Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 36122-ID

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF US$208 MILLION

TO THE

REPUBLIC OF INDONESIA

FOR A

STRATEGIC ROADS INFRASTRUCTURE PROJECT

June 2,2006

Transport Sector Unit East Asia and Pacific Region

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective June 1,2006)

Currency Unit = Indonesian Rupiah IDR 1,000 = US$O.111

US$ = IDR9,OOO

AADT ACAP ADB AMDAL Bappenas Bapedalda

BPK Capex CTC DGH DGLT DOP DSC EIRTP- 1 EIRTP-2 ESAMP GO1 ICB JARNS JBIC KPK LARAP LARF MPW MOT NCB PAP PBC POLRI PSC SOP SRIP SRRP UKL UPL WP

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS

Annual Average Daily Traffic Anti Corruption Action Plan Asian Development Bank Analisa Mengenai Dampak Lingkungan (Environmental Impact Assessment) Badan Perencanaan Pembangunan Nasional (National Development Planning Agency) Badan Pengendalian Dampak Lingkungan Daerah (Local Environmental Impact Management Agency) Supreme Audit Institution Capacity expansion Core Team Consultant Directorate General o f Highways, Ministry of Public Works Directorate General of Land Transport Directorate o f Planning, Ministry o f Public Works Design and Supervision Consultant Eastern Indonesia Region Transport Project Second Eastern Indonesia Region Transport Project Environmental and Social Assessment Management Plan Government of Indonesia International Competitive Bidding Java Arterial Road Network Study Japan Bank for International Cooperation Anticorruption Commission Land Acquisition and Resettlement Action Plan Land Acquisition and Resettlement Policy Framework Ministry o f Public Works Ministry o f Transport National Competitive Bidding Project Affected Person Performance Based Contract Indonesian National Police Project Steering Committee Standard Operational Procedure Strategic Roads Infrastructure Project Sumatra Region Roads Project Upaya Pengelolaan Lingkungan (Environmental Management Effort) Upaya Pemantauan Lingkungan (Environmental Monitoring Effort) Work Program

Acting Vice President: Country Director:

Sector Director: Task Team Leader:

Mr. Jeffrey S. Gutman, EAP Mr. Andrew Steer, EASIN Mr. Jitendra N. Bajpai, EASTR Mr. Jerry Lebo, EASTR

INDONESIA Strategic Roads Infrastructure Project

CONTENTS

Page

A . STRATEGIC CONTEXT AND RATIONALE ..................................................................... 1

1 . 2 . 3 .

Country and sector issues .................................................................................................... 1

Rationale for Bank involvement .......................................................................................... 3

Higher level objectives to which the project contributes .................................................... 3

B . PROJECT DESCRIPTION ..................................................................................................... 5 1 . Lending instrument .............................................................................................................. 5 2 . Project development objective and key indicators (Annex 3) 5

3 . Project components 5

4 . 5 .

............................................. ..............................................................................................................

Lessons learned and reflected in the project design ............................................................ 6

Alternatives considered and reasons for rejection ............................................................... 7

Partnership arrangements (if applicable) ............................................................................. 8 Institutional and implementation arrangements .................................................................. 8 Monitoring and evaluation o f outcomes/results .................................................................. 9

Critical risks and possible controversial aspects ................................................................. 9

Loadcredit conditions and covenants ............................................................................... 10

C . IMPLEMENTATION .............................................................................................................. 8 1 . 2 . 3 . 4 . Sustainability ....................................................................................................................... 9

5 . 6 .

D . APPRAISAL SUMMARY .................................................................................................... 12 1 . 2 . 3 . 4 . 5 . 6 . 7 .

Economic and financial analysis ....................................................................................... 12

Technical ........................................................................................................................... 13

Fiduciary ............................................................................................................................ 13

Social ................................................................................................................................. 15

Environment ...................................................................................................................... 16

Safeguard policies .............................................................................................................. 17

Policy Exceptions and Readiness ...................................................................................... 19

* .

FOR OFFICIAL USE ONLY

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not be otherwise disclosed without World Bank authorization.

Annex 1: Country and Sector Background ............................................................................... 21

Annex 2: M a j o r Related Projects Financed by the Bank and/or other Agencies .................. 27

Annex 3: Results Framework and Monitoring ......................................................................... 30

Annex 4: Detailed Project Description ...................................................................................... 34

Annex 5: Project Costs ................................................................................................................ 40

Annex 6: Implementation Arrangements .................................................................................. 42

Annex 7: Financial Management and Disbursement Arrangements ..................................... 45

Annex 8: Procurement Arrangements ....................................................................................... 55

Annex 9: Economic and Financial Analysis .............................................................................. 61

Annex 10: Safeguard Policy Issues ............................................................................................. 67

Annex 11: Project Preparation and Supervision ...................................................................... 90

Annex 12: Documents in the Project File .................................................................................. 92

Annex 13: Statement o f Loans and Credits ............................................................................... 93

Annex 14: Country at a Glance .................................................................................................. 98

Annex 15: Anti-Corruption Action Plan ................................................................................. 100

Maps: IBRD 34582,34583,34584,34585,34586,34587, 34588

INDONESIA

Source

STRATEGIC ROADS INFRASTRUCTURE PROJECT

Local Foreign Tota l

PROJECT APPRAISAL DOCUMENT

BORROWER INTERNATIONAL BANK FOR

EAST ASIA AND PACIFIC

79.00 0.00 79.00 0.00 208.00 208.00

EASTR

DEVELOPMENT Total:

Date: June 2,2006 Team Leader: Jerry A. Lebo

79.00 208.00 287.00

Country Director: Andrew D. Steer Sector ManagedDirector: Jitendra N. Bajpai

Sectors: Roads and highways (1 00%) Themes: Trade facilitation and market access (P); Decentralization (S); Infrastructure services for private sector development (S) Environmental screening category: Full Assessment

Project ID: PO79906

Lending Instrument: Specific Investment Loan

[XI Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m.): 208.00 Proposed terms: Variable-Rate Single Currency Loan payable in 20 years, including 5 years o f grace and annuity principle repayment, at a rate equal to LIBOR for the Loan Currency plus the Variable Spread, subject to any waiver o f a portion o f such interest as may be determined by the Bank from time to time.

RECONSTRUCTION AND I I I

Borrower: Republic o f Indonesia

Responsible Agency: Ministry o f Public Works J1. Pattimura No. 20 Jakarta Selatan 12 1 10 Indonesia Tel: (62-2 1) 720-028 1 727-658 1 Fax: (62-21) 720-1760,727-9232 Contact: Mrs. Sr i Apriatini Soekardi, Director o f Planning, Directorate General o f Highways

Expected effectiveness date: November 1,2006 Expected closing date: December 3 1,201 1 Does the project depart from the CAS in content or other significant respects? Ref: PAD A.3 Does the project require any exceptions from Bank policies? Ref: PAD D. 7 Have these been approved by Bank management? I s approval for any policy exception sought from the Board? Does the project include any critical r isks rated “substantial” or “high”? Ref: PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Re$ PAD D. 7 Project development objective Ref: PAD B.2, Technical Annex 3

[ ]Yes [XINO

[ ]Yes [XINO [ ]Yes [XINO [ ]Yes [XINO

[XlYes [ ] N o

[XIYes [ ] N o

The objective o f the Project i s to improve economic competitiveness by improving the capacity and quality o f strategic national roads on the Borrower’s islands o f Java and Sumatra, improving road safety and increasing the efficiency, quality and transparency o f works procurement and implementation in Indonesia’s Ministry o f Public Works.

Project description [one-sentence summary of each component] Rex PAD B. 3. a, Technical Annex 4

The US$287 mi l l ion Project includes the following components (front end fee cost excluded):

Component 1- Improvements to Strategic National Roads (US$262. I million). This component consists o f

(a) Betterment of approximately 155 kilometers o f urban and inter-urban roads;

(b) Expansion o f road capacity on approximately 85 kilometers o f urban and inter-urban roads, including bridges;

(c) Construction o f approximately 55 kilometers o f new urban and inter-urban roads, including bridges;

(d) Construction o f a new bridge of approximately 50 meters on an inter-urban road; and

(e) Implementation o f a Performance-Based Contract Pilot Program on an approximately 1 10 kilometer section o f the North Java Corridor, involving betterment o f approximately 10 kilometers and maintenance of approximately 1 10 kilometers.

Component 2- Implementation Support (US$20.1 million). This component consists o f

Suppoft to the Directorate df Planning o f M P W and the P M U in Project implementation, including environmental management, project performance monitoring, implementation o f the Anti-Corruption Action Plan, financial management monitoring and reporting.

Assistance to M P W in the design of works, pre-contract activities, supervision o f construction and implementation management for Sub-Projects;

Assistance to M P W in preparation and implementation o f the Performance-Based Contract Pi lot Program;

Assistance to M P W in the procurement o f consultancy services and works, including in implementation o f the Anti-Corruption Action Plan; and

Assistance to M P W in carrying out financial and technical audits on Project works.

Component 3 - Road Sector Institutional Development (US$4.1 million). This component consists o f two aspects o f the required to support the road sector in Indonesia:

(a) Supporting Indonesia’s overall road safety strategy (US$3.5 million) by developing: (i) an integrated road safety strategy and long-term plan, including an institutional framework; and (ii) a pilot integrated road accident database/analysis system, and establishing self-sustaining personnel development procedures for traffic police; and

(b) Training o f Project staff (US$ 0.6 million) in the application o f the Project Management Manual, including procedures on procurement, financial management procedures, reporting procedures, and in the application o f the Anti-Corruption Action Plan and the Environmental and Social Assessment Management Plan.

Which safeguard policies are triggered, if any? Re$ P A D D. 6, Technical Annex 10

Environmental Assessment (OP/BP/GP 4.0 1) Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) Involuntary Resettlement (OP/BP 4.12)

Significant, non-standard conditions, if any, for: Re$ P A D C. 7 Board presentation: There are no conditions for Board presentation.

Loadcredit effectiveness: The Additional Conditions o f Effectiveness consist o f the following:

(a) The detailed engineering designs and bid documents for Work Program -1 , in each case satisfactory to the Bank, shall have been adopted by the Borrower;

(b)

(c)

(d)

The Project Implementation Plan satisfactory to the Bank shall have been adopted by the Borrower; The Project Management Manual satisfactory to the Bank shall have been adopted by the Borrower; and The Borrower shall have shortlisted the Financial Management Experts in accordance with the Procurement Plan and the provisions o f the Loan Agreement.

I

I OTHER: 1. (a) The Borrower shall engage a Procurement Agent in accordance with the Procurement

Plan and the provisions o f the Loan Agreement to assist the Borrower in the selection and employment o f the DSC, CTC and Procurement Advisor in accordance with the Procurement Plan.

(b) Except as the Bank shall otherwise agree, the Borrower shall (i) retain the services o f the Procurement Agent until completion o f al l procurement activities for the DSCs, CTC and Procurement Advisor consultants’ services under the Project; and (ii) take al l such steps as are necessary to ensure that the Procurement Agent i s permitted to provide i t s services in accordance with i t s contractual terms o f reference.

2. (a) The Borrower shall engage a Procurement Advisor in accordance with the Procurement Plan and the provisions o f the Loan Agreement to assist the Borrower in the procurement in accordance with the Procurement Plan o f works for all Sub-Projects.

(b) Except as the Bank shall otherwise agree, the Borrower shall (i) retain the services o f the Procurement Advisor until completion o f al l procurement activities for works under the Project; (ii) ensure that the Procurement Advisor shall at al l times during Project implementation provide reports directly to DOP and shall provide a copy directly to the Inspectorate General in M P W and the Bank; and (iii) take all such steps as are necessary to ensure that the Procurement Advisor i s permitted to provide his services in accordance with i t s contractual terms o f reference.

3. Bank to assist the Borrower in the procurement o f works for Sub-projects under WP-1 and for consulting services where the Procurement Agent i s not involved, in accordance with the Procurement Procedures set out in the Loan Agreement.

The Borrower shall engage a Public Notary with terms o f reference satisfactory to the

4. based internal audits o f financial controls and technical audits o f selected road sections to determine if the quality o f construction meets the specifications and technical standards included in the bidding documents and contracts. Such audits shall be carried out in accordance with terms o f reference satisfactory to the Bank and the schedule set forth in the Project Management Manual. Copies o f the reports from such audits shall be made available to the Bank promptly upon their completion. Should either the Borrower or the Bank determine that any such audit identifies any significant lapse in internal controls, quality o f outputs realized or any significant delav in execution o f the works contracts under the Proiect. the Borrower shall DreDare and

The Borrower shall carry out at regular intervals during Project implementation, risk-

submit to the Bank for i t s review and comments a time-bound action plan for remedy o f the identified problems; and shall, promptly after the Bank has discussed the results o f its review with the Borrower, take al l necessary action to carry out the time-bound action plan, taking into account the Bank’s comments on such plan.

5. financial audit reports (including qualified audit reports) and all technical audit reports for the Project prepared in accordance with the Loan Agreement and all formal responses o f the Borrower in relation to such reports. The Borrower shall ensure that M P W shall place the information provided for in this paragraph on the M P W official website (http://www.pu.go.id, or any successor website thereto) within one month o f the report being accepted as final by the Borrower.

The Borrower through M P W shall make publicly available promptly after receipt al l final

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

Indonesia's economic performance has stabilized in recent years with Gross Domestic Product (GDP) growth in 2006 expected to remain around 5-6 percent. Inflation is expected to continue to decline, as the impact o f the 2005 fuel price increases disappears. Efforts are underway to address the long needed reform agenda in key sectors, such as judiciary and legal, as well as to improve economic legislation. Decentralization efforts, which started five years ago, are beginning to take root.

There has also been good progress in non-economic areas. The anti-corruption campaign has continued with a growing number o f prosecutions (and convictions) for corruption. The Anti- corruption Commission i s playing a leading role in this area and in broader reform, including, most recently, taking the lead in a proposal for fundamental c iv i l service reform. The Supreme Audit Agency has continued breakthrough audits (including dissemination o f results) on government agencies and public enterprises. In addition, a peaceful process o f regional direct elections has continued.

Sector Issues

Since the end o f the financial crisis, infrastructure investment has lagged behind needs and more investment in key infrastructure sectors i s considered necessary if the Government's growth targets are to be met. Between 1975 and 1997, Indonesia enjoyed more than 30 years o f robust growth and decreasing poverty rates from 64 to 17 percent, in part due to the high spending on infrastructure. Better road networks, larger and more efficient harbors and airports, improved supply systems for electricity and water and more extensive flood mitigation measures are areas where investment i s needed in the near-term.

Transport i s o f key importance to the performance o f the Indonesian economy, particularly the road sector, which accounts for the major share o f domestic freight and inter-urban passenger land travel. Enhanced international competitiveness, as wel l as the availability and affordability of goods and services within the economy (especially access to basic services in isolated areas) rely on efficient functioning o f the transport sector.

Transport demand in Indonesia has been growing faster than GDP for nearly a decade and traffic levels are now above pre- 1997 levels. Congestion on the arterial road network i s a widespread problem, especially on Java. For the foreseeable future, traffic growth can be expected to increase at 1-1.5 times GDP growth rates (roughly seven to 10 percent per annum). The national road network o f about 34,628 kilometers o f national arterial roads consists o f about 27,000 kilometers, about 649 kilometers o f to l l roads, and about 8,000 kilometers o f unclassified /strategic roads.

1

A summary o f key road sector issues includes:

On Java, roads are approaching capaciQ, thereby hindering economic growth; conversely, lack of basic road access is hindering growth on the eastern islands, particularly for the rural poor. It is expected that about 55 percent o f the arterial network in Java will be congested by 20 10. The coverage and quality o f local roads remain inadequate to service the eastern region and Kalimantan where poverty i s high.

Maintenance is reasonable for national roads but poor on provincial and rural roads, Over hal f o f the provincial and local roads are in good/fair condition, compared to around 80 percent for national roads.

Growing backlog of investment requires increasedjhancing from each level of government and the private sector. Despite higher budget allocations since the 1997 crisis, the backlog o f construction and rehabilitation is estimated as IDR 17 trillion, posing an imminent crisis. The plan to build more than 1,000 kilometers o f expressway with private participation has a number o f problems, including land acquisition and related financing.

Traffic Growth. Traffic growth i s increasing by seven to 10- percent per annum with a consequential increase in road accidents. In 2005, there were some 30,000 reported fatal accidents.

Corruption remains an endemic problem. Collusion in procurement o f works and services i s rampant at both local and national levels, while sanction mechanisms are weak.

The World Bank assists Government with i t s review o f the country sector strategy and progress in achieving i t s vision for the sector. The findings and recommendations o f this collaboration are well presented in the Bank’s publication “Indonesia: Averting an Infrastructure Crisis: A Framework for Policy and Action”, June 2004 and “A Road to Economic Growth: Strategic Priorities for the Road Sector in Indonesia” issued by the World Bank in partnership with Japan Bank for International Cooperation (JBIC) and the Asian Development Bank (ADB) in January 2005. The key areas o f action identified in these documents include: (a) the need to establish a stronger public policy for planning and managing the road sector, with focus on improved service and development impact; (b) the need to establish a sustainable financing policy, with appropriate cost recovery from users and sound framework for private sector participation; and (c) the need to improve the efficiency in implementation o f public infrastructure programs, including competitive prices, transparent transactions, and sustainable quality.

Bank Sector Strategy

In recent years the Bank, through i t s steady engagement with the Government, has financed critical investments and has nurtured key reforms and good practices including the creation o f a Tol l Road Authority (BPJT) and making the previous regulator/operator, Jasa Marga, an operator only. The Bank has further supported the design o f a standard concession model for to l l roads,

2

road asset management framework, planning capacity building at provincial and Kabupaten (district) levels, options for establishing a road fund, plan for Java Arterial Road Network Development Study (JAWS), Land Transport Development Plan (LTDP), Road User Taxation (Charges) in the highway sector, and pilots on the enforcement o f vehicle overloading rules. The Bank’s aim i s to assist in improving existing road capacity in Java, Sumatra (Sumatra Region Roads Project), and in the eastern islands (Eastern Indonesia Region Transport Project [EIRTP- 17 and Second Eastern Indonesia Region Transport Project [EIRTP-21).

Among the Bank’s three currently planned transport sector operations, two will focus on reducing the critical bottlenecks in national roads, and one will nurture expressway development in Java by developing an expressway plan, financing land and supporting transparent award o f concessions, in accordance to the integrated national development planning and policy for land transport development plan and nationalhegional intermodal transportation system. The institutional agenda will complement the planned investments including the anti-corruption practices in partnership with ADB, JBIC and Ausaid, the three key donors in the sector. This proposed Strategic Roads Infrastructure Project will further strengthen procurement and anti- corruption measures.

2. Rationale for Bank involvement

The rationale for Bank involvement i s based on the need to support the economic growth and competitiveness o f Indonesia by eliminating traffic bottlenecks along strategic road corridors and enhancing road sector management capacity. Through i t s development and implementation o f a comprehensive Anti-Corruption Action Plan (ACAP) the Project will help to build institutional capacity for efficient, effective procurement, both within the Project and beyond. The Bank has extensive experience in the road sector in Indonesia having supported numerous projects and technical assistance support programs over the last several decades. The Project i s a logical continuation to the Strategic Urban Roads Infrastructure Project (Loan 4054-IND) which successfully reduced traffic bottlenecks in selected areas in North Java and the Second Highway Sector Investment Project (Loan 37 12-IND) which addressed road maintenance and capacity expansion, as well as sector reforms.

3. Higher level objectives to which the project contributes

The Country Assistance Strategy (CAS) discussed by the World Bank Board o f Executive Directors on November 25,2003 (Report No. 27108-IND October 29,2003) focuses on assistance to Indonesia to overcome the l o w rate o f investment and to improve the public service environment, two major impediments to reducing poverty. The objectives o f SRIP are fully consistent with, and give substantial support to, two o f the five areas identified as essential to raise investment and improve services, namely, fostering a competitive private sector and expanding Indonesia’s infrastructure. A CAS Progress report is under preparation and is scheduled to be presented to the Board in 2006. The Project contributes to the Government’s overall poverty reduction and growth strategy by supporting rapidly rising transport demand and alleviating congestion along key transport corridors, particularly in Java. More than 58 percent of Indonesia’s population i s in Java and 21 percent in Sumatra. About two-thirds o f the Project

3

beneficiaries are located in Central and West Java. It i s estimated that 40 to 45 million people are likely to benefit from the Project.

4

B. PROJECT DESCRIPTION

1. Lending instrument

The Project will be financed with a specific investment loan. The Borrower has selected a Variable-Rate Single Currency Loan payable in 20 years, including 5 years o f grace and annuity principle repayment, at a rate equal to L IBOR for the Loan Currency plus the Variable Spread, subject to any waiver o f a portion o f such interest as may be determined by the Bank from time to time.

2. Project development objective and key indicators (Annex 3)

The objective o f the Project i s to improve economic competitiveness by improving the capacity and quality o f strategic national roads on the Borrower’s islands o f Java and Sumatra, improving road safety and increasing the efficiency, quality and transparency o f works procurement and implementation in Indonesia’s Ministry o f Public Works.

The key performance indicators for the above development objective are: percentage reduction in travel times on Sub-project roads; annual average daily traffic (AADT) on Sub-project roads relative to forecast flows as reported in the Project Implementation Plan; Performance-Based Contract Pilot Program implemented as designed; Road safety studies and pilot program carried out as designed; Anti-Corruption Action Plan implemented and construction supervision carried out as designed (percentage o f new contracts fully compliant with no breaches); number o f technical audits carried out; and number o f kilometers o f betterment, capacity expansion, and new roads constructed, and number o f meters o f bridges completed.

(a) (b)

(c) (d) (e)

(0 (g)

3. Project components

The US$287 mi l l ion Project includes the following components (front end fee cost excluded):

Component 1 - Improvements to Strategic National Roads (US$262.1 million). This component

Betterment o f approximately 155 kilometers o f urban and inter-urban roads;

Expansion o f road capacity on approximately 85 kilometers o f urban and inter- urban roads, including bridges;

Construction o f approximately 55 kilometers o f new urban and inter-urban roads, including bridges;

Construction o f a new bridge o f approximately 50 meters on an inter-urban road; and

5

(j) Implementation o f a Performance-Based Contract Pilot Program on an approximately 1 10 kilometer section o f the North Java Corridor, involving betterment o f approximately 10 kilometers and maintenance o f approximately 1 10 kilometers.

Component 2- Implementation Support (US$20.1 million). This component consists of:

(9 Support to the Directorate o f Planning o f MPW and the PMU in Project implementation, including environmental management, project performance monitoring, implementation o f the Anti-Corruption Action Plan, financial management and monitoring, evaluation and reporting;

(g) Assistance to MPW in the design o f works, pre-contract activities, supervision o f construction and implementation management for Sub-Projects;

(h) Assistance to MPW in preparation and implementation o f the Performance-Based Contract Pilot Program;

(i) Assistance to MPW in the procurement o f consultancy services and works, including in implementation o f the Anti-Corruption Action Plan; and

(j) Assistance to MPW in carrying out financial and technical audits on Project works.

Component 3 - Road Sector Institutional Development (US4.1 million). This component consists of two aspects o f the required support to the road sector in Indonesia:

(a) Supporting Indonesia’s overall road safety strategy (US$3.5 million) by developing: (i) an integrated road safety strategy and long-term plan, including an institutional framework; and (ii) a pilot integrated road accident database/analysis system, and establishing self-sustaining personnel development procedures for traffic police; and

(b) Training of Project staff (US$0.6 million) in the application o f the Project Management Manual, including procedures for procurement, financial management, and reporting, and in the application o f the Anti-Corruption Action Plan and the Environmental and Social Assessment Management Plan.

4. Lessons learned and reflected in the project design

Readiness for Implementation. Based on experience in implementing S W , EIRTP-1 and 2, the first annual work program o f civil works, as well as terms o f reference and requests for proposals for technical assistance should ideally be ready for implementation not later than Project negotiations. This i s expected to speed up implementation and disbursements.

6

Quality of Engineering Designs. In the past, there have been some concerns relating to the quality o f some detailed engineering designs. To improve quality under SRIP , the engineering designs have been reviewed by international consultants and the Bank.

Quality of Construction. Quality o f works has been an issue in past projects. This Project will emphasize improving the quality control o f construction primarily through: (a) strengthening the powers and authority o f the Design Supervision Consultant who will be designated as “Engineer”; (b) carrying out independent technical audits; and (c) implementating o f an Anti- corruption Action Plan.

Corruption and Collusion. This Project addresses the risk o f corruption and collusion through an Anti-Corruption Action Plan which builds on the one for EIRTP-2 (Annex 15).

Sustainability. The Project includes a pilot program to introduce performance-based contracting for road maintenance and rehabilitation to improve quality o f construction, reduce corruption and increase value for money spent.

Safeguards. Environmental agencies at the provincial and kabupaten levels need strengthening and must be more involved in planning and monitoring road programs. SRIP includes training to pertinent provincial and Kabupaten environmental agencies (Bapedaldas) to improve their capacity and help them assume a larger role in monitoring safeguards. Land acquisition tends to start late in the project cycle and i s frequently not completed before a contract begins. SRIP will require that the necessary land be acquired and compensation completed before contract signature.

5. Alternatives considered and reasons for rejection

The main alternative to the Project would be to develop the Trans Java Highway (primarily as tol l roads) along a new alignment, rather than add capacity to the existing road corridor. While some sections o f the alternative corridor already exist, the majority could not be realized until around 201 0-20 15. Meanwhile, traffic along the existing roads will continue to increase, traffic speeds and quality o f traffic service will continue to decrease, and traffic accidents will continue to rise, unless those roads are widened or alternate routes around congested areas are built. Further, according to the Bank-financed Java Arterial Roads Network Study (JAWS, 2001) and the other studies under the Strategic Urban Roads Infrastructure Project, the proposed tol l road developments are expected to divert 30 percent or less o f the traffic on existing parallel roads (such as SRIP Sub-Projects). This is due to the fact that tolls discourage diversion o f traffic and most o f the traffic volumes along this corridor involve short to medium length journeys, which are not likely to divert to to l l roads. However, the impact o f the proposed tol l roads was assessed in determining the level o f improvement for each pertinent SRIP Sub-project. The Bank i s supporting development o f the Trans Java Highway in parallel to the SRIP project.

Geographic coverage. Initially, SRIP was to cover national roads throughout Indonesia. However, since funds are limited, i t was decided to limit SRIP to Java and Sumatra. These two islands (especially Java) contain large populations and significant economic activity, in addition to having the most congested roads in Indonesia. Further, restricting SRIP to these islands

7

reduces resources needed for proper management, and supervision o f construction and allows sharper focus n issues and rapid problem solving.

Design Alternatives. At the Sub-project level, alternatives ranged from betterment (strengthening and pavement overlays and minor widening), major widening and traffic management to increase traffic capacity and improve road safety, and new bypasses around constricted road sections. Various possible design cross-section alternatives were also evaluated for each Sub-project based o n existing and projected traffic volumes and cost-benefit analyses o f such investments. Considerations o f availability o f right-of-way or the difficulty in obtaining required right-of-way, as well as the results o f consultations with local people and government agencies, were key factors in determining capacity expansion Sub-Projects, including whether widening would be done on both sides, to the left or to the right o f the existing alignments.

C. IMPLEMENTATION

1. Partnership arrangements

The Government has established an umbrella Steering Committee (SC) to guide and oversee the development o f road infrastructure and road traffic and transport. The SC reports to the Ministerial-level Committee on Policy for the Acceleration o f Infrastructure Development, which is chaired by the Coordinating Minister for the Economy, through the Sub-committee on Planning and Investment. The Sub-committee i s chaired by Bappenas’ Deputy for Infrastructure, who also chairs the roads steering group. The Steering Committee has appointed the Directorate General o f Highways (DGH) within M P W as the Executing Agency for the Project.

A number o f organizations will be involved in the Project. These include Bappenas, Ministry o f Finance (approval o f Project’s budget, administration o f special account and loan account), Ministry o f Home Affairs (facilitation o f provincial participation and coordination), Bapeda Province (coordination o f provincial activities), Bapedalda Province (environmental overview), Directorate General of Land Transport in the Ministry o f Transport and Directorate o f Traffic Police in the Indonesian National Police (overview o f traffic and safety aspects including overloading and traffic control devices), and local communities and non-governmental organizations (represent local intere’sts as stakeholders, assist in minimizing corruption, participate in procurement committees and attend bid processing).

2. Institutional and implementation arrangements

The Ministry o f Public Works i s the executing agency through the DGH. The Directorate o f Planning (DOP) within the DGH is the implementing agency and wil l be responsible for the day- to-day activities and has established a Project Management Unit (PMU) to be responsible for managing al l activities o f the Project. Direct responsibility for project implementation will be shared between the agencies responsible for each road. The Project Organization Chart i s shown in Annex 6.

