Report No. 3170a-IND

Indonesia E CoPYTransmigration Program Review(In Two Volumes)

Volume 1: Summary of Major Findings and RecommendationsApril 2, 1981

East Asia and Pacific Regional OfficeFOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Before November 15, 1978

US$1.00 = Rp 415Rp 1.00 = US$0.0024Rp 1 million - US$2,410

After November 15, 1978

US$1.00 - Rp 625Rp 1.00 = US$0.0016Rp 1 million - US$1,600

WEIGHTS AND NEASURES - METRIC SYSTEM

1 millimeter (mm) = 0.039 inches1 meter (m) = 39.37 inches1 kilometer (km) = 0.62 miles1 square kilometer (sq km) 0.386 square miles1 hectare (ha) = 2.47 acres1 cubic meter (cu m) - 35.31 cubic feet1 million cubic meters (MCM) - 811 acre feet1 liter (1) - 0.264 gallons (USA)1 liter/second (1/s) = 0.035 cubic feet per second1 kilogram (kg) = 2.2 pounds1 metric ton (ton) = 2,205 pounds

INDONESIAN FISCAL YEARApril 1 - March 31

FOR OFFICIAL USE ONLY

ABBREVIATIONS

ATT - Agricultural Technical TeamBAKOPTRANS - Badan Koordinasi Penyelenggaraan Transmigrasi -

Coordinating Body for Executing TransmigrationCRIA - Central Research Institute for AgricultureDGA - Directorate General of AgrariaDGE - Directorate General of EstatesDGFCA - Directorate General of Food Crops AgricultureDGT - Directorate General of TransmigrationDOA - Department of AgricultureGOI - Government of IndonesiaIGGI - Inter-Governmental Group on IndonesiaIPEDA - Iuran Pembangunan Daerah - Land TaxJMT - Junior Minister for TransmigrationNES - Nucleus Estate and SmallholderNPV - Net Present ValuePIR - Perkebunan Inti Rakyat - A program to establish new

migrants on tree-crop smallholdingsPMU - Project Management UnitPNP - Perusahaan Negara Perkebunan - State-owned Estate EnterprisePTP - Perseroan Terbatas Perkebunan - State-owned Estate

Corporation operating under the commercial codeRepelita - Rencana Pembangunan Lima Tahun - Five-Year Development PlanREC - Rural Extension CenterSATDAL - Satuan Pengendali Transmigrasi Control Unit for

TransmigrationSKP - Satuan Kawasan Pengembangan - Development Unit

for 2,000 FamiliesTSP - Triple Superphosphate

GLOSSARY

Alang-alang - A coarse grass (Imperata cylindrica)Padi gabah - Threshed unhusked ricePasang surut - Coastal swamp influenced by tidal actionRawa - Freshwater swamp

Thisdocument 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.

INDONESIA

TRANSIIIGRATION PROGRAM REVIEW

TABLE OF CONTENTS

VOLUME 1: SUMMARY OF MAJOR FINDINGS AND RECOMMENDATIONS

Page No.

SUMMARY AND CONCLUSIONS ... . . . . . . . . . . . . . . . . . . i-viii

INTRODUCTION .... . . . . . . . . . . . . . . . . . . . . . . 1

1. BACKGROUND.. 3

Hlistorical Overview . . . . . . . . . . . . . . . . . . . . . 3

Past Transmigration Projects. . . . . . . . . . . . . . . . 3

Past Performance . . . . . . . . . . . . . . . . . . . . . 4

Factors Affecting the Formulation ofthe Repelita III Transmigration Program . . . . . . . . . 6

Increased Pressures for Transmigration . . . . . . . . . . 6

New Developments in Agriculture . . . . . . . . . . . . . . 7Organizational Changes . . . . . . . . . . . . . . . . . . 8

Increased Funding. 8The Repelita III Transmigration Program. 9

Current Program Status .10

2. MIGRANT WELFARE AND FARMING SYSTEMS FOR TRANSMIGRATION . . . 12

General Findings . . . . . . . . . . . . . 12Recommendations on Farming Systems . . . . . . . . . . . . . 14

Farming Systems for Swamp Reclamation . . . . . . . . . . . 14

Farming Systems for Upland Transmigration . . . . . . . . . 14Agricultural Supporting Services . . . . . . . . . . . . 16

Tree Crops for Transmigration . . . . . . . . . . . . . . . 18Benefits . . . . . . . . . . . . . . . . . . . . . . . . 18

Demand for Tree Crops . . . . . . . . . . . . . . . . . . 20Alternative Systems for Introducing Tree Crops .21

Issues in Tree Crop Establishment . . . . . . . . . . . . 22

3. PROGRAM EXPANSION, RESOURCE USE AND PROJECT QUALITY . . . . 24

Program Expansion .24

Optimal Use of Managerial Resources in the GOI Program. . 24Promotion of Spontaneous Migration. . . . . . . . . . . . 25

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Page No.

The Use of Natural Resources ... . . . .... . . . . . . 28The Rehabilitation of Grasslands . . . . . . . . . . . . . 29Timber Disposal . . . . . . . . . . . . . . . . . . . . . . 31Environmental Awareness . . . . . . . . . . . . . . . . . . 32

Project Quality . . . . . . . . . . . . . . . . . . . . . . . 32Project Preparation ... . . . . . ..... . . . . . . . 32Land Identification ... . . . . . ..... . . . . . . . 33Land Development Standards ... . . ...... . . . . . 33Program Coordination ... . . . . ..... . . . . . . . 34Institutional Development ... . . . . . . . . . . .. . . 36

4. THE OVERALL TRANSMIGRATION PROGRAM: THE DEVELOPMENT STRATEGYAND THE ROLE OF EXTERNAL ASSISTANCE . . . . . . . . . . . . . 37

The Development Strategy . . ... . . . . . . . ..... . 37Program Objectives ... . . . . . . . . . . . . . . . . . 37Program Uniformity ........... 39Resource Constraints ... ........................... . ..... 39Development Strategy ... . . . . . . . . . ...... . 40

The Role of The World Bank . . . . . . . . . . . . . . . . . 40Settlement Components . . . . . . . . . . . 41Program Development ... ..... . . . . . . . . . . . . 42Possible Project Pipeline ... .. .. ..... 43Coordination of Donor Activities ... . 44

APPENDICES

1 - Conclusions and Major Recommendations . . . . . . . . . . 452 - Tables

1 - Location of Repelita III Transmigration Sites . . . . 542 - Repelita II Swamp Reclamation Sites . . . . . . . . . 573 - Regional Distribution of Tidal Swamp Development During

Repelita II and III . . . . . . . . . . . . . . . . 584 - Repelita III Targets for Swamp Reclamation . . . . . 585 - Summary of Nucleus Estate and Smallholder Projects 596 - Proposed PIR Program (1980/81) . . . . . . . . . . . 60

3 - Note on Integrated Annual/Perennial Cropping Systems . . . 61

LIST OF TEXT TABLES

2.1 Yields Reported in Five Transmigrant Communities . . . . 13

2.2 Transmigration Schemes With and Without Tree Crops . . . . 192.3 Cost-Benefit Ratios by Year Tree Crops are Introduced . . . 204.1 Distribution of Central Government Development Expenditure

by Sector for Each Province. . . . . . . . . . . . . . . . 38

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Page No.

FIGURES

1 - Government Sponsored Migrants to the OuterIslands, 1905-1980 . . . . . . . . . . . . . . . . . . .5

MAPS

IBRD 12696 R3 - INDONESIA - Administration and PopulationIBRD 15329 - INDONESIA - Activities Related to Land

Settlement in Pelita III

VOL[JME 2: ANNEXES

Annex 1 - Key Constraints to the Implementation of TTpland TransmigrationAnnex 2 - The Swamp Development ProgramAnnex 3 - Tree Crops for TransmigrantsAnnex 4 - Moving with the Flow: The Case for Spontaneous Transmigration

in the Indonesian Transmigration Program

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Working Papers for the Upland Program Review /a

I Maps

II Project Components, Transmigration II

III Working Papers on AgricultureIII/I Soils - I. MaudeIII/2 Cropping Systems for Red-Yellow Podzolic Soils - CRIAIII/3 Migrant Welfare in Five Transmigrant Communities - G. DavisIII/4 Upland Cropping Systems - A. MacMillan

IV Working Papers on Physical Planning and Land DevelopmentIV/1 Resource Inventories for Transmigration - J.P. MalingreauIV/2 Standards for Physical Planning - A. MacMillanIV/3 Forestry Aspects of the Transmigration Program - L.G. BlomkvistIV/4 Additional Tables on the Implementation of Swamp Development -

P. MomalIV/5 Additional Tables on the Economic Evaluation of Swamp Development -

P. MomalIV/6 Swamp Program Accomplishments and Plans - P. MomalTV/7 Design of Government Canal Systems in Coastal Swamps - P. Momal

V Working Papers on Organization and ManpowerV/1 Organization and Functions of TKTD and Organization and

Functions of PTPT - A. MacMillanV/2 Organization and Functions of DGT and Organization and

Functions of Other Agencies - H. ThiasV/3 Organization Charts for Swamp Development

VI Working Papers on CostsVI/1 Regional Implications of Transmigration Expenditures - R. Key

/a Available on file in the East Asia Projects Department.

