)

Z of Total Bank PDAMComponent project cost cost loan GOI Surabaya

Part A - BNA/IKK towns 44.3 39.21 23.15 16.06 -Part B - Surabaya 29.2 25.78 14.07 6.56 5.16Part C - Institutional Dev. 11.8 10.45 3.84 6.61 -Part D - Technical Assistance 10.8 9.54 6.54 3.00 -

Project Administration 3.9 3.47 - 3.47 -

Total /a 100.0 88.45 47.60 35.70 lb 5.16

Total US$ million equivalent 80.4 43.3 32.4 4.7Z of Total 100 54 40 6

/a Columnar totals may not add up due to rounding.7i GOI expects to obtain co-financing totalling about US$2.5 million

equivalent for Parts C and D.

Table 2.1s SUMMARY OF PROJECT COSTS /a

-------- Rp million --------- X ---- US$ million ---- X ofComponent Local Foreign Total Foreign Local Foreign Total base cost

Part A - BNA/IKK towns 13,567 13,829 27,396 50.5 12.33 12.57 24.91 40.7

Part B - Surabaya 8,389 8,610 16,999 50.6 7.63 7.83 15.45 25.2

Part C - Inst. Development 2,546 4,91i 7,463 65.9 2.31 4.47 6.78 11.1

Part D - Techn, Assistance 2,685 4,336 7,021 61.8 2.44 3.94 6.38 10.4

Project administration 1,639 703 2,342 30.0 1.49 0.64 2.13 3.5

Base Cost 28,826 32,395 61,221 52.9 26,21 29.45 55.66 90.9 H

(without tax)

Value added tax (10%) 2,883 3,239 6,122 - 2.62 2.94 5.57 9.1

Base Cost 31,709 35,634 67,343 52.9 28.83 32.39 61.22 100.0(June 1985)

Physical contingency 3,485 3,798 7,283 52.2 3.17 3.45 6.62 10.8Price contingency 7,547 6,282 13,828 45.4 6.86 5.71 12.57 20.5

Total Project Cost 42,740 45,714 88,455 51.7 38.85 41.56 80.41 131.3

Front-end fee /b - - - - - - -

Total FinancingRequired 42,740 459714 88,455 - 38.85 41.56 80.41 -

/a Columnar totals may not add up due to rounding.7F Front-end fee is 0%.

For detailed cost estimates see Annex 8.

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2.21 GOI would be responsible for about 40% of the project costs and PDAMSurabaya for about 6%, the latter being provided from internal cash genera-tion. The sources of project finance are summarized in Table 2.2 above. GOIexpects to obtain bilateral aid or cofinancing sources for services valued atabout US$2.5 million in total, required under Parts C and D of the project.Confirmation of the amounts and sources was provided at negotiations.

2.22 The project financing plan has been developed in accordance with GOIpolicy for financing of water supply system investments (para. 1.08).

III. IMPLEMENTATION ARRANGEMENTS

A. Executing Agencies

The Borrower

3.01 The Government of Indonesia would be the borrower and would pass theproceeds, together with the local currency requirements, to the executingagency, CK, which, in cooperation with the East Java Provincial Government, twokotamadyas (including Surabaya) and eleven kabupatens, would implement theproject. On completion of the project the assets would be transferred to thePDAMs and management and operations would be entrusted to them.

Cipta Karya and Directorate of Water Supply

3.02 Cipta Karya with a staff of about 5,000, is composed of six Directc-rates with responsibility for programming, public housing, urban and regionalplanning, sanitation and water supply and building research. The water supplydirectorate, DAB, is itself composed of five sub-directorates. These are theSub-directorates of Planning, Implementation West, Implementation East, Storesand Equipment, and Organizational Development. DAB employs about 1,600 staff.About 500 of DA3 _ staff are employed at the headquarters in Jakarta. Of theseabout 300 are directly engaged on central planning, development and constructionactivities. About 30% of the staff at the headquarters hold engineering ortechnical degrees and another 25% are educated in finance or administration.DAB is making increasing use of its province based offices, and cooperates withprovincial, kotamadya and kabupaten governments in the impLementation ofprojects.

3.03 DAB's Planning Sub Directorate is currently the focal point for theplanning of BNA and IKK projects. Its 150 engineers and technicians, with theassistance of consultants, prepare projects, train regional staff in projectdesign, review designs, and monitor projects and programs. Some of DAB's plann-ing functions will be transferred shortly to the Directorate of Programming.DAB also has regional project offices in all the 27 provinces; these officesnormally execute projects outside Jakarta. For large projects and those whichreceive foreign assistance DAB appoints specific project managers who work underthe general supervision of the Director of DAB. The organizations of CiptaKarya and DAB are shown in Figures B and C.

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3.04 Cipta Karya and DAB receive considerable technical assistance: inaddition advisors provided under on-going Bank-funded projects, the AustralianGovernment has provided six engineering advisors and co-financing arrangementsbetween the Bank and the Australian Government have been drawn up to coverinstitutional and other studies. The sector is also supported by funds andspecialist inputs provided by, amongst others, ADB, WHO, UNDP, and severalbilateral funding agencies.

The Provincial and Kabupaten Covernments

3.05 East Java province is managed by the Governor who, while reporting tothe Ministry of Home Affairs, is also the representative of all centralministries active in the Province. In 1982 it was decided that the ProvincialPublic Works Department of East Java would be split into three departments,Cipta Karya (for urban development), Bina Marga (roads) and Pengairan (irriga-tion), each reporting to the Governor. The new Provincial Cipta Karya (PCK),91which will take over the urban development staff of the former Provincial PublicWorks Department, would share responsibility for project implementation withCentral Cipta Karya. To this end, in addition to its own staff, it would alsouse qualified persons from the public works departments of the second levelgovernments.

Water Entities

3.06 Project facilities would eventually be owned and operated by PDAMsunder the direction and ownership of the kabupaten or kotamadya governments inwhich they are located. Law No. 5 o' 1962, Law No. 5 of 1974, the Ministry ofHome Affairs Decree 26 of 1975 and the joint Ministry of Home Affairs andMinistry of Public Works Decrees 3, 4 and 5 of 23rd January 1984 provide thelegal framework for PDAMs. The regulation of each PDAM is approved by therespective People's Council of the kotamadya or kabupaten and it is ratified bythe Governor. Whereas typically PDAMs were organized to serve a single urbanarea, in order to effectively and efficiently use management systems andmanpower, PDAMs have been organized during last few years to operate all watersystems within a kabupaten or a kotamadya. PDAMs in Part A (BNA/IKK Towns) ofthe proposed project will be structured in this way.

3.07 Five PDAMs covered by the project are already formed (KotamadyasSurabaya and Pasuruan and Kabupatens Pasuruan, Ngawi and Probolinggo) andoperate existing water supply systems. Four of the eight other kabupatenscontaining project towns also have towns with existing water enterprises(Pacitan, Ponorogo, Nganjuk and Bondowoso) but PDAMs have not yet been estab-lished. In Kabupatens Pacitan, Ponorogo, and Nganjuk the existing systems areBPAM (para. 1.06). The existing system in Bondowoso is operated by the

9/ Although PCK shares the same name as CK they are in fact unrelatedorganizations; the former being responsible ultimately to DDN. However,central CK staff are often seconded to or work closely with PCK, and inEast Java the head of MPW KANWIL and of Provincial Public Works is thesame person.

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kabupaten Public Works Department. Agreement has already been reached betweenCK and the respective heads of the Level II local governments concerned and wasconfirmed at negotiations that: (a) PDAMs in all remaining eight kabupatenswill be formed as the project systems come into operation and the water entitiesbecome financially viable, in any case not later than December 31, 1992;(b) each PDAM will incorporate both new and existing water supply systems. Allwater entities will be organized or reorganized to operate the proposed watersupply systems. The structure of PDAM Surabaya is shown in Figure D. Thetypical structure of existinglad proposed kabupaten PDAMs included in theproject is shown in Figure E.

3.08 PDAM management reports to a board of directors. The board chairmanis typically the head (Walikota or Bupati) of the kotamadya or kabupaten. Themembers of the Board of Directors are appointed by the Walikota or Bupati for afour year term. There are generally four to five members and they usuallyinclude the heads of the Health Services Section, Public Works Section, andFinance Section, of the local government and a branch of any government bank.The board appoints the Managing Director who, with the assistance of threedeputy managers (Finance, Technical and Operations), is responsible for imple-menting policy an' conducting day to day business. Kabupaten PDAMs have a headoffice usually in the principal city and local operating units in the othercities and towns of the kabupatens. Tariff adjustments are approved by eachPDAM board and ratified by the Walikota and Bupati and Governor. There arenational guidelines for the tariff structure which are generally followed byPDAMs (para. 4.05).

B. Project Organization and Management

3.09 Responsibility for the management and supervision of construction ofwater supply projects in East Java rests with CK, which intends to use similarimplementation arrangements as in use successfully in the first East Java WaterSupply Project. PUOD would assist on policy matters and in dealings with localgovernments. Figure F shows the organization structure for implementation ofthe project.

3.10 The present Project Management Unit (PMU East Java) for the first EastJava project would continue in its present role and would be responsible forParts A and B of the project, as well as coordinate reporting by the severalproposed Project Implementation Units (PIUs) including those to be set up forthe components to be implemented outside East Java. The present PIU for thefirst East Java project would also continue its role as well as take respons-ibility for Part A of the proposed project. Since their establishment for thefirst project, the two units have gained a great amount of experience in themanagement, coordination and supervision of a diverse, major project which is

10/ Detailed descriptions of the enterprises included in the project aregiven in the feasibility studies and socio-economic, institutional andfinancial reports in the Project File (Annex 17).

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proceeding quite satisfactorily to date. Both units would be strengthened tocope with the net additionaL workload caused by the proposed project throughtransfers of CK and PCK staff, as well as consultant advisers. New PIUs wouldbe formed for the purposes of Part B and the training component of Part C of theproject. Another Project Management Unit (PMU Jakarta) would be established andwould be responsible for Parts C and D of the project. The project organizationarrangements are illustrated in Figure E. The project implementationarrangements, staffing and responsibilities of the various units are shown inAnnex 10 and were confirmed at negotiations.

3.11 The PMUs would manage and coordinate all subproject planning andimplementation activities under the general supervision of CK. In addition, thePMUs would be responsible for liaison with CK, PCK, local governments and PDAMsand the Bank, project progress reporting and monitoring, and consumer educa-tion. The PIUs would be responsible for procuring goods and civil works byLCB. CK would be responsible for recruitment of consultants and ICB procure-ment, excepting in the case of Part B which would be handled by the PIU.Construction supervision progress certification and disbursement applicationwould be the responsibility of the respective PIUs, which would also maintainthe necessary documentation in support of SOE applications (para. 3.18).

3.12 PDAM Surabaya would be delegated to be the PIU for Part B under theoverall supervision of CK under similar arrangements as for Loan 1709-IND. TheManaging Director of PDAM Surabaya will be the subproject director, responsiblefor implementing all aspects of the subproject. A new project office would beestablished within PDAM with a suitably qualified engineer as Project Supervisorsupported by other technical staff. The Project Supervisor will be supported byqualified and experienced engineering staff including a Deputy to be secondedfrom CK, to enable him to evaluate and approve engineering designs and procure-ment documents, to supervise construction and to coordinate other principalactivities associated with implementation of the project. Consultants appointedfor preparation of final designs and contract documents are expected to completetheir assignment about mid-1985, and a further consultancy assignment isprovided for during the construction phase, for technical evaluations.construction supervision and management assistance. Agreement was reached atnegotiations that all required consultants and key staff would be appointed inaccordance with the Implementation Schedule agreed with the Bank.

3.13 In line with GOI policy, locally procured works will be carried out by'economically-weak' contractors, i.e., those rated as Class C contractors in theProvince's annually-updated prequalified contractors list. In view of therelative inexperience of such contractors, the PIUs will be provided withexperienced full-time supervisory staff and transport facilities to ensure anacceptable standard of construction.

Implementa 'on Schedule

3.14 The project would be implemented over a six-year period, October 1985to December 1991, as illustrated in Figure C.

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C. Procurement

3.15 Procurement for the proposed project will follow closely the proce-dures established for the first East Java project (Loan 2275-IND). Civil workscontracts costing about US$6.6 million and sixteen equipment and materialscontracts totalling about US$18 million, together representing 44Z of theproposed construction costs, would be procured on the basis of ICB in accordancewith Bank Guidelines. The balance of the civil works and equipment supply,totalling about US$36.5 million, comprising about 180 contracts of estimatedsize ranging from US$80,000 to US$1.8 million equivalent, that are unlikely tobe of interest to foreign bidders, would be procured following local competitivebidding procedures (LCB) which were reviewed by the mission and found satis-factory to the Bank. Vehicles, including motorcycles, valued at aboutUS$1.1 million equivalent would be subject to reserve procurement because GOIrestricts their importation. Equipment, materials and minor works (particularlyfor rehabilitation of existing water supply systems) required in small lots oron an urgent need, valued individually at less than US$300,000 equivalent andtotalling less than US$4 million equivalent would be procured through prudentshopping procedures. Local manufacturers would be granted a preference of 15Zof the CIF price of imported goods or the prevailing customs duty, whichever isthe lower in the evaluation of bids. Bidding documents for equipment and civilworks contracts exceeding US$500,000 and US$1 million respectively totallingabout US$42 million would be subject to review by the Bank prior to bids beingsought.

3.16 In order to meet the proposed construction timetable, advancedcontracting has been initiated by CK for: (a) goods and materials for Part A ofthe project valued at about US$16 million; and (b) civil works for the primaryand main process plants for Part B, valued at about US$19 million. Experiencein other projects in Indonesia shows such procurement typically takes 12-18months from advertising to award of contract. Procurement in these cases is.ollowing Bank guidelines and the appropriate reviews by Bank staff are beingcarried out. Awards of the contracts concerned are not expected until followingloan effectiveness and will be reviewed by Bank staff in due course. Agreementwas reached at negotiations that (a) procurement of the vehicles required forthe project and subject to reserve procurement would be carried out and com-pleted under a schedule agreed with the Bank and completed by December 31, 1989and (b) remaining land acquisition will be completed six months before start ofconstruction for respective component in accordance with the ImplementationSchedule agreed with the Bank.

3.17 Details of the proposed ICB and LCB contracts and procurement reviewarrangements are contained in Annex 9. A summary of the procurement arrange-ments for the project are summarized in the following Table 3.1.

D. Disbursement

3.18 The proceeds of the loan would be disbursed against: (a) 45% of netexpenditures for civil works for Parts A and C of the project; and 65% for PartB of the project; (b) 1OOZ of the foreign 'CIF) cost of directly importedequipment; 95% of ex-factory costs if locally manufactured equipment; and 65Zfor other locally procured equipment; and (c) 100% of expenditures for technicalassistance not financed from other sources. All disbursements would be madefollowing standard Bank documentation requirements, excepting minor procurementunder all categories valued at less than US$100,000 equivalent per contract forwhich Statements of Experditure (SOE) procedures would be used.

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Table 3.1: ESTIMATED VALUE OF PROJECT PROCUREMENT ANDDISBURSEMENT BY EXPENDITURE CATEGORY AND PROCUREMENT PROCEDURE

(US$ million)

LCB Not TotalExpenditure Open Prudent applic- expenditure &category ICB bidding shopping Other able disbursement

Civil works 6.6 32.7 0.2 39.5(L.0) (13.5) (0.1) (17.6)

Equipment 18.0 3.8 0.2 1.1 23.1(15.2) (3.3) (0.2) (0.0) (18.7)

Land 1.1 1.1(0.0) (0.0)

Tech. assistance 11.8 11.8(7.0) (7.0)

Project admin. andoperations 4.8 4.8

(0.0) (0.0)

Total 24.6 36.5 0.4 12.9 5.9 80.4(19.2) (16.8) (0.3) T7.0) (0.0) (43.3)

Note: Amounts shown include base costs (June 1985) and physical and pricecontingencies. Amounts shown in parentheses are estimated disbursementsfrom loan proceeds. 'Other' procurement procedures would apply to: ti)reserve procurement of vehicles; and (ii) recruitment of consultants inaccordance with Bank Guidelines.

3.19 GOI budgeting and capitrl funding arrangements would be used for pre-financing of expenditures eligible for reimbursement from loan proceeds. GOIagreed at negotiations: (a) to delegate payment authority for expenditures fromthe pre-financing funds to the PMU (East Java); and (b) not to apply to the Bankfor disbursements less than $100,000 in aggregate at any one time.

3.20 The estimated disbursement schedule is shown in Annex 9 along with thecountry profile. It is expected that loan disbursements will be completed byMarch 31, 1992, about six months after completion of civil works. The disburse-ment period of nearly seven years is slightly less than the current countryperformance of within eight years, due to the good disbursements performance todate in the similar Loan 2275-IND], the proposed use during implementation ofexperienced staff from that project (para. 3.10) and the advanced state ofproject preparations and procurement (paras 2.18 and 3.16). Disbursementprogress would be monitored by the PMU for all subprojects.

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E. Accounts and Audits

3.21 Project accounts will be maintained by each PMU and PIU starting withaccounts for COI's fiscal year ending March 31, 1986. These accounts will beaudited by independent auditors satisfactory to the Bank and the audit state-ments made available to the Bank within seven months of the close of each fiscalyear. Accrual accounting systems are to be in place for each of the waterentities with the assistance of the proposed consultants, well before the timethe project facilities come into operation. After the accounting systems are inplace, these would be audited annually starting with accounts for the yearending December 31, 1990, by independent auditors satisfactory to the Bank andaudit reports made available to the provincial monitoring unit in PCK who wouldsend a summary including the actions taken to carry out any recommendations bythe auditors, to the Bank not later than August 31 each year. For PDAMSurabaya, satisfactory audit arrangements are already in place and would becontinued (para. 4.17). COI has indicated that PDAM Surabaya audit reportswould also be provided to PCK for follow up.

F. Operations and Maintenance

3.22 Operation and administration of the 75 BNA/IKK water supply sub-projects would eventually come under the control of 12 separate PDAM organiza-tions. Eleven of these will be kabupaten-wide PDAMs which would incorporate theBHA and IKK project towns, as well as other towns with existing water supplysystems (within each kabupaten). The twelfth PDAM would operate the KotamadyaPasuruan water supply system. Water for each BNA and IKK system will bechlorinated but other treatment is unlikely to be necessary because all watersources confirmed to date meet the WHO Drinking Water Standards. PLN mainspower supplies would be utilized for all the BNA towns and for all IKK townswhere mains power is available. On-site generators would be utilized wheremains power is not available. In all cases a standby generator would beprovided for IKR towns. Generators and pumps would be maintained throughservice contracts with respective suppliers.

3.23 New offices and a central workshop for each PDAM would also beprovided during the project. The Head Office and Workshop would be fullyequipped to operate the water supply systems it controls and would hold spareequipment in store. Training of PDAM operators would be provided both by thePIU and its consultants on specific aspects of the new systems, and by means ofgeneral training courses to be provided under Part C of the project.

3.24 A responsibility of the P1MU would be to assist PDAM Surabaya to engagesufficient staff and to provide the necessary training to enable them to takeover operation of the treatment works at the end of the recommended transitionperiod following commissioning. It is expected that a proportion of the staffengaged by the PDAM project office for day-to-day supervision of constructionwould be retained to form the nucleus of the operating group for the new treat-ment works under the PDAM Director of Production. These arrangements aresatisfactory.

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C. Monitoring and Evaluation

3.25 Monitoring the progress of the project toward its physical, financialand institution-building objectives would be through reports prepared by the PMU(East Java) for project management purposes. The reports will include relevantdata on progress in the format agreed during negotiations. Performanceindicators (Annex 14) would serve as a basis for evaluating progress toward theproject objectives and will be reported by CK routinely to the Bank. Technicalassistance would be provided to assist the PMU (East Java) and the beneficiarywater entities to establish the project monitoring system effectively. Uponcompletion of the project, CK would prepare a completion report within sixmonths of the closing date of the loan.

IV. FINANCIAL ASPECTS

A. BNAIIKK TOWS

Past Finances

4.01 Since existing PDAMs and BPAMs to be covered under the project are inan early stage of formation, available financial information is limited and isnot fully reliable. Audited financial statements are only available for PDAMNgawi (as of March 1981 and 1982), BPAM Nganjuk (first Balance Sheet March1981), and BPAM Tretes, now a unit of PDAM Kabupaten Pasuruan (as of March ;981and 1982). In most other existing PDAMs/BPAMs, however, the first Income andCash Flow Statements are under preparation. The available information issummarized in Table 4.1.

4.02 All the enterprises except Kotamadya Pasuruan, Kabupaten Ponorogo andTretes (a unit of PDAM kabupaten Pasuruan) incurred losses in 1983 even beforedepreciation (ranging from Rp 0.5 million at Pacitan to Rp 13.5 million atNganjuk). After deducting depreciation on historic costs, all water enterprisesexcept PDAM Kotamadya Pasuruan incurred losses. The losses are attributable tolow tariff rates, few service connections and the absence of commercial andindustrial customers capable of paying higher tariffs. The advantage of ahigher number of connections and the presence of industrial and commercialconsumers is exemplified by the better financial performance of KotamadyaPasuruan which has the highest number of connections (2,880) of the 8 existingwater enterprises and a significant number of commercial and industrialconnections which use onLy about 14% of the water sold but contribute about 39%to the revenues.

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Table 4.1: PERFORMANCE OF PROJECT WATER ENTERPRISES(Million Rupiah)

Income (Loss) NetOperating before depre- Depreci- income

Enterprise period Revenues Expenses ciation ation (loss)

Bondowoso 1983 1.31 2.88 (1.57) NA (1.57)Nganjuk 1983 27.26 40.79 (13.53) 12.18 (25.71)Ngawi 1983 45.49 58.81 (13.32) 16.40 (29.72)Pacitan Apr 83/Dec 84 9.51 10.04 (0.53) 11.82 (12.35)Pasuruan Apr/Dec 83 45.42 53.88 (7.46) NA (7.46)Pasuruan (Kot) Apr/Dec 83 78.22 50.36 27.86 15.95 11.91Pasuruan(Tretes) Apr 83/Dec 84 59.06 44.40 14.66 20.36 (5.70)Ponorogo Apr/Dec 83 6.97 6.43 0.54 3.06 (2.52)Proboliaggo 1983 6.00 8.48 (2.48) NA (2.48)

4.03 Whilst past results are of interest, they have little bearing on theoverall financial projections because the future systems will be eithertotally new or will be much greater in size Cabout two to 15 times greater interms of service connections) than the present systems. However, the follow-ing characteristics are shared by most of the existing enterprises:

(a) accounting is on a modified accrual basis. While revenues arerecognized at the time of sales and the majority of expenses arerecognized at the time they are incurred, depreciation expenses arenot always computed or recorded in the books;

(b) the records of fixed assets are very limited. This is particularlythe case for PDAMslBPAMs where the first Balance Sheets are not yetestablished by the Auditors;

(c) billing and collection systems need strengthening. Customers settletheir bills at the office of the PDAM/BPAM. Little effort is putinto following up unpaid bills;

(d) operations are subsidized by government in all the enterprisesexcept kotamadya Pasuruan and Ponorogo where some cash surpluses areproduced;

(e) labour productivity is very low, up to 39 employees serve 1,000connections;

(f) house connection charges are high and payment terms stringent.Connection charges range from Rp 65,000 to over Rp 100,000.Installments when allowed, are only for 6 months; and

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(g) although average 5ariffs are low in absolute terms (Rp 80, i.e.,US$0.07, per cu m ) they are not cheap considering the low level ofservice provided. Service is not continuous and is only availableto a small segment of the population (between 1.3% in Bondowoso and16Z in Egawi).

4.04 Technical assistance over a 3 year period will be provided to eachof the water entities under the proposed project to establish PDAMs, developor improve their organizational capabilities and strengthaen their financialperformance (para. 2.15). The proposed monitoring arrangement by PCK isexpected to help in improving the situation (para. 2.12 and Annex 5).

Tariff Structure

4.05 The existing water enterprises are currently using several differenttariff structures although all set their minimum tariff at Rp 50 per cubicmeter. However, the enterprises are planning to revise their structures inthe next tariff increases so that they are substantially in line with theNational Water Rate Structure (NWRS) (promulgated by the joint decree of theMinister of Home Affairs and the Minister of Public Works on 23rd January1984) which is acceptable to the Bank. The NWRS is presented in Table 4.2.This tariff structure was adopted in the setting of the recommended tariffsfor each of the 12 PDAMs. The base factor "A" refers to the selling price ofwater per cubic meter for residential consumers using 0-10 mi3 month. Forresidential IKK a tariff factor l.OA was used at all levels of consumption.Tariff level is set by each water entity based on financiaL needs.

Tariff Levels, Affordability and Willingness to Pay

4.06 According to GOI policy, basic needs systems (defined as those whichprovide up to 60 l/c/d on average) would be financed by central governmentgrants. Accordingly the proposed BNA and IRK schemes will be financed by cen-tral government grants. Furthermore, water tariffs should be set at levelssufficient to cover operations and maintenance costs (OEM) and depreciationwhile maintaining affordability i.e. water charges to be less than 4% ofmonthly income. Once the PDAMs are fully operational with their full numberof connections this will ensure that each PDAM is financially viable and thatthe depreciation allowance will generate cash for working capital or minorexpansions.

4.07 The consultants have updated socio-economic surveys to ascertain thecurrent levels and distribution of household incomes in the project towns andthe amount consumers might be prepared to pay for water. Using these data,and the projected O&M costs and depreciation for each PDAH, tariff affordabil-ity was assessed. The tariff calculation indicates that 10 out of the 12PDAMs are likely to be able to set a tariff to cover full O&M and depreciationexpenses at an expenditure of up to 4Z of household income.

4.08 The affordability analysis indicates that the required water chargefor the PDAM Hadium and Pacitan rises significantly over the affordabilitytarget and the computed monthly water charge is considerably higher than theamount householders would be prepared to pay. In these cases it was therefore

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unrealistic to maintain the full tariff and the effect of utiLizing a tariffto cover O&M costs plus a part of depreciation was investigated. Thisanalysis showed that Madiun and Pacitan will be able to cover OWM plus 45Z and90Z depreciation respectively.

Table 4.2: NATIONAL WATER RATE STRUCTURE

Monthly consumption range

Classification Type of consumers O-1Om3 11-20m3 21-30m 3 Over 30m3

IA Public hydrants, Public bath-house, Public Toilets 0.8A 0.8A 0.8A 0.8A

B Social-Government clinic &hospitals, places of worship 0.8A 1.OA 1.5A 2.OA

IIA Residential l.OA 1.5A 2.0A 3.OAB Government l.OA 1.5A 2.OA 3.0A

lIIA Comercial - Small 2.5A 2.5A 5.OA 5.OAB Commercial - Big 4.OA 4.0A 8.OA 8.OA

IVA Industry - Small 3.OA 3.OA 6.OA 6.oAB Industry - Big 5.OA 5.OA lO.OA lO.OAV Special (Ports) 15.0A 15.0A 15.OA 15.OA

4.09 The connection charges (in December 1984 prices) will be(a) Residential, Government, Social - ap 50,000 in BRA and Rp 15,000 in IKKtowns (tp 21,000 with storage tank); (b) Commercial, industrial - Rp 75,000.The charges will be collected in equal monthly installments over five yearperiods without interest. Impact of the charges on affordability analysis isminimal.

Financial Projections and Results

4.10 Existing waterworks systems in the project area are included in thefinancial projections in line with the concept of a kabupaten-wide waterenterprise. The adopted tariff rates used in the projections are shown inTable 4.3. The present tariff rates in existing water enterprises, which arelower than those recommended, are expected to be gradually adjusted to avoid abudden increase of tariff at the start of the consolidated operations; pro-cedures for tariff increases are outlined in Project Files (Annex 15). Pro-jected financial statements for each PDAM consisting of Income Statement,Sources and Application of Funds, Balance Sheet, Financing Plan, andMonitoring Indicators relate to entities many of which are yet to be formedand are based on (a) limited actual data reviewed in paras. 4.01 through 4.03;(b) socio-econooic data collected during project preparation; and (c)estimates of capital costs, revenues and operating expenses for the nextseveral years. The detailed projections for each PDAM are available inProject Files. Projections for a typical PDAM are shown in Annex 11. The

_ . _ _ . - -..-...- ,:

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results are broadly indicative but should be viewed with caution particularlyin relation to revenues derived from semi-rural IKRCs. Assumptions used in thefinancial projections are presented in Annex 12.

Table 4.3: TARIFFS (1985 PI CE LEVELS)(Rp/Ml

1984 Actual 1988 1989 1990 1991PDAMs Min Ave Min Ave Min Ave Min Ave Min Ave

Blitar N N 94 106 117 132 131 148 136 154Bondowoso 80 - 88 98 102 113 117 130 123 137Kediri N N 72 91 83 104 93 117 98 123Madiun N N 91 93 105 107 121 123 130 133Nganjuk 50 86 112 147 116 152 119 156 125 164Ngawi 50 79 75 115 92 142 91 140 105 162Pacitan 50 65 85 99 98 114 113 131 125 146Pasuruan (Kab) 50 88 69 135 69 135 67 132 75 147Pasuruan (Kot) 50 106 57 119 58 121 59 124 69 144Ponorogo 50 69 88 119 101 136 75 133 96 130Probolinggo 50 79 111 125 127 144 144 163 167 189Ternggalek N N 90 106 104 123 119 141 140 165

Average 86 113 98 127 104 137 116 150

4.11 The highlights of the assumptions used and the main results of thefinancial projections are presented below.

(a) the total project cost will be funded by Bank loan and by GOI coun-terpart funds. The assets will be given as a grant to the PDAMs,thus the financial projections have been prepared without provisionfor debt service;

(b) presently, volume of water sold is zero in case of four enter-prises. In case of others, the increase is minimum of 40% in caseof Pasuran Kotamedya to 26 fold increase in case of B ndowaso. Forthe 12 PDAMs, the volume increases from 4.8 million m in 1985 to20.4 m3 or by more than four times;

(c) the 1991 average tariff which is a function of costs and 3affordability in each PDAM varies in 1985 prices from Rp 123/m inKediri to Rp 189 in Probalinggo. The proposed tariffs arereasonable and acceptable to GOI;

(d) five of the eight enterprises which are now operating, do not coverany depreciation. Only Parsuruan Kotamadya covers full deprecia-tion. By 1991, ten are expected to cover 100% and the remaining two90% and 45%;

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(e) five of the eight operating enterprises presently do not cover theircash operating and maintenance expenses either. The ratio of theirexpenses to revenue varies from 112Z to 334%. By 1991, the ratio isexpected to improve to about 70% for all twelve; and

(f) operating deficits are expected to be incurred until completion ofthe project construction in 1991. The total deficit over the sixyears is Rp 1,333 million for all 12 entities i.e., average ofRp 1.54 milLion ($1,403 per entity per month). This level ofoperating subsidies is in line with the government policy to assistnewly created water enterprises for a period of between 3 to 5years. Cash shortfalls of the water entities are subsidized by thelocal government concerned, whereas central government subsidizesBPAMs through Cipta Karya. Assurances were obtained during negotia-tion that required operating subsidy will be made available to thewater entities.

