integrated irrigation sector project (loans 1017 & 1018-ino[sf])

7/31/2019 Integrated Irrigation Sector Project (Loans 1017 & 1018-InO[SF])

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ASIAN DEVELOPMENT BANK PPA:INO 17164

PROJECT PERFORMANCE AUDIT REPORT

ON THE

INTEGRATED IRRIGATION SECTOR PROJECT(Loans 1017-INO/1018-INO[SF])

IN

INDONESIA

December 2001


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CURRENCY EQUIVALENTS

Currency Unit Indonesian Rupiah (Rp)

At Appraisal(August 1989)

At Project Completion(April 1999)

At Operations Evaluation(May 2001)

Rp1.00 = $0.00055096 $0.00012121 $0.0000907$1.00 = Rp1,815 Rp8,250 Rp11,025

ABBREVIATIONS

ADB Asian Development BankBAPPEDA Badan Perencanaan Pembangunan Daerah

(Regional Development Planning Agency)DGFCH Directorate General of Food Crops and HorticultureDGRD Directorate General of Regional DevelopmentDGRLR Directorate General of Reforestation and Land RehabilitationDGWRD Directorate General of Water Resources Development

DI Daerah Istimewa (special region)EIRR economic internal rate of returnEOM efficient operation and maintenanceha hectareIOMP irrigation operation and maintenanceISF irrigation service feeM&E monitoring and evaluationO&M operation and maintenanceOEM Operations Evaluation MissionPBB pajak bumi dan bangunan (land and building tax)PCR project completion reportPPAR project performance audit reportPRAS provincial agricultural servicePRIS provincial irrigation servicePTGA Indonesian On-Farm Water Management ProjectPWRS provincial water resources serviceR&U rehabilitation and upgradingRepelita Five-Year Development PlanSJFC South Java Flood ControlTA technical assistanceTDU tertiary development unitVO variation orderWATSAL Water Sector Adjustment LoanWID women in developmentWOC Water Operations CenterWUA water users association

NOTES

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

Operations Evaluation Department, PE-586


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CONTENTS

PageBASIC DATA iiEXECUTIVE SUMMARY ivMAP vii

I. BACKGROUND 1

A. Rationale 1B. Formulation 1C. Purpose and Outputs 1D. Cost, Financing, and Executing Arrangements 3E. Completion and Self-Evaluation 3F. Operations Evaluation 4

II. PLANNING AND IMPLEMENTATION PERFORMANCE 4

A. Formulation and Design 4B. Achievement of Outputs 5C. Cost and Scheduling 5D. Procurement and Construction 6E. Organization and Management 6

III. ACHIEVEMENT OF PROJECT PURPOSE 7

A. Operational Performance 7B. Performance of the Operating Entity 10C. Economic Reevaluation 11D. Sustainability 11

IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS 12

A. Socioeconomic Impact 12B. Environmental Impact 13C. Impact on Institutions and Policy 13

V. OVERALL ASSESSMENT 14

A. Relevance 14B. Efficacy 14C. Efficiency 15D. Sustainability 15E. Institutional Development and Other Impacts 16F. Overall Project Rating 16G. Assessment of ADB and Borrower Performance 16

VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS 16

A. Key Issues for the Future 16B. Lessons Identified 18C. Follow-Up Actions 22

APPENDIXES 23


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BASIC DATAIntegrated Irrigation Sector Project (Loans 1017/1018-INO[SF])

PROJECT PREPARATIONTechnicalAssistance

Title Type No. ofPerson-months

Amount($ million)

ApprovalDate

TA 857 Telang and Saleh DrainageImprovement Project PPTA 43 0.65 23 Feb 1987

Loans

a

Loan 479 Lower Citanduy Irrigation Project 55.20 13 Nov 1980Loan 518 Wadaslintang Multipurpose Project 87.70 23 Jun 1981Loan 522 Bali Irrigation Sector 33.60 17 Sep 1983Loan 638 Second Irrigation Sector 85.00 22 Sep 1983Loan 725 Technical Assistance Program

Loan25.00 18 Dec 1984

Loans 860(SF)/861 Third Irrigation Sector Project 120.00 17 Nov 1987

KEY PROJECT DATA ($ million) Per ADB Documents ActualTotal Project Cost 264.0 250.1

Foreign Exchange Cost 103.0 110.6Local Currency Cost 161.0 139.5

ADB Loan Amount/Utilization 200.0 198.0ADB Loan Amount/Cancellation 5.2

KEY DATES Expected ActualAppraisal 1-18 Aug 1989Loan Negotiations 13-15 Nov 1989Board Approval 17 Apr 1990Loan Agreement 27 Jun 1990Loan Effectiveness 25 Sep 1990 10 Aug 1990

Initial Disbursement 22 Apr 1991Project Completion 31 Mar 1995 31 Mar 1997Loan Closing 30 Sep 1995 29 Jan 1999Months (effectiveness to completion) 54 79

ECONOMIC AND FINANCIALINTERNAL RATE OF RETURN (%)

Appraisal PCR PPAR

Economic Internal Rate of Return 15.9 13.4 8.3Financial Internal Rate of Return

BORROWER Government of Indonesia

EXECUTING AGENCIESPart A: Directorate General of Water Resources DevelopmentPart B: Directorate General of Public Administration and Regional AutonomyParts C & E: Directorate General of Food Crops and HorticulturePart D: Directorate General of Reforestation and Land RehabilitationPart F: Directorate General of Regional Development

= not calculated, ADB = Asian Development Bank, PCR = project completion report, PPAR = project performanceaudit report, PPTA = project preparatory technical assistance.a

The number of person-months spent for preparatory work for the Project under various loans cannot bedetermined.


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and seed production components; (vi) substantial noncompliance with major loan covenants forirrigation policy reforms; and (vii) questionable selection of some subprojects for investment.

The evaluation has identified important issues for the future, among which are (i) sectorapproach to irrigation development and firm commitment to institutional development andcapacity building; (ii) beneficiary and WUA participation, including delegation of responsibility for

irrigation O&M to WUAs; and (iii) simplification of scope and involvement of fewer agencies.

A stop-start approach to irrigation development reduces opportunities for institutionalcapacity building, leads to an inefficient deferred maintenance regime, and raises false hopeswith water users and government agencies that development will continue in a well-plannedlong-term manner. A long-term commitment to irrigation sector development is required withmajor sectoral institutional changes addressed by using other loan modalities such ascombining a sectoral investment and program modality within a long-term framework.

In general, farmers, and collectively WUAs, were not involved in a participatory mannerin project activities. Paternal, top-down attitudes of all executing agencies together with(i) inappropriate funding mechanisms, (ii) less than satisfactory institutional project design, and

(iii) less than optimum use of consultants and nongovernment organizations all contributed to alack of beneficiary participation. Tertiary designs and water management without WUAparticipation led to incomplete development of tertiary systems. The Project paid less attention todetermining the readiness of WUAs to undertake O&M of tertiary systems. Difficulties intransferring O&M responsibilities were due to farmers inadequate knowledge of operationalresponsibilities, lack of skills for managing the schemes, insufficient involvement of WUAs, andinadequate extension services.

Under the complex project design, resources of the Asian Development Bank and theGovernment, required to ensure efficient and effective implementation, were severely stretched.The Project, executed through six government agencies, was geographically diverse andincluded three unusual subprojects: (i) Batang Anai in West Sumatra with peat soils; (ii)

Wawotobi in Southeast Sulawesi with high land development needs; and (iii) the core subprojectTelang-Saleh in South Sumatra, a major swamp pilot project, accounting for about 25 percent ofthe total project area. These subprojects were not representative of the irrigation sector inIndonesia and had major technical differences from the Java irrigation subprojects. Limiting theProject to Java subprojects only, which were more homogeneous, contiguous in area, andsimilar in development requirements, would have significantly simplified implementation andallowed major works and activities (drains, flood prevention, tertiary development, andinstitutional support) to be finished.

Among the lessons learned are the following:

(i) Nationally managed provincial irrigation project activities need to be transferred

to local provincial and district water resource services. The pressure to retaincontrol at the center (national and provincial) rather than to delegate anddecentralize continues to decrease institutional and project implementationefficiency. During project design, institutionalization of project activities needs tobe given priority.

(ii) The participation of beneficiaries is critical if they are to feel a sense of ownershipand responsibility; this will also affect their attitudes to ISF and O&M. WUAestablishment and strengthening should be accelerated with a focus on


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(a) quality organizations, (b) involvement in tertiary and main system O&M, and(c) a clear linkage between irrigation service and irrigation fees.