INDONESIA

TRANSMIGRATTON PROGRAM REVIEW /1

SUMIMARY AND CONCLUSIONS

1. The transmigration program is a part answer to a number of problemsfacing Indonesia: employment opportunities for the rural poor, resettlementof farmers from critically impoverished watersheds and disaster areas, foodself-sufficiency, and the development of remote and underpopulated provinces.The W4orld Bank recognizes the role which transmigration can play in meetingGovernment of Indonesia (GOT) objectives, and it is aware of the risks andresponsibilities entailed by support for a resettlement program on the scaleproposed. For this reason, the Bank has reviewed the upland, swamp and treecrop subsectors to identify the conditions for program success and todefine those steps required to assure them.

2. The review indicates that the Government has made significantprogress in mobilizing agencies and resources in support of the recentlyexpanded transmigration program. In the first two years of Repelita III(the third five-year development plan), over 90,000 families were resettled,compared to 48,000 families in the preceding five years. The Public WorksDepartment initiated studies to identify land suitable for the settlement of300,000 families; the Directorate General of Transmigration (DGT) undertooka program to develop small sites (less than 2,000 families each); and theestate sector laid plans to establish tree crops for 75,000 new transmigrantfamilies. The Directorate General of Agraria (DGA) began reviewing thestatus of land reform and land transfer in the outer islands, and a specialDirectorate was established within the DGT to promote spontaneous migration.Five hundred thousand families were registered to move. These actionsillustrate the commitment of the Government to the transmigration programand suggest that more people will be moved during Repelita III, and movedunder better conditions, than in any previous equivalent period.

3. The report also indicates that problems remain. High targetsresult in poor quality implementation; yields and incomes in upland sitesare low despite significant increases in investment per family; and the

/1 This Review combines four papers prepared between October 1979 andSeptember 1980. The report on Upland Transmigration was prepared byMs. C. Davis and Messrs. H. Thias, D. Mead (Bank), A. MacMillan (FAOCooperative Program), L. Blomkvist and J. Malingreau (Consultants). Workon Swamp Development was carried out by Messrs. P. Momal, J. Coulter, T.Dwyer (Bank) and B. Rahman (Consultant). k paper on Tree Crops forTransmigration was written by Messrs. P. Melkye and D. Morrow (Bank) andone on Spontaneous Transmigration by Ms. C. Davis. Mr. P. Whitfordassisted in finalizing this report.

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scale of the current program requires that questions on sustained resourceuse be more clearly addressed. This sector review focusses on four keyquestions.

(a) How can migrant welfare be assured?

(b) How can the scale of the program be expanded?

(c) What steps are needed to assure sound use of the nation'snatural resources?

(d) How can the quality of projects be improved?

Major findings are summarized below.

Migrant Welfare

4. Farmers' welfare is based primarily on their means of production.For this reason, an evaluation of farming systems for transmigrationconstitutes a major part of the sector review and a major conclusion of thisreport is that a wide variety of farming systems will be necessary andappropriate in a transmigration program of the scale proposed.

5. Farming systems for Swamp Reclamation - A review of yields andincomes among migrants in swamp reclamation areas suggests that currentfarming practices are economically viable if deep peats and overdrainage canbe avoided, and if the necessary infrastructure can be provided at relativelylow cost. The Wiorld Bank, therefore, is prepared to assist the Governmentwith reconnaissance and project preparation studies intended to eliminateareas with poor soils, and to develop a first-phase project to test theassumption that overdrainage can be avoided without costly water controlstructures.

6. Farming Systems for Upland Areas - A review of the upland transmi-gration program indicates that, while migrants in upland (rainfed) areas arebetter off at the new sites than they were in Java, yields and incomes areboth low and extremely variable. This, coupled with the high visibility ofthe program, rising expectations resulting from economic development, and abroader spectrum of applicants, dictates that incomes should be increasedand risks reduced, if communities are to be established which can attractand hold settlers. To achieve that objective, the following recommendationsare made.

(a) Food Cropping - Food crop production is an important aspect ofthe transmigration program and early Repelita III settlements inareas which are flat, suitably fertile and accessible to marketsare encouraging. However, where food crop production alone isintended, the timely supply of inputs, good extension and adequateprocessing and marketing must be ensured.

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This can be achieved by strengthening existing agriculturalsupporting services including cooperatives, and such an effort isbeing made in the second Bank-assisted project for transmigration.Alternatively Government could develop agricultural ProjectManagement Units (PMUs) to secure inputs, ensure good extensionand provide access to credit, processing and marketing.

(b) Integrated Farming Systems - Where good management and timelyinputs cannot be ensured (for example, in remote areas whereservices and markets do not yet exist), settlement should beginwith diversified farming systems based on farmers past experience.Such projects should place more emphasis on extended home gardens,and trees intercropped with food, fishponds, small livestock andoff-farm employment. Less reliance should be placed on externallysupplied inputs such as fertilizers, pesticides, extension. (SeeAppendix 3.)

(c) Other Income Sources - Where soils, topography or rainfall aremarginal for food crops or where distances limit the marketing oflow value crops, tree crops or supplementary income sources (e.g.rural industries) should be provided as an integral part ofproject design.

The World Bank is prepared to support projects to explore each of theseoptions.

7. Tree Crops for Transmigration. A review of the tree cropsubsector confirms the benefits of tree crops in terms of increased farmerincomes, reduced risk and improved cost recovery to the Government. It alsoshows that these benefits are greater the earlier tree crops are introduced.The Government, recognizing these benefits, has already agreed to theprovision of at least 1.5 ha of tree crops for each existing transmigrantfamily, but it has not yet made firm plans for the implementation of thiscomponent. To speed up this program, it is proposed that:

(a) a reconnaissance of agricultural conditions and income levels andan asessment of agricultural potential in existing transmigrationareas be undertaken immediately by the Government;

(b) based on the above, a comprehensive investment strategy in the treecrop subsector should be prepared by the Directorate General ofEstates (DGE), taking into account the needs of transmigrants andother smallholders; and

(c) should the Government so request, financial assistance for aprogram to provide tree crops to existing transmigrants and localsmallholders in areas of major transmigration development shouldbe considered by the Bank.

8. Given Indonesia's improved resource position, the need to increasemigrant incomes, make better use of available land (particularly that over8% slope), protect soils from erosion, and provide attractive benefits for

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indigenous smallholders, all point an increased role for tree crops in thetransmigration program. The major vehicle for planting smallholder treecrops is now the Nucleus Estate and Smallholder (NES) program, but theDirectorate General of Estates (DGE) has recently initiated a program inwhich migrants assist in the development of tree crops on their own land.This program called PIR (Perkebunan Inti Rakyat) is very promising and shouldreceive strong GOI and Bank support.

9. Agricultural Supporting Services. Regardless of the farm modeladopted, the coordination of agricultural supporting services is one of themost critical components of a successful transmigration program. At presentthis task is assigned to an Agricultural Technical Team (ATT) which hasneither staff nor facilities and which has limited authority to make policydecisions. To circumvent this constraint, it is recommended that:

(a) the Department of Agriculture (DOA) should take an increasinglyactive part in determining farm models for transmigration and incoordinating the tree crop and food crop subsectors;

(b) the ATT should be given regular institutional status and permanentstaff and should it be provided with technical assistance toestablish procedures for monitoring input supply; and

(c) agricultural supporting services should be strengthened. Particularattention, should be given to adequate budgeting for the distri-bution of fertilizers; improving seed production and distribution,particularly for secondary food crops; establishing and supervisingstandards for agricultural inputs and tools; training agriculturalextension staff to meet the needs of transmigration areas; andestablishing systems to monitor the delivery and use of agricul-tural services.

Program Expansion

10. A main concern of Government is how to increase the scale ofthe transmigration program without jeopardizing either migrant welfare or theother commitments of the involved agencies. To this end, two major recommen-dations are made: to optimize the use of scarce managerial resources; andto promote spontaneous migration.

11. Manaqerial Resources

(a) To effectively utilize existing managerial resources, settle-ments should be consolidated in areas with large developmentpotential. This would also facilitate regional development.

(b) To expand managerial capacity, there should be a very significantincrease in the effort and funds devoted to institution buildingand training in the major implementing agencies.

(c) To speed settlement, Government should consider subcontractingtree crop establishment and other forms of agricultural develop-ment.

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12. Spontaneous Migration. To facilitate spontaneous migration,community development should be phased (i.e., strong core communities shouldbe established by the Government but subsequent growth should be based onspontaneous migration); existing constraints to movement and land transfershould be reduced; and employment opportunities in transmigration sitesshould be maximized. Spontaneous movement could be facilitated by a generalprogram of investment in the outer islands and decentralization of educationalfacilities and administrative functions.

Sound Resource Use

13. The Rehabilitation of Critical Lands. There are sound financialand ecological reasons for preferring the development of grasslands overforests. Transmigration projects in grasslands are up to 25% cheaperto implement than those in forested areas, due largely to the reduced costof land clearing. This does not include the value to the nation ofmaintaining timber and preserving a unique ecological resource. However,most new sites are proposed for areas of primary forest, due, in part, toland tenure problems, the low soil fertility of grasslands and thedifficulty of controlling invasive grasses.