4.12 The key indicators of financial performance of each of the projectPDAM are summarized in Table 4.4.

Revenue Covenant

4.13 Present service in the water systems under operation is limited to afew thousand persons, with water rationed most of the day. The existing waterentities are financially weak and their staff are inefficient and untrained.Given the time required to bring about institutional improvement and training,and the relative large size of new works compared to existing facilities,normi.1 financial covenants would not be meaningful before the new works enterinto operation. Furthermore, keeping the affordability analysis in view,assurances were obtained during negotiation that (a) tariff structure will beset for each water entity along the lines of the National Water RateStructure; (b) tariffs will be adjusted every year with objective of reachinga level in 1991 (on completion of the project) which will allow each waterentity to cover at least operations, maintenance and depreciation on revaluedfixed assets; (c) in the case of water entities in Madiun and Paci..an which.-re presently expected to cover operations and maintenance expenses, but onlya part of the depreciation expenses, the affordability analysis will beupdated by GOI by December 31, 1990, in order to determine maximum portion ofdepreciation on revalued assets which can be recovered. Methodology to beused for this analysis is set out in Project Files. Since the water entitieshave no previous debt service, and the Government and the Bank are financing100% of the capital expenditure which is transferred as equity to theentities, this would ensure that with the exception of Madiun and Pacitan,each water entity is financially viable from cashflow perspective, with thedepreciation allowance generating cash for working capital or minor expan-sions. The average and minimum tariffs required to comply with the revenuecovenant are shown in Table 4.3. The minimum tariff (in 1985 prices) requiredin 1991 to meet this requirement would mean an increase from about Rp 50/mi toRp 116 (US$0.11) which implies a gradual increase in real terms spread overthe next six years. The proposed tariffs would be comparable to thoseprevailing elsewhere in Indonesia at this time and are considered reasonableby GOI. Assurances were also obtained during negotiations that (a) the

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Table 4.4: SELECTED FINAANCIAL DATA

PDAM 1985 1988 1989 1990 1991

Blitar Volume sold, mlu a 3 NA 0.14 0.55 1.01 1.46Average tariff, RpIm3 NA 134 179 218 241Total revenues, Rp rlu NA 24 118 255 405Operating expenses, Rp mln NA 72 141 219 286Depreciation, Rp mln NA 31 79 105 119Cash (months of operating expenses) WA 1 1 1 2Z of working ratio /a NA 299 120 86 71Z of depreciation covered NA 0 0 34 100

Bondowoso Volume sold, mLli a 3 0.06 0.16 0.64 1.12 1.6Average tariff, RpIw3 22 124 154 191 215Total revenues, Rp rln 1 28 132 274 431Operating expenses, Rp mln 4 82 154 238 305"',preciation, Rp mln 2 35 85 110 126-.ash (months of operating expenses) 1 1 1 1 2Z of working ratio Ia 334 296 117 87 71% of depreciation covered 0 0 0 32 100

Xediri Volume sold, mln a3 NA 04l9 0.77 1.35 2.23Average tariff, Rp/w3 NA 114 141 172 192Total revenues, Rp =ln NA 29 138 285 509Operating expenses, Rp mln NA 63 131 251 349Depreciation, Rp mlu NA 41 106 141 160Cash (months of operating expenses) NA 1 1 1 2Z of working ratio /a NA 219 95 88 69Z of depreciation covered NA 0 7 24 10n

Nadiun Volume sold, min 3 3 NA 0.16 0.54 0.92 1.31Average tariff, Rp/rm NA 117 145 180 207Total revenues, Rp mlu NA 23 95 196 316Operating expenses, Rp mln NA 81 142 212 266Depreciation, Rp aln NA 29 73 97 110Cash (months of operating expenses) NA 1 I 1 2Z of working ratio /a NA 352 149 108 84Z of depreciation covered NA 0 0 0 45

Ngaujuk Volume sold, mln a3 0.38 0.53 0.97 1.40 1.88Average tariff, Rp/m3 86 195 215 235 261Total revenues, Rp min 33 108 229 368 549Operating expenses, Rp min 46 172 250 323 3Q0Depreciation, Rp mln 18 56 112 143 158Cash (months of operating expenses) I 1 1 1 2Z of working ratio /a 141 159 109 88 71Z of depreciation covered 0 0 0 31 100

Ngawi Volume sold, min a3 0.98 1.05 1.28 1.51 1.74Average tariff, RpIm3 79 145 193 205 254Total revenues, Rp min 77 155 258 329 471Operating expenses, Rp mln 70 199 246 305 353Depreciation, Rp mln 15 43 84 106 118Cash (months of operating expenses) 7 1 2 2 2Z of working ratio /a 90 129 95 93 75Z of depreciation covered 51 0 14 23 100

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Table 4.4: (cont'd)

pAns 1985 1988 1989 1990 1991

Pacitan Volume sold, rlr a 0.15 0.25 0.6 0.94 1.29Average tariff, RpIu3 65 125 155 192 226Total revenues, Rp aln 9 36 111 214 340Operating expenses, Rp amln 11 85 126 181 229Depreciation, Rp aln 13 42 85 109 123Cash (months of operating expenses) 3 1 1 2 2Z of working ratio /a 112 238 114 84 68Z of depreciation covered 0 0 0 31 90

Pasuruan Volume sold, al=n 3 1.5 1.57 1.78 2.04 2.32Average tariff, Rp/ 3 107 170 183 194 230Total revenues, Rp ala 161 269 338 417 565Operating expenses, Rp mln 137 262 309 362 420Depreciation, Rp aln 35 65 107 130 145Cash (months of operating expenses) 2 3 3 4 22 of working ratio /a 85 97 91 87 74% of depreciation covered 68 10 27 42 1t0

Pasuranc Volume sold, ala m3 1.42 1.42 1.42 1.57 2.00Kotamadya Average tariff, Rp/m3 106 150 165 182 226

Total revenues, Up aln 150 219 263 339 528Operating expenses, Rp mln 126 158 205 266 353Depreciation, Rp mln 18 59 122 157 ,'6Cash (months of operating expenses) 4 2 2 2 2X of working ratio /a 84 72 78 79 42 of depreciation covered 100 100 47 46 ioo

Ponorogo Volume sold, aln a3 0.20 0.34 0.90 1.50 2.14Average tariff, Rp/m3 69 150 185 195 204Total revenues, Up aln 14 55 200 357 534Operating expenses, 2p ala 24 135 195 280 362Depreciation, Rp aln 3 47 116 152 172Cash (months of operating expenses) 1.3 1 1 2.5 22 of working ratio /a 167 248 98 78 68Z of depreciation covered 0 0 4 51 100

Probolinggo Volume sold, mln a3 0.11 0.21 0.52 0.83 1.15Average tariff, Rp/a3 79 158 196 239 296Total revenues, Rp mln 8 38 121 232 387Operating expenses, Rp aln 16 96 162 227 281Depreciation, Rp ala 3 29 70 93 106Cash (months of operating expenses) 1 1 1 1 22 of working ratio /a 196 253 134 98 73Z of depreciation covered 0 0 0 5 100

Trenggalek Volime sold, aln a3 NA 0.13 0.51 0.88 1.27Average tariff, Rp/a3 NA 134 167 207 257Total revenues, Rp mla NA 22 105 219 380Operating expenses, Rp mln NA 81 129 212 272Depreciation, RP mln NA 28 71 94 108C_:sh (months of operating expenses) NA 1 1 1 2Z of working ratio la NA 366 123 97 72Z of depreciation covered NA 0 0 7 100

/a Total operating expenses/total operating revenues.NA - PDAM not yet operational.

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depreciation allowance will be used exclusively for improvements or expansionsof the water systems, working capital or to amortize future debt if any; and(b) in accordance with its current practice, GOI will make satisfactoryarrangements to provide funds for working capital and system expansion needsof the financially weak water entities.

B. SURABAYA

Existing Enterprise

4.14 Prior to 1978, the water supply cperation for Surabaya was handleddirectly by the city government of Surabaya. In 1978, the PDAM Surabaya wasestablished to manage the waterworks operations. Since then, the PDAM hasoperated as a semi-autonomous enterprise within the framework of the CityGovernment. All waterworks assets previously owned by the Government havebeen transferred to che PDAM.

4.15 In 1981, under the Second Water Supply Project (Loan 1709-IND), thePDAM engaged consultants for management and financial advisory assistance,covering a broad range of activities including (a) organizing andrestructuring the water enterprise; (b) management, financial and operationpolicies; (c) review and development of operational manual; and (d) accountingsystem. As a result of the above assignment, the PDAM has implementedrecommended financiaL procedures to enhance internal control, efficiency, andthe gathering of information.

4.16 A review of the generaL accounting system shows that it is commer-cially oriented and uses the double entrv and accrual method of bookkeeping.Important information particularly water production, water consumptifn bycustomer category, billings, and collections is available. Financial state-ments, which include income statement, balance sheet and funds flow statement,are prepared regularly and the format of the financial reports follows thestandard forms recoumended by GOI. Management reports are likewise regularlyprepared. These include reports on personnel, inventories, billings andcollections.

4.17 Audit of the PDAM is done annually by government auditors and iscompleted within six months following the end of the fiscal year. Auditreports are comprehensive and are reviewed by the PDAM Board of Directors andmanagement and key recommendations are implemented. This arrangement would becontinued.

Past Finances

4.18 The PDA! Surabaya, has consistently shown profits from its opera-tions. Likewise, enough cash was accumulated in the past through its depre-ciation account for the PDAM to finance the third water treatment plant atNgagel which was completed in 1982. It is also involved in the financing ofthe ongoing distribution project which is being assisted by the IBRD; thisproject has suffered some delay, however, the problem has been resolved.

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4.19 The highlights of the financial performance of the PDAM for the lastfour years (1981 to 1984) are shown in Table 4.5.

Table 4.5: PDAM SURABAYA INCOME STATEMENTS(in Rp million)

Audited Unaudited1981 1982 1983 1984

Volume sold (million m3) 56.3 60.2 59.8 63.8Total revenue 6,334 10,507 12,176 13,684Operating expenses 5,456 7,003 9,390 10,696Income tax 311 1,015 934 671Income after tax 519 1,380 1,280 1,957Payment to Kotamadya 258 285 759 630Payment to others 40 60 150 115Net Income 221 1 035 371 1,212Average oper. exp./m3 sold Rp 55 77 112 122Z Operating ratio- 86 67 77 80Z Rate of return 4 16 11 12Current ratio 2.6 2.3 1.8 1.9Z Debt (debt-equity) 0 0 23 20Days accounts receivable 97 104 94 106Debt service ratio NA NA NA NAContribution to investment (X) 76 152 90 75

Tariffs

4.20 PDAM Surabaya tariffs have been adjusted periodically. The latestincrease of about 80% which became effective on April 1, 1985, incorporatessix major categories of consumer and 12 sub-categories. The new structure,which follows the pattern set by the National Water Rate Structure, is presen-ted in Project Files. It provides for cross-subsidy between the various sub-categories, with residential consumers being the main beneficiaries. Thelowest charge rate for a Class B Resid ntial consumer (i.e. the lower of thetwo residential categories) is Rp 80/m>

Affordability

4.21 The affordability analysis of the new tariff indicates that about60% of all Surabaya households could afford to pay the water charges for adomestic connection within 4% of their budget. A similar calculation forsupplies through concessionaires and vendors showed that about 99% of thepopulation could aff 3rd the service, at the agreed final selling price to theconsumer of Rp 300/mr.

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Financing Plan

4.22 As indicated in para. 2.20, the total cost of the Part B would befunded from the following sources: (a) approximately 55% of the capital cost(which equals 60% if tax is excluded) from the proposed loan from the Bank;(b) approximately 252 of the capital cost from a loan from GOI; and(c) approximately 20% of capital cost from PDAM's internally generatedfunds. The proposed loan to the GOI would be at standard conditions. GOIwould then lend 80% of the total project cost to PDAM at a fixed interest rateof between 11% and 12% p.a. for a period of 25 years including a five yeargrace period. A moratorium on interest payments during construction periodhas been agreed in order to improve PDAM's short-term cash position. Signingof a subsidiary loan agreement between GOI and PDAM Surabaya would be acondition of disbursement for Part B of the Project.

Profit Sharing

4.23 PDAM Surabaya is required to distribute 55% of its net income aftertax to the Kotamadya and the remaining 45Z to various other funds (such asstaff bonus, charities, general reserves, and pension fund). These provisionsare made within the general guidelines of the Ministry of Home Affairs and theregulations of the Kotamadya Council. However, the Ministry of Home Affairshas recently issued further guideline to provincial Governors suggesting thatPDAMs should not be required to make any further contributions to theirKotamadyas and that the PDAMs should be allowed to use their revenues exclu-sively for water supply related expenses and investments. Local government ofSurabaya has not accepted the guideline fully even though during 1984, itaccepted a contribution of 32% instead of the 55%. Others also accepted lowerpayments. In view of the budgetary needs of the city and other recipients ithas been agreed that these contributions would be limited in future to the1984 figure (with minor adjustments) plus an increase of 52 each year. Basedon present projections, this would result in gradually lowering the paymentsto Kotamadya and others to about 12% and 6Z respectively by 1991. Thesearrangements were agreed by GOI during appraisal. Letters frorn the Mayor ofSurabaya and Managing Director of the PDAM confirming the agreed limitiationson payments to the city and others respectiveLy were received prior to theloan negotiations.

Financial Projections

4.24 The financial projections for the PDAM are given in A-Iex 11 and theaccompanying detailed assumptions are presented in Annex 12. The projectionsconsist of Income Statement, Source and Application of Funds, Balance Sheet,Financing Plan and Monitoring Indicators. Highlights of the assumptions usedin the financial projections are as follows:

(a) in order to provide increased supplies of water to meet existing andfuture demand, it is assumed that Surabaya will continue its programof expanding the capacity of source and distribution works. Theassumed development programs and dates when water becomes availableare (i) Karangpilang Treatment Works Stage I (Project being proposedfor Bank financing) in 1989; vii) Karangpilang Treatment Works Stage

- 34 -

II in 1992 (2 m3/s); and (iii) rehabilitation and expansion ofdistribution mains. The implementation is not expected to be amajor burden on management because the construction is managed byPMU and PTU which is separate from t-he PDAM with the exception ofsecondment of some staff from the PDAM to PIU; and

(b) sources of funds for Karangpilang Stage II and the major distribu-tion extensions are assumed to be: 60X of cost (net of taxes) to befinanced by external loans; 201 from GOI loan and the remaining 20%to be obtained from internally generated funds.

4.25 The results of the analysis show that Surabaya is expected tocontinue operating at a profit, throughout the projection period (1985-94).The key monitoring indicators are summarized below:

1985 1986 1987 1988 1989 1990 1991

Volume sold million 3 65 66 66 70 94 98 100Operating ratio 72 74 83 72 72 76 65Employeesl,000 conn. 15 15 15 14 13 12 12Rate of return (historic

costs) (Z) 20 13 7 14 13 10 15Days accounts receivable 91 91 91 91 91 91 91Debt service ratio n.a. 6 6 9 9 6 3Debt/Debt plus equity 23 31 44 49 53 61 63Current ratio 2.4 5 9 11 12 11 12Contribution to investment

AnnuaL Z 96 38 34 56 50 34 42Three year (last, current, next)

average X 92 35 39 49 45 42 44

Based on detailed assumptions outlined in Annex 12 which are reasonable, thefinancial position of the PDAM is expected to be satisfactory throughout theprojection period.

Revenue Covenant

4.26 Under the Second Water Supply Project (Loan 1709-IND), GOI isrequirad to take all steps needed, including increases in PDAM's water ratesand charges to provide water revenues at least sufficient to cover itsoperating expenses (including depreciation on revalued assets), incerest anddebt amortization in excess cf depreciation. However, as mentioned above,la-.e cities like Surabaya providing more than 60 l/cId are expected by GOI tofinance part of their investment program from internal cash generation.Accordingly, it is more appropriate to have a cash generation covenant in caseof Surabaya. Assurances were obtained during negotiations that GOI would takeall measures (including adjustment of tariffs) as required to produce fundsfrom the PDAM's internal cash generation equivalent to not less than 30% of

- 35 -

the annual average of the PDAM's capital expenditure incurred or expected tobe incurred, during three years (past, current and next) period. This impliesmaintaining of the average tariffs at present level in real terms. As shownin financial projections in para. 4.25 above, the PDAM is expected to be abLeto comply with the proposed covenant. The balance of funding required toimplement the investment program would be obtained through loans from thecental government in accordance with GOI water sector financing policy (para.1.08).

C. Other Financial Covenants for all PDAMs

4.27 The other financial covenants for Part A (UNARIKM) as weLl as Part B(Surabaya) water entities include the requirements for the insurance of thegoods to be financed from the proceeds of the Bank loan, and to cover otherrisks of the entities consistent with appropriate practice; a limitation onincurrence of long-term debts without the consent of the Bank unless debtservice is covered at least 1.5 times; and the periodic monitoring of theentities for financial performance and project financing agreement compliance.

V. ECONOMIC AND SOCIAL ANALYSIS

A. Justification

5.01 The population density of Java is higher, the poverty is greater,and the water availability is less than elsewhere in Indonesia. Externalassistance of Java's water supply development is allocated by agreement withGovernment to the Netherlands Government, the ADB and the Bank, who operate inWest, Central and East Java Provinces respectively. Like the first East JavaWater Supply project (Loan 2275-IND), the proposed Project will meet the basicwater supply needs of the population in priority cities and towns.

5.02 Providing safe, reliable water to larger portion of the populationis the main purpose of the Project, but emphasis is also placed on theachievement of sound institutional and overall financial policies for thesector outlined in para. 1.08, the strengthening of DAB and other sectorinstitutions and the establishment of financially viable and effectivelymanaged PDAMs.

5.03 The systems to be installed under Part A o' thie Project are designedfor low cost and rapid implementation, and will reach she poor at affordableprices. They represent the least cost method of providing a basic waterservice. The average cost per capita served of the systems for the 12 BNAtowns is Rp 61,000 at mid-1985 price levels including taxes (Rp 74,600including price contingencies). The 63 IKK systems are considerably cheaperand average Rp 30,100 per capita at mid-1985 price levels (Rp 36,600 withprice contingencies). It should be noted, however, that these costs do notinclude the costs of the existing test wells which will be converted toproduction wells. The IKK cost per capita at the mid-1985 base would be aboutRp 32,300 if these wells were not already available.

- 36 -

5.04 Under Part B of the Project, the level of service in Surabaya, whichis currently characterized by interruption and low water pressure as a resuLtof inadequate sources, will be improved. The source and other components havebeen selected and sized on Least cost basis while bearing in mind GOI'srequest to allow for the anticipated expansion of the plant, up to an eventualpossible capacity of 5 m3/s. Taken together with the recent reduction inrates charged to the poorer members of the community and the continuingprogram to install more public taps (para. 2.16) the project is expected tohave a significant impact on the urban poor.

B. Marginal Cost

5.05 For Part A BNA/IKK PDAMs, the long-term marginal cost of water wasestimated using long-run Average Incremental Cost (AIC) at a 10% discountrate. The AIC for the tweLve PDAM's is estimated (in 1985 prices) at Rp 335(US$0.30 equivalent) per mn compared with the proposed average tariff (in 1985prices) of Rp 150 (US$0.14 equivalent) per m . The large disparity in theaverage tariff and the AIC is because a large proportion of the water salesare to low-income consumers for whom low tariffs within affordability limitswould promote the use of safe water to people who would otherwise rely onunsafe alternative sources. However, under the tariff structure guidelineschar 9 es for commercial, industrial and residential users consuming more than30 m per month would, in the majority of the PDAMs, exceed AIC (as seen forPart B of this project). Higher tariffs than those proposed are not consid-ered feasible until consumer confidence in the new system is established. TheAIC's for BNA/IKK PDAM are presented in Annex 13.

5.06 Por Part B Surabaya, at 10% discount rate the AIC is estimaSed atRp 198/m3 at 1985 price levels. The present average tariff (Rp 250/mi at 1985price levels) is substantially above the estimated AIC because the chargedrate will cover not only operating costs and depreciation but also debt ser-vicing and at least 30% of future capital expenditures necessary for expansionof the utility.

C. Rates of Return

5.07 The Internal Financial Rate of Return (IFR) which is the rate ofdiscount which equalizes the present worth of incremental financial costs (netof taxes) and revenues (at constant prices) resulting from the project wascalculated for each PDAM by aggregating subprojects within its boundaries.Aggregation is appropriate because the tariffs are uniform within each PDAHand there are no significant differences in the per capita cost of individuaisubprojects. The IFR is negative for most BNA/IKK Systems and 17.5% forSurabaya. The benefits of the project were the3 supplemented using as proxy(a) the charge by the vendors for the first 3 m /month (approximately 20 lcpd)and (b) average water charges for higher consumption. For towns where data onvendors is not available, cost for constructing and maintaining wells and costof carrying water was used. ERRs so calculated range from 0.7% to 6.6% (aver-age 4.4%) in BNAJIKK systems and 20% in Surabaya. A 20% increase in capitalcost with an unchanged benefit stream would reduce the average ERR to 3.1%,and with a 5% reduction in the benefit stream, would yield an average ERR of

- 37 -

2.4Z (Annex 13). The corresponding figures for Surabaya are 17Z and 15.7Zrespectively. These calculations are not, however, a complete measure of theeconomic rate of return because it does not adequately take account of all thebenefits which result from the new system combined with improved sanitationpractices for the present users in the form of improved service. GOI and theBank staff recognize that the rates of return for the semi rural BNAIIKKcommunities fall short of the levels that wouLd be generally acceptable fortraditional urban water supply projects. However, justification does not restsolely with the rate of return, because (a) it provides essential and safewater supply service, at Least cost, to a heretofore unserved population(about 90Z of whom are poor) living in semi-rural areas; (b) it will help toimprove the health and living standards of the population and (c) it providesthe means for strengthening sector institutions and replicable policies basedon basic needs approach. The project as a whole would yield an ERR of 11Z. A201 increase in total costs with an unchanged benefit stream, would yield anaverage ERR of 81, and with a 5X reduction in the benefit stream would yieldan average of 7Z.

D. Project Risk

5.08 Available data on willingness to pay for piped water in smaller IKKs(i.e. population less than about 5,000) is not conclusive. There is some riskthat a part of the revenues from such systems may be slow in materializing.The experience of several IKKs under first East Java Water Project indicatesoversubscription of available connections within the very first year (ascompared to four years connection build-up period assumed in the financialprojections). On the other hand, data based on IKKs elsewhere in Indonesiaindicates low willingness to pay due to available shallow wells and thereforethere is som: likelihood that all connections will not be subscribed withinfour years of project completion. The share of total revenue from the smallerIKKs in the two weakest PDAMs (Madiun and Pacitan) is about 10 and 11%respectively. The impact of this is expected to be minimal. There are nosignificant implementation risks anticipated.

E. Poverty Impact

5.09 Part A of the project would benefit about 820,000 people by 1991through house connections and standpipes. The level of population served willbe increased 10 times, while present users will have improved water quality,service, pressure and reliability. Ninety-three percent of the totalconnections and 87Z of the distributed water will be for households withgovernment, commercial, industry, and social users receiving the balance.About 90Z of the total population or 1.2 million persons in the beneficiarytowns are below the relative poverty level of $130 equivalent/household/month.Because of the nearly uniform distribution of incomes across each BRA/IKK,about 90% of the population served, or some 740,000 persons in the projectarea would be poor. In Surabaya, about 1.3 million persons are estimated tobe poor, of which about 240,000 would benefit from the project. In total,about 80Z of the urban poor in the project areas would benefit from the pro-ject. In Surabaya, where the present charges by vendors are particularly

- 38 -

high, PDAM Surabaya [have agreed] to reduce the cost of water to low incomegroups. About 67Z of the water produced and the capital cost of Part A wouldbenefit the urban poor. The corresponding figure for Surabaya is only 8X dueto large industry and commerce in the city; and for the overall project is35x.

F. Environmental Impact

5.10 The proposed project will have a significant net positive environ-mental impact and will improve the quality of life of persons in the bene-ficiary cities and towns. During construction there will be some disruptionof vehicular and pedestrian traffic, and earth excavation will increase sedi-ment loads of storm water runoff, but these will be temporary situationswithout major detrimental effects. After project completion the volume ofwastewater will increase, but this will be limited by reason of the relativelylow capacity of the water supply syst1ems; the expected volumes will be readilyhandled by existing storm water canals and drains provided the urbanauthorities take appropriate maintenance actions.

5.11 A major environmental improvement is expected to follow from theeffluent discharge control program to be implemented in conjunction withPart B of the Project. Surabaya's scarce raw water resources are currentlythreatened by high pollution levels in the Surabaya River (Annex 6), consis-ting mainly of organic waste discharges (often illegal) by a small number oflarge factories and the residential areas alongside the river. The mainsources of pollution have been identified and an action plan for reduction inthe waste discharges concerned has been agreed. Achievement of specificprogress with the action plan, namely; assignment of management and monitoringresponsibility; completion of preinvestment studies by the main polluters andtheir commitment to carry out the recommended actions; and completion of astudy for improvement of domestic sanitation in areas adjoining the river, isa condition for disbursement against Part B of the project. The program isexpected, inter-alia, to strengthen the institutional arrangements formonitoring and control of industrial effluent discharges in East Java.

5.12 The Government is striving for improvements in the level of sanita-tion within Surabaya and these are being effected by ongoing programs underthe Fifth Urban Development Project which is partly financed by Loan 2408-IND.Subprojects within that project include extensive KIP environmental sanitationworks, solid waste management improvements and major drainage improvements.Of relevance included also is the preparation of an integrated urban improve-ment project for medium, small cities and towns in East Java which is likelyto focus on many of the project cities of both first and second East JavaWater Supply projects.

- 39 -

VIr. AGREEMENTS REACHED AND RECOMNENDAIIONS

6.01 During negotiations agreement was reached on the following points:

(a) an action program to reduce PDAM Surabaya's unaccounted-for-waterlosses to about 25Z of production by 1991 would be carried outcommencing April 1, 1988 (para. 2.07);

(b) details of measures taken or to be taken by PDAN Surabaya to reducethe cost of water to low income groups (para. 2.10);

(c) PCK will be responsible for development function for monitoring andproviding assistance to all water entities in East Java(para. 2.13);

(d) the staffing and implementation arrangements for ti) the PCK unitresponsible for the monitoring and development function (para. 2.13)and (ii) the PNUs/PtUs (para. 3.10);

(e) terms of reference for the various technical assistance requirementsfor the project (para. 2.15 and 2.16) and details of any bilateralaid or cofinancing arrangements agreed to by COI in respect of suchassistance (pEra. 2.21);

(f) PDAMS will be formed in eight kabupatens by December 31, 1992 andall water entities will incorporate new and existing water systems(para 3.07);

Cg) all required consultants and key staff would be appointed inaccordance with the project implementation schedule agreed with theBank (para. 3.12);

Ch) GOI would (a) procure all vehicles required for the project under aschedule agreed with the Bank and complete such procurement byDecember 31, 1989; and (b) complete land acquisition six monthsbefore start of construction (par-A. 3.16);

(i) GOI will arrange for the delegation of payment authority forexpenditures from GOI's prefinancing funds to the PMU (East Java)(para. 3.19);

(C) CK v.2uld not apply to the Bank for disbursements less thanUS$100,000 in aggregate at any one time (para. 3.19);

(k) auditing of the project accounts and beneficiary PDAMs should beundertaken by independent auditors satisfactory to the Bank startingGOI FY86 and CY9O respectively. Project audit report would be madeavailable to the Bank within seven months of the end of the fiscalyear. Audit reports for the water entities would be made availableto the provincial monitoring unit who wouLd send a summary including

- 40 -

the actions taken to carry out recommendations by the auditor to theBank not later than August 31 each year (paras. 3.21);

(1) format of monitoring and performance indicators (para. 3.25);

(m) GOI would continue to provide operating subsidy to Part A waterenterprises until completion of the project (para. 4.11(f));

(n) for Part A water entities: (a) the tariff structure will be setalong the lines of the National Water Rate Structure; (b) tariffswill be adjusted every year with the objective of reaching a levelin 1991 (on completion of the project) which wilL allow each PDAM tocover at least operations, maintenance and depreciation on revaluedfixed assets; (c) in case of water entities in Madiun and Pacitanwhich are presently expected to cover only part of depreciation,affordability analysis will be updated by December 31, 1990 todetermine tariffs; (d) the depreciation allowance will be usedexclusively for improvements or expansions of the water systems orto amortize future debt if any, and (e) GOI will make sitisfactoryarrangements to provide funds for working capital and s stem expan-sion needs of the financially weaker water entities (para. 4.13);

(o) profit sharing from PDAM Surabaya to Kotamadya and others would belimited in future, commencing in 1985, to the 1984 figure (withminor adjustments) plus an increase of 5% each year (para. 4.23);and

(p) PDAM Surabaya's internal cash generations to be equivalent to notless than 30% of the annual average of the PDAM's capital expendi-ture incurred or expected to be incurred during three years (past,current and next) period (para. 4.26);

(q) debt limitations and insurance (para. 4.27).

(r) an action plan to cause industrial and residential effluentsdischarging to the Surabaya River between Ngagel and Mojokasri tocomply with the Governor of East Java's Decree No. 43/1978 not laterthan December 31, 1987 (para. 5.11).

6.03 Signing of a subsidiary loan agreement between GOI and PDAM Surabayaand achievement of agreed progress on pollution control in Surabaya would beconditions of disbursement against Part B of the Project (paras 4.22 and5.11).

6.04 Subject to the above, the Project is suitable for a Bank loan ofUS$43.3 million equivalent, for a term of 20 years including a grace period offive years.

ANN'X 1- 41 - Table Al.1

INDONESIA

SE JOND EAST JAVA WATER SUPPLY PROJECT

Sector Tables

1980 Population and Land Area for Indonesia,Java and East Java Province

E. JavaIndonesia Java Province

PopulationPeople 147.5 91.3 29.2Z of total 100 62 20Z growth rate 2.3 2.0 1.5Density per sq km 77 690 609

Land Area'000 sq km 1,919.0 132.2 47.9Z of total 100 7 2

Source: SAR 4282-IND East Java Water Supply Project, April 1983. (Data from1980 Census).

- 42 - ANNEX 1Table A1.2

INDONESIA

SECOND EAST JAVA WATFR SUPPLY PROJECT

1980 Population and Population Density forKabupatens and Kotamadyas of Fast Java Province

Land area DensityName Population (sq km) (persons/sq km)

Kabupatens Pacitan /a 478,037 1,310.50 365Ponorogo7a 783,381 1,311.09 598Trenggaler7/a 564,542 1,205.22 468Tulungagung-7b 833,323 1,667.93 500Blitar /a 1,037,258 1,667.93 622Kediri-7-a 1,235,265 963.21 1,282Malang 7Wa 2,045,939 4,778.37 428Lumajang 874,516 1,790.90 488Jember /b 1,881,091 2,948.87 638Banytwangi /b 1,420,837 5,782.50 246Bondowoso /ra 61Z,160 1,560.1i 392Situbondo 7n; 525,046 1,457.67 360Probolinggo /a 866,318 1,428.93 606Pasuruan /a 1,034,967 1,315.20 787Sidoarjo 7W 854,298 591.59 1,444mojokerto 7b 705,596 835.33 845Jombang 941,988 1,159.50 812Nganjuk /a 882,832 1,182.64 746Madiun Ia, /b 640,561 1,033.82 620Magetan 608,820 672.70 905Ngavi /a 769,286 1,245.70 618Bojonegoro 999,418 2,834.02 353Tuban lb 871,898 1,904.70 458Lainongan 1,049,956 1,812.80 579Greski 729,039 1,137.05 641Bangkalan 6R8,362 1,144.70 601Sampang 604,541 1,152.04 525Pamekasan 539,095 732.85 736Sumenep 854,925 1,857.59 460

Kotamadyas Kediri 221,830 63.40 3,499BLitar 78,503 16.30 4,816Malang /b 511,780 69.03 7,414Probolinggo 100,296 25.24 3,974Pasuruan /a 95,864 13.58 7,059Mojokerto 7b 68,849 7.25 9,496Madiun /b - 150,562 30.no 5,019Surabayia/b 2,027,913 274.06 7,400

total 29,188,852 47,922.00 609

/a Covered by this project.T7 Covered by earlier World Bank water supply projects.

Source: 1980 Census

ANNEX 1- 43 _ Table A1.3

Page 1 of 2

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

BNA/IKX town Names List

Category 4 Reference Category 5Kabupaten (BNA) Towns Number (IKK) Towns /a

Ngawi Mantingan 1/b 1wadungan2 Widodaren3 Keduonggalar4 Geneng (Tambakromo)

Mhdiun 1Mejayan (Caruban) 5 Saradan6 Dagangan7 Pilangkenceng (Kenongorejo)8 14nisrejo Wungu (Nojopurno)9 Delopo10 Geger (Purworejo)

Ponorogo Ponorgo 11 Soko12 Balong13 Mlarak (Joresan Siwalan)14 Jenangan15 Kanman

Pacitan Pacitan 16 Bandar17 Nawangan18 Punung19 Kebonagung20 Donorojo21 Nagadirejo

Trenggalek Trenggalek 22 Panggul23 Kampak (Bondoagung)24 Watulino (Prigi)25 Pule26 Bendorejo27 Munjuagan28 Dongko

Blitar Wlingi 29 Sanan Kulon30 Garu31 Gandusari32 Ponggok33 Talun34 Kanigoro

ANNEX 1- 44 - Table A1.3

Page 2 of 2

Category 4 Reference Category 5Kabupaten (BNA) Towns Number /b (IKK) Towns /a

Nganjuk Kertosono 35 Sawahan36 Baron37 Tanjung Anom38 Gendang39 Rejoso40 Prambon (Watudandang)41 Bagor

Kediri Pare 42 Gurah43 Ngadiluwih44 Wates45 Grogol46 Semen47 Paper48 Purwoasri

Pasuruan Pandaan 49 Puirwodadi50 Wonorejo51 Grati52 Puspo53 Sukorejo

Probolinggo Leces Malasan 54 Mlron55 Sumber56 Patalan (Kedawung)57 Kuripan58 Bantaran

Bondowoso Bondowoso 59 Sukasari60 Prajekan61 Tapen62 Tegal Ampel (Sekarputih)63 Maesan

Pasuruan (Kotamadya) - -

/a In some cases the names of the Category 5 towns were found to be differentfrom those listed in the study Term of Reference. In these cases, the namegiven in Lhe Terms of Reference is shoun, and the revised name obtainedduring the surveys is given in brackets.

lb The Reference Numbers are as shown on Map 19310-IBRD.

- 45 - ANE 1Table A1.4

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJFCT

Rainfall, Water Availability and Needs for Indonesia and Java

Javaas Z of

Indonesia Java Indonesia

Average rainfall (millimetre/year) 2,340 2,5R0 110

Water Availability (uillion cu mlyr)Surface (firm flow) 703,000 44,000 6Subsurface 475,000 24,000 5

Total 1,78,n0n 68,000 6

Per capita (cu m/day) 21.9 2.0 9

Projected 1990 Needs (million cu m/yr)Agriculture 137,000 62,000 45Tndustry 500 200 40Household 6,600 4,100 62

Total 144,100 667300 46

As % availability 12 Q8

Source: Data from the Directorate Ceneral Water Resources. Table constructedby Bank staff.