The DOP and i t s P M U will be supported by Core Team Consultants (CTC), who will assist with al l aspects of project and financial management, monitoring, evaluation and reporting, and

8

ensure that they are properly undertaken in a timely fashion. The CTC will assist with detailed project preparation for Work Program-3 o f the Project, and assist in the management o f the Design and Supervision Consultants (DSCs) in the detailed design o f these programs. CTC will closely liaise with DSCs and other consultants employed under the Project.

The DSCs wil l be appointed by DGH to assist the immediate Project Managers, appointed by the central Government, in al l aspects o f the design, procurement and implementation o f the c iv i l works. The DSCs will be the supervision engineer for al l works contracts. The DSCs will have a main office in Jakarta and provincial and site offices to provide full regional support for the Project. The terms o f reference for CTC and DSCs are available in the project f i les as wel l as the Project Implementation Plan and Project Management Manual.

3. Monitoring and evaluation o f outcomes/results

The DOP i s the implementing agency and will monitor the overall performance o f the Project and i t s implementation. This includes: (a) the extent to which project objectives are being achieved, (b) the administrative, physical and financial progress o f implementation o f the project components; and (c) the extent to which required implementation procedures are being complied with.

4. Sustainability

The sustainability o f Project investments will be determined by the quality achieved and the availability o f funds for maintaining the completed works. The Project will improve quality through: (a) a performance-based contracting approach that strengthens accountability and the authority to enforce contracts, whereby supervision engineers can reject defective work and withhold payment for such works; (b) the procurement o f qualified contractors and supervising engineers; (c) the training (both formal and on-the job) o f public works staff and contractors; (d) carrying out o f technical audits; and (e) implementation o f an Anti-Corruption Action Plan to reduce the chances for fraud and corruption (Annex 15).

For the technical assistance components o f the Project, sustainability wil l be highly dependent on the level o f ownership and buy-in by the concerned agencies. The past performance o f DGH/ M P W in these areas has been generally good, however s t i l l uneven.

5. Critical risks and possible controversial aspects

The overall risk rating for the Project i s high and i s considered high risk for corruption. An enhanced Anti-Corruption Action Plan has been agreed with Government as a key item to moving forward on the Project. The Project does not have any controversial aspects. I t s investments are straightforward and its technical approach i s based on standard approaches, which build on existing Government programs.

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Risk

Corruption compromises the

Difficulties in acquiring land project quality and impact

and resettlement

fi Delay in procurement

Rating

S

H

Inadequate capacity to execute Project

Project agencies

Poor attention to environmental management

Effective coordination among

H = High; M = Moderate, S= Substantial)

M

M

M

Mi tigat ion

MPW will implement the ACAP shown in Annex 15.

(a) The Land Acquisition plans for Work Program-1 have been adopted and the land acquisition process i s underway; (b) reasonable budgets will need to be provided; and (c) civil works contracts will be signed only after completion o f land acquisition and payment of compensation. (a) A Procurement Plan has been developed and will be updated annually; (b) a Procurement Agent will be appointed to assist DGHI DOP in selection o f consultants; (c) CTC and DSCs are required to be in place prior to award of works contracts; and (d) training in procurement will be provided to procurement committees. PMU i s organized based on EIRTP-2 model and supported by consultants Partnership approach was adopted during preparation and effective management arrangements were built on lessons learned from SRRP and EIRTP. (a) Implementation o f the ESAMP and agreed land acquisition and resettlement framework based on previous project experience; (b) DSC will exercise more effort on environmental supervision and CTCs will follow up on safeguards during implementation; and (c) active involvement of provincial environmental agencies (Bapedaldas) in monitoring activities and training o f their staff Support to road safety strategy i s included in the Project including support to traffic police activities

6. Loan conditions and covenants

1. Effectiveness Condition

The additional conditions o f effectiveness are:

(a) The detailed engineering designs and bid documents for Work Program - 1, each satisfactory to the Bank, shall have been adopted by the Borrower;

(b) The Project Implementation Plan satisfactory to the Bank shall have been adopted by the Borrower;

(c) The Project Management Manual satisfactory to the Bank shall have been adopted by the Borrower; and

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(d) The Borrower shall have shortlisted the Financial Management Experts in accordance with the Procurement Plan and the provisions o f the Loan Agreement.

The additional legal matter to be included in the legal opinion consists o f the following: the Environmental and Social Assessment Management Plan and the Anti-Corruption Action Plan have been adopted by the Borrower and are legally binding.

2. Key Legal Conditions

The Borrower shall engage a Procurement Agent in accordance with the Procurement Plan and the provisions o f the Loan Agreement to assist the Borrower in the selection and employment o f the DSC, CTC and Procurement Advisor in accordance with the Procurement Plan.

Except as the Bank shall otherwise agree, the Borrower shall (i) retain the services o f the Procurement Agent until completion o f al l procurement activities for the DSCs, CTC and Procurement Advisor consultants’ services under the Project; and (ii) take al l such steps as are necessary to ensure that the Procurement Agent i s permitted to provide i t s services in accordance with i t s contractual terms o f reference.

The Borrower shall engage a Procurement Advisor in accordance with the Procurement Plan and the provisions o f the Loan Agreement to assist the Borrower in the procurement in accordance with the Procurement Plan o f works for all Sub-Projects.

Except as the Bank shall otherwise agree, the Borrower shall (i) retain the services o f the Procurement Advisor until completion o f al l procurement activities for works under the Project; (ii) ensure that the Procurement Advisor shall at al l times during Project implementation provide reports directly to DOP and shall provide a copy directly to the Inspectorate General in MPW and the Bank; and (iii) take al l such steps as are necessary to ensure that the Procurement Advisor i s permitted to provide his services in accordance with i t s contractual terms o f reference.

3. Bank to assist the Borrower in the procurement o f works for Sub-projects under WP-1 and for consulting services where the Procurement Agent i s not involved, in accordance with the Procurement Procedures set out in the Loan Agreement.

The Borrower shall engage a Public Notary with terms o f reference satisfactory to the

4. based internal audits o f financial controls and technical audits o f selected road sections to determine if the quality o f construction meets the specifications and technical standards included in the bidding documents and contracts. Such audits shall be carried out in accordance with terms o f reference satisfactory to the Bank and the schedule set forth in the Project Management Manual. Copies o f the reports from such audits shall be made available to the Bank promptly upon their completion. Should either the Borrower or the Bank determine that any such audit

The Borrower shall carry out at regular intervals during Project implementation, risk-

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identifies any significant lapse in internal controls, quality o f outputs realized or any significant delay in execution o f the works contracts under the Project, the Borrower shall prepare and submit to the Bank for i t s review and comments a time-bound action plan for remedy o f the identified problems; and shall, promptly after the Bank has discussed the results o f its review with the Borrower, take all necessary action to carry out the time-bound action plan, taking into account the Bank’s comments on such plan.

Economic Internal Rate o f Return (EIRR)

5. financial audit reports (including qualified audit reports) and al l technical audit reports for the Project prepared in accordance with the Loan Agreement and all formal responses o f the Borrower in relation to such reports. The Borrower shall ensure that M P W shall place the information provided for in this paragraph on the M P W official website (http://www.pu.go.id, or any successor website thereto) within one month o f the report being accepted as final by the Borrower.

The Borrower through M P W shall make publicly available promptly after receipt al l final

WORK TYPE Capacity Bridge/

Betterment ExDansion New Roads Flvover

D. APPRAISAL SUMMARY

Annual Work Program WP 1 34% W P 2 60% W P 3 51%

1. Economic and financial analysis

34% 55% 28% - 32 yo 43 yo 27% 79% 49% 31% 72 y o 79%

Economic Analysis (Select Cost Benefit) NPV= US$ Mi l l ion 309.6; EIRR = 41 percent

The Highway Development and Management Model was used to perform the economic evaluation o f the Project. An economic evaluation was undertaken for: (a) each Sub-project; (b) for the proposed three Work Programs (WPs); and (c) for the Project as a whole. The results o f the evaluation o f each Sub-project are presented in Annex 9 using the following three economic indicators: (a) N e t Present Value; (b) Economic Internal Rate o f Return (EIRR); and (c) First Year Rate o f Return (FYRR). The EIRR results for each annual work program by type o f work are shown below.

A sensitivity analysis was undertaken to measure the impact o f significant changes in the user benefits and project costs. These results show that most o f the Sub-projects remain economically viable even in the low-case scenario, which reflects a 20 percent increase in construction costs and a 20 percent reduction in overall benefits.

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2. Technical

The c iv i l works o f the Project involve road betterment, some periodic maintenance o f existing rights-of-way, some road widening from two lanes to four lanes, and new rights-of-way/bypass construction. Generally, the works pose no significant technical problems, although in some areas o f highly plastic swelling and shrinking soil, special construction techniques will be employed. Performance-based Contracting will be applied for the f i rs t time in Indonesia. To increase support by the pertinent agencies, workshops have already been held in a number of locations in Indonesia in preparation for the contracts. Also, a study o f this issue including impacts on Government agencies was carried out by consultants from New Zealand. There are no major technical issues and the significant factor will be the agreement o f the Ministry o f Finance to ensure funds are available for the full implementation period o f this contract.

3. Fiduciary

Financial Management (Annex 7). The Financial Management assessment for the Project was carried out in accordance with the Financial Management Practices in World Bank- Financed Investment Operations issued by the Bank’s Financial Management Sector Board on November 3,2005. The Bank reviewed the financial management capacity and procedures o f the Directorate General Highways (DGH) o f the Ministry o f Public Works (MPW) as the executing agency. The Bank’s team visited DGH at the central level, and the public works offices at the provincial level in Pantura, DKI Jakarta, West Java, Central Java, East Java, Riau; and Traffic Directorate o f Indonesian Police. In addition, the Bank also met with representatives from the civ i l engineering faculty o f Bandung Institute o f Technology and Riau University.

The financial management capacity assessment notes that the Directorate o f Planning o f DGH, M P W has considerable prior experience in managing Bank-financed projects, and sufficient capacity to implement the Project and financially account for it. Such capacity i s however variable at the province Public Works office locations. I t i s noted that the internal control environment in the implementing agencies is relatively weak, which is in part reflected in the relatively high incidence o f fraud and corruption problems reported in previous projects in this sector. This was particularly so in c iv i l works expenditures, which form a large part o f project expenditures in this Project. Finally, substantial inherent risks arise at country and entity levels, due to the weak country control environment overall, although financial management reforms are making headway very gradually. To the extent that this Project will rely on financial management systems and procedures o f the Government, fiduciary risks will arise. Taking al l these factors into consideration, the overall Financial Management risk o f the Project i s rated as “substantial”.

A Financial Management Action Plan has been developed in consultation with the Directorate o f Planning to help mitigate the identified financial management risks. This action plan includes strengthened internal controls through regular technical and financial audits o f Project activities, strengthened payment validation procedures to reduce risks o f fraud, segregation o f some financial functions from the rest o f Project management to maintain checks and balances, documentation o f Project and financial management procedures in a manual to guide Project staff, and steps to train Project staff in financial management procedures.

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This assessment has concluded that, after the implementation o f the actions stated in the Financial Management Action Plan in Annex 7, the Project will satisfy the Bank’s financial management requirements as stipulated in OP/BP 10.02.

Procurement (Annex 8). Procurement activities will be carried out by the Directorate General o f Highways (DGH), Ministry o f Public Works and at the central level and which i s mainly for the technical assistance components; and Public Works Offices at the provincial level in the participating Provinces in Java and Sumatra. DGH, through the Directorate o f Planning (DOP), will manage and coordinate the various implementing un i t s at the central and provincial level. The DOP will include a Procurement Officer who will be supported by the Procurement Advisor, Each o f the implementing units wil l form a procurement committee to procure the packages for which they are responsible.

An assessment o f the capacity o f the Implementing Agency to implement procurement actions for the Project was carried out from December 2004 to September 2005. The assessment reviewed the organizational structure for implementing the Project and the interaction between the Project’s staff responsible for procurement and the Ministry’s relevant central unit for administration and finance. Some aspects o f the Procurement Assessment for SRIP are based on the result o f the Procurement Assessment for the Second Eastern Indonesia Region Transport Project (EIRTP-2), in particular with regard to the legal aspects, procurement cycle management, record keeping, and general procurement environment. The result o f the EIRTP-2 procurement assessment on these aspects i s s t i l l applicable for this Project.

The overall procurement risk o f the Project i s considered “high”. This risk level i s due mainly to the following: (a) the bulk of the procurement packages consists o f large packages o f significant strategic value; (b) a performance based contract pi lot will be introduced (a f i rst in the country, in general, and in this sector, in particular); (c) previous experience in selection o f consultants indicates significant difficulties in terms o f weaknesses in the evaluation process and extreme delays in the planned time schedule; (d) the central P M U will be a newly established PMU, different from existing Bank-funded projects in the transport sector; (e) although many staff at the Central and Provincial level are experienced with donor-funded projects, there i s s t i l l uneven understanding o f the principles o f the Bank’s Procurement Guidelines, and in particular Selection o f Consultants and large I C B Procurement; ( f ) the procurement o f works will be conducted simultaneously, which will stretch the coordination between the DOP and the PIUs and the DOP and the Bank; and (g) the general procurement environment is weak and significant cases o f fraud and collusive practices have been found in past projects in the sector, leading to numerous investigations, re-biddings and cases o f mis-procurement.

The risk mitigation measures which have been agreed are: (a) the tendering o f the three large consultancy contracts under Component 2 - Implementation Support to MPW, as well as the appointment o f a Procurement Advisor, through the designated Procurement Agent, thus avoiding delays and ensuring a transparent process. This Procurement Agent will be responsible for preparing the shortlist and the technical evaluation report and submitting to the procurement committees for four consultancies (CTC, two DSCs and Procurement Advisor); (b) provision o f additional support to the Procurement Officer at the Central Level P M U through the Procurement Advisor; (c) the establishment o f a Procurement Plan for the Project with annual

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updates for the subsequent years; (d) provision o f procurement training during Project Launch, and in particular on performance-based procurement, and annual workshops in every fourth quarter o f GOI’s fiscal year; (e) establishment o f an Anti-Corruption Action Plan for the Project; and (0 the use o f the new e-procurement system once launched by the M P W (subject to the Bank’s assessment o f this system). In the interim, the existing semi e-procurement system can be used as an additional measure to advertise and provide the bidding documents. Strengthened procurement procedures form part o f the Anti-Corruption Action Plan outlined in Annex 15.

Anti-Corruption Action Plan (Annex 15). As noted in the Country Procurement Assessment Report (CPAR- Report No. February 2001), corruption and collusive practices are wide spread in public procurement and during implementation in Indonesia. This indicates that both public and private sectors are willing and able to abuse projects such as SRIP. The resulting financial losses, including substandard quality o f construction (which i s adversely affected by corruption), have been a cause of concern to the Bank and the Government o f Indonesia. The f i rs t serious attempt to reduce corruption in the road sector was introduced under EIRTP-2. The MPW’s oversight o f this procurement has resulted in supervision o f the procurement process and rebidding o f 25 percent o f the contracts. The EIRTP-2 i s in the early stages o f implementation and it i s too early to judge the success or failure o f its Anti-Corruption Action Plan (ACAP). It i s clear that there i s need for a well focused initiative to reduce corruption in the road sector. The key area o f concern i s the procurement process; therefore the enhanced ACAP for SRIP includes use o f e-procurement, elimination o f pre-qualification, pre-bid meetings, confidentiality o f list o f bidders that purchased bidding documents, introduction o f procurement technical expertise, and other measures.

M P W will contract a Procurement Advisor who will have a specific reporting l ine to DGH, DOP and copy to Inspectorate General in M P W and the Bank. The Procurement Advisor i s likely to be a firm with international experience and a strong track record in the provision o f independent monitoring and auditing services, particularly for public procurement.

Given the concern over delays for selection of consultants (more than one year on average) and concerns o f corruption in the process, M P W will contract a Procurement Agent for procurement o f the key consulting contracts under SRIP.

4. Social

The Project is expected to lead to positive social development outcomes, which include improved access for road users and generally a more efficient market for labor, economic goods, services, and other facilities as a result o f new/and or improved access, which will also stimulate economic growth in Java and Sumatra. In addition, property prices for land adjacent to the completed Sub-projects will increase, benefiting those along the roads, including those affected by minor land acquisition not causing displacement.

Negative impacts derive from land acquisition. The mitigation measures to manage land acquisition and resettlement impacts together with consultation, disclosure and monitoring arrangements are described below in Section 6 on Safeguard Policies and in Annex 10.

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The Project will involve a number o f construction workers coming to live in base camps along the project corridors; these workers could potentially spread HIV/AIDS. To mitigate the risks of HIV/AIDS transmission, the construction contracts include clauses requiring contractors to allow their workers to attend education sessions where materials such as awareness brochures and condoms will be distributed. This i s a standard provision in the Standard Bidding Documents used for the works (and agreed between Multilateral Development Banks and FIDIC). This wi l l follow the same methodology developed under the parallel ADB Loan for the Road Rehabilitation-:! Project. This i s a small targeted activity, using existing materials, where the MPW wi l l invite the relevant local health department or non-governmental organizations to provide services such as an initial information session, and one or two follow up meetings during contract execution. This activity wi l l be financed through the contracts and wil l be targeted to a initial few contracts to see the results before expanding further. MPW has been coordinating with the Ministry o f Health on this aspect.

5. Environment

The Project was prepared in accordance with the requirements o f OP4.01 Environmental Assessment, and assigned an EA category “A” due to the potential for significant adverse environmental impacts. As the main type o f civil works wi l l be construction o f new roads, and betterment and capacity expansion o f existing national roads, there may be significant potential environmental impacts which may adversely affect land and soil resources, water and air quality, and natural ecosystems. These impacts are mostly on site locations along the road alignments, and offsite too, in locations where construction and road fill materials are sourced, excavated, stored and processed.

To ensure these significant potential impacts are identified, analyzed and clearly understood so that they can be effectively avoided, minimized, and/or acceptably managed, the GO1 has adopted an environmental management process that i s adequately funded. As part o f this process, GO1 has adopted an overall Environmental and Social Assessment Management Plan (ESAMP), which wi l l serve as the Project’s umbrella Environmental and Social Assessment, setting out a strategic screening process that will ensure all Project-associated adverse impacts are identified, effectively mitigated through the implementation o f tangible measures for each Sub-Project, are monitored both at the Sub-project level and cumulatively, and that the required and sustainable institutional framework for these measures i s functioning and i s monitored. This process i s funded through the Project.

A two-stage environmental screening process has been followed: (a) an initial screening to determine whether any environmental examination i s required, and (b) a second stage screening to determine the extent o f further environmental examination. The screening process wi l l result in categorizing Sub-projects into category “A”, “B”, or “C” depending on the nature, scope, and intensity o f potential adverse impact of the Sub-project. The screening procedure and i t s results are described in full in the ESAMP. Category “A” Sub-Projects, being the most severe, wi l l require Sub-project EIA’ s/AMDALS (Environmental Assessments). Category “B” Sub-projects wi l l require Environmental Management Plans (UKL) and Monitoring Plans (UPL), and Category “C” Sub-projects will require only standard operation procedures (SOP).

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Effective implementation o f the environmental aspects o f the ESAMP will be the responsibility o f the Directorate o f Planning, DGH, through the relevant government agencies at the Provincial, City and District (Kabupaten) levels o f Government. The relevant agencies in Sumatra have received the necessary training under the Bank-financed SRRP. The corresponding agencies in Java have received the same training financed by another project. Training for Bapedaldas at the provincial and local levels in the project area in both Sumatra and Java wi l l receive training on use and application o f ESAMP in 2006 as part o f training on use o f the Project Management Manual. Oversight o f and guidance on ESAMP implementation wil l be provided by the Directorate o f Planning, which i s supported by a Core Team Consultant (CTC) and Design and Supervision Consultants (DSCs) and the Sub-Directorate o f Environmental Affairs at the DGH. The CTC team will include environmental specialists who are directly involved in screening Sub-projects for potential impacts and monitoring implementation.

The Bank has reviewed the ESAMP and the environment safeguard documents for the f i rst batch of Sub-projects in the first years annual work program. Extensive consultations with stakeholders were held. The l is t of consultations, dates, and attendees i s shown o f the ESAMP. The ESAMP and the Work Program-1 documents are disclosed publicly and locally in Indonesia in a manner that complies with the Bank’s disclosure policy, and also at the InfoShop at the Bank. Consultation and information disclosure processes are fully outlined in the ESAMP. Annex 10 provides summary information on the EA instruments for all o f the Sub-Projects.

6. Safeguard policies

The following safeguards polices are triggered by the SRIP project

Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.0 1) [XI [I Natural Habitats (OP/BP 4.04) [ I [XI

Pest Management (OP 4.09) [I [XI Cultural Property (OPN 1 1.03, being revised as OP 4.11) [I Involuntary Resettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OD 4.20, being revised as OP 4.10) [XI Forests (OP/BP 4.36) [I Ex1 Safety o f Dams (OP/BP 4.37) [I [XI

Projects in Disputed Areas (OP/BP/GP 7.60)* [I [XI

Projects on International Waterways (OP/BP/GP 7.50) [I [XI

[XI

[I

The safeguard screening category o f the Project i s “S l ” and the environmental screening category o f the Project i s “A”.

Environmental Assessment (OP/BP/GP 4.01): As described above, the MPW has prepared an overall Environmental and Social Assessment Management Plan (ESAMP), that will serve as the Project’s umbrella Environmental Assessment. The full l i s t o f Bank safeguards policies (10+1) and the environmental requirements o f the GO1 have all been incorporated into the screening

* By supporting the proposedproject, the Bank does not intend to prejudice the f inal determination of the parties’ claims on the disputed areas

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process to ensure that if any one o f them i s triggered by a Sub-project, the requirements o f that policy are complied with if the project i s to fund the Sub-project, or it will be deleted from the approved l i s t o f Sub-Projects.

For WP- 1, the required AMDALs, UKLAJPLs, and SOPS have already been prepared, reviewed and approved by the relevant bodies in Indonesia. Environmental safeguard documents for most o f the Sub-projects under WP-2 and WP-3 Sub-projects have also been prepared. These will be revised as needed and new environmental documents consistent with the ESAMP will be prepared for any new Sub-projects (which might be added to the lists) during implementation o f SRIP.

Natural Habitats (OP/BP 4.04): Project appraisal confirms that this safeguard i s not triggered.

Cultural Property (OPN 11.03): Five cemeteries in Karawang, Semarang, Cianjur, Ngawi, and Tegal, have been identified in areas affected by Sub-projects under Work Program-1 . O f these, the two in Semarang and Cianjur have been relocated after extensive consultation with the local population. I t has been determined that the other three cemeteries can remain in their current location, and steps are being taken to secure them from any potential damage as a result o f construction activities. Screening for cultural property issues will be carried out for al l Sub- Projects under WP-2 and WP-3 as a part o f the environmental screening process as detailed in the ESAMP.

Involuntary Resettlement (OP/BP 4.12): As the Sub-projects in SRIP are rolled out, land acquisition will occur on a varying scale for Sub-projects which require widening o f existing roads or where new roads are constructed on new rights-of-way. To mitigate the risk to people and communities who will be affected by the land use and land acquisition needs o f SRIP, GO1 and the World Bank have agreed to a Land Acquisition and Resettlement Policy Framework. It ensures that compensation i s provided at market prices, that any entitlements to project affected persons are paid out before their land and other assets are taken into possession by the Project that they have been consulted in a participatory manner, and that implementation o f land acquisition, compensation and resettlement, as well as their post- resettlement status i s monitored.

Similar to the management o f environment impacts, GOI’s ESMAP will serve as the Project’s umbrella social management document setting out the strategic screening process that will ensure that al l the Project’s social issues are captured. For individual Sub-Projects, GO1 has prepared four instruments: (a) Land Acquisition and Resettlement Policy Framework (LARF) - to give overall Project guidance for the preparation o f the LARAPs; (b) Land Acquisition and Resettlement Action Plans (LARAPs) - which for specific Sub-projects sets out the processes for and agreements on the compensation and resettlement assistance to be given to project affected people and communities affected by land acquisition; (c) Abbreviated LARAPs - for Sub-projects when fewer than 200 persons are affected; and (d) TRACER studies - as a due diligence investigative report to ensure that in cases where land acquisition and resettlement activities were conducted by local governments before SRIP was prepared, the Bank i s fully informed o f how that process was undertaken, and that post-corrective actions if any, are taken satisfactorily to the Bank.

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Consultations: The ESAMP contains detailed requirements for consultation regarding land acquisition and resettlement. For each Sub-Project, consultations with PAPs were carried out as part o f the preparation o f the L A M P . These consultations comprised information to PAPs on Sub-project design, and their compensation entitlements and options. Moreover, local governments consult with PAPs on compensation since the finalization o f compensation amounts i s done through negotiations (rnusyawarah = deliberation) with PAPs.

Grievance procedures will be available to al l PAPs, and the executing agency and local authorities will be responsible for ensuring that PAPs are aware o f the procedures and have full information concerning the planning and implementation o f resettlement activities.

Monitoring o f implementation o f the LARAP for each Sub-project will be carried out by the local monitoring teams on a bi-monthly basis. Project wide monitoring and reporting will be supervised by DOP and its CTC consultants, and the monthly monitoring reports will be sent to DOP. The Sub-Directorate o f Environmental Affairs (DGH) will be involved in this process. DOP will in turn forward the monitoring reports to the Bank for review and comment. The monitoring consultants and their terms o f reference will be cleared by the Bank. By the midterm review and by Project closure, an evaluation based on terms-of-reference approved by the Bank will be conducted by an independent consultant.

Indigenous Peoples (OP 4. I O ) : N o proposed Sub-project location i s in an area that would affect indigenous people (IP). Most Sub-project locations are in Java and none o f them affect or pass through areas in which IPS live. Other locations o f proposed Sub-projects are in urban areas o f Sumatra (Palembang, Lampung, Jambi) in which no IPS have been identified. For those Sub- Projects that have not yet been finally identified (especially under WP-2 and WP-3), a screening process will be carried out as a part of the EA process to determine whether there are any IPS in the areas to be affected by the Sub-Projects. However, at this point it is not anticipated that such populations will exist in the areas considered likely candidates for Sub-Projects.

Disclosure has been carried out at the World Bank’s Infoshop on February 1 , 2006, the Jakarta Project Information Center, and the web site o f M P W o f the ESAMP with includes the LAW, three AMDALs, an example o f one UKLAJPL, an example o f one L A R A P and one Abbreviated LARAP.

7, Policy Exceptions and Readiness

N o policy exceptions apply. The Project i s ready as assessed against the agreed regional and country criteria.

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Readiness Criteria 1. Monitoring and evaluation performance

indicators, including baseline data, are ready.

2. Counterpart funds for the 1 st year of implementation have been allocated.

3. Land acquisition and resettlement plans are in place, including the required funds.

4. Project Management Units and Project Implementing Units are established and staffed.

5. Final draft o f the Project Management Manual i s ready (covering scope, organization and its TOR, procurement, budgeting, disbursement, reporting and auditing arrangements).

6. Commitments from Regional Governments (if applicable) for participation and provision of counterpart funds are in place.

7. Bidding documents in format ready to issue to contractors Le., including Bill o f Quantities, Drawings, Specs, etc. for each road.

8. EA complete for Each road.

9. Anti-Corruption Action Plan adopted.

10. Disclosure complete.

Status June 2006 Complete - attached as Annex 3 to this document

Complete - Government has confirmed allocations Complete - Government adopted the LARAPs for al l Work Program 1 Sub-Projects at negotiations May 22,2006 and has completed LARAPs for a further six Sub-Projects. Complete

Project Implementation Plan and Project Management Manual complete as o f negotiations May 22,2006 and will be updated using latest Project scope information and finalized as a condition o f effectiveness. Central/Provincial/Local governments will finance land acquisition and resettlement costs. MPW will obtain written confirmation. Drawings and bidding documents are complete in draft. For the Work Program -1 these will be ready to issue to bidding in June 2006 and represent more than 25 percent o f the Project. Complete - Government adopted the agreed EAs at negotiations May 22, 2006 Complete - Government adopted the agreed ACAP at negotiations May 22,2006 and provisions are reflected in the legal agreement. Complete - February 1 , 2006

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Annex 1: Country and Sector Background

INDONESIA: Strategic Roads Infrastructure Project

A. Key development issues and rationale for Bank involvement

1. passenger land travel in Indonesia, playing a critical role in linking communities and markets throughout the country, increasing economic growth, and helping reduce poverty.

The road sector accounts for the major share o f domestic freight and inter-urban

2. country and the population. The level o f sector investment has increased since the end o f the 1997 financial crisis, but has not kept pace with population growth and rising transport demand. In addition, as a result o f decentralization, new provinces and kabupaten are being created which i s leading to the reclassification o f many provincial (and non-status) roads to national road status. The result has been a recent increase in the length o f the national road network from about 27,000 kilometers to about 35,000 kilometers.