14. To circumvent problems associated with land tenure, it isrecommended that:

(a) the Directorate General of Agraria (DGA) should work with PublicWorks to identify land, and committees should be established inreceiving provinces to deal with problems of land alienation andcompensation for transmigration;

(b) the Public Works Department should undertake an inventory ofgrasslands with settlement potential and this inventory shouldbe turned over to provincial authorities and the DGA todetermine its ownership status and, where appropriate, tonegotiate its release for transmigration;

(c) the benefit package for indigenous people should be upgraded andthey should be encouraged to relinquish land claims in return forthis package; and

(d) support should be given to the DGA for its efforts to develop alegal framework which permits the redistribution of underutilizedland to both local farmers and transmigrants.

15. To permit smallholders to cope with grassland (alang-alang), thetechnical package and the funds allocated for alang-alang control also must beimproved. To this end, it is recommended that:

(a) projects should be undertaken to explore all aspects of thetechnical and economic parameters of grassland rehabilitation;

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(b) realistic alang-alang control measures should be included in allrelevant projects; and

(c) adequate provisions for renewable fuelwood supplies should beprovided in grassland sites.

The Review recommends that an early Bank-assisted project specificallyaddress the problem of grassland development.

16. Timber Disposal. When national priorities and regional developmentinterests do require land clearing in forested areas, as they will in pro-vinces such as East and Central Kalimantan, adequate timber recovery must bethe aim. Procedures for timber disposal should be determined prior to projectimplementation. Acceptable arrangements might involve marketing throughexisting forest concessionaires, land development contractors, or the migrantsthemselves. In some cases processing facilities should be developed inassociation with the project and the Government slhould reconsider those poli-cies and regulations which limit the exploitation of timber from transmigra-tion sites. The third World Bank project in support of transmigration willaddress problems of timber disposal in East Kalimantan and technicalassistance for studies on timber disposal in transmigration areas should beprovided through the technical assistance credit now available to GOI or inthe Forestry Project proposed for Bank assistance.

Project Quality

17. Project Preparation. Adequate project preparation will permitimprovements in farming systems and better pre-planning. For this reason,project preparation activities are now being financially assisted by the Bankand should continue to have high priority for Bank support. To have a greaterimpact on regional development, transmigration needs to be integrated withprovincial planning.

18. Land Development. Review findings suggest that manual land clearingwith chain saws, which is the most common method at present, has advantagesfor soil preservation and tendering when compared to mechanical land clearing.The Government, however, maintains a strong commitment to increasingmechanical clearing in order to obtain rapid land development. Under thesecircumstances, the mechanical land clearing done for the TransmigrationProject II should be carefully monitored for both speed and quality and thisevidence should be used to determine future land clearing methods. Differentmethods of land clearing should be attempted and monitored in other sites andthe supervision of existing land clearing should be improved.

19. Coordination. To improve overall program coordination, thefollowing steps are recommended:

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(a) The Office of the Junior Minister of Transmigration (JMT), whichhas the responsibility for overall coordination of budgeting andimplementation, should use available staff to take an increasingly

active role in coordinating implementation; and to increase itseffectiveness and improve its ability to attract additional staff,it should be given regular institutional status. The World Bank,UNDP and FAO are currently supporting technical assistance tostrengthen this office.

(b) DGT staff will have the major responsibility for coordination oncesettlers have arrived on-site. Therefore, the Bank is prepared toconsider financial assistance for DGT training activities andconsideration of the incentive structure for DGT staff merits earlyattention by the Government.

(c) In general, over the next few years, increased attention should begiven to institution building and training in the terms of referenceof consulting firms, and greater use should be made of specialistmanagement and training consultants.

The Development Strategy

20. Review findings suggest the following development strategy:

(a) Future projects should aim at improving the welfare of those whomove and at promoting ecologically sound regional development. Tothe extent that projects are successful in these aims, an impactwill be felt on population redistribution and food security.

(b) There may be many types of projects, both in agriculture and othersectors, which can contribute to transmigration goals, and a varietyof farming systems and organizational arrangements is thereforenecessary and appropriate.

(c) To make optimal use of managerial capacity, sound core communitiesshould be established in areas where large-scale regionaldevelopment is desired and subsequent development should stressspontaneous migration.

(d) To expand the scale of transmigration, a greatly increased insti-tution building effort is required and more preparation and imple-mentation should be contracted out to the private sector.

(e) Implementation of this program will require increased attention toprogram quality and cost control.

(f) Actions to strengthen program coordination mechanisms should receivehigh priority by the Government.

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The Role of the World Bank

21. The World Bank is prepared to assist GovernmLent in the irmplementa-tion of the transmigration program as long as reasonable standards of settle-ment are attained. To maximize thie impact of Bank-assisted projects, theReview recommends a shift from an emphasis mainly on area specificsettlement to a combination of activities which improve migrant welfare andproductivity, and promote prograt development. Three or four different typesof projects could be ready for appraisal in the next few years. They wouldinclude Transmigration III, a project intended to resettle 12,000 families inEast Kalimantan, address problems of timber disposal and continue project pre-paration and training. The pipeline could also include projects to improvethe technical procedures for grassland developmernt; to rehabilitate existingsites; and to support the PIR /1 program in areas suitable for tree cropdevelopment.

/1 Perkebunan Inti Rayat - smaallholder plantation developuent.

INDONESIA

TRANSMIGRATION PROGRAM4 REVIEW

INTRODUCTION

1. Indonesia, the fifth largest nation in the world, contains 142million people (1980), 92 million of whom reside in Java, an island with about7% of the nation's land. Seventy percent of Java-s total area is cultivatedand population densities in irrigated areas rise to 2,000 people/sq km.Meanwhile vast areas of low fertility soil lie uncultivated in the outerislands and low population densities in some of these areas impede regionaldevelopment and economic growth. These facts have been so striking for solong that programs to wed the underutilized labor of Java with theunderutilized land of the outer islands have figured in the programs ofIndonesian Governments for three-quarters of a century. Together theseprograms have resulted in the movement of more than one million poor andlandless farmers and it is estimated that at least two million people are inthe outer islands as a direct result of transmigration programs and associatedpopulation growth.

2. Throughout the 20th Century, planners in Indonesia have seentransmigration principally as a means of reducing overcrowding in Java andproviding land and employment to the poor. More recently, transmigration hasalso been seen as a means of increasing national food production and reducingIndonesia's dependence on imports, stimulating development in remote and underpopulated provinces and exploiting underutilized natural resources. Reviewfindings suggest, however, that the solutions to the problems of Java and theother overpopulated inner islands lie largely within these islands.Government-sponsored transmigration is not seen as the solution to Java'spopulation problem nor the answer to national food deficits, although in bothareas transmigration can help. Of more importance will be the impact oftransmigration on the lives of migrants and on the development of regions towhich they move.

3. In the past, both the size and the quality of the transmigrationprogram were limited by a shortage of funds; but the improved resourceposition of the country at the present time has prompted the Government ofIndonesia (GOI) to call for a renewed effort to promote large-scaletransmigration and in so doing to set the stage for balanced economicdevelopment and regional growth. This program was initiated in March 1979,the beginning of the Third Five-Year Development Plan (Repelita III), and bothplanning and settlement are now occurring on an unprecedented scale.

4. The World Bank recognizes the role which transmigration can playin meeting Government objectives. At the same time, it is aware of the risksand responsibilities entailed by support for a transmigration program of the

scale proposed; and for this reason, the Bank has undertaken a review of theupland, swamp and tree crop subsectors in an effort to identify the keyconditions for program success and to define those steps required to assurethem.

5. In these sector reviews, the following questions are addressed:

(a) How can migrant welfare be assured?

(b) How can the scale of the program be expanded?

(c) How can the program be developed in such a way as to make best useof the nation-s resources?

(d) Ilow can the quality of projects be improved?

6. The following report summarizes the findings of the sector reviewand the Bank's recommendations to the Government. Chapter I provides thebackground material for understanding the transmigration program. Chapter 2summarizes major findings on migrant welfare and their implications forfarming systems adopted for transmigration, and Chapter 3 providesrecommendations on program expansion, resource use and program quality.Chapter 4 outlines the Bank's proposed role in support of the transmigrationeffort. More detailed descriptions of Upland and Swamp Transmigration aregiven in Annexes 1 and 2 and a Tree Crop Subsector Report is included asAnnex 3. Recommendations on spontaneous migration are covered in Annex 4.

7. The Review does not attempt an overall evaluation of the priorityof transmigration within the Government-s total development program, nordoes it evaluate whether the welfare objectives of transmigration might beachieved more effectively by investing in other activities on Java. Ratherit examines transmigration in a historical context, looks at achievementsand constraints and suggests ways in which implementation of the present pro-gram could be improved.

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1. BACIKGROUND

A. Historical Overview

Past Transmigration Projects

1.01 Indonesian resettlement efforts have had two critical components incommon: all have been based on smallholder agriculture; and most have beenGovernment sponsored. Within this agricultural framework, variations in thefarm model have only recently appeared.