-46- ANNEX 1

Table A1.5

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

Access to Clean WVater at End of Itepelita IlI(March 1984)

Households Percent of all 1984Source of water ('000) utoan households /a

Piped Water 2,326 36Existing connections in

November 1980 /b 1,631 25

Additions (November 1980-March 1984):Central Government Program 463 7Other additions /c 232 4

Pumps /d 727 11

Total 3,035 47

/a Number of urban households assumed to grow at 21 p.a. from 1980 to1983/84.

lb Source: 1980 Census. Percentage adjusted for projected 1984 population.

/c Includes independent schemes, e.g., some PERUMffAS sites, docks, publicbuildings, and expansions by local water authorities independent ofcentral government development budget (e.g., Jakarta). Assumed to be halfof Central Government Program.

/d Proportion of households using pump assumed to stay the same as in 1980.

Source: World Bank Report No. 4800-IND. Indonesia: Urban Services SectorReport, June 1984.

- 47- ANNEX 1

Table A1.6

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

Manpcwer Requirements for PDAMS by Size of PDAM1983-90

Size of water enterprise(number of connections) /a

Belco 2,000- 7,500- Above TotalIKK 2,000 7,500 20,000 20,000 employees

Total Employees1982 (thousand) - 3 2 3 6 141950 (thousand) 12 2 6 2 16 38

Estimated Employees per1000 connections 3.5 15 12 10 10 15in 1990 (per IKK)

/a Based on assumption of total house connections rising from 850,000 in 1982to 2.4 million in 1990.

Source: Urban and Semi-Urban Water Supply - Forecast of Manpower and TrainingNeeds 1983. 1990: Report of the Water Supply Manpower DevelopmentProgram, DSE/IRC, February 1983.

-48 - ANNEX 2Page 1

GNDONESIA

SECOND EAST TArA WATER SUPPLY PROJECT

BNA/IKK Water Systems and Demand Analyses

GOI Water Supply Investment Program

1. WOI's investment program in urban water suppLy has evolved over pastREPELITA to become a highly systematized approach suited to mass-provision ofminimal standard systems intended to quickly overcome severe deficiencies inwater suppLies to Indonesia's 45 million urban and semi urbanized popula-tion. The program, although ambitious in physical terms, is characterized bymodest service levels (Table A2.1) standardized designs, low-cost tec'inologyand decentralized implementation, as well as its emphasis on service to low-income groups. The intent is to build systems which provide an essentialservice at an affordable price, to use scarce man-power effectively, and todemonstrate to consumers the benefits of safe water so the community itselfwill take initiatives to extend and improve the service. Accordinglyfacilities are of low cost design; design procedures are standardized; abouttwo thirds of the population served would receive house or yard connections,the remainder receiving standpipe service; projects would be executed in theprovinces by local staff to the extent capabilities there permit; goods wouldbe purchased in bulk and distributed from regional and central stores; theprojects would be financed as grants and given free to the communities; andtariffs are expected to cover operation and maintenance costs and, ifpossible, the depreciation (although some sub-projects may be subsidized inthe early years of operations when there are few connections or in the poorerareas where a higher tariff may not be affordable). For larger '-ities struc-tured tariffs (based on the national water rate structure), are expected tocover operation and maintenance costs, depreciation of assets, limited expan-sion of services and full debt servicing in excess of depreciation.

East Java Water Supply Investment Program

2. An early target in the GOI's program was the country's most populousprovince, East Java. In 1982-83 the Bank agreed with GOI on a selectionprocess, planning and desiL criteria, financing arrangements and operationsand maintenance standards._

Selection of BNAIIKK Towns

3. Cipta Karya officials have stated that the following generalprocedure was used in the town selection:

1/ See Staff Appraisal Report No. 4282-IND, East Java Water Supply Project,April 5, 1983.

- 49 ANNEX 2Page 2

(a) East Java kecamatans reported on their needs for water supply, elec-tricity, roads, etc. to each kabupaten local government (BappedaLevel 2). The reports contained information on current wateravailability and the problems of obtaining water, potential watersources and the general health of the community.

(b) Priority towns for water supply development were selected by BappedaLevel 2 taking into account the information provided by thekecamatans and other social and economic factors. The selected listof towns for each kabupaten --as then sent to the East Java provin-cial government (Bappeda Level 1).

(c) Bappeda Level 1 in conjunction with the PAB office of Cipta Karyacompiled the overaLl list of towns to be provided with new watersupplies based on the individual kabupaten reports. In the case ofBNA selection, towns where PAB were already implementing, orplanning to implement, separate water supply schemes were notincluded (for instance the kabupaten capital of Ngawi).Additionally only one BNA town was selected in each kabupaten. TheList of towns agreed at provincial level was then forwarded to theMinistry of Home Affairs in Jakarta.

(d) Consultations between the Ministry of Home Affairs, the Ministry ofPublic Works (through Cipta Karya) and the provincial government(through Bappeda Level 1) allowed the final list of project towns tobe drawn up.

In the future it is proposed that selection should also distinguish betweentowns of similar category and needs on the basis of those towns willing tocontribute a larger share of project cost.

Project Water Supply System Features

4. Existing Facilities Five of the twelve BRA towns currently possessa limited piped water supply system serving a small percentage of the projectarea population. The works are of varying age and range from the oiped supplyfrom Unbulan Spring to ?P.suruan, constructed between 1915 and 1917, to themore recent works constructed since 1980 at Ponorogo and Pacitan. The oldersystems are generally in poor condition and require extensive repairs. Wherenecessary they will be completely r.eplaced iuring the project. Seven of theeleven project kabupatens contain !KK towns located in hilly or even moun-tainous terrain. Water availability at some of these towns is poor and pipedwater supplies from spring sources have already been constructed. However,the systems are generally in bad condition, the water ir sometimes dirty andthe supplies are not disinfected. Additionally, in extended dry seasons, thepresent spring .ources are often inadequate.

- 50 - ANNEX 2

Page 3

Table A2.1. COI URBAN WATER SUPPLY LEVELS OFSERVICE TARGETS FOR REPELITA IV

BNA ProgramLarge Medium Small IKK

Town category Metro city town town program(1) (2) (3) (4) (5)

Po?ulation ('000) over 500 100 20 31,000 to to to to

1,000 500 100 20

Percent of 1990 populationto be served /a 70 70 70 70 70

Domestic demand (1/cap/day)Direct house or yardconnections /b 210 170 150 90 60/c

Public standpipe /b 30 30 30 30 30

Total 120 100 90 60 45

Nondomestic Demand /d(Z of domestic demand) 60Z 40Z 30% 20% 5Z

Allowance for Unaccounted Water(Z of total production) le 20Z 20% 20Z 20Z 15Z

/a Represents national target. Percentage population served by individualschemes may vary in accordance with density of development, alternativewater supplies, boundaries of town and service area, etc.

/b The ratic of population served by house/yard connections to the popu:-lation served by public standpipes shouLd reflect the national target of70:30. This ratio may vary for individual schemes (based upon socio-economic survey) in which case the domestic demand for the house/yardconnections should be varied so that the total average domestic demandtarget is achieved.

/c Yard connections only. Domestic demand for yard connections should notbe reduced but the ratio of yard connections to public standpipes may bevaried, based upon a socioeconomic survey, between the limits 80:20 and20:80, utilizing the full capacity ofthe module.

Jd Allowances shown are for budgeting purposes only. Actual amounts formedium-large cities and metropolitan areas to be based on survey ofrequirements.

/e Minimum Allowance. For existing systems this may be increased on thebasis of a survey of actual losses and estimated trend.

Source: Cipta Karya

- 51- ANNEX 2Page 4

5. Most households in both the BNA and IKK project towns obtain theirwater for drinking and cooking from dug wells located in the yard of thehouse. These wells are sometimes fitted with electric or hand pumps, but moreoften a bucket is used to abstract water. The depth of wells varies butgenerally it can be said that dug wells supplies are deeper and more unre-liable (or even impossible) in the hillier areas. In the lowlands, wheregroundwater is shallower and more plentiful, the existing dug wells aresometimes not suitable as sources. Wells are situated in the densely housedareas of some project towns and close to the household's sanitary facili-ties. Bacterial contamination of some existing well supplies is inevitable.

6. Most households in East Java boil their water before using it fordrinking in order to avoid the adverse effects of contamination. Because ofthis, households in some of the project towns in the lowLand areas, whereexisting shallow well supplies can provide adequate quantities of water, areusually unworried by potential water quality problems. It is therefore likelythat considerable efforts will be needed during project implementation toinform people living in these areas of the benefits of the new piped watersupply schemes so that the desired number of connections required to make thesystems financially viable can be achieved.

Service Policy and Design Criteria

7. The 12 BNA subpojects were designed in accordance with the formerRepelita III service policy of the Government of Indonesia and the remaining63 IKK towns in accordance with the current Repita IV service policy. Thedesign service policies adopted for Part A of the Project are similar to thoseadopted for the First East Java project and summarized in Table A2.2.

Project Area, Service Area and Demand Projections

8. It was not possible to lay down a single, simple definition of theproject area for any town since there is generally no town boundary whichcould be used; if kecamatan boundaries are used, the project areas wouldgenerally be too large and would cover low density rural areas. Hence, basedon engineering judgment, settlements which could be economically served by anextended town distribution system have been included as part of the projectarea. Topographical features, population densities, the views of Governmentofficials and future development plans are all considered where these wererelevant to the Project.

9. The people in the project area who will actually be supplied gener-ally comprise those where the service can be provided in the most cost-effec-tive manner. This was normally achieved by allocating supplies to the towncenter and the most densely populated parts of the town, and then workingoutwards until the target service figure was reached.

10. On the above basis, the service area was chosen such that all peoplewithin the area will receive a piped supply either by individual connectionsor by standpipe. In certain situations (such as along a transmission mainsupplying a town) households which are not in the project area can be suppliedat very low cost and source and transmission works have been sized accord-

- 52 -ANNEX 2Page 5

ingly. Similar provisions have been made for commmities whose existing watersupplies are endangered by proposed spring or wellfield developments for theProject; in general standpipe installations are provided for thesecofhamities.

Demand

11. Demand projections were made in different ways for the BNA and IKKsubprojects. For the BNA towns, population projections were made by theconsultants using census data; future population growth was based on recenthistorical rates with local adjustments. For each subproject the area to beserved encompasses about 60Z of the area's total population (in accordancewith the BNA planning criteria). The demand was then assessed assuming thecombination of the various types of connections shown in the town. It islikely that unconstrained demand would exceed these allocations, but under thedesign criteria all BNA connections would be metered and the progressivetariff structure is expected to inhibit excess consumption.

~ 53 ~ ANNEX 2Page 6

Table A2.2. WATER SUPPLY SYSTEM DESIGN CRITERIA FORCATEGORIES 4 AND 5 TOWNS

Category 4 (BNA) towns

Supply level at public taps 30 liters/capita/day (lJc/d)Supply level at yard connections 60 (I/c/d)Supply level at house connections 120 (l/cld)Population served Target 60Z of 1985 project area

population (Repelita III standard)Ratios of population served by houseconnection, ya.d connection and public taps 25:25:50 (Repelita III standard)

Design group for house connection One household/unitDesign group for yard connection One household/unitDesign group for public taps 200 persons/unitAllocation for nond'mestic demand 25Z of domestic demandAllocation of unaccounted water 15Z of domestic demandMaximum day peaking factor 1.15Maximum hourly peaking factor 1.75Minimum storage requirem;r, 15Z of maximnm day demand (target

20Z)Minimum pressure in distribution system 10 meters headDesign horizon for distribution system 1985 populationDesign horizon for transmission/treatment 1990 populationMethod of operation To meet demand from metered

supplies

Category 5 (IKK) towns

Supply leveL at public taps 30 (l/c/d)Supply leveL at house connections 60 (l/c/d)-Population served 50Z-1OOZ (target 70Z) of 1985

project area populationRatio of population servrd by houseconnection and public tap 70:30

Design group for public taps 200 persons/unitDesign group for house connections 10 persons/unitMinimm pressure in distribution system 10 meters headAllocation for nondomestic demand 50Z of domestic demandAllocation for unaccounted water 15% of domestic demandMaximum day peaking factor 1.1Design horizon for distribution system 1995 populationDesign horizon for transmission line 1995 populationMethod of operation Flow restricted supply (unmetered)

24 hours per day

-54 - ANNEX 2Page 7

12. The demand for IKK systems was also based on population projec-tions. However, in accordance with standard CK procedures, the systemincrement, service population and number of connections were then based on thepresent values shown in Table A2.3 below.

Table A2.3. STANDARD SYSTEMS FOR CATEGORY 5 (IRK) TOWNS

No. ofProject area System Design No. of house publicpopulation increment population connections taps

(l/s)

3,000-6,000 2.5 3,190 219 56,001-10,000 5.0 6,380 438 10lO,001-15,000 7.5 9,565 676 1415,001-20,000 10.0 12,755 895 19

13. The design number of house connections provided for each incrementwas increased during this project so that 70Z, instead of 50Z, of the servicepopulation is now assumed to be served by house connections. Extra houseconnections are likely to make the schemes more attractive to households whoalready possess their own well supplies and who might therefore be reluctantto use a public tap supply, and the higher income generated by extra houseconnections should give IKK subprojects a better chance of covering theiroperating costs. IKK connections, being unmetered, are simpler than BRAconnections, and therefore more easily affordable. At the same time asignificant number of public taps to serve the poorer members of the communityare still being provided under the revised policy. The flow to each IKK con-nection will continue for 24 hours per day but will be limited by flowrestrictions on all house connections and public taps.

14. The demand summary for the twelve PDANs and the expected number ofconnections together with a breakdown of demand for each consumer type isgiven in Tables A2.4, 5 and 6 below.

Project Components

15. Each BRA system comprises a spring o_r deep weLl source, pumps andmotors where necessary, transmission and distribution pipe, service reser-voirs, service connections, public standpipes (to serve poorer households) andoffice and workshop space. Service connections are all metered.

16. At least two wells are provided at each BNA town with a deep wellsource so that a partial supply can be maintained in the event of breakdownof, or maintenance to, one of the electric submersible pumps. Similarly twopumps are provided in each of the three forwarding pumping stations requiredunder the project. Pipelines have air valves at high points and washouts at

-55 - ANNEX 2

Page 8

low points, and distribution systems are subdivided by gate valves intomanageable areas. Fire hydrants are also provided. Storage is provided byground level reservoirs or water towers set at the required level to maintainthe required pressure in the system. These are standard Cipta Karya designsof 300, 500, 750 and 1,000 m3 unit size, except for the water tower substruc-tures which were individually designed on the basis of site investigationdrilling results. Pumps will be operated manually where wells are sited closetogether, or by float operated valve in the reservoir and pressure activatedswitch on the pumping main when sources are remote from one another.

17. Each IKK system also comprises a spring or deepwell source, pumpsand motors as necessary, transmission and distribution pipe, service connec-tions, public standpipes to supply poorer households and a small combinedoffice and workshop facility.

18. A notabLe feature of the IKK service connections is that they areall fitted with flow restrictors. Flow restricted service connections enablethe distribution system to be designed for average demand and it is thereforeof lower capacity and hence of lower cost than a normal distribution systemwhich is designed to meet peak demands. Storage reservoirs and the need formeters are also eliminated and costly volume based billing is not required.Their disadvantage is that the house consumer cannot instantaneously draw alarge volume of water, thereby necessitating in-house storage consisting of asmall 20 liter clean water enclosed tank combined with a 300 liter open stor-age tank. Public taps also have a 3.5 m3 tank to store the flow restrictedsupply. Standby wells are not provided for the low cost IKK subprojectsbecause it is assumed that the standardized pumping units can be rapidlyreplaced in the event of a breakdown. Pumps are controlled by pressureswitches and system pressure is sustained by a hydro-pneumatic tank. However,many difficulties have arisen in IKK pilot schemns which highlight the needfor refinements in system design, more reliable operation and better consumerinformation. Lessons learned to date have been incorporated in the proposedproject designs and model systems constructed in this way under the first EastJava Water Supply Project are operating reasonably satisfactorily.

W sourcesAscts

19. ALl 75 project towns are expected to utilize either spring or deepwell water sources. These sources were preferred because of the easier andlower cost operation and maintenance that they afford compared with analternative treated river or surface water source. Where alternative springor deep well sources are feasible, selection of the source was based on a netpresent value comparison of capital and operating costs and, where the costdifference was marginal, on engineering judgment.

20. The suitability of selected spring sources was confirmed by recourseto existing records, by the measurement of flows during the dry season and byfield and laboratory analysis of water quality. Water rights were also dis-cussed with local officials prior to selection of a spring source.

21. The towns selected for deep well sources fall into two categories:those in areas of known groundwater potential where test drilling is not

-56 ANNEX 2Page 9

required, and those in areas where test drilling is required to confirm theavailability of suitable quality water. Production wells at towns in thefirst category will be constructed during the project impLementation stage.Test drilling at the towns in the second category, however, was either carriedout during the former EJWS project or is being carried out during the EJWS 2project. Out of a total of 31 towns requiring test drilling 29 towns alreadyhad confirmed borehole sources by mid January 1985.

22. It is possible that one or two of the outstanding test wells at IKKtowns located in the hillier areas may fail to yield satisfactory results.Conversely if groundwater is proven at some of these difficult locations(where drilling has never been attempted before) it may be appropriate toattempt drilling at three other similar IKK towns where the selected springsource flows are marginal.

Environmental and Health Aspects

23. Sanitation is not included in the project but is being addressed byother ongoing government programs including those of INPRES, (a presidentialfunding source provided directly to provincial and kabupaten projects), andthe Kampung Improvement Program (KIP), which is a program to improve thequality of crowded urban areas. Local health officials also run educationprograms to try and improve sanitary practices.

24. During the EJWS-2 project the consultants carried out a shortsanitation identification study at a representative sample of the projecttowns. The aim of the study was to examine the need for improvements in thepresent methods of wastewater and excreta disposal in the context of theimminent improvements to be made to the potable water supplies. The reportconcluded that many people are utilizing unsuitable or unsafe water supplies(such as rivers, or wells contaminated by being too close to sanitaryfacilities) and that the introduction of safe, improved supplies under thisproject will do much tc reduce the present incidence of preventable disease.

25. The proposed project will do much to reduce the use of insanitarysources for water supply. In view of the relatively small quantitiesconcerned there is unlikely to be a significant deterioration of existingconditions due to the increased waste water discharges. At the same time thereport recommends that further improvements are necessary in both towndrainage systems (particularly at the larger towns) and in current sanitationpractices. Improved maintenance, cleaning and regular flushing of drains isrequired so that wastewaters can be more easily removed from the urban areas,and the use of correctly designed pit latrines and septic tanks (as alreadyadopted in ongoing government programs) should be rapidly expanded. Only thenwould the current relatively high levels of water washed and sanitationrelated diseases be reduced. Water borne fecal systems do not exist in theproject towns, nor are they expected to be installed because of cost and thelimited flushing water volume available to households. Pour flush latrines,leaching pits and pit privies are the commonly adopted methods for fecal wastehandling, and these are supported by the Government KIP and INPRES prgoramsdescribed above. A forthcoming proposed arban project is due to be preparedduring 1986, with funding from Loans 1653 and 1972, and would addressinfrastructure deficiencies in medium and small-sized towns in East Java.

INDONESIA

SECOND EAST JAVA WAMTR SUPPLY PROJFCT

nemand Suomary - Part A RNA/KJKK Towns

PASIT-PON0- PACT- TRERNO- NOAN- PASII- RITAN PR800- RONDO-

PDRI4s YEAR TOTAL NGAWI MAMIIIN ROMO TAN nALEK JIIK IEDIR1 RLTTAR RUAN (IKota- LTNnRnO WOSOmadya)

Total population ('000) 19Rs 1,322.98 122.77 81,7n 138.30 75,42 76,R4 146.M8 123.74 A3.32 IR4.74 104.30 RR.2R 96.9q1991 1,424.12 131,q0 87.09 143.61 75.64 RI40 159.54 135.24 R7.46 2n0.18 116.40 96.36 101.30

Population with water (0onn) 1985 66.86 19.6f3 0.n 2,4R 5,10 00on 7LA0 0.00 0,nn 15.65 13.36 1,49 1.351991 774.73 52.18 5R,51 R8825 51,53 51.95 74,31 9n,16 61,6R 56,16 71.n3 47,20 71,77

2 population with water 19M5 s.05 15%99 .0no 1.79 6,76 o,nn 5,32 n.nn n,nn R8.47 12,R1 1.9 1.39s1991 54.4n 39.56 67,R 61.45 6R,1 61,82 46.5R 66,67 7n,52 27.24 61.02 4R.9R 69.4R

Number of connections ('Onn) 1985 11.17 2,23 0.0o 0.47 0,44 0.00 1,15 0.n0 0.n0 3.3R 2,RR 0.31 0.311991 74.43 s.n6 5.01 R,13 4.42 4.93 6.90 7,41 5.59 6.66 7.52 4,63 7.17

Volume sold** millioni ml/year 1qR5 4,80 0.98 00o 0.20 0,15 o00o 0,3 3 ,nn n00 n 1.5n 1.42 n.11 0.061q91 20,39 1.74 1.31 2,14 1,29 1,27 1,8R 2,23 1.46 2.32 2.0 1.15 1.6n

M3 /Month/Connection 198S 35.Rl 36,62 0.0 35,46 28.41 n.00 27.54 n,n. 0,00 36,9 41.09 29.57 16,13199l 22,83 28.66 21,79 21.94 21.85 21.47 22.71 23,4q 21.77 29.0n 22.16 20.70 1,60

Production per capita - lcd 19Rs 246.07 1fiO69 0,nn 259,94 94,Rn 0,no 157,n3 0.00 0.0 n OR8.3 416.nn 237.95 143.251991 84.R3 107,4R 72,17 7R.16 80,69 7R880 81,55 79.72 76.30 133,15 9A.76 7R.53 71.86

% unaccounted water 1985 20,.7 15.0n 0.00 15,00 15.00n 0.0 15.00 n0nn o00n 15.0n 30,nn 15,nn 1s,no1991 1S5.0 15,00 IS,0n 1i.no 19.00 Is.00 15.0o 15.0o 15.nn 15.nn 15.0n 15.00 15.00

Volume produced - million ml 19R5 6.1 .1s 0.00 0,24 0.1R 0,00 n,45 n.nn n.nn 1,76 2.03 0,13 o0.71991 23,99 2,05 1.54 2.52 1.52 1,49 2.21 2.62 1.72 2.73 2.35 1,35 1,RR

Notea: Percentage of population with water is sometimes lower than 60% target hecause the base population includes cities and towns under thePDAM jurisdiction which are not covered by the project.Figures may sometimes differ alightly from those presented in individual consultant reports due to rounding.

Cf1

1seCO £tAtT JAVA vTU 3mn. PROW.C

Dlstributlen Of Couuetlum ooA Demud by n aid by Cemumar Catego - 4,ber of ComeCttons /a

COSVWrlolo W2AV2 AlUtU w 1o0300 rACTAN sn A 11 s - v013 IIA! 9480243 WATAMIL P NAsour-0 1040024140 MTALCAlfOIR? (eu a) S X S S 7

IA

SIadfilpha 64 1.30 Al 0.4R 142 1.75 sn 1.02 4C 0.92 9 1.11 n 1.14 2A A6A 7n 2.n0 127 1.49 44 0.S ion 1.9 gm 1.7

t1Rtdne,2sal M-ia 741 15.41 145 M4.M4 2,15s 14.471,242 2.1 7,2 5 I 1m 2.41 2,141 t1n.4 1744 21.12 94 If,." 1,317 20.S - - 1,179 21.45 2,259 12.S1 I1.75s 21.112-20 1.071 21.17 a4s 2.41 2,311 34.42 2,243 21.25 I2,2s 22.41 2,2ln 23,13 1,797 22.71 941 24.90 1,145 20.19 1,267 42.22 12,19 24.14 2,259 m2S 192 23 24.n21-30 344 6.40 -- 94 2.47 - - - - n10 7.44 1,127 42.11 1631 1. - 4*,12 1.41I up 447 3.8 I? - 217 14 - - - - 917 I1.77 - - 74 I2.n - - 12,55 2.1

subtotal 2.641 32.21 2.490 11.73 -.4S 0 49.71 2A.4AS 5.49 2.210 44.44 I. AM 419 MIS. 4.4 1 0jJ91 31.74 I.5 42,10 *4 44.2 1.151 51.24 4SIP A 41.02 4.24 51.2

Oovurnut 47 0.93 30 0.C0 56 A.4s 4 2.00 n 6 0.12 40 n0.n 42 N.U2 is n.4l A 0.22 4 M.45 14 0.11 In 0.21 404 0.5Commrvtal 134 2.73 7 n.24 IS 0.164 46 2.l5 247 1.1 14 A .4 1 5 n0.0 127 2,99 442 4,92 497 11221 Al 2.12 112 1.56 2,29 1.0Induvtrial I 0n02 I2 0.24 16 0.20 22 0.24 14 0.10 t2 0.12 21 0.217 14 0,9 sn 0,122 20 0,27 - - - - lit 0tsoilal 41 0.93 24 0.54 sO 0.2. I2 2.41 202 2,05 44 0.67 55 0.49 7n ls , 40 0,60 14 I,4 246 0.54 12 n0.42 643 0.sPorts _ * _ - I 0,02 - - - - I

Sbtotal 233 4.60 717 "j f4 i tAN 249 I S ! 1!!. -s0 274 . 22 2.14 2I4 1.21 542 I A.24 21I 24.20 20 23j 160 2.31 1149 i

Totul BRA 2.942 54.14 2.42 35 12 5.949 721.2 1074 14.94 2.157 J1 l! 3 .777 'A 7 1 .407 4.10 1.114 31.42 4.742 712.4 7921j j*.lnn 2.702 'IO11 4.1 477 2 4 .4 42 .

Itiedpipeu 44 0o91 124 2.47 72 0.49 47 0.4s sn 1202 43 21.20 1 1.02 47 I2.n 40 0.40 - - 41 0.91 4l 0.44 712 n94YostideMs 2,m $1.19 1,904 s57s 1,99 24.47 1,912 40.04 2, 29 44.44 21.4 42.54 1s79y 4 *.00 1,22 Sim1,752 24.10 - - 1 772 14.21 2,209 1m0. 26,36A 11.49bnUosdontk 79 12.5 173 2.45 120 1.4A 120 2,44 211 2.70 224 2.52 it? 2.47 147 3.34 207 I,A2 - - 22 2.1s 134 12.7 170 1.l2

Titat TIM 1224 4%1.1 16 .102 1.9 182 24.34 2.314 4144 2.317.1 4LI 1J-2L -4 26 4.207 12.90 -.1J 7 Ln014 LA 2.M12, 412.7 2.192 $1 'AS,14 2 0 1U 74

65D TOTAL s. n60 0on.0o 5.o02 1 n 4.121 MOM 4.422 mo.o00 4.9 M a .nlo A-O IM Ar 7.124 200.00 5.591 moMno 4MAI 20s. 122 200.0 431 I20.0n 7.11.270 j tC0 l S192i IJ no

AlU 2

-59 2

sECN Al JAVA VArES SUIPPLY DRJC

Utseribttin of 7 netionand Deemod by rawA and be CM Cateory(Water coneuwptta per coomcclon per moutb -. )_a

cooinmptioc USE.r MOAMMOA 1500 SOUDCategory (eC U) tEAl! 38A10M3 POERU PACrTYJ CLTE ECANUCE Uh WLITA PASIUVAM PAShfANF LTNl MD" TOAL

NIAStaniptpe 110.15 176.J6 130.n0 225.00 22S.00 114.40 13.00 m,2Sne 10R.S1 252.MA 209.ns 23n.no 14.22

WeS -deutiAl 0-on .Te o.cn *,oo to1 q.a0 R.5 ? .0n o .9o R,X onw usa 7.37 A.7111-20 17.19 13.00 15.O 15.00 15.n0 17.21 I.0D 13.n0 1R.21 10.11 13.n0 15.IJ 16.1s21-Wn 24.0 0.00 n.nn 0.00 0.0D 22.74 nno o0en 24.S 2n.26 22.39 n0D 21.5s10 up 72.05 n.00 n.no n.n0 0.nn 58.04 0.00 0.n0 fsA.o3 n0.n S7.1 n,nn 56.50

Subtotal 24.95 11.50 11.5n 11.51 11.50 sn161 ll,Sn 13.4' 25.74 Is5.1 I541 11.80 1i.00

rowewnst 17.21 5 16.77 11.95 35.57 43.11 10.75 a7 77.113 43.61f 400 L.50 23.11 21.13rc sel 50.14 3s.43 141.13 2n.73 7.11 39.99 106.20 5.t2 ss.os 14.31 11.03 4.75 2*.64

Industrial e.nn j'. 516.13 AS.n5 36.no 7s.nn 20.15 45.En M0.61 107.50 0.00 n,no 144.1nSocial 13.0QR 67.11 237.2n 32.33 71.29 71.00 1A110 31.53 49.7t 97.16 66.0O 152.71 113.04Parts o.00 0.00 o.nn n.no 0.00 n0.n o.00 o.0n n.n0 10n,3.n 0.0D n,nn 10.nn.0n

Subtotal 64.5 11.26 167.41 4R.37 32.27 46.04 204.65 10.22 S4,70 35.96 21.55 14.42 52.09

Totel FM 10.50 25.22 21.02 20.63 10.42 21.75 23.56 19.20 31.14 22.11 3.56 16.0R 22.16

StandpLpes 171.73 123.11 154.00 197.23 193.00 173.23 IQRno 103.00 lR.n0 o.0n 13.21 198.0n 17A.%6%auldaftia 22.77 20.30 10.50 10.80 19.30 10Q.0 19.3A 03 10 .30QA 0.00 10.3fl 10.30 20.02

on-domestic 1e.78 12.30 14.79 10.70 10.30 19.31 l0,o0 2e0.n Manso 0.00 19.01 14.m 19tRI

Total 3 2zs.9n Z1.61 24.29 21.70 21.55 21.38 21.31 71.14 25.55 0.00 23.47 21.4 215.7

CED TOTAL 2P.57 21.70 21.4n 21.RS 21.41 22.71 21.41 21.73 2R.97 22.11 20.61 1P.54 22.70

a Cnslt antes' feasibility reports, nctober 1954.

-60 - 3Page 1

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

Surabaya Water Supply System and Demand Analysis

General

1. The Karangpilrang water treatment project will provide an additional1 of treated water to the city of Surabaya, the provincial capital ofEast Java. The city is situated at the mouth of Kali Surabaya on the Straitof Madura. The present population is estimated at approximately 2.2 millionof which about 50Z are supplied with potable water through the existing PDAMdistribution system.

2. The basic concept for the project originates from the 1976 long termwater supply master plan for Surabaya. The report recommended a four stagesource development sequence utilizing water from springs located to the southof Surabaya, followed by construction of a new water treatment works in theWonokromo area which would abstract raw water from the Brantas/Surabaya riversystem. Improvements in source works and distribution since 1976 have broadlyfollowed the recommendations of the long term master plan and further exploi-tation of the upland springs south of Surabaya and other sources is currentlybeing investigated. However, in view of the urgent need for water inSurabaya, PDAM chose to give higher priority to a source which could beexploited in advance of the major source developments. Abstraction from KaliSurabaya in stages which would match the available finance was thereforeselected as the priority scheme.

3. Studies and feasibility level designs for the Karangpilang watertreatment plant were commissioned in the second half of 1983 and, followingsubmission of the draft final report at the end fo November in that year,extensive review and discussions took place with the PDAM and the Bank. Thisresulted in final selection of the Bulu site near Karangpilavg for the intakeand treatment works. The final report, incorporating agreed amendments, wassubmitted to PDAM in March 1984.

Existing Level of Service

4. An analysis of PDAM Surabaya's current level of service is shown inTable A3.1 below. Accurate records of the numbers served are not availablebut the following estimates have been made by consultants:

(a) Residential connections: 74,000 connections supplying 85,550 m3/d;assuming a per capita consumption of 200 l/head/d gives an estimatedpopulation served of 430,000; and

(b) Public taps and vendors: 4,164 connections supplying 13,330 m3 /dand assuming 20 1/head/d gives an estimated population served of670,000.

- 61 - ANNEX 3Page 2

Table A3.1. PDAM WATER SUPPLIES(JUNE-AUGUST QUARTER 1983)

Customer Total supplies No. of Average demandclassification (m'/month) (m'7day) connect- per c3nnection

ions (m /day)

Commercial 591,660 19,723 10,747 1.83Industrial 320,517 10,684 1,711 6.24Other enterprises(Sidoarjo Gempol

Supply) 288,146 9,605 42 228.66Port Authority 14,272 475 3 158.33Government 991,794 33,060 2,155 15.34Social institutions 61,911 2,063 558 3.69Residential 2,566,656 85,555 73,611 1.16Vendors 399,904 13,330 4,164 3.20

Total 5,234,860 174,495 92,991 -

A5. The total population provided with piped water by direct connectionor through a vendor is therefore estimated to be 1.10 million. Residentialsupplies account for 57% of wIter sold by the PDAM. Supplies to nondomesticconsumers total some 75,620 mI/d. The production capacity of existing sourcesis 3.32 m3 /s, equivalent to 286,850 m Id. From records maintained by the PDAMof water produced and billed, the amount of unaccounted water in terms ofvolume and proportion of total production in recent years is given in TabLeA3.2 below.