(iii) Regular coordination meetings within the Regional Development PlanningAgency (BAPPEDA) are important and should concentrate on the needs forinteragency planning; identification of planning priorities; and assessment of

proposals for scheme, subproject, and sector monitoring and evaluation, andinstitutional development coordination. To carry out such a program, theprovincial water resources services need to strengthen their technicaldepartments for irrigation planning and design, BAPPEDA needs to allocateregular funding (routine budgets) for funding such meetings, and beneficiariesneed incentives and assistance to participate in bottom-up planning andimplementation activities.

(iv) Strengthening of administrative sections of provincial and district water resourcesservices is required through the focused training of administrative staff andstreamlining of procedures. The proposed introduction of efficient managementinformation systems could also be very effective in more efficient utilization of

staff time.

(v) More involvement of provincial and district authorities and beneficiaries in keypolicy directives is essential. Implementation of government O&M policy shouldbe formulated, explained, and discussed jointly in a participatory manner withmanagers of the provincial and district water resources services, BAPPEDAofficials (provincial and district levels), and other senior provincial governmentofficials.

(vi) A two-year commissioning period is generally required for adequate developmentprograms for medium-sized schemes (1,0005,000 hectares) with a four-yearperiod for large and major schemes (larger than 5,000 hectares). Programs

should include training, improvements in infrastructure, development ofinformation techniques for crop planting reporting, adjustments in water allocationsystems, optimization of budgets, and purchase and commissioning ofequipment.

(vii) A human resources development program should be the basis of the trainingprogram. Training units need to be incorporated into the structural organization.All staff holding positions should be compelled to carry out a fixed number oftraining days each year as instructors. A training monitoring system andinformation system should be established to provide feedback for future courses

(viii) Community organizers are required to ensure beneficiaries participate in

government-led activities. However, a sustainable mechanism should beintroduced, whereby project beneficiaries are not dependent on projectcommunity organizers. Farmers need to participate and be organized into WUAs(or other suitable institutions) at the earliest possible stage of system planning.Ensuring farmer involvement in tertiary system construction and main systemdesign, prior to agreement on the modality of subproject development and O&M,is essential. For farmers to be available for participation in planning and designactivities, field motivators must be active and in place in a timely manner,coinciding with the fielding of the survey, investigation, and design consultants.


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I. BACKGROUND

A. Rationale

1. In early 1989, the Government of Indonesia asked the Asian Development Bank (ADB)to finance part of its irrigation subsector investment program under the Rencana Pembangunan

Lima Tahun (Repelita) V (1989/901993/94). The loan would support the rehabilitation andupgrading (R&U) of existing irrigation and drainage schemes, and the improvement of operationand maintenance (O&M) in the key rice-growing province of Central Java, and the provinces ofDaerah Istimewa (DI) Yogyakarta, South Sumatra, Southeast Sulawesi, and West Sumatra. TheProject1 was designed to support the Governments development goals in the agriculture sectorat that time, which included consolidating rice productivity gains, broadening the agriculturebase, creating rural employment opportunities, and achieving balanced regional development.2Repelita V also placed increased emphasis on promoting diversified cropping systems andimproving sector efficiency.

B. Formulation

2. Appraised in August 1989, the Project was prepared without a project preparatorytechnical assistance (TA). However, all seven subprojects,3 including four core subprojects andthree noncore subprojects, had existing preparatory studies, including feasibility studies anddetailed designs, financed primarily by ADB under earlier loans and TAs, as well as by theWorld Bank and the governments of Italy and the Netherlands.4 Institutional issues of theProject were also well supported by earlier ADB loans and TAs.5

C. Purpose and Outputs

3. The Project aimed to accelerate agricultural development in the major rice-producingprovinces to increase farm productivity, create employment opportunities, and improve the livingstandards of poor farmers. The Project was expected to have considerable impact on poverty

1Loans 1017/1018(SF)-INO: Integrated Irrigation Sector Project, for $200 million, approved on 17 April 1990.

2The Project was preceded by three ADB-financed irrigation sector projects including Loan 522-INO: Bali IrrigationSector Project, for $33.6 million, approved on 17 September 1983; Loan 638-INO:Second Irrigation Sector Project,for $85 million, approved on 22 September 1983; and Loans 860(SF)/861-INO: Third Irrigation Sector Project, for$120 million,approved on 17 November 1987.

3Core subprojects, evaluated and approved in the appraisal report, included South Kedu irrigation, Serayu barrageand Ijo Tipar drainage, and Lower Citanduy irrigation subprojects in Central Java; and Telang and Salehagricultural development in South Sumatra. Noncore subprojects, subject to final approval during projectimplementation, included Kulon Progo (Opak-Serang) irrigation subproject in DI Yogyakarta, Batang Anai irrigationsubproject in West Sumatra, and Wawotobi irrigation subproject in Southeast Sulawesi (see Map).

4Preparatory works were financed under Loan 518-INO: Wadaslintang Multipurpose Project, for $87.7 million,approved on 23 June 1981; Loan 725-INO: Technical Assistance Program Loan, for $25.0 million, approved on18 December 1984; TA 857-INO: Telang and Saleh Drainage Improvement Project, for $350,000 from ADB and

$300,000 from the Government of the Netherlands, approved on 23 February 1987; Loan 479-INO: LowerCitanduy Irrigation Project, for $55.2 million, approved on 13 November 1980; 1980 feasibility study of Sermo Dam,1983 hydrological study of Sermo Dam, and 1985 detailed design of Sermo Dam financed by the World Bank;1986 Dataran Anai feasibility study for the development of water resources financed by the Government of Italy;and 1989 detailed design study of Batang Anai financed by the Government of Indonesia.

5TA 5160-REG: Study of Food Demand and Supply and Related Strategies for Developing Member Countries(Phase II), for $500,000, approved on 23 October 1984; TA 673-INO: Study of Irrigation Management, for$350,000, approved on 27 March 1985; TA 937-INO: Efficient Irrigation Management and System Transfer, for$600,000, cofinanced by the Ford Foundation for $300,000, approved on 17 December 1987; Loan 860(SF)/861-INO: Third Irrigation Sector Project, for $60 million, approved on 17 November 1987; and Loans 1014/1015-INO(SF): Food Crop Sector Program, for $250 million, approved on 13 March 1990.


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reduction in its area of influence as it would directly benefit about 260,000 poor and near-poorfarm families. Average per capita income was anticipated to increase, at full development, from$55 to $125 per annum, which would then be above the projected poverty level. Increased farmincome would be generated by expanding the irrigated rice area, and increasing croppingintensities and yields per hectare (ha). Construction activity was expected to generate additionalemployment opportunities: 6,500 person-years for skilled labor and 39,000 person-years for

unskilled labor. The Project was also designed to provide institution building to strengthen thetechnical, management, and coordination capabilities of government agencies for planning andcoordination, and for irrigation and agricultural development, as well as of irrigation committeesand water users associations (WUAs). The project components included the following.

1. Part A: Irrigation Development

4. R&U of irrigation and drainage facilities. This included tertiary systems and otherrelated infrastructure covering an aggregate area of 110,000 ha; and surveys and mapping,planning and detailed designs, and civil works.

5. Introduction of efficient O&M (EOM)6 in irrigation and drainage schemes. Covering

an aggregate area of about 132,000 ha, this component included (i) review of existing staffinglevels and O&M systems, procedures, and practices; (ii) determination of O&M requirementsand preparation of manuals and training materials; (iii) training of O&M staff and WUAs;(iv) provision of equipment; and (v) introduction of EOM. The transfer of O&M responsibilitiesfrom the central Government to provincial irrigation services (PRIS) required project financing ofincremental O&M costs, equipment, buildings, and training of irrigation service personnel; andthe transfer of irrigation schemes with areas of less than 500 ha to WUAs.

6. Institutional strengthening. Focusing on provincial, district, and subdistrict irrigationservices, district irrigation committees, and WUAs, the scope included establishing a projectmonitoring and evaluation unit in each PRIS, redeploying staff; and providing training (includingspecialized training overseas), equipment, and facilities.

2. Part B: Irrigation Service Fee

7. Introduction of an irrigation service fee (ISF). The Project provided consultingservices, equipment, and facilities for introducing ISF for about 129,000 ha of the project areawith the aim of achieving full recovery of O&M costs by fiscal year 1999/2000.

3. Part C: Agricultural Development

8. Strengthening of existing agricultural services. The scope included (i) establishingand operating tertiary demonstration units (TDUs); (ii) improving seed production;(iii) developing land, including clearing and leveling; and (iv) providing institutional

strengthening. The activities included establishing about 22 TDUs, with each intended to(i) demonstrate proper on-farm water management techniques and related organizationalarrangements at the tertiary level; (ii) serve as a field training ground for extension staff, localofficials, and farmers; (iii) improve three existing seed farms and other facilities; and (iv) develop4,000 ha into rice fields.