1.02 Irrigated Projects. Early Dutch efforts to resettle Javanese in theouter islands and most GOI transmigration efforts through the early 1970s weregenerally premised on irrigation. The Dutch in fact, assumed that withoutirrigation Javanese would not move and/or would not be succesful and, in theliterature, problems were typically attributed to the failure of irrigationplans. In early schemes, migrants received 0.7 ha irrigated plots, anarrangement which placed considerable pressure on the land as childrenmatured. In more recent projects, farmers received 2.0 ha of land withirrigation potential though irrigation itself frequently was delayed. In mostsclhemes, migrants were provided with free transportation to the site, land,housing, an agricultural package and subsistence supplies for the first year.

1.03 Swamp Reclamation. A variation on irrigated farming was introducedin the 1930s along canals dug for log transportation purposes in Kalimantan.In these areas, in theory, tidal action backed fresh water up river estuariesonto low land making wet rice cultivation possible. In practice, canalsprovided drainage and most areas were used for rainfed rice. Only smallnumbers were settled on such schemes in the colonial period and a major effortannounced by the Public Works Department in 1957 was hampered by lack offunds. Not until 1967-68 was the groundwork laid for the present program,which has since resulted in the opening of some 240,000 ha of tidallyinfluenced land by the Public Works Department. Present swamp reclamationprojects provide each farmer with 2.25 ha of land suitable for bunded rainfedrice and these projects absorbed 13% of all migrants moved during Repelita II.

1.04 Smallholder Tree Crops. Although during the Dutch period far morefarmers were moved as estate laborers than as transmigrants, this program wasnot linked to transmigration until 1978, when the potential of the estatesector was first tapped for transmigration in Nucleus Estate and Smallholder(NES) projects. Under the NES concept, funds were made available torehabilitate or expand existing estates and to increase their capacity toplant tree crops for smallholders, including both local people andtransmigrants. Bank-assisted NES projects, including the proposed NES Vscheme, entail planting (or replanting) some 86,600 ha of estate land and

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181,000 ha of smallholdings. The smallholder components of these projectswill benefit 9,750 local families and 41,800 relocated families, of which16,000 will be transmigrants and the rest local smaliholders (Appendix 2,Table 5). Farmers have generally received 2.0 ha of block-planted tree cropsand 1.0 ha for food crops. In NES projects, unlike other transmigrationefforts, incomes will be sufficiently high at project maturity to enablepartial cost recovery.

1.05 Rainfed Food Cropping. The main farming system for the Repelita IIItransmigration program is based on foodcrop production by smallholders inrainfed areas in the outer islands. This concept was tested in two pilotschemes in South Sumatra in the late 1970s: by the Bank-assisted project atBaturaja and on an FAO-assisted project at Pematang Panggang. In these pilotprojects, farmers received 5.0 ha of dry land, of which at least 1.0 ha wasto be in tree crops established in the course of the project. The emphasison food production under rainfed conditions was prompted by growing riceimports, by an increased availability of locally produced fertilizer and bythe favorable results of research in areas of rainfed agriculture.

Past Performance

1.06 By 1930, around 20,000 migrants had been moved to the outer islands,while over 600,000 had been relocated as estate laborers. With the decline ofplantation investment in the outer islands from 1930 to 1970, transmigrationbecame the major vehicle for movement, and since 1930 about one million peoplehave been resettled through Government sponsored transmigration programs(Figure 1).

1.07 The extent of spontaneous movement is not known, but according tothe 1971 census, of the one million Java-born residents in Lampung Province,only 250,000 were moved with Government support. The census also indicatedthat the total reverse movement from the outer to the inner islands wasapproximately one-third as large as the movement to the outer islands.

1.08 The major lessons from these data are as follows:

(a) Sectors in which growth has taken place (i.e., the estatesector in the 1920s) have drawn migrants to the outer islands.As a corrollary, the low rate of outward migration to the outerislands between 1930 and 1970 is related to the collapse ofinvestment in these areas during that period /1 and anacceleration of investment should speed maovement.

/1 The importance of historical events in limiting economic expansion andmigration in Indonesia cannot be overemphasized. The worldwidedepression caused the collapse of Dutch investment in the 1930s andthereafter followed: the European and Pacific Wars (1939-1945), theIndonesian Revolution (1945-50), a series of internal rebellions(1957-1962) and a period of economic decline (1957-1967). Only since1967 has an extended period of growth been sustained.

GOVERMENT SPONSORED MIGRANTSTO THE OUTER ISLANDS

1905-1981

325, 000-

300,000-

275,000-

250,000-

225,008-

200,000PE t75,000-0vP 1 50, 8000LE 125,000-

t00,000-

75,000

50,088

25,000 n0-

s90z 1~4NME Ot RAhIA BY YER t- s988/181

NUM1BER OF TRANSMIGRANTS BY YEARS llS-198W/181

(b) Centralization of educational and administrative opportunitieshave fostered Jakarta-bound migration on the part of both outerisland residents and Javanese. Conversely, decentralizationof educational facilities and administrative functions woul,lpotentially slow iimmigration and promote the emigration ofJava-born.

(c) Sponsored transaigrants are followed by spontaneous settlers, andthis process can be accelerated by an understanding of chainmigration and by a reduction in the constraints to movement.

B. Factors Mfecting the Formulation of the Repelita IIITransmigration Program

Increased Pressures for Transmigration

1.09 By 1978, transmigration had come to be seen as an important toolfor providing relief to a number of critical problems facing Indonesia.These included:

(a) Providing Opportunity to the Landless. Over 80% of Java's peoplelive in rural areas. Of these, some 40% are landless and anotherone-third live on less than subsistence holdings. By the late1970s, the need for land and employment opportunities among Java'spoor was so strong that only a small number of the families whichapplied for transmigration could be moved.

(b) Protecting Critical Lands. With increased population pressure,poor farmers in densely populated provinces are cultivatingincreasingly steep slopes in upper watersheds causing erosion anddownstreami flooding. Transmigration is viewed as a part answer tothis problem and to that of relocating people displaced bydisasters and by development projects such as dams and roads.

(c) Promaoting Regional Development. In the outer islands there arepotentially productive areas with population densities so low thatarea development is not economically feasible. Transmigrants canprovide the critical mass to justify infrastructure and services(such as extension and clinics) as well as labor and markets; andfor this reason, transmigration has assumed a growing role inregional development.

(d) Increasing Food Production. Finally, the Government seestransmigration as an important component in its effort to move

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toward food self-sufficiency. Transmigration can contribute toincreased food production in two ways: (i) by allowing poorfarmers to produce their own food, and (ii) by opening new landsfor cultivation.

1.10 For these reasons, the Government decided on a massive increasein the transmigration program in Repelita III. It also decided thatmovement on the scale envisioned should entail a reasonably low per familycost.

New Developments in Agriculture

1.11 One of the significant changes in the transmigration program is an

emphasis on food crop production on rainfed land. The present farm modelwas largely shaped by the following factors:

(a) Increasing Demand. A growing population and rising incomes haveexpanded the demand for food, particularly rice. This, coupledwith widespread harvest losses in 1977, led to the import of 2.3million tons of rice, making Indonesia the world's largestimporter of rice and a major influence on the world market price.

(b) Agricultural Research. With traditional farming systems, thepotential for surplus food production on the marginal soils of theouter islands is limited. But by the late 1970s, research by theCentral Research Institute for Agriculture (CRIA) showed thatimproved cropping systems, fertilizer use and pest control inthese areas could significantly increase food crop yields andfarmers incomes./1

(c) Fertilizer Availability. The key element in the assumption ofsustained food crop production in the outer islands is theavailability of fertilizer. Because of limited funds and localsupplies, no fertilizer was available for rainfed crops until1974. By 1980, however, Indonesia produced more than two milliontons of urea per year, increasing to 4 million tons by 1982.Production of phosphate based fertilizers, upon which urea uptakeis dependent, remains limited and these fertilizers must still beimported.

/1 Gross income on selected fields in one transmigrant community in Sumatrawere increased from Rp 210,000/ha (US$336) with traditional farmerpractices, to Rp 600,000/ha (US$960) with free inputs (fertilizers andpesticides) and CRIA management. To date this research has not fullyevaluated economic and risk factors which continue to limit input useand yields (para. 2.01).

-8-

Organizational Changes

1.12 Until August 1978, the Directorate General of Transmigration (DGT)in the Department of Manpower and Transmigration was responsible for allaspects of the transmigration program. With a small budget and limited staff,the ability of the DGT to carry out its activities was constrained and duringRepelita II, efforts to expand the scale and quality of the program led tosignificant shortfalls in the numbers moved.

1.13 In 1976, the Government, faced with the need to resettle 6,000Javanese families from the reservoir area of the new Wonogiri Dam, turned tothe Public Works Department for a crash program of land clearing andresettlement. Using heavy machinery, the Public Works Department developed2,750 ha of land in Sitiung, West Sumatra and settled 2,000 families within ayear./l This rate of implementation was sufficiently impressive for theGovernment to conclude that involvement of the Public Works Department inphysical planning and land development would facilitate expansion of thetransmigration program during Repelita III.