Table A3.2. UNACCOUNTED WATER SURABAYA PDAM

Year 1980 1981 1982 1983 1984 /a

Total production (million m3 ) 74.1 76.9 89.8 101.7 74.6Amount billed (million m3) 55.9 56.3 60.2 60.4 42.2Unaccounted water (million m3) 18.2 20.5 29.6 41.3 27.3Unaccounted water (Z) 27 27 33 41 36

/a Records for 1984 available to September.

-62 - ANNEX 3Page 3

6. The main source of water for those without a piped supply is handdug wells which tap the shallow aquifer underlying the city. Water from thesewells is often polluted and shows a trend of increasing salinity levels.Rivers and canals within the city are heavily polluted and their objectionablecondition deters people from using them as a source for drinking or cookingwater.

Existing Facilities

7. Sources of Supply. Potable water for piped distribution within thecity is obtained from two main sources:

(a) Ngagel Treatment Works, which provides 3,000 I/s by treating rawwater abstracted from the Kali Surabaya at Jagir Dam; and

(b) Pandaan and Umbulan Springs which provide some 320 ls of waterdelivered through Long transmission pipelines. Gempol and Sidoarjoare also supplied from these sources and consequently only about 200I/s reached Surabaya.

3.08 Ngagel Treatment Works. Flow rates in the lower reaches of KaliSurabaya vary between 5 cu mTs in the dry season and 400 cu m/s at times offLood. The quality of raw water at Ngagel intake is poor exhibiting the rangeof major parameters shown in Table A33 below.

Table A3.3. RAW WATER QUALITY AT NGAGEL INTAKE

ValueParameter Unit Minimium Maximium

Suspended solids mg/l negligible 6,000Organic matter(permanganate value) mg/l 02 4 30

Turbidity mg/l 5 500Dissolved oxygen mg/l 0.5 6

9. The first treatment works at Ngagel (Ngagel I) was constructed witha capacity of 80 1/s in 1922. Since then it has been expanded in numerousstages to its present capacity of 1,000 1/s. In 1963 the first stage of theNgagel II w-orks was constructed with a capacity of 500 l/s, and in 1969 it wasextended to 1,000 l/s. Construction of Ngagel III works was completed in 1982and this added a further 1,000 ls capacity to give a total combined worksoutput of 3,000 1/s. Water for the thre works is abstracted from KaliSurabaya immediately upstream of the Jagir Dam.

10. Ngagel I treatment works comprises a multitude of small units whichinclude three separate sedimentation systems in parallel, six banks of rapidgravity sand filters, and gas chlorination., The Ngagel II works wasoriginally fed directly from the river but difficulties in operation led to

- 63 - ANNEX 3

Page 4

the introduction of the two presedimentation basins upstream of the plant.The treatment works comprises radial flow primary clarifiers, 'accelator'clarifiers, rapid gravity sand filters and gas chlorination. Ngagel III worksfLow is fed through three presedimentation units and is then pumped to a flashmixer prior to treatment by direct filtration and chlorination.

11. During the feasibility study phase the consultant assessed theperformance of the Ngagel installations using, amongst other means, turbidityas a parameter to define the overall efficiency of the treatment provided bythe three plants. In general, Ngagel I and II were shown to perform wellwhile Ngagel III was consistently less satisfactory. Trials are currentlybeing carried out by the PDAM to achieve effective coaguLation/sedimentationoat Lhe Ngagel rrI works. The Level of operation and maintenance at the Ugagelworks is very high and the poor performance of the Ngagel III plant reflectsthe lower standards which were apparently adopted for its design.

12. Spring Sources. Pandaan springs were first developedi for supply toSurabaya in 1903. No treatment, apart from disinfection, is provided beforetheflow is conveved over a distance of 36 km to Surabaya in a 450 mm diametergravity main. Umbulan spring was first developed in 1932. Water quality fromImbulan is also good and apart from chlorination, the water does not receivetreatment. Flow is pumped over 75 km in two stages; initially through a 400mm diameter main to Gempol and from there in a 450 mm diameter main toSurabaya.

Distribution System

13. The piped distribution system in Surabaya has been extended steadilyduring the last 30 years from a total pipeline length of 184 km in 1969 to 502km in 1980. The most recent program of extension. comprising 22 km of primarymains (400 - 1,200 mm diameter) and 60 km of secondary mains, is currently inprogress under Bank Loan No. 1709-IND. The design basis fcr the latestextension work incLudes for the distribution of supplies from existingsources, amounting to 3,330 lls, and from future sources of 3,000 l/s. Apartial allowance for peaking of demand is also included and the proposedincrease in supply from Karangpilang can be distributed withlout furtherextension of the primary network.

14. The totai effective storage capacity within the system is estimatedto be only 6,000 m . Due to the present imbalance between demand and supply,many sections of the network suffer from low or zero pressure during part ofthe day and the provision of additioal storage capacity is justifiablyconsidered to be of secondary importance.

Population Forecasts

15. Forecasting of the future population in Surabaya has been based onthe most recent census data and previous studies. The extent to whichprevious estimates have taken into account such factors as migration and-egional structure planning was reviewed by the consultant for the FeasibilityStudy. The population forecasts adopted for project planning are summarizedin Table A3.4 below.

-64 - ANNEX 3Page 5

Table A3.4. POPULATION OF SURABAYA

Year 1980 1985 1990 1995

Population(mln) 2.02 2.38 2.86 3.35

Future Water Demands

16. In preparing the 1983 revised estimates of future water demands, theassumptions of previous studies, principally the Surabaya Master Plan Study(1976) and the Surabaya Metropolitan Area - Urban Development Planning Study(1983), were reviewed and modified to take account of new data. Theseincluded: recent and proposed rate- of providing new connections; the latestproduction and supply figures; PDAM policy on provision of public taps anddata obtained from a brief field study of water consumption in two sampleresidential areas. Water consumption figures adopted for the water demandforecast were 200 l/c/d for residential connections and 20 l/c/d from publictaps.

17. During the current project preparation, these demand estimates werereviewed in the light of the current PDAM plans for installing new housec--nnections. A revised demand forecast has been established, which issummarized in Table A3.5 and detailed in Table A3.6. This forecast is thuseffectively a "constrained" demand, dependent on the physical capacity of thedistribution system. For comparison purposes, the demand forecast which wouldresuLt from applying the current Repelita IV planning criteria has also beencalculated and is shown in Table A3.7. It can be seen that the "tconstrained"demand is well below theRepelita IV criteria figure, even after thesubstantial expansion in system capacity in the period 1988 and 1995. (MHMPTables 3.4 I and II).

18. The proportion of unaccounted water is presently estimated at about37% of production. For the purpose of orojected demand estimates this wasassumed to be a temporary condition, to be rectified by a program of wastecontrol, and a uniform figure of 25% of production was adopted. The PDAM iscurrently preparing to engage consultants to recommend procedures for limitingunaccounted water to acceptable levels through leakage control, meter replace-ment and reductiors in administrative losses.

-65- ANNEX 3Page 6

Table A.3.5. PROJECTED AVERAGE DAY WATER DENANDS FOR SURABAYA(in cu mNw)

Year 1985 1990 1995

Total revised "constrained" demand,as used in projections (Table A3.6) 3.31 4.31 5.77Total demand which would apply under currentRepelita IV planning criteria (Table A3.7) 5.95 7.11/a 8.30/a

/a these figures are based on Repelita rv criteria (stipulated for 1984-89)for the forecast population in the corresponding year.

The Proposed Scheme

19. Several options for development of new source works for watersuppLies to Surabaya were identified in the 1976 Master A4an Report,including: increased abstraction from the Brantas Basin, use of upland springsources, groundwater and abstraction from Kali Bengawan Solo. Groundwater wasshown to be of low potential, development of spring sources would require moretime than surface watc -nurces and abstraction from the Brantas Basin wasshown to be the least - alternative for surface water abstraction. KaliSurabaya was selected as the source after consideration of water managementsystems in the Brantas Basin and pollution problems.

20. The 1983 feasibiLity study examined three possible treatment workssites on Kali Surabaya; Kebonagung (6.5 km upstream from Ngagel TreatmentWorks), Bulu (10.5 km from Igagel) andKrikilan (21.5 km from Jgagel). Rawwater quality was a key factor affecting selection of the recommended site. Amarked decline in water wuality and increasing risk of major industrialpollution incidents, for sites close to Surabaya, were idrntified in earlierstudies and confirmed by a further program of sampling and analysis carriedout in 1983.

21. Selection of the least cost option (the site at Bulu) wasrecoimended provided that satisfactory pollution control measures areenforced. This approach is considered reasonable since these measures are inany case necessary to improve conditions at Ngagel.

22. The principal components of the recommended Karangpilang schemecomprise; river intake and raw water pumping station, presedimentation tanks,flocculation units, clarifiers, filters, chlorinators, clearwater reservoirstorage, forwarding pumping station and a 7.5 km trnsmission pipeline. Thefinal layout of the seheme components will be determined during the detaileddesign stage (due to be completed in June 1985).

- 66 - ANNEX 3Page 7

23. The river intake will be sited on the left bank of Kali Surabaya atBuLu. The primary and main treatment units are separated from the intake bythe main road along the riverside and will be located on an adjacent siteimmediately north of the road. PDAM are in the process of acquiring la3dsufficient for the proposed 1 m3/s works and its later extension to 3 m Is. Afurther extension t3 the site will be reserved to allow for possible long-termdevelopments to 5 m /s capacity.

24. The proposed treatme,t process is a conventional one, based onanalysis of raw water quality- and operating experience at the existingNgagel works. The proposed clarification process will be based on the use ofupflow floc blanket clarifiers together with rapid gravity filters.

25. The 7.5 km long transmission pipeline will have a diameter ofapproximately 1,000 mm and feasibility study designs assume welded steel con-struction with corrosion protection. It will be connected directly into thenew distribution mains which are shortly to be constructed on the west side ofthe city.

Water Resource and Source Development Aspects

26. Water shortage in the Lower Brantas delta occurs in the dry seasonand a proposed agreement berteen the Directorate General Cipta Karya andDirectorate General Water Resources Development provides for implementation ofmeasures aimed at saving water at the same rate as required for supply toSurabaya. The recommended measures inciude lining of irrigation canals,repairs to lifting gates on Kali Surabaya and improvements to irrigationoperating procedures to Kali Surabaya. The costs of these measures areincluded in the estimates for Part B of the Project.

28. Studies and designs for further development of the Umbulan springsource are presently being prepared by consulting engineers financed byJICA. It is understood that since the Umbulan waters would benefit people ina number of towns in addition to Surabaya, a separate operating authority maybe established from wh5ch Surabaya would be a major consumer.

29. Under the long-term plan for larangpilang, abstractions from KaliSurabaya will increase in stages to 5 m Is. Comprehensive resourcedevelopment is required for this increase and is being considered by the GOI.

30. The water source development sequence adopted for the purpose ofpreparing financial projectio s for PDAM Surabaya assumes a first stage devel-opment at Karangpilang of 1 m Is in 1988 followed by a second stage

1/ Raw water quality in Kali Surabaya does not currently meet WHO standardsfor raw water to be used for drinking water purposes. Industrial andfecal pollution parameters exceed reasonable levels and legal limits butGOI has formulated an action plant to abate the problems in Kali Surabayaprior to commissioning of the new plant. Details of the action plan aregiven in Annex 6.

- 67- ANNE 3Table A3.6

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

Surabaya - Water DemanC Estimates

"Constrained" Demand Used for Projections

1985 1990 1995

No. of house connections 86,200 129,000 229,000

No. of public taps (concessionaires/vendors) 4,400 5,400 6,400

People served

House connections 603,400 903,000 1,603,000

Public taps 880,000 1,080,000 1,280,000

Consumption

House connections (m3/day) 120,680 180,600 320,600

Public taps (m3/day) 17,600 21,600 25,600

Nondomestic (m3/day) 65,000 74,750 95,000

Losses (25Z of production) (m3/day) 67,760 92,320 147,070

Subtotal (m3/day) 271,040 369,270 588,270

Total (inscl. Greslk supply:0.17 a /sec) (m /sec) 3.31 4.44 6.98

- 68- ANNEX 3

Table A3.7

INDOESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

Surabaya - Water Demand Estimates

Demand Using Repelita IV Criteri-

1985 1990 1995

Total population 2,380,000 2,860,000 3,350,000

Population to be served (70%) 1,666,000 2,002,000 2,345,000

People served

House connections (70Z) 1,166,000 1,401,000 1,641,000

Public taps (30x) 500,000 601,000 704,000

ConsuMption

House connections (m3lday) 244,900 294,200 344,600

3Public taps (m3Iday) 15,000 18,030 21,120

3Nondomestic (m3/day) 155,940 187,340 219,430

Losses (20% of consumption) (m3/day) 83,170 99,920 117,030

Subtotal (m3/day) 499,000 599,490 702.180

Total (incl. Gresik supply:0.17 m /sec (m /sec) 5.95 7.11 8.30

-69 - ANNEX 4Page 1

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

Training Component

1. Cipta Karya's training strategy for the urban sector is consistentwith GOI policy to provide regional autonomy through development projects and,also, with the Bank's aim to assist institutional development within thesector. The First East Java Water Supply Project included a substantialtraining component (Loan 2275-IND) that is still ongoing. When completed thetraining component will have assisted CK in:

(a) establishing a permanent provincial training unit (PTU) in EastJava, capable of meeting not only the immediate training needs ofthe project beneficiary cities and towns, but also able to supportlong term provincial training for planning, design, construction,management, operation and maintenance of water supply enterprises,and

(b) strengthening the manpower development of the Directorate of WaterSuppLy (DAB) in Jakarta through part-financing of the HumanResources )evelopment Project (HRDP), thus enabling DAB to givegreater support to the regions, for instance in the provision oftraining materials, training of trainers etc.

2. Specific training activities under Loan 2275 in relation to the dualobjectives outlined above are listed as follows:

(a) Part-financing (together with Australian Aid and GOI) of a team ofconsultants operating in East Java who will (amongst other things):

- establish a PTU capable of serving the whole East Java region.

- give institutional support to the 8 PDAMs which incltude 50towns in the First East Java Water Supply Project.

- provide classroom training for personnel of the 50 towns (anactivity in which other water enterprises will be invited toparticipate, up to the limit of available funds).

- provide in-service training for the same 50 towns.

(b) Financing of a two-year contract fox an expatriate manpowerdevelopment expert, based in the DAB Jakarta.

(c) Part-financing (together with Netherlands Aid and GOI) of a team ofconsultants in the Human Resources Development Project (HRDP) inJakarta, which is strengthening central activities, especially thedevelopment of training materials and training programmes.

-70 - ANNEX 4Page 2

(d) Financing of local consultants to increase the trainingopportunities ava ilable to the regions, in the form of "classroom"and "in-service" training.

Proposed Training Component

3. The training component of the Second East Java Water Supply Projectwill continue to develop and reinforce the dual training objectives of theFirst Project. Additionally it will assist CK to implement more rapidly itsbroad long-term Sector training strategy by financing the establishment ofPTUs in other provinces. The objective will be to create PTUs in locationssuitable for their subsequent development as Regional Training Centers. Thescope of the Proposed Training Component would include the following elements:

(a) East Java Activities

(i) Identification of training needs and provision of formaltraining for personnel involved in the Second East JavaProject including, but not necessarily limited to:

- staff of Provincial/Kabupaten Public Works- staff of PNU/-PIU- personnel of 12 PDAMS- contractors

(ii) Development and expansion of the East Java PTU practicaltraining facilities at its location on the WIYUNG complex.

Ciii) Technical assistance to enable the PTU to provide in-servicetraining to PDAMS as a follow-up to formal trainingprograms.

(b) Central Activities

(i) Extension of the HRDP to:

- provide support to increase the coverage of formaltraining programs to reach target groups including waterenterprises staff, DAB staff, community groups,contractors, and local consultants.

- develop the capability of DAB and PAB staff, and localconsultants to provide systematic, performance oriented,in-service training to water enterprises.

- training DAB staff and local consultants to assume therole of HRDP.

(ii) Development of training facilities at Pejompongan Jakarta,as the National Training Development Center (traininglaboratory, practical training workshop, cpgrading classroomfacilities).

- 71- ANNEX 4Page 3

(c) Sectoral Objectives

To assist the estabLishment of provinciallregional training centerselsewhere in Indonesia, for example, by establishing a PTU atSemarang, and upgrading existing training facilities at Medan, UjungPandang (Sulawesi), and Bandung, to PTU standards.

Training BeneficiariLs and Support Requirements

4. Part A of the Project will establish water supply systems in 12major towns and 63 smaller towns (IKK), all of which are located within 11Kabupaten. Only 4 of the "mother towns" of these 11 Kabupaten are included inthe project. A fifth one was a beneficiary under the first East Java Project,and the remaining six already have water supply installations. However, fortraining purposes the staff of these 6 towns will be included in the scope ofthis proposal, as many of them will be key personnel in the management,operation and maintenance of the subsequent Kabupaten-wide water enterprises.

Total staff members involved in these 11 Kabupatens could be of theorder 900 persons by 1988, of which the following should be considered aspriorities for formal training:

- Directors and Senior Managers 40- Middle Managers and Supervisors 360- Administrative/Clerical Staff 50- Technical Operators 120

Total 570 persons

Other target groups for training are:

- Staff of Kabupaten/Provincial P.U. 100 persons- PK.U/PIU Staff 50- Contractors 80

In addition, it is envisaged that where spare places are available,staff of other PDAM's in East Java will be invited to participate in thetraining.

Output from centrally supported activities in Jakarta will include25 additional formal t--aining courses per year and 20 additional "in-service"training projects per year.

It is expected that Netherlands Technical Assistance will beavailable to continue further support of expatriate consultant input into the"Human Resources Development Programme (HRDP)" providing Government ofIndonesia will also continue its support. Here it is proposed to includeapproximately US$1.3 million for local consultant and other support to HRDP.Materials for the Consumer Education activities are estimated at $100.000.

-72 - ANNEX 5Page 1

INDONESIA

SECOND EAST JAVL WATER SUPPLY PROJECT

East Java Provincial Movitoring and Development Unit

1. PDAMS are responsible to their district heads (Bupatis or Walikotas)and through a lengthy administration chain to DDN. Substantive supervision ofoperation and maintenance by higher levels of government are importantbecause, as experience has shown, for various reasons, PDAMs may not engage inthe best of utility practices due to shortage of funds, staff and experience.

2. Periodic review of operating results of PDAMs under the Bankfinanced projects indicates large amount of unaccounted for water; operatinglosses; poor collection of water bills; and large accounts receivablesparticularly from government agencies at most PDAMs. Review of staffingindicates several vacancies at senior levels; high incidence of existing staffwho are not permanent employees of the PDAMs and are frequently withdrawn; andlack of authoritative direction to support the organizational development ofPDAMs. In response to this urgent need, the government has agreed to assignresponsibility for monitoring and development in East Java to Provincial CiptaKarya whose functions would include (i) provision of technical and financialguidance and related implementation support to the PDAMs; (ii) supervision ofthe operation, finance and management of PDAMs; (iii) review of an assistancein the preparation of tariff and other charges; (iv) appraisal of investmentproposals and review of their priority and justirication; and tv) provision ofchannels to exchange information on the improvement of systems and procedures.

3. The monitoring and development function is expected to be carriedout at local, provincial and national level. Separation of functions at eachlevel is indicated below.

Local Level

4. The functions of monitoring at local level is to enable theManagement and the Board of individual water enterprises to review, on aregular basis, the technical and financial performance of their enterprise,with a view to improving it.

Provincial Level

5. The functions of monitoring at provincial level nre to enable theProvincial Government, together with Provincial representatives of CentralGovernment, to:

(a) regularLy review the technical and financial performance of allPDAM's within the Province;

(b) identify problems in individual water enterprises;.

- 73 ANNEX 5Page 2

(c) provide technical and financial expertise in order to assist waterenterprises to solve problems identified;

(d) assist in appraisal of investment proposals and review of theirpriority and justification;

(e) compare Provincial development targets with actual results; and

(f) provide regular reports and statistical information to CentralGovernment.

National Level

6. The functions of monitoring at Central Government level are to:

(a) compare overall national, and individual provincial, water supplyperformance with national targets;

(b) be able to respond to out of line situations, identified atprovincial Level, through the provision of additional technical andfinancial assistance, which is beyond the resources of the province;and

(c) obtain the information that will facilitate future planning in thewater supply sector.

7. Monitoring function at local level is being developed as a part ofinstitutional development support provided to each project PDAM. Monitoringat national level is carried out by CK and DDN. Consultants funded under Loan2275-IND are working with the two agencies to assist them in effectiveLycarrying out the monitoring function. The monitoring at provincial level hasbeen almost non-existant and deserves special attention. The arrangementsdescribed below have been developed following a study by the consultantsreferred above.

8. Experience has shown that in order for the monitoring unit to getaccess to central government support and funding, it must be a project ofCipta Karya. This would also permit the recruitment of suitably qualified andexperienced staff by being able to offer adequate salaries. At the same time,in order to obrain the involvement and authority of Provincial Government,without which it will be difficult to function effectively, it should beheaded directly by the Chief of PCK. Should the Head of the Monitoring Unitbe below the equivalent rank of Bupati, we foresee problems in obtainingcompliance from PDAMs. The Head of PCK who reports directly to Ranwil P.U.,has sufficient seniority, authority to ensure that reporting procedures arefollowed by PDAMs via Bupatis.

_ 74 - ANNEX 5Page 3

Organization of Monitoring and Development Function

9. The staffing requirement would be as follows:

1 Manager1 Electrical/Mecharnical Engineer1 Distribution Engineer1 Water Supply Engineer3 Assistant Engineers1 Accountant3 Assistant Accountants3 Secretaries3 DriversWatchman etc.

The unit would be provided with equipment and vehicles as detailedbelow.

10. The staff will be initially located at PCX office. It willeventually move to the proposed new accomodation within PMU/PIU complex.

11. The estimated capital and operating costs expected to be incurred bythe unit are as shown below. The loan would be used to finance civil worksand consulting services.

(a) Capital expenditure to be financed through the project will be asfollows:

Item Amount(Rp. million)

Office buildings 6503 vehicles 233 motor cycles 3Technical equipment (see para 10) 40Office equipment 15Water quality testing equipment 2o

Meter testing apparatus 20Miscellaneous equipment 100

(b) Annual operating costs

Maintenance (0.5x) x capital cost) 1,100Staffing costs 32Travel, subsistence 48Vehicle running expenses 15Equipment maintenance 6Office utilities, phone etc. 12Water quality testing (B.T.K.L) 10Seminars/Workshops 20

1,243

- 75 ANNEX 5Page 4

(c) Foreign consultants - 48 m.m. to be financed by IBRD(24 m.m Engineer, 24 m.m. Financial Management includ-ing office space) 880

Total 3,510

12. Counterparts to the foreign consultants would be the senior staff ofthe provincial monitoring unit since this will strengthen the long termcapacity and effectiveness of the unit.

13. Schedule of Technical Equipment Requirements is as follows:

Cost Rp. million

Leak Detectors 5.5Metal pipe locator 1.5Non-metal pipe locator 5.5Bacteriological testing equipment 1.5Chemical/physical testing equipment 2.5Flow meters 3.0Pressure meters/recorders 3.5Tool kits 3.0Equipment for punp testing 1.5Electrical/mechanical testing equipment 2.5Drafting equipment 5.0Miscellaneous 5.0

Total 40.0 million

14. Next steps required for implementation

(a.) Public Works and Home affairs to officially agree on the location ofthe monitoring unit within the provincial government structure.This agreement is expected by end July 1985 i.e. by the time of thenegotiations for the proposed Second East Java project.

(b.) Complete other formalities at provincial level to transfer themonitoring and development responsibility to PCK.

(c.) Cipta Karya to agree on GOI allocation of monitoring budget in timefor inclusion in 1986/87 budget.

{d.) Consultants (W.D. Scott) to complete proposals on performanceindicators and reporting formats by end Nay.

(e.) Home Affiars and Cipta Karya to agree on performance indicators andreporting formats by end July.

-76 - ANNEX 6Page 1

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

Pollution Control in Kali Surabaya

1. The consultant's feasibility study report identified the risk ofsevere industrial pollution occurring in Kali Surabaya and the adverse effectsthis would have on the existing works at Ngagel and the proposed works atKarangpilang. The problem is being tackled in two stages: a first stagestudy, aimed at preparing recommendations for improvement; and a second stage,for implementation of the recommendations. The GOI, through the DAB andfinanced four Loan 2275-Ih-D, has appointed consultants for the first stagestudy, in parallel with the design of the Karangpilang treatment works. Thefindings of the consultants are as follows:

(a) pollution loads are generally higher at high river flows due toresuspension of deposited organic solids;

(b) main pollutants are organic wastes (including oil and grease),suspended solids, ammonia and coliform bacteria in excess of bothlocal stream standards and WHO recommendations for raw water qualityfor drinking water purposes;

(c) about 19% of che organic pollution originates from domestic sourcesand 81Z from industrial sources (of which 94% was identified asemanating from just four factories); in all cases the dischargesexceed the effluent standards set by the East Java Governors DecreeNo. 43/1978 as shown in the following table;

rd) the 5.ndustries concerned discharge about 80 tons per day ofsuspended solids which have a direct effect on the design andoperation of the proposed Karangpilang water treatment plant;

2. Design of the proposed treatment plant allows for dealing with thelevels of pollution identified but operation of the plant under such condi-tions would cost more (mainly due to chlorine consumption) than if betterquality raw water were available, moreover the risk of contamination break-through is possible at times of excessive pollution. In view of the limitednumber of point sources of the pollution concerned and the illegal nature ofthe discharges, it is considered appropriate that the existing GOI monitoringand control system be empLoyed and strengthened as necessary to correct thesituat:.on.

3. At the present time pollution control authority in Surabaya isvested in several overlapping jurisdictions, including the Ministry of PublicWorks (D.G. Water Resources Development), Ministry of Health, Ministry ofIndustry and Ministry of Environmeat and Population. The efforts of thesevarious bodies are being coordinated at the provincial level through therecently formed Demography and Environmental Bureau (BKLH) of the Governor'soffice. The role of BKLH is expected to be strengthened shortly and more

- 77 - ANNEX 6Page 2

authority and staff provided in order to undertake its mandate moreeffectively.

4. Following consultations with KLH and BKLH, the Study Phase Irecommendations include an action program for the abatement of pollution inKali Surabaya upstream of the city's existing and prosposed water treatmentplants (i.e. over the reach between Ngagel and Mojokasri) in both the near-term and the future. The near-term solution would be achieved throughimplementation of an action plan aimed at abating existing pollution beforeDecember 31, 1987 (i.e. prior to commissioning of the new ICarangpilang watertreatment plant). Future pollution wculd be avoided by more effective controlof effluent discharges through strengthening of the agencies concerned.

5. In detail, the action plan would be managed by Cipta Karya'sDirectorate of Environmental Pollution (PLP) in cooperation with KLH and BKLH,and assisted by consultants. The plan consists of a preinvestment phase andan investment phase for measures to be implemented by the four principalindustrial polluters and Kotamadaya Surabaya,. which is responsible forsanitation services in the main residential areas contributing domesticpollution. Comp'etion of the pre-investment phase is a condition ofdisbursement against Part B of the project and will require:

(a) the four industries to: (i) obtain expert advice and prepare feasi-bility studies (for evaluation by PLP) of the inplant wastetreatment and process changes necessary to limit their respectiveeffluent discharges to within legally-prescribed limits; and(ii) commit to make the recommended investments and process changesto meet the end-1987 deadline; and

(b) Kotamadya Surabaya to carry out, with the assistance of Cipta Karya,a prefeasibility study of the improvements needed to domesticsanitation in residential areas abutting the river and its tribu-taries.

6. The investment phase is expected to occur mostly during 1987. Theindustries' investments would be self-financed. The Kodya Surabaya invest-ments are expected to be implemented and financed under the city's KIPcomponent of Loan 2408-IND (Urban V) during 1987. It is also expected thatthe sanitation investments would be planned with the assistance of the ongoingUNDP Urban Sanitation Investment Support Project i'US/84/005 (managed by theBank under the World Water and Sanitation Decade-related UNDP projectINT/81/047. The Governor of East Java isas already indicated to the fourindustries in question that failure to comply with the end-1987 deadline willresult in punitive action by the Province as provided for in the regulations.

7. Monitoring of the action plan and the performance of the variousidentified polluters will continue under the control of Cipta Karya in themeantime. Strengthening of local capabilitien to monitor, control and avoidwater pollution is, howerver, the aim of the Second Phase Study. For thispurpose, Cipta Karya is expected to hire consultants to refine and implementinstitutional development measures identified during the first phase. Themeasures would include reorganization of BKLH from its largely staff function

-78 - ANNEX 6Page 3

into an effective operational entity and strengthening of its linkages withand the procedures followed by the present agencies responsible for sampling,testing and analysis, and enforcement. In addition, the capability of theagency to provide technical assistance to industry in order to reduce waste,conserve water and treat effluents effectively would be developed. Theoutcome of the Phase II study is expected to be of national significance inproviding a prototype for replication in other industrialized areas.

sFCONn RAST JAVA WATFR SIIPPLY PROJECT

lndustrial Fffluent nischar ed to Rurahava River. lNniu to )ko oknsrlSelected D1schartes

Increase InTncrease In Load to river: river con-

cnncAntraston in river present volume at centrationConcentration at I cu m/s and 4n cu m/s legal maximum from legal

Plant to river Load to river from present discharge in mg,l 2n mg/i discharReno. Yame/product 'low r:p Rnn RR COD -ROD SS COn ROT) Ss COP Rnn cnn ROD

(o /day) … (mR/1) … (kg/d4y) - (mg/1) - ------ (k/day) ---- ---- (g/) -- ----

56 PT Haka/Tannery ISQ 97,5 17n In2 15.5 2.7 1H.2 n001A 0DAM1 MO.OI 7,° 1.2 n,nnq 0.0040,o04 n.00n 0 n.nns n.nn2 n,nno9

46 PT aeke Box/Paper mill 2,781 710 235 1,038 1,974 b54 2,8R6 2,25 n,74 1,21 139 S5. 0.16 0.06n0.6 n,01 0.43 n,n4 n.n2

57 PT Suparue/Paper mill 22,n84 551 14R 545 12,17n i,26h 12,69n 113.2 3.63 11.67 1,104 442 1,2R 0.5l3.41 n.RR 0.4R n012 n.13

58 PT Nivon/Food additive 42,336 >147 147 an0 >6,23n 6,230 17,312 >7.2 7.2 20.0 7.,117 R47 2.45 1,n0>1.8 1.8 5,nl n,06 0.25

54 Agung lertas/Paper sill 31,696 910 125 1,291 11,331 4,212 41,636 36.26 4.R8 sn,s 1,6i5 674 1.95 n.7Rqnh0 1,22 12.63 0.49 0.19

28 BintanR Apolo/nye works 118.7 536 2R0 334 63.6 33.2 39.6 n,n74 n0n3a n0.46 5S9 ',4 n,0n7 n.no3n,n01 n,n0 N0MI1 n.nn2 n.nno7

61 Ajinouoto/Food additive 16,171 2M.58 7.64 495,2 485.4 124,6 P,352 n036 n,n3 8,42 8n0 323 n,94 n,37n0.6 -n0.2 n.nR 0,23 n.nq

slb U

-80 - ANNEX 7Page 1

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

TECHNICAL ASSISTANCE SUMMARY

A. Project Implementation Assistance

1. Advisory services to PMU and PIUs forproject management and construction

Executing Agency: Directorate General Cipta Karya,(Directorate Air Bersih)

Objectives: (a) project uanagement assistance to P Wfor: (i) monitoring, review andproblem solving in respect to financial(budgeting, expenditure, reimbursement)and physical (procurement construction,handover) progress; (ii) coordinationof PIU reporting and actions; and(iii) liaison with IBRD.

(b) project execution assistance to Part A(BRA/IKK) project PIU for: (i) manage-ment of physical and financial pro-gress; (ii) training in contract admin-istration; qualtiy control, commission-ing of systems; (iii) coordination ofconsumer education campaigns; and(iv) on-the-job training of BPAM/PDAMstaff and operators.

Duration of servic.: January 1986 through December 1989

Costs:

Manmonths Cost (Rp mln)

PHIU advisers:Foreign 24 216Local 60 150Support 110

Subtotal 475

- 81 ANNEX 7Page 2

PIU advisers:

Foreign 24 216Local 216 540Support 227

Subtotal 983

Total 1,458

(as Z of Part A construction cost, Rp 40 bln: 3.74%)

TOR Status: TOR will be prepared by CK based on thoseused for similar purposes in loan 2275 andare expected to be available by October 31,1985.