6Defined as (i) the level of operation required to ensure the delivery of the right amount of irrigation water to thecrop or the removal of excess water at the right time so as to make possible optimum crop production in anirrigation scheme; and (ii) the level of regular and periodic maintenance required to keep the system facilities andequipment in such condition that efficient operation can be achieved.


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4. Part D: Soil and Water Conservation

9. Establishment of soil erosion control measures. To safeguard the existingWadaslintang reservoir in South Kedu, Central Java, project-specific interventions included(i) implementation of erosion control measures, such as terraces and waterways on 4,500 ha of

critical land, and the construction of check dams; (ii) establishment of soil conservationdemonstration farms; and (iii) training of farmers in erosion control techniques.

5. Part E: Women in Development

10. Support of the contribution of women farmers. Focusing on contributions toagricultural development and family welfare, a pilot subproject in Telang and Saleh wasdesigned to encompass (i) inclusion of women in workshops, demonstration, training, andextension related to the O&M of improved drainage systems; (ii) strengthening of agriculturalextension services to women farmers; (iii) establishment and strengthening of womens farmergroups; (iv) provision of assistance to setting up home industries; and (v) training of womenvillage leaders and key women farmers.

6. Part F: Strengthening of Coordination and Monitoring

11. Strengthening of coordination and monitoring capability of development agencies.Focusing on regional development planning agencies (BAPPEDAs) at the provincial and districtlevels, the Project was to provide office buildings, equipment, other facilities, training, andconsulting services.

D. Cost, Financing, and Executing Arrangements

12. The total estimated project cost at appraisal was $264 million, including a $103 millionforeign exchange component (Appendix 1). ADB financing of $200 million equivalent was

provided through loan 1017 for $170 million from ADBs ordinary capital resources, and loan1018 for $30 million equivalent from ADBs Special Funds resources. The ADB loansrepresented about 76 percent of total project costs and were to provide financing for 97 percent($100 million) of the estimated foreign exchange costs, and 62 percent of the local currencycosts ($100 million). The Government of the Netherlands was expected to make available about$8.0 million in cofinancing (half grant and half loan) for the Telang and Saleh core subproject.The Government of Indonesia was to finance the remaining local currency costs of $56 million.The loans were approved by ADB on 17 April 1990 and became effective on 10 August 1990.The Directorate General of Water Resources Development (DGWRD) was the principalexecuting agency.

E. Completion and Self-Evaluation

13. The Project was completed in March 1997, about two years later than envisaged atappraisal. The project completion report (PCR),7 circulated to the Board in October 1999, rated theProject partly successful. It concluded that the physical targets of rehabilitating and upgradingirrigation and drainage schemes were essentially met. However, problems relating to inadequateO&M were experienced. The Project paid less attention to determining the readiness of WUAs toundertake O&M of tertiary systems. Difficulties in transferring O&M responsibilities related to

7ADB. 1999. Indonesia. Integrated Irrigation Sector Project, Project Completion Report. Manila.


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inadequate farmers knowledge of operational responsibilities, lack of skills for managing theschemes, insufficient involvement of the WUAs, and inadequate extension services. Capacitybuilding to institutionalize ISFs and thus reach full cost recovery for O&M was not successful. TheISF program experienced operational and administrative difficulties. Procedures for ISF collectionwere complicated and time-consuming for the Government and WUAs involved. Despite theinvolvement of BAPPEDAS, effective monitoring and coordination of project implementation was

difficult. Coordination was complex and multisectored across three levels of government. Theeconomic benefits of the Project would be sustained only when EOM mechanisms were in place,supported by well-functioning WUAs and attainment of full cost recovery for O&M. While theestimated economic internal rates of return (EIRRs) of the subprojects and the Project wereacceptable, continuing problems related to O&M, if not rectified, would likely curtail or substantiallyreduce future project benefits.

F. Operations Evaluation

14. The project performance audit report (PPAR) focuses on pertinent aspects of the Projectand presents the findings of the Operations Evaluation Mission (OEM), which visited Jakartaand the project areas in May 2001. The PPAR includes an assessment of the effectiveness of

the Project in achieving its objectives, generating and maintaining benefits, and sustaining theoperations of subproject irrigation systems and support services. It also deals with otherimportant issues related to the results of the Project. The PPAR is based on (i) a review ofproject files and related documents; (ii) discussions with the staff of executing and implementingagencies at the central, provincial, and district levels including staff from the project monitoringand evaluation unit established under each PRIS; (iii) interviews with farmer stakeholders,spouses, WUA members, landless field workers, and key informants; and (iv) physicalinspection of all subproject sites and major civil works. The PPAR also took into considerationthe data and analysis presented in the PCR. Copies of the draft PPAR were submitted forreview to the executing and implementing agencies, as well as to ADB staff concerned.Comments received were taken into consideration in finalizing the PPAR.

II. PLANNING AND IMPLEMENTATION PERFORMANCE

A. Formulation and Design

15. The Projects goals and purpose were consistent with the Governments developmentneeds and ADBs operational strategy for Indonesia at the time of approval and remainedrelevant at the time of evaluation. The Project followed the sector loan approach, which wasconsidered the most appropriate and cost-effective method of ADB assistance in view of thenumber of subprojects. In addition, Repelita V was generally considered to be well conceivedand appropriately formulated to meet the development needs of the irrigation subsector.DGWRD had been the executing agency for 28 loans and TAs from ADB, three under the sectorlending modality, and as such was judged to have the necessary experience and capability to

implement a sector loan. However, a detailed institutional assessment of DGWRD was notundertaken.

16. Project design strengths included the involvement of BAPPEDAs and the introduction ofO&M as a project-supported activity. A project weakness was the inappropriate use of ADBssector loan modality, due to the limited number (seven) of very large, geographically dispersedsubprojects already identified and appraised (including feasibility studies and detailed designs)before project implementation. The methodology and selection criteria established for approvalof noncore subprojects were sound and comprehensive. However, approval of the Batang Anai,


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and Telang and Saleh subprojects should have been withheld based on technical and economicconsiderations. Less investment in large civil works, and more emphasis on investments ininstitutional aspects of O&M, would have likely resulted in better and more sustainable gains inO&M efficiencies and crop yields. A design limited to the three large contiguous subprojects inCentral Java province alone, which accounted for about 75 percent of the project area, wouldhave been simpler and more effective. Pressures to add seemingly small subcomponents (i.e.,

additional projects, pilot women in development [WID] activities, paddy seed production farms,and pilot watershed protection) disproportionately diverted limited resources from primaryproject activities.

B. Achievement of Outputs

17. The physical targets were essentially met for R&U, EOM, TDU development, andwatershed improvement works; and exceeded appraisal targets for the technical transfer ofO&M for small-scale irrigation systems to WUAs. A list of physical achievements is detailed inAppendix 2. In general, tertiary infrastructure (farmer responsibility) and drainage and floodprotection works were not fully completed. Land development fell significantly short of targets,primarily due to shortfalls in the Batang Anai subproject as a result of large areas of deep peat

soils unsuitable for rice production. Training programs were partially successful, although morepractical courses with field-level, on-the-job follow-up would have been more effective. Theminor project components were too small to have a measurable impact and did not yieldreplicable models for the future. Details of project outputs are included in paras. 2644.

C. Cost and Scheduling

18. Actual project cost was about $250 million, 5.3 percent below the appraisal estimate of$264 million. Differences were primarily due to (i) cancellation of the cofinancing arrangement of$8 million with the Government of Netherlands for the Telang and Saleh subproject,8(ii) cancellation of various other project infrastructure works (particularly drainage), and(iii) depreciation of the rupiah from Rp1,815 to the dollar at appraisal to Rp2,342 in 1996. In

addition, most civil works contracts contained no price escalation clauses. ADB financed allforeign exchange costs of $110.6 million (appraisal estimate $103 million), including$23.8 million in interest during construction and related charges, and about 63 percent($87.3 million equivalent) of total local costs of $139.5 million (appraisal estimate $161 million).Government funding amounted to an estimated $52.1 million equivalent, or about 21 percent oftotal project costs. However, neither the PCR nor OEM could confirm the $16.3 million inGovernment project expenditures for administration and land acquisition because accountswere consolidated with other projects.