1.14 Under these circumstances, the Government began a major reorgani-zation of the transmigration program in early 1978. In March 1978, thePresident created the position of Junior Minister for Transmigration (JMT) tocoordinate the activities of the various Directorates General working on theprogram and on August 31, 1978 the new organizational arrangements forRepelita III were set out in Presidential Decree 26/78. This decreetransferred responsibility for project implementation from DGT to the agenciesnormally responsible for each sector. All told, 7 Departments and 53Directorates General are involved in the Repelita III transmigration program,although only a few play major roles. Site selection, land development androad construction were given to Public Works; land alienation and landtransfer to the Directorate General of Agraria (DGA); selection, resettlement,housing and community development to the DGT; and agricultural inputs andextension to the appropriate Directorates General in the Department ofAgriculture (DOA). Other agencies, Health, Education, Religion,Telecommunications and the like, were to be involved as required.

Increased Funding

1.15 A major factor altering the content and scale of the program wasthe country's improved resource position. This allowed the Government toundertake an expanded resettlement program despite a nearly tenfold increasein cost per family - from about US$500/family at the beginning of the SecondFive Year Development Plan (Repelita II) to US$5,000/family in Repelita III.The difference in cost was caused by inflation, improved project design

/1 While the rate of land development in Sitiung was satisfactory, faultyland clearing methods limited agricultural productivity (Table 2.1). Inlater sites, mechanized clearing techniques were improved although landclearing still suffers from an emphasis on the quantity rather than thequality of work accomplished (para. 3.30).

(the introduction of feasibility studies, topographic mapping, detailedvillage design), new components (link roads, hydrological surveys,agricultural research), improved inputs (initial land clearing up to 1.0 ha,the provision of cattle, fertilizer) and by certain diseconomies of scaleresulting from the centralization of the program and correspondingdifficulties in contracting, supervision and quality control. With theprogram's increased access to funds, however, financing ceased to be themajor constraint to effective program implementation.

C. The Repelita III Transmigration Program

1.16 In response to these developments, the Third Five-Year Plan(Repelita III) proposed the settlement of 500,000 transmigrant familiesbetween April 1979 and March 1984 (Annex 1). These families were to be movedto 250 settlements located mainly in Sumatra, Sulawesi, and Kalimantan. Ofthe settlements originally proposed, 18% were intended for areas of swampreclamation. All other communities were to be established under the standardupland program based mainly on food production in areas of rainfed agri-culture. In the initial stages of program formulation, Bank assistance wasprojected for nearly 50% of proposed settlement. Tree crops were to beintroduced into these projects at a second stage of development. Thesetargets did not include those to be moved under the NES tree crop schemes.To meet the cost of transmigration, the Government's indicative budget forRepelita III allocated Rp 1,240 billion (US$2.0 billion) for manpower andtransmigration, nearly 6% of the projected development budget.

1.17 In 1979, the GOI and the World Bank agreed upon a secondBank-assisted project intended as a model for the Repelita III transmigrationprogram. This project, which is to settle 30,000 families along the newTrans-Sumatra Highway /1 in Jambi Province and rehabilitate settlements for4,000 additional families, had four important features:

(a) large-scale settlement in a single development area;

(b) an emphasis on rainfed food crop production;/2

/1 Partly financed under the Second Highway Project (Credit 260-IND).

/2 The package to promote food crop production in Transmigration II(Ln. 1709/Cr. 919-IND) originally included the following components: (i)the identification of 2.0 ha of land of under 8% slope for food crops,plus 1.5 ha of land of under 15% slope for future tree crops; (ii) theprovision of 1.25 ha of clean cleared land per family for houselot andfoodcrops; (iii) the provision of appropriate seeds and seedlings; (iv)the provision of fertilizer and pesticides for three years; and (v)support for extension services and cooperatives. Since appraisal it hasbeen agreed that settlement could proceed with only 1.25 ha availableunder 8% slope.

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(c) a test of the cost and quality of mechanical land clearing; and

(d) the use of the organizational arrangements specified underPresidential Decree 26/78.

Based on the information available at the time (para. 1.11), strong supportfor the food crop model (with tree crop development projected for a laterstage) was judged to be the best way to establish migrants while facili-tating large scale movement.

1.18 A year later, the Bank appraised a first project in swampreclamation for transmigration. This project, a 9,000 ha pilot project for3,200 families, will test the assumption that overdrainage and soiltoxification can be avoided without costly structures for water control. Italso initiates those studies on which future project preparation would bebased, including an inventory of reclaimable swampland, a reconnaissance ofexisting areas which might be upgraded, and studies on potable water supplyand on the ecological impact of swampland development.

D. Current Program Status

1.19 Shortly after the beginning of Repelita III, the World Bank senttwo review missions to Indonesia to evaluate the upland and swamp transmigra-tion programs. At the time of these missions (October 1979), programprogress was slow. Of an adjusted target of 53,000 families for 1979/80,only 7,200 families were moved in the first six months. A lack of preparedprojects and inadequate interagency coordination were identified as majorconstraints to program expansion. In the ensuing months, however,significant improvements were made. In the second half of 1979/80, 15,200families were moved (for a total of 22,400 families in the first year ofRepelita III) and 60,000 families were settled in the 80/81 fiscal year.These 90,000 families moved over two years represented a substantialincrease over the rate of implementation during Repelita II, when 48,000families were moved.

1.20 In addition, during 1979 and 1980, a series of new initiatives weretaken to increase the numbers moved. Project preparation was begun by thePublic Works Department to identify land suitable for the settlement of300,000 families; a directive was issued permitting the DGT to develop smallsites identified in cooperation with the provinces; the estate sector wasenlisted by the Government to establish tree crops for 75,000 transmigrantfamilies within the 500,000 overall target; and alternative managementsources such as forest concessionaires and private voluntary organizations(e.g., church and social groups) were approached for assistance. The DGA

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began work on the legal foundation for agrarian reform which would allow theredistribution of underutilized lands to both indigenous and transmigrantfamilies and a new Directorate was established within the DGT to promotespontaneous migration.

1.21 These initiatives illustrate the high priority attached by theGovernment to the transmigration program and the dilemma faced by theGovernment and the donor agencies in attaining both rapid movement andsufficient quality to protect the welfare of the transmigrants and toestablish a sound foundation for future development. Reconciling theseobjectives is the main task of the Government in Repelita III and the majorsubject of subsequent sections of this report.

1.22 The major findings of the Review on migrant welfare and theimplications of farming systems for transmigration are discussed in Chapter 2.Findings on program expansion, resource use and the quality of implementationare dealt with in Chapter 3.

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2. MIGRANT WELFARE AND FARMING SYSTEMS FOR TRANSMIGRATION

A. General Findings

2.01 One of the most important findings of this report is that, whilemigrants are better off in most transmigration sites than they were in Java,crop yields and incomes in upland areas are both low and extremely variable(Table 2.1). Of 592 farmers surveyed in communities dependent on rainfedagriculture, only 9% of farmers reported paddy yields of more than one tonper family (of padi gabah or unhulled rice)./l This would meet subsistenceneeds for a family of five if rice alone were eaten. Nearly two thirds(65%) of the farmers reported that they had obtained 500 kg of paddy orless. These farmers relied on crops other than rice for subsistence andobtained cash largely from off-farm work. By comparison, 84% of transmi-grants in Upang Delta, a tidal reclamation scheme in Sumatra, reportedyields of more than one ton, while only 3% reported less than 500 kg ofpaddy. These low rice yields in upland areas, whether caused by environmentand pests or by erratic input supply and the risks associated with higheruse of cash inputs, cast doubt upon the ability of these small farmers toobtain projected yields and invest in the inputs upon which increased foodproduction depends.

2.02 Based on yield and income data, the general conclusions of thisreport are as follows:

(a) The incomes of migrants with two hectares of wet rice in swampreclamation areas appear to be sufficient to justify the presentsettlement strategy, if deep peats and acid sulphate soils can beavoided, and if drainage canals and other infrastructure can beprovided at relatively low cost.

(b) Yields from early Repelita III settlements in areas which are flatand suitably fertile and which have access to inputs and marketsare encouraging and food crop production which is an importantobjective of the transmigration program is worthy of support.It is apparent, however, that the diverse conditions in uplandareas will require many farm models adapted to specific situations(see 2.05).

(c) The tree crop alternative, as in NES, or PIR projects provides atechnically acceptable method of increasing incomes andproductivity on the marginal soils of the outer islands. However,tree crop establishment is constrained by the capacity of theDGE and other management sources to implement projects on thescale desired by GOI.

/1 Only the results for rice are presented, as this is the preferred foodof the transmigrants and also because production of a marketable surplusof rice was a major justification for transmigration.