2. Advisory services to PDAM Su.abaya forproject management and construction

Executing Agency: Directorate General Cipta Karya (DirectorateAir Bersih)

Objectives: Assistance to Part B PIU for: (i) manage-ment of physical and financial progressincluding monitoring review and problemsolving; (ii) review and evaluation of ten-derers' and contractors' proposals anddetailed designs; (iii) training in contractadministration, quaiity control, commission-ing and operation of systems; and(iv) reporting and liaison with PMU andIBRD.

Duration of service: January 1986 - December 1988

Costs:

Manmonths Cost (Rp mln)

Project managementForeign 36 324Local 36 90

Procurement and con-struction supervision:

Foreign 40 360Local 156 390Support 350

Total 1.513

(As Z Part B construction cost, Rp 24 bln 6.25X)

- 82 - ANNEX 7Page 3

TOR Status: TOR to be provided by CK (in consultationwith PDAM Surabaya) by October 31, 1985.

3. Surabaya Unaccounted-for Water ControlProgram Advisory Services

Executing Agency: Directorate General Cipta Karya (DirectorateAir Bersih)

Objectives: To assist PDAM Surabaya in implementation ofits loss-reduction program includingtraining and monitoring of (i) leakage andwaste control unit staff; (ii) meter repairand replacement unit; (iii) meter readingsystem staff; and (iv) procurement andoperation of leak detection and meter repairequipment.

Duration of service: January 1987 - December 1988

Costs:

Manmonths Cost (Rp mln)

Training and monitoring:Foreign 20 180Local 48 120

Equipment:

Leak detection 80Meters (bulk) 120Meter repair 50Support 90

Total 640

(As Z of rehab. cost, Rp 4 bln 16X)

TOR Status: (As for 2 above)

4. Management and accounting advisory servicesto project BPAMs and PDAMs

Executing Agency: Directorate General Cipta Karya (DirectorateAir Bersih)

Objectives: Assist in setting up organization, manage-ment, accounting, administrative and person-nel systems in PDAMs and training staff intheir use. Apply material prepared for the

- First East Java PDAMs to the extent pos-sible.

-83 - ANE 7Page 4

Duration of service: January 1988 - December 1989

Costs:

Man-months Cost (Rp mLn)

Local 300 720Support 108

Total 828

(As X Part A construction cost, Rp 40 bln 2Z)

TOR -_tus: TOR based on thos.: used for similar purposesin loan 2275-IND will be prepared by CK andare expected to be available by October 31,1985.

B. Institutional Development

5. Training and advisory services to East JavaProvincial Monitoring Bureau

Executing Agency: Directorate General Cipta Karya (DirectorateAir Bersih)

Objectives: Assistance in the establishkmnt of aprovince-wide monitoring unit in East JavaTingkat I Dinas Cipta Karya, to superviseEast Java PDAMs' performance and develop-ment, through training of staff, developmentof procedures and review of performance data(with particular reference to First andSecond EJWS projects' PDAMs) and prvision ofoffices, furnishings and equipment.

Duration of service: January 1986 - December 1989

Costs:

Man-months Cost (Rp mln)

Foreign 48 640Support 240

Total 880

TOR Status: TOR will be prepared by CK (in consultationwith PUOD) and are expected to be availableby October 31, 1985.

-84 - ANNEX 7Page 5

6. East Java Pollution Control Institutional Development Study

Executing Agency: Directorate General Cipta Karya (DirectorateEnvironmental Sanitation) in consultationwith State Minister of Population andEnvironlent (KLH).

Objectives: To strengthen agencies of the East JavaProvincial Government to more effectively:(a) monitor water pollution; (b) controlindustrial and residential effluentdischarges; and (c) provide technical adviceto polluters, through a review andimplementation of new organi?- -ionarrangements, legal procedure. and powers,staffing, training of staff and provision ofmonitoring equipment.

Duration of service: January 1986 - December 1987

Costs:

Manmonths Cost (Rp mln)

Foreign 15 200Local 45 170Support 145

Total 515

TOR Status: TOR will be prepared by CK (in consultationwith KLH) by end-October 1985.

C. Future Project Preparation

7. Surabaya Water Supply Expansion(Karangpilang II)

Executing Agency: Directorate General Cipta Karya (DirectorateAir Bersih)

Objectives: (a) Update 1976 water supply master plan;

(b) prepare feasibility studies for provis-ion of 2 m Is treated water through:(i) extension of Karangpiolang watertreatment plant; and (ii) augmentationof transmission and distribution piping;

-85- ANNEX 7

Page 6

(c) prepare detailed designs and procurementdocuments for the proposed expansion;and

(d) prepare technical and financialproposals for loan finding agencyreview.

Duration of service: Jinuary 1986 - December 1987

Costs:

Man-months Cost (Rp mln)

Foreign 60 560Local 300 750Support 387Soil Invest. 150Survey 250

Total 2,077

(As X of Rp 50 bln 4.1%)

T0R Status: TOR have been prepared by CK.

8. Third East Java Water Supply ProjectPreparation

Executing Agency: Directorate General Cipta Karya (DirectorateSina Program)

Objectives: Planning and engineering of water supplyproject in 11 Kabupantans (not previouslyaddressed by 1st and 2nd EJWS projects) andselected BNA towns elsewhere in East Java,including groundwater investigations.

Duration of service: January 1987 - July 1988

Costs: Approximately Rp 3,000 millionTOR Status: TOR have been prepared by DBP (in consulta-

tion with DAB).

9. Advisory Services for Water Supply Organization Structure

Executing Agency: CK in cooperation with PUOD

Objectives: (i) Kake a review and analysis of alterntiveorganization structures based on finan-cial viability, staffing adequacy andoperating efficiency criteria to meet

-86 - ANNEX 7Page 7

water supply needs for the provinces ofIrian Jaya and North andJ South Sulawesi;(ii) recommend suitable structure: (iii)prepare necessary legislation; (iv) pre-pare work program to implement theaccepted recommendation. The consultantwill make full use of existing institu-tional information collected by Messrs.Scott and Furphy and Irian Jaya andMessrs. Sinotech on North and SouthSulawesi.

Duration of service: January 1986 - September 1987

Costs:

Man-months Cost (Rp mLn)

Foreign 15 200Local 40 130Support 130

Total 460

TOR Status: TOR to be prepared jointly by CR and PUOD byDecember 31, 1985.

I PII1OSIA

OPOIMO PAST JAVA IJATpR liPPIy PPfnJpPW

NOetstled Cort Rattoates and Procuraant Arranhements

Part A JA,RAlc Towns

4usAry hy PnA.4 nd Siheenpnnent

I of Source Trans- Trent- 'lietrth. 9ervice Rervice Pover nther

I proup develop- mimleon mont pIpe- reser- cnnnec- feel- fact- nladlaimpaten Lacal Foreain Total Fore Ig total mnt luina plants linae volr ttona ittile ltitee office Vehiglo land

Iliter 1,127.17 1,119.51 2,2t2.7n111 A1.1 4.2h 12.11 114.26 AR.2,S 731.4Q In2114.49 9.n 1411,4n 219.11 141,.91 44,77 ¶9.14hndovoso 1,114.59 1,249.11 2,143,An s2.41 A7. in24.922 124.4q S7.1h 443.41 In2.47 73.1i. WM .n 247.92 sn,19 111.21 1.ladiri 1,914.A1 1,914.44 1,n27.1. 111.16 I2.n% 259.14 4.41 ¶.1 h2s,99 1n 7.12 74An.34 1711.4 23M.n7 151.12 49.71 41.71Kadiun 979.12 994.44 1,933.14 49.17 7.1A 27.11 4.2* 111.4% 494.92 204.41 499.40 11h.1. 1%7.74 1l.10 64.79 h1l.21

Acnjuk 1,221.49 1.20%,4 2,429.47 49.64 n4.7 249.44 9S.17 74.32 91117n 294.15 WM912 137.n4 211.7n M24.22 17.04 42.11liecwi 612.2 422.113 1,4nl4 4U.44 .14 191.49 4.11 *1141no 1.1A 291.47 2400.2 111.75 134.4S 19n.12 4,A1 34.44Pacitan q24.61 9411.9A 1,4RS.41 n1.99 C.AR 94.19 9n.24 41.27 .2.317 714.1 4h1.11 104,4? 214.41 41.22 4A.17 11.72PAsuru. Klotaaadva 1,950. 1,526.26 1,135.94 sn5117 1 nn 147.71 274.44 22.4 1 til A4 11.42 41,111 71.29 230.00 MA n,nn s2.9n*asuruan 792.94 434.61 1,611 IS S1.41 %q. 141.39 162.6n 44.4n 74.9s S7.24 144.96 7A.41 191.52 2nn,fl1MM 41.n. 46Ponorego 1,412.14 1,644.21 1,247,nl n.314 21.45 140.24 11.4fn 62.44 1,1126.94 4n1.15 qe1,4 n 21.411 211.74 SAM 75.1 42,n1Prubolinnuo 9s1.9 4 414.44 1,42R.S2 sn,ss 7.114 57.1 14f4.2 62.02 hin.1l1 74,19 42A.44 91.79 9. 74 141,1 7S.7 12.01Trengactek 990,11 997.41 1,048.11 51.22 7.11 124,71 91,97 74,11 914.14 74.19 440.27 219.24 21.1nq 45.47 71.42 17.52

nace codt w/o tex 1,9&7.11, 11,42A.47 27,394.24 Sn1.n Qn1.1 1,799.41 1,274.14 7$1.19 7,41S.84 2,714.12 4,191,71. 1,377.n 2,112.22 1,145,12 420,16 447.99Value added tax 1,1S6761 1,1A2.4A 2,1Q,143 - 9,11 17.941 127,41 75.14 741,9q 272.1. .64,14 211.75 2hn.22 114,5I 47.42 4A.41

la$* Cost (June 1943) 24,924,9s 1j,211.32 m1j ji,91 sn.sn inn,nn l,9.411 I.4RAN.9 424.53 ,117,44 2,491,29 7,519,14 1,SIS,2S 2,61.244 1,474,6J3 112.11 A14.79

Physical continOencie. 1,499.44 1,S21,11 1,1121.9 s14.51 1 11.11 191.1 141.14 42.49 412.79 299,11 191,9 IM9,91 244.24 147,04 01,11 91.47Price contingenctes 2,9U4.92 1,R42.21 4,127,24 1n. 2n,0n 147,16 2416,11 145.12 1,A11,5n1 994,2 2S7.4l 3111 572.49 299.41 IAI,42 M2M29

Tetal Nubprolect Cost 19.401,47 19,774,71 39,176,6A s09sn Ima,n 2,ilf,`S .1,422n2 11n74.49 In.6n4.72 1,616,61 Q.M911. 1,961.1 I.721,17 1,2.21,2 1.2497n1 669.17

- " - ~~ ~ ~-

z1rI_ -b. _1_ __ _tr __

-~ ~ ~ ~ ~ ~ ~ ~ T

mm 3437 JEt 34153 mw~~~~~~~~~~~~~~~~~~~.Y ~~~~3PeY,34

346013,. It_. Tmeltt i tl _ t bie _ d Lees' 'ls t -l'a Wstem ts _t i_

'33... civl n. I *1467t WI 01.-s 143.1 0*_n n,nn 17.26 211.. nm 11 .1 e , 112.u Iin.61 1n6 a%,10 n.'i'neWS.W3 is.7 241.44 746.111 113812 0.0 tl'.m 1'k.? 111.13 102.13 SA.M 112ELM 1S1 30.36 4.m a.m

_|_ '%.I, Ilna n 17.iA kn0 17.nn 1 .n.M 30 0.431 ;nn. n, M k3.0 kan n* m 6."n

q.tet.3 2.24.7 I 3.27.3? 3111.-SIN 1 37.35 0.1 1711.4 130.31 411.13 441.34 1.42 744 331, I .9 51.3 I1 a 4s__ M1.IIssed.-.. Cv11 .fl,. 1.1122.11? 121.1 21.21 011 0.0 115 31.72 71.6 34.7% Vo.112 13to.4 1.l 17.73 12.2

W-11_ 3 .1 n ,71. . n.A _._m 17s.n sn.o 141.12 1411.1 64.1' I 26.31 S.n 7nM nM nDimJsB r.0. u.n. n.n e 1e.n 1n,n e n.01 nDin Aim n,_ 4.M *_m n,n nafm nJI

9e46se3 L 1n1 ." I. n n. 233n3 * 43711.17 .116 1 4,"3l 14." 1 74511S In 313.42 7. 1592 I,,-s

'.4t.3 rivEt -i. 13.67.17 3.mn.jj 14.11 01 1n.3W 133 17.02 11.&3 246.13 42,. 211.11 114,M7 1.31t 41.4' 16.-1V4_I '.11 te n'.m e s *fl, n. n_ 1`r.1 62.n1 36.3a* 136.3 64.1 373ja %.%% 219.1, I._A 1."Ut_.. 14.1 4*l.17 110 In.? 01 20.4 n. nm O.* n kd . n. *nn *n n n* n.m

%fter. 1, 27.21 3.3.74 3.M13. 0.kT n.nn n2.m 43-.4 117.4 GM." 6A3737 4.01. 1 4%S 17.4' "',,% V-."

1641. Civil .4. 3 7t2-b I7nm1S 7 1A.43 n,rn 0n.0 3.42 1747 270. 7 Sea.1, 24113.6 376.3 ".ee' e.." 63.64 30.29'oI.e1 211 73l* 414.71 e11 0.n 01. *1.41 246.4 r .57 27 .42 1in vs." 6.64 3.1? J.m * .m

A . 1.71 110 33.3 7 0.01 n, .33 nl m n_ * nip om n.m n.m n.m n*m m

%eca..3 3.30%?. 1 n. 1u 14." l3.32 n,nn 34T7.1 0nt31 R'.m 176.7 130.7 217.11 5 'A1 4AJ3 am... 304l

*1 & _ vrltil _rt. 3.I2.14 396.32 433.4 njt.4 0.nn 2?.412 17.3 IM.3.1 316.14 123.76 342.31 30P0M %9.-' 1 1.3 3339-5,rl_etrI.-? 37.26 7317.1R n, n 0.'n 310.74 343.37 30." ,n .4 an. n 376.12 *1-1 26.11 in *_m*_t4 l42.1 42.31 ".m 73., 7 0.01 23.m5 nM.m n."nDm n:M n.n ".M n_m nnm *.m

9.3603.3 !Afl' 7-. 46.4 1.22IwI 3.20K."1 33.07 0.01 333.71 174.sl 466.23 .73.7 attnq 2*3.1 311421 1611 4.31 33.I11?0

lse Civil st. 342.6? 441.31 1.13A 11.5, 0.01 * 72.11 z.40. 270.34 343. 272.112 327.37 11.1% 21.74 71 1.46feelve 611.1' 341.4 4*4n61 n.m 11.01 71.n1 71.11 ".53 n234.11 21.30 74,1 I.Als %.3 ken s 03.3344 1646 14.41, 11.1n 717 0.01 37.17 n .0 nkm iem nm nim nim n.J nI _ o.m

%4.t.3 3.301.0% 463.n2 327,03 37.17 11.01 333.23 2J. 110.1 116.3 2.T77 01.11 7-Pe 215 21 1.1

'..ie rivet .... *.013 t.13 4111.13 7^212 n.m*,nn n,nn 5.3l 36.33 M. 1".1 271I%l IM.77 3m.11 111 1t.13l k3.71'-. n 3.n w *e..a n,M 0.A 336.03 13343 51 'n.m 31.13 31M.n1 % 77 f 17 0.01 n.n

11.7 n1172 n,n 31.36 3n0 14.1' o n, n.M *_0 1.,n 0.n11n n,1 0._ n.m

-.13,7.1 e'1.n1 .043.93 36.36 11. 311 171 1.3a kne % 31n1.3a 137.23 34.5 73t.e t133.13 61.12 15 3 t.n

v*..._... r3.3 *l _ r.1S 1 31,.L I4nes. 131.04 0.. n*,1 3M.1 214UIn 34".13 734.1 116.3 735.62 31S54 61.13 93_3 12,.e1'_eg.msl q1.set d1471,n1 4311.70 1$313.72 11.0n 0,nn M1. 631 .7 161 17A," 46.76 3 6.47 13.4 *n" n_m

n." un.ie n_M 1.1 e3r0 n' n n,n *m nn. n,e nm rnM M 0.D0 n,.M n.m n.m

''e.13.1 a^ 3.'n. 3 2 26.121S 1 7 n.m 749.34 131.17 166.33 3"0.3 R mn3 U614 t131,l 61.3?7 Wnk. 3,.n

**3C_,~ 9v1

3... rI* 754.411 13.3 1., n 01 74 .7* n,e.4 nl3,nn *11 733.03 111 32.34 713 * .7 -7.1 V13

013we3 11.23 201.30 "en.m n.m e,nn 3773 716.26 71.0W 221.3, 1.71 334.111 9.6 3n73 01 n.3.44 am... *nI.A n.m 30n 7 110 211.71 n.M 0nn aim n_ m -. m aim nm 4nnm nim

-"ht.* 3 .1 11.1, r 7 6 313.43 30.71 n 11.n1 311.2? 271.74 771S74 M t" 121.1s 24%.70 r .4 311 17 S.1S 70 .12 7. 1

_o r.. C3v33 esns 3 mi4s'-6 3e.11 0,nn kn,n kn0 211 .7 7I.-1 137.11 340144 21-7.1 233.11 363.4 %2S 411 36.21e"lr_ss ~1, eI.13 .*sa 1-o.in. nn n.m 110 233.11 * 16310 171.96 * 4141 16.1 31.0 2.4 311 n.*m nrv_ *a,nn <74,r0 623 nr.m ,n n,nnW 11 oe n,en e_m n.m n o * nnm *nn n,m' n,nn n n_m

- F._.3 1411.n1 3.4119.76 31.1 .21 n.m 11.01 '111,7 131.31 131 .3 416.10 123.26 167.13 6.2 .' 61.9 31e1

vraau.. reset .. L ,*. 3133.. 4s1.1' 2.m n,en ..- r 31.11 1,37 21F.41 3S3e33 270.02 I33 .: 1.71 1.71 3. 3r,, -A0.01 241.21 n 3n 1,n n n2,.n 1112.61 I30133 76.34 36.4 112.21 6.46 27.13 ai4m en,

r...o.1e '~3ve3 sri. 04.1-1 4.17.60 77?404 11.0n 0.01 37.63 375 236.17 334.73 270.1' 333111t 137.13 31 14 11. n7 R.12574.41. 711.12 723.36 Ik-0 3.01 1 37.1 -"".n 116.1t 23.71 11.31 0.127 1.77 ii.m G.M 11.0

tasi 7.1'1 17-12 e,ne 33,76 11,0" 1 n nm a M n e.e n.em anm nn n.n aim n,nm

t1, J* 1l 3e,1 n * p 36.16 11,n 117-91 167.13 117.43 171.9 T R1.13 771 nl e 11 2% 1_12 41n3.7 *1 A7

Tet.t 11f-.e11 1.. 1 s-17 *1¶9773 n41.61 11.311n nkno n 11*71 7&larI e,I a 77i 1 1,al 331,1.63 13.417 S13.73 11.3A 31.17

M 61.1 _ 31..3 307 j a," n * 3 4_ r1rn 41 7n 3,111.37 1,631.3 463.0? 3ne,77 ¶1

ST 93*f 5.63 14.1

1,j 19 3.412.4 * 173 .1 4 7.17 1331333 12.1 "I." n3. r, 3. 111.7 '3.13 13.2 14.34*flt. n..ute.s-er*, 2t. 1,^1119.17 9. 1 e,nn1' 21?3 4.46 11n4 739.31 13,4An 1177.3 e11A.7 3 .1 P1_3,0% 23M374 264.11 916.311 2eA1

'otal t9.hortlQ s t 14. 5fljl 361113.41 36n r2..3 233.31 1104 2.33.1 *,4~1 3743.91 7.561 4X4,4 ±., 3.fl5sf 3.347.l1 1132.3? 2*6.31

qRrnNn PAlSY JAVA WATRR SlUPPLY PRflJICT

netallad root ruttuwtea - Part 8 Suralava

Summary Pst ipited 7ty aofl,fltnd ral ntiar 'e*ar

Iq55 _ _ _6 Iq57 1q55 IqRq 199nComponent Local torelin Iotal L.ocAI Farilsn LctI 'orelf n Ineal Forelptn InCl Porali1n Local foreign Local Foreign

Civil WorksSource Ipprovementat 71.41 49.17 l,f.a4 n.nn n.An f 25R.25 21l.ln 2240.7 1A7,AM P.Qqn 7n41 n,nn n .nn n,nn n..nTnta%e and primAry plant -4n,nl l'lA.ih.nn 57A.fnn n.nn n,m %3N%m l4.nn 215.fnn A,fnn lts,nn 34,nn i.fnn 14.nn n.nn n.nnMain proceas plant 2,oj4.nn 1,175Snn 6,n27.nn n.nn n.nn lf?.fnn l sqnn 1,1i 4n.n 1,71.nn f71nn fiii.nn f7lfn f37A.Mn n,nn n,nfStorage and conveyance l,fn7.nn 697.M 2lq4.M nn IA n. nn nnn 41nn 5.nn 7m.Mnn I.fnl n 7s.011 2i5.fnn 171.1lf1 fo.o n.,n n.nnSite development 4fnh.nn 174.nA s79,nn n.nn n.nn Al.n" 1s.nn 1i2.nn (fnnl22. 12nn .S2.00 fi.nn l 2nn n.0nn o.0nnrsTstrlbtton reheblSxation 1,2s54.n 1,2ih.on ?s,.nR0n n.nn n,on n,nn n.n n.nn n.nn 157.51 Iii.nn 527.0n 627.00 470.nn 471.00

L"Mpoets l1.nn 2R0.nn 311.nn0 n.nn n.,n 6i,nn ShAn 55.0nn 14n.nn h.nn 5,00 1dnn 2R.nn n.n0n n.nn0Fleetrical 47.00 427.nn 474.nn n.nn n,nn q s.nn .nn ll, nn 24 n %nn 41 .n n.nn n.nn n.nn n.nnPipes 0nn.no 2,nn4.nn 2,sn4.n00 n.nn n,n Inn.nn 4n,.nn 4nn.nn 1,6ni.nn n.nn n.nn A,nn n.nn n.nn n.nn

land 471.24 n.n0 474.2A 47A.2h n.nn n.nn n.rn n.rn n.nn n,nn n.nn n.nn n,nn A*n,1 rI,nn

Bas root(Tw-tout taxi 5,191.17 A.All.s7 15,099.74 475.25 n,nn 1,104.25 .qsq,1on ?,"U.57 4,11 l7 i.7,n° 1,jn0.4 1.111 nn I.1 JRnfk 47n.n 47n.nt

Valise-added tax (10P) R5q.12 qAi.ls i,qq.q7 s7i.11 n,nn 11.41 IS6.°1 295,55i 4It.l 17S.71 11n.U 111.10 I11.Ro 47.0n1 47*nn

Bass C~ost(June 19a5) 9,210.q 9,411.72 I1,659,791 026,n0 n,nn 1.522,50 JI776,.21 1,255.&2 4,541,01 1 02,±na 1,411.7P 1,46A.In 1,2%1.Rn 517nn S.1 17.11

Phyaical contingenciea I.1IA.'4 1,42A.91 7,xln4*Qf 7a.Q1 n,nn 22.41n 250.04 4AQ.tl sAA,so 25q.q2 21S.n7 2iq5l% 1R7.77 77,ss 77.55Price cnntIngmncic 2,25°.17 2,n7, .74 4,2AR.11 12,1n n.nn 142.5q 125,.1 sil.16 762.565 Ws.41 0l.I51 11.27 U44.1 750.11 251.72

Total Rubprolect roast 12.57'.201 12.q22.17 257042,75 17.10 n.nn l,.Q,qp0 2,1l1.1n 41,Afin % 1A,5R. l,5n4,11 2,14101.5 2,247,12 l.074.l5 A 74,110 55.27

Li!

INDoKr.IIA

SECOND 8.11 JAVA WAS'A SUPPLY PROJECT

etAlled Cost Ex.t".gte - Part C Innsttutional Development

s,asati iaga'se tby Component and CAlend4r Y.er

198h 1986 1987 19U _ 989 1990Component Local Freenn Totel Local iormigo Lol Poveign LoWl rmian Local Forei n rc P o.ljn Local oroeign

Trainins-t java activitieaCivil work. 10.00 200.00 2,0.0( 0.00 o.00 0.00 0,00 10,n0 200.00 0,00 0.00 0,00 0.00 0,0o 0.00Equipnent 35.00 100.00 125.00 0.00 0.00 0,00 0,00 0.00 0.00 2..00 100,00 0.00 0,00 0.00 0.o0Training services 10.00 240.00 2so.00 o,00 0.oo 2,10 60,00 s.00 120.00 2.10 60.00 0.00 0.00 0.00 n.00Opdratind costs 80.00 110.00 400.00 0.00 0.00 20,00 90.00 20.00 80.00 20,00 80.00 20.00 80,00 0,00 0.00

Subtotal 161.00 860.00 1,025.00 0.00 0.00 22.10 140.00 75.00 M00M00 47.10 m240. 20.00 0!.00 0,00 0.00

Central activitiesCivil works 25.00 100.00 125.00 0.00 0.00 0.00 0,00 25.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00rqLipwnt 21.00 100.00 12S.00 0.00 0.00 0.00 0.00 0.00 0,00 2s.00 100,00 0.00 0.00 0,00 0,00Advlior, services(H90P) /a s00,00 800.00 1,300.00 0.00 0.00 125.00 200,00 250.00 400.00 125.00 200n00 000 000 000 0O00

Operating costs 0.00 10.000 3oo0.00 0.00 0o00 0.00 0.00 0.00 o0000 0,00 900 0.00 90,00 0.00 90,00

Subtntal S5.000 1.160.o 1.910,00 0.00 0.00 125.00 2n0.00 271.00 090000 o.n 390.00 0.00 90.00 0A00 90.00

Sector activitie.Land 50.00 00 10.00 0o00 0S00 o0.00 0,00 o00 0.0oc 0.00 0.00 0.00 0.00 0.00 0.00Civil ,imks,

Semrmn" TU 250.010 100.00 350,00 0,00 0.00 0,00 0,00 210.00 100.00 0.00 0.00 0,00 0.0o 0.00 0.00Fltting PtU extension Lb 120.00 680.00 800.00 0.00 0.00 0.00 0.00 120,00 680.00 0.00 0,00 0.00 0.00 0.00 P.00

Equipment ISemarang PTU 20.00 80.00 100.00 0.00 0.00 0.00 o0no 0.00 0,00 20,00 80.00 0.00 0.00 0.00 0#,00Exitlong FTU extensions 80.00 220.00 400,00 0.00 0.00 0.00 0.00 0.00 0,00 80,00 320.00 0.00 0.00 0.00 0.00

Subtotal s20.00 1,180.00 1,700 o,00 0.00 0.00 0..00 0.00 00 MO_0 0L,o0 400,00 0.00 0.00 0.00 0.00

Total Training 1,235.00 3,400.00 4,63s.00 0.00 0.00 191.S0 340,00 720,00 1,170,00 297150 1,030.00 20,00 170-00 0.00 90,00

PDIAN lnitorini 6 DevelopmentCivil woie Jo 616.31 S12.09 1,22S1.4 0.00 0.00 343.18 269.s 343.18 2694.5 0,00 0.00 0.00 0.00 0,00 0,00tEuipment 38.18 111.45 151.64 0.00 0.00 9,55 28.86 28.64 86.59 0.00 0,00 0,00 0,00 0.00 0.00Advisory services 92.73 s 23.64 616l,6 0,00 0.00 23.18 130.91 86.36 2h1.82 23.18 130,91 0.00 0.00 0.00 0.00Operations 321.64 139.09 462.72 0.00 0.00 64,73 27.82 641,3 27.82 64.73 27.82 64.13 21.82 64.73 2t.82

Total IVnit, 4 D,v. 1,140.91 1,317.27 2,458,36 0,00 0.00 440.6 457,14 482,91 645117 87.91 ISS.73 84.73 27182 t4.13 27.82

Pollution Control Inst. Duv. 170.00 200.00 310.00 0.00 0.00 8IS00 100.00 81.00 100.00 0.00 0.00 0,00 0,00 0.00 0.00

Blae cost 2,545.91 4,911,27 7.463.18 0.00 0,00 723,14 897,34 j278/.9I 2,515.17 385,41 1,188.73 84,73 197,h2 U4.13 117,82(without tax)

Value added tax (101) 214.9 491.713 746.32 0.00 0.00 72,11 89.71 12.79 21,518 38,14 118.87 8.47 19.78 6,47 11.78

s.nae Cast 2,800.50 s,409.00 8,209.s0 0.00 0.00 791.45 986,85 1,416.70 2,167.35 423.95 1.307.t0 93.20 217.60 11.20 129.60

Physical contingencies 2so0,0 140.90 820.95 0.00 0.00 79.54 98,69 141,67 276,74 42.40 130.76 9.32 21,76 7,12 12.9tPrice contingencies 129.48 998,75 1,528,23 0,00 0.00 71,4n 68.86 262.01 444.28 121.99 341,19 37.1t 110,55 36.93 63.23

Total Subprolect Cost 1,610.03 6,948,65 10,5.j68 0.00 0.00 946,39 1.154.40 1.120,38 3,488.37 588.33 1,780,11 139.88 319.94 111.2l 205.79

La Foreign cost financing proposed by Covernuent of Netherlands.

Lb Sendung, adan and Ujung Pandang.

lc Including preulsos for PHU/PIU r

INWDONSI A

SECOND -UST JAVA UATSP. SU?IYV PllOJECt

Detailed Cost letioates - Part D Technical Assistance

su.4?y Estimated by Co n nt adClnd4v YsarCRp milion) ~

1955 _ 1986 _1987 1988 198S _........ 1990Component tocal foreign Total Lcal Forsian Local 9Foreign Local ForaeAn Local 9 rein Localst F oreln Local 9 ores

inpIeontatIon Aalstance'014*71 IU favi.ee To408.18 612.73 1,020.91 0.00 0.00 179.82 151.28 179.82 151.28 179.82 0.00 179.82 0.00 0.00 0.00FDAN Surabaya advisorst

Karengptang tITP 211.52 R48.18 1,060.00 0.00 0.00 193.77 159.69 193.77 159.69 193.77 159.69 0.00 0.00 0,00 0,00Unaccounte4-for-vater

reduction prosram 90.00 358.18 448.18 0.00 0.00 0.00 0,00 91,05 133.07 91.05 133107 0.00 0.00 0,00 0.00PAI/P4DAN advisers 406.38 173.64 580.00 0.00 0.00 0.00 0.00 144,98 0,00 144.98 0.00 259,96 0.00 0.00 0.00

Subtotal 1,116.36 1,992.73 3,109.09 0.00 0.00 317359 310.97 609,62 444.04 609.62 292976 469.78 0.00 000 -0^L

Fuur poect prePrationSurabi ye UittreSupply 11 588.18 882.73 1,470.91 0.00 0.00 196.11 539.29 196.11 539.29 0.00 0.00 0.00 0.00 0,00 0.00East JAvA Water Supply III 840.00 1,260.91 2,100.91 0.00 0.00 0.00 0.00 525.25 525.28 525,28 525.28 0.00 0.00 0.00 0.00Water Organisation Study 140.00 200.00 340.000 0.00 0.00 140,00 200,00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0

Subtotal 1,428.10 2,143,64 3,571.82 0.00 0.00 196,11 53S,29 721.39 1,064.57 525.28 525.28 0.00 0,00 0.00 0.00

Bass cost 2,684,55 4,136.36 7,020.91 0.00 a-CO 709.70 1,050,26 1,331.01 1,50B,61 1,14.90 818.04 469.76 0.00 0.00 0.00(vithout Cex)

Value added tax (10X) 268.45 433,64 102.09 0.00 0,00 70.97 105.03 133.10 150,86 223.49 81.80 46,98 0.00 0,00 0,00

%-Ii CDCX 2,953,00 i..770.00 7,723,00 0,00 0.00 750.67 1,5529,4 1,464. 1654 12439 899, 5167 000 000 000

Physical contingencius 147.65 238.50 386.15 0.00 0.00 39.03 57,76 73.11 67,97 62,42 44.99 25.84 0,00 0,00 0.00Price eontingencies 864.93 555,78 1,420.11 0.00 0,00 66,89 76,95 258,41 254.31 342.88 224,52 196,69 0.00 O,W0 0,00

Total Subproject Cost 3,961,58 5,564.28 9,529,86 0.00 0.00 886,59 1,290.00 1,795.78 1,996,76 1,658,70 12,69.36 739.29 0!00 0°00 0,00

em1

- 92 -ANNEX 9Table 1Page 1 of 2

lIDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

Procurement Arrangements

Contract Listing by Subproject and Category

Component & No. of ICB or Base cost/alocation Description contracts LCB (Rp mln3i

Part A - BNA/IKK TownsCLvil works

10 BRA towns 17 production wells 1 LCB 473.021 IlK towns 21 production wells I LCB 418.014 tovas 14 spring captures 2 LCB 137.5Blitar Wlingi (DNA) systems /b 2 LCB 559.9

DXK system /c 7 LCD 468.6Head office 1 LCB 93.5

Bndowoso Bondowoso (BRA) system 2 LCB 696.3Im systems 6 LCB 332.2

Kediri Pare (BRA) system 3 LCB 909.7IKK systems 8 LCB 545.6Read office 1 LCB 93.5

Madiun Mejayan (BNA) system 3 LCB 509.3Il systems 7 LCB 390.5Head office 1 LCB 88.0

Nganjuk Kertosono (BNA) system 3 LCB 694.1DKM systems 8 LCB 469.7Head office 1 LCB 126.5

NSgawi Mntingan (BNA) system 3 LCB 642.4IlM systems 5 LCB 267.3Read office I LCB 93.5

Pacitan Pacitan (BRA) system 2 LCB 566.5DX systems 7 LCB 349.8

Ponogoro Ponogoro (BNA) system 3 LCB 1,219.9IKm systems 6 LCB 307.0

Pasurnan (Rab) Pandaan (BNA) system 2 LCB 398.2IKg systems 6 LCB 297.0Head office 1 LCB 99.0

Pasuruan (lot) Pasuruan (DNA) system 3 LCB 1,601.6Probolinggo Leces (BNA) system 2 LCB 585.2

Im systems 6 LCB 298.1Head office I LCB 88.0

Trenggalek Trebggalek (BNA) system 2 LCB 498.3Im systems 8 LCB 402.6

Equipment31 BNAJIKs Well screens and cssings 2 LCB* 220.0BNA towns Pipes, fittings & meters 4 ICB* 7,436.0IKK towns Pipes, flttings & meters 2 ICB* 2,409.0BNA towns Elec. & mech. equipment I 2 ICB* 627.0

Elec. & mech. equipment II 2 LCB* 627.0ImK towns Elec. & mech. equipment 1 2 ICB* 904.0

Elec. & mech. equipment II 2 LCB* 900.0General Vehicles 1 Id 913.0

Miscellaneous equipment 12 LCB 275.0

Total Part A 144 29,098.3

-93 - ANIINE 9Table 1Page 2 of 2

Component & No. of ICB or Base cost/alocation Description contracts LCB (Rp mm)

Part B - SurabayaKarangpilang treatment plant:

Civil works: Intake & primary units 1 LCB* 1,560.8Main process units 1 ICB* 5,595.4Conveyance wozks I ICB 1,823.1Reservoir and pump station 1 LCB 1,163.8Electrical works 1 LCB 520.0Site work 2 LCB 753.8

Equipment: !echanical and electrical equipment 1 ICB 342.1Pipes 1 ICB 2,754.4

Brantas Basin Channel lining and gateirrigation works repairs I LCB 1,200.0

PDAM distribu- Pipe repair and replacementtion system and meter replacementrehabilitation 4 LCB 2,758.8

Total Part B 12 18,472.2

Part C - Institutional DevelopmentCivil works

Surabaya Training center extension 1 LCB 275.0PU/PIU building I LCB 110.0Monitoring unit building 1 LCB 137.0Monotoring remedial works 20 LCB 1,100.0

Jakarta Training center extension 1 LCB 110.0Semarang Training center 1 LCB 275.0Bandung, Medan &Ujung Pandang Training Center extension 3 LCB 716.0

EquipmentSurabaya Training workshop 2 LCB 132.0

Monit. unit furnishings 2 LCB 125.0PKU/PIU furnishings 2 LCB 44.0

Jakarta Training equipment 2 LCB 154.0Semarang Training equipment & furnishings 2 LCD 273.0Bandung, Medan &Ujung Pandang Training equipment & furnishings 6 LCB 565.0

Total Part C 44 4,018.0

Total 200 51,588.5

/a June 1985, including tax but not including contingencies.7F Works typically include piping installation, house connections, pumping stations,

water towers and ancillaries./c Works typically include piping installation, house connections, storage tanks,

standpipes, pumping stations and minor buildings and ancillaries./d Reserve procurement.