19. Compared with the original five-year project implementation schedule, actual physicalcompletion was delayed by about two years, necessitating two loan extensions. Loan accountswere kept open for delayed payments until March 1998, and accounts were not officially closed

until January 1999 (a total delay of 40 months). Delays in recruiting consultants, adverseweather (particularly major floods in 1992), and slow action by ADB (based on agency staffviews) in issuing no-objection letters on award of many civil works contracts all contributed tolengthening implementation. Serious difficulties were experienced in sequencing andcoordinating interrelated activities. In general, agricultural development activities preceded R&Uworks and adversely affected this project subcomponent. In the Serayu core subproject, canal

8The Netherlands development assistance program for Indonesia was temporarily suspended shortly after theProject was approved by the ADB Board.


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R&U works were completed well before the commissioning of the new Serayu barrage. Uponcommissioning, new canal works suffered significant damage, as conveyance tests at fullcapacity were not completed. Additionally, following the cancellation of funding from theNetherlands, the recruitment of consultants and, therefore, the civil works for the Telang andSaleh subproject, were delayed for two years.

D. Procurement and Construction

20. Procurement of consultants and contractors was overly complex because of the largenumber of packages used by the executing agencies. Bidding implementation was generallysatisfactory. A number of executing agencies raised concerns regarding the length of timerequired to obtain ADBs no-objection letters for several civil works contracts. However, many ofthese delays resulted from (i) the executing agencies failure to adequately comply with ADBguidelines; (ii) inadequately prepared summary subproject reports9 in some cases; and(iii) legitimate technical engineering issues (i.e., design aspects of Sermo Dam in theYogyakarta subproject).

21. Delays in the completion of subprojects and several cases of low standards of

construction were generally attributable to weak supervision and poor organization of work bycontractors. High construction contract cost overruns were not uncommon, and while they didnot necessarily mean poor value for money, they could be indicative of (i) inadequate orinaccurate initial design surveys; (ii) poor design based on inadequate or inaccurate surveys;(iii) inaccuracies in taking-off of quantities, bills of quantities, and contract preparation; (iv) poorunit rate engineering estimates; (v) no mutual check zero10 carried out after the start ofconstruction; (vi) inadequate site survey capabilities and use of day works measurement androutine certification procedures by site staff; (vii) variation orders (VOs) due to poordesign/survey, contractor suggestions, local farmer requests, site staff proposals, and changesin specifications; (viii) excessive cost estimates in VOs or lack of preparation of VOs(inadequate or no design section in VO preparation); (ix) lack of willingness or technical ability ofsite supervisors to make obvious cost saving adjustments on-site; (x) poor management and

site staff control of volume of work in the contract, in particular contractor manipulation ofearthwork import, disposal, and transport items; (xi) the ability of experienced, well-managedcontractors to dominate site construction and administrative procedures; and (xii) unrealistic bidprices leading to contractor claw back during construction.

22. Cost overruns on individual civil works contracts could have been significantly reducedwithin the existing procedural framework if staff resources and implementation techniquesemployed had strictly followed contractual procedures and routine information systemmaintenance.

E. Organization and Management

23. Project components required implementation through six central Government agencies,five provincial offices, and dozens of district and subdistrict offices of each agency (Appendix 3).

9Feasibility studies produced by the executing agency with assistance from project consultants. Government andADB approval of the report was required for noncore subprojects to be formally included for financing under theProject.

10A joint review by the contractor and the owner of quantities of work required at the beginning of a contract.


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introduced under the Project, most of the subprojects did not have O&M budget allocations. Thisled to infrastructure deterioration such as rusting gates, broken parts, siltation, and heavy weedgrowths on main canals. The impact of the institutional strengthening component andperformance of the WUAs varied among the subprojects. Field-level institutions wereestablished in most Central Java and West Sumatra subproject areas, and most of the trainingprograms provided field staff with technical knowledge on infrastructure and O&M. Appendix 5

presents a detailed discussion of the achievements and performance of the seven subprojects.

2. Part B: Irrigation Service Fees

28. This component comprised introducing ISF for about 129,000 ha of the project area withthe aim of full cost recovery of O&M by fiscal year 1999/2000. ISF for main system O&M wasintroduced under the Project in Central Java and Southeast Sulawesi.13 However, collectionrates were not set to recover full O&M costs and typically Rp15,000Rp20,000/ha, less than 10percent of O&M needs, was collected. ISF funds during the Project were collected by localgovernment and were not linked to the provision of O&M services in the area where the fundswere collected. WUAs had no control over the use of ISF collected from members. ISF wasgenerally perceived as an additional government tax.

29. The OEM noted that in areas where WUAs were active, 100150 kilograms of paddy percrop (in addition to the above ISF) were contributed by WUA members to WUA funds forinternal operations and tertiary O&M.

3. Part C: Agricultural Development

30. This component comprised (i) establishing and operating TDUs, (ii) improving seedproduction, (iii) developing 4,000 ha of rice fields, and (iv) providing institutional strengthening. Atotal of 22 TDUs and 14 satellite TDUs were established, meeting appraisal targets. Seed farmswere rehabilitated in Tegalgondo and Serayu in Central Java, Telang and Saleh in SouthSumatra, and Wawotobi in Southeast Sulawesi. At the tertiary level, the main agencies involved

in irrigation development have key functions, working closely with the WUAs. TDUs generallywere able to demonstrate significantly higher yields that were mainly attributed to improvedagricultural inputs and practices rather than to improved water management techniques.Constraints to TDU activities included (i) timing of TDU implementation vis-a-vis main systemactivities, (ii) farmer resistance to construct new tertiary infrastructure, (iii) lack of qualitytopographic and soil data, and (iv) lack of trained water management extension workers.

31. Only 1,638 ha were developed compared with the appraisal target of 4,000 ha: 1,400 hain four Wawotobi subprojects and 238 ha in Serayu. Development of a further 1,929 hapostproject in Batang Anai was stated to be complete, but this could not be demonstrated to theOEM. All project land development areas visited by the OEM appeared appropriate and utilized.However, some areas in the downstream reaches of Wawotobi were suffering from water

shortages, double cropping was not practiced, and available labor was sometimes constrainedfor these subprojects. In addition, major secondary swamp forest was visible in areas reportedlycleared under the Project on Batang Anai.

13Central Java has one of the most successful collection areas in the country. Recent regulations in Central Javareversed a 1998 governors instruction to stop ISF collection; in many locations ISF collection reportedly continuesbut under WUA management.


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32. The overall impact of the agricultural development component was marginal. Most TDUprograms were carried out before irrigation systems were upgraded. This aggravated fieldoperation problems and precluded most water management extension activities (often due tolack of water control structures and/or lack of water). TDU operations that began after R&Uworks generally lasted only 12 years, and few TDUs continued after project funding stopped.Although data are not available on farmer outreach, in terms of adoption rates of improved

practices, the OEM estimates that the TDU program did not result in a significant increase inyields in the seven subproject areas. Rehabilitation significantly increased the capacity of theseed farms to produce higher yielding certified seed. However, widespread increased use ofcertified seed by project farmers is not evident due to (i) uncertainty about the quality andbenefits of certified seed, (ii) higher prices than for seed purchased from other farmers, and(iii) timely availability of seed.

4. Part D: Soil and Water Conservation

33. This component comprised establishing soil erosion control measures to safeguard theexisting Wadaslintang Reservoir in South Kedu, Central Java. The risk to WadaslintangReservoir was documented by ADB in the PPAR for the Wadaslintang Multipurpose Project

(footnote 4). The older Sempor Reservoir is designed to augment supplies to the South Keduirrigation subprojects but suffers from water shortages because of reduced reservoir storage.Small-scale physical interventions were included under the Project for 4,500 ha of critical land inthe watershed. Although adequately constructed, the works are considered inadequate in natureand scope to have any significant positive impact on the overall watershed condition.

34. Sediment monitoring is not carried out by Wadaslintang Reservoir operators, despite thelong-standing concerns about reservoir storage capacity and the availability of echo-soundingequipment on the nearby Sermo Reservoir where monitoring surveys are undertakenbiannually. The ongoing South Java Flood Control Sector Project14 (SJFC) includes catchmentprotection activities in the Wadaslintang Reservoir catchment area. However, consultant reportsindicate that ongoing activities are unlikely to seriously address the sedimentation problems

emanating from the watershed.

5. Part E: Women in Development

35. WID activities commenced in late 1993 on a pilot basis in Telang and Saleh. The SouthSumatra Provincial Agricultural Service implemented the component with assistance from theconsultants, who designed and implemented training activities for 1,300 participants in 10,930training days. In general, technology transfer and institutional development programs weredirected at the head of the household, although only a small percentage of them were women.The most successful intervention was the project-supplied drinking-water storage tanks thatreportedly had a significant impact on reducing waterborne diseases. WID activities in theproject area ceased after the Project.

6. Part F: Strengthening Coordination and Monitoring

36. Under ADB TA 1363-INO,15 four monitoring and evaluation (M&E) models weredeveloped and tested in 19921993, using the Project as a pilot area. The models all includedmethodology for measuring (i) financial progress, (ii) physical progress, (iii) water management,

14Loan 1479-INO: South Java Flood Control Sector Project, for $103 million, approved on 7 November 1996.

15TA 1363-INO: Strengthening Project Benefit Monitoring and Evaluation Activities of the Directorate General forWater Resources Development, for $458,000, approved on 22 August 1990.


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(iv) project benefits, and (v) environmental impact. The TA provided a robust, simple, andflexible M&E system that minimized new field data collection and therefore allowed highgeographic coverage at low incremental cost. During the TA, ADB consultants recommendedthat the M&E system be introduced into project provinces. Instead, the M&E activities under partC of the Project designed a detailed database based on rapid rural surveys and devised anM&E technique based on logical framework techniques. The M&E system was to monitor and

evaluate the impact of budgetary support interventions in any sector. The method, which wasadopted nationwide, used, in sequential order, a set of development parameters to track theexpenditures. This system was not designed specifically for the irrigation sector and the M&Eproposal designed under TA 1363 was not directly or indirectly used. The two systems wereconceived to perform different tasks: (i) the TA used time-based systems for M&E, and (ii) theProject used a logical framework general procedure to monitor the impact of individual budgetexpenditures.

37. Under part C, the project M&E units of the provincial water resources service (PWRS)were not strengthened in monitoring irrigation system performance. They were directed awayfrom the models prepared under TA 1363 toward collecting primary data through surveys,focusing on detailed information on sample schemes rather than global coverage, annual

performance monitoring against predetermined targets (measured as a ratio rather thanabsolute parameters), and discontinuing the simple time series presentation of M&E reporting.As a result of the change in focus of the project M&E away from the irrigation sector, theadvances made under the World Bank Irrigation Sector Support Project and TA 1363 wereseverely curtailed. The OEM found no continuation of routine M&E of the irrigation sector in anyof the project provinces except Southeast Sulawesi. The Central Java M&E Unit is consideredto be active but is preparing detailed expensive reports focusing on measuring performanceagainst short-term budget expenditure rather than irrigation sector M&E.

38. Coordination activities of BAPPEDA under part F were institutionally difficult (perhapsinappropriate) as project funds were channeled through national-level funding mechanisms in allsectoral agencies. BAPPEDA and provincial and district irrigation and agriculture organizations

had, during project implementation, no direct management role or responsibilities inimplementing project activities. Terminology in the appraisal report does not differentiatebetween nationally funded, provincially based irrigation projects from provincially based,provincially funded (Dinas) organizations.

B. Performance of the Operating Entity

39. DGWRD and its provincial, district, and subdistrict irrigation agency counterparts fromthe subproject areas have successfully executed and implemented many funding agency-assisted projects. Together, they have thousands of engineers who have been the recipients ofnumerous government and funding agency-sponsored formal training programs, as well astechnical knowledge transfer from specialized consultants over the past 20 years or more.

However, the Project still relied heavily on the use of domestic and international consultants inits implementation, with the executing agencies focusing on their administrative role andconstruction supervision. For survey and design of irrigation and drainage works, theshortcomings included (i) low status of the provincial hydrology units and the failure to processincoming hydrology data at the provincial level; (ii) lack of staff time to monitor developments byother agencies, such that programs for paddy development were not well coordinated withoverall special planning activities; (iii) relative inexperience of technical staff who checkeddesigns by domestic consultants; (iv) lengthy administrative procedures and poor informationsystems; (v) insufficient time in the field to ensure that main system designs were adequate;


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(vi) unprogrammed time-consuming redesigns of ongoing construction works; (vii) lack of full-time qualified surveyors; (viii) low budget allocations (on a per hectare basis) to domestic designconsultants; (ix) consultants' work often preceding contract administration, which led to someconfusion in supervisory duties and the timing of consultant submittals; and (x) lack of anysupporting programs to establish and coordinate WUA involvement in design activities.

40. Many of these shortcomings were amplified by (i) the inexperience and lack of end-product concern by many domestic design consultants, and (ii) the absence of qualityassurance procedures in routine contract execution and supervision.

C. Economic Reevaluation

41. Based on directly quantifiable benefits and costs, the EIRR of the overall Project hasbeen reestimated by the OEM at 8.3 percent, compared with the appraisal estimate of15.9 percent and the PCR estimate of 13.4 percent. The EIRRs for the various subprojectsrange from 12.6 percent for the South Kedu subproject to 3.1 percent for the Batang Anaisubproject, all lower than those calculated at appraisal and at project completion (Appendix 6).

42. Sensitivity analyses carried out for changes in yields, cropping intensities, crop prices,and production costs indicate that relatively modest changes (either positive or negative) wouldhave a significant impact on economic efficiency. However, yields and production on Javaduring the 1990s stagnated. The Governments lack of progress in reversing watersheddegradation or improving O&M makes any positive change in this trend unlikely.

D. Sustainability

43. Sustaining project facilities and outputs requires an effective irrigation O&M program. Ade facto culture of deferred maintenance of irrigation systems, which was fostered by projectsupport for R&U, resulted in scheme rehabilitation investment that was six to seven times higherin present value terms than that required if maintenance had been satisfactorily undertaken. 16

Although O&M funding remained constant in real terms during project implementation, allocatedfunds were used primarily for provincial irrigation agency staff remuneration and only 1540percent was generally used for urgent repairs and minor civil works. Since 1997, funding hasbeen provided to provinces as part of the general provincial block-grant transfer mechanism.This, in conjunction with the fiscal crisis, has resulted in the allocation by provincial governmentsof even fewer resources for O&M than expected in the central Governments block-grantbudgeting assumptions. Due to the rupiah devaluation, the value of the budgeted O&M subsidyhas been reduced from about $1215 equivalent/ha before 1997 to $34 equivalent/hathereafter.

44. The Government and ADB recognized the inadequacy of irrigation O&M during projectdesign. However, ADB believed that the Governments 1987 Statement of Policies for Irrigation

Operation and Maintenance (IOMP),

17

combined with a 15-year action plan and support fromADB and other funding agencies, would result in an efficient O&M program throughout thecountry, with 100 percent of the financial burden carried by water user beneficiaries. Inretrospect, the IOMP had the right policy goals, but conditions did not exist for effectiveimplementation. It was promulgated through confidential policy dialogue with funding agencieswithout the benefit of public consultation. Ownership of the IOMP within the Government was

16Based on World Bank average estimates for all irrigation systems in Indonesia.

17The full Statement of Policies for IOMP is given in Appendix 3 of the appraisal report.


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never strong. It was also bound to fail because of (i) inadequate legal and regulatoryframeworks; (ii) weak sectoral institutions for integrated planning and management;(iii) involvement of a number of uncoordinated government agencies pursuing narrow functionalmandates; (iv) ineffective administrative and implementation performance of provincial anddistrict irrigation agencies; (v) complexity of staff deployment and performance incentives,budget transfer, and organizational structure to implement the IOMP; (vi) the absence of

mechanisms for beneficiary participation in decision making; and (vii) inconsistent andunreliable data and management information systems for irrigated areas.

IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS

A. Socioeconomic Impact

45. Direct project benefits have been captured primarily by small farm families with incomesnear or below the poverty line. However, due to the very small average farm size, adverse pricetrends of inputs and outputs, and the lack of progress on crop diversification, a significantpercentage of beneficiaries are unlikely to have achieved economic status permanently abovethe poverty line. Off-farm income, often representing 3050 percent of farm family income, has

also been significantly affected by the financial crisis. Based on the appraisal report, the largemajority of farmer beneficiaries had operational holdings of 0.5 ha or less, with the exception offarmers in the resettlement areas of the Telang and Saleh, and Wawotobi subprojects, wherefarm sizes averaged 2.0 or more ha. The OEM estimates that over the past 10 years, farm sizesin Central Java and DI Yogyakarta subproject areas have decreased to an average of 0.250.40ha due to ever-increasing population pressure and, recently, from reverse migration from largeurban areas. However, in the Telang and Saleh areas, farm size has increased dramatically to4.06.0 ha because many original settlers have left the area due to depressed socioeconomicconditions. Estimates of average farm-family crop income in the future with and without theProject are given in Table 1.

46. Income increases in US dollar terms range from 17 percent for Central Java subprojects

to 115 percent for the Batang Anai subproject. However, average increases may distort the realsituation at the individual farm level, based on the location of the farm in the system. Farmers inthe upper third of most irrigation systems (closest to the main and secondary canals), who likelyreceived adequate water supplies even before the Project, would be largely unaffected byproject investments. Conversely, farmers in the lower end of the systems, who previouslyreceived little or no water, may have experienced a doubling of both cropping intensity andyield, and resulting income increases of 300400 percent.