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Table 2.1: YIELDS REPORTED iN FIVE TkANSMIGRANT CUMS1UNITLES /a

Number Rice yield Hectares Yield % farmers % Families Reportingof years per family under per using No rice 500 kg over Sampleon site per year (kg) cultivation hectare/b inputs yield or under 1,000 kg size

RainfedSitiung I1 1 314 0.60 523 100 20 89 0 (35)Sitiung I 2 221 1.19 185 100 46 96 2 (45)

Baturaja 1 1.5 623 0.93 669 85 6 72 19 (32)

Rimbobujang II-V 1.5 441 1.87 235/c 98 18 75 4 (178)2limbobujang I 2.5 992 1.66 598/c 71 4 26 28 (114)

Way Abung 9-12 4-5 504 1.05 480 29 16 68 4 (70)Way Abung 7-8 5-6 757 1.47 514 22 6 50 8 (36)Way Abung 4-6 7-8 585 1.39 420 9 7 59 9 (44)Way Abung 1-3 9+ 462 1.02 452 26 0 7b 3 (38)

Tidal /dUpang-Purwobarjo 2 2,248 1.19 1,889 0 0 3 89 (37)Upang-Tirtakencana 4-5 2,371 1.80 1,317 0 0 0 97 (37)Upang-Tirtamulia 5-7 2,747 1.90 1,445 0 0 2 95 (41)Upang-Purwosari 7-8 1,865 1.85 1,008 0 0 11 88 (63)Upang-Makarti 9 2,664 2.30 1,158 0 0 2 71 (41)

/a Farmner reports are typically lower than agricultural department statistics. This is due in part to the fact that agricul-tural department statistics are extrapolated from measured 5 meter-square plots on harvested fields, fields which fail arenot measured and for this reason the statistics overstate aggregate yields. Harvests in the year of most of these surveyswere also rather poor.

/b Farmers cannot judge the percent of a field which is cultivated, particularly in primary forest areas which have residuallogs and stumps. For this reason this statistic which represents the farmer's reported yield divided by the total area hereported cultivating is not comparable between villages.

/c Field area is oversized in this community. These Fields are newly felled by migrants and have perhaps 0.50-0.60 ha ofplantable land, thus distorting productivity on a per hectare basis.

/d Upang Delta is one of the most successful of the tidal developments and may not be representative of all comumunities ofthis type.

Source: Field surveys, Bank Staff

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B. Recommendations on Farming Systems for Transmigration

Farming Systems for Swamp Reclamation

2.03 The yields obtained by transmigrants in selected swamp reclamationsites (Table 2.1) demonstrate the possibility of developing swamps for eitherrice or coconuts even with minimal purchased inputs and modest on-sitemanagement. The economic viability of such projects is, therefore, high ifdeep peats and overdrainage can be avoided and if infrastructure costs can bekept low. For this reason, the Swamp Program Review (Annex 3) recommendsimproved site selection to eliminate areas with potential soils problems andbetter water control to reduce the probability of overdrainage and soiltoxification, but it argues that infrastructure such as extensive dikes andpolders do not appear to be economically justified. If the firstBank-assisted project (para 1.17) proves successful, continued support toswamp development would be justified. To improve the agricultural system, theReview recommends:

(a) increased income diversification through expanded aquacultureand the introduction of small livestock, secondary food crops andtree crops such as coconuts, coffee and cloves;

(b) increased attention to weed and pest control by the DirectorateGeneral of Food Crops Agriculture (DGFCA); and

(c) further experimentation with estate crops, such as oil palm, whichare tolerant of acidic conditions and grow in swampy land.

Farming Systems for Upland Transmigration

2.04 Food crops are a critical part of the farming system for transmigra-tion since they provide early returns to labor and capital and meetsubsistence needs. Furthermore, to the extent that communities are self-sufficient in food, or have surpluses, they reduce national food deficits.The World Bank supports Government efforts to improve food cropping systemsunder rainfed conditions and to improve agricultural supporting services forfood crop production in the outer islands. At the same time it recognizesthat present low yields of rice and maize in upland areas cast doubt upon thescale and viability of a transmigration program based primarily on food cropproduction. For this reason, the report recommends that the GOI adopt a rangeof farm models for transmigration suited to different land, market, andmanagement possibilities. Among other things, the farm size and croppingsystem should be selected or adapted to suit the potential of eachtransmigration site and should be aimed at providing the settlers with anadequate and reasonably secure source of income. Furthermore, while farmmodels will be essential in the planning phase of a project and in the initialyears of settlement, in order to ensure sufficient land of suitable slope andfertility for the farming system envisaged, they should not become astraitjacket after the settlers are established. Instead, projects shouldprovide the fariaers with access to credit, planting materials, livestock andextension advice in order to diversify their farming systems.

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2.05 There are many farming systems appropriate to upland areas. Among

them are the following:

(a) Food Crop Production. Where soils and rainfall are suitable,(as in the alluvial areas now being settled in Central Sulawesi),where irrigation is feasible (as in some areas of South Sumatraand Southeast Sulawesi) or where markets dictate the need for foodproduction (as in the proposed settlements around sawmills andmines), farming systems emphasizing food crops may be preferred.In such cases, it is essential that arrangements be assured forthe supply of key inputs - fertilizer, pesticides, extension.These might be provided through improved provincial services,through food crop Project Management Units (PMUs) /1 run byspecially recruited and trained GOI officials, or by turnkeyprojects in which private firms manage establishment and inputsupply.

(b) Integrated Farming Systems. Where soils are relatively good andrainfall reliable, but where good management cannot be assured,highly diversified farming systems will be necessary to protectfarmers from undue risk. These should place more emphasis onhome gardens, intercropped tree crops, fishponds, small livestock,green manuring, and on-farm flexibility, and less emphasis onexternally supplied inputs than current projects. Such farmswould generally provide for the family½s subsistence food needsand a modest marketable surplus of other crops. An example isgiven in Appendix 3.

(c) Tree Crop projects. Where soils, topography or rainfall aremarginal, as in many of the upland areas available fortransmigration, tree crops or supplementary income sources (e.g.logging) should be provided as an integral part of the projectdesign.

With improved project preparation capability, the Government is now in abetter position to design projects tailored to different land and managementconditions, and for this reason, procedures are required which ensure theinvolvement of the Department of Agriculture in the choice of farmingsystem.

/1 Strong PMUs are now regarded as a critical element for tree cropestablishment in the outer islands (para 2.14) but this concept has notyet been tried in the food crop subsector.

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2.06 Agricultural Supporting Services. Regardless of the farm model,the ability of the DOA to provide proper policies and adequate organizationalarrangements for the delivery of agricultural services is critical to programsuccess. At present these tasks are largely the responsibility of theAgricultural Technical Team (ATT), a committee consisting of representativesfrom each of the Directorates General in the DOA. While well informed, thisgroup is handicapped by its lack of regular institutional status. Itsmembers have other functions, it has neither staff nor facilities and itlacks authority to take policy decisions. These problems may be increasedif recommendations on integrated farming systems are followed, as DGFCA andDGE are accustomed to operating independently. The Bank, therefore, attacheshigh priority to steps by the DOA to strengthen its role in providingagricultural policies for transmigration, improving its ability to define anddeliver appropriate agricultural supporting services, and increasing itscoordination of activities in the tree crop and food crop subsectors.

2.07 The following steps are recommended to achieve this:

(1) A high level body should be established to make policy decisionsin agriculture. One possibility is that this be an AgriculturalPlanning Subcommittee of the SATDAL /1 consisting of the fiveagricultural Directors General and those from the DGT and PublicWorks. Alternatively such a committee might be formed within theDOA.

(2) The ATT should be given regular institutional status within the DOAand sufficient staff and facilities to program and monitor theprovision of agricultural supporting services for transmigration.(One way to do this might be to incorporate the ATT into the Bureauof Planning within the DOA). Bank financing is also recommendedfor technical assistance to the ATT to establish procedures formanagement and monitoring.

(3) Steps should be taken to strengthen agricultural supporting servicesfor transmigration, particularly in the fields of agriculturalextension, seed and input quality control and supply, agriculturaltools standards, research and the distribution and overallmonitoring of agricultural services.

/1 The committee of all Directors General involved in transmigration(para. 3.33).

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2.08 Specific activities which should be undertaken to strengthenagricultural supporting services include the following.

(a) Rural Extension Centers should be built and staffed prior totransmigrants arrival and the extension program strengthenedthrough additional staffing, specialized training and widerdistribution of written materials in transmigration areas.Bank support for these activities under the NationalAgricultural Extension Project II (Credit 996-IND) isrecommended. Efforts to increase incentives for subject matterspecialists in remote areas should be explored.

(b) Seed improvement can be fostered by developing existingprovincial seed farms in transmigration provinces andestablishing small seed laboratories for quality control.These steps can be taken within the second Seeds Projectproposed for Bank assistance. In addition, GOI shouldstrengthen seed distribution firms and review seeddistribution costs to ensure adequate budget provisions.Providing transmigrants with an initial seed package for thehome lot at the point of origin would ensure quality seed andprevent transfer of pest-prone rice varieties by the trans-migrants.

(c) The present policy of a three-year free supply of fertilizerto transmigrants should be continued and the transport subsidyrequired for each transmigration project should be estimatedin advance and included in the corresponding DIP. Qualitycontrol standards for fertilizers, rock phosphate and limeshould be established and used in conjunction with regionalapplication guidelines to be prepared under Soils ResearchInstitute supervision.

(d) Research by CRIA should be increasingly focussed on farmingsystems integrating food crops and tree crops, and moreattention should be given to improving the productivity ofhome gardens. Research should be intensified on thetechnology for alang-alang control and the reclamation offresh water swamps.