* Contracts proposed for advanced contracting.

INDONESIA

SrCONf EAST JAVA 1WATER SIIPPLY PROJECT

Procurement Review Procedure

Aggre- Prior review requirements Post-award reviewProcure- gate Inst, to Rid requirementsment limit Advert- bid/gen. Tech Contr, evals & Prequalif, (contr, documents

procedure (B) isement cond, specs Bno doc, award procedure bid eval, & award)

Equipment>$ 500,000 ICR none /a, /b /c /f /j /h /h / Not applic,<S 500,00n LCR none /a 7e- none none none none none<$ 3nn,0O0 LTCH (prudent 2,n0n,non 7a- 7 ; none none none none none /1,

shopping) -

Civil Works>$ 2,on0,non ICB none /a,/b /d /f /R /h /h /i Not applic.>s 1,000,000 LCR none 7ea 7 Tf 3 s, 7h 7hW _ Not applic.<$ 1,non0,0n LCR none 7W none none none none none /1<5 300,000 LCR (prudent 2,000,000 7) 7e none none none none none /1, /k

shopping)

/a General Advertisement placed in "Development Forum," /f Standard specifications to be used; specific provisions71 Optional specific Advertisements placed in "Development to be used as and when necessary.

Forum." a Nonstandard documents specific to contract and not/c Documents to conform to provisions of Rank's "Sample previously reviewed by '.nko

Bidding Documents for Procurement of floods," /h All hid evaluations an& Award recommendations../d Documents to conform to provisions of Bank's "Sample i 'Part B (Karang pilang) contracts only prior to seeking

Bidding Documents for Procurement of Works," applications,/e Documents should conform to provisions of GOI documents / Review by World Bank, Jakarta Office.

previously agreed under Loan 2275-IND, 7k Recording and reimbursement by Statement of Expenditure(SOE) procedure,

N I

95- ANNE 9Table 3

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

Estimated Disbursement Schedule for Bank loan(S million)

Cumula- Z Cuim- CountryCumulative Amount tive lative profile X

Semester project ex- dis- disbur- disbur- cumulativeSemester ending penditure /a bursed sement sement disbursement

1 06/30/86 0.85 0.2 0.2 0 12 12/31/86 4.50 n.5 0.7 2 43 06/30/87 16.35 2.2 2.9 7 84 12/31/87 29.05 2.5 5.4 13 145 06/30/88 48.15 5.6 11.0 25 216 12/31/88 58.30 8.0 19.0 44 297 06/30/89 68.54 9.5 28.5 66 398 12/31/89 72.98 5.2 33.7 78 499 06/30/90 ,76.89 4.n 37.7 87 58

10 12/31/90 79.00 2.1 39.8 92 6711 06/30/91 80.00 2.1 41.9 97 7512 12/31/91 n.9 42.8 99 R213 06/30192 /b 0.5 43.3 1on 88

/a Including nonreimbursible expenditures (taxes and duties, land, andproject administration.

/b Closing date 09/30/92.

-96- AM 10Table I

INDONESIA

SECOND EASr JAVA lAYEI SUPPLY PROJEC

Implementation ArrangEmenrs

Penctional Responasibilftles

Bidng Payment DisbuxeentPlanning Prea- Ewal- Pbysical *atbori- Appll- Naui- Project

Component & design Budgeting ratin ation progress zation cati tortIg reportn

Part A - BVAfl1

Equipment procurement PM PHU PM* SDL* P31U(A) CPF CKH ICF PM

Civil works - ML I-mu PHU PHU SDL P1U(A) Pluck) P11(A) CKF PtU

CivU *otks - DM PHU PHU PHI SDL PIUtA) PIll(A) PIU(C) CF PHU

Part B - Surabsya

Equipment - ICB SDP PUM(B) PIu(B)* PU(B)* P11() PIU(B) 1UM CXF PM

Equipment - LCB SDP PIU(B) P1U(B) P 1(B) P11(3) p11(B) PU() CXF PIU

Civil works - ICB SDP PDU(B) P1U(B)* P11(B)* PI1(B) PDU(B) PMR(3) CKF PHU

Civil works - tC SDP PIU(B) P11(B) P10(B) P11(B) P11(B) P ( C) CF PMD

Source works SDP PDU(B) DGlD DGURD DGURD DGYRD NA C(IF PM

Part C - Inst. Dev.

Training

Civil works/equipment SDD PIU(C) SDD/SDP SDL P1U(C) PIU(C) PI0(C) CXF PHU

Advisers SDD PIU(C) SDD SDD PID(C) PI1(C) NIA CKF PNW

rbAitoring & Development

Civil works/equipment SDP PHU SDP SDL PAR PAB PBA C(F PHU

Advisers SDP PHU SDP SDP PHU SDP COF CDF PHU

Part D - Inst. Dev.

Inplementation advisers SDP PMH SDP SDP SDP SDP COF CDF PHI

Surabaya II SDP SDP SDP SDP SDP SDP CKF COF PHU

East Java III SDP SD? SDP SDP SDP SDP CFF C?F PlU

Legend:

CKF - CLpta Karya Finance Division PMU - Project Managemnt UnitDDN - Depart eaen Dalen NegerL SOD - DAB Subdit. DevelopmentDGWRD - D.C. Water Resources (Jatta Office) SDL - DAB Subdit. LogisticsPAB - CK Proyek Air Berslh (Jatie Branch) SDP - DAB Subdit. PlanningPIU(A) - Project 1Iplementation Unit (Part A)PIU(B) - Project upIeaentation Unit (Pa. t B) N/A - Not applicablePIU(C) - Project Implementation Unit (Part C) * - Review by SEKNEG required

tNWNC8SIA

SECOND EAST JAVA WATER SUPPLY PNOJCCT

Islmomentatfon Arfanmeoein

Impltaientstin Action Schadule

Tender dokuent/ilTk arm" ltonKAtimate anCot Typo Submission iomeinIa.IM.o Sub.mi.stan

CeIctatne of %nu- SUtNOlH'U Lank Issue Close SIKlC/1lIW hnak luru Contract Contractcnotingelncis) dering Coophr- Clearance Clearance Invi- tend.ra/ Comple- Clearance Clearance notice of sign complstionComponent Ip millioen) LCUICS process tion SEKNO/IOW Bank tation ptopomall tion DExIIO/HPW hnk &'t0d diti dat.

h t A - CNA/IIIX4ufi4uont ph I (wntL ocreen b costng) 220.00 LCW 8 02/85 Wa/GS 0/85 09/85 10/85 OI/Uk - 02/a 04/86 OS/U 11/86q4uipment ptg 11 (pipes & C/H) 10,901.00 lCS C 02/85 01/8S 06/8S 10/8s 12/65 01/68 08/86 10/b6 12/I: 01/81 01/88Equipment p4 121 2 ,OOO.0 LCU A 02/8S 05/8S 0/85 09/85 10/85 01/6 - 02/116 04/86 6o/Ik6 Il16Cmlil aorm DNA/tlr

soorce I (IJ/J1) 490.00 LCJ a - - - 02/a8 03/8b 06/8b - 01/8 09/t6 10/8b 07al8Source It (87/88) 538.SO LCD 8 - - . 02/81 03/Il 0a/8ta 01.81 0/1 7 tO/SI ok/SDClvil works I 1,000.00 LCC A - - - 01/8b 04/8k 0k/ak - 05/8t OS/U 06/68 02/87Clll acrkm II 6 000.00 LCC A - - - 03/81 04/81 04/a7 - 05/t7 03/87 08/7 021/68Cmii varke 111 4.551 10 LC i - - - 03/8 04/86 04/88 - 0as8a 0ala 0W/s6 021lsrIce connection (87/88 unttl 90/il) 2,208.00 LCD A - - - - - - - - 04/01/87 0O/30/81Vehicla 913.00 Desere - ' ' ' ' ' '1O/Ol/8k 10/06/81

Part a - SuabMgAC4qulrtia IrT I (pipes) 2,134.90 ICC C 06/85 nl/S 11/85 12/83 02/88 09/88 1210 12/66 02/87 03/C1 12/8SEquipunt pkg 1I (C/N) 341.60 108 C 07/t5 09/83 10/85 11/85 01/86 05/86 09/86 I1/86 0oils 02/87 Offs8Clitl orks-slte work 1 WM1,0 LCD a O/WS 609/83 ini/s 11/Wa 12/85 03/8k - C4/86 06/86 01/86 01/81Civil w,rkm-eource Impronvunt 1,200.00 LCD a 08/85 09/85 10/85 10/85 11/85 02/86 02/8k 01/86 03/86 0O/U8 06/66Ci11 works-intake structure lSo0.70 LCD a 08/85 09/tS 10185 11/85 01/86 0M/86 01/86 09186 1las II196 061U8COitv worke-win treatment 5,595.10 ICD 0 01/85 09/8S 0I/a 10/S 1/8S 0s/aS 06/86 08/ak 10/96 1118b 01189Civil works-main electrical 321.40 LCs 0 11/8S 11/83 12/8S 11/86 01/81 Ob/8 07/87 09/817 11/87 12/87 08/88 Cliii ,e,rho-reusr,oir 4 p-p station 1,1b3.80 LCD 0 11/as 01/J6 02/8b 06/86 08/86 01/87 02/el 04/67 0U187 02/81 11186Cliii wonk-pIp. 10l10 1,52t.10 LD 0 09/83 5 Ilia 12/81 11/88 01/81 06/82 01/87 09/81 11/81 12/8l Ob/CSCLvi1 works-altt Work 11 SO6.10 LC8 D Wa/8s 01/85 02/16 04/a6 061k6 11/8b 12/86 02/47 04/87 0O/67 11/10E4uipment pta itl (material for rohab.) 1,6bS.10 LCD * 08/87 08/81 09/aI 09/81 10/81 01/SS * 02/U8 04/1U OStes OS/8tCivil vorks-pipi rehabItitattIn l,103.60 LCD A 06/87 08/87 09/87 04/88 04/88 03/88 - OS/G 06/88 06/88 06/90

Pert C - lratttl4ton..I Devel0I,Menti"'I W.rkn-E. at Java 6 nt ro 1,622.00 UL 8 08/85 09185 10185 10/85 11H85 02186 - 01/88 03/86 08/88 101C2ll wraks-IC for ,D,N0,U eIitio 991.00 LCD a 06/86 05s/5 09/46 06/86 10/88 01/J2 - 02/87 04/81 05/87 03/88Cuill worka-eetoral 110" 00 UL 8 06/88 08/18 09/8b 09/68 10/S6 01/87 - 02/81 041/7 03/82 04/8CAnisory-HISP, PIU/coeionre COX I,100.00 Cr. I*IL C 02/U8 03/8b-08/8b 04/86 0/86 02/86 08/8o 09/86 09/86 10/16 10/86 08/90Advisory-monltortng 8a0.00 Con F/L p 02/88 03/86-04/86 04/a6 0M/86 0/US 08/8a 09/86 09/86 10/8b 10/86 081904uipment-all IocAtionS 11293,00 LCD

pollution control study 440.00 Can L/I C 10/8 Ili85 Ils/t 12/85 12/85 01/86 0O//k 01/66 0l/Dk 02/86 0V/87part Technical AsseltanemLaperetn or I Ipnle tngattaPtat A-PNU/PIU 1,438.00 Con L/P a 10/85 11/15/85-12/15/85 01/21/86-02/151/8 03/0S/8b6 0/0/86 07/OS/86 07/10/8b 08/10/86 08/1l/t6.09/07/86 10/13/86 11/13/86 11/IS/90Fart 8-FOM Suraba a 1.513.00 Con L/r a 10/85 11115/85-11/l5/85 01/11/86-0U/lS/86 03/05/86 05/0 0/86 01/03/86 0l/10/86-08/10/86 08/15/86-09/0/Zt8 1O/IS/8i 11/IS/86 11/15/90anatgement * accounting advitory to

2PA & PFOAM 828.00 Con LIF r 10/85 11/07/85-12/07/85 12/15/18-01/05/86 01/10/86 02/10/86 03/10/8b 03/151/6-04/Ul/i6 04/01/16-04/IS/16 04/211/6 04/21/86 04/21/U8

Sarosbya It 2,077.00 Con LIf C 12/8l 01/86-02/86 02/86 03/86 0/86 06/86 06/86-07/36 01/86 08/8b 09/86 03/88feat ava sI/cotiluncte ADAI 3,000.00 Can F/L 0/F 11/5 01/O 6-02/t8 02/86 03/8b 01/86 06/86 06/at-07/a8 07/8k 08/86 Ot/U6 03688Unaccounted-for water/SurabAya 6C'OO. Con LI/ a 11/85 0/8b-02/86 021/8 03/ab 0/86 06/86 06/86-07/86 07/Uk 08/86 t9/86 02/86nter Inostitution 240.00 Can L/t a 10/85 11/85 11/85 12/8S 12/85 01/86 01/8b 01/6 01/ak 02/16 02/81

Total 62,811.10

NotUm, (1) Type or tandectog procaets (Aertlsement - contract elan). Type A . Ip 20-100 mIlliton (10 vasksil Typ. I * Op 100-500 utllton (32 veeke)l Typo C * More Ithn Rp 300 mIllton (81 wvke/procurament;l Type D * Morethan Rp 100 million 133 wseehrC.V.2; Type I .11aW4a Cooperation (enWrAl)l Type P c Opdn propOc4ul and Type 0 Direct eppoteent. It(22 Approval requirementl Type A . Prom PHi to 1t88D Type 8 a trno P30 to W5 to DJCI to KrW to I18D2 end Typ.s CtD * Prrom FU to w88 to DiCK to 8s0x%G to 1810s

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a S... LS.P a.. tJ.m ,m u ms m

too~~-C. ... . .... .p ZO. ...... e ..... I.on

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.... ...* ....... t. to:Sa

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..I... ... ........ N O 15 INS II aI* C -.-IL.-...... a

I .IB.t... .... ....... adI else IO

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Annex 11Page 1

70 100 EI P?88AM 1*31A3*171 MUM W72 DaE sraarrs73 FT ENDS 12137475 1985 198 1987 1988 1989 I19 1991 192 193 1S9t677 NPULATION-IN 114.74 188.27 19i.86 195.53 199.2 33.07 206-18 2D9.33 212.53 215.7978 FESONIINNECTIU 4.63 4*63 4.64 5.39 6.83 7.18 8 843 8.43 8.43 8.437' Z OF PIRtATIOE SERVED 8.47 8.31 8_17 10.21 16.07 21.71 27.24 26.83 26.43 26.03

Bi ilTER CDI11ONS-000 3.38 3.33 338 3_71 4*69 5.66 b_b 6.b6 6-66 6-6682 c IWrI1 Tim0sNflhC. -3Jo10 37.10 37.18 35.25 31.72 30802 2397 28.97 28.97 28.9783 Y0Liw SlL-IflION 93 1.50 1.50 1.50 1.57 1378 2.04 2.32 2.32 L232 2328485 I .IlNACOsIED FIRt 1(t1 15.00 15.00 15_031 150 15.00 .08 O 1500 106 1500 15066 IUAER FII UNC NI NStl 13 177 1.77 tn 7 L.84 2.10 2.46 2372 2.72 212 2n287 AVEUGE OMER TARIFF 107.00 13.00 156.06 170.00 183-00 19400 230.n47 2441S 2D.46 275.81

89 WATER IU I 160.97 195If 234.69 266.48 326.32 395.2 5374 56543 59B.56 638.7596 COUIECTI4IU FEES 0.00 0.00 6.00 2.70 11.54 20689 31.25 31.25 28.SS 19.7291 aIER 0.00 0.00 0.00 0.0 0.08 000 0.00 0.00 o00 0.009293 TOTAL 0O81R1I IEMWES 160.97 195.58 234.69 269.18 337.96 416.71 5i< Y9 596.68 62?11 6S-.47

95 PERSAML 49.42 e7.39 Y6.9B [31.35 141.86 158.0 £75.12 1M83 193.07 2072i9 CHEIICJlKS 1.41 1.52 I-d4 2.85 655 10.85 15.54 16.32 17.14 17U997 POiE 10.3. 1.19 120S 15.63 25.26 36.30 48.30 50.72 53.2 55.9193 MBrERIAS 23.98 25.90 27.97 31.9 40.29 51.19 62.60 65.73 69.02 n2.479 rTISIRTATIO-DIHER 6.53 7.06 7.62 20615 26.5 28..9 3.55 32.08 33.69 35.37

LO0 lam ITBS a.05 9.78 11.73 [3.46 16.89 20.84 28.25 29.83 31.36 32.9216 *IUIIISTaTIN-ENERAL 37.52 40.52 43.76 47.3 5£.17 55.65 59..8 6.66 65.00 69.08102[OS TOTAL OPEurT E l 137.27 163.36 195.90 26.2. 308.59 361.81 420.05 441.22 463.31 486.481041os INCONE BEFO EPUCIAFION 23.70 32.22 33.89 6.97 9.27 54.91 144.94 155.4 163.80 171.99[06 DEPRECIATIN 35.03 35.7J3 37.bv 65.25 106.55 130.36 L14.4 155.4* 1.3.90 171t.S107 WEPUTDIG INCOIE -11.33 -352 1.00 -e 82. -77.28 -73.45 .00 a0 800 0.00 oM1tol09 OPERATIONL INTEREST 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00110 011 IJIE (t.) OR EXPEN. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00ILL NET DIEW -11.;3 -3.52 1.00 -58. 28 -77.28 -75.45 0.00 0.00 0.00 0.00112113 RATIOS AND COHPARATORS:L14115 AVE.EXFENDITURES/N3 SO. 91.25 13.59 130.15 167.27 173.06 177.33 181.38 190.52 200.06 210.06116 110506 RATIO 103/; 35.28 Z9 353 83.43 91.41 91.34 96.82 74.5 713. 73.88 73.08117 Z OPERTIN RATIO103#106/93 107.04 101.80 99.57 12165 122.87 118.11 100.00 100.00 100.00 100.00[18 S MET Dlail 0, WC -7104 -1 90 0.43 -21.65 -22.a7 -18.11 0.00 0.00 0.00 0.00[19 2 REAL TARIF INCREASE 12.56 11.11 0.90 -Lfn -1.84 10.32 0.89 0.82 1.65120 2 CR1 OPERATIN REVEUES 21.50 20.00 14.69 25.52 23.34 15. St.1 S. la 5.00121 65201H HAER SOL 0.00 G.to 4.19 13-7 14.42 1.51 0.00 0.00 0.0122 AVERE RAE BASE #f50.08 941.25 9.0.93 L727.98 2OM-2b 348.09 3725. 852.14 389.45 3926.53123 : RATE OF fETUIN -1.19 -0.37 0.10 -. 37 -2.oB -2.18 0.00 0.00 0.00 0.00I24 I DEPRECIATI[ON CUVEED 61.15 *4.1 102.o4 10.69 21/.47 *2.12 10.00 100.00 100.00 100.00

_ 100 -

136 IOOZ UEPN Po0M.UA PASURI Page 21371Lo SuUCE MND APPUCATION OF FUNDS NILL1U will

140 141 193 198 1937 1998 199 1990 191 1992 1993 1994142143 SOURCESOFRU-DS144145 DICOIE SEF DEPRECIATION 23}70 32.22 38.89 6-97 29.27 54.91 14.94 155.4 163.80 171.9146 NMN-OPERAT c SEEN () o 0.00 0.00 ..00 0.00 0 .00 0 .00 0.00 0.0o 0.00147 -- .

143 6soss DnTERL GERIAT[U 23.70 32.22 33.09 6.97 29.21 54.91 144.94 155.46 163.80 171.9914915C OPERAINc SUBSIDIES 0.00 0.00 000 0W00 00 11. 0.00 0.00 0.00 0.00£15 EQUITY - BRI RINDING 0.15 352.96 456.70 S10.08 67.62 15.65 0.00 0.00 0.00 0.00152 EOUITY-GOI 25.10 210.04 438.5S 406.31 14.72 54-07 0.00 0.00 0.00 0.00153154 IORROIIINGS155 --156 PROPOSED BRD LOAN 0.00 0.0W 0.00 0.00 0.00 0.00 0.00 0.00 o.m 5.00157 NATIONIL LOANS 0 0 0 0 0 0 0 0 0158 uT LOANS 0 0 0 0 0 a 0 0 0 0

160 uTAL lORIbiiiNIG 0.00 0.00 0.00 0.00 9.00 0.00 0.00 0.00 0.00 0.00161162 TOTAL SOUES OF FUNDS 48.95 595.22 934.1w 723.36 244.61 124.63- 14494 155.46 163.80 171.99163 ------- _ _ _164165 APPLICATION OF FUNBS166--.167168 CAPITAL EXPENDITURES:169A7 PROPOSED PROJECT 25.25 563.00 895.25 716.39 215.;4 69.72 0.00 0.00 0.00 0.0071 INTEIEST CAPITALIZED a 0 0 0 0 0 a a 0 0

172 OTHR 1ORKS 0.00 0.00 0.00 0.00 0.00 0.00 174.00 145.00 153.00 159.00173 OtHE ORIS 0 0 0 a a a 0 0 0 0174175 rOTAL CAPITAL EXPENDITURES 25.25 563.00 395.25 716.39 215.34 69172 174.00 145.00 153.00 159.00176 DEBT SERVICE177178 AHORTIZATION o Co 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00179 oPEurIoNL INTIEREsr G0D. 0.00 0.00 0.0 0.00 0.00 0.00 0.00 0.00 0.00180 -_ _131 OTAL EBUT SERVICE 0.00 1100 0.00 0.00 0.00 U.OO 0.0 0.00 0.00 0.00192183 1ORKING CAPITAL NEEDS (t) 12.)4 6.bu 7.50 5.27 15.32 19.16 31.08s 7.00 7.32 8.59124 OlER ASSETS OR LIAB.NEEDS 0.00 0.00 0.00 0.00 0.00 -0.00 0.00 0.00 0.00 0.00185L36 TOTAL APPL[CAfION OF FUNDS 38.19 569.A 902.75 721.66 230.66 38.88 205.0S 152.00 160.32 167.59187 --------------------…---------

133 iNCREASE (*J1 u DECR. CASH 10.76 25.54 31.39 1.71 13.95 35.75 -40.15 3.46 3.47 4.40

190 oEBT SERVICE RAT[U NA NA NA NA NA NA NA NA NA NA191192 : CAPITAL EXPEND /NET ASSEr 2.09 ,. .5 91.33 2s.93 6 tb I. 4.5 3*.73 3.91 4.04

Annex I1I-101 Page 3

207 tOOZ DEPN PDAN IKU PASURUAN208 11111 IFAI209 BALANCE SHEErS210 FT EMS 12131211212 1985 1986 1987 1989 1989 1990 1"1 1992 1993 1994213214 FIXEO ASSETS 1068.08 1110.80 1199.67 2779.14 371786 4230.62 4d7.06 4871.97 5115.57 S371.34215 ACCUMATED DEPECL[AION 127.7 168.62 22b.00 302.85 433.63 598.68 787.02 987.73 1200.91 1432.94216217 NET FlDO ASSETS 940.J1 9S2.19 979.67 2476.29 329.23 3631.95 820.04 384.24 3914.66 3938.40218 MORK IN PROGRESS 25.24 588-24 1483.49 716.38 215.33 69.72 174.00 319.00 n72.00 631.0021 9220 CASH 20.47 46.01 77.40 79.10 93.06 128.81 68.66 72.12 75.60 79.99221 CCOUNTS RCEIABLE 26.83 32.60 39.12 44.41 54.J9 65.97 81.96 94.24 99.76 106.46222 INVENTORIES 24.68 26.66 28.79 32.81 43.56 56.61 70.38 73.89 77.59 81.4722m Oe CURwENr ASSETS 1 0.00 a .0. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00224 OTHEWI CURET ASSETS 2 0 0 0 0 0 0 0 0 0 026 SUTOTAL CURRENT ASSErS 71.98 105.26 145.30 156.33 L91.01 251.39 227."9 240.25 2S2.94 267.92226 OTHER ASSETS U a U 0 0 0 0 0 0 0227228 TOTAL ASSETS 1037.53 1635.b9 2608.46 3349.00 3690.57 3953.05 4222.04 4443.49 4639.60 4837.32229-- - - - - - - - - -::230231 ACCOMIrS PAYABLE 13.30 14.3. 15.51 19.57 24.97 30.44 3b.11 37.92 39.31 41.81232 OIrER CURRENT L[AMLITZES 0 0 0 0 a 0 0 0 0 0233 utEB UUIUTrES 0 0 0 0 U O u 0 0 0234 EQUITY - LBRD FUWIIW 0.15 353.tl UZr.81 1119.89 1187.51 123.16 1283.16 1203.16 1203.16 1203.16235 LNG-ERn EBT 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0o.o0 0.00 0.00236237 EUITYl 1024.08 1268.21 1783.14 2209.54 2473.09 2719.45 2982.76 3202.41 3396.63 3592.36238 _ __…_ _ _ _ _ _ _ __-_ _ _ _ _ _ _ _ _ _ _ _ _ __-_

239 TOTAL EQUITY LIAJILITIES 1037.53 1635.69 2608.46 3349.00 3690.57 3953.05 4222.04 4443.49 4639.60 4837.32240241 CURRENT RATIO 5.41 7.33 9.37 7.n 7.65 8.26 6.31 6.34 6.35 6.41242 OURING CAPITAL EXCL.CASH 38.21 44.89 52.39 57.66 72.18 92.13 123.22 130.21 137.53 146.12243 1 DENT (DEDT+EOUITY 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00244 3 OATS ACCOuNTS RECEIVA3LE o1 61 61 61 ol 61 6l o1 61 61245 b4EBT/NET FIX.ASSETS + I1P 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00246247 ONE HNOTH CASH REOUIRENENTS 12.80 IS.:3 2.O73 24.31 28 41 32.65 34.28 36.00 37.80 39.69248 TUO MONTHS CASH ROuIRREEFS 25.60 30.o8 41.40 48.62 So.33 65.30 0.5. 71.99 75.59 79.37

- 102 - Annex 11

Page 4

IOZ DEPN PDA B t* PASURLJNFINANCIG PLAN NILLIEON RWIA

TOTAL 1935 TO I#O TOTAL 1S% TO 1990

TOTAL Z 1985 1986 1987 1988 19B9 190 OTAL z

INCOME BEFORE DEPRECTITIuN 185.96 7.48 23.70 32.22 38 59 6.97 29.27 54.91 162.26 6.60NON-OPERATING RB .ENES (ft 0.00 0.00 0.00 0.00 0.00 0.00 o.uo 000 o o.00 0.00

GROSS INTERNAL GEHERA[IuN 185-96 7.48 23.70 32.22 38939 6.97 29.27 54.91 L62.26 6.60

MINUS:ANORTIZATION 0.00 0.00 0.00 0.00 0.00 oo oo 0.00 0.00 000 0.00OPETIONL INTEREST 0.00 0.00 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00

TOTAL OEBT SERVICE 0.00 0.00 0.00 0.00 0.00 0.00 0.10 0.00 0.00 0.00

HURKING CAPITAL NEEDS (*t 6e.86 2.b9 1294 6.68 7.50 5.27 15.52 19.16 53.92 2.19OIHEI ASSETS OR LIAB.NEEDS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

NET INTERAL GENERATIUN(+) 119.10 4.79 10.76 25.54 31.39 1.71 13.95 35.75 108.34 4.40

CAPITAL EXPENDITURES:

PROPOSE PROJECT 2484.95 100.00 25.25 563.00 895.25 716.39 215.34 69.72 2459.70 100.00INTEREST CAPITALIZED 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 OWOTHER VORKS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00OiMHER UORKS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.0W 0.00 0.00

TufAL CAPITAL EXPENDITURES 2484.95 100.00 25.25 563.00 895.25 716.39 215.34 69.72 2459.70 100.00

NET TO BE FINACED (+) 2365.35 95.21 14.49 537.46 63.06 714.68 201.39 33.97 2351.36 95.60

FINANCE BY:

PROPOSE IBRD LuAN 0.00 0.O0 0.00 0.00 0.00 0.00 0OOu 0.00 0.00 0.00aNATIONAL LOANS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00OTHER LOANS 0.00 U.U0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00OTHER 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00EOQIITY - lORD FUNDING 1203.16 48.42 0.15 352.96 456.70 310.03 67.62 15.65 1203.01 48.91

oPERATING SUBSIDIES 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00EuU}TT-GOI 1281.79 51.58 25.10 210.04 438.55 406.31 147.72 . 54.07 1256.69 51.09

INCREASE (*) OR DECR. CASH 119.10 4.79 10.76 25.54 31.39 1.71 13.95 35.75 10d.34 4.40

' CONTRIB. TO INVESTHENT 4.79 42.61 4.54 3 ,1 0 24 o.4d 'i.28 *.40

- 103 - Annex 11Page 5

[Uj, DEPN PDA [AB PASMM

lUNITOTRIN INDICAiONS

l985 1986 1987 1988 198 1996 19 1992 1993 1994

DE ,D

POPULATION-= 184.74 188.27 191.86 195.53 1W.2 2W.M07 206.18 209.33 212.53 21579X POPULATrON SENDE 8.41 6.51 J. 17 1QL21 16.07 21.11 21.24 26.83 26.43 26.03WATER CONECTIOlS0OO 3.33 3.8 3.38 3.71 4.69 5.66 6o o 6.o6 6.o6 6.66CONSUTION B3JIC/GNNl. 37 .1b 37.10 37.10 35.25 1.72 39.02 28.97 28.97 28.97 28.97VOLUIIE SOLDH-IILLOI 3 1.50 1.50 1.50 1.57 1378 2.04 2.52 2.32 2.32 2.32Z UNNCCOUIOED FOR MATER 15.00 15-00 15.00 15.06 15.00 15.00 l5.00 15.00 15.90 lS.-0WATER PR0ODTI0N NILUON H3 177 1.77 1.77 1.84 2.10 2.40 2.72 2.72 2.72 2.72POULTION SERVED-OoO 155 1S565 15.66 19.96 32.02 44.09 56.16 56.16 56.17 56417PERSONS PER CONECTION 4.63 4.63 4-o4 5.39 6.83 7.78 8.43 8.43 8.43 8.43CONSUNPTIOI/CAP.JDIA-LITER 263.41 263.45 262.94 215.12 lS2.56 1639 [1.2.97 11297 112.95 112.96IANAGENEN

IDTS ACCOUITS ECEIVAILE 61 bi o1 61 61 61 ol i1 61 61NMNIER F PLOTEES 77 77 77 7 78 31 84 84 84 84E8PLOYEES/1000 COWNECTIONS 22.79 22.79 22.79 21.05 16.65 14.30 12.61 12.61 12.61 12.61Z INCREASE I EnPLOYEES 0.00 0.00 1.30 -3.01 3.83 3.70 0.00 0.00 0.00

FINACIAL

TARIFF IN CURRENT PRICES 107.00 139.00 156.00 170.00 183.00 194.00 230.47 24.15 258.46 275.81AVE. TARIFF DNREASE 21.50 20.08 8.97 7.65 6.01 18.80 5.94 5.86 6.712 9011116 RUTIO 85.28 83.53 83.43 97.41 91.34 86.82 74.35 73.95 73.88 73.98I CONTRIBUTION TO INVESTH. 42.61 4.54 3.51 0.24 6.48 51.28 65.43 102.39 102.27 102.772 RATE OF RETURN -1.19 -0.37 0.10 -3.37 -2.68 -2.18 0.00 0.00 0.00 0.00OEBT SVICE RATIO N NA 10 NA N NA U NA N NAX OEBT (DEBT#EUITY) 0.00 0.00 0.00 0.00 0.00 0.00 0.0o 0.00 0.00 0.00

CuoSNtsr ---- PRiCES NL sI.