47. Although estimates are not available, project activities during implementation likelyrequired close to the appraisal estimate of 39,000 person-years of unskilled labor, as most civilworks were simple and labor-intensive. The OEM also estimates that higher cropping intensityand incremental rice production have directly and indirectly created an additional demand of

25,00030,000 person-years of annual employment.


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Source: Project Completion Report and OEM estimates.

B. Environmental Impact

48. The flood control and drainage measures for the Central Java core subprojects areassumed to have reduced flooding in agricultural, village, and some semiurban areas. However,no reliable data are available on the reduced incidence of flooding, which remains a seriousproblem in many areas. The success of the national integrated pest management program,ongoing since 1988, the removal of pesticide subsidies in 1989, and the inclusion of integratedpest management demonstrations in the agricultural development program for the project-supported TDUs have likely reduced pesticide usage in rice production in the subproject areas.Fertilizer use is estimated to have slightly increased due to the marginal increases in croppingintensities, offset by the deteriorating paddy-fertilizer price ratios because of the reduced pricesupport for paddy and gradual removal of fertilizer subsidies induced by the financial crisis. As

reported in the PCR and confirmed by the OEM and other ADB studies,18

increasing populationpressure, unregulated land use (particularly cassava production on steep slopes), and unabateddeforestation have caused extremely high rates of soil erosion in six of the seven watershedsabove the subprojects irrigated areas. The impact of these increasing soil losses will include(i) a shorter than expected life of the Sempor, Wadaslintang, and Sermo reservoirs, which servesubproject areas in Central Java and DI Yogyakarta; (ii) sediment disposition behind all majorweirs, in canal networks, and main river offtakes, which will reduce irrigation suppliessignificantly below design capacity (and will require costly annual maintenance); (iii) increasedflooding and drainage problems; and (iv) loss of important fishing grounds and mangrovecomplexes in the lagoons that serve as drainage outlets to the sea in Central Java and DIYogyakarta. The Project partially addressed these problems with the soil and waterconservation component in the Wadaslintang watershed and partial dredging of the Sagara

Anakan lagoon in the Lower Citanduy subproject, but erosion and soil deposition rates continueto increase.

C. Impact on Institutions and Policy

49. The introduction of ISF was slow and complex, and collections problematic. Project-financed R&U and EOM, combined with central Government subsidies for O&M (also

18TA 2665-INO: Institutional Strengthening of the Forestry and Soil Conservation Services in the Segara AnakanBasin, for $250,000, approved on 17 October 1996.

With

Project

Item Irrigated

Revenues 4,711 12,078 17,002 4,711 14,162 16,475 2,154 2,550 2,692 7,439 13,717 9,004 12,645

Expenses 1,732 4,978 6,722 1,732 5,644 6,466 1,106 1,278 1,433 3,624 5,517 3,900 5,203

Income 2,979 7,101 10,280 2,979 8,518 10,008 1,048 1,273 1,259 3,815 8,200 5,104 7,443(Owner) $270 $644 $932 $270 $773 $908 $95 $115 $114 $346 $744 $463 $675

Income 1,192 2,840 4,112 1,192 3,407 4,003 2,096 2,545 504 1,526 3,280 5,104 7,443(Tenant) $108 $258 $373 $108 $309 $363 $190 $231 $46 $138 $297 $463 $675

Rainfed Irrigated Irrigated

With

Project

Without

Project

Rainfed Irrigated

With

Project

Irrigated

Without

Project

Irrigated

Without

Project

Irrigated Areas

Without

Project

With

Project

Without

Project

With

Project

Rainfed All Areas Rainfed

Table 1: Annual per Hectare Farm Budgets for

Rice Paddy Crops (Rp'000)

WawotobiBatang AnaiTelang-SalehKulon Progo Central Java


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covenanted under the Project), gave a mixed signal, namely, that there was little need to beserious about collecting ISF. This undermined the urgency of reforms. Project implementationarrangements split functional subproject organization from the regular structure of the provincialirrigation agencies involved and put control in the hands of managers familiar with civil workswho were motivated to achieve physical and financial targets, but unfamiliar with and generallyuninterested in implementing institutional reforms (i.e., strengthening WUAs and ISF). The top-

down approach used for forming WUAs resulted in leaders being chosen from above rather thanthrough a bottom-up organization. The focus on establishing WUAs to meet targets was easilydisconnected from substantive development of management capacity for irrigation O&M. Thisexplains the large number of WUAs that have become inactive. By disregarding existing localfarm organizations, the social capital embodied in existing networks among farmers, theirmutual trust, and history of cooperation were neglected. These local organizations had beenresponsible for the original construction of many small irrigation schemes, including areas laterincorporated into larger schemes.

50. Project support for the IOMP did not change the underlying dynamics of irrigationdevelopment. The Government continued its role as an operator, directly implementing activitiesrather than assuming the role of an enabler. Farmers gained some means for a greater voice,

but technical, legal, and organizational services to aid WUAs were largely absent, except for theGovernments own targeted programs directly delivering conventional classroom training thatwas not conducive to the effective development of WUAs.

V. OVERALL ASSESSMENT

A. Relevance

51. Overall project relevance has changed considerably in some respects from the time ofapproval to evaluation. Project goals of increasing farm productivity, creating new employmentopportunities, and improving the living standards of farmers, the majority of whom are livingbelow or near the poverty line, remain highly relevant. Achieving this through investments to

improve irrigation efficiency and O&M similarly remains cogent. However, funding agency-subsidized investments (primary beneficiaries contribute nothing to the investment costs andlittle to O&M) in large-scale R&U (i) foster a deferred maintenance culture, (ii) are an estimatedsix to seven times more expensive than annual maintenance, and (iii) result in only temporarymarginal improvements in irrigation efficiency. The highly top-down centralized approach ofproject design and implementation and lack of public consultation on policy reforms are alsooutdated. Major investments in isolated transmigration areas for transforming fragile swamplandinto irrigated rice areas (Telang and Saleh subproject) has also been largely curtailed as theyhave generally been shown to be economically, ecologically, and technically unsound. Based onthe rationale of the Project and relevance of project design at appraisal, the Project is assessedas relevant, although borderline to being partly relevant due to the weaknesses discussed.

B. Efficacy

52. In general, the Project achieved its physical targets for R&U, TDUs, introduction of EOM,transfer of facilities and small irrigation systems, establishment of WUAs, WID, soil and waterconservation, and training. The higher cropping intensities and rice yields resulted in substantialincremental output of rice, increased farmer incomes, and job creation, but these were lowerthan the optimistic appraisal expectations. Growth in rice crop yields and farm income havebeen affected by deteriorating rice-fertilizer price ratios and the economic recession. Physicalcompletion of R&U, which dominated project expenditures, was significantly delayed and in


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most cases did not achieve full restoration of capacity or efficiency of the irrigation systems.Project funding was inadequate to fully address all system needs (particularly drainage andtertiary canal development), yet supported some works that may not have been technically oreconomically justified (i.e., construction of large new weirs rather than rehabilitation of existingweirs, and overextension of canal lining). Deterioration in most systems started soon afterproject completion due to less than adequate O&M funding and management. Progress on ISF

has not been significant, and development of self-sustaining WUAs was largely not achieved.Overall, the Project is assessed partly efficacious in terms of achieving its stated purpose andtargets.

C. Efficiency

53. The EIRR estimates for the seven subproject areas range from 12.6 percent for theSouth Kedu subproject to 3.1 percent for the Batang Anai subproject. Although the selectioncriteria for approval of noncore subprojects were sound and comprehensive, approval of theBatang Anai, and Telang and Saleh subprojects should have been withheld based on technicaland economic considerations. Gains in O&M efficiency and crop yields could have been greaterand achieved more efficiently and sustainably through much less investment in large civil works,

and more emphasis on investments in institutional aspects of O&M. These include PRISsystems and procedures for planning and operating irrigation systems, assessing wateravailability and demand, operating reservoirs, and upgrading basic system information.Efficiency gains could also have been higher if the project had placed more emphasis on tertiarysystem development tied to improvements in empowerment and organizational capacity ofWUAs for better irrigation management. Given the acceptable overall EIRRs in two of the sevensubprojects, and the overall project EIRR of 8.3 percent, the Project is assessed partly efficient.

D. Sustainability

54. Overall, under current circumstances, the sustainability of irrigation systems operationsand project incremental outputs is assessed as less likely. The unabated deterioration of project

watersheds will continue to cause flooding and drainage problems in the wet season, reducewater availability in the dry season, exacerbate the problems associated with increasedsedimentation, and reduce water quality over time. Fiscal austerity induced by the continuedfinancial crisis and the move toward decentralization have substantially reduced centralGovernment funding for O&M, which was already inadequate prior to the crisis. Fiscal austerityhas also affected financial incentives for farmers to use the level of inputs required for continuedhigh rice yields. ISF policies have not been effective. ISF payments have continued to dwindleand have not been able to reduce the fiscal burden on government resources for O&M.Turnover of small irrigation systems has had some success, but the majority of WUAs in thesesystems remain incapable of performing adequate O&M, as do the large majority of WUAs onlarge-scale systems. High population pressure, particularly on Java, and continued urbanizationand industrialization will continue to reduce commandable irrigation area and compete more

aggressively for reduced supplies of quality freshwater. Hope for the future rests with aseemingly renewed resolve by the Government, combined with a better, more focusedapproach by funding agencies,19 to deal effectively with the institutional, regulatory, and legalissues at the root of many problems in the water sector, which have now reached crisisproportions.

19Such as the World Banks Water Sector Adjustment Loan (WATSAL).


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E. Institutional Development and Other Impacts

55. The Projects substantial commitments to improve institutional capacity at all levelswithin the irrigation subsector were laudable but yielded little long-term impact. WUAs were not,in general, developed into effective, empowered, self-sustaining farmer organizations. TheIOMP and ISF programs were an admitted failure, although they have been replaced since 1999

by more potentially meaningful reforms under WATSAL. The EOM program has been effectivelyhalted. The Projects impact on poverty reduction was likely very significant in limited areaswithin command areas of most subprojects, particularly areas where flooding and drainage weresubstantially improved and/or cropping intensities effectively doubled. Overall, institutionaldevelopment and other impacts of the Project are assessed as low.

F. Overall Project Rating

56. The overall project rating, based on the analysis of existing reports and data, the findingsand observations of the OEM, and a weighted matrix of the above five rating criteria, is onlypartly successful. The Project has substantially achieved most of its physical targets andimproved the incomes and welfare of a large percentage of poor farm families in the areas

covered by the Project. However, there have been (i) substantive shortfalls on O&M, WUAdevelopment, and cost recovery targets; (ii) significant shortfalls in improvements in WID andexecuting agency institutional capacity; (iii) accelerated deterioration of watersheds andresultant problems of sedimentation, drainage, and flooding in a number of subproject areas;(iv) insufficient attention to tertiary irrigation and drainage canal development; (v) negligiblelong-term impact of TDU and seed production components; (vi) substantial noncompliance withmajor loan covenants on irrigation policy reforms; and (vi) questionable selection of somesubprojects for investment. Issues (i), (iii), and (vi), in particular, represent a significant threat tothe productivity and sustainability of irrigation infrastructure, and have already adverselyaffected achievement of projected full development benefits of the Project.

G. Assessment of ADB and Borrower Performance

57. Based on discussions and descriptions of project design and implementation throughoutthe PPAR, the Borrowers performance in project undertakings is rated as less than satisfactory.The complex organizational arrangements and the difficulties in coordinating activities amongthe various executing agencies support this rating. ADBs performance is rated satisfactory asmonitoring and supervision of project activities by ADB staff is deemed adequate.

VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

A. Key Issues for the Future

58. For sustainability, a holistic, project-cycle, sector approach to irrigation developmentrequires a long-term commitment (810 years) to institutional development and capacitybuilding in a project area. The Project, like ADBs East Nusa Tenggara Irrigation SectorProject20 and Third Irrigation Sector Project (footnote 2), failed to provide long-term replicablesectoral support to strengthen institutions in the regions covered. A stop-start approach toirrigation development reduces opportunities for institutional capacity building, leads to aninefficient deferred maintenance regime, and raises false hopes with water users andgovernment agencies that development will continue in a well-planned, long-term manner. Along-term commitment to irrigation sector development is required, with major sectoral

20Loan 952(SF)/953-INO: Nusa Tenggara Agricultural Development, for $25 million, approved on 7 February 1989.


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institutional changes addressed through other loan modalities. ADBs sector developmentprogram approach, combining a sectoral investment and program modality within a long-termframework,21 is considered appropriate.

59. The decentralization legislation of 1999 and ongoing major water sector reforms(WATSAL), which are delegating responsibility for irrigation O&M to WUAs, and reorganizing

and redefining river basin management, are fundamental. These far-reaching reforms arecrucial to sustainable management of the enormous investments in this sector. O&M under theProject followed the 1987 IOMP, which was unsuccessful principally because of (i) lack ofdelegation of budget and responsibility; (ii) inadequate understanding during program design ofthe institutional setup; and (iii) an inappropriate environment for WUA participation. EOM wasdesigned for all projects of the World Bank and ADB (prior to ADBs loans 860(SF)/861) to be

just another project activity. As such it bypassed, and effectively weakened, the role of localgovernment agencies in system O&M.

60. Farmers, and collectively WUAs, were not generally involved in a participatory manner inproject activities. Paternal, top-down attitudes of all executing agencies, together with(i) inappropriate funding mechanisms, (ii) less than satisfactory institutional project design, and

(iii) less than optimum use of consultants and nongovernment organizations, all contributed to alack of beneficiary participation. The involvement of WUAs in irrigation management at the mainsystem level, despite irrigation committees, was ineffective. At the tertiary level, and often at thesecondary level, farmers reacted to their own needs through seasonal maintenance and simpleoperational activities. On-farm water management and tertiary development were notadequately addressed under the Project. Tertiary designs and water management without WUAparticipation led to incomplete development of tertiary systems. Considerable effort on WUAstrengthening and legal reform was made under the project training and institutional activities.These were partially successful in their own right, but were not coordinated with implementationand utilization of physical works. TDUs were successful in introducing short-termdemonstrations and catalyzing dialogue between agencies. TDUs were not sustained and asuccessful model for the extension services to WUA for on-farm water management remains

unavailable.

61. Under the project design, ADB and Government resources required to ensure efficientand effective implementation were severely stretched. The Project, executed through sixgovernment agencies, was geographically diverse and included three unusual subprojects:(i) Batang Anai with peat soils; (ii) Wawotobi with high land development needs; and (iii) thecore subproject Telang-Saleh, a major swamp pilot project accounting for some 25 percent ofthe project area. These subprojects were not representative of the irrigation sector in Indonesiaand had major technical differences from the Java irrigation subprojects. Limiting the Project toJava subprojects, which were more homogeneous, contiguous in area, and similar indevelopment requirements, would have significantly simplified implementation and allowedmajor works and activities (drains, flood prevention, tertiary development, and institutional

support) to be finished.

62. A considerable effort was made under the Project and under TA 1363 (footnote 15) toprovide and test a framework for irrigation sector M&E. Activities under Part F failed toinstitutionalize the results of this TA and currently, while effort and interest in the project M&Efield has been considerable, the lack of a national policy to institutionalize M&E activities leadsto considerable wasted effort and poor information available for irrigation sector managers.

21An implementing modality similar to the adjustable program loan of the World Bank could also be considered.


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More effort by ADB and the Government is needed in the future to ensure that benefits andsynergies from previous sector interventions are fully exploited.

63. The ongoing ADB-supported Segara Anakan22 and SJFC projects23 have activities in theLower Citanduy core subproject area. Drainage, flooding, and sedimentation problems arecomplex and severely affect the sustainability of the Segara Anakan lagoon and Lower Citanduy

subproject. A comprehensive river basin development plan including a review of the results ofTA 2665 (footnote 18) and a subsequent implementation program under the Segara Anakanloan are required.

64. Watershed activities under the Project were of a piecemeal, pilot nature, and hadinsignificant effect on sediment reduction. High and continuously growing sediment yields due todeforestation, population pressure, and changing land use in upper watersheds are anincreasing threat to irrigation and drainage infrastructure sustainability. Part D (paras. 33-34)provided a basis for coordination dialogue between agencies involved in water resourcesdevelopment and watershed protection in the project area. Future investments in major R&Ushould only be considered in areas where upper watersheds are stable or where equal attentionis given to watershed protection such that rates of soil erosion (and therefore sediment yields)

will be within acceptable limits to ensure sustainability of water infrastructure. Significantinterventions are still required to address major concerns regarding sediment runoff andsustainability, particularly in the Wawotobi and Citanduy subprojects.

65. Access roads built under the Project were seen to be very beneficial to overall ruraldevelopment providing access to markets, landholdings, and infrastructure. Due to fundingconstraints a number of roads were canceled and maintenance on a significant portion of roadsconstructed has deteriorated. Adequate coverage and maintenance of suitable roads isessential and should include (i) access roads along all primary and secondary canals,(ii) access into all tertiary areas, (iii) paved access to subproject area and local markets, and(iv) access to all primary and secondary drains.

B. Lessons Identified

1. Project Design and Formulation

66. Nationally managed provincial irrigation project activities need to be transferred to thelocal PWRS and district water resources services. The pressure to retain control at the center(national and provincial) rather than to delegate and decentralize continues to decreaseinstitutional and project implementation efficiency. During project design, institutionalization ofproject activities needs to be given priority. The optimal arrangements for decentralization needto be determined, with proper definition and assessment of roles, responsibilities, andabsorptive capacities of PWRs and district water resource services. All future irrigationdevelopment projects should be formulated with mechanisms encouraging and ensuring the full

participation and ownership of beneficiaries with the support of PWRS and district waterresources service for future system management.

22Loan 1476-INO(SF): Segara Anakan Conservation and Development Project, for $22.8 million, approved on17 October 1996. The project has inadequate watershed management components to control the high level ofsediment present in runoff that enters the Lower Citanduy and lagoon area.

23The Citanduy SJFC subproject office informed the OEM that they were using a 1975 Citanduy Flood Master Planfor piecemeal selection of works. A recent mathematical model designed under part A of the Segara AnakanProject should be used for the basis of a detailed review of drainage and flooding in the Citanduy River.


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2. WUAs and Beneficiary Participation

67. WUA formation and operational efficiency are prerequisites to the implementation ofgovernment policy in many aspects of irrigation development. PWRS does not have anappropriate social orientation to carry out WUA establishment and training activities effectively.Beneficiaries must participate if they are to feel a sense of ownership and responsibility, which

will also effect attitudes to ISF and O&M. The impact of institutional development in this regardhas been limited. Lack of appreciation of the need to develop linkages with target groups duringWUA formation has hindered programs for WUA development. In forming WUAs, care has to betaken to minimize disruption to existing social structures.

68. Farmers are reluctant to form and join government-induced WUAs that substitute fortraditional associations that have survived for a long time. WUA establishment andstrengthening should be accelerated with a focus on (i) quality organizations, (ii) involvement intertiary and main system O&M, and (iii) a clear linkage between irrigation service and ISF. Asthe Government has not been able to adequately fund postproject O&M, private O&Mmanagers, financed by WUAs, should be considered as an alternative to publicly providedO&M. The number of WUAs that require formation and training is beyond the scope of a single

short-term project. All future development projects should include components specificallyorientated toward WUA development. However, WUA institutional building is a complexprocess: appropriate performance indicators must be identified and progress of capacitybuilding efforts strictly monitored. An institutionalized PTGA (on-farm water management)subproject, working through BAPPEDA or routine extension service organization, should beused to coordinate the activities. However, training activities require administrative, logistical,and organizational assistance. Full-time PTGA subproject working teams will be necessary forthe larger irrigation schemes like Serayu and Citanduy and in districts with significant irrigationdevelopments. Training at the field level (PTGA level C) with a two-year routine follow-upprogram and regular backstopping activities are required for all technical irrigation and villageschemes in accordance with the respective development programs. The training and PTGA unitshould be institutionalized and training budgets provided through routine regional development

budget sources at district and provincial levels.

3. The Project Approach and Coordination Issues

69. Regular coordination meetings within provincial and district BAPPEDA are important andshould concentrate on the needs for interagency planning; identification of planning priorities;and assessment of proposals for scheme, subproject, and sector M&E, as well as institutionaldevelopment coordination. Interagency action programs for irrigation development can besuccessful through regular consultations at BAPPEDA-chaired routine meetings. PWRS needsto strengthen its technical department for irrigation planning and design, BAPPEDA needs toallocate regular budgets to fund such meetings, and beneficiaries need incentives andassistance to participate in bottom-up planning and implementation activities. An appropriate

cost recovery mechanism could be arranged to ensure that provinces and districts are able toraise adequate funds to finance their policymaking, coordination, and monitoring functions.

4. Project Implementation

70. Strengthening of administrative sections of PWRS and district water resources servicethrough the focused training of administrative staff and streamlining of procedures is required.The gradual increase in depth of experience in technical departments should free senior stafffrom involvement in routine administrative issues if appropriate delegation of tasks can be


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achieved. The proposed introduction of efficient management information systems could also bevery effective in promoting the more efficient use of staff time. Special care needs to be taken inpreparing budgets, cost estimates, and realistic implementation schedules. Designs, bills ofquantities, and contracts must be carefully checked by the project staff. This involves seniorstaff spending more time and effort on supervision. All checking should be carried outindependently within a quality assurance framework.

5. Irrigation Development Policy

71. More involvement of provincial and district authorities and beneficiaries in key policydirectives is essential. Implementation of Government O&M policy (and WATSAL) should beformulated, explained, and discussed jointly with the PWRS district and provincial managers,BAPPEDA (provincial and district), and other senior provincial government officials in aparticipatory manner. Understanding of, and/or preparation for, the implications of the policy onshort-term and long-term planning is minimal. A long-term provincial/district irrigationdevelopment plan should be ratified by provincial planners and beneficiaries, and used forannual program definition.

6. Comprehensive Program for Irrigation Scheme Commissioning

72. Commissioning requirements have only been studied at the demonstration subdistrictoffices. A two-year commissioning period is generally required for adequate developmentprograms for medium-scale schemes with a four-year period for large and major schemes.Programs should include

(i) continued training of staff and WUAs in operating schemes until an optimumacceptable management level is reached;

(ii) minor modifications and infrastructural improvements that may be necessary forstructures and gates to ensure accurate measurement and control and/or systemextensions;

(iii) development of adequate information techniques for reporting crop plantingactivities from the field to the operators;

(iv) adjustment and change from a theoretical (as designed) water allocation systemto one based on actual needs (social and technical), calibration of measuringstructures, and the development of appropriate water management techniques;

(v) adjustment and optimization of needs-based budgets;(vi) familiarization period between operators and farmer groups necessary to develop

relationships and trust;(vii) minor repairs to structures that may have been overlooked by the contractors

and supervision staff;(viii) review of tertiary system infrastructure; and(ix) purchase and commissioning of necessary equipment and training in its use.

7. Difficulties in Promoting Farmer Participation in Irrigation Development

73. Community organizers are required to ensure beneficiaries participate in government-ledactivities. However, a sustainable mechanism should be introduced whereby projectbeneficiaries are not dependent on community organizers. Farmers need to participate and beorganized into WUAs (or other suitable institutions) at the earliest possible stage of systemplanning. Ensuring farmer involvement in tertiary system construction and main system design,and prior to agreement on the modality of subproject development and O&M, is essential. For


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farmers to be available to participate in planning and design activities, field motivators must beactive and in place in a timely manner, coinciding with the fielding of the survey, investigation,and design consultant. All costs and time-consuming coordination activities should be borne bya community organizer consultancy or integrated into the survey, investigation, and designconsultancy.

74. To achieve farmer contributions through provision of labor and materials to field-levelsystem construction, significant efforts, outside the capabilities and time constraints of PWRSstaff, are required. These efforts should not be underestimated; district and subdistrict officialsunderstand these requirements better than national planners. Every project should includecomprehensive, long-term, institutionalized WUA development programs.

75. Specific recommendations for improved farmer participation in irrigation developmentsand management include (i) small scheme design activities (handover [PIK] and village [PID]schemes) should be carried out in a participatory manner at subdistrict level with support fromdistrict offices and consultants; (ii) WUA establishment and strengthening activities under themultiagency PTGA training program should be accelerated and routine PTGA training(pembinaan pengairan) financed through the regional development budget; the legal status of

WUAs should allow the WUA to undertake contracts with second parties and choose where theyobtain their services; and (iii) WUAs should be formed before R&U design activities commenceand be encouraged, by the use of community organizers, to participate in system design. Aprogram of tertiary and field-level system construction with farmer participation should bescheduled to be complete within one year of the main system works.

8. Training

76. A human resources development program should be the basis of the training program.Training units need to be incorporated into the structural organization. All staff holding positions(surat keputusan) should be compelled to undertake a fixed number of training days asinstructors each year. All irrigation staff attending should have fixed work positions with the

respective government organization. A training monitoring system and information systemshould be established to provide feedback for future courses. O&M implementation andbudgetary and organizational policy need to be clear before further training at district andsubdistrict levels can be effective.

9. More Efficient Use of Consultants

77. Although the performance of consultants was generally satisfactory, specific aspectsshould be addressed in future irrigation projects to ensure optimal use of consulting resources.First, weak agency staff will not benefit from day-to-day counterpart strengthening unless staffare assigned full time, given specific tasks, and provided