(e) Finally, the quality and the efficient and timely delivery ofinputs and effectiveness of agricultural services should bemonitored by the responsible agencies. Technical assistanceto aid the establishment of monitoring systems should beprovided by the management team providing assistance to theJMIT for monitoring and coordination.

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Tree Crops for Transmigration

2.09 With Indonesia's improved resource situation, the need to increasemigrant incomes, to make better use of available land (particularly that over8% slope), to protect fragile soils from erosion, and to provide attractivebenefits to local families, thereby facilitating land alienation, all pointto an increased role for tree crops in the transmigration program.

2.10 Benefits. A review of food crop and tree crop alternatives confirmthe benefits of tree crop developments to migrants and to the Government.

(a) Income. Migrant incomes on standard transmigration schemes with1.25 ha primarily under food crop production are estimated at US$530per family annually. PMU established tree crops with 2.0 ha underrubber have projected incomes of approximately US$1,200 annually,while farmers on NES schemes with 1.0 ha of food crops and 2.0 harubber would have an annual income of US$1,600 per family.

(b) Risk. An acceptable income from food crops assumes averagerainfall, sustained fertilizer use and upland paddy yields of 1.7ton/ha (or the equivalent from other crops) by year 5. Withoutadequate rainfall or fertilizer, or with paddy yields of 1.4 ton/ha,the average annual income per family would fall to about US$400,below the absolute poverty line of US$465 (1979) in the outerislands./l PMU tree crop schemes reduce this risk in early years bypartial compensation for labor (for land clearing and planting) andby intercropping trees with rice or other food crops./2 NESprojects provide a secure source of employment for migrants untiltree crops are established.

(c) Cost. While tree crop projects are initially more expensive to theGovernment, their cost is substantially reduced in the long run dueto cost recovery enabled by higher family incomes (Table 2.2).

(d) Other Models. Costs could be reduced and management constraintsrelaxed by consideration of models other than the PMU and NESprototypes. For example, settlers could be given the responsibilityfor land clearing, planting and maintenance of the tree crops, withthe Government providing seedlings, inputs and limited supervision.This approach is being tried under the estates in the PIR programand this strategy should be encouraged by both the GOI and the Bank.

/1 This effect may be understated, since paddy yields on good schemesaverage only 0.7-1.0 ton/ha at present.

/2 In rubber replanting schemes, local smallholders plant one ha of rubberintercropped with rice in the first year of the project and a secondha intercropped in year 4.

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Table 2.2: TRANSMIGRATION SCHEMES WITH AND WITHOUT TREE CROPS

Trans scheme Trans scheme

Trans II Trans II NES rubber NES rubber with 2 ha rubber with 2 ha rubber

on on (2 ha) on (2 ha) on in Year 3 in Year 3

grassland/a forest/a grassland forest on grassland on forest

Rubber DevelopmentDirect costs - - 2,527 3,108 2,527 3,108

Machinery - - 237 700 237 700

Overheads /b - - 253 310 253 310

Subtotal - - 3,017 4,118 3,017 4,118

Food Crop DevelopmentInitial land clearing (foodcrops) /c 73 806 58 645 73 806

Settler subsidy and cash grant 423 423 49 49 423 423

Seeds/fertilizers 487 487 41 41 487 487

Cooperatives/RECs/PMSU /d 263 264 240 263 317 317

Seed farms and equipment 17 17 17 17 17 17

Plant protection 3 3 3 3 3 3

Subtotal 1,266 1,999 408 1,018 1,320 2,03

Roads /e 600 600 700 700 700 700

Settler housing 400 400 400 400 400 400

Village infrastructure and health /f 200 200 200 200 200 200

Resettlement costs /f 287 287 287 287 287 287

Land alienation /f 80 80 80 80 80 80

Buildings and civil works /f 60 60 60 60 60 60

Equipment/vehicles /f 70 70 70 70 70 70

Management/consultant services 97 97 126 155 223 252

Administration/overheads 80 80 16 6 96 86

Total investment cost/family 3,140 3,873 5,364 7,094 6,453 8,306

Average annual net income/familyover 25-year life 530 530 1,595 1,595 1,446 1,446

NPV - net family income 4,083 4,083 8,384 8,384 6,931 6,931

NPV - investment cost 2,875 3,574 4,789 6,442 5,072 6,552

NPV - total cost recovery Lg 133 133 2,456 2,456 1,845 1,845

NPV - net cost to GOI 2,742 3,441 2,333 3,986 3,227 4,707

Ratio of NPV net family income

to NPV net cost to GOI 1.49 1.19 3.59 2.10 2.15 1.47

/a Excludes livestock from Trans II model to make constant with tree crop models.

/b Equal to 10% of direct costs of rubber establishment.

/c Land clearing on 1.25 ha food crops in Trans II and 1.0 ha in tree crops models.

/d Assumes planting material supply units in tree crops models equivalent to cooperatives or RECs.

/e Assumes an additional $100 per family for rubber area roads.

/f All costs here standardized for all models.

/g Represents cost recovery to GOI from IPEDA in case of Trans II and IPEDA and cost recovery of

25% of annual rubber production for tree crop farmers.

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2.11 The cost of typical transmigration and tree crops projectsprovide further support for tree crops. The initial investment cost ontransmigration schemes in grasslands is US$3,140/family (1979, no cattle)compared to US$5,400 for NES schemes under similiar conditions (see Table2.2). The investment costs in forested areas are US$3,900 and US$7,100respectively. However, with projected cost recovery, NES schemes with 3 haunder production (2 ha tree crops, 1 ha food crops) cost US$440/family lesson grassland than transmigration schemes with 1.25 ha under cultivation;and, in forested areas, a 3 ha NES scheme costs only US$560/family more.Processing facilities are not included in the comparison. Cost-benefitconsiderations as well as concern for migrant welfare indicate that it iswise to plant trees soon after migrant arrival (to avoid cost duplicationand delayed cost recovery), and preferably no later than year 3 (Table 2.3).

Table 2.3: COST-BENEFIT RATIOS BY YEAR TREE CROPS ARE INTRODUCED(10% discount rate)

Grassland Forest

One stage (NES) 1:3.6 1:2.1Two stage - 3-year delay 1:2.2 1:1.5Two stage - 6-year delay 1:1.9 1:1.4Transmigration only 1:1.5 1:1.2

2.12 Demand for Tree Crops. The Government intends that transmigrantsin areas of rainfed agriculture should develop at least 1.5 ha of their 3.5ha plot for tree crops. (This was based on assumptions that a full 2.0 hawould be suitable for food crop production). Assuming that about 36,000migrant families moved before 1979 should receive tree crops and another48,000 moved by the end of 1980 will require tree crops within the next fiveyears, Government should be prepared to provide 140,000 ha of tree crops forexisting transmigrants by 1986. There is no program at present to meet thisneed. It is therefore recommended that GOI should move rapidly to develop aplanting program for existing migrants and local smallholders within thesame development area.

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2.13 Alternative Systems for Introducing Tree Crops . Effortc; toencourage migrants in Pematang Panggang (South Sumatra) and Riribobujang(Jambi) to plant rubber by themselves have been only minimally successful.Javanese are generally unfamiliar with plantation crops and are fully occupiedby food cropping and off-farm work for subsistence. In addition, problems ofobtaining planting materials and fertilizers have proven difficult in remotetransmigration sites. Therefore, only those crops which migrants are familiarwith and which require minimal inputs (coconuts, coffee, cloves) are likely towould be established by the settlers on their own, and crops such as rubberwill require some degree of government assistance. Appendix 3 illustrates oneproposal for facilitating settler established tree crops.

2.14 The PMU system, in which farmers are supplied with plantingmaterials and inputs, organized by a PMU, and partially compensated for theirlabor, is an acceptable system for introducing tree crops to smallholders. Upto now, PMUs have been organized and staffed by the provincial staff of DGEand it is unlikely these PMUs could undertake additional large-scale tree cropplanting at present. PMUs could potentially be established by the estates,however, and the PIR program, in which estates provide inputs andorganizational assistance to migrants represents a step in this direction.

2.15 In the immediate future, the estates have the most evident capacityto meet the tree crop demand among existing migrants, but they are being askedto undertake "local NES" (domestically funded NES projects) and PIR programsas well as their own planting. Therefore, in view of their limited capacity,it is recommended that the Government give priority for tree crop developmentto:

(a) migrants and local smallholders in the vicinity of existing orproposed estates;

(b) those located in large settlement areas; and

(c) the poorest migrants or those settled the longest.

Scattered and remote settlements could be assisted by PMUs either managed bythe estates or upgraded by technical assistance from estate staff. Furtherdetails are given in Annex 3.

2.16 To support this program it is recommended that:

(a) a reconnaissance of agricultural conditions and income levels andan assessment of agricultural potential in existing transmigrantareas should be undertaken to determine those which require treecrop development;

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(b) financial assistance should be made available, perhaps with Bankassistance within the NES pipeline of projects; and

(c) priority should be given to expanding estate and PMU implementationcapacity, through staff training and management assistance,especially for those estate groups not previously involved inexternally-assisted projects. This activity is being consideredfor financing in the next NES loan.