TARIFF /113 107.00 120.37 33.74 134.95 134.51 132.03 14. 23 148.59 149.81 152.25REAL TARIFF INCPEASE 12.50 11.11 0.90 -0D.3 -1.34 11.55 0.89 0.82 1.63SAlART OODJEIPLOYEEJNOKTI 53.48 67.52 84.41 111.38 111.39 118.85 111.03 111.03 111.03 111.03OPER.ElIlEITURES/N3 SOLD 91.25 100.54 111.50 132.79 127.20 120.69 115.91 115.95 115.96 115.96

- 104 -

78 rILE I PFA SURAAYA - BASE CASE Page 11

771 zic.is*wrNILON Page 672 DlWll SrT^EMERr73 FT E1r 5 12131

7475 19S4 1985 198 1987 1 19 15 19 1992 1M3 194

7677 POPILATII-0 224.00 Z379.96 246893 25611.3 265720 2756.65 2859.93 291 331.26 3119.24 210.8478 wEsn erI 12 11 1L 1L 11 u 11 it LO to 79 ZOFPPNOMATIOSERVE 52 52 52 52 54 56 58 60 62 d4 6*3011 UTER C9UTIONS-000 193.00 109.O5 113.65 116.05 126.05 1 5.05 1525 168.05 186.05 206.05 228.0582 C0SUIpTiI 53/frlc0. 52 49- 4 4 4 57 54 So 56 S6 5483 VALUE SeF-iuLLION lHtIL. 63.79 6477 66.40 66.40 69.93 953.66 97.67 100.35 125.45 I7.75 It; o9

84 :Z WACcOfNEDFOR UOE 36 35 35 S5 34 3 V 25 25 2s 2585 PRODUCTIOU NIlLI 113) 99 64 9.64 102.16 102.16 195.96 133.80 133.801 I.90 167.26 183.67 16.92367 AVEE VATER TARIFF(1IIp3) 151.67 250.00 290.00 290.0 m. 353.0O 353-.0 4.00 4.0o 444.00 44.00

89 UTER REVEUES 9675.00 16191.1 18593.12 1593.12 2U6.56 33061.93 443.92 u4 -4. 55157.58 61162.L 6554.36s9 COMECTIO FEES 2007.00 120.00 100.00 750.00 2500.00 1562.U0 283.00 2647.00 324.00 7.00 4=.0O91 OTHER DE 1688.00 1173.0 1206.00 1227.0 13.00 136.0 116300 1285.00 142.00 1576.0 1744.009293 TOTAL ooErrAg EE S 13450.0 S614.91 2757.12 29570.12 23469.56 36019.9 37724.92 48487.40607 4ss 364.1l 71656.36'495 PERSOIEL 2477.00 367.35 33130 36.5 4072.12 4436.05 S003.73 5498920 6366.6 19349 7406.9756 CIENICALS 914.00 914.00 1012.00 1052.56 1279.00 1696.00 t1.6 19074 25 2.09 26.0O 3331.0097 Pogo 16I7.W0 1792.00 1986.00 2142.72 2516.00 3W10 340.61 :37.32 5349.00 5876.00 80O8.o99 NATERUILS 1047.00 193.20 154.66 1625.03 194.9 2695.70 2900.S6 3092.40 4274.69 4714.82 5142.SI

9 BERT$ 852.00 1619.18 1959.31 1959.31 2468.66 336.20 3447.39 4155.54 556.76 6116.21 657.44Lo0 AON[NISTRArION-GENERAL 898.00 15.0 1270.76 1498.81 1652.66 [954.0 2325.29 2737.01 31.69 3699.0 4299.681i1 P9R04SE0 HATER 000 0.00 9.00 0.00 0.00 0.010 0.00 09 .00 0.00 o 0.0102 VAT FE 96.97.59.LGO.lo1 0.00 523.42 577.14 626.95 739.0? 970.75 e169.82 1i6s-75 159274 1721.67 1963.1213 TOTL OPERATDIG EXPEES 7905.0C 10"4.15 11521.07 123924 14670.49 170.50 20219.69 22776.x 2064657118.9 35559.72L04 I01KE ErE ErCITION 565.09 870.66 s276.05 81777 n.1382.07 us59.4 1750.2 25710. 31921.01 S666.32 J6097.65!05 DEPECIATION 291-00 302e88 3391.56 4605.21 5117.24 741S.42 9379.10 927.50 1219.62 5417.87 16679.86L06 ERTINs DNE 2754tr 5157.73 5384.49 3572.51 902.83 10131.06 9126.13 tSM94 19700.39 1238.45 19417.79107 INTEREST 0.00 0.00 997.51 873. 3603 315.43 781.04 4035.31 3996.85 10640.471027.35108 MER nCE ) OR EcN 126.00 360.00 3e.00 3w.00 3.00 3.00 30.00 3 .00 30.08 30.00 3.0oL09 ICOME BFORE TA 2623.00 5497.78 4456.98 266924 7126.80 9288.64 9315.9 12513.64 71s.54 8567.93 919044110 nOME TAX 671.00 1918.22 LS5394 928124 2488.38 3245.02 294. 4373.77 5514.04 2"2.79 319751511l NET DEW AFTE TAX 1957.00 3579.56 2903.04 1741.0 4638.42 6843.61 5419.91 3139.96 19257.50 s575.19 5112 PATNeT KoreANsTA 630.09 665.0 699.25 733.L6 765.32 99.31 348.73 81.16 935. 782.S1 1031.63113 PATIT OTHERS 115.00 368.79 66.23 384.54 403.77 423.96 44S.15 467.41 490.78 51S.32 5410.9114 NET I WIE MFPERP T L212.09 255.77 138.56 623.31 3464.83 481I.35 4116.92 o;81.29 893100 4077.36 4348.56!115S---------------

16 URTIOS AD CWAuATORS:117Il AVE. EXP.1N3 SLD 103183 122.3S 161.26 173.50 186.62 209.78 197.21 207.01 226.98 226.77 232.22 240.77119 : IORUDN rUTIO 103/93 58.03 56.11 55.40 60.24 5L.49 SL.28 53.60 46.s9 47.12 48.00 49.62120 S OPERATDG RTI0103+105/93 79.52 72.29 74.11 82.63 71.51 71.87 75.81 65.80 67.36 71.13 72.5921 12 NET nC ON REWTI1S1/93 16.55 19.23 13.6 8.46 16.21 16.78 14.34 16.79 16.99 8.37 3.26

122 Z REAL rIFF DinEA 64.83 2.00 0.00 26.07 0.00 0.00 25.78 0.08 0.00 0.e012n I GWN OPErTN REVE 3.40 11.72 -I.0S 38.50 26.43 4.73 28.53 24.52 10.39 7.52124 : GROWTH MTER SOLD 1.53 2.53 0.00 5.32 3.93 4.29 2.74 25.0l Q.81 7.21125 AVE. RATE BASE 221*22112 L7167 17546 2171 256 31718 44859 47669 47231 70915 2632 'OM126 : PATE OF RETRI/125 11.40 20.40 13.33 6.94 13.76 13.47 11.35 17.23 1446 o. 02 b.5%127 REVISED RON LLN 114125 7.06 14.62 3.a4 2.15 10.2z 10.73 8.64 146 12.45 *.40 4.31J

- 105 -

,, ,,,,X,; * ~~~~~ru_l iuwnwsF - e ux W&

laI Annex I11141 MIES M ALICATIN OF RIND SIlIE Page 7

14214314 1964 1M5 1966 197 t96 191 199 [l 1992 1mt 1994

14S14 SNCES OF FMS147 -140 INC. BEFAM.AFTER TAX 4974.00 6252.43 7211 720 490 I 1.69 14304.46 1400.95 21336.67 241397 31663.52 32918949149 PAT I&OTANAVnGHERS 745.00 W10.71 [064.48 1117.70 113.59 1232.7 13.86 1359.59 1426.50 1497.83 1572.1215 *ON-OPE- IEEIE IES 126.00 30 00 39.00 30.0 30.00 30.00 30.W0 30.00 30.00 50L00

152 GRMS INTEEN GEIEA ATTE 4103.00 5S73.64 660.63 6101.79 1012.10 130t2.19 13277.07 1998.09 24957.47 30135.70 31315.7

153 1154 IORIOUNG155 CAP. DNRES LON 1709 6Q5.00 426.05156 POOSED a113 LOIN [A 1 2236.00 5810.00 3653.00 11.010 659.00157 PROPOSED 901 LOIN 2 I 1504.00 217. 1609.00 57200 0.00 0.00 0.29 D.W 0.00156 n133 Disrinuri 0.00 1000.00 200.00119 PROIP FOEIK LGIN 0DI13 659.S &.80 S135.0 9650.40 4913.60 991.60 84.W016 PROP. 901 LOIN U-2 f 0lS1 274.75 20U.25 4721.25 40*21.11 206.50 370.25 35.00161 CAPITALIZED INTElEST KP- 134.6 633.02 1276.76 1954.11 2116.15 1077.96162 CAPITALZED ITEIEST IF-2 3.56 378.1 1397.85 2924.77 4041.78 2917.14163[64 TOTAL ESOEI 0.00 165M80 430021 9250.0Z 7511. 11I4S9.27 210 .05 17574.01 11101.13 4245.99 119.00165'- 16 TOTAL OF RL4S 4103.00 7264.44 II2.93 [I.81 176B.56 2450146 39.12 37522.10 36059.35 3 t381.69 31.43477167168169 AlICTiN OF RFEEOS7D R9IAILITATION L EXIEIISII 69500 600.00 1100.00 16W.00 2663.00 4153.00 4563.00 429.00 S271.00 5796.0Q

171 low13DISNIUTIOU O.W 20100.001 191.001172 PROPOSED PIWECT MMI I 330.00 220.00 3636.00 8416.00 5523.W0 338.00 2900.0173 *ARN PILING 2 1099.00 8173.00 19LS3.00 11062.00 4016.00174 .91 DISTRIUTION VOWES 5I22 D 4250.00 1481100 140.00175 O000 MM -11DU0 3727.00 165500 600.00 1600.00 230.00 1OD0l00 900.W0 700.00 800.00 400.00 500.00176 VAT FOR 170 T 175 0.60 457.00 673.60 1111.60 1052.20 1522.1 25B4.63 2134.70 1339.50 715.20 643.60177 CTITED INTEEST 0.00 685.80 560.21 633.02 1316.33 2232.22 3514.00 3902.61 401.78 2997.14 0.00173179 rOTAL CAPITAL EX ITURE 4657.00 571L0 7969.1 129602 12890.53 IS975.32 31944.60 27394.31 I[876.29 1054.34 7079.60190 DEIT SERVICE181182 AMORTIZATION 0.00 0.00 i6.3 0.37 247.60 278.21 312.59 [10e67 1204.13 2856.93 32'0.95183 INTEIEST 0.00 0.00 897 5£ 93.27 846.03 815.43 791.04 40.31 3906.35 10640.47 10287.S3184

S roTAL OET SERVIE 0.00 0.00 1093.63 1893.63 1093.6 L053.63 1O93.63 51o.98 5110.9 1349740 13497.40186197 MORIN CPITAL E 52 -230.05 212.33 5914 1470.72 2122.74 779.63 2510.71 2623.19 2028.23 1199.65199 OER ASSETS Of LIA-ES -63.00 o DoW 339.00 319.00 348.0 340.00 0.00 0.00 0.00 0.00 0.00189lO reTAL APPLIcATiE oF FUNS 416.0o s2.7s isl377 US1.40 15794.1 22531.690387.37 nOO6.00 26510.45 629.97 21776.64191192 NCRASE (+) dR ECU. CASH -413.00 1443.69 -483.94 900.41 144.70 1969.76 -309.75 2516.10 9543.90 3001.72 96.13193- …… -..

194 DEOT SERICE RArIO N NA 6.06 5.59 9.26 11.93 12.14 3.90 4.89 2.23 2.32195 s CONIDUTION TO INVESTN-s 74.60 92.52 34.65 39.24 48.45 44.6e 43.69 47.35 90.63 119.40 185.33196 : CAPIrAL EED /ET ASSET 22.34 32.96 30.38 52.08 30.16 40.39 6.05 59.40 19.61 12.12 7.72

1" S CURRENr TER ET INrERMAL EuERAION / 1VE. cAPITAL ExPeDrTuRE PRoDR TEAR. CURREN TEAR AN NET TEAR.

- 106 - Annex 11Page 8

211 TABU 3 PFU SUATA - BASE CASE212 ~~~~~~~~~~~~~~~~~~~NILLIW

213 BLA N EET214 FT E 2215216 16 1995 19 19 m 19 19 1991 9m 1i 1£

213 FS AT 3 A.0 35.03 4 .0 5214.913 7 A.12 92.9 979 10150 164697 175M 19741219 AccUATO KP#IIIT 1 .1512 23. 9.6 32. 412631 42.41 316.91 703.53 936.401 103066220221 NET FDO ASES 1760A0317332 26W.61 26694.33 4241.14 47.76 4I1.81 4618.13 9572.5 J13. 91674.m m Di s 6m0.63 9160.03 4341 141L2 3121.731 A0.n .45 531.92 196.14 U739.34 0.00223224 CAS 475.01 113.69 1514.76 2315.17 4159.6 612. 5920.0 9 U93. 1711965.7 25907.9 35545.722S ACC.UTS ICYA3E 3243.3 443.95 4.29 569.2 6407.4 V11. 95.173 1157465 14366.4 15.SS [6829.59226 IEIOUI 2405.0D JAS.03 1612.03 113.49 I21.77 1457. 2314.27 2175.42 2319.30 326.A 35.1122 OTIER aPiSSE 1 12.1 31.03 3. 3.6 MA .0 M. 30.0 31.6 N. . 30.0022; OM N ASSS 2 0 0 9 0 0 0 0 0 O 0 022923 oTe ASSESI 115.10 U4.311 U4.0 11 4.011 114.011 U4.0 11 .0 1 4.6 .00 1A 1.0 U4.00231232 TOTAL ASSTS 3120.00 37. 3.2147493.52 511311.14 715. 99060.14 12113 140549 1429 147730233 ____-

234235 ACCOuTS PAYMLE IS20 45.0 415.0 516.35 611.27 769.0 . 2.4 9.04 U5.V 1332.7 1481.6U236 OSNER 1l LL LITIES 341.03 2903. 1269.01 U6.0 52.0110 57.0 634.011 697.05 767.0 86483 93.8.1237 OTNE IILI 1965.09 56. 121 7.03 I.0 52.03 19L0 1N.0 1953 18.0 1.00 119.00238239 LONI-IEE 01T 5215.0 699.9LIMA 20159.3 V4279.41 379.U 5115.92 751U1.266 80.0 11631.06 837.022402-1 EWm 20376.03 2294L77 24790.33 254633 211611.6 6 79.81 379.73 U45.0 S12 -02 2574 613.94242243 TOTAL EWITM & LIULI 319.69 36718.57 352 4745. 50.14 135. 9015.14 1513 140569 146239 147731

245 CUUMEIT RATI3 1.94 Z.4 4.69 8.62 10.59 MM 11.46 13.44 1772 20.65 23.21246 OIKIK WATAL E-CIS 3093.03 296295 492.29 55.42 621.14 9343.9 9623.52 12.23 14157.42 1679.65 17U95.30247 Z S EITIIEET4EOUII) 20.3 23.12 31.14 4.34 43.78 53.45 6.79 62.75 61.41 40.04 57.39248 * 9 r5ACCouSM E1 AIE 106 91 91 91 9L 91 91 91 91 91 91249 ZUEDTIIET FILISSETS + VP1 21.92 26.05 36.65 S2.12 59.91 67.32 7Z.32 75.64 o0.1 85.3 90.a6250 CASNII OMTM OPSATDTC ER?. 0.92 2.61 1.03 2.64 4.09 4.95 4.16 5.46 9.38 12.01 14.71251 1 ROUTE TI0P91 EX ERSES 579 735 SOS 7I I017 1264 199 [527 1906 2156 2417

A.zmez IL- 107 _

TIELE 5 POAM SUWATA - EASE CASEPAY Ir ON SUCE GP. OP.

FINAINCIG PUN snIuIgO

_____________ ------- roTiL -

1:85-1l 2 1995 1M 1997 198 1999 1940 1991 1=2 16-90 Z

IE BEf D LN AFTER rA 111910 87.45 252.43 7722.18 7249.78 1134.4 11427.43 15053.8S 22231.47 2.76284 55,97.65 o7.35£NN-ERAflN EPENE5 550 0.43 340.00 0.00 30.00 30.00 30.00 3D.00 30.00 3.W. 150.W. 0.18PAY xOTAITAIOTNEIIRS 9681 7.56 1013.79 1061.48 111.70 U73.59 1232.27 1293.98 1358.58 1426.50 581-92 7.10RSS ITBRL CatrION 102I 9 79.911 858.64 27J0 6102.08 10140.82 [3165.16 13M72.97 20842.90 2611.94 49765-.3 og.0O

WINDS:=ORrmZAnlON 38 2.76 0.00 196.1. 220.37 247..0 278.21 312.59 1074.98 1207.85 1254.90 1.51INrET 20811 16.31 0.13 897.51 813.2) 885.6o 1195.5 21739." 6879.21 7n3UX6 6028.0 1.23

TOTAL DEOI SERVICE 24409 19.07 o.eo 1093.63 1093.63 113n.20 1471.74 2491.49 794.20 917121 723.69 .79

ioRKING WIT.L HEEDS 111 U664 9.11 -230.05 2129.53 258.14 1470.72 2122.74 779.63 2510.71 2623.19 6760.57 8.16OME ASSETS OR LIAINIEEGS 1696 1.33 38.00 339.00 339.00 340.00 340.00 0.00 0.00 3.00 t5.00 1.64

NET DNTENAL 1ENaTION(f) a4590 50.47 54ME.0 3065. 7 411.30 7196.91 923.68 1048.84 1077.99 14377.54 34 .47 41.48CAPITAL EXPt. vAr L[n7 8.50 457.00 674.00 1112.50 1046.70 1513. 2S94.40 213.470 1339.50 a945.: 8.38cA-ALuzzE [NFE1Esr 8331 6.51 685.80 50.21 633.02 1276.76 1954.11 2116.15 1204.81 0.00 6440.25 1.77RAILiTAri0oN gETaIONs 1%66 15.36 695.00 600.09 U0. 1680.00 2W63.00 4153.00 4563.00 42V.00 10116.00 12.21HE DsIRinuriOiN 9312 7.28 0.00 0.00 0.00 0.0 0.00 0.00 5M-021.0D 42900 0.00 0.00PROPSE PRECT-ARS is 23195 I.12 220.00 3640.00 825.00 568.0 3344.09 298.00 0.00 0.00 22975.00 27.73ARWZILAIN 2 43243 33.7) 0.00 0.00 0.00 1099.00 S1a3.00 18893.06 L1062.00 40Le.00 28165.00 41.05

110 DISTRI!UTIeN 790 3.05 2000.00 1000.00 0.00 0.00 J.W 0.00 0.00 0.00 1900.00 2.29OE ORIS 9455 7.39 1655.00 600.00 1600.00 2300.00 1!'90.00 800.00 90000.0 00.00 63.00 7.6O

TOTAL CAPITAL EXPENIfJURES 121976 100.00 5712.80 7974.21 12870.52 12790.46 1-SZ.11 30654.55 2466.S 14734.50 82841.85 100.00_= _ = = _ = - - - - ~~----=------- ---- :- :_ _ _ _ _ _: _ _

3E( TO HE FI1ICED II) 63 49.53 242.11 4908.47 3-59.22 5593.55 9321.43 2015.70 14308.52 5.96 48478.38 58.52

FINANCED BY:

PROPOSW [RID LOAN RARNG I 146' 1O." a.CO 226.00 5810.00 3653.00 17W.W 659.00 0.00 0.00 14066.00 16.98PEROP WI LOANS lA.UN6 1 49 91 5.07 0.00 ISY OO 2307.00 1608.00 S2.60 C.O 0.081 0.00 6491.00 7.34DEn DIST.RiBUli'm 1200 0.94 IO-.aO 200.00 0.00 0.0W '1.00 3.80 0.0d 0.00 2W00.D 0.24

PROP. FOREIGN LOANX1P2D.-sf 3153- 24.d 0.00 0.00 0.00 659.40 4!i.0 11l-33580 050.40 40113.eO 10399.QO 20.40PROP. 6I LOA P-24DIST. ;St39 10.27 0.00 0.00 0.00 2i4.75 20O4;.5 3PUT.25 4021.00 20?7.50 7041.25 8.50CAPITALIZED INTERESTS 3S11 n.51 635.00 568.21 633.02 127.7.6 146'.i1 2116.15 t204.81 0.00 O4.25 7.77

TOTAL BORROUIG .747.0 52:.4-2 1o35.a0 4500.21 9250.02 7471.91 tI181.1. 1t334.20 14876.21 7060.10 51117.50 6A.73

CONTRIBUTIONS nR &wrsEUITf C(MTRIIUTIONS

.NCREASE (+) OR DECR. CMS9 11374 3.99 !143.,9 -408.27 790.80 1898.36 1059.73 -161.51 57.69 o!03.14 26S9.12 3.21

colrRIT. TO NEsr: 91/101 50.47 5.76 .38.45 34.27 56.27 -. 76 34.12 42.04 9/.58 41.48 41.48

caINTRIS. TO INVESTEr S(NEr nir.GEN.'ciP.ExP. cUR-

RENT YF1.NEXT 2 YAS/3l o1.80 27.34 29.93 34.83 7.48 44.78 65.94 145.32CON't[U. TO INVESTIENT (NEt INT SEI./CAP.EXP. LASTYEAR+TNIS lR+NEXT R1/33 92.49 34.63 ;9.iS 48.83 44.67 42.46 44.43 91.21

- 108 -

1ALE 4 rnu -lKAsta - A , Amx 11

inm m DIuIwToas Page 10

196 19SS 19 19 191 i 19 90 l9l 1992 19I3 199

POFLATION-O 2294 237116 2468.93 2561.34 2657.20 2756.65 2859-93 243.;8 3030.26 3119.24 3210.84POPULATI ED 5200 52.00 52.00 52.00 54.06 56.00 S5.00 66.006.00 64.00 66.60

EATR CoIIlEOS- 103.00 109.05 113.05 116.05 12C.05 133.05 152.05 168.05 136.05 206.05 223.05COSUPTION3/NOMTII/CO 51.6L 49.49 46.95 47.68 4.23 56.54 53.53 49.76 56.1l 55.71 53.97VOLtJE SOLD-LION N3 63.79 64.77 66.40 66.40 69.93 93.66 97.67 100.35 125.45 137.75 147.i9Z tICCOU FOR lTER 35.99 35.00 35.00 35.00 34.00 30.00 27.00 25.00 25.00 25.00 25.00VIER FROII NrLUON 13 99.64 99.64 102.16 102.16 105.96 [33.a 133.8 13 167.6 1113.67 196.92VOLWUE SU-LION 113 63.79 64.77 66.40 66.40 69.93 93.66 97.7 100.35 125.45 1377S 147.69

AYS ACCUNIS ECEIVULE 106 91 91 91 91 91 91 1 91 91 91-3ER OF EJLOYEES 1650 1650 1650 1620 1780 1830 1896 1959 m2 2310 2350EMPLGIEESIo000 CIIECON 16.02 15.13 14.66 14.56 14.12 [3.26 L243 U160 6 193 [1.21 10.30I ICRES I EMT 0.0 0.00 2.42 5.33 2.81 3.28 3.17 13.85 4.05 1.73

FINANCIAL

TAUFF IN CaErT PRI 151.67 250.00 280.00 280.00 3.0 353.00 353.00 444.00 444.06 4U.00 44.00AVE. TArI DICEJSE 64.33 12.00 0.00 26.07 0.00 0.00 2578 0.00 0.00 0.00Z MOREING RATIO 58.03 56.11 55.40 60.24 51.49 51.28 53.60 46.98 4.12 48.00 49.6Z CIUU1IU TO INVESTL- 74.60 92.52 34.65 39-24 48.45 44.60 43.69 47.35 90.63 19 1s5.n3Z RATE OF RETU U.40 20.40 13.33 6.84 13.76 13.4 U.35 17.23 14.46 6.02 6.54lEoT swRCE RTIO NA NA 6.06 5.58 9.26 11.93 12.14 3.90 4.88 2.23 2.2z MRTBT4fOITY) 3.38 23.12 31.14 44.34 49.79 53.45 60.79 62.75 61.41 60.04 57.39

COSTANT - PRICES ANALYSrIS

TARIFF 110 151.67 231.48 240.05 m.27 259.47 241.36 223.48 263.94 251.37 2M9.40 228.00REAL TARIFF DICREASE 52.62 3.70 -7.41 16.13 -6.98 -7.41 18.10 -4.76 -4.76 4.76SURA 0OOEtLOYEEINOITH 125.10 143.44 143.46 12.35 140.13 139.68 139.68 139 68 134.18 134.88 13.88OPER.WMITURES/13 SOLD 122.35 149.31 148.75 148.15 154.19 134.34 131.06 134.93 128.33 125.21 123.64

- 109 - Annex 12

Page 1

ASSUMPTIONS USED IN THE FINANCIAL PROJECTIONS

PART A - BNA/IKK TOWNS

1. Financial projections are presented for each of the 12 proposed,consolidated PDAMs in 11 kabupatens and one kotamadya. Existing waterworkssystem in a kabupaten, although not included in the present project, areincluded in the financial projections in line with the concept of akabupatenvide water enterprise. The financial projections for each PDAM arepresented in Annex 9.

OPERATING INCOME

2. Water production. For the project towns with new water supplysystems, unaccounted for water is assumed to be 15X of demand throughout theprojection period.

3. Service Area Population. The project area population for each BNAand IKK town was defined in the design studies. The percentage of populationserved refers to the percentage of project area population using publicstandpipes and yard and direct house connections.

4. Number of Connections. The construction period, which includesactivities from land acquisition to the completion of installation of serviceconnections, is estimated to last from 1985 to 1990. It is anticipated thatinstallation of service connections will be started in 1987 and actualdelivery of water a year after. A gradual increase in population served isassumed until the target number of connections is reached in 1990. Forrevenue generation purposes it is assumed that whole year revenues from thetarget connections for the new projects will be realized as follows:

Year 4 (1988) - 10 of target connectionsYear 5 (1989) - 401 of target connectionsYear 6 (1990) - 70Z of target connectionsYear 7-10 (1991-1994) - 1001 of target connections

5. Water Consumption. For the project towns, the standard domesticconsumption rates are as follows:

- 10 - Annex 12Page 2

Type of Connection Average ConsumpSionper Month (m )

BRA Towns

Standpipe: per household (assumed to be fivemembers) at 30 litres per capita 4.5per day (lpcd)

Yard connection:per household (assumed to be fivemembers) at 60 lpcd 9.0

House connections:per household (assumed to be fivemembers) at 120 Lpcd 18.0

IKK Towns

Standpipe: per household (assumed to be fivemembers) at 30 lpcd plus 1OZ peaking 4.95factor

House connection:per connection assuming 10 personsserved by a connection at 60 Lpcd plus 19.81OZ peaking factor

Tariffs6. Average tariff for 1985 is based on either actual or has been 3derived for new PDAM (using national structure and basic rate of Rp 50/M3 forfirst 10 m of domestic consumers. A rate increase has been assumed each yearleading to the target rate required in 1991 on completion of the project. Inpractice the local governments authorize tariff increases every three years.Details about tariffs are given in Annex 13.

7. Water Revenues. The main source of revenue will be water sales,including sales through standpipes. No specific charge is assumed for meterrental or maintenance charges, administration charges or penalities for latepayments which are adopted by some of the existing enterprises.

8. The connection fees will be as follows: for BNA towns, Rp 50,000for residential, government and social customers, and Rp 75,000 for comercialand industrial customers; for IKK towns, Rp 15,000 for residential, governmentand social customers. This will be collected in equal monthly installmentsover five years without interest.

-i111i- Annex 12Page 3

Operating Expenses

9. Most details are available in socio-economic, institutional andfinancial studies; sunmmary report which is available in project files.

10. Personnel. Personnel expenses are based on detailed analysis of thenumber of employees required to operate each PDAM. The integration of severaltowns and cities in a water enterprise results in economies of scale. Thenumber of employees required to serve one thousand connections is expected tobe about 11. The salary rates used are based on prevailing GOI salaries(which are considerably higher than salary levels of small PDAMs) adjusted forinflation.

11. Chemicals. Chemical costs consist mainly of expenditures on calciumhypochloride for chlorinating water. They are based on the volume of waterproduced, and are assumed to follow the inflation rates given below.

12. Power. This represents expenditures on purchased electric power orestimated cost of generated power with standby units. Power expense estimatesare based on the volume of water produced and are assumed to follow theinflation rates.

13. Repairs and maintenance. These are expressed as a percentage ofcapital costs or on a lump sum basis for each kind of asset to bemaintained. These are shown under the account "Materials" in the IncomeStatement. Repairs and maintenance costs of the nonproject towns withexisting systems are maintained at the present level, but are adjusted forinflation.

14. Transportation costs. These represent the costs of operating andmaintaining transportation equipment including fuel, servicing, annualregistration and insurance. Various rates are assumed for each kind of trans-portation and are assumed to follow the inflation rates.

15. Administration and general. These represent office running expensessuch as the cost of office supplies, and other administrative costs and arebased on number of total personnel. Costs are assumed to follow the inflationrates.

16. Bad debts. These are the portion of water sales which are assumedto be noncollectible. They are estimated to be about 5Z. Given relativelysmall size of the PDAMs, it should be possible to control the bad debts.

17. Depreciation expenses. Depreciation expense is calculated using astraight line method based on the economic lives of the assets. For simpli-fication, a composite depreciation rate is computed for each proposed waterenterprise, and applied on the revalued assets. The composite depreciationrates in the PDAMs range from 2.87Z to 3.28%.

18. Income Tax. The financial projections are prepared using tariff torecover operating costs and depreciation. No profit and therefore no incometax is assumed.

- 112 - Annex 12

Page 4

19. Inflation Rates. The assumed rates of inflation for local costs are8% for 1985 through 1990 and 5% thereafter. The estimated foreign inflationis 5% in 1985, 7.5% for 1986, 82 for 1987-90 and 5Z thereafter.

Cash Flow and Balance Sheet Accounts

20. Fixed assets. The value of fixed assets for the towns included inthis project are based on the capital costs calculated for each BNA and IKKtown. It includes the equipment cost, civil works, engineering and super-vision costs, land, physical contingencies and price contingencies based oninflation rates applicable in the year of disbursements. The values of assetsof existing systems were furnished by each water enterprise. Eixed assets arerevalued using the local inflation rates.

21. The costs of the subprojects in each proposed PDAM area are to befinanced partly from the loan to be provided by the Bank and partly from GOIcounterpart funds. The project costs will in effect be grants by the CentralGovernment to each water enterprise because after completion of the systemsthe assets will be turned over to the PDAM.

22. Work in progress. This includes all ongoing construction pro-jects. For financial projection purposes it is assumed that part of thesystem will be finished in 1987 and commissioned a year after. The rest ofthe system is scheduled to be finished by 1990.

23. Cash. In the initial years when the revenues would not be able tomeet the cash requirements it is assumed that the cash shortfalls (includingthe Cash Balance to be maintained to at least match the equivalent of onemonth cash operating expenses of the following year) would be provided by theGovernment. These cash deficiencies are shown as "Operating Subsidies" in theFinancial Statements - Sources and Applications of Funds.

24. When a PDAM becomes fully operational it is expected that therewould be excess cash over and above that normally required for its operation;this is particularly so for PDAMs where tariffs are set to recover operatingand maintenance expenses and depreciation. This excess cash, aftermaintaining a balance equivaLent to about two months cash operating expenses,would be reinvested in the PDAM. This excess cash is shown as "Other Works"in the Financial Statements - Sources and Applications of Funds.

25. Accounts receivable. These are projected at about two months oftotal water sales. Accounts receivable in existing water enterprises rangefrom about 1.5 to 2.5 months.

26. Inventories. Inventories of materials and supplies are project# andIKK town was defined in the design studies. The percentage of populationserved refers to the percentage of project area population using publicstandpipes and yard and direct house connections.

27. Account payable. This was projected to be equal to two monthsoperating expenses excluding personnel cost and bad debts.

- 113 - Annex 12Page 5

28. Equity IBRD Funding. This account represents the foreign componentof the project cost which is assumed to be financed from IBRD loan. Since theproject funding is considered as a grant to the PDAM this is also treated asEquity account. Equity-GOI funding represents Local cost of the project.Actual IBRD lean disbursement will be done on basis of overall agreedpercentages.

29. Equity. The equity account represents the Government counterpartfunds in the project cost, Operating Subsidies, if any, revaluation surpLusarising from revaluation of assets, and accumulated income or loss fromoperations.

Part B. Karangpilang Scheme

30. The financial projections presented in Annex 1' relate to the com-plete operations of PDAM Surabaya. They are based on the existing frameworkdeveloped for the PDAM's audited accounts and assume that the Karangpilangscheme is sanctioned, for commissioning in 1988.

Ot'erating Income

31. Water production. Water production is based on existing facilitiesand an assumed expansion of the PDAM operations in Surabaya. Minor improve-ment in the existing source is assumed in 1986 and this would slightly raisethe water production in that year. KarangpiLang Stage I (1 m3 /sec), wculd becommissioned in late 1988; full production is assumed in 1989. The secondphase would- add a further 2.0 m3/s in 1992.

32. Unaccounted for water is currently es;imated at 36% of production.In view of the determined effort of the PDAM management to reduce losses(including a specific leakage program) it is assumed that the percentage ofthis will steadily decrease over the projection period as follows: 1985through 1987, 35%; 1988, 34%; 1989, 30%; 1990, 27%; and thereafter 25Z.

33. Service area population. In 1984 63.79 million m3 of water was soldby the PDAM. The water was sold through about 103,000 connections. It hasbeen estimated that some 1.1 million people receive water from PDAM, eitherdirectly or indirectly and this represents about 50% of the Surabayapopulation. The rest of the people in the city get their water from dugwells, rivers and canals.

34. Numbers of Connections. The increase in the number of connectionshas been estimated as follows, based on PDAM forecast: 1985, 5,000; 1986,4,000; 1987, 3,000. With the commissioning of Karangpilang at the end of1988, PDAM is expected to step up its program of water service connection.The rate of connection is assumed to be 10,000 in 1988. Beginning in 1989 andthereafter, a 2,000 increase in the rate of connections over the precedingyear is assumed.

35. Water consumption. In June 30, 1984, PDAM had about 100,000customers with residential customers comprising 80% of the total andcommercial being the second largest group at 10Z. The water consumption

- 114 - Annex 12

Page 6

pattern is detailed in Annex 3. It is assumed that the consumption patternwill not differ significantly during the projection period.

36. Tariff Rates and Structure. The tariff rates and structure arebased on those currently used by the PDAM. Another increase is planned for1988 which will raise the tariff to an average Rp 353/m . In line withexisting practice of PDAM to raise tariff every three years, the rates areassumed to be increased in 1991 and 1994 using the inflation rates as thebasis. The new average rate is estimated at Rp 444 in 1991.

37. Operating Revenue. Based on the 1984 and 1985 water sales data, anaverage water tariff rate of Rp 250/m3 has been computed. Operating revenuesthereafter are based on the average tariff rates given above.

38. Connection Fees. This includes design, connection and inspectionfees. From 1985 to 1988 these are assumed to be collected within the year ofconnections. Starting in 1989, it is assumed that installments spread over 5years will be allowed for 50% of the connection fees and the other 50%collected in the year of connection.

39. Other income. Other income includes meter rent, penalties,administrative fees.

operating Expenses

40. Personnel. Personnel costs include salaries and wages, incentives,overtime and employee benefits. Personnel costs are based on the existingmanning levels of PDAM. At the end of 1984, the staffing level was approxi-mately 16 employees per thousand connections. Additional personnel will behired for the leakage controL program, KarangpiLant Treatment Works, Stage Iand Karangpilang Treatment Works, Stage II and other expansion of thesystems. The increase in personnel renumeration rates is based on theprojected manning levels and is assumed to follow the percentage increase dueto inflation.

41. Electricity, fuel and chemical costs. These cost items are based onthe volume of water produced and cost rates prevailing in 1984. These costsare adjusted for production Level and assumed to follow inflation rates.

42. Repairs and maintenance (materials). Repairs and maintenance arenon-personnel expenses required for the operation of the treatment works andthe distribution systems. The cost of distribution has been related to thevolume of water distributed. For the treatment works, this is based on thecapacity of the plants in operation and the volume of production. This costitem is assumed to follow the percentage increase due to inflation.

43. Bad debts. Uncollectible accounts are assumed to be equal to 10% ofwater revenues, in line with the experience of the PDAM.

44. Other expenses. This account consists of general administrativeexpenses for such items as transportation, incidental expenses, fuel and oil,communication, commission, public relations, education and training and

- 115 - Annex 12Page 7

others. It is assumed that increases for these expenses are due to theincrease in number of consumers and the effect of inflation.

45. Value Added Tax (VAT) introduced by GOI is assumed to equal 10 ofall operating expenses excluding personnel and IOZ of all capital expenditure.

46. p±greciation. Depreciation rates are based on existing governmentregulations (Undang-Undang Nomor 7 Tahun 1983 tentang Pajak Penghasilanbeserta Peraturan Pelaksanaannya) issued by the Directorate General of Taxesof the Ministry of Finance. A composite rate of about 8% based on the 1984computation has been used for 1985. For 1986, with the expected commissioningof the new IBRD assisted distribution system (Loan 1709) the depreciation rateis assumed to increase to 9%. This is due to the fact that pipes are depreci-ated at 1OZ. For the rest of the projection period, the composite rate of 9%has been used.

47. Income tax. The income tax levied on the PDAM is based on thegovernment tax law, Undang-Undang No. 7 Tahun 1983. The rates are applicableas from 1985 and are as follows:

Annual Income Tax rate

First Rp 10 million 15%Next Rp 40 million 25ZIn excess of Rp 50 million 35Z

PDAM has requested GOI for a reduction of the tax rate; however nospecific response has yet been received. It should be noted that the samerate is applicable to commerciaL entirprises. For purposes of the pro-jections, the above tax rates are used.

48. Interest expenses. Interest expense pertains to both existing andprojected loans that PDAM would incur in the future. The loan agreement forthe existing IBRD loan which was signed in 1980 provided for a loan of US$8.0million and repayment was scheduled to start in May 1984. Due to the delay ofthe project, PDAM made a request to GOI to move the payment date underrelending agreement to 1986 upon substantial physical completion of theproject and the request was granted.

49. The new loan represents the amc'imt that would be provided by GOI toPDAM, equivalent to about 80X of the total cost about 55Z based on relendingof IBRD funds and 25Z from GOI's own resources. The interest during construc-tion has been assumed to be added to amount of the loan. Interest on foreignKP 2 and GOI loans for both KP 1 and KP 2 is assumed to be paid when due.

50. Inflation rates. The assumed inflation rates for local costs are asfollows: 1985 through 1990, 8%; and thereafter 5%. For foreign costs, theinflacion rates used are as follows: 1985, 5%; 1986, 7.5%; 1987-90, 8%; andthereafter 5Z.

- 116 - Annex 12Page 8

Cash Flow and Balance Sheet Accounts

51. Fixed assets. The values of fixed assets include estimates for boththe existing and the new treatment plants. The latter includes equipmentcost, civil works, engineering and supervision costs, land, physical contin-gencies and price contingencies based on inflation rates applicable in theyear of disbursements.

52. Work in progress. This account includes all ongoing constructionprojects. For 1984, the amount pertains to the construction project financedby Loan 1709. Starting in 1985, this would include the Karangpilang TreatmentWorks.

53. Cash. It is assumed that PDAM would maintain a minimum balanceequivalent to one month's cash operating expenses. It is likewise assumedthat excess cash would be kept by the PDAM. In practice such excess cashwould be either invested in income earning securities or deposited in interestearning accounts, however, such income has not been assumed for projectionpurposes.

54. Accounts receivable. Accounts receivable, net of allowance fordoubtful accounts, are currently estimated to be about 3.5 months of the grossbillings for water. On the basis of the current improvement in receivablemanagement, in particular the setting up of individual customer ledger cards,it is assumed the accounts receivable would be reduced to three months ofbillings. An updated customer ledger would enable PDAM to immediatelyidentify delinquent accounts for disconnection or further collection effort.

55. Inventory. It is assumed that the inventory account from 1984 to1988 will be decreased to reach a level equivalent to nine months of materialusage based on the annual average material usage.

56. Other assets. These include deposits to PLN, guarantees, and surveycosts. The reduction of the figure between 1984 and 1985 is due to the finalamortization of survey costs. For the purpose of the projection, it isassumed that this will remain constant over the projection period.

57. Accounts payable. Accounts payable is assumed to be equivalent toabout a half month's operating expenses less depreciation, based on theprevious year's operating expenses; this assumption is in line with currentPDAM experience.

58. Other current liabilities. These include miscellaneous liabilities,and any previous years' tax liabilities of the PDAM. The balance of theseunpaid taxes is about Rp 1.5 billion. PDAM has had a number of discussionswith Ministry of Finance officials regarding the repayment scheme. Thereduction in this account between 1985 and 1986 is due to the assumption thatthese tax liabilities would be paid off by 1986 in accordance with a PDAMfinancing plan and the reclassification of deposits to income account, thelatter in accordance with the auditors' recommendation.

- 117 - Annex 12

Page 9

59. Long term debt. Long term debt includes the amount borrowed by thePDAM from IBRD for the Distribution Project (Lean 1709). Starting in 1986,PDAM would start drawing funds from GOI for the Karangpilang Treatment Works(KPI). Interest during construction has been capitalized (i.e. added to theloan amount; at the same time, it is also added to the project cost).Additional loans are (a) proposed GOI loan for KP1; (b) proposed foreign loanfor KP 2 plus Disttribution and (c) proposed GOI loan for KP 2 plusdistribution.

60. Equity. The equity account represents both the owners equity andretained earnings.

Others

61. Profit Distribution to Kotamadya. For 1985, the profit distributionof the PDAM to the Kotamadya set at Rp 665 miLlion. In consultation withKotamadya, it is assumed to increase at 5% per year.

62. Payments to Others. Based on the existing plan of the PDAM, theprofit distribution for others would be based on the 1985 amount of Rp 348million with a 5Z increase every year until the end of the projection.

63. Project loans. It is assumed that IBRD will provide a loan forabout 60% of the project cost to GOI; GOI wilL on-lend these funds and providefor an additional 20Z of the project cost. The assumed terms of the loans toPDAM are:

- 20 year including a 5 year grace period- 12% interest per annum- equal semi-annual payments- initial loan drawdown to be made in 1986 (from the National

Government) and the final drawdown in 1990- loan repayment to start in 1991- moratorium on interest during construction

64. Financing Plan. The financing pLan for the Karangpilang Project isassumed to be as follows:

ExpendituresTotal project costs Rp 25,845 million

Sources of fundingIBRD 55Z 14,066?DAM 20% 5,288%OI 25% 6,491

Rp 25,845

65. The projectzd disbursements schedule by agency per year, based ondiscussions with the Bank mission would be as follows:

-118 - Annex 12Page 10

Year Estimated disbursement IBRD PDAM GOI

1984 330 3301985 242 - 242 -1986 4,004 2,236 264 1,5041987 9,267 5,810 650 2,8071988 6,015 3,653 754 1,6081989 3,678 1,708 1,398 5721990 2,308 659 1,649 -

25,845 14,066 5,288 6,491

/a In million Rp. Figures may not tally due to rounding.

66. Notes on 1984 and 1985 financial statement. The 1984 statements arebased on both actual unaudited figures, while the 1985 accounts are based onthe budget and program of the PDAM. The data have been provided by the PDAM.

-19 - ANNEX 13Page 1

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

Notes on Economic Rates of Analysis

Least Cost

1. Within the framework of the design criteria for the various pro-jects, the selected designs represent least-cost solutions. For example,alternative sources of water for the BNA schemes were compared using dis-counted cash flow techniques (11% p.a. discount rate was used); distributionnetworks were designed using computerized network analyses to ensure that pipesizes are not larger than necessary; where alternative options were availablefor other components (such as service reservoirs) these were evaluated on thebasis of least-cost and engineering considerations. Similar approaches wereused for the IKK designs, within the framework of the standardissd designmethod for this type of scheme. For Part B of the Project (Karangpilang),components have been selected and sized on least-cost abasis while bearing inmind DOI's request to allow for the anticipated expansion of the plant, up toan eventual possible capacity of 5 m'/s.

2. The flow-restricted IKK schemes offer substantial cost savings whencompared with the more conventional BRA schemes, although of course the levelof service provided is not as high. The relative costs can be illustrated bycomparing the average per capital costs (excluding taxes) of the two types ofscheme:

BNA: Rp 55 400/capita including allowance for drilled wel'ls.IKK: Rp 29 400/capita already installed, 1985 price levels.

If a large IRK scheme is compared against a small BNA scheme thedifference is even more apparent; for example Mantingan (capacity 16 i/s) hasaverage cost of Rp 70 300 per capita while Kauman (in Xabupaten Panorogo,capacity 10 ls) has an average cost of Rp 22 000 per capita.

Marginal Cost and Average Tariff

3. The economic analysis for Part A (BNA/IKK Towns) shows that tariffsare projected to be substantially less than the average incremental costs(AIC) as shown in Table A15.1. Average figures show tariffs to be about 45Zof AIC; the corresponding figure for the First EJWS Project was 49Z. Thefollowing factors contribute to the difference between the tariff and the AIC:

(i) Tariffs have been generally set to cover 0 & M costs plusdepreciation, with no allowance for a rate of return. AIC has beencalculated to include capital and 0 & M costs, calculated at realdiscount rate of 10% (i.e. net of any inflation allowance). Thisdiscount rate is substantially higher than the ERR calculated forthis project component (calculated at 4.4%).

-120- ANNEX 13

Page 2

(ii) The AIC calculation takes full account of the timing of expendi-tures; this is particularly important during the constructionperiod, wheD large outflows are not matched by inflows from revenue.The tariff calculation, on the other hand, considers the projectwhen it is complete and fully operational with no adjustments due tothe project start-up.

TabLe A15.1: AVERAGE INCREMENTAL COST (AIC) AND ERR(In 1985 Prices)

Proposed average Proposed tariffAIC tariff fos 1991 as a percentage

PDAM Rp per H3 (Rp per N) of marginal cost

Blitar 327 154 47Bondowoso 316 137 43Kediri 274 123 45Madiun 342 133 39Nganjuk 330 164 50Ngawi 448 162 36Pacitan 324 146 45Pasuruan (Kab) 290 147 51Pasuruan (Kot) 311 144 46Ponorogo 337 130 37Probolinggo 389 189 49Trenggalek 337 165 49

Average Rp/m3 335 150 45Average US$1m3 0.30 0.14

4. In case of Part B (Karangpilang) the tariff substantially exceedsthe AIC (1.31 times AIC in the main analysis). This is because the tariff forSurabaya PDAM is set to cover not ony 0 & M costs, but also debt servicing,allowances for future expansion and payments to the kotamadya and others(including income tax) which is substantia'lly higher than 0 & M and deprecia-tion. The rate of return for this component (19.3Z) also substantiallyexceeds the discount rate used (10%).

Calculation of Economic Rate of Return (ERR)

5. The calculation of ERR is based on a standard format which comparesactual costs (capital and operating) against estimated benefits. The benefitsare represented by two components:

(a) a minimum water supply allowance to all households and(b) the remaining supply to all consumers.

- 121- ANNEX 13Page 3

6. For benefis (a), the minimum supply has been taken as 20 lpcd(corresponding to 3m /month for a family of 5 persons); this has been appliedto all households which will receive a supply (i.e. house connections, yardconnections or public standpipes). The value of this water has been estimatedby considering alternative sources of water which they might have to resort towithout the project. In the case of Surabaya, there is evidence from theexisting situation that people in some areas are willing So pay very highprices for their basic supplies of water (e.g. ap 1 875/m , ref para 5.2.6 ofProject Preparation Report). A conservative overall figure of Rp 500/m3 hastherefore been used in assessing the value of the first 20 Lpcd.

7. In assessing the corresponding value for the BNA/IKK towns, it wasrecognized that conditions vary widely throughout the project area. In someareas where water is scarce, some people are making cash payments for basicsupplies, while in many other areas direct payments are unnecessary since dug-wells close to the house can be used. However in all cases is clear that areliable supply of potable water has a substantial value to the people. Thiscan be considered in relation to:

i) charges actually paid to vendors (In Pasuruan town, vendors sellwater for Rp 500/m have been found, giving family expenditures onexisting water sources of Rp 2000 - 3000/month).

(ii) costs for constructing and maintaining existing dug wells and forcarrying water from the wells. Actual costs are likely to varywidely depending on depth and standard, but if the total annualcosts (allowance for capital cost and operation) of a well is, say,Rp 10,000 and it serves families with a minimul supply of 20 lpdc,the cost per 3 would be Rp 91/m 3. If the cost of carrying thewater3is related to a typical wage (of say Rp 1030/day), the costper m3 for a supply of 20 lpcd would be Rp 500/m even if the totaltime for carrying is only ½ hour per day.

(iii) Further costs are being incurred by most of the population becausethey are boiling all water used for drinking; awareness of thedangers of drinking unboiled water from traditional sources wasfound to very high. The new sources to be provided under the pro-ject will be chlorinated, thus making boiling theoretically unneces-sary; however many consumers may choose to continue to boil theirwater if they consider the chlorination process to be unreliable.Thus there is likely to be a benefit on this account (in cash termsor in health terus), but it is not considered to be sufficientlyspecific to enable it to be quantified for the analysis.

8. Bearing the above factors in mind, an average figure for the valueof the basic minimum supply (20 lpcd) in Part A towns has been taken asRp 400/m for the purpose of the analysis.

9. The remaining supply to all consumers above the 20 lpcd allowance(i.e. benefit (b)), has been valued at the average tariff which is expected tobe applied to all consumers within a given PDAM.

-122 - ANNEX 13Page 4

Part A - BNA/IKK Towns

10. Economic rates of return (ERR) have been calculatd for each PDAM,including all BNA towns and IKKs under its jurisdiction. This analysis isconsidered appropriate since the per capita investment cost and the standardsof service are similar, the administration and management will be shared, theinvestment will start and reach its design horizon within the same period, andthe tariff will be uniform for all towns in the same PDAM.

11. The analysis includes operating subsidies by the Government added onto investment, to cover cash deficits from the start of the consolidated oper-ations until the PDAH's target connections are fully attained. Where possible,tariffs have been set to cover operation and maintenance and depreciation,starting in the PDAM's full year of operations. However, the computed tariffsshould be affordable by the community and the tariffs in two PDAMs have to beadjusted downward to a level sufficient to cover operating and maintenance costsand part of depreciation or operating and maintenance costs only.

12. The ERRs shown in Table A.13-1, are low, averaging 4.4Z. The ERRindicates the economic justification for higher tariffs. However, lovertariffs are necessary to keep water affordable and to promote the acceptanceof safe, publicly supplied water.

13. The ERR using tariffs as a proxy for consumer willingness to paymeasures only a part of the project, since the water services provide minimumamounts of water, e.g. up to half of the beneficiaries in some towns will beserved by standpipes, IKK connections will have flow restrictors and waterpressure will limit the volume usable by other connections.

14. A typical analysis for Kabupatan Pasuruan is attached. The analysisof the other PDAMs is sumnarized in Table A15.2.

15. These rates of return underestimate the economic benefits, becausethey do not capture externalities which accrue to the community, such asimproved health and reduced morbidity and mortality. Furthermore, the watercarried from the well or purchased from water vendors is not purified andlacks the convenience of piped water. In any case justification of thisproject does not rest upon these rates of return, but that at a minimum costprovides essential and safe water supply to a heretofore unserved population(more than half of whom are poor) and strengthens sector institutions andpolicies.

-123- ANNEX 13Page 5

Table A15.2: ECONOMIC RATES OF RETURNBNA/IKK TOWNS

Sensitivity Analysis ERR (Z)BPAK ERR (%) + 20Z-Investment + 202 Investment

- 5Z Benefits

Ngawi 0.7 (-.3) (-1.0)Madiun 3.1 1.9 1.1Ponorogo 5.0 3.6 2.9Pacitan 4.9 3.5 2.9Trenggalek 5.6 4.1 3.4Nganjuk 5.2 3.8 3.2Kediri 5.6 4.1 3.5BLitar 4.5 3.1 2.4Pasuruan 6.6 5.0 4.4Pasuruan Kotamadya 3.3 2.0 1.3Probolinggo 3.6 2.3 1.6Bondowoso 5.2 3.7 3.0Average 4.4 3.1 2.39

N = legative ERR

part B - Karangpilang Project

16. The economic .rate of return (ERR) has been calculated for theKarangpilang Project including costs related to distribution rehabilitation.For the purpose of the analysis, the project has been treated separately fromthat of the PDAM oper2tion.

17. The rate of return has been calculated by using Rp 500 per cu m forthe first three cu m per month (at an approximate 20 lpcd consumption) and theaverage tariff for the remaining water sold as a proxy for economic benefits.These rates are conservatively chosen and substantially understate vendorprices in Surabaya. The results of the ERR snAlysis indicate a high rate ofreturn (19.3Z) which is well above the projected inflation rates. The analy-sis included benefit of water loss reduction relrted to Iarangpilang productononly. The loss reduction benefit to the rest of the system is not includedwhich, of course, results in underestimating the benefit. On this basis alonethe project appears to be a sound investment. The current pricing for waterbeing adopted by PDAM is intended not only to cover operating cost but alsodebt servicing and about 30Z of future capital expenditure (which together isfar in excess of 0 & M plus depreciation as in case of Part A).

18. For purposes of sensitivity analysis, the ERR was recalculated usinga 2O0 increase in capital cost; a second one was prepared with the sameincrease in capital cost but with a 5% reduction in benefits. Results show areduction of the ERR from 192 to 16Z and 15% respectively, thus indicatingthat the economic viability of the project is not sensitive to price/costfluctuations.

PWSACORIO2 IRIAl. RON PYFACIO R09 KNEIW I2IAL RON PVFACIaO ROk 1 ETFV INTERPOLATED ROI044 SIWlE 3.46 .046 6.27 2.79 .067 6.16 -14.42 .066162246

FlRST 3 CU.R. :IP400I13

ECONOMIC ANALYSIS OF KASUPAIEN PASURUAN............ ........................... ,

INCREMENTAL VALUES 1I 1985 PRICES (MILLION RUPIAH)

...................... ................................... e ................................................... .,.... .. ,........... .,

-. U VME SOLD -.-. OPERATI6I LESS SALA- INVESTMENT2/ IOIAL HOUSE CONN. TARIFF SALES NET FLOWYEAR IUSEHOLDS FIIST 3 NJ REMAIN- TOTAL COSI RI INCREASE COST REVENUES IP/R3 BENEFIT

000 ONIII/HHOLD ING HILL.13 FOR PRESENTEMPLOVEES 1/

.................................................................................. ..1985 0.00 22.95 22.95 -22.951986 0.00 478.80 478.80 -478.801"? 0.00 0.00 0.00 0.00 0.00 0.00 705.30 705.30 0.00 0.00 0.00 -705.301988 1.02 0.04 0.16 0.20 38.44 24.64 521.73 535.53 2.05 134.95 36.69 -496.7919d9 3.38 0.12 0.29 0.41 $3.84 24.64 144.85 114.05 8.28 134.95 87.60 -78.171990 5.75 0.21 0.46 0.67 70.21 24.64 43.34 88.91 14.50 134.95 145.25 70.841991 . 8.11 0.29 0.66 0.95 87.27 24.64 62.63 21.01 141.28 213.72 172.101992 8.11 0.29 0.66 0.95 81.27 24.64 62.63 21.01 147.28 213.72 172.101993 8.11 0.29 0.66 0.95 87.27 24.64 62.63 18.96 141.28 213.72 170.051994 0.11 0.29 0.66 0.95 87.27 24.64 62.63 19,23 147.28 213.72 170.32

1995-2018 8.11 0.29 0.66 0.95 87.27 24.64 62.63 0,00 147.28 213.72 151.09.....................................................................................................................….........................

PV AT 10 2 51.50 1.85 4.24 6.09 588.36 184.12 1417.22 1921.47 50.76 1359.08 -411.62

I OF NARGINAL COST 33.23 10.40 80.04 102.87 -2.87

MARGINAL COST AP/N3 290.61

RECOMMENOED TARIFF1991 147.28RECOMXNOED TARIFF(1991) AS A PERCENTAGE OF HARGINAL COST: 50.67

2 HAlE OF RETURN: 6.60

1/ PRESENT STAFF ARE 77. THE SALAkY INCREASE WHICH IS NOT DUE TO THE PROJECT 1 ESTIMATED AT RP 470000/YEAR PER EMPLOYEE.

2/ INVESIMENT OOES NOT INCLUDE FRICE CONIIN61NCIES AND TAXES9

- 125- ANNEX 14Page 1

MONITORING INDICATORS

1. It is proposed that the following indicators should be monitored onquarterly basis during and after execution of the Project and that therequired data is included in the GOI's reports to the Bank. The indicatorsshould apply to each of the PDAMS.

2. Demand

(a) Total population in the project area (to be updated annually)

(b) Percentage of the total population served

(c) Total numbers of connections

(d) Average consumption per connection (m3/month)

Ce) Total numbers of standpipes and increase during the last

quarter

Cf) Volume of water sold (m3/year)

Cg) Percentage water unaccounted for (as proportion of production)

(h) Volume of water produced (m3/year)

3. Management

(a) Number of employees

(b) Number of employees per 1,000 connections

(c) Percentage increase in number of employees, relative to

previous year

(d) Number of professional staff vacancies (engineers, accountants,

administrators, managers)

(e) Average salary per employee (Rp/month)

- 126- ANNEX 14P?age 2

4. Financial

(a) Average tariff (Rp/m3) in current prices

(b) Increase in average tariff since previous year, in Z

(c) Net profit (loss) including and excluding depreciation

(d) Rate of return, in Z (net income plus operational interest

divided by average net fixed assets

%e) Level of accounts receivable, expressed in days by ratio:

(accounts receivable x 3651annual billings)

(f) Bill collections during the quarter as Z of the billing

(g) Working ratio, in Z (operating expenses net of depreciacion

divided by operating revenues

(h) Working capital (ratio of curren- assets to current

liabilities)

(i) Cash and Bank deposits as Z of total operating expenses

(j) Percentage contribution to investment (total sources of funds

divided by total capital expenditure)

(k) Debt service ratio, in Z (gross internal cash generation

divided by debt service payments)

(1) Ratio of long-term debt to long term plus equity (in Z)

(i) Government accounts receivable as of Z total accounts

receivable.

5. Format of the monitoring indicators will be similar to the onepresently in use for Loan 1709 and 2275-IND.

- 127 - Annex 15

INDONESIA

SECOND EAST JAVA WATER SUPPLY PROJECT

Documents in the Project File

A. Sector InformationDraft reports prepared by W.D. Scott on organization, monitoringarrangements, tariffs.

B. Project Related Reports and DocumentsReports prepared by Sir M. MacDonald and Partners, Asia and Consortia ofIndonesia Consulting Firms ;in 1984.

1. Dr-sign Criteria Report - Category 3 & 4 (March 1984)2. Sanitation Identification Study Report (August 1984)3. Design Criteria and Standard Report Category 5 (IKK Towns)4. Design Criteria and Standard Report Category 4 (BNA Towns - Nov 19845. Socio Economic Institutional and Final Studies - Summary Reports

(Oct 1984)6. Socio Economic Institutional and Financial Reports of:

- Kab Kediri WSE (Oct 1984)- Kab Pasuruan WSE (Oct 1984)- Kodya Pasuruhan WSE (Oct 1984)- Kab Nganjuk WSE (Oct 1984)- Kab Bondowoso WSE (Oct 1984)- Kab Probolinggo WSE (Oct 1984)- Kab Pacitan WSE (Oct 1984)- Kab Blitar WSE (Oct 1984)- Kab Madiun WSE (Oct 1984)- Kab Ngavi WSE (Oct 1984)- Kab TreuggaLek WSE (Oct 1984)- Kab Ponorogo WSE (Oct 1984)

7. Project Prepartion Report (December 1984)8. Addendum 1 to Project Preparation Report (March 1985)9. Supplementary Financial Annexes

FIGURE A

- 128 -

INWONESIASECOND EAST JAVA WATER SUPPLY PROJECT

Ministry of Public Works amd Cipla KwyaOrpnation Chwrt

Pubro

L I~~~~~~~~~~~~~~~~~~~~~~~~

Naig Paw N W uSW gWw upySnTdeu~ G "m p*m.n

I laor | Iorgmmk

|~~~~~~~~~~~~~~~~imr Di b C

Ho IrV ft Building WaKsupPla Pning

Pdd Bank- 242

INDONESIASECOND EAST JAVA WATER SUPPLY PROJECT

Dlrectorate of Water SupplyOrganizatlon Chad

Dioctooloe dofWaler Su;tV

Eat E ipmnteone n

Consiution R an is lrmiFrag iLblylanningmonWxis De Dveslomnt

I Sub Dkecicrele | | Sul>Dlresbule I I Section S|uDectorete |ui od rechnb et Cam1 ucshn Constntjctlon d Stofes & d Owartorlobol

. o rg _ well Fall Equirpent nm en_ t

section PooriNng Paw- , section vwmtsection SaJsection Seetion

Uction ftgwa ~~~~~~Regional setoneveopxmet

soction Regiomi f~~~Setion Section ol t

E~~llon Evaluation ~~~~EvdAxation Stores nwctsa~~~~~~~~~~~~Sction section sci ewse

West ~~~~East East

Vftell onk-27574

j ,~~~ I 2 1 2 , .1 S 1 2,1~~~~~X Wht leobn i| Salom | | Setbn l fi Sectn | | cethn

INDONESIASECOND EAST JAVA WATER SUPPLY PROJECT

PDAM Surabaya Organization Chart

totla * Motodol IAIdnfl _tratvtocInicI Pant a Mahlenc Sc P rclnRoDWtmn AdUni_t .Nw

tnt

LWu? IKer Ionf I ielmltTmtnn Picnt I MiwonnbAg un:ingrwith~~~totnci SectasocltySctin ocio

Aonito nntEvduatn ccmntoowa cieio RychosIng

Audoi no -agiDrArg&CocinsubUnli

AuOpwatbonilot o vScto Urnhit

FWKmkg ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Rpairclog

Wodd8cE-27675

INDONESIASECOND EAST JAVA WATER SUPPLY PROJECT

Organization Chart for TyplCal PDAM

K~abptein Oovernmen

Bi adol UPCeNIOrl

l l ~~~~~~~PDAM Monitorlno|External Audit __ Unit of Provinc

Cipta KevrynGOneral Manager

IDlr ctorl

Finance and Administration ~~~~~~~~~~~~~~~~~~~~Technical ServiceDivltton l l Operations MaEE ; r] Olvtilon

Atmn,S Personnel C| hs Pn Accounting Hea [1 [ HedofLo

SGencrtal Servie | 4 ecetian Lends Pl

Prehosing Accounting|Ica.Ho

CWoneraltJh i 0 h Local OPerating UnStv Bi-|iMgean

,! i .1.. . r. .. ... :- .

| L :~~~~~~~~~~~~~~~~ ,.: ]. *:. . i. -1

W~~~~~~~~~~ '- : .... . ...-. ' . jz

LKL -- }L{~~~-....- ' : C;= r,

i~~~1 I r:: :J,1

IJ This structure would bo modified to suit the individual needs of Rach PDAM evca blatarito2/ While the positional Inter.raiasionships remain the same, individual staff may at IKK Sstsemsoccupy more than one positlon in smaller Local Operating Unite World banO-24Op3

- 132 -

RISREE E

IN0O

SED"D EASE JAVA WATER SUPPLY PRDJrEC

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