The density o f the road network in Indonesia i s relatively l ow in relation to the size o f the

3. The Government’s vision for the national highway sector i s presented in Section A.l o f this document. This annex emphasizes the role o f SRIP in helping realize this vision and in addressing the main issues facing the road sector.

B. SRIP helps ameliorate infrastructure bottlenecks which are hurting growth

4. affecting the economic l i f e and social well-being o f Indonesians. I t i s particularly serious on Java, which i s home to 62 percent o f Indonesians and represents 6.8 percent o f the total land area. Although traffic congestion eased following the financial crisis o f 1997, traffic levels returned to the pre- 1997 levels by 200 1 and continued to grow at about 4-8 percent annually. The need for systematic investments for improving network capacity and i t s management i s severe. Currently, highly congested corridors include North Java, Trans-Sumatra and to a lesser extent the Trans- Kalimantan. According to the Java Arterial Road Network Study (JAWS, 2001), which i s the most up-to-date examination o f inter-urban capacity needs on Java, without further capacity improvements, the share o f the highly congested arterial network will r ise from 4 percent in 2000 to 37 percent by 2010, and by 2020 the entire arterial network in Java would require four-lane capacity.

Traffic congestion along main traffic corridors and approaches to major cities i s severely

5. The 1997 crisis forced deferment o f a substantial program o f upgrading and capacity expansion that was planned by the Government. Few capacity expansion investments have taken place since then. This has created a significant backlog o f capacity expansion needs. Bank financing since the crisis had focused on preservation o f the existing network. In 1998, for example, the capacity expansion component under the Second Highway Sector Project (Loan 3712-IND) and Sumatra Region Roads Project (Loan 4307-IND) was drastically cut to release funds for road preservation. The recent operations to support the two Eastern Indonesia Region Transport Projects (Loan 4643-IND and Loan 4744-IND) once again support preservation o f the existing network. The Asian Development Bank (ADB) has adopted a similar approach by

21

extending two loans for road rehabilitation in Sumatra and Kalimantan. In the past, donor funded projects in Java that include capacity expansion investments included the Bank supported Strategic Urban Roads Infrastructure Project (Loan 4054-IND), ADB supported North Java Transport Corridor Project, and JBIC supported Heavily Loaded Roads Rehabilitation Project. Despite these interventions, arterial road capacity constraints in Java, especially along the North Java Corridor, remain severe. At the request o f the Government, the Bank has responded favorably to support JARNS, other public investments, and potential freeways (some are to l l road) development needs.

6. implementation o f JARNS recommendations. The estimated capacity expansion needs o f the strategic road network in Java are about 7800 km. Donor activities at present consist o f JBIC's North Java Corridor Flyover Project (which focuses on nine locations) and an Urban Flyover Project. The Project coverage will be limited to Java (inter-urban and urban roads) and parts o f Sumatra (urban roads). Some o f the Sub-projects that were identified during preparation in SURIP and SRRP, which could not be funded due to budget constraints, have been included under the proposed SRIP.

Role of the Strategic Roads Infiastructure Project. SRIP will assist with the

C. and private funds

Capacity expansion and maintenance needs are not met due to inadequate public

7. network) has been inadequate since the financial crisis o f 1997, particularly for kabupaten roads. Funding i s expected to stay below the economically justified road expenditure needs over the coming decade. Since road preservation i s s t i l l seen as a general public expenditure responsibility, there i s no explicit recovery o f costs imposed by road users. Currently, road related taxes are treated as a general tax revenue and funding for road programs remains below the collected revenues. Under-funding problems are compounded by unpredictability in the level o f funding. Further, the allocation o f funds among road networks, regions and nature o f treatments i s sub-optimal. In order to meet transport demand, a sustainable and stable source o f finance needs to be established. JARNS estimated the capacity expansion costs o f strategic roads in Java during 2005-20 10 at about U S $ l bi l l ion (in 2000 prices). Recently, Government has announced an ambitious plan to build 1,600 kilometers o f to l l roads over the next decade at an estimated cost o f over US$9 billion. However, given the needed preparation time for such investments, to l l roads will not materially reduce congestion on existing parallel roads before 20 10- 20 12. Also, many tol l roads (especially sections away from big urban areas) will probably require public support to make them attractive to the private sector. Although, the concept o f a road fund financed directly from road user charges has been under discussion for over twenty years, i t was not included in the Road Law o f 2004 and is unlikely to be implemented without concerted support at the highest levels o f Government.

Funding for road programs (preservation, capacity expansion, and extension o f the road

8. and building new l imited access roads where widening beyond four lanes poses difficulty and the potential for introducing tolls is feasible. Moreover, commercially feasible (bankable) sections of roads would be eligible for private participation only if factors affecting private participation are improved. After the financial crisis o f 1997, several inter-urban to l l road sections had been

Based on J A W S analysis, future capacity i s best provided by widening existing roads

22

authorized and negotiated. However, private interest has been limited and few fully conforming bids are being received - this despite the recently enacted reforms mentioned in the last paragraph o f Section A. 1 o f this Project Appraisal Document.

9. relieve capacity problems. The option to expand capacity o f the existing network alignment (of the type proposed under SRIP) thus remains a high priority. However, capacity expansion schemes along the Jakarta - Bandung and Cikampek- Jakarta corridors, and within the Greater Surabaya area take into consideration the likely development o f tol l roads. The Bank strategy i s thus to support public financing o f the highest priority capacity expansion schemes, while working with the Government to accelerate legal and institutional reforms and technical work needed to support high grade highway (some will be tol l roads) development.

In the next five to seven years, tol l road development will remain slow and would not

10. and, in this regard, if the political interest in a road fund can be revived, the Bank should support i t s creation according to the findings o f previous studies.

The cost o f road preservation should be recovered through a fee charged to road users

1 1. Role of SRIP. Road funds sourced from specific road user charges, not from general tax revenue, have been studied over the past 20 years. Recently, the Bank has supported a study o f road funds under TAP41, a workshop in 2001, a technical assistance for socialization o f the road fund concept in 2002, and technical assistance under EIRTP- 1 to establish pi lot road funds in two provinces (study commenced in January 2004). Further deepening and extension o f this work i s being carried out under EIRTP-2. Despite these efforts, the concept o f the road fund i s yet to be accepted. The Road Law o f 2004 does not support the road fund concept. Hence, a high level dialogue between the Bank Country team and the Government on a sustained basis for funding road development and preservation would be necessary. SRIP will not cover the issues of freeways/ to l l roads since they are currently addressed through an ongoing PPITA technical assistance operation and the Bank i s considering extending a loan in FY 2008 towards development o f freeways.

D. Improving sector governance and making decentralization work i s a priority,

12. The need for further reform and institutional strengthening is well recognized within the Government. However, moving the agenda forward will require garnering support as part o f an overall strategy for improving sector performance. A priority l i s t o f key institutional issues in the sector includes:

e Rethinking the role of central agencies. Under decentralization the role o f M P W has changed from an operational role to one o f policy/ resource allocation and provider o f technical guidance to regions. However, DGH has yet to adequately assume this role under the ongoing decentralization efforts.

Improving sector management. Government has invested heavily to build capacity at central and regional levels, and to develop and apply improved planning and programming tools. However, these tools have yet to be extended to meet the needs o f the provinces and Kabupatens, who have increasing responsibilities in the transport

23

sector. However, the Government has recently restricted the role o f Jasa Marga as an operator o f to l l roads only and created the Indonesian Tol l Road Authority (BPJT) for policy and development purposes.

Tackling corruption and quality of construction. Road works tend to be expensive and the quality o f works i s often inadequate. This results in reduced useful l i f e o f roads while increasing demand for rehabilitation fund. It i s also linked to unhealthy procurement practices and related corruption. The public sector loss from corruption and poor quality o f construction can reach up to 50 percent o f road sector investment.

Enforcing truck overloading regulation. Truck overloading is widespread in Indonesia leading to premature failure o f roads and increase in maintenance costs. It i s estimated that as many as 90 percent o f trucks are overloaded, greatly undermining sector sustainability .

Improving road safety. Road accidents and fatalities continue to be a national problem despite the continuous support by the Bank, ADB and others over the past 25 years.

13. Under decentralization DGH has deconcentrated many o f its technical staff to the regions. The Bank i s currently supporting decentralization efforts through the implementation o f EIRTP- 1 and EIRTP-2. Technical assistance and an implicit “learning-by-doing” approach have been extended. However, DGH still retains a strong influence in implementation o f regional programs, in part, due to limited local capacity and funding constraints. As regions become less reliant on the center for funding and implementation support, the role o f DGH would evolve. The Bank’s strategy is thus to support DGH in various areas, including improving the framework for information sharing among regions, building capacity, and to strengthen i t s role in policy setting and provision o f technical guidance to regional government.

14. procedures (PPBP) are being developed under EIRTP- 1 , while application and further training will be extended under EIRTP-2 and SRIP. The part o f planning tools dealing with urban road management systems (URMS) needs further development. Also, there is need to update the set of road design standards and guidelines for Indonesia.

In support o f recent decentralization policy, planning, programming, and budgeting

15. procurement, stricter supervision by consulting firms, independent technical audits, and intensifying training in project and contract management. Moreover, under new projects the Bank has introduced anti-corruption action plans. However, more effort would be necessary to bring awareness within al l levels o f government and stakeholder groups.

The Bank i s addressing construction quality by increasing transparency and efficiency in

16. Due to poor enforcement and corruption, progress on truck overloading control has been limited. Under SRRP, a pi lot program o f commercial weigh station operation was found effective in reducing overloading and it is recommended that it be expanded to cover other areas in Indonesia.

24

17. blackspot investigatiodelimination programs (under SRRP and EIRTP- 1). The Bank would continue to support such efforts under a responsive institutional framework. Sustainability o f current initiatives is uncertain due to poor coordination between responsible agencies. The project steering committee established to coordinate road safety has so far proven ineffective. Hence, the first step would be to identify a high-level “champion” for road safety who would provide leadership in developing a national strategy that may seek Bank support.

The Bank strategy on road safety has been to support targeted initiatives, such as accident

18. have a shared vision for reform and development o f the road sector. Consequently, in the coming months the Bank will have extensive discussions with the Government to clearly define what needs to be done, priorities, timing o f implementation o f various actions, and generalized implementation strategy. It i s important that this effort be coordinated with other donors, especially ADB, JBIC and AusAID. The strategy to implement the agreed program would take into consideration the following: (a) program should be demand driven by GO1 and reflect their priorities which will increase their commitment to the program and increase the probability o f sustainability in the future; (b) implementation to be shared by various donors considering the comparative advantage o f each; (c) investment projects to be used as a mechanism to implement the various components o f the agreed program; (d) each investment project to focus on few elements/ TAs rather than overload projects with many TAs which reduces the burden on DGH/ M P W to administer the implementation and increases the probability o f success and sustainability o f the TAs.

Recent discussions between the Bank and GOI/ M P W have demonstrated the need to

19. government through technical assistance and training. Initially, SRIP was to include most o f the areas mentioned in the previous section. However, due to the large increase in cost o f construction (due to the huge increases in price o f fuel and bitumen in 2005, especially in October) and in order to increase the effectiveness and sustainability o f TAs (as discussed in paragraph 18 above), it was agreed with GO1 to reduce the scope o f the TAs under SRIP. It i s understood that areas which have been deleted will be addressed under future Bank-financed projects or projects financed buy other donors, especially ADB. SRIP will address road safety (through improving manpower skills o f the traffic police). Development o f a bridge management system will now be handled by JBIC. Truck overloading will probably be considered under the proposed National Roads Improvement Project (NRIP) in FY 2007. ADB is supporting a truck over-loading program.

Role of SRIP. The Project aims to strengthen sector governance at the national level o f

20. have confirmed corruption under SRRP, EIRTP- 1 and SRIP preparation. Also, despite the implementation o f an Anti-Corruption Action Plan (ACAP) for EIRTP-2, about 25 percent o f the civ i l works packages that have been bid have exhibited collusion. Corruption i s a major problem facing the road sector at a l l levels o f government, however, i t is not restricted to roads or to the Ministry o f Public Works. It is a national problem and GO1 at the highest level i s targeting it and taking concrete actions to reduce corruption. Also, the Bank’s institutional focus on corruption issues has increased several-fold recently.

Corruption. Investigations by the Bank’s Department o f Institutional Integrity (INT)

25

2 1. East Asia and Pacific Region’s Infrastructure Unit, Operations Policy and Country Services department and INT. I t emphasizes third party independent monitoring and strengthening o f the Supreme Audit Institution (BPK) for fiduciary audits, the Anticorruption Commission (KPK) for forensic investigation/ sanctions, and the Inspectorate General in the MPW for audits o f road- related activities. This initiative was discussed by a high level mission from the Bank with the GO1 at the highest levels around mid February 2006. The GO1 was receptive to the ideas, but has not yet formally agreed to it. The lessons learned from implementation o f the ACAPs under EIRTP-2 and other ongoing Bank projects in Indonesia wi l l be built into the ACAP to be developed for SRIP and agreed during project appraisal. Further, a representative o f INT wi l l participate in the appraisal mission for SRIP to help finalize the ACAP for SRIP. Moreover, the Bank at both headquarters and Jakarta needs to increase i ts resources to tackle and monitor efforts to reduce corruption. Corruption i s a long term problem which can not realistically be solved through one or two road projects. I t requires genuine commitment and effective policies and actions from the GO1 including MPW as well as leadership, support, and steady and focused monitoring by the Bank.

A new initiative to address corruption issues under SRIP i s being developed jointly by the

26

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies

INDONESIA: Strategic Roads Infrastructure Project

Sector Issue

Bank-financed

- Development planning, capacity in north Java corridor, and investment cost recovery.

- Restoration o f main road networks, central and Provincial institutions, and road transport policy.

- Planning and implementation of road investment and maintenance, priority o f preservation, and road transport regulations.

- Efficiency o f road subsector, road policy, and annual programming.

- Road policy implementation, annual programming, capacity expansion and institutional strengthening.

- Mobility in 25 Kabupatens, institution building at Kabupaten level, and annual programming.

- Management o f district road programs, implementation, and labor-based technology.

- Access and preservation in 73 Kabupatens, capacity of all institutions regarding Kabupaten roads.

- Access and preservation in 5 1 Kabupatens, institutional capacity, ippropriate technology, social and snvironmental imDacts.

Project

Jakarta - Cikampek Highway Project, Ln, 2049-IND, 198 1-90

Highway Betterment Project, Loan 2404- IND, 1984-88.

Highway Maintenance and Betterment Project, Ln. 2717-IND, 1986-90

Highway Sector Project, Ln. 3 133-IND, 1989-95.

Second Highway Sector Investment Project, Ln. 3712-IND, 1994-2000

Rural Roads Development Project, Ln. 2083-IND, 1982-87

Second Rural Roads Project, Ln. 2881-IND, 1987-94.

Third Kabupaten Roads Project, Ln. 3490-IND, 1992-97.

Eastern Indonesia Kabupaten Roads, Ln. 3579-IND, 1993-99.

Latest Supervision (PSR) Ratings

(Bank-financec ~

Implementation Progress (IP)

irojects only)

Development 0 bj ec tive

(DO)

S

S

S

S

S

S

S

S

S

27

- Access and preservation in 27 Kabupatens, institutional capacity,

- Integrating planning and management o f transport infrastructure in region, road development and preservation, resources use and service delivery.

- Decentralizing responsibility for the planning, design, construction, maintenance, management and regulation o f urban transport from central to local government. Access and preservation o f primary arterial National roads in 15 provinces in Eastern Indonesia Region and improved road management. Connectivity, access and preservation o f national roads in 16 provinces and 3 7 kabupaten improve road management and support decentralization in Eastern part o f Indonesia, 16 provinces and 37 kabupaten.

Other development agencies In Sumatra, Java and Kalimantan, using much o f the same sectoral analytical basis and approach as the EIRTP.

Capacity expansion in congested corridor.

Capacity expansion on heavily trafficked routes.

Fifth Kabupaten Roads Project, Ln. 3732-IND, 1994-99.

Sumatra Region Roads Project, Ln. 4307-MD, 1998-2005. Closed December 2005

Strategic Urban Roads Infrastructure Project (SUMP), Ln. 4054- IND, 1997-2003.

Eastern Indonesia Region Transport Project (EIRTP-l), Ln. 4643-IND, closing June 30,2006. Second Eastern Indonesia Regional Transport Project (EIRTP-2), Ln. 4744- IND, ongoing

ADB Roads Rehabilitation (Sector): two projects: one i s almost completed and the other i s ongoing. ADB North Java Transport Corridor Project-completed. ... .......... JBIC Heavy Loaded Roads Improvement Project- one i s on going and the other i s completed.

[mplementation Progress (rp)

S

S

S

MS

MS

Development 0 bj ective

(DO)

S

S

S

MS

MS

28

Removal o f bottlenecks.

Access and capacity expansion.

Capacity expansion o f east coast heavily trafficked routes

Tanjung Priok main national seaport accessibility

Accessibility to Java from Madura island

JBIC North Java Flyover Project and Urban Arterial Road Improvement Project - both projects are ongoing. JBIC 18 provinces replacement and new construction-planned.

JBIC Sumatra East Coast Highway, ongoing.

JBIC, Tanjung Priok Seaport Access Road

China: Surabaya - Madura Bridge, on going

Implementation Progress (IP)

Development Objective

P O )

DO Ratings: HS (Highly Satisfactory), S (Satisfactory), MS (Moderately Satisfactory), U (Unsatisfactory), MU (Moderately Unsatisfactory), HU (Highly Unsatisfactory)

29

Annex 3: Results Framework and Monitoring

INDONESIA: Strategic Roads Infrastructure Project

I

1 Project Development Objective

To improve economic competitiveness by improving the capacity and quality of strategic national roads on the Borrower’s islands o f Java and Sumatra, improving road safety and increasing the efficiency, quality and transparency o f works procurement and implementation in Indonesia’s Ministry o f Public Works.

1 Intermediate Outcomes

Outcome One: Reduced congestion and increased travel speeds on project roads.

Outcome Two: Construction Supervision and project management support effective and performance based constructing pilot program implemented as designed.

Project Outcome Indicators

Reduced congestion and improved traffic safety on project roads.

Intermediate Outcome Indicators

Outcome One: Pace o f construction as expected. Average travel speeds and traffic levels increase per projections.

Outcome Two: CTC and DCS team perform effectively. Performance based constructing pilot program implemented as designed.

Use of Project Outcome Information

Year 1-Year 2: Gauge speed and transparency in procurement.

Year 2-Year 4: Gauge quality and pace of civil work construction.

Year 5: Assess impact and sustainability o f road investments through assessment o f quality of construction and maintenance practices.

Use o f Intermediate Outcome Monitoring

Outcome One: Year 1-Year 3: Improper construction management may result in increased congestion, which should be addressed.

Year 3-Year 5: Congestion should begin to reduce as sub- projects are completed. Proper intersection designs will be critical to ensuring the benefits of increases road capacity and quality. Outcome Two: Year 1 : Gauge speed and effectiveness o f Procurement Agent in terms of timeliness and quality of consulting service procurement.

Year 2-Year 5: Gauge performance of consultant and compliance with agreed TOR. Independence and role o f construction supervision and design team are important to ensuring quality of construction.

Year 2: Ensuring quick start-up of PBC pilot to ensure adequate period for implementation.

30

Intermediate Outcomes

Outcome Three: Anti-Corruption Action Plan implemented and road safety improved,

Intermediate Outcome Indicators

Outcome Three: Number o f Technical Audits carried out and project procurement conducted in compliance with Guidelines. Road accidents reduced on project roads.

Use of Intermediate Outcome Monitoring

Outcome Three: Year 1-Year 3: Gauge effectiveness and capacity o f audit team and monitor procurement corruption indicators and complaints.

Year 3-Year 5: Gauge effectiveness o f follow up on technical and financial audit results. Monitor road safety statistics in Droiect area.

31

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Annex 4: Detailed Project Description I N D O N E S I A : Strategic Roads Infrastructure Project

1. The US$287 million Project wi l l cover five provinces in Java (West Java, Banten, Central Java, and East Java) and three provinces o f Sumatra (Lampung, Jambi, and South Sumatra Palembang). The Project addresses a discrete portion o f road preservation, capacity expansion, and development o f bypasses in Java and Sumatra, and consists o f three main components (excluding the Front End Fee o f US$0.52 million):

Component 1 - Improvements to Strategic National Roads (US$262.1 million); Component 2 - Implementation Support (US$20.1 million); and Component 3 - Road Sector Institutional Development (US$4.1 million).

2. supported Strategic Urban Road Improvement Project, and the Asian Development Bank’s funding o f the North Java Roads Improvement Project, and in Sumatra under the World Bank funded Sumatra Region Roads Project. The components o f the Project are detailed in the following sections. Costs shown besides each Project component include contingencies but exclude value added tax (VAT).

The Project follows from work already undertaken in Java under the World Bank

Component 1 - Improvements to Strategic National Roads (US$262.1 million). This component consists of:

(a) Betterment o f approximately 155 kilometers o f urban and inter-urban roads;

(b) Expansion o f road capacity on approximately 85 kilometers o f urban and inter- urban roads, including bridges;

(c) Construction o f approximately 55 kilometers o f new urban and inter-urban roads, including bridges;

(d) Construction o f a new bridge o f approximately 50 meters on an inter-urban road in central Java; and

(e) Implementation o f a Performance-Based Contract Pilot Program on an approximately 1 10 kilometer section o f the North Java Corridor, involving betterment o f approximately 10 kilometers and maintenance o f approximately 1 10 kilometers.

4. The Project will be implemented over five years, and wi l l encompass about 24 Sub- Projects in 22 packages, six o f which are expected to commence during the f i rs t year o f the project. LARAPs for these first year Sub-projects have been prepared and adopted and i t i s expected that land wi l l be acquired and affected persons compensated by June 2006. No Sub- Project wi l l commence construction until al l necessary land acquisition and resettlement are finalized to the satisfaction o f safeguards personnel o f MPW and the Bank.

34

under PBC Total

5. Criteria for selection of Sub-projects are as follows:

401.46 248.04 $617,839

the proposed Sub-project must be approved by DGH as a priority, must be compatible with regional and local plans, and must be included in the relevant WP approved by the Bank;

the proposed Sub-project must have a minimum economic rate o f return o f 15 percent as calculated in a manner satisfactory to the Bank, or a lower economic rate o f return if the Bank agrees;

the proposed Sub-project has a minimum international roughness index (IRI) o f 6.0 and a surface distress index (SDI) o f more than 50 to be proposed for inclusion as a betterment Sub-project;

the proposed Sub-project must have a minimum volume to capacity ratio o f 0.6 to be included as a capacity expansion Sub-project;

the necessary counterpart funding to fully finance al l works and activities must be available for the Sub-project to be implemented in accordance with the schedule in the Procurement Plan;

appropriate engineering, social and environmental standards and practices that would minimize any acquisition o f land and avoid involuntary resettlement o f displaced persons must have been considered in the design o f the proposed works and activities;

for proposed works and activities involving the involuntary resettlement o f Project Affected Persons (PAPs), (i) a Land Acquisition and Resettlement Action Plan (LARAP) or an abbreviated L A R A P when fewer than 200 PAPs are concerned must be prepared in accordance with the ESAMP and in consultation with said PAPs; (ii) such LARAP or abbreviated L A R A P must be approved by the Bank; and (iii) every PAP must be compensated and/or provided with a resettlement site and moving allowance prior to the taking o f the land and related assets. Such compensation and provision o f resettlement site and moving

35

allowance must be substantially completed prior to the signing o f the contract for the carrying out o f such works or activities; and

N o Su b-P ro jec t 1 Karawang Bypass 2 SemarangNRR

3 Demak Bypass

(h) for proposed works and activities, the environmental impact assessment requirements must be completed according to the ESAMP, including the provisions relating to cultural property, as approved by the Bank.

Km Type Province 1 1.47 New Road West Java 2.23 Capacity Central Java

7.00 Capacity Central Java Expansion

Exoansion

6. lists the Sub-projects by work program, province, type o f improvement, length, metropolitan or no-metropolitan, indicative cost, and indicative implementation period. Work Program 1 i s defined in Table 2 below as the f i rs t six Sub-Projects. The Sub-projects in the Table 3 under WP- 2 and WP-3 might change to reflect changing circumstances. Each WP will be cleared by the Bank before procurement starts.

The Sub-projects already included under SRIP are given in Table 3 below. This table

4 5 6

Ngawi Ring Road 10.75 New Road East Java Karangampel - Cirebon 28.5 1 Betterment West Java Cianjur Ring Road 7.50 NewRoad West Java

36

22.

37

- - Keprekan I 8.60 I Capex I Java I 88,373,360,356 I 9,819,262 I 1,141,775 TOTAL I 401.5 I I 2,237,143,046,048 I 248,571,450 I

Component 2- Implementation Support (US$20. I million). This component consists o f

(a) Support to the Directorate o f Planning o f M P W and the P M U in Project implementation, including environmental management, project performance monitoring, implementation o f the Anti-Comption Action Plan, and financial management, monitoring and reporting. These services will be provided by Core Team Consultants (CTC) whose terms o f reference are available in the project files, and the Borrower's Project Implementation Plan. This sub-component includes supply o f office and communications equipment to support management and implementation o f the Project by Directorate o f Planning, equipment to support PUSDATA o f the Secretary General o f MPW, and financing o f incremental operating costs such as staff travel, per diems, communications, consumables, web page establishment and maintenance, advertising o f bidding, printing and publication o f project information, rental o f meeting facilities; and costs related to financial and technical audits by the Inspectorate General o f Ministry o f Public Works which expenditures would not have been incurred absent the Project;

(b) Assistance to M P W in the design o f works, pre-contract activities, supervision o f construction and implementation management for Sub-Projects;

(c) Assistance to M P W in preparation and implementation o f the Performance-Based Contract Pilot Program;

(d) Assistance to M P W in the procurement o f consultancy services and works, including in implementation o f the Anti-Corruption Action Plan; and

(e) Assistance to M P W in carrying out financial and technical audits on Project works.

Component 3 - Road Sector Institutional Development (US$4. I million). This component consists o f two aspects o f the required to support the road sector in Indonesia (with emphasis on Java and Sumatra). Discussions are underway with the M P W regarding the need to address various aspects, including: Updating the standard Indonesian Road Design Manual with emphasis on filling in gaps in technical base, identifying sections which require updating to meet best practices appropriate for Indonesian conditions and affecting those updates, and setting up an appropriate institutional structure for distribution o f the revised manual and the training o f al l local agencies involved in highway development; Identifying the changes to be made to the Indonesian Highway Capacity Manual (it i s now about 10 years old and uses an outdated DOS platform) and developing the terms of reference, budget cost estimate, and time schedule to affect those changes and to train staff in the use o f the revised manual; Extend the initiative started under EIRTP- 1 in the development o f planning, programming, and budgeting procedures to cover three provinces in Sumatra and five provinces in Java; and continuation o f the successful axle-load control pilot that was developed under an earlier Bank supported project. There are various funding agencies active in the road sector and some o f these activities will be taken up under their financing. For example the new Road Sector Development Loan supported

38

by the Asian Development Bank included a component on axle-load control. Specifically funded under this Project are only the following two sub-components:

(a) Supporting Indonesia’s overall road safety strategy (US$3.5 million) by: (i) developing an integrated road safety strategy and long-term plan, including an institutional framework; and (ii) developing a pilot integrated road accident database/analysis system, and establishing self-sustaining personnel development procedures for traffic police; and

(b) Training o f Project staff (US$0.6 million) in the application o f the Project Management Manual, including procurement procedures, financial management procedures, reporting procedures, and in the application o f the Anti-Corruption Action Plan and the Environmental and Social Assessment Management Plan.

39

Annex 5: Project Costs

Republic of World Bank Indonesia Loan

INDONESIA: Strategic Roads Infrastructure Project

Total

Cost by Project Component

11 US$ 1 = 9000 IDR 21 Costs exclude cost o f land acquisition and resettlement as well as taxes which are funded directly by Government. 31 Design and supervision services are calculated at 4 percent o f the cost o f the works for design (excluding the roads already designed) and 4 percent o f the cost o f works for supervision 4/ Consultant services represents approximately 10 percent o f Loan amount, including PPFs 51 Unallocated consists o f physical and price contingencies on civil works

Category Works Goods Consultant Services (CTC, DSCs, PBC,

(US$) (US$) (US$) 7437 1,429 174,000,000 248,57 1,429

0 1,325,000 1,325,000

40

Cost by local and foreign inputs

Category Works Goods Consultant Services (CTC, DSC, PBC,

Local Foreign Total (US$) (US$) (US$)

109,371,429 139,200,000 248,571,429 265,000 1,060,000 1,325,000

Procurement Agent and Advisor) Consultant Services (Road Safety)

I Training. I 360.000 I 240.000 I 600.000 I

10,110,000 6,740,000 16,850,000 1,500,000 1,000,000 2,500,000

" Incremental Operating Costs 540,000 360,000 Refund o f Project Preparation Advances 1,230,000 820,000

900,000 2,050,000

41

Front End Fee Una1 located

TOTAL

0 520,000 520,000 5,930,571 7,548,000 13,47837 1

129,307,000 157,488,000 286,795,000

Annex 6: Implementation Arrangements

INDONESIA: Strategic Roads Infrastructure Project

1. level ministries. The provinces, districts and their respective local governments where the project roads are located have a role in accordance with the Government’s regulations on decentralization, particularly with regard to land acquisition, resettlement and environmental monitoring.

The Strategic Roads Infrastructure Project i s a national level project, executed by national

2. chair a Steering Committee to oversee the Project activities and allow agencies concerned with the Project to be represented at the policy level. I t wi l l be the responsibility o f the Steering Committee to facilitate coordination among the provinces, and within and access the departments.

The National Development Planning Agency (Bappenas), Deputy for Infrastructure, wil l

3 . Executing Agency. The Ministry o f Public Works (MPW) i s the executing agency through i t s Directorate General o f Highways (DGH). The Directorate o f Planning (DOP), within the DGH, i s the implementing agency and wi l l be responsible for the day-to-day activities and has established a Project Management Unit (PMU) to be responsible for managing all activities o f the Project.

4. Implementing Agency. The DOP wi l l be in charge o f day-to-day implementation o f all components o f the project, with the exception o f the road safety strategy (Component 3 [a]). The DOP has established a Project Management Unit which wi l l be assisted by full time, qualified staff.

5 . be responsible for each o f the respective Sub-Projects. They will report to the Directorate o f Roads and Bridges for Western Region (DRB-WR) for non-metropolitan Sub-projects and to the Directorate Freeways and Urban Roads (DFUR) for metropolitan Sub-Projects. DRB-WR and DFUR will guide, supervise and monitor the Satkers during implementation. DRB-WR and DFUR report to DOP in regard to contract administration, and progress o f the Project. The SRIP project wi l l be implemented in accordance with this existing arrangement. I t i s the Bank’s understanding that DGH i s now preparing a new organization structure o f implementation unit as mandated by new Law no 17 year 2003 on State Budget and Law no 1 year 2004 on State Treasury. Current discussion indicates that, starting 2007, DGH will establish several implementation units (PIUs) through out the country, which wi l l be responsible for national road project implementation. The PIUs wi l l be responsible for implementation o f each Sub-Proj ect within respective region o f PIU. The PIU report to Directorate o f Roads and Bridges for Western Region (DRB-WR) for interurban Roads and to Directorate Freeways and Urban Roads (DFUR) for urban roads. DRB-WB and DFUR wi l l report to DOP in monitoring loan funded project implementation progress. For the purposes o f the SRIP project, the Bank w i l l assess a new arrangement once DGH decide the new organization structure o f Implementation Unit.

Satker (Project Manager) ofDGH. The Satkers o f DGH located at the Project site, wi l l

6. implementing the Project: the Core Team Consultant (CTC), the Design and Supervision

Support Consultants. The DOP’s PMU wi l l be assisted by the following consultants in

42

Consultants, the Consultant for the Performance Based Contract. Terms o f Reference for the various consultants are available in the PIP. P M U and CTC will liase with the Traffic Police and DGLT regarding that component o f the Project.

7. aspects o f the Project and will issue recommendations for sanctions as appropriate. The IG i s responsible for the internal financial and technical audits o f the Project. Audits will cover design, bid preparation, procurement and construction. Currently, IG undertakes routine annual internal financial and technical audits on all projects under MPW. The audit reports contain findings o f any irregularities in project implementation, and recommends actions to be taken, Le., repayments, corrections, and sanctions. IG carries out further investigations in case o f strong evidence o f criminal wrong-doing. The audit report i s submitted to M P W and the respective Directorates General within MPW. DGH, through i t s respective implementation directorates are responsible for following up on IG’s recommendations and must report back to IG on actions taken and inform DOP subsequently. IG makes sure that any follow-up actions taken by the DGH comply with i t s recommendations. IG will issue its statement o f compliance if it i s so. Bank experience in the past shows that IG recommendation o f sanction to be exercised or followed up by the DGH were either not clear or very light. IG i s expected to be specific and clear to i t s recommendation. Any cases with strong indication o f criminal action shall be taken into further investigation by prosecutor.

Inspectorate General. The Inspectorate General (IG) o f M P W will monitor the fiduciary

8. land acquisition and resettlement according to agreed policies and for environmental monitoring. Local governments contribute the most to financing and implementing land acquisition and resettlement since their community i s the one who suffer most from existing road conditions. However, the Ministry o f Public Works, according to the Road Law, i s responsible for national roads, therefore the ultimate responsibility to finance land acquisition and resettlement falls to MPW. M P W will be responsible to ensure that the land acquisition and resettlement has been executed in full prior to commencement o f the works contracts, irrespective o f implementing or funding party. With regard to environmental monitoring, the local environmental office, Bapedalda will be responsible for monitoring all environmental aspects o f implementation. The DSCs responsible for construction supervision on site will provide the local environmental office with a report on environmental related activities. Under special circumstances, as required in AMDAL, the local environmental offices will test, check and monitor the site by themselves. The Project will provide the necessary budget, facilities and equipment accordingly for these purposes.

Local Governments. Local governments are responsible for financing and implementing

9. safety action plan. With regard to the Road Safety sub-component 3 (a), and in l ine with i t s relative institutional responsibilities, the Directorate General o f Land Transport o f the Ministry of Transport will be the implementing unit responsible for Component 3(a)(i) o f the Project. The Directorate o f Traffic Police o f the Indonesian National Police will be the implementing unit responsible for Part 3(a)(ii) o f the Project. The Borrower shall establish a Road Safety Steering Committee to oversee the process o f implementation and coordination o f Part 3(a) o f the Project within one month o f the Effective Date. The Project’s PMU will act as the secretariat to the Road Safety Steering Committee.

Ministry of Transport and Indonesian National Police. Indonesia has adopted a road

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Annex 7: Financial Management and Disbursement Arrangements

INDONESIA: Strategic Roads Infrastructure Project

A. Summary o f the Financial Management Assessment

The Strategic Road Infrastructure Project will be financed as a Specific Investment Loan, with a total Project size o f US$ 287 million, o f which US$ 208 mil l ion will be funded from this loan. The Directorate General o f Highways (DGH) of the Ministry o f Public Works (MPW) is the executing agency for this Project. The Directorate o f Planning (DOP) within DGH i s the implementing agency. The Directorate o f Land Transport in the Ministry o f Transport and the Directorate o f Traffic Police in the Indonesian National Police are the implementing agencies for the roads safety strategy component.

The Bank undertook a financial management assessment to determine if the financial management system of the executing agency had the capacity to produce timely, relevant and reliable financial information on the project activities, and if the accounting systems for the project expenditures and underlying internal controls were adequate to meet fiduciary objectives and allow the Bank to monitor compliance with agreed implementation procedures and appraise progress towards i t s objectives. The financial management assessment was carried out in accordance with the Financial Management Practices in World Bank- Financed Investment Operation ”, November 2005 guidelines issued by the Financial Management Sector Board. As part o f the assessment, the DGH offices at the central Ministry and their regional offices at Pantura, DKI Jakarta, West Java, Central Java, East Java, Riau were visited. The Bank also met with representatives o f the Civ i l Engineering Faculty at Bandung Institute o f Technology and Riau University to assess their potential involvement in Project oversight.

In terms o f financial management capacity, the assessment notes that the DGH and i t s DOP have considerable prior experience in managing Bank financed projects, and sufficient capacity to implement the Project and financially account for it. Such capacity is, however, variable at the provincial Public Works Dinases. The assessment also noted that the internal control environment in the executing agencies i s relatively weak, which is in part reflected in the relatively high incidence o f fraud and corruption problems reported in previous transport projects. This was particularly so in civ i l works expenditures, which form a large part o f total expenditures in this Project. Finally, substantial inherent r isks arise at country and entity levels, due to the weak country control environment overall, although financial management reforms are making progress very gradually. To the extent that this Project relies on financial management systems and procedures o f the Government, fiduciary r isks will arise. Taking al l these factors into consideration, the overall financial management risk o f the Project i s rated as “Substantial”.

An action plan has been developed, in consultation with the DGH, to help mitigate the identified financial management risks. This Financial Management Action Plan includes strengthened internal controls through regular technical and financial audits o f project activities, strengthened payment validation procedures to reduce r isks o f fraud, segregation o f some financial functions from the rest o f project management to maintain checks and balances, documentation o f Project and financial management procedures in a manual to guide project staff, and steps to train Project staff in financial management procedures.

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This assessment has concluded that after the implementation o f the actions stated in the Financial Management Action Plan, the Project will satisfy the Bank’s financial management requirements as stipulated in OP/BP 10.02.

B. Country Issues

Weaknesses in the country’s financial management systems have been well documented. The Country Financial Accountability Assessment completed by the Bank in 200 1 concluded that the control environment in Indonesia was weak. The Asian Development Bank Country Governance Assessment Report (September 2002) similarly concluded that there was need for reform o f the national financial management system following the decentralization process in the country.

The Ministry o f Finance issued a White Paper in 2002, laying out the principles for reform o f public financial management in the country. Since then, there has been steady, though slow, progress in implementing these reforms. In particular, the regulatory instruments needed to initiate reforms have been issued, including the State Finance Law no. 17/2003, State Treasury Law no. 1/2004 and the Public Accountability Law no. 15/2004, which provide a legal basis for improvements in the country’s public financial management.

Implementation o f these new laws and regulations i s making gradual progress. The Ministry o f Finance has been reorganized and the Budget and Treasury functions have been separated into distinct Directorates in l ine with international good practice. The budget proposal for 2005 introduced functional and program classifications, with a stronger focus on the outputs and performance o f budget entities, and presentation o f budgets using the international standard GFS200 1 classification. The system o f State Treasury Management and Budget Execution is being modernized, with the gradual automation o f treasury operations and the introduction (on a pi lot basis) o f a Treasury Single Account. Concurrent with the introduction o f far reaching changes in budgeting procedures, the Ministry o f Finance experienced considerable delays in issuing i t s Budget approval documents (DIPA) during 2005. However these teething problems have been substantially overcome, and for fiscal year 2006, DIPA’s for most agencies were issued on time in January 2006. N e w modern accounting standards for Government agencies have been promulgated, though implementation o f these standards i s likely to pose challenges due to capacity constraints. A set o f consolidated financial statements o f the Central Government, were prepared on a modified accrual basis for 2004 for the f i rst time and received a disclaimer audit opinion by the Supreme Audit Board (BPK). A similar set o f financial statements have also been issued for 2005.

Indonesia has st i l l an ambitious reform agenda to implement. The next phase in fiduciary reforms will focus on streamlining the implementation o f recent laws through the issuance o f corresponding regulations, including modernization and automation o f the Treasury, including full introduction o f the Treasury Single Account; and strengthening capacity o f the Supreme Audit Board and o f the internal audit function in the country. The Government has committed to the implementation o f this reform agenda with the support o f the World Bank and other donors, and these are supported under the World Bank’s financed Government Financial Management

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and Revenue Administration Project and Asian Development Bank financed State Audit Reform Project.

This situation impacts the financial management arrangements for this Project to the extent that this Project relies on Government financial management and project implementation systems.

C. Risk Assessment and Mitigation

Risk

Inherent risk Country level

Entity level

Project leve 1

Budgeting

Accounting

Internal control

Risk Rating

H

H

H

S

S

H

Risk mitigation measures incorporated into project design

Continued support to PFM reforms through GFMRAP, in coordination with similar work being done bv other donors Inclusion o f audit cost for Inspectorate General, MPW, to conduct technical audits (covering financial aspect and internal controls) for Project implementation with terms o f reference acceptable to the Bank. Financial management consultants will help strengthen capacity to prepare consolidated interim quarterly financial reports Project Management Manual includes clear description o f financial management procedures for guidance o f Project staff. The Anti Corruption Action Plan covers: - civil society involvement in the procurement

process - audit report access to the public - monitoring by KPK (anti corruption agency) - strengthened payment validation procedures.

Annual budgets and work programs w i l l be required. Budgeting control procedures o f Government o f Indonesia to be followed.

Use o f government Chart o f Account and loan simplified category for Bank reporting.

Strengthened internal controls will include regular internal technical and financial audits, stronger payment validation procedures and specific requirements for accounting evidence. Payment verification function to be segregated from project management. These measures are fully detailed in the Project Management Manual.

Condition of Effectiveness

Done at negotiations May 22, 2006 (refer to Financial Management Action Plan)

Acceptable draft Project Management Manual submitted at negotiation on May 22,2006, full adoption before effectiveness (refer to Financial Management Action Plan)

Done at negotiations May 22,2006, part o f Project Management Manual (refer to Financial Management Action Plan) Done at negotiations May 22,2006, part o f Project Management Manual (refer to Financial Management Action Plan) Done at negotiations May 22,2006, part o f Project Management Manual (refer to Financial Management Action Plan)

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Risk

Control risk Funds flow

Financial reporting

Auditing

Project funds are not used for the purposes intended, with due regard to economy and efficiency.

Risk Rating

S

S

Risk mitigation measures incorporated into project design

Dedicated bank account at the Central Bank (Bank Indonesia) to channel loan disbursements. DG Treasury shall issue a circular letter to the relevant KPPN Offices providing guidelines and criteria for eligible project expenditures in accordance with the Loan Agreement Direct payment will be used as the basis for disbursements method for consultant and civil works type o f expenditures. Other type o f expenditures will be based on the submission o f Statement o f Expenditures. For direct payment; satisfactory accounting evidence to be submitted to the Bank

Special purpose financial statements for annual reporting, and un-audited Interim Financial Reports will be submitted in an agreed format on quarterly basis as part o f the Project Reports.

0 Audit arrangements to include appointment o f BPK as Auditor on terms of reference acceptable to the Bank;

Audit reports and audited financial statements will be made available to the public.

MPW will implement action plans agreed to strengthen financial management and procurement arrangements as detailed in Annex 7 and 8 o f this document.

Condition of Effectiveness

Disbursement Letter agreed at negotiations on May 22,2006

Done at negotiations May 22,2006, part o f Project Management Manual (refer to Financial Management Action Plan) Done at negotiations May 22, 2006 (refer to Financial Management Action Plan)

I). Implementing Agencies

The Directorate General o f Highway (DGH) in the Ministry o f Public Works (MPW) i s the executing agency. The Directorate o f Planning (DOP) in the DGH i s the implementing agency for all components, except Component 3(a). The DGH has extensive prior experience in implementing Bank financed projects through the implementation o f Sumatra Region Roads Project (SRRF': IBRD 4307-IND), Eastern Indonesia Region Transport Project (EIRTP-1: IBRD 4643-IND) and (Second Eastern Region Transport Project (EIRTP-2: IBRD 4744-IND). The most recent previous project audit on other World Bank financed projects implemented by DGH, MPW for FY 2004 was for SRRP and EIRTP-1 . The audit reports and audited financial statements for all these projects were received on time, and with an unqualified audit opinion,

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but management letters issued included many findings, most o f which related to payments made for incomplete works, poor asset management, damaged roads and procurement problems.

The DOP in DGH will be responsible for overall project management. Day to day project management will be undertaken by the Project Management Unit (PMU) established within the DOP. The P M U will be chaired by the Directorate o f Planning and assisted by full time qualified staff in adequate numbers and supported by staff from related agencies (when needed). The P M U will be supported by a Core Team Consultant and will develop the annual works programs, monitor progress in project implementation and compliance with World Bank safeguard policies. This will include the preparation o f annual programs, financial management, procurement, performance indicators and physical achievements. I t will also include the preparation and submission to the Bank and the Steering Committee o f quarterly Interim Financial Reports (IFRs) and annual progress reports on overall project implementation.

The Project will be part o f DGH M P W Satker working unit (Director o f Planning i s the head o f the Satker). As head o f the Satker, the Director o f Planning i s assigned as KPA (budget holder). Director General, DGH, will supervise the KPA, while payment verifications will be conducted at the Finance Unit within DGH.

Direct responsibility for project implementation at the province level will be shared among the units responsible for each road within provincial Public Works offices (P2JJPerencanaan Pengawasan Jalan dan Jembatan and PPJJM/ Pembinaan Jalan dan Jembatan Metropolitan) through their Satker.

E. Strengths and Weaknesses

Strengths

DOP is familiar with Bank financial management and disbursements requirements. All audit reports have been received on time and most material audit observations raised in earlier project audit reports have been satisfactorily resolved.

DOP has been able to prepare reliable financial reports on a regular basis. Nevertheless, given the large size o f this Project and the total volume o f project activities likely to be simultaneously under implementation, M P W is hiring financial management specialists, at the central and district level, to augment its financial accounting capacity.

Core Team Consultants will provide technical support to the DOP in managing the Project. Their tasks will include financial management support including production o f the quarterly Interim Financial Reports in the quarterly Project Reports.

Weaknesses

The project financial management arrangements will rely, to some degree, on the financial management systems o f the Government. Given the acknowledged and well documented weaknesses o f these systems and the very gradual pace o f reform, Project implementation will be exposed to some weaknesses and risks.

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In the similar, previous projects, verification and monitoring of c iv i l works contracts were found to be main accountability weaknesses, in addition to collusion in procurement. These weaknesses in internal controls pose clear fiduciary risks. This aspect has been given particular attention in designing the financial management arrangements for this Project and will be carefully monitored during the Bank’s supervision.

The M P W has its own internal audit unit, the Inspectorate General (IG). However, IG’s activities cover only 30 percent o f all M P W budget implementation. Currently IG has 70 auditors with economics, management and technical backgrounds, however, no accountants. Although al l o f them have received internal audit training and certification from BPKP, their work plan does not include risk based internal control assessments and no guidelines for such work are available.

F. Action Plan to Mitigate Risks

An action plan has been developed in consultation with the Directorate o f Planning to mitigate the identified financial management risks. Adherence to the agreed Financial Management Action Plan i s expected to reduce the financial management risk o f the Project to acceptable levels.

Financial Management Action Plan

Action A. Project Organization and Staffing 1. Project Management Unit established and staffed. This organization should allow for adequate segregation o f duties between project financial verification functions and project management.

2. Recruitment o f financial management specialist consultant to help prepare the Interim Financial Reports

B. Project Management Manual A Manual to document procedures to be followed by implementing unit covering all aspects o f procurement and financial management. This should include, inter alia, all financial management and disbursement procedures for this project. Also included should be annual budgets and work programs for at least the f i rst year, stronger payment validation procedures, segregation o f duties among payment authorization and “commitment maker” functions at central level, financial reporting formats, supervision, internal audit arrangements community oversight arrangements and anti corruption plan

Expected Output

DGH decree which sets out the Project’s organizational structure and F M staff appointments acceptable to the Bank.

Acceptable terms o f reference and qualification o f financial management consultant as part o f CTC

Draft Project Management Manual acceptable to the Bank (developed and simplified based on EIRTP 11’s Project Management Manual)

Final Project Management Manual acceptable to the Bank

Due Date

By negotiations

By effectiveness

Done at negotiations, May 22,2006

By effectiveness

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C. Training for DGH and province public works dinas staff who will require the necessary skills to carry out respective duties as described in the Project Management Manual D. Internal Audit Risk-based Internal Audits to be systematically undertaken for all project activities at regular intervals, jo int ly by private sector audit firms and the Inspectorate General, based on terms o f reference acceptable to the Bank. Copies o f these audit reports to be provided to the Bank

E. Auditing. Arrangement o f the project annual audit in accordance with a specific TOR and by independent auditors acceptable to the Bank

Project Management Manual training

0 Incremental operating cost o f internal audits included in the Project cost estimates. draft M P W decree (including terms o f reference on IG responsibility for internal audits o f project activities to be issued

Terms o f reference and letter to auditor (including TOR) confirming the audit arran aements

By effectiveness

Done at negotiations, M a y 22,2006

Done at negotiations, M a y 22,2006

G. Financial Management Arrangements

The accounting policies and procedures for this Project will substantially fol low Government financial management procedures, with strengthened procedures where appropriate. These Government procedures include, for instance, the Government budgeting procedures, accounting standard (PP no. 24,2005) and Government accounting systems (PerMenKeu no. 59/PMK.o6/2005) which have been issued following the issuance o f Finance and Treasury Laws. Following are summarized procedures starting from budgeting to reporting procedures. All project activities and expenditures will be included in the central Government budgets and administrative and accountability procedures for approving expenditures and disbursing funds to beneficiaries will fol low Government procedures. Detailed procedures are given in the Project Management Manual.

H. Budgeting

Since FY 2005, the Government has been using a unified budget system which does not differentiate the recurrent budget from the development budget. The budget o f the Bank funded Project will be integrated into the budget o f the respective government agency where the Project will be implemented, namely DGH, MPW. Under this arrangement, for auditing purposes, the Project budget performance measurement will be combined with the performance o f the corresponding budget allocation o f the implementing agency.

The Project budget proposals are submitted to the Directorate General (DG) Budget in June o f the year proceeding the budget year. DG Budget allocates budget ceilings in September. DGH, M P W then proceeds to prepare budgets in detail. The results o f the work are then submitted to DG Budget and Bappenas for clearance. The final budget for the Project will then be ready for submission to the World Bank as the annual work program o f the Project. The budget i s presented to the Cabinet (as part o f the national budget) in September and after Cabinet approval,

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i t i s presented to Parliament. Further details o f the budgeting process are available in Project Management Manual.

I. Activities and Expenditure Programming

Based on the annual work program, procurement plan and the approved budget, DGH would be able to program Project activities and undertake procurement.

Self-Managed activities. Based on the assigned budget, DOP, P2JJs and PPJJMs may request an advance payment of a maximum o f a month’s projected cash needs from the Treasury Office o f Ministry o f Finance (KPPN) in order to finance activities and administrative expenditures with a maximum o f 1/12 o f the annual budget. This advance i s maintained on an imprest fund basis. The advance should be accounted for to KPPN within a month. A Payment Request should be prepared by DOP, P2JJs and PPJJMs for eligibility review (for i t s eligibility to the budget and documentation completeness) by the finance units within DGH, M P W or the respected P2JJs and PPJJMs who then issue a payment order.

SuppIier/Consultant/Contractor Contracts. Payments to eligible suppliers, consultants and contractors will be made in accordance with their contracts, through direct transfer. To effect payments, the project management unit (Satker) would prepare a payment request for verification (for i t s eligibility, compliance with the approved budget, compliance with the contracts and acceptability o f supporting documentation) by the finance unit within DGH, MPW, who then issues payment order (SPM). The finance unit then submits the SPM to KPPN, who in turn issues a Bank transfer instruction (SP2D) to the central bank/ government bank. The payment will then be transferred directly to the account o f the respective vendor or consultant or contractor, and K P K N will debit the project Designated Account (DA) for the Bank’s portion. Although the payment processes will follow Government procedures, some additional payment validation measures will be prescribed to mitigate fiduciary risks, including stronger accounting evidence, audit trails and procedures to validate contracts and outputs. These are available in detail in the Project Management Manual.

J. Accounting and Record Keeping

The M P W Finance Unit and provincial sub-units fol low the Government’s accounting standards (Government Regulation no. 24,2005) and accounting system (Ministry o f Finance Regulation no. 59/PMK.06/2005). Government accounting software i s used to record al l transactions. Manual back-up (general cashbook and i t s supporting books) is s t i l l maintained in both the finance bureadsub-unit and KPPN. The system i s closed monthly and budget realization reports are submitted to Ministry of Finance on a quarterly basis. KPPN also maintains a budget realization records card specifically for each Project. This card i s supported by advance and contract monitoring cards (one card for each contract).

K. Reporting

Currently the Government i s implementing GFS classification as the Government Chart o f Accounts. The Ministry o f Finance Chart o f Accounts does not include codes for funding sources

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(e.g. donors). As a consequence, the government accounting software does not differentiate project expenditures from government expenditures. Therefore, to enable this differentiation, Project expenditures for budgeting and for facilitating report preparation by component and expenditure category, the following additional steps will be included in the Project Management Manual: (i) project component and expenditures category (as per Loan Agreement) must be reconciled with the Government’s chart o f accounts; (ii) DGH’s Finance Unit must differentiate all o f the Project’s payment vouchers and payment remittance orders; (iii) Finance Unit must reconcile the Project records with the Project’s Designated Account.

DOP will work closely with P2JJs and PPJMs in preparing the Interim Financial Reports (IFRs), which are useful to determine if loan funds are available when expenditures due for payment. The IFRs will include (a) sources and uses o f funds (by Project activity and due by disbursement category); (b) six months forecast o f fund required; (c) Loan DA activity statement (d) disbursement and expenditure status; (e) detail expenditures for contracts subject to prior review (if any); ( f ) summary expenditures for others/contracts not subject to prior review; (g) output monitoring report (unit o f output by Project activity); and (h) procurement management report.

Al l reports received from the provinces will be compiled in an agreed IFR format and submitted on a quarterly basis, within 45 days o f the end o f the reporting period, to the Bank through Ministry o f Finance. The f i rst report will consist only o f the planning part covering six months forecast o f fund required and procurement plan. The IFR will be used as a basis o f disbursement. The quarterly reports wil l be aggregated for the annual financial audit.

Monitoring o f the budget for the Project will be through the IFRs and the agreed interim audit and supervision schedule. This mechanism will help ensure that the IFRs are reliable for monitoring purposes. This mechanism also enables early identification o f any problems, especially shortcomings in budget execution processes such as under-spending o f budget allocations.

L. Funds Flow and Disbursement Arrangement

Disbursements for c iv i l works and consultants contracts will be made under “direct payment” procedures. In order to facilitate disbursements for others (Le. goods and incremental operating costs) a Designated Account (DA) denominated in U S dollars will be opened in the Central Bank under the name o f the Ministry o f Finance (MOF). The management o f the DA would be the responsibility o f the Directorate General Treasury, MOF. The DA ceiling limit i s set at US$75,000 to cover the quarterly funds required to finance goods and incremental operating costs.

Disbursements from the Loan will be made under the direct payment method for c iv i l works and consultant type o f expenditures based on the submission o f full documentation/ copies o f accounting evidence (including contract, monthly certificate with photo status, third party’s receipt) along with the withdrawal applications. Replenishment o f DA for expenditures related to goods and incremental operating costs would be based on the submission o f statements o f expenditures duly approved by DG Treasury, MOF. Although the management o f the DA would be under the responsibility o f DG Treasury, MOF, the DOP will be responsible to reconcile the

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DA as part o f the IFR. The DA statement will be received by DOP from DG Treasury, MOF. All documentation for the expenditures as reported for disbursements would be retained at the DOP and shall be made available to the auditors for the annual audit and to the Bank and i t s representative if requested.

DG Treasury shall issue a circular letter to the relevant KPPN Offices providing guidelines and criteria for eligible Project expenditures in accordance with the Loan Agreement.

M. Internal Controls: Project Management Manual

The Project Management Manual (PMM) documents the financial management system and procedures to be followed by the DGH and the provincial Public Works Dinas’s staff that are involved in the Project to ensure that sound financial management practices are followed. The P M M will include aspects such as organization structure, job descriptions, budgeting, procurement (with addition o f World Bank procedures if there are differences), record management for finance unit, assets management, f low o f funds, payment verification - with additional verification processes for Bank-financed expenditures and for Performance Based Contracts, accounting (including use o f government chart o f account for the project), reporting (IFR format, how to prepare and preparation time line at each level), annual audit arrangement, supervision plan, governance/anti corruption and disclosure requirement (including acceptable mechanism for c iv i l society oversight on procurement, sanction and remedy procedures, audit report publication and complain handling mechanism); monitoring and evaluation mechanism (including training plan and supervision plan) for Project implementation and IG review on P M M compliance.

N. Internal Control: Internal Audit

The Project will have strengthened internal audit arrangements. Audits will be conducted by the Inspectorate General (IG) o f M P W with the assistance o f private sector auditors quarterly. The assessment shows that MPW’s IG has limited capacity to conduct internal audit o f the project transactions, IG’s auditors have received internal audit training and certification from BPKP training centre. However, their work program does not include risk based internal control reviews, and no guidelines related to this are available. The assessment recommends that IG recruits accountants to enrich i t s team.

Technical assistance to improve IG’s capacity is being provided through EIRTP- 1. The IG work plan includes an internal audit o f this Project’s activities and expenditure with the assistance o f a qualified private audit firm. Terms o f Reference for this will be agreed with the Bank,’ and will cover a review o f internal controls for this Project’s expenditures. Reports on audit findings will be submitted to the external Project auditors as wel l as to the Bank for information.

Specifically for this Project, verification by IG should include substantive checks on the reliability o f accounting evidence and on project implementation, including technical audits.

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0. Audit Arrangement

2007 2008 2009 2010 10% 3 0% 60% 80%

Expected 20.8 41.6 62.4 41.6 Cumulative 20.8 62.4 124.8 166.4

Annual special purpose Project financial statements will be audited by independent auditors acceptable to the Bank. DGH (with the input from provincial Public Works Dinases) shall prepare the annual consolidated Project financial statements and submit these to the Supreme Audit Board (BPK) for audit. B P K i s accepted as the auditor for this Project, given i t s independence and in line with the Country Audit Strategy. The annual audit reports shall be furnished to the Bank not later than six months after the end o f the Government fiscal year (June 30 o f the following year). The audit will be conducted in accordance with the terms o f reference for audit acceptable to the Bank. The Bank will separately discuss with B P K the modalities for involving private sector audit f i rms to supplement their capacity for this work. The DGH, MPW, as the executing agency, will produce a Project Financial Statement (a single audit opinion comprising Project account, Dedicated Bank Account and /SOE) within six months after the end o f the Government fiscal year. DGH, M P W will make the annual audit report o f the Project available to the public.

2011 100% 41.6 208.0

Disbursement Schedule for Loan Bank FY (US$ million)

Category Amount of the Loan Allocated

Percentage of Expenditures to be financed

Amount o f the Loan Allocated (expressed in US$)

(1) Works (expressed in US$)

174,000,000 70%

(2) Goods (3) Consultants’ services and

1,325,000 100% 19,950,000 100%

training (4) Incremental operating costs

(5) Refund o f the Project Preparation Advance

(6) Front-end Fee

720,000 80%

2,050,000 Amount payable pursuant to Section 2.07 (a) of the General Conditions

Section 2.04 o f this Agreement in accordance with Section 2.07 (b)

520,000 Amount payable pursuant to

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(7) Unallocated TOTAL AMOUNT

o f the General Conditions 9,435,000

208,000,000

Annex 8: Procurement Arrangements

INDONESIA: Strategic Roads Infrastructure Project (SRIP)

A. General

Procurement for the project would be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated M a y 2004, and the provisions stipulated in the Loan Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, estimated costs, prior review requirements, and time frame have been agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

Procurement o f Works: Works procured under this Project would include betterment, capacity expansion o f existing roads, construction o f new roads, bridge replacement and flyovers, and road maintenance works along urban and inter-urban national roads. The procurement will be done using the World Bank's Standard Bidding Document (SBD) for al l I C B contracts which i s based on the harmonized FIDIC document used by multilateral financiers. All procurement o f works will use post-qualification, including large contract packages with estimated amount o f above US$ 10 million. This having considered that the works are road construction which i s not complex in nature and the experience o f the Borrower with pre-qualification processes in EIRTP-1 and 2 reflected long delays in the process. Additionally, pre-qualification may lead in some cases to increased risk o f collusion among the pre-qualified bidders.

A special feature o f this Project i s the introduction o f a Performance-Based Contract (PBC) for roads maintenance pilot. This PBC pilot will be introduced o n a 100 kilometer section and include betterment and maintenance activities with a total estimated contract amount o f US$ 18 million. The preliminary identification phase o f the PBC pi lot was done in August - September 2005 by a consultant appointed by the Bank in cooperation with the MPW. The second phase o f this pilot will be the setting up o f the frame work: the risk analysis, the bidding documents, and the identification o f training.

International Competitive Bidding (ICB) will be used for al l works contracts estimated to cost more then US$3.0 mi l l ion each. National Competitive Bidding (NCB) will be used for al l other packages, if any. The current Procurement Plan does not envisage the usage o f N C B under the Project.

Procurement of Goods: There are three goods packages proposed under the Project. One IT equipment package, with estimated contract value o f US$200,000, and one vehicle package, with an estimated contract value o f US$75,000, will be procured through NCB. Procurement wil l be carried out by the DGH at the Central Level. A model bidding document for procurement of Goods using N C B developed in EIRTP-2 based on the Bank's SBD for Goods will be used. One package o f equipment for road safety with an estimated contract value o f US$ 1 .O mil l ion will be procured through ICB. The Bank's SBD for goods will be used.

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Selection o f Consultants: There are three large consultancy contracts (One CTC contract and two DSC contract) proposed for the Implementation Support to M P W under Component 2 o f the Project and one Technical Assistance package for the Road Sector Institutional Development under Component 3 (a) o f the Project. In addition, and as a measurement to expedite and safeguard procurement under the Project, the following two consultancies will be financed under the Project: 0

0

Procurement Agent to carry the selection process for the three large consultancies and Procurement Advisor contract Procurement Advisor to provide procurement support and monitoring for the work packages under the Project.

The GOI’s project preparation team will ensure that the time o f the loan signing and effectiveness coincides with the signing o f the first six works packages (expected to represent 26% o f the loan amount) and the appointment o f the Core Team Consultant and Design and Supervision Consultants. This i s to ensure disbursements proceed as soon as the loan i s effective. A lesson learned from EIRTP-2, in which the procurement process for the main implementation support and supervision consultants experienced significant delays which in turn delayed the overall implementation o f the Project.

The selection method for consultants to be used will be Quality and Cost Based selection (QCBS) for all assignments estimated to cost more then US$200,000 and Selection Based on Consultant’s Qualifications (CQS) for those estimated to be less than US$200,000.

Incremental Operating Costs: A total o f US$ 900,000 will be allocated for incremental operating cost o f which 20 percent will be funded by GOI. These costs are to cover Project management costs by GO1 staff that will be using GOI’s administrative procedures acceptable to the Bank.

Others: Training, estimated at US$600,000, for GO1 staff will be provided using self-managed activities under GOI’s administrative procedures acceptable to the Bank.

The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works and goods procured, wil l be presented in the Project Management Manual o f this Project.

B. Assessment o f the agency’s capacity to implement procurement

Procurement activities will be carried out by Directorate General o f Highways (DGH), Ministry of Public Works at the central level and which is mainly for the technical assistance components; and Public Works Offices (Dinas) at the provincial level in the participating Provinces in Java and Sumatra. DGH, through the Directorate of Planning (DOP), will manage and coordinate the various implementing units at the central and provincial level. The DOP will include a Procurement Officer who will be supported by the Procurement Advisor. Each o f the implementing units will form a procurement committee to procure the packages they are responsible for.

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An assessment of the capacity of the implementing agency to implement procurement actions for the Project was carried out from December 2004 to September 2005. The assessment reviewed the organizational structure for implementing the Project and the interaction between the Project's staff responsible for procurement and the Ministry's relevant central unit for administration and finance. Some aspects o f the procurement assessment for SRIP i s based on the result o f the procurement assessment for the Second Eastern Indonesia Region Transport Project (EIRTP-2), in particular with regard to the legal aspects, procurement cycle management, record keeping, and general procurement environment. The results o f the EIRTP-2 assessment on these aspects are s t i l l applicable for this Project.

The overall procurement risk o f the Project i s considered "high" considering the large value o f the contracts, the history o f some corruption cases in the sector and the previous delays in selection o f consultants. Specifically, this risk level is due mainly to the fact that : (i) the main bulk o f procurement packages consists o f large packages o f significant strategic value (ii) a performance based contract pilot will be introduced which i s the f i rst in the country in general and in this sector in particular; (iii) previous experience in selection o f consultants indicates significant difficulties in terms o f weaknesses in the evaluation process and extreme delays in the planned time schedule , (iv) the central P M U will be an entirely new established PMU, different from existing Bank funded projects in the transport sector; (v) although many staff at the Central and Provincial level are experienced with donor funded projects, there i s st i l l uneven understanding o f the principles o f the Bank's Procurement Guidelines and in particular selection o f Consultants and large I C B Procurement; (vi) the procurement o f works will be conducted simultaneously which will stretch the coordination between the PMU and the PIUs and the P M U and the Bank; and (vii) the general procurement environment is weak and significant cases o f fraud and collusive practices have been found in past projects in the sector leading to numerous investigations, re-biddings and cases o f misprocurement.

The risk mitigation measures which have been agreed are: (i) selection o f the three large consultancy contracts for the Implementation Support to M P W under Component 2 and the Procurement Advisor by a Procurement Agent to avoid delays and ensure a transparent process. This Procurement Agent wil l be responsible for carrying the evaluation for these three consultancies; (ii) provision o f additional support to the Procurement Officer at the Central Level P M U through the Procurement Advisor, (iii) the establishment o f a Procurement Plan (PP) for the project for the 1'' year implementation with annual updates o f the PP for the subsequent years; (iv) provision o f procurement training during Project Launch, and in particular on performance-based procurement, and annual workshops in every 4'h quarter o f the GOI's FY; (v) establishment o f an Anti-Corruption Action Plan for the Project; (vi) use o f the new e- procurement system once launched by the M P W ( subject to the Bank's assessment o f this system). In the interim, the existing semi e-procurement system can be used as an additional measure to advertise and provide the bidding documents.

Each member o f the procurement committee for a Sub-project and each Echelon I - I V official of M P W ("Official"), who i s involved in the procurement process for a Sub-project, shall disclose to the head o f the procurement committee for that Sub-project and to the Procurement Advisor if they or any o f their immediate family members are related or otherwise connected to any o f the members o f the boards o f directors or commissioners o f the bidders and/or consultants

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participating in any o f the procurement packages for any Sub-project under the Project (“Interested Member”). Any Interested Member shall recuse himself or herself from further participation in the evaluation process for that Sub-project; and any Interested Member who i s an Official shall recluse himself or herself from any decisions relating to the evaluation process or contract award for that Sub-project.

Project Managers assignments will be based on M P W criteria.

Strengthened procurement procedures form part o f the Anti-Corruption Action Plan and are outlined in Annex 15.

C. Procurement Plan

The Borrower, at appraisal, developed a Procurement Plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Bank on May 22, 2006. This plan is available at the Directorate General o f Highways, Ministry o f Public Works. I t will also be available on the M P W official website and on the Bank’s external website. The Procurement Plan will be updated in agreement with the Bank annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

D. Frequency of Procurement Supervision

In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment o f the Implementing Agency has recommended one supervision mission annually to visit the field to carry out post review o f procurement actions if any. However, the current procurement plan does indicate that al l packages are prior review.

E. Details o f the Procurement Arrangements Involving International Competition

1. Works and Goods

(a) List o f contract packages to be procured following I C B i s provided in the table below.

(b) I C B contracts for works estimated to cost above US$ 3,000,000 equivalent per contract and I C B contracts for goods estimated to cost above US$ 200,000 equivalent per contract will be subject to prior review by the Bank.

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Sub-project Province

1 Karawang Bypass West Java

Method IDR US% Post/ Prior/ Date of advert Pre Post

Qual review ICB 11 1,638,460,798 12,403,273 Post Q. Prior June, 2006

2 3 4 5

Semarang N,R.R Central Java ICB 96,862,500,194 10,762,500 Post Q. Prior June, 2006 Demak Bypass Central Java ICB 38,236,385,336 4,248,487 Post Q. Prior June, 2006 Ngawi Ring Road East Java ICB 70,3 15,045,201 7,812,783 Post Q. Prior June, 2006 Karangampel - Cirebon West Java ICB 145,005,981,345 16,111,776 Post Q. Prior June, 2006

-ahPalmerah, Jambi I Jambi I ICB I 53,123,355,090 I 5,902,595 I Post Q. I Prior I January,2007 I

6 7 8 9

Cianjur Ring Road West Java ICB 95,174,818,915 10,574,980 Post Q. Prior June, 2006 Brebes - Tegal Bypass Central Java ICB 193,299,977,520 21,477,775 Post Q. Prior Sept, 2006 Semarang - Demak Central Java ICB 157,820,040,011 17,535,560 Post Q. Prior Sept, 2006 Kabuyutan Bridge Central Java ICB 4,805,553,344 533,950 Post Q. Prior Sept, 2006

10 Pejagan - Losari

1 1 Widang - Lamongan Cilegon - Pasauran

Bandar-Lampung l2 Rvnacc

Central Java ICB 39,113,710,179 4,345,968 Post Q, Prior Sept, 2006 Banten ICB 64,520,226,594 7,168,914 Post Q. Prior Sept, 2006

East Java ICB 38,898,812,783 4,322,090 Post Q. Prior January, 2007

Lampung ICB 175,298,520,793 19,477,613 Post Q. Prior January, 2007

14

15

ICB 63,121,564,601 7,013,507 Post Q. Prior January, 2007 Palembang WRR

Pasuruan - Pilang East Java ICB 157,733,566,2 12 17,525,952 Post Q. Prior January, 2007

South Sumatera

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. l6 17

West Java ICB 45,813,075,000 5,090,342 Post Q. Prior TBD Soekamo-Hatta Bandung Boyolali - Kartosuro Central Java ICB 95,8 15,406,807 10,646,156 Post Q. Prior TBD

18 19

~ ~~

Ambarawa Ring Road Central Java ICB 93,198,000,000 10,355,333 Post Q. Prior TBD Semarang - Bawen Central Java ICB 153,064,606,272 17,007,178 Post Q. Prior TBD Semarann - Kendal Central Java ICB 28,627,763,260 3,180,863 Post Q. Prior TBD

20 Semarang - Pekalongan Central Java ICB I 160,409,454,597 17,823,273 I Post Q. I Prior TBD

2 1 22

Pemalang Bypass Central Java ICB 66,872,860,840 7,430,3 18 Post Q. Prior TBD Magelang - Keprekan Central Java ICB 88,373,360,356 9,819,262 Post Q. Prior TBD

Total 2,237,143,046,048 248,571,450

Goods contracts

1 2 3

Method US$ IDR (~1000) Review I T Equipment NCB 250,000 2,250,000 Prior Vehicles for Project staff NCB 75,000 675,000 Post Equipment for Road Safety ICB 1,000,000 9,000,000 Prior Sub-total 1,325,000 11,925,000

2. Consulting Services

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(a) List o f consulting assignments i s given below.

Integrated Road Safety Program QCBS 2,500,000 22,500,000 Prior Sub-total 19,350,000 174,150,000

(b) Consultancy services estimated to cost above US$200,000 per contract and al l single s selection o f consultants (firms) will be subject to prior review by the Bank.

ur

(c) Short l is ts composed entirely o f national consultants: Short lists o f consultants for services estimated to cost less than US$400,000 equivalent per contract, may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

Consulting Services contracts

e

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Annex 9: Economic and Financial Analysis INDONESIA: Strategic Roads Infrastructure Project

A. Background

There are two models that were developed in Indonesia to measure vehicle operating costs and road performance use: (i) the Indonesian Road Management System (IRMS); and (ii) the Urban Road Management System (URMS). I R M S was designed to screen inter-urban road sections for betterment and minor capacity increases and URMS was designed to screen urban roads for betterment. Both models are similar in concept; but are unable to handle capacity expansion and new roads on new right o f way.

As a result, the Highway Development and Management Model (HDM-4) was chosen to perform the economic evaluation o f the Project. First, it allowed the roads to be grouped for the purposes o f economic evaluation (unlike IRMS). In addition, and after adapting to Indonesian conditions, HDM-4 was used to select an optimal group o f road improvements, given the budget constraints and insufficient funds to undertake all the economically viable projects.

B. Feasibility Studies and Annual Work Programs

A total o f 32 feasibility studies were completed as part o f the project preparation. Individual feasibility studies were prepared for all new roads, capacity expansion (widening), and bridge/flyover projects. In addition, a single feasibility study was prepared for betterment o f urban roads, and another for betterment o f inter-urban roads Sub-Projects. The complete set of feasibility studies i s available in the project files.

The works program was defined based on three Work Programs (WPs). All Sub-projects proposed to be financed under WP-I, and the corresponding feasibility studies were subject to detailed review. These Sub-projects did not require land acquisition (or land had already been acquired) and were considered to be ready for procurement.

The candidate Sub-projects for WP-2 and WP-3 may be subject to change, and need to be confirmed or adjusted using the following selection criteria. The Sub-project must meet the agreed criteria.

C. Case Scenarios

Each Sub-project was subject to the following three case scenarios: 0

0

Base Case. Do minimum Scenario. Perform routine maintenance only. Periodic Maintenance Case. Perform periodic maintenance in accordance with DGH’ s norms which recommend: overlays every five years and intermediate re-seals after three years, in addition to routine maintenance. Project Case: Road betterment, capacity expansion (widening) or new construction (bypasses).

0

The internal rate o f return (IRR) was calculated for each Sub-project. Sub-projects with an IRR higher than the discount rate (1 5 percent) were considered economically viable. Also, the f i rst

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year rate o f return (FYRR), (measured as the net benefit in the year the project i s open to traffic divided by the capital cost) was used to determine the optimum year o f opening.

D. Project Costs

The road agency costs considered in the analysis included: land acquisition costs and any additional costs associated with the resettlement o f project affected people, project construction costs, and road maintenance costs after completion o f construction. Land costs were included even when the land had already been acquired by public authorities.

E. Project Benefits

The following project benefits for road users were considered in the economic evaluation: reduction in vehicle operating costs, reduction o f travel time, and reduction o f number o f accidents. These benefits were calculated primarily as a result o f improved road surfaces, widened carriageways, and improved geometry. Also, long-term savings to the road agency were estimated from reduced or delayed periodic maintenance costs, following resurfacing or structural strengthening.

F. Project L i fe Period and Population Forecasts

The l i fe o f a road project was defined as 20 years, and estimates o f vehicle operating costs, travel time, accident costs, and maintenance costs were included for each year o f the project’s l i fe.

Population growth in Indonesia has gradually fallen from over 2.4 percent per annum in the 1970s to around 1.4 percent in the 1990s, and i s expected to continue to fall. Therefore, i t has been assumed that the national growth rate wil l be around 1 .O percent per year for the forecasting period. This rate was applied to al l inter-urban (non metropolitan) Sub-Projects. Local growth rates, on the other hand, are expected to vary, mainly in response to internal migratory movements. In principle, individual forecasts should have been made for each city, based on local development plans. However, after reviewing a sample o f development plans, it was concluded that reliable forecasts could not be made at local level. Accordingly, a simplified procedure was adopted, using a population growth rate o f 2.7 percent per annum for al l urban areas in Java and 3 .O percent per annum for the urban areas in Sumatra. These rates reflect recent growth in urban population and reasonable expectations about future developments.

G. Traff ic Flows Forecasts

Two basic approaches to forecasting traffic flows were used, depending on the type o f Sub- Project under consideration.

0 For road widening and betterment Sub-Projects, the proposed upgrading should only affect traffic flows along the road itself. Therefore, other network effects were assumed to be negligible. For these Sub-Projects, the current traffic f low was multiplied by the traffic growth factors (shown below) to obtain forecast traffic for each year during the appraisal period.

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Year Motor cycles

I 2005 I 5.2 I 6.3 I 5.6 I 5.6 I 5.2 I 5.2 I 4.2 - 1 4.2 I 4.2 I

Buses Trucks Car Utility Pick Small Large 2-axle 3-axle Trailer

U P &

2006 2007

0 For new by-passes, it was also necessary to consider the traffic on the existing road which i s likely to divert to the new road. The procedure and diversion curves utilized are described in detail in the project implementation plan archived in the project files.

The traffic forecasts made no allowance for modal diversion. Inter-urban road improvements in the North Java Corridor, which runs generally parallel to the railway, are l ikely to generate a switch from rai l to road. However, previous studies, have demonstrated that the potential for switching i s quite limited, as the rai l and road services are used by distinct segments o f the passenger and freight markets, and because improvements to the rai l network are l ikely to counteract any change in the roads’ relative attractiveness.

5.5 6.6 6.0 6.0 5.5 5.5 4.4 4.4 4.4 5.8 7.0 6.3 6.3 5.8 5.8 4.7 4.7 4.7

H. K e y Inputs to Calculate Vehicle Opera t ing Costs

All key inputs to calculate vehicle operating costs were used extensively in previous studies; namely, SURIP, JARNS, and HLRIP. The following HDM-4 inputs are found in Appendix 3 o f the SRIP Report: Feasibility Studies Volume 1 : Approach and Procedures for Preparation o f Feasibility Studies. This report has been archived and can be found in the SRIP project files. These inputs include: representative vehicles, vehicle operating characteristics, economic and financial costs, composition o f vehicle production and distribution costs, new vehicle prices, interest rates, tire costs, value o f passenger time, and accident costs.

I. Results

An economic evaluation has been undertaken for: (i) each Sub-project; (ii) for the proposed three Work Programs (WPs) WP-I, WP-2, WP-3; and (iii) for the project as a whole. The results o f the evaluation o f each Sub-project are presented using the following three economic indicators: (i) N e t Present Value (NPV); (ii) Economic Internal Rate o f Return (EIRR); and (iii) First Year Rate o f Return (FYRR). Except for one Sub-project in each WP, al l proposed Sub-projects have an EIRR o f 15 percent or more. The ERR for the Project i s 41 percent. The following summarizes the EIRR results for each annual work program by type o f work.

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Return (EIRR) Betterment

Capacity Expansion New Roads Bridge/ Flyover

J. Sensitivity Analysis A sensitivity analysis was also undertaken to measure the impact o f significant but likely changes in the user benefits and project costs. These results show that; except in six cases, most o f the Sub-projects remain economically viable even in the worst case scenario, which reflects a 20 percent increase in construction costs and 20 percent reduction in overall benefits. Therefore, it i s concluded that the overall program i s robust and likely to produce high economic returns.

Work Program WP 1 46% WP 2 40% WP 3 85%

Sei

60% 13% 19% 59% 5 6% 21% 95% 62% 10% 149% 104%

sitivity Analysis I Cost +20% and 1

24.8 I 75 I 19.4 I 72 I 87 I 17.3 I 62 I 73

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Economic evaluation

Su b-Droiect I Works I US$ 1 km I US$/km I ERR I

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Annex 10: Safeguard Policy Issues INDONESIA: Strategic Roads Infrastructure Project

ENVIRONMENT

A. Brief Project Description

The Strategic Roads Infrastructure Project (SRIP) comprises several urban and inter-urban highway Sub-projects o f betterment, capacity-expansion, and new construction on new right o f way. The Project will be implemented through three work programs (WP). The Sub-projects in the second and third year might be further clarified during the first year. The first work program consists o f the Sub-projects given below:

Work Program -1

B. Environmental Assessment Requirements and Documentation

The Government o f Indonesia (GOI), represented by the executing agency, the Ministry o f Public Works, has prepared an overall Environmental and Social Assessment Management Plan (ESAMP) that will serve as the project’s umbrella Environmental Assessment. The ESAMP sets out a strategic screening process that will ensure that al l Project-associated adverse impacts are captured and effectively mitigated through the implementation o f tangible measures for each Sub-project, which are then monitored both at the Sub-project level and cumulatively, and that the required and sustainable institutional framework to ensure these measures i s established and monitored. This process i s also funded through the Project. The full l i s t o f Bank safeguards policies (1 0+1) and the environmental requirements o f the GO1 have al l been incorporated into the screening process to ensure that when any one o f them i s triggered by a Sub-project, the requirements o f that policy are complied with if the project is to fund that Sub-project, or it will be deleted from the approved l i s t o f Sub-Projects.

The screening procedure and i t s results are described in full in the ESAMP, and will result in categorizing Sub-projects into category “A”, “B”, or “C” depending on the nature, scope, and intensity o f potential adverse impacts o f the Sub-project. Category “A” Sub-projects being the most severe, will require Sub-project EIA’s/AMDALS (Environmental Assessments), Category “B” Sub-projects will require Environmental Management Plans (UKL) and Monitoring Plans (UPL), and Category “C” Sub-projects will require only standard operation procedures (SOP).

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For WP- 1, the required AMDALs, Environmental Management Plans (UKL) and Monitoring Plans (UPL), and standard operation procedures (SOP) have already been prepared, reviewed and approved by the relevant bodies in Indonesia. Environmental safeguard documents for most o f the Sub-projects under WP-2 and WP-3 Sub-projects have also been prepared. These will be revised as needed and new environmental documents consistent with the ESAMP will be prepared for new Sub-projects (which might be added to the lists) during implementation o f SRIP.

C. under Indonesian Environmental laws, namely:

Sub-Projects. Three Sub-projects require a full environmental assessment (AMDAL)

Ngawi Ring Road Cianjur Ring Road Brebes - Tegal Bypass

10.8 km o f new highway 7.5 km o f new highway 17.1 km o f new highway

Another seven Sub-projects require a simple environmental impact assessment (EIA) and environmental management plan (EMP), or site specific Environmental Management Plan (UKL) and Monitoring Plan (UPL). Eight Sub-projects need the standard operation procedures (SOP) which describe a set o f typical mitigation measures for small-sized road construction work.

The Ngawi Ring Road Sub-project comprises the construction o f a new 7 kilometer road and betterment o f 3.6 kilometers including construction o f new bridges with a carriageway width o f 7 meters. This ring road i s necessary to reduce through-traffic to the central ci ty of Ngawi area, which was 80 percent o f the current traffic, and to improve traffic safety and the environment. According to i t s AMDAL, the environmentally and socially sensitive spots along the alignment are: (1) the existing irrigation system, (2) two schools, and (3) one cemetery. The adverse environmental and social impacts at these spots are addressed through: (1) the provision o f eight culverts for irrigation; (2) one school will be moved back from the highway and a noise barrier and tree-plantation wil l be installed at the other school; and (3) the cemetery will be relocated away from the road right o f way.

The Cianjur Ring Road Sub-project comprises the construction o f a 7.5 kilometer ring road with bridges and box culverts on new right of way with a carriageway width o f 7 meters. The new alignment would help reduce existing heavy traffic on small roads in the residential areas, which would greatly improve traffic safety. According to its AMDAL, the environmentally and socially sensitive spots along the alignment are: (1) a school, and (2) three cemeteries. The adverse impacts at these spots are addressed through: (1) moving the school back from the road, and (2) relocating the cemeteries away from the road right o f way.

The Brebes - Tegal Bypass Sub-project comprises construction o f a new 17.1 kilometer long bypass with a carriageway width of 7 meters. The bypass i s aimed at decreasing road congestion problems in the city o f Tegal and Brebes and at the same time improves the road transportation infrastructure in this area thereby efficiently accelerating the regional and national traffic volumes which pass through the Brebes-Tegal artery road. significant impacts l ikely to be caused by construction o f this Project can be classified into 3

According to i t s AMDAL, the

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phases: pre-construction, construction, and post-construction. The environmentally and socially sensitive spots along the alignment are: (1) the productive land, and (2) two schools. The significant adverse impacts are addressed through (1) land acquisition, and (2) noise barriers and tree-plantation will be installed.

The table below in this Annex provides summary information on the environmental assessment and resettlement instruments for the Sub-Projects.

D. Existing Environment

Ecological Environment. All the Sub-projects are located in urban, semi-urban or farmland areas. The AMDALs, UPLAJKLs, or SOP confirmed that there are no protected areas, natural forests or wetlands near the Sub-project sites.

Environmentally Sensitive Spots. AMDALs, UPL/UKL, and SOP identified environmentally sensitive sports for this Project, which are highly populated residential areas, schools, hospitals, rivers, ponds, and lakes. Accordingly a major environmental issue for this Project would be noise control.

E. Major Mitigation measures

The AMDALs, UPLAJKL, and SOP cover a full rage o f mitigation measures for the design, construction, and operation stages. The following mitigation measures are a sample o f some o f the key measures that will be taken at each stage o f implementation:

Design Considerations 0 Schools, hospitals, religious places such as mosques, churches, and residential areas that

are too close to the alignments will consider various alternatives which may result either their relocation, adjustments in the alignment, entrance re-locations or other arrangements reached following consultations with users and owners o f these facilities. The roads and bridges have adequate evacuation and drainage for storm flows. Designs to avoid flooding o f nearby communities and farmland from drainage o f storm water from the roadshridges. The designs will fol low the approved engineering design standards for roads and bridges. Suitable noise barriers will be installed in critical locations along the road alignment. Cut slopes to be protected to avoid erosion and eventual slip failure.

0

0

0

0

0

Key Construction Impact Mitigation Measures 0 Aligning the resettlement and construction schedules to ensure those affected by

resettlement receive their compensation entitlements before their assets are taken into possession. Ensuring heavy equipment is operated within locally acceptable hours. Avoiding unnecessary disturbance to structures/institutions in near by settlements that are not re-located. Ensuring that safe access to mosques, schools, hospitals and other public areas i s maintained during the construction.

0

0

0

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e Ensuring spoil material i s disposed o f appropriately and not in flood plains or agricultural land.

e Erosion and Sedimentation Control Management requirements are complied with. e . Land, soil and water pollution from use o f fuels and lubricants, sediment flow, etc i s

controlled and monitored. Excavation o f fill material i s done in approved and controlled pits and areas, and that these areas are adequately rehabilitated/ restored by the civ i l works contractors after their use.

Key Operation Requirements e

e

e

e

Periodic maintenance and cleaning o f storm drains, channels, culverts, etc, to ensure no blockage. Maintaining the landscape architecture o f the slopes through regular vegetation clearance and trimming. Constant periodic repair and maintenance o f road and bridge infrastructure. Constant monitoring for noise and air quality will continue so that new/additional management measures are adopted by the local public works authorities if required.

F. Environmental Monitoring

The Projects monitoring system i s designed (i) to ensure that the set o f responses to and management measures for the Sub-project’s potentially adverse impacts described in the various AMDAL’s, UKLAJPLs, SOPS, Design Drawings and other contract documents are implemented as required, (ii) to evaluate whether these mitigatiodmanagement measures in the Sub-projects are successful directly, cumulatively, provisionally and nationally and (iii) to alert the project’s authorities, such as the DGH, the PMU’s, the Bapedalda’s and the World Bank about the success or otherwise o f the ongoing environmental and social processes in such a manner that changes can be made if required.

To achieve these goals, the monitoring plan i s functionally structured into two levels; e

e Monitoring at the individual Sub-project Levels. Monitoring o f the SRIP as a whole at the Project Level.

The first level o f monitoring, which is the closet level to “the action” will be performed routinely and regularly, in the manner specified in the AMDALs and/or UKLAJPL’s and will be done by the Local PMU’s and the Provincial and District Bapedalda’s. The District Bapedalda will take the lead by working closely with the DSC to perform regular and intrusive monitoring during the construction phases and to prepare regular monitoring reports. The Bapedalda and the DSC are empowered to issue instructions and punitive measures to the c iv i l works contractor’s. During construction the Bapedalda and the DSC will monitoring indicators detailed in the AMDAL’s and/or UPLLJKLs, including activities at quarry sites and management o f soil erosion and sedimentation control, water quality, spoil disposal, slope stability, noise, dust and air quality. At the end o f the construction phase, as the DSC demobilizes, the Bapedalda’s will continue to monitor the operations phase for noise, air quality, storm water evacuation, etc.

The next level o f monitoring o f the SRIP at the Project Level will be for oversight monitoring, which will be the overall responsibility o f the Sub- Directorate o f Environmental Affairs in

70

DGH, to be assisted and supported by the Core Team Consultant (CTC). Essentially, the DGH will receive the periodic monitoring reports from the Bapedalda’s and the DSC at the Sub- Project level. The sub- directorate o f environmental affairs in DGH and CTC will also conduct random and periodic site visits to ensure they are fully briefed on the issues. The sub-directorate of environmental affairs DGH assisted by the CTC will then prepare periodic consolidated reports for the PMU, DGH and the World Bank. These periodic consolidated reports will then be used during supervision missions by the World Bank who will also undertake regular site visits to the Sub-Projects.

G. Institutional Arrangements and Training

The key institutions with responsibility for environmental management o f the SRIP are;

(i>

(ii)

(iii)

(iv>

Sub-Directorate o f Environmental Affairs in the DGH. The governmental authority responsible for the implementation o f the entire ESAMP.

Core Team Consultant. Serves under DGH Technical Directorate and will also support and assist the sub-directorate o f environmental affairs in the DGH

Design and Supervision Consultants. Lead role for design review, monitoring, including environmental monitoring, and reporting o f implementation.

Provincial Project Planning and Supervision Units (P3JJ). Lead role o f planning and supervision at the provincial level.

The Provincial and District Bapeldalda- Will review and approve AMDALs, UPL/UKL’s and monitors their implementation and they will be assisted by the DSC.

Institutional capacity in the Bapedalda’s varies across districts and provinces, but generally the provincial level Bapedalda’s are more fully staffed, better trained, have more budget and have laboratories that are very well equipped and staffed. The District Bapedalda’s who have already taken the lead in reviewing and clearing the AMDAL’s and the UKL/UPL, will continue to lead the monitoring. Where the districts have limitations in terms o f laboratory facilities for instance, laboratories o f the provincial Bapedalda will be used. The DSC will work closely with the Bapedalda’s at both levels.

In order to implement the ESAMP and ensure adequate monitoring, the sub-directorate o f environmental affairs DGH will provide on an ongoing basis the required training for the staff o f the Bapedalda’s.

The training program i s proposed at provincial level to ensure participants are familiar with al l the requirements o f the monitoring o f the safeguard policies o f the World Bank and Government of Indonesia, and also with the environmental and social requirements o f the respective AMDALs, UKLsAJPLs, Land Acquisition and Resettlement Action Plans (LARAP), and the Land Acquisition and Resettlement Policy Framework (LARAF).

71

The SRIP will finance the training program and wil l also provide Bapedaldas with the necessary budget support to undertake the monitoring activities required from them under the SRIP. These costs are included in the SRIP COSTAB.

The Sub-Directorate o f Environmental Affairs in the DGH, which was setup with support from the World Bank in 2001 , has established i tse l f well and has a good track record o f working closely with the Bank and for addressing the pressing environmental and social needs o f the roads projects it has supported.

H. Public Consultation and Information Disclosure

Two-stage public consultations process was carried out for the AMDAL Sub-Projects. For the other Sub-projects not requiring an AMDAL, a single stage public consultation was conducted. The detailed dates and locations are described in the ESAMP.

The World Bank has reviewed and cleared the ESAMP and the WP-1 environmental safeguard documents. The ESAMP and the WP-1 documents are disclosed publicly and locally in Indonesia in a manner that complies with the Bank’s disclosure policy, and also at the INFOSHOP at the Bank.

SOCIAL

The Strategic Roads Infrastructure Project (SRIP) triggers two social safeguards policies, namely Involuntary Resettlement (OP/BP 4.12) and Cultural Property (OPN11.03). Indigenous Peoples (OP 4.10) safeguard policy i s not triggered. A full explanation o f the approach to social (and environmental) safeguards i s provided in the Environmental and Social Assessment Management Plan (ESAMP).

A. Involuntary Resettlement (OP/BP 4.12)

Most o f the SRIP Sub-projects in each o f the three annual work programs will require land acquisition that will lead to resettlement o f varying scale. To manage the resettlement issues to ensure compliance with GO1 requirements as defined in the ESAMP and the World Bank’s Involuntary Resettlement policy OP/BP4.12, the GO1 has prepared a suite o f resettlement instruments.

A Land Acquisition and Resettlement Policy Framework (LARF) was prepared to give overall project guidance for the preparation o f the LARAPs, abbreviated LARAPs, and TRACER studies for those Sub-projects where land was acquired before preparation o f SRIP was started.

72

The General Principles o f the LARF are:

Land acquisition and involuntary resettlement should be avoided or minimized where feasible. Where it i s not feasible to avoid land acquisition and resettlement, the affected people should be assisted in their efforts to improve their livelihoods and standards o f living to at least equal with their pre-project status. Project Affected Persons (PAPs) will receive compensation commensurate with replacement cost o f losing their own assets as a result o f the impact o f the Sub-project. PAPs will be fully consulted in a participatory manner and will receive information about their rights and entitlements, and will be involved with resettlement planning and implementation. If the PAPs and the local government are unable to come to an agreement on a resettlement action plan after more that a year, the Sub-project will be deleted from the SRIP program. If the number o f PAPS i s less than 200 people, or if less than 10% o f their productive assets are lost and no people are physically displaced, then an abbreviated L A M P will suffice. Otherwise a full L A M P will be required.

The LARF designates the following categories o f PAPs:

0

0

Those who have legal land certificate, girik, or adapt t i t le (individual or communal) -wil l receive compensation for land, buildings, and fixed assets. Those who occupy land in a residential, commercial, or industrial zone in the Sub-project area, but do not hold a certificate or legal t i t le will receive compensation for land, buildings, and fixed assets according to the length o f their stay and the replacement value o f the assets. Those who occupy public land on sites such as rivers, roads, parks, or other public facilities in the Sub-project area will receive allowances and other resettlement assistance from the local government. In cases where public land i s occupied for a long period without sanction from the government and recognition from the government in terms o f obligation to pay land taxes and fees, or in camatl lurah agreements, the PAPs will get compensation based on the findings o f the socio-economic survey and inventory o f assets lost; Those who are renters will be assisted in finding other rental property.

0

0

Monitoring o f LARAP implementation and results will occur as follows;

0 Internal monitoring and reporting on the implementation o f LARAPs and Abbreviated LARAPs will be undertaken by the Monitoring Team comprising representatives from local government, project affected people and non-governmental organizations or a university on a monthly basis. External monitoring and evaluation. By the Midterm Review and by Project closure, an evaluation based on TOR approved by the Bank will be conducted by an independent consultant to assess (i) whether the compensation and resettlement entitlements have been provided to the PAPs as planned in the LARAPS, and (ii) whether adequate income

0

73

restoration measures were planned, and whether these have enabled the PAPs to at least restore their standard o f living, or whether they still face serious problems which require further assistance. The cost o f internal monitoring will be borne by local budget and external evaluation will be borne by the SRIP.

0

Land Acquisition and Resettlement Action Plans (LARAPs), which set out the processes and agreements for compensation and resettlement assistance to be given to project affected people and communities for land acquisition needs that are identified and known.

The LARAPs are be prepared by the appropriate level o f government to be delivered to the Directorate o f Planning (DOP) in the Ministry o f Public Works. The DOP will ensure that this plan i s reviewed b y the Sub-Directorate o f Environmental Affairs (DGH). After review and consultation with the affected people and the local government and i t s consultants (who prepared the LARAP), the DOP will submit the LARAP to the Bank for review and clearance. After Bank clearance, the L A R A P will be formally issued as a BupatYWalikota Letter.

The scope and level o f detail o f the L A R A P will vary depending on the Sub-Project’s resettlement impacts, but generally, the full LARAP will be structured as follows:

0

0

0

0

0

0

0

0

0

0

0

0

Sub-project description. Impacts o f the Sub-Project, including project activities leading to impacts, and the areas o f impacts. Main objectives o f the LARAP. Findings o f the socio-economic study and inventory o f assets lost for each PAP together with compensation entitlements. Institutional framework identifying agencies responsible for resettlement activities, and any steps necessary to enhance the capacity o f those agencies to carry out the resettlement activities. Eligibility criteria for PAPs for various kinds o f compensation and resettlement assistance. Principle to be used in valuation o f assets. Resettlement measures, including description o f the compensation packages, assistance and other measures. Consultation arrangements and description o f consultations held. Grievance procedures. Organizational responsibility and implementation schedule, including costs and budget. Monitoring and evaluation arrangements.

As some local governments have relatively small local revenues and could experience difficulty in providing full funding for the necessary budget for land acquisition there can as i s practiced in Indonesia be cost sharing between three levels o f government (local, provincial and central government) depending on the status o f the Sub-project.

Abbreviated LARAPs are prepared for cases when fewer than 200 PAPs are affected.

74

Tracer Studies are due diligence investigative reports that are prepared to ensure that, in cases where land acquisition and resettlement activities were conducted and concluded by local governments well before the Sub-projects were identified for Bank financing and approved LARAPs were prepared, the Bank i s fully informed o f how the process was undertaken, and that corrective action if any, are taken satisfactorily to the Bank.

K m

11.47

2’23

More specifically, if a Sub-project included in the l i s t in the Project Implementation Plan was proposed for WP 2 or 3, and land acquisition for this Sub-project was conducted before October 2004 by local government without a LARAP approved by the Bank, a “tracer study” shall be conducted to assess whether the land acquisition has been implemented commensurate with the LARF agreed between the Government o f Indonesia and the World Bank (including where possible an evaluation o f the situation o f PAPS before and after the land acquisition). Tracer Studies will not be accepted for Sub-projects for which land acquisition began subsequent to the October, 2004, Bank mission. These Sub-projects will require preparation o f a satisfactory LARAP.

LGU, Type o f Type of Social Report

Tracer LARAP Province Environmental

Report (# o f PAP) (# o f PAP)

Tracer for 289 Pending (survey

on July 7, 2005 conducted) has been

LARAP for 39 HHs affected. No objection on June

Karawang West Java

UKL/UPL HHs approved

UKLiUPL N A Semarang

Central Java

Summary o f Environment and Resettlement details per Sub-project

SOP Demak

Central Java 4.40

Sub Project

N A N A

85 HHs (30 kiosks

Karawang Bypass

0’75

Semarang NRR

Tracer for 388 to be relocated). Comment on draft

HHs approved LARAP provided, On 7, O5 revised version

AMDAL Ngawi

East Java

Demak Bypass

28’5

Ngawi Ring Road

SOP NA NA Cirebon, West Java

37 HHs affected.

Karangampel- Cirebon

7‘50

17.05

20.1 1

Cianjur Ring Road Tracer for 297

on N~~ 17, 05

Comment on draft Cianjur, AMDAL HHs approved LARAP provided,

revised version pending.

3 HHs affected. Comment on draft

AMDAL HHs approved L m provided, revised version

pending 92 HHs (83 kiosks

Semarang & to be relocated). Demak, UKL/UPL NA Comment on draft

Central Java LARAP provided,

West Java

Tracer for 612

on N~~ 17, 05

Tegal, Central Java

revised version

Brebes-Tegal Bypass

Semarang - Demak

:om pensation budget in

1,870,000 (1,470,000)

3,048,000 (2,948,000)

4 1,500 (500)

444,800 (80,000)

75

- No.

-

Sub Project Type of I Type o f Social Report K m LGU, Province

Total & om pensation budget in L A R A P ('000)

10.40 Semarang - Kendal (PBC)

Semarang & Kendal,

Central Java

L A R A P (# of PAP) Report (# o f PAP)

pending.

Brebes, Kabuyutan Bridge ~ 0.05 1 Central Java UKLiUPL I N A N A

35 HHs affected. 2omment on draft LARAP provided, revised version

pending. Pending (survey

has been conducted)

39 kiosks (all kiosks to be relocated)

Comment on draft LARAP provided,

revised version pending.

37 HHs affected. Comment on draft LARAP provided,

revised version pending.

16 HHs affected. Comment on draft LARAP provided,

revised version pending.

65 HHs affected. Comment on draft LARAP provided,

revised version pending.

20 HHs affected. Comment on drafi LARAP provided.

revised version pending.

N A

20 HHs affected (1 0 kiosks to be

relocated). Comment on drafi LARAP provided

revised version pending.

TBD

Pending (survey has not been done

Pejagan - Losari Cirebon, (Sec.1) Central Java

I 9'43 I 4,386,360 (3,425,360) SOP N A

SOP I N A Cilegon - Cilegon, Banten Pasauran (Sec. 1) 1 l7'I0 I

I I

643,000 SOP N A

1,497,600 (1,307,600)

Bandar Lampung Lampung, Bypass 12 UKLKJPL NA

UKLKJPL N A

SOP N A

Palmerah, Jambi Jambi, Jambi 22'90

91 7,100 (795,600) 13

Palembang Western Ring Road

Palembang, South Sumatera 8'45

2,677,450 (2,500,000) 14

634,180 (517,230)

Pasuruan, East Java Pasuruan - Pilang 32.81 15 SOP N A

16 -

17

UKLKJPL 1 N A Soekarno Hatta Bandung, Bandung West Java

3'80

Boyolali & Boyolali - Kartosuro 15.40 Sukoharjo,

Central Java

376,500 (249,000) N A UKLKJPL

18

19

- TBD 7.30 Arnbarawa Ring

Road Semarang,

Central Java Semarang - Bawen 22.55

SOP 1 N A N A 20 -

76

Sub Project Type of Social Report

Tracer L A R A P (# of PAP) (# of PAP)

N A N A Semarang - Pekalongan (PBC)

Total & Compensation

budget in L A R A P (‘000)

Pemalang Bypass

___

Magelang - Keprekan

Km

100.0

8.60

LGU, Province

Semarang & Pekalongan, Central Java

Pemalang, Central Java

Magelang, Central Java

Type of Environmental

Report

SOP

UKLAJPL

UKLAJPL

131 HHs affected.

Comment on draft Tracer

provided (Oct 5,05), revised

version pending.

N A

N A

Pending I M P W had adopted agreed Tracer Studies and LARAPs for al l Sub-projects in the f i rs t work program namely the f i rst six Sub-Projects, and they have been disclosed publicly and locally in Indonesia in a manner that complies with the Bank’s disclosure policy, and they also have been disclosed at the INFOSHOP at the Bank on February 1, 2006. Resettlement instruments for the remaining Sub-projects will be prepared during project implementation in compliance with the approved LARF.

B. Training

Training will be provided to the Sub-Directorate o f Environmental Affairs (DGH) in M P W to enable it to provide training the local government staff involved in the preparation, implementation and monitoring o f LARAPs. The training will be funded from the SRIP budget.

C. Monitoring

Monitoring o f implementation o f the LARAP for each Sub-project wil l be carried out by the local Monitoring Teams on a monthly basis. Project wide monitoring and reporting will be supervised by the Directorate o f Planning, and the monthly monitoring reports will be sent to the Directorate o f Planning and i t s Project Management Unit. The Sub-Directorate o f Environmental Affairs (DGH) will be involved in this process. The monthly monitoring information on each Sub-project will be shared with the World Bank for review and comment. The quarterly Project Reports submitted to the World Bank will include consolidated information on the status o f LARAP. The monitoring consultants and their terms o f reference will be cleared by the Bank. By the Midterm Review and by Project closure, an evaluation based on terms o f reference approved by the Bank will be conducted by an independent consultant.

D. Public Consultation and Information Disclosure

The ESAMP contains detailed requirements for consultation regarding land acquisition and resettlement (as well as environmental issues). For each Sub-project, consultations with PAPS

77

were carried out as part o f the preparation o f the LARAP. These consultations comprised information to PAPs on Sub-project design, and their compensation entitlements and options. Moreover, LGUs consult with PAPs on compensation since the finalization o f compensation amounts i s done through negotiation (musyawarah = deliberation) with PAPs. Disclosure has been carried out at the Bank’s Infoshop on February 1,2006, the World Banks Public Information Center in Jakarta, and the web site o f M P W o f the ESAMP with includes the LAW, three AMDALs, an example o f one UKLKJPL, an example o f one L A R A P and one Abbreviated L A R A P plus four Tracer Studies.

E. Cultural Property (OPN 11.03)

Five cemeteries in Karawang, Semarang, Cianjur, Ngawi, and Tegal have been identified in areas in which Sub-projects are included under WP-1. O f these, two in Cianjur and Semarang have been relocated after extensive consultation with local populations. I t has been determined that the other three can remain in their current location, and steps are being taken to secure them from any potential damage as a result o f construction activities. Screening for cultural property issues will be carried out for al l Sub-projects under WP-2 and WP-3 as a part o f the environmental screening process as detailed in the ESAMP. Procedures for handling o f chance finds o f historical or cultural artifacts are included as standard provisions in construction contracts.

F. Indigenous Peoples (OP 4.10)

The Indigenous Peoples (IP) policy is not triggered by the SRIP as no locations o f the proposed Sub-projects are in areas that would affect indigenous people (IP). Most Sub-project locations are in Java and none o f them affect or pass through areas in which IPS live. Other locations o f proposed Sub-projects are in urban areas o f Sumatra (Palembang, Lampung, Jambi - WP-1) and there are no IPS identified in those locations. For those Sub-projects that have not yet been identified (especially under WP-2 and WP-3) a screening process will be carried out as a part o f the EA process to determine whether there are any IPS in the areas to be affected by the Sub- Projects. However, if indigenous peoples are identified in the area to be covered by any such proposed Sub-project, Government has indicated its decision that such Sub-project shall not be included in the SRIP and shall not qualify as a Sub-project.

78

Land Acquisition and Resettlement Policy Framework for SRIP

The following i s the Land Acquisition and Resettlement Policy Framework (LAW) adopted by Indonesia for the purposes o f the SRIP project.

Brief Project Description

The Strategic Roads Infrastructure Project comprises several urban and inter-urban highways Sub-projects o f betterment, capacity-expansion, and new construction on new right o f way. This Project wil l be implemented through three work programs (WP). The current distribution o f Sub- Projects i s described in ESAMP. The Sub-projects in the second and third year might be further clarified during the f i rst year.

The Environmental and Social Assessment Management Plan (ESAMP) will serve as the Project’s umbrella environmental and social management document, setting out the strategic screening process that will ensure capture o f al l the projects social issues, Le., resettlement issue.

CHAPTER 1 - DEFINITIONS

The definitions used in this Policy Framework are: 1.

2.

3. 4.

5.

6.

7.

8.

9.

“Project” means the Strategic Roads Infrastructure Project (SRIP) including al l Project components, Sub-projects and i t s activities as described in this Loan Agreement between the Republic o f Indonesia and the Bank. Sub-project i s part o f the project, which the physical activity i s on the government, provincial and kabupatedkota authority area. “Government” means the Government o f the Republic o f Indonesia. “Province Government” means the Regional Government o f a province in the Western o f Indonesia (Java and part o f Sumatra). “KabupatedKota Government” means the KabupatedKota Government in a province in the Western o f Indonesia (Java and part o f Sumatra). “Project Affected Persons“(PAP) are person or institution or business unit which because o f Sub-project implementation are affected with respect to: (i) livelihood; and (ii) right or, ownership or benefit o f building and land (agriculture land, grassland, and other productive land), or other physical assets which are acquired or affected temporarily or permanently. “Physically Displaced Persons“, are people affected by the project who have to relocate because : (i) the remaining land or building i s not sufficient for shelter or work place, or (ii) the remaining land i s less than 60m2, or (iii) the remaining agricultural land is no longer adequate for cultivation. “Land acquisition” means an activity by any level o f Government to obtain land, buildings or other assets on the basis o f eminent domain f rom Project Affected Persons for purposes o f the Project against provision o f compensation and assistance. “Compensation“ means replacement o f land at replacement value, either with land-for-land o f equivalent size or productivity, or payment o f cash equivalent to replacement value if land i s not available or the PAP choose cash, and includes the replacement value o f building, plants and/or other assets connected with the land as impact o f the right o f land release or transfer.

79

10.

11.

12.

13.

1

2.

3.

4.

5.

6.

7.

8.

“Resettlement” means an effort/activity to relocate the Project Affected Persons into a new location which meets the requirements o f settlement so that they can develop a better l i fe or at least equal with the previous condition. “Relocation Assistance” means the assistance provided to displaced persons/families to cover (i) the costs o f moving from their previous to new location, and (ii) an allowance equal to the local average costs o f living if a transition period i s needed to resettle in a new location o f residence or business. “Resettlement Assistance” means an effodactivity to improve ability and PAP economic and social life, so that they can improve their standard o f living or at least equal with the previous l i fe before the Sub-project implementation. The resettlement assistance includes efforts to handle the difficulty in transition period. “Tracer study” means a due diligence study conducted to ensure proper procedures according to World Bank OP 4.12 have been carried out and the outcomes have been what would have been expected under this policy framework in the event land acquisition and/or resettlement has occurred in an area o f a Sub-project before October 2004.

CHAPTER 2 - GENERAL PRINCIPLES

Involuntary resettlement should be avoided where feasible, or minimized to the extent possible. During the Sub-project preparation process, consideration o f technical options shall involve a concurrent assessment o f potential associated land acquisition impacts, so that, where feasible, design alternatives to minimize such impacts can be identified as early as possible. Where it i s not feasible to avoid resettlement, physically displaced people should be assisted in their efforts to improve their livelihoods and standards o f living or at least equal with the previous l i fe. PAPs will receive proper compensation based on calculation o f the real replacement cost o f the assets they lose as a result o f the impact o f Sub-project. PAPs should be fully consulted and should receive proper information o f their rights and be provided with opportunities to participate in planning and implementation o f land acquisition and resettlement. If the PAPs and Local Government are unable to come to an agreement on a resettlement action plan after more than a year, the Sub-project will be deleted from SRIP program. If the PAPs number less than 200 people, or if less than 10 YO o f productive assets are lost

and no people are physically displaced, an abbreviated LARAP can be done. Otherwise a full L A M P will be required. However, the specific requirements for an abbreviated or full L A M P in particular Sub-projects should be reviewed in case-by-case basis. This Policy Framework provides guidelines and a set o f procedures o f Land Acquisition and Resettlement for PAPs appropriate to their social and economic condition. Tracer studies have been conducted for a number o f identified Sub-projects for which land acquisition had been undertaken before October 2004 in order to assess whether the process was compliance with the requirement o f the Bank’s OP 4.12.

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CHAPTER 3 - SOCIAL ECONOMIC SURVEY, INFORMATION AND CONSULTATION

3.1 Social-economic Survey and Inventory o f Assets Lost 1. As part o f the planning and land acquisition process, the relevant level o f Government

will conduct a survey to (i) define the areas to be affected by the Sub-project by making the drawing alignment, (ii) collect basic socio-economic data on the PAPs, and (iii) identify the impacts on each PAP (or affected family) with regard to al l assets lost and whether they will be displaced. The survey wil l constitute the baseline against which implementation progress will be monitored.

2. The socioeconomic survey should be conducted after project designs are provided or at least after the road corridor alignment i s determined.

3. The date o f the social-economic survey will be the latest cut-off point to record the persons in the Project area who will receive compensation, resettlement and resettlement assistance.

4. The social economic survey will be a detailed description about PAP social economic condition before the Sub-project i s implemented. The survey should include such information as: a.

b.

,

Social characteristics o f al l Project Affected Persons and households: numbers, age, gender, education, job, standard o f living, time o f stay. Information about vulnerable groups, such as low-income groups, female-headed households, elderly, orphans, minorities, and handicapped, those without legally protected t i t le to land, and other marginal groups. Land tenure and transfer systems including patterns o f authority over land. Sub-project impacts on the PAP’S patterns o f economic and social activity, including impacts on social networks and social support systems. Where resettlement i s taking place and PAPs are relocated to new locations, the capacity o f services (school, medical) in the host community to accommodate the resettlers should be assessed.

c. d.

e.

5. The inventory of assets lost will record for each PAP (or affected family) (i) the precise extent o f property loss (area o f agricultural land; residential, business and other structures, crops and trees etc), (ii) the legal ownership status o f land, and (iii) whether the PAP will be displaced. The inventory will also include NJOP and market prices o f land and building. The information should be based on the written information from authoritative institutions such as local banks, or local brokers. The socio-economic survey and inventory o f assets lost will include al l PAPs, and will be the basic information informing land acquisition, resettlement and resettlement assistance processes.

6.

3.2 Information, Awareness, and Consultation 1. Local Government will conduct intensive awareness campaigns among PAPs, to

provide information about planned Sub-project activities, possible Sub-project impacts and compensation and resettlement options. Awareness and consultation will be conducted together with social economic survey among all PAP and related stakeholders. These activities can be conducted through open discussion, FGD (focus group discussion), dialogue, or other ways appropriate to

2.

81

local condition. Care should be taken to ensure consultations include vulnerable and marginal groups. The purpose o f the consultation i s to accommodate the opinions/aspirations, and suggestions o f PAPS and related stakeholders about land acquisition and resettlement policy and strategies.

3,

3.3 Independent Organization In conducting social economic survey activity described in sub chapter 3.1 and 3.2, Local Government will involve independent institutions, which have good experience in social economic survey or community development work.

3.4 Land Acquisition and Resettlement Action Plan (LARAP) 1. Based on the results o f the survey described in sub-chapter 3.1, the appropriate level o f

Government prepares a comprehensive Land Acquisition and Resettlement Action Plan (LARAP) or Abbreviated LARAP depending on the level o f possible impact as described in Chapter 2, paragraph 6 above. A full L A R A P will contain the following elements : a. Sub-project description b.

c. d. e.

2.

potential impacts o f the Sub-project, including project activities leading to impacts, the areas o f impacts; main objectives o f the Land Acquisition and Resettlement Action Program findings o f the socioeconomic study and inventory o f assets lost institutional framework identifying agencies responsible for planning, implementation, and monitoring o f resettlement activities, and any steps necessary to enhance the capacity o f those agencies to carry out resettlement activities eligibility criteria for PAPs for various kinds o f compensation and resettlement assistance principle to be used in valuation o f assets; resettlement measures, including description o f the packages o f compensation and other resettlement measures for each category o f eligible persons, site selection, preparation and relocation strategies for those PAPs that will be relocated to new sites, housing, infrastructure and social services, environmental protection and management where appropriate, mechanisms o f community participation in the resettlement process (including host communities);

implementation schedule, including costs and budget

f.

g. h.

i. grievance procedures j . k. monitoring and evaluation arrangements.

3. Abbreviated L A R A P If PAP less than 200 people, or if productive assets affected by the Sub-project are less than lo%, then an abbreviated may be prepared. An abbreviated LARAP will contain, at a minimum, the following elements: e

e

e

Census survey o f PAPs, assets lost, and valuation o f assets Compensation and resettlement assistance description; Consultation with PAPs about compensation alternatives

82

0

0

0 Schedule and funding The L A R A P will be prepared by the appropriate level o f government to be delivered to the SRIP secretariat, Public Works Ministry, which, after review, will submit the L A R A P to the Bank for review and clearance. After World Bank approval, the L A R A P will be formally issued as a BupaWWalikota Letter. The World Bank will issue clearance for procurement to proceed for the Sub-project once land acquisition i s complete and PAPs have received compensation as established under the LARAP. During implementation o f the L A R A P the appropriate level o f government will provide regular progress reports to the SRIP Secretariat which will forward those reports to the World Bank.

Institutional responsibility for implementation and procedures for grievance redress; Arrangements for monitoring and implementation; and

4.

5.

6.

3.5. Tracer Study If a Sub-project included on the l i s t o f the Project Implementation Plan (PIP) i s proposed for WP 1,2 or 3 and land acquisition for the Sub-project was conducted before October, 2004 by local government without a LARAP approved by the Bank, a “tracer study” shall be conducted to evaluate whether the land acquisition has been wel l implemented appropriate with the Land Acquisition and Resettlement Policy Framework between Government o f Indonesia and The World Bank and to evaluate PAP condition before and after the land acquisition. Any Sub- Project in the PIP for which land acquisition began subsequent to October, 2004 will not be considered for funding without preparation o f a satisfactory LARAP. For Sub-projects under WP-1 the process i s already completed.

CHAPTER 4 - LAND ACQUISITION

4.1 Compensation 1. The PAPs will receive fair compensation calculated at real replacement cost.

2.

Replacement costs are: (i) agriculture area: the pre-project or pre-displacement, whichever i s higher, market value o f land o f equal productive potential or use located in the vicinity o f the affected land, plus the cost o f preparing the land to levels similar to those o f the affected land, plus the cost o f any registration and transfer taxes. (ii) land in urban area: the pre-displacement market value o f land o f equal size and use, with similar or improved public infrastructure facilities and services located in the vicinity o f the affected land, plus the cost o f any registration and transfer taxes, and (iii) for housing and other buildings: replacement based on material market price to build replacement building similar to the affected building, or to repair a partially affected structure, plus cost o f transporting building materials to construction site, plus cost o f any labor an contractors fees and cost o f registration and transfer taxes. In determining this replacement cost, depreciation o f assets and material salvage value are not countable, nor are lost assets affected by value added as a result o f project activities. Compensation for trees, plants and other assets are to be negotiated based on established price standards for various kinds o f trees and cash crops.

83

3, Follow up monitoring and evaluation o f the implementation o f the compensation process will be conducted to make sure that PAPs receive their compensation as described in the LARAP. Internal and external monitoring will conducted and will include a census or sampling survey depending on the number o f HH affected by project. The report and recommendation will be made publicly available.

4.2 Relocation Assistance

previous to new location, and (ii) an allowance equal to the local average costs o f living if a transition period i s needed to resettle in a new location o f residence or business (e.g. during the time it takes to build a new house/business)

Displaced persons/families will be assisted with regard to (i) the cost o f moving from their

4.3 Resettlement Assistance In addition to the compensation for land, building, and fixed assets, the PAPs, who have suffered an income loss due to the displacement (e.g. job loss), will receive resettlement assistance, to assist them in re-establishing or improving their livelihood in the new environment. Resettlement assistance can be provided in parallel with Sub-project construction and implementation.

4.4 Compensation Alternatives 1.

2.

3.

4.

5. 6.

Based on the agreement reached at the negotiation, the eligible PAPs can choose to receive cash compensation or land replacement. Physical displacement may include provision o f serviced sites, land swaps, l ow cost housing, real-estate housing provided through a Bank Tabungan Negara (BTN) credit facility, or other schemes organized by the appropriate level o f Government. PAPs can also form cooperative housing groups to construct housing. For this Local Government will coordinate with relevant institutions to provide service and rehabilitation assistance as needed. The Physically Displaced Persons will not bear the costs o f depreciation o f their buildings, and charges or taxes related to the relocation or compensation. PAPs can take and bring their salvaged building materials to the new site. Cash compensation must be given to PAPs before their move to a new location or the destruction o f their old building.

4.5 Categories o f Project Affected Persons PAPs can be grouped into: 1. 2.

3.

4. those who are renters

those who have legal land certificate, girik, or adat t i t le (individual or communal); those who occupy land in a residential, commercial, or industrial zone in the Project area, but do not hold a certificate or legal title; those who occupy public land on sites such as rivers, roads, parks, or other public facilities in the Project area; and

84

4.5.1 Persons who Have Land Certijkate, Girik or Adat Title 1, PAPs who have land certificate, girik, or adat title, will receive compensation

for the land, building, and fixed assets appropriate with ownership status and its environmental condition.

2. PAPs described in sub-chapter 4.4, point 1, who are displaced by the Project, can choose to receive cash compensation or other options as described in sub- chapter 4.5.

3. The lots at the resettlement site will have land t i t le o f the same level or higher (whenever possible) than they previously had, and the certificate will be issued within 6 months after displacement o f the physically displaced persons.

4. PAPs will receive transport allowance to move themselves and their belongings, including any salvage material they choose to retain.

5. PAPs who suffer an income decline due to resettlement will also receive resettlement assistance to increase their ability to improve their lives.

Persons Who Occupy Land in a Residential, Commercial or Industrial Zone in the Project Area But Do Not Hold a Land Certijkate or Legal Documents 1. PAPs who are recorded in the baseline survey and who occupy land in a

4.5.2

residential, commercial, or industrial zone in the Project area, but do not hold a land certificate, girik, or hak adat, receive compensation o f land, building, and fixed asset according to the length o f their stay and the replacement value o f the assets.

economic survey who have to displaced, can choose to receive cash compensation or other options as described in sub-chapter 4.3.

certificate will be issued within 6 months after the displacement.

2. PAP described in sub-chapter 4.4 point 2, who are recorded in the social

3. The lots at the new site will have Hak Pakai or a higher land title, and the

4. PAP will receive transport allowance sufficient to move their belongings. 5. PAPs who suffer an income decline due to resettlement will also receive

resettlement assistance facilitated from the Local Government to increase their ability to improve their lives.

1, PAPs who are recorded in the social economic survey that clearly delineated as public land such as railway, under bridge o f fly over will receive allowance and other resettlement assistance from the local government.

2. In cases that the public area: (i) has been occupied for long period o f time without any sanction from the government, (ii) people occupying the land have received recognition from the government by incurring the obligation to pay land tax or fees, or a camat/lurah agreement has been effected on land transactions such that it i s no longer clear the land i s public land, the PAP should receive compensation based on the recommendation o f the social economy survey

4.5.3 Persons Who Occupy Public Land on Inzastructure or Public Facility Sites

4.5.4 Persons Who Are Renters PAP who are renters, and are recorded in the social-economic survey, will be assisted in finding a rental-house, or a housing site o f similar size to the one lost, which can be rented or rent-purchased through affordable installments.

85

4.6 Land donation 4.6.1 Land donation i s acceptable only if: a) the land donator gets direct benefit from the

project/ Sub-project and they are not poor people; b) PAP have been informed clearly their right on compensation as stated in this framework and they still willing to donate without any pressure.

the land. This statement shall be duly signed by the PAP with appropriate stamp/materai and witnessed by third parties.

in the process o f land donation.

4.6.2 The donor shall provide a written statement clearly indicating willingness to donate

4.6.3 P M U and the Bank should ensure that there i s no pressure or intimidation to the PAP

4.7 Resettlement Site 1. The resettlement site provided for the physically displaced persons will include

adequate infrastructure and public facilities to promote development o f a good social and economic life, including: (a) Road or footpath as necessary; (b) Drainage system; (c) Water supply (if a piped water distribution network i s not available, there should

be wells that comply with health standards); (d) Electricity; (e) Access to health facility, education, work places, religious services, and sport

facilities, in accordance with the size o f the new community; and (f) Access to public transport facilities. The location reserved for resettlement as described in point 1 o f this sub-chapter will be widely publicized so that the general public will be well informed. The physically displaced persons will be informed o f the completion o f the resettlement site at least one month before displacement, and they will be invited to survey the new site. The physically displaced persons will move to the new site after the infrastructure and facilities at the resettlement site are completed and feasible to live in as confirmed by the Project supervisor and local community leader.

2.

3.

4.

CHAPTER 5 - ASSISTANCE, MONITORING AND EVALUATION

5.1 Types o f Assistance 1.

2.

3 .

4. 5.

PAPS whose job, income, or living are disturbed by the Project or are physically displaced will receive assistance to improve their standard o f living or at least to maintain it at the level before the implementation o f the Sub-project. The assistance program will give priority to vulnerable community members and groups, including to women and women headed households. In implementing the assistance care should be taken to smoothly integrate the newly resettled people with the host community in the resettlement area. The assistance can be linked to existing programs and resources. Resettlement assistance may include one or more o f the following: (a) Allowance (b) Motivation development (c) Skill and vocational training

86

(d) Assistance to start and develop small businesses (e) Small scale credit (0 Marketing development (g) Strengthening o f community based organization and services (h) Grievance resolution and mediation (i) Training to promote gender equality, such as woman access and participation in decision-making . (i) Health training about the environment, reproduction, HIV/AIDS.

5.2 Assistance Schedule and Cost 1. The assistance will start during the consultation prior to displacement. The program

should be limited only in one year budgeting but can be conducted in several years appropriate with PAP needs. The fund for the extended assistance will be reserved from the Project funds or other sources as defined by the Bupati/Walikota letter in the LARAP.

2.

CHAPTER 6 - INSTITUTIONS AND FUNDING

6.1 Land Acquisition Committee (LAC) The various activities described above will be implemented by Land Acquisition Committee in each Local Government. Head, Members, and Tasks o f the Land Acquisition Committee 1.

6.2 The Land Acquisition Committee as described in sub-chapter 6.1 will be chaired by District Head, with members from relevant agencies in the Local Government (e.g. Land Agency, Technical Agency requiring the land, Adminitrative Agency). The tasks o f the Land Acquisition Committee described in sub-chapter 6.1 include, among others: (a) to inform and consult to the PAP on the Sub-project plan (b) to conduct asset inventory to be acquired; (c) to disclose affected asset in places that can be accessed easily by PAPs (d) to negotiate and reach agreement on compensation with PAPs.

2.

6.3 Consultation and Assistance by Independent Institution 1, In the planning and implementation, especially related to the informatiordawareness,

consultation, training and assistance to the community, the L A C will be assisted by independent institution, which are experienced and have achieved good results. They should be keen and skilful in community development and they should be able to integrate various sectoral activities at the community level. Transparency and consultation should be strengthened to solve local problems, quickly, and effectively. Complaints, which cannot be solved locally, will be processed through the procedures described in Presidential Decree No. 36 o f 2005 and Regulation o f the Minister o f Agraria No. 1 o f 1994.

2.

6.4 Coordination between Bappeda and Land Acquisition Committee (LAC) 1. Bappeda should act as the main coordinator handling al l environmental and social

matters connected with Works. This would include consultation, land and building

87

acquisition and compensation, resettlement, and rehabilitation assistance. Bappeda should also be responsible for liaison with all stakeholders and non-governmental organizations

2. Intensive communication and coordination should be developed between Bapedalda, Bappeda, and the Land Acquisition Committee. Joint meeting coordination will be conducted at least once each month.

3. BupatUWalikota and other related officials conduct the evaluation for the development o f land acquisition and resettlement and rehabilitation assistance, at least one for each month.

4. Provincial Government together with i t s related institutions will monitor and assist the Local Government in conducting community rehabilitation assistance as describe on this Framework Policy.

1. Reports and funding sources for the implementation information campaign, consultation, assistance, and resettlement as described in this Policy Framework shall be coordinated with the Project SRIP at Local Government in related Province.

2. General arrangements will be covered in the Project Implementation Plan. The details o f the cost and funding sources will be covered in the LARAP which will be determined by the Bupati/Walikota letter as agreed by the relevant funding sources.

3. The Project Management Unit SRIP at the related province will provide the proposed LARAP to the SRIP Secretary, Ministry o f Public Works for furnish it to the World Bank for reviewed and approval.

4. Independent Institution will be retained as required by the Project and/or Bank to periodically carry out external monitoring and evaluation o f the implementation o f the LARAPs.

5. The Bank may carry out an inspection o f the site or location o f candidate Sub-projects with prior notification to the Executing Agency, MPW, although the inspection can be conducted independently. The result o f inspection, which shall be discussed with related local government agency, shall be informed to the Executing Agency.

6.5 Coordination

CHAPTER 7 - MONITORING AND EVALUATION

7.1 Internal monitoring and reporting Internal monitoring and reporting on the implementation o f LARAPs and Abbreviated LARAPs will be undertaken by the Monitoring Team comprising representatives from Local Government, project-affected people, and NGO or University on a monthly basis and will include:

(a) Information on consultations held during L A R A P preparation and implementation (b) Information on the delivery o f compensation and rehabilitation entitlements as

stipulated in the LARAP comprising (i) the timely provision o f compensation to individual PAPs, and (ii) the timely provision o f resettlement assistance (relocation and income restoration assistance) to individual PAPs (see Annex 1 for reporting format).

(c) Information on grievance redress (see Annex 1 for reporting format)

88

7.2

(d) The Socio-Economic Survey and Inventory o f Assets Lost undertaken during the preparation o f the LARAP will constitute the baseline for monitoring o f implementation progress.

(e) Monthly monitoring information on each Sub-project will be shared with the World Bank.

(0 Quarterly project report will include consolidated information on the status o f L A R A P implementation prepared by the P M U and submitted to the World Bank.

(g) The budget for internal monitoring will be borne by local government. External Monitoring and Evaluation 1. By the Midterm Review and by Project closure, an evaluation based on TOR approved

by the Bank will be conducted by an independent consultant to assess (i) whether the planned compensation and resettlement entitlements have been provided to the PAPs as planned in the LARAPs, and (ii) whether adequate income restoration measures were planned, and whether these have enabled the PAPs to at least restore their standard o f living, or whether they still face serious problems which require further assistance.

2. If the PAP has not been able to overcome income and the standard o f living problems, the Local Governments will provide an extension of the assistance.

3. The budget for External Monitoring and Evaluation will be borne by the Project.

CHAPTER 8 - GRIEVANCE MECHANISM

8.1. Bappeda, Local Monitoring Team, Sub-project Manager, or the PMU-SRIP. The Team shall respond to it by conducting an investigation and deliberation no later than twelve working days.

Project affected people can submit any complaint on LARAP implementation to either

8.2. existing regulation (Perpres 36/2005).

For any complaint on disagreement o f compensation amount the Project will fol low the

89

Annex 11: Project Preparation and Supervision

I N D O N E S i A : Strategic Roads Infrastructure Project

Planned Actual PCN review February 18,2004 July 23,2004 Initial PID to PIC July 23,2004 May 13,2005 Initial ISDS to PIC July 23, 2004 May 16,2005 Appraisal April 17, 2006 May 2006 Negotiations May 22,2006 May 22,2006 Board/RVP approval June 27,2006 Planned date o f effectiveness Planned date o f mid-term review Planned closing date

November 1,2006

December 3 1.201 1

Key institutions responsible for preparation o f the Project: Ministry o f Public Works

Bank staff and consultants who worked on the Project included:

Name Title Unit Hatim M. Hajj Task Team Leader until EASTR

February 28,2006 Jerry Lebo Senior Transport Specialist EASTR

(economist) and Task Team Leader starting March 1 , 2006

Sally Burningham Senior Transport Specialist EASTR Alain Dube Senior Transport Specialist EASTR Mesra Eza Operations Officer, Transport EACIF Kundhavi Kadiresan Portfolio Manager EACIF Yogana Prasta Senior Disbursement Officer EACIF Novira Kusdarti Asra Financial Management EACIF

Imad Saleh Lead Procurement Specialist EACIF Firman Dhannawan Procurement Specialist EACIF Glenn Morgan Lead Environmental Specialist EASES Farida Zaituni Operations Analyst EACIF

James Monday Consultant (Environment) EASEN Mackay Angus Consultant (Environment) EACIF Asger Christensen Lead Social Development EASSD

Bruce Harris Consultant (Social Issues) EASRD Sulistiowati Nainggolan Urban Specialist EACIF Francisca Melia Consultant (Land Acquisition EACIF

Steven Burgess Senior Social Development EACIF

Specialist

(Environment)

Specialist

and Resettlement

90

Specialist (Anti-corruption) Junxue Chu Finance Officer L O A G l Anthony Toft Chief Counsel LEGEA Melinda Good Senior Counsel LEGEA Imogene Jensen Senior Economist (Quality EASIN

Assurance, Economics, Sector Issues)

Sr i Oktorini Program Assistant EACIF Christopher D e Serio Senior Program Assistant EASTR

Bank funds expended to date on Project preparation: 1. Bank resources: US$534,892 (as o f end-May 2006) 2. Trust fund PHRD TF052415 (Borrower-executed): US$1,124,594 3. Trust fund JPN TF030484 (Bank-executed): US$259,852 4. Project Preparation Facility: PPF P4080: US$826,211 5. Project Preparation Facility: PPF P408 1 : US$1,2 19,935 6. Total (Borrower): US$3,824,592 7. Total (Bank): US$794,744

Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$56,000. 2. Estimated annual supervision cost: US$lOO,OOO.

91

Annex 12: Documents in the Project File

INDONESIA: Strategic Roads Infrastructure Project

A.

1.

B. 1. 2. 3.

C. 1.

D. 1. 2. 3. 4.

5.

6. 7. 8. 9. 10.

11. 12. 13.

14. 15. 16.

E. 1. 2. 3.

Project Implementation Plan

Project Implementation Plan, May 2006

Bank Staff Assessments Bank Staff Aide Memoires covering period from 2003 to 2006 Procurement Capacity Assessment for SRIP, December 2005 Financial Management Assessment for SRIP, December 2005.

Others Country Assistance Strategy, October 2003

Program Preparation Reports Draft Feasibility Study Report, Volume 2, for Gresik -Lamongan, December 2004 Draft Feasibility Study Report, Volume 2, for Batang-Weleri Draft Feasibility Study Report, Volume 2, for Kaligawe Flyover, December 2004 Review o f Studies for Preparation o f the Strategic Urban and Inter-Urban Road Components Technical Assistance Consulancy Services Study And Project Preparation Strategic Road Infrastructure Project Feasibility Study Brebes - Tegal - Pemalang (Volume 2), February 2005 Feasibility Study Bekasi - Karawang (Volume 2), January 2005 Draft Feasibility Study Report Magelang to Keprekan, Volume 2, December 2004 Feasibility Study Magelang - Secang (Volume 2), January 2005 Draft Feasibility Study Report for Interurban Betterment Schemes, Volume 2, December 2004 Feasibility Study Brebes - Tegal Bypass (Volume 2), November 2004 Cianjur Feasibility Study Cianjur Ring Road (Volume 2), September 2004 Draft Final Report Study O f Introducing Road Safety - Audit In Indonesia, September 2004 Feasibility Study Pemalang - Pekalongan Volume 2, September 2004 Penyampaian Laporan Study Tracer Brebes - Tegal Bypass, May 2004 AMDAL Study For Widang-Gresik Road

Environmental and Social Assessment Environmental and Social Assessment Management Plan Volumes 1 and 2, January 2006 Magelang-Keprekan LARAP Study (in Bahasa), November 2005 Simple Land Acquisition and Resettlement Action Plan (LARAP) Study o f Kal i Banteng Fly Over Semarang (in Bahasa), Year 2004

92

4.

5. 6. 7. 8. 9. 10. 1 1.

Tracer Study Final Report in Ruas Jalan Lingkar Utara Pemalang, Kabupaten Pemalang (in Indonesian language) LARAP Report o f Peningkatan Jalan Soekarno - Hatta Pekanbaru Tracer Study Report o f Peningkatan Jalan Soekarno - Hatta Pekanbaru LARAP Report o f Pembangunan Jalan Lingkar Ambarawa Tracer Study Report o f Pembangunan Jalan Lingkar Ambarawa LARAP Report o f Semarang Northern Ring Road, dated May 22,2006 LARAP Report o f Cianjur Ring-Road, dated May 22,2006 LARAP Report o f Ngawi Ring-Road, dated May 22,2006

93

Annex 13: Statement of Loans and Credits

INDONESIA: Strategic Roads Infrastructure Project

Original Amount in US$ Millions

Difference between expected and actual

disbursements

Project FY Purpose ID

IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd

PO97535 2006

PO77175 2006

PO71296 2005 PO76174 2005

PO78070 2005

PO84583 2005 PO85133 2005

PO85374 2005 PO92019 2005

PO95883 2005

PO74290 2004 PO71318 2004

PO71316 2004

PO64728 2004

PO59931 2003

PO63913 2003

PO79156 2003

PO76271 2003 PO73772 2003

PO72852 2002 PO73970 2002

PO40578 2002

PO49539 2001 PO40528 2001 PO73025 2001

Community Recovery Through the KDP ID-Domestic Gas Market Development Proj. ID-USDRP ID-Initiatives for Local Govern. Reform Support for Poor and Disadvantaged Areas ID-UPP3 Govt Fin1 Mgt & Revenue Admin Project ID-HIGHER EDUCATION Kecmatan Development Project 3B ID Reconstruction of Aceh Land Adrnin Pro ID-E. IND REG TRANSPT 2 ID - Coral Reef Rehab and Management I1 ID - Coral Reef Rehab and Mgmt Prog I1 ID-LAND MANAGEMENT &POLICY DEVT PROJECT ID-Water Resources & IrrSector Mgt Prog ID-Java-Bali Pwr Sector & Strength ID Third Kecamatan Development Project ID-PPITA ID-Health Workforce & Services (PHP 3) ID - U P P 2 ID-GLOBAL DEV LEARNMG (LIL) ID-EAST. IND. REGIONAL TRANSPT ID-PROVINCIAL HEALTH I1 ID-W. JAVA ENVMT MGMT ID-SECOND KECAMATAN

0.00

80.00

45.00 14.50

69.00

67.30 55.00

50.00 80.00

0.00

200.00 0.00

33.20

32.80

45.00

141.00

204.30

17.10 31.10

29.50 2.66

200.00

63.20 1 1.70

208.90

0.00

0.00

0.00 15.00

35.00

71.40 5.00

30.00 80.00

0.00

0.00 0.00

23.00

32.80

25.00

0.00

45.50

0.00 74.50

70.50 0.00

0.00

40.00 5.75

11 1.30

94

64.70

0.00

0.00 0.00

0.00

0.00 0.00

0.00 0.00

25.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00 0.00

0.00

0.00 0.00

0.00 0.00

0.00

0.00 7.50

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00 '0.00

0.00

0.00 0.00

0.00 0.00

0.00

1 .oo 0.00

0.17

0.16

0.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00

0.00 0.00 0.00

51.20

80.00

45.00 28.65

102.12

134.27 56.3 1

78.29 153.68

25.50

173.00 7.02

51.00

59.38

69.95

136.84

74.20

13.14 97.00

77.15 1.68

41.30

80.23 7.68

61.60

0.00

0.00

0.29 0.00

0.00

-0.34 0.64

0.00 52.1 1

0.00

29.67 0.43

0.36

6.46

33.16

88.09

33.78

10.23 42.12

37.33 1.68

39.64

67.81 6.81

46.97

0.00

0.00

0.00 0.00

0.00

0.00 0.00

0.00 0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00

0.00 1.72 0.00

PO68051 2001 PO68949 2001

PO59477 2000 PO49545 2000 PO40196 1999

PO41895 1999 PO36049 1999

PO40061 1998

PO03993 1998

DEVELOPMENT PROJECT ID-GEF-W. JAVA ENVT MGMT ID-LIBRARY DEVELOPMENT PROJECT - LIL ID-WSSLIC I1 ID-PROVINCIAL HEALTH I ID-SUMATRA BASIC EDUCUATION ID-SULAWESI BASIC EDUC. ID-EARLY CHILD DEVELOPMENT

DEVELOPMENT ID - BENGKULU REGIONAL

ID-SUMATRA REGL RDS

0.00 0.00

0.00 0.00

54.50

47.90 21.50

20.50

234.00

0.00 4.15

71.40 38.00 20.10

15.93 0.00

0.00

0.00

0.00 2.54 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00 0.00

0.00 10.65

5.00

50.00

2.05 0.56

43.65 18.63 0.35

11.09 1.33

4.63

7.08

10.00 0.00

34.00 16.24 0.99

11.85 11.99

9.63

57.08

2.12 0.00

0.00 4.38 0.00

0.00 11.99

4.63

1.40

Total: 2,059.66 89.70 10.04 66.98 1,795.56 26.24 820.33 649.02

95

INDONESIA STATEMENT OF FC’s

Held and Disbursed Portfolio In Millions o f U S Dollars

Committed

IFC

Disbursed

IFC

FY Company Loan Equity Approval

2004 2003 2006 1999

2004 2002 1989 1997 1989 1994 2003

2005 2005 2000 2002 2004 1997 1993 1996 2004 2005

1991 1995 1999 2001 2003 2004 1992 1996 1995 1997

2000

BonaVista School Buana Bank Buana Bank ITCF LYON-MLF-Ibis Medan NP School P.T. Gawi PT Agro Muko PT Alumindo PT Astra PT Astra PT Astra PT Astra Otopart PT Astra Otopart PT Austindo N... PT Bank NISP PT Bank NISP PT Bank NISP PT Berlian PT Bina Danatama PT Bina Danatama PT Ecogreen PT Ecogreen PT Grahawita PT Indo-Rama PT Indo-Rama PT Indo-Rama PT Indo-Rama PT Indo-Rama PT Indo-Rama PT KIA Keramik PT KIA Keramik PT KIA Serpih PT Kalimantan PT Makro PT Makro

1 .oo 0.00 5.00 40.00 2.01 1.75 11.50 0.00 4.78 0.00

0.00 0.00 0.00 24.00 15.06 0.00 0.00 35.00 0.00 0.07 0.00 30.00 25.00 0.00 0.00 0.00 0.00 20.00 5.00 48.00 0.23 1.65 4.50 11.25 0.00 0.00

0.00 12.16 0.00 0.00 0.00 0.00 0.00 2.20 0.00 0.20 0.19 0.12 0.70 0.00 0.00 2.85 2.04 0.00 3.35 0.00 0.00 0.00 0.00 0.00 3.82 1.57 0.81 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.61 1.25

Quasi

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.86 0.00 0.00 0.00 0.00 3.62 0.00 0.00 5.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

Partic.

0.00 0.00 0.00 0.00 2.01 0.00 4.07 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6.73 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.00

53.49 49.50

0.00 0.00 0.00

Loan Equity Quasi Partic.

1 .oo 0.00 0.00 0.00 2.01 0.00 5.35 0.00 4.78 0.00 0.00 0.00 0.00

24.00 1.96 0.00 0.00

35.00 0.00 0.07 0.00

30.00 15.00 0.00 0.00 0.00 0.00 0.33 4.88

14.00 0.23 1.65 4.50

11.25 0.00 0.00

0.00 12.16 0.00 0.00 0.00 0.00 0.00 2.20 0.00 0.20 0.19 0.12 0.70 0.00 0.00 2.85 2.04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.82 1.57 0.81 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.61 0.79

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.83 0.00 0.00 0.00 0.00 3.62 0.00 0.00 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 2.01 0.00 4.07 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6.73 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.00

53.49 49.50 0.00 0.00 0.00

96

1998 PT Megaplast 4.38 2.50 0.00 0.00 4.38 2.50 0.00 0.00 1993 PT Nusantara 0.00 0.00 10.16 7.90 0.00 0.00 10.16 7.90 2004 1997 2001 1995 2004 1997 2003 200 1 2005 2004

PT Prakars (PAS) PT Sayap PT Sigma PT Viscose PT Viscose PT Wings SMM Sunson WOM Wilmar

35.00 2.50 0.00 9.38 9.50 2.17 3.00 11.62 0.00 20.00

0.00 0.00 9.02 0.00 0.00 0.00 1.09 0.00 0.00 0.00 0.00 2.92 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 7.35

20.00 0.00 0.00 0.00 0.00 0.00

35.00 2.50 0.00 9.38 5.00 2.17 0.00

11.62 0.00

20.00

0.00 0.00 1.09 0.00 0.00 0.00 0.00 0.00

19.93 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

9.02 0.00 0.00 2.92 0.00 0.00 0.00 7.35 0.00 0.00

~~

Total portfolio: 383.35 57.46 21.64 144.99 246.06 53.58 21.61 144.99

97

Annex 14: Country at a Glance INDONESIA: Strategic Roads Infrastructure Project

Household final consumption expenditure 59.1 61.6 63.7 65.2 General gov't final consumption expenditure 11.2 7.8 8.4 8.2

POVERTY and SOCIAL Indonesia

- 3 0 1

-GCF +GDP

2005 Population, mid-year (millions) GNI per capita (Atlas method, US$) GNI (Atlas method, US$ billions)

Average annual growth, 1999-05

Population 1%) Labor force (%J

Most recent estimate (latest year available, 199905)

Poverty (% of population below national povem line) Urban population (% of total population) Life expectancy at birth (years) Infant mortality (per 1,000 live births) Child malnutrition (% ofchildren under 5) Access to an improved water source (% of population) Literacy (% ofpopulation age 15+) Gross primary enrollment (% of school-age population)

Male Female

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1985

GDP (US$ billions) Gross capital formation/GDP Exports of goods and services/GDP Gross domestic savings/GDP Gross national savings/GDP

Current account balancelGDP Interest paymentslGDP Total deb!/GDP Total debt service/exports Present value of debffGDP Present value of debVexports

87.3 28.0 22.2 29.7 49.2

-2.2 2.7

42.0 28.8

1985-95 1995-05 (average annual growth) GDP 7.7 2.2 GDP per capita 5.9 0.8 Exports of goods and Services 9.3 2.4

221.3 1,240 273.9

1.4 2.7

17 I 46 66 31 27 70 91

111 112 110

1995

202.1 31.9 26.3 30.6 56.3

-3.2 3.1

61.5 29.9

2004

5.1 3.6

13.5

East Asia 8 Pacific

1,870 1,280 2,389

0.9 1.1

41 70 32 15 78 90

113 113 112

2004

254.3 23.2 32.1 27.9 24.9

0.6 4.6

53.9 -25.7

2005

5.6 3.8 8.6

Lower- mlddle- Income

2,430 1.580 3,847

1 .o 0.7

49 70 33 11 81 90

114 115 113

2005

287.2 22.2 33.5 26.6 23.4

0.3 1.7

46.5 -27.0

2005-09

6.3 4.9

11.2

I Development diamond'

Life expectancy

T

GNI Gross Per primary capita enrollment

Access to improved water source

I -Indonesia - Lower-middle-income !arouD

I Economic ratios'

I Trade

Domestic Capital savings formation

1 Indebtedness

I Indonesia Lower-middleincome arow

-

STRUCTURE of the ECONOMY

(% of GDP) Agriculture Industry

Services Manufacturing

1985 1995 2004 2005

23.2 17.1 15.6 13.4 35.8 41.8 44.3 45.8 16.0 24.1 28.7 28.1 40.9 41.1 40.1 40.8

Growth of capital and GDP (%) 'I 20

10 0 I . -'10 -20

(average annual gmwth) Agriculture Industry

Services

Household final consumption expenditure General gov't final consumption expenditure Gross capital formation Imports of goods and services

Manufacturing

1985-95 1995-05

3.4 2.4 9.7 2.1

11.2 3.3 7.9 2.2

6.5 3.3 4.6 3.6

11.0 -3.4 8.5 0.0

2005 1 Growth of exports and imports (Oh) 1 0.6 4.2

40 4.1 2o 3.9

6.2 4.8 0

6.8 9.1 -20

9.4 7.4 4o

4.0 6.4 4.2 -Exports +imports

27.1 12.3 I Note: 2005 data are preliminaly estimates.

98

Indonesia

PRICES and GOVERNMENT FINANCE

Domestic prices (% change) Consumer prices Implicit GDP deflator

Government finance (% of GDP, includes current grants) Current revenue Current budget balance Overall surplus/deficit

TRADE

(US$ millions) Total exports (fob)

Fuel Rubber Manufactures

Total imports (cia Food Fuel and energy Capital goods

Export price index (2000=100) Import price index (2000=100) Terms of trade (2000=100)

BALANCE of PAYMENTS

(US$ millions) Exports of goods and services Imports of goods and services Resource balance

Net income Net current transfers

Current account balance

Financing items (net) Changes in net reserves

Memo: Reserves including goid (US$ millions) Conversion rate (DEC, local/US$)

EXTERNAL DEBT and RESOURCE FLOWS

(US$ millions) Total debt outstanding and disbursed

IBRD IDA

Total debt service IBRD IDA

Composition of net resource flows Official grants Official creditors Private creditors Foreign direct investment (net inflows) Portfolio equity (net inflows)

World Bank program Commitments Disbursements Principal repayments Net flows Interest payments Net transfers

1985 1995

4.8 9.4 4.3 9.7

19.8 15.6 -2.3 7.8 -1.0 4.1

1985 1995

18,527 45,418 .. 10,465 .. 2,916 .. 18,312

10,259 40,629 .. 3,022 .. 3,007 .. 16,290

.. 24

.. 26

.. 95

1985 1995

19,371 52,923 17,840 54,461 3,062 -3,076

-3,542 -1 1,748 88 981

-1,923 -6,431

2.433 9,578 -510 -3,147

5,880 14,787 1,110.6 2.248.6

1985 1995

36,715 124,398 3,590 12,503

844 756

5,823 16,416 384 1,875

12 26

273 501 980 1,129 154 2,303 310 4,346

0 1,493

1,068 1,312 777 2,090 133 975 644 1,115 262 926 382 188

2004

6.1 6.3

17.6 7.4

-1.0

2004

71,585 15,803 1,144

22,063 46,525 3,786

11,797 12,175

107 114 94

2004

89,783 79,116 10,667

-10,917 1,138

1,564

-1,255 -309

36,320 8,938.9

2004

137,024 8,943

996

-23,647 1,931

34

29 -2,927

554 -3,408 4,409

773 649

1,389 -740 576

-1,316

2005

10.5 13.7

18.2 7.6

-0.5

2005

85,625 19,155 1,468

22,343 57,600 3,888

17,429 13,949

124 130 95

2005

89,783 79,116 10,667

-10,768 1,189

930

-1,315 385

34,729 9,504.0

2005

133,482 8,131 1,000

-24,855 1,865

34

134 -3,017

-400 -3,118 6,084

900 646

1,417 -771 482

-1,253

Inflation (%) 25 T

1 O' 00 01 02 03 a4 151 -GDP deflator -CPI

O5 I 99 W 01 02 03 M

Exports rn Imports

Current account balance to GDP (%)

14

12 10

8

6 4

2 0 I 99 00 01 02 03 04 05 I

Composition of 2004 debt (US$ mill.)

8: 996 A 8,943

A - IBRD 8 . IDA D - Other muitilateral F ~ Private C. IMF G - Short-term

E - Bilaleral

Development Economics 4/10/06

99

Annex 15: Anti-Corruption Action Plan

INDONESIA: Strategic Roads Infrastructure Project

Since 2003 all new projects supported by the World Bank in Indonesia have needed an agreed Anti-Corruption Action Plan (ACAP) in place. This particular ACAP builds upon experience in the sector over recent years. The main actions are stated below, and in an Action Plan Table that i s arranged in accordance with six key elements, namely:

1. Enhanced Disclosure 2 Civil Society Oversight 3, Mitigation o f Collusion Risks 4. 5. Complaint Handling Systems 6. Sanctions and Remedies

Mitigation o f Forgery and Fraud Risks

Increasing effectiveness o f procurement procedures within MPW

One key area for corruption concerns i s in the procurement process. Ongoing road sector projects (SRRP, EIRTP- 1 and EIRTP-2) have procurement at the local/provincial/ kabupaten levels involving local administrations in the procurement o f about 300 NCB contracts per project. SRIP i s a national government, national roads project with a limited number o f works procurement packages (expected 2 1 ICB contracts for works) and all the procurement wi l l be directly undertaken by MPW itself, whether physically in Jakarta or in the relevant province. This ACAP i s built around this more “centralized” model which should lend i t se l f to easier monitoring and a higher quality. The following procurement packages are expected.

0 Approximately 22 ICB works contracts (1 5 in f i rst year) with an average value o f US$lO million

0 Three goods contracts at a total approximate value o f US$1.325 million 0 Few consultancy contracts including three large consultancy contracts for management

namely the Core Team Consultant and Design & Supervision consultants.

The following procurement related aspects are introduced for SRIP:

0 E-procurement on the MPW official public web-site for both works and consultant services contract - “semi” e-procurement initially in l ine with the system already in place in MPW, full transaction based e-procurement when the new e-procurement system i s launched (expected in July 2006) and assessed by the Bank to be acceptable. MPW to hire a Procurement Advisor for the works contracts. Procurement Advisor to provide a set o f services to ensure that procurement and award decisions are carried with measures to avoid collusion and fraudulent practices MPW to hire a Procurement Agent for the four large consultancy contracts expected under SRIP including short listing, technical evaluation and contract negotiations Revise and improve on the selection process and qualifications o f Civil Society Representatives (current suggestion i s to request assistance from local universities wherever this i s appropriate)

0

0

0

100

0

0

0

0

External technical audits procured by M P W to assess on-going and finished works. Inspectorate General role, responsibilities, facilities to be reviewed and strengthened where needed. Review criteria for nominating procurement committees Provide project implementers with needed facilities and budget

E-Procurement within MPW

M P W already has in place a "semi" e-procurement system for public bidding which i s up to the limit o f what i s currently allowed under current Indonesian law. In line with this "semi1' e- procurement system, M P W has agreed to use their official website www.pu.go.id for publishing key information related to SRIP , including: Invitation to Bid, download o f bidding documents, bid clarifications, minutes o f bid opening, information on bid award. This level o f e-procurement i s already in place for many o f their current bids. M P W is technically ready to move to full transaction based e-procurement on enactment o f a pending Presidential decree. After enactment of the decree or other relevant legislation M P W will, within three months, commence use o f a transaction based e-procurement system. This is being synchronized with the overall dialogue with the Government on e-procurement. Any use o f transaction based e-procurement for SRIP will be compliant with the "E-Bidding Requirements for MDB Loans, Grants and Credits", May 2005.

Procurement Advisor within MPW

M P W will hire a Procurement Advisor with reporting responsibilities to the Inspectorate General of MPW. This Advisor i s required to provide a set o f services to ensure that procurement and award decisions for works are carried with measures to avoid collusion and fraudulent practices. The provider o f these services will be a specialized reputable firm, preferably separated from the regular project management consultancies, but with access to national expertise and ability to mobilize staff at the provincial level. Short listing and selection o f this firm will be scrutinizedh-eviewed by the Bank.

With regard to the f i rst six works contracts, given that the Procurement Advisor will not yet be in place, the M P W will ensure that a public notary attends the bid opening, The public notary will hold in escrow the one sealed copy o f each bid submitted and deliver directly to the Procurement Agent on his appointment. The MPW will ensure that the Procurement Agent reviews the bids and the bid evaluation report prior to submission to the Bank for no objection.

The scope o f the services o f this firm will be detailed further in a terms o f reference; however, at a minimum the assignment should include the following:

0 Assisting in setting and managing an e-procurement system for SRIP initially and with prospects for expanding to al l World Bank-financed projects in the sector in line with government systems; Developing measures/protocols to avoid collusive/fraudulent practices for bidding o f works contracts based on experience in the country: discourse o f al l information, participation in the evaluation process, verification o f participation o f bidders, verification o f owners estimates versus submitted prices;

0

101

0 Setting up a monitoring system to capture salient information about contract processes, participating bidders, awarded contractors, variation in contracts, unit prices, etc. . . with the objective o f identifying any collusive trends; Ensuring all procurement processing and awarded decisions are carried within the agreed time frame avoiding delays and need for extension o f bids validities; and Reviewing the procurement system in MPW particularly with regard to consultant selection and work with MPW to develop a revised system

0

0

Procurement Agent within MPW

The history o f the process for selection o f consultants reveals long delays and weaknesses in the short listing and evaluation reports. In addition to delaying the project, such practices make these selection processes vulnerable to corruption. The need to mobilize the large consultancies in a timely, efficient and transparent manner wil l require specialized support to the MPW. The optimum form o f this support i s to recruit a Procurement Agent to carry the full selection process on behalf o f MPW for the Core Team Consultant, Design and Supervision Consultant and Procurement Advisor. Given MPW concerns about legal issues, the Procurement Agent wi l l carry all the required tasks (Le. short listings, evaluation, etc.) and will submit his recommendations to the procurement committee who wi l l be expected to adopt them. The profile of this consultant should be an internationally reputable firm specialized in these services.

Anti-Corruption Action Plan as adopted by Ministry of Public Works

1. Enhanced Disclosure

The MPW wil l provide the following information in the PIP, PMM, the MPW website, and in the bidding documents: “The contact point for complaints related to the Strategic Roads Infrastructure Project: To : Directorate o f Planning Ministry o f Public Works Tel: Fax: e-mail: To: Inspectorate General Ministry o f Public Works Tel: Fax: e-mail: To the World Bank Fraud and Corruption unit Email: investigationshotline@worldbank.org Website: http://www.worldbank,org/integrity If you prefer to remain anonymous, you may wish to make use o f a free email service (such as Hotmail or Yahoo) to create an email account using a pseudonym. This way, we could correspond with you as necessary, to seek clarification or additional information. This would be helpful for us in pursuing your allegation. Through a Fraud and Corruption Hotline hired by INT for this purpose: (24 hourdday;

102

translation services are available) Toll-free: 1-800-83 1-0463 Collect Calls: 704-556-7046 Mai l : P M B 3767, 13950 Ballantyne Corporate Place Charlotte, N C 28277, United States” Each annual Work Program and the Procurement Plan will be published on the official website o f M P W and made available to the public as a part o f the public disclosure policy o f this project. M P W will publish a quarterly newsletter on the official website o f M P W including information concerning the l i s t o f contracts, implementation progress, project-related workshops and the number, typology and status o f complaints for each location. M P W will send the quarterly newsletter to the civ i l society (e.g. NGO) forum in each project province in hardcopy or through an electronic mailing system. Guidelines o n disclosure o f information to the public o n project and procurement activities shall be incorporated in the PMM, and will include the following key actions:

a. The M P W will and the World Bank may make publicly available, promptly after completion o f a mid-term review o f the project carried out in accordance with the loan agreement, the mid-term review report and the aide-memoire prepared for this purpose. M P W will also post this on the M P W official website within 2 months o f the completion o f the mid-term review.

b. The M P W will and the World Bank may make publicly available promptly after receipt al l final audit reports (financial or otherwise, and including qualified audit reports) prepared in accordance with the loan agreement and al l formal responses o f the government in relation to such reports. M P W will also post this on the MPW official website within 1 month o f the report being accepted as final.

c. The M P W will and the World Bank may :

Make publicly available promptly after finalization al l annual Procurement Plans and schedules, including al l updates there to; M P W will also post this on the official website o f M P W within one month o f the end o f the fiscal year.

Make available to any member o f the public promptly upon request all bidding documents and requests for proposal (this provision does not include actual bids and proposals) issued in accordance with the procurement provisions o f the loan agreement, subject to payment o f a reasonable fee to cover the cost o f printing and delivery. Each such document will continue to be made available until a year after completion o f the contract entered into for the goods, works or services in question.

Make available to any member o f the public promptly upon request al l shortlists o f consultants.

Actively encourage representatives o f c iv i l society groups to attend the public bid openings and other key procurement steps. Representatives o f c iv i l society will be included as observers and sign the attendance l i s t for the Procurement/Selection

103

process.

For works: (i) For the first six c iv i l works contracts, if the Procurement Advisor has not been hired, then a public notary will (A) attend the opening o f bids, and certify the Minutes o f bid opening o f bids (B) send one copy o f the bids (after the bid opening) to the P M U within 24 hours; and (C) keep in a safe place one copy o f the sealed bids (after bid opening) and make available on request the copy o f the bids and the minutes o f the opening o f the bids to the Procurement Advisor when hired (ii) For the remaining civ i l works contracts, the Procurement Advisor will do al l o f the above steps.

For consultants services: (i) For the CTC consultants, the DSC consultants and the Procurement Advisor, a Procurement Agent will be used. (ii) For the procurement o f the other consultants’ services where a Procurement Agent is not used, a public notary will be invited to officially witness the opening o f the technical and financial proposals, and certify the Minutes o f Opening o f technical/financial proposals. The public notary will also keep in a safe place one copy o f the technical proposals submitted by each consultant (once they are open), the sealed financial proposals (before they are open), and one copy o f the financial proposals submitted (after they are open).

In l ine with the Procurement Guidelines, within two weeks o f contract award (Bank’s no objection) publish in UNDB online, dgMarket, on M P W website, and send to those who submitted bids, contract award information identifying the bid and lot numbers and the following information (a) name o f each bidder who submitted a bid (b) bid prices as read out at the bid opening, (c) name and evaluated prices o f each bid that was evaluated; (d) name o f bidders whose bids were rejected and the reason for their rejection; and (e) name o f the winning bidders, and the price it offered, as wel l as the duration and summary scope o f the contract awarded.

Make available, promptly upon request by any person or company, a l i s t o f al l contracts awarded in the three months preceding the date o f such request in respect of s project, including the name o f the contractor / supplier / consultant, the contract amount, the number o f bidders / proposes, the procurement method followed and the purpose o f the contract

The M P W will establish a webpage within the official website o f M P W that provides monthly updated information on project activities. This information would include, for each province or district, inter alia : nature o f contracts awarded (estimated cost, scope o f works, contractor details); current estimate o f the progress o f implementation (e.g. gross estimate o f completion as a percentage o f works to be carried out); other project-related activities such as workshops; data concerning complaints and remedial actions

M P W will actively encourage representatives o f c iv i l society groups to attend public bid openings and other key procurement steps. C iv i l society observers may be invited from local universities or other independent institutions. Experience in other projects strongly suggests that the unit being monitored should not control the selection and briefing o f such representatives, therefore a third-party, the Inspectorate General, acting on behalf o f the Project, may be required to perform these roles. Details concerning the selection and

Civil Society Oversight

104

briefing o f representatives must be recorded at the national level. Guidelines on appropriate procedures wil l be provided in the PMM. The M P W will establish a mechanism whereby the media and civ i l society groups can become involved in monitoring the progress o f the project including implementation. This mechanism will include regular sharing o f information with the media. Copies o f press clippings (etc.) will be sent to the national level for discussion and filing. Regular (e.g. annual) Accountability Meetings will be held to enhance accountability and sharing o f information. The f i rst o f these will occur at the province level, before procurement o f contractors or service providers, so that any c iv i l society and community representatives required for the procurement processes (etc.) can be selected in a transparent manner. Each meeting must be properly organized and the agenda widely distributed amongst interested parties.

Mitigation of collusion risks Works contracts. M P W will hire a Procurement Advisor to support the management o f the procurement o f goods and works for the Project

0 M P W will use “semi” e-procurement and publish on i t s official website for al l works contracts:

o all Invitations to Bid, o bidding documents and drawings, o clarification o f bids, o bid opening minutes, o information on contract award.

Manual system will continue to run in parallel for contractors who wish to use it. 0 Bidding documents will be available for download on-line. N o charge for electronic

documents. 0 “Procurement Advisor” to certify the documents are on-line prior to the issuance o f the

Invitation to Bid and remain available to bid opening. 0 No pre-qualification 0 List o f bidders remains confidential until bid opening. 0 N o Pre-bid meetings. The specifications shall be defined clearly in the bidding

documents. Clarifications can be sought through written correspondence and replies will be sent to al l bidders. Appropriate guidelines providing for this will be prepared.

0 “Procurement Advisor” to be present to observe the bidding process and opening 0 Bids to be under control o f “Procurement Advisor” during the “Bid Submission

Period”. 0 Two sealed copy o f the bids submitted to be kept by “Procurement Advisor”, which

will send one sealed copy to P M U within 24 hours to be kept by PMU. 0 “Procurement Advisor” to immediately check the bids for any signs o f collusion (using

tracking software) and to certify the minutes to be submitted to Procurement Committee, and copy to the PMU.

0 Bid Evaluation Report to be complete and submitted within 4 weeks and prepared by “Procurement Advisor” to be submitted to Procurement Committee, and copy to the PMU.

0 Bids awarded within original bid validity period. Any extension o f bid validity period for the second time or for cumulatively greater than 8 weeks requires Bank no

105

objection. Bank would not provide such no objections.

eligible for financing.

responsibility as the "Engineer" in the works contract.

contracts and eight randomly selected ABPN financed contracts and report in the quarterly Progress Report: bid price o f concrete, bitumen,

N o rebids. If needs a rebid due to corruption and/or collusion, Sub-project is not

M P W to use FIDIC arrangements with the independent supervision consultant having

0 M P W will track the following indicators from the bill o f quantities o f the SRIP

Consultant services. M P W will hire a Procurement Agent to assist Procurement Committee to undertake the procurement o f the consulting services for the project. This i s zxpected to apply to three key consulting contracts for consulting services. MPW will use "semi" e-procurement and publish on i t s official website for all consultant :ontracts

0

0

Shortlisting: N e w process for shortlisting. Request for Proposals. Only the CVs o f key personnel with be requested and evaluated up to about 10 staff. (Currently up to 100 CVs have been requested and evaluated making this a very mechanical process).

NCB procedures. No NCB procurement of works is expected. The clarification o f N C B procedures fol lowing Keppres 80/2003 to be acceptable by the Bank i s included in the Legal Agreements. Following such clarifications, the implementation plan includes: 0 Advertisement in national newspapers 0 Removal o f geographic and other restrictions

Use o f post-qualification which allows participation by bidders without any restriction Advertisement of bids. The M P W will employ a standard agreed format (minimum column size=lO) o f advertisement and place in a nationally circulated newspaper, on the M P W official website. on the UNDB on-line and dn Market websites. Project Managers. Project Managers to be assigned based on agreed qualifications as stated in MPW criteria reauirements to be Dut in the Proiect Mananement Manual. Guidelines for preparation o f specifications / selection criteria in the Bidding Documents / request for proposal will be prepared to ensure compliance with Bank guidelines. This will include suggestions to conduct simple surveys on available products in the market and the alternative o f hiring consultants for procurement o f works / services to define the specification / terms o f reference. Guidelines to prepare owner estimates, particularly for consultancy work will be defined. This will include the requirement to provide a detailed breakdown o f estimates, suggestions to conduct simple market price surveys, maintaining data base o f survey results and previous purchases under EIRTP-1 and EIRTP-2, which will be accessible to al l Implementing Units A narrative justification o f each shortlisting will be required for proposing shortlists for prior review contracts. Guidelines on preparing these justifications will be prepared Public openings for I C B and QCBS processes will be attended by the Procurement Officer / Treasurer / c iv i l society representatives. The reports / records o f public openings for al l prior review contracts shall be submitted promptly to the Bank (2 x 24 hours) The M P W will provide guidelines and training on how to conduct clarifications /negotiations that are in line with the Bank guidelines.

106

The M P W will prepare guidelines and training on monitoring contract implementation. Mitigation of Forgery and Fraud Risks

3ach Project Implementation Unit will include a qualified procurement specialist / officer md financial management specialist / officer The MPW will establish procedures to maintain proper project and procurement filing ncluding filing o f advertisements, bidding documents, evaluation reports, contract award md final contract documents. rimelines for procurement decisions will be agreed between GO1 and the Bank to establish service standards and avoid procurement delays to reduce opportunities for corruption. These will be clearly stated in the Project Management Manual. The M P W will establish procedures for regular review o f accounting reports including all supporting documents (Le. travel report, receipts, etc.) Guidelines for submission o f complete documentation required for requests for payments [SPP) to KFKN will be prepared by M O F via Circulated Letter o f DG Treasury M O F to al l KPPN. The M P W shall conduct regular interim audits by third parties, which will include review of procurement process and procurement results (end use checks, quality and quantity o f acquired goods / works / services, verification o f payments, price comparison between contract mice and market mice. etc.). The M P W shall conduct training as needed to improve the capability o f key personnel at all levels. This will include, as necessary, aspects o f procurement, financial management, design, and supervision o f implementation. The design capability and the quality o f design will be improved in order to avoid any design review in post contract signing. The M P W shall delegate the authority for supervision o f works by stating clearly and in detail the bidding/contract document the authority for Engineer’s and Engineer’s Representative.

A complaints handling mechanism, which includes maintaining a project complaint log and filing to monitor status o f fol low up o f each received complaints, will be established by the implementing Agency and the Bank. The mechanisms will include provision for fol low up investigations o f substantial complaints by the internal Auditors, or third party audit to ensure independency and reliability o f the system.

Complaint Handling System

All complaints received shall be responded to by the Project Implementation Unit (PIU) within 7 days o f receipt, with copy to PMU, World Bank and DGRI.

All complaints handling component will be included in the website to be established for the project. This will be updated on a monthly basis.

For the complaint mechanism to function, i t i s essential that information concerning the alternative conduits for complaint (telephone hotline’, dedicated email ad+ and PO Box) is widely disseminated.

Strict procedures to ensure anonymity o f informants will be enforced.

Recording and appropriate referral o f al l incoming complaints will be undertaken by the

107

Implementing Agency with each case generating an automatic, standard format report to the Bank.

Tracking o f the status o f investigations and measures taken will be reported in monthly reports to management and the Bank. Complaints deemed possible serious infringements may be further investigated by the Bank.

Remedies for non-compliance with agreed time-lines for procurement decisions / service standards will be established and will include the following remedies :

An Evaluation report must be submitted to the Bank within four weeks o f bid/proposal submission. Failure to do so will be deemed to be a failure o f due diligence; timely and appropriate action acceptable to the Bank will be required to remedy the situation. Request for extension o f bid validity for 8 weeks beyond the original validity will quire the Bank's prior approval. Bank will not give such no objections.

Sanctions and remedies

0

The MPW will establish the remedial actions and sanctions for cases o f fraud and corruption that are reported and for which evidence i s found. This will include sanctions to staff proven to be involved in such cases. In all contracts, evidence o f fraud, corruption, collusion and coercive practices will result in termination o f the relevant contract, possibly with additional penalties imposed (such as fines, blacklisting, etc. in accordance with Bank and/or Government regulations and may result in suspension o f disbursement o f funds with respect to that contract. Any entity that is found to have misused funds may be excluded from subsequent funding. Information regarding such cases, where lessons are learned and funds are retrieved, will be widely disseminated. Disbursement to any given contract/location can be suspended or stopped completely i f cases o f corruption are not dealt with effectively.

108

World Bank supervision

The World Bank team will supervise implementation o f the six elements, through inter alia:

Disclosure o f information will be supervised mainly through (a) checking the frequency and comprehensiveness o f website updates and, (b) checking the distribution o f materials to key CSOs in participating provinces.

Civ i l societv oversight will be supervised mainly through (a) reviewing the attendance o f CSOs in Public Accountability Meetings and (b) reviewing the inclusion o f CSOs in project activities, particularly in monitoring procurement.

Mitigation o f collusion risks will be supervised mainly through (a) tracking key data related to procurement (e.g. unit costs, schedules) and (b) periodic analysis o f al l bids that have suffered from collusion, to identify weaknesses in the system.

Mitigation o f forgery and fraud risks will be supervised mainly through (a) reviewing the findings o f strong technical and financial audits, to be held during (interim audits) and after (post audits) each year for a significant sample and (b) reviewing incoming remarks from third party observers/monitoring.

The complaints handling system will be supervised mainly through (a) periodic review o f statistics based on problem typology, severity and location, and (b) field level checks to ensure that problems are being reported and acted upon.

The system o f sanctions and remedies will be supervised mainly through (a) periodic review o f the sanctions that have been enforced by the project based on typology, severity and location, and (b) periodic review o f sanctions enforced by agencies external to the project such as the police, attorney general and Corruption Eradication Commission.

As a part o f the work o f the Bank-executed External Supervision Team, outlined in Attachment A below, there will be a need to make comparative studies/evaluations between “project and non-project” activities. The government i s therefore requested to make information regarding SRIP and similar activities available to the Bank

External Supervision of Roads Projects - Enhanced WB Supervision

This note focuses on the External Supervision Team or EST which will assist the Bank to supervise the project and carry out related tasks. The team may be mobilized under one or more contracts, depending on need, under a Bank-executed trust fund.

The primary function o f the proposed EST i s to advise and support the Bank and the Bank’s internal Anti-Corruption committee for Indonesia (ACI) in supervision, specifically to help identify the risks o f fraud and corruption at an early stage, and to bring these to the attention o f the Bank and Government institutions for further processing. The EST will include a dedicated

109

core team o f experts with additional members “on call.” This team must possess strong skills for successful field and desktop reviews - including financial, procurement, accounting, legal and technical. The focus o f the services will be the SRIP, assisting the TTL and A C I primarily through:

1. Identifying and tracking simple indicators o f corruption. Starting with the procurement process through implementation. These, indicators will include those related to quality and cost as well as those related to the critical path o f Sub-project timelines. The aim i s for the Bank to catch problems earlier than would otherwise be possible, ideally before funds are put at risk. The experts will prepare and implement processes for collection and analysis o f relevant, easily available data - including comparative analysis o f the data against that originating from comparable non-SRIP sources (e.g. other M P W activities). They will also assess data entry to help ensure that it i s entered correctly and in a timely fashion. They will also help to coordinate remedies with project management.

2. Helping with supervisorv reviews o f the proiect’s progress, through Sub-project site checks, both on a