To supplement government estate capacity, the use of private sector firms toestablish tree crops for smallholders would also be desirable. Such firmsmight be Indonesian or foreign-owned private estates, forest concessionairesor transnational agri-businesses. Their involvement might include any orall of the following elements: clearing, planting, maintenance, processingand marketing. Their compensation might take the form of a fee for service,a turnkey contract or a production sharing agreement.

2.17 Issues in Tree Crop Establishment. The preceding analysis suggestsseveral issues of importance to the Government.

(a) System of Tree Crop Development. Several management systems areavailable. In the past, the Government provided transmigrants withland and expected them to establish their farms largely bythemselves. To stay within this tradition and avoid providing asingle group with multiple benefits while others are neglected,GOI should consider maximizing the use of migrant labor andspreading labor requirements over several years.

(b) Timing of Tree Crop Development. Economic analysis indicates thatit is cheaper and less risky to establish migrants with treecrops rather than plant them at a second stage of development.This suggests strong support for programs such as PIR. However, theBank recommends that highest priority be given to tree crops formigrants already settled, in order to build on sunk costs and reachviable income levels.

(c) Tree Crop Beneficiaries. Present tree crop planting and replantingprograms are geared largely to local smallholders who in many casesare dependent on tree crops for their livelihoods. These programsshould not be reduced. To the extent they exhaust managerialresources, other management systems should be sought for trans-migration.

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td) Cost Recovery. The high investment costs of tree crop developmentsand the higher incomes to be derived from them means that it is bothdesirable and feasible to achieve cost recovery at higher levelsthan the collection of land tax (IPEDA) in transmigration projects.Therefore, in designing projects based on tree crops, it isessential that attention be given to the instruments for and levelof cost recovery. For those sites in which it is feasible, asystem such as that adopted for NES projects, in which smallholdersdebt is collected by the estate which markets their output, appearsviable. The use of export cesses and long-term bank credit shouldalso be examined.

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3. PROGRAM EXPANSION, RESOURCE USE AND PROJECT QUALITY

3.01 Recommendations to facilitate program expansion, promote soundresource use, and improve the quality of project implementation are summarizedin this chapter.

A. Program Expansion

3.02 The World Bank shares the Government's view that the transmigrationprogram should be of sufficient scale to meet national objectives. However,it also recognizes that high targets coupled with limited managerial capacitycan cause project quality to suffer. For this reason, achieving a balancebetween the quantity and quality of settlements is one of the major challengesof the program. Therefore, to increase the scale of movement without furtherstraining the institutions involved, steps are required to optimize the use ofexisting and new managerial resources and to promote spontaneous migration.

Optimal Use of Managerial Resources in the GOI Program

3.03 To optimize the use of the limited managerial staff within theGovernment agencies, proposed transmigration sites should be consolidated andthe program focussed upon areas with the largest development potential. Thiswould:

(a) facilitate the management of a larger number of sites with fewermid- to high-level personnel;

(b) simplify ongoing planning, monitoring and tree crops establishment;

(c) maximize regional development impact; and

(d) provide core centers for spontaneous migration.

Consolidation may also exacerbate land acquisition and of farm employmentproblems and may not be appropriate in all settings.

3.04 To expand the managerial capacity of Government agencies, increasedattention and funds are needed for institution building and training. Inparticular, programs should be initiated to:

(a) train and upgrade DGT staff, particularly those servingas village heads and project managers;

(b) improve the quality of extension workers and upgrade DGFCA staffto manage inputs for foodcrop production;

(c) increase and train DGE staff; and

(d) train personnel for planning, design and construction supervisionwithin Public Works.

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A component to train DGT staff is proposed for inclusion in the third Bankassisted project for transmigration; extension workers are to be upgradedthrough the National Agriculture Extension Project II. Intensive managementtraining in DGE will be provided under the fifth Bank assisted NES project anda project is now being prepared to do manpower training in Public Works.

3.05 To accelerate settlement, the GOI should also explore alternativemanagement systems for establishing settlements. The use of DGT to developsmall sites and of the estates to develop smallholder tree crops is sound, astheir experience and management capacity are known. Further room forexpansion lies in enlisting other institutions such as private estates, forestconcessionaires and social organizations to prepare and implementtransmigration schemes. To maintain uniformity of standards, thesedevelopments should be approved and closely monitored by the Government.

3.06 Expanded use of the private sector offers the greatest opportunityfor speeding implementation. Where management is the main constraint, the useof private contractors to provide inputs and establish migrants is possible.Consideration should also be given to turnkey projects in which experiencedprivate firms handle all aspects of preparation and implementation in regionsidentified for development by the BAKOPTRANS./1

Promotion of Spontaneous Migration

3.07 There are no absolute constraints to movement in Indonesia. Peopleare willing to move; people are moving; mechanisms exist for moving people andcan be tapped to move them in greater numbers. What is needed is investmentin the outer islands, the use of labor-intensive methods in the developmentprocess, and policies and infrastructure to support chain migration.

3.08 Chain migration. Virtually all spontaneous migration occurs throughpre-existing chains of social support. When labor shortages arise, those inthe labor scarce areas alert friends and relatives, encourage theirimmigration, and assist in their initial support. Therefore, to fostermigration from critical areas in Java to specific areas in the outer islandsrequires two steps. First, seed communities must be established in which theGovernment assists migrants who have no way to bear early risks. In thesecond stage, however, cost considerations suggest that Government shouldconcentrate on emnployment creation and land transfer and encourage unsponsoredimmigration through family ties.

3.09 Facilitating movement. Spontaneous migration can be facilitated byappropriate policy measures. Annex 4 includes recommendations on spontaneousmovement which are summarized below.

3.10 Phased Community Development. To promote spontaneous migration,community development must be phased. This can be done by:

(a) establishing nucleus communities with village infra-structure, seed farms, livestock stations and other services;

/1 Badan Koordinasi Penyelenggaraan Transmigrasi (Coordinating Body forExecuting Transmigration).

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(b) providing the agricultural core with strong technical andsocial support;

(c) emphasizing labor intensive activities; and

(d) promoting immigration through established social networks by:

(i) reserving land near established settlers for spontaneousimmigrants;

(ii) providing information on opportunities to those within thecommunity; and

(iii) encouraging communication and travel between home andsettlements.

3.11 Removal of Existing Constraints. There are legal and practicalconstraints to spontaneous movement which should be removed.

(a) Constraints To Travel. A lack of information on cheap travel andaccommodation is a major constraint to the movement of the poor.To reduce this constraint, the Government should:

(i) construct free or low cost transit hostels where migrants canrest and eat cheaply;

(ii) provide barracks in new settlements;

(iii) establish regular and well publicized transportation;

(iv) subsidize outward transport; and

(v) provide information on transit hostels and transport tosponsored migrants to be disseminated by them to relatives andfriends at home.

(b) Constraints To Orderly Land Transfer. The inability of migrantsto obtain land in the outer islands is the major constraint tosettlement. To reduce this problem, GOI should take the followingsteps.

(i) Within transmigration sites:

- allow spontaneous immigrants to register for settlementin the transmigration area;

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- reserve land for homesteading and devise proceduresfor its transfer to new immigrants; and

- reserve land for nonagriculturalists in corevillages and establish procedures for its transfer.

(ii) Adjacent to transmigration sites:

- set aside unutilized land which can be redistributedto local settlers and spontaneous transmigrants;

- develop a system of land transfer between local cultivatorsand spontaneous immigrants; and

- establish a land transfer system between timber con-cessionaires and immigrants.

3.12 Employment Possibilities in Transmigration Areas. Most spontaneousmigration is triggered by labor shortages. Therefore, to generate employmentopportunities, planners should consider the following steps.

(a) On-Farmu

(i) intensify services (extension, etc.) to early migrantsto establish sound core communities;

(ii) diversify cropping so that the peak labor demands of asingle staple (such as rice) do not set limits on sustainedlabor absorption; and

(iii) provide farm land in installments, allocating new land as thefirst part is brought under cultivation. This would maximizethe incentives for land development and on-farm work.

(b) Off-Farm

(i) permit off-farm work eitlher by farmers or relatives theyrecruit;

(ii) encourage contractors to use laborers for half-days so asto limit interference with agricultural work and maximizethe numbers receiving wages; and,

(iii) encourage work arrangements within villages which allowvillagers to share jobs.

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(c) In the Services and Industry Sector

(i) use local raw materials produced by transmigrant labor forconstruction;

(ii) provide credit for small businesses; and

(iii) provide small machinery (for example, food processing equip-ment) for cash or credit.

(d) In Larger Industries

(i) introduce sawmills and other large industries wherefeasible; and

(ii) allow temporary land concessions for sugar, sisal, andlumbering to create employment. When homestead landis filled, concession lands can be broken up among small-holders.

(e) In All Areas

(i) provide manpower centers in core villages to disseminateinformation on employment opportunites; and

(ii) encourage existing migrants to recruit and provideback-up support to relatives and friends.

3.13 The establishment of a Directorate for Spontaneous Migration withinDGT should increase attention to the needs of spontaneous migrants andencourage their movement. Care must be taken, however, that this Directoratefosters spontaneous movement rather than attempting to move people underanother kind of sponsored program. Because of the importance of spontaneousmovement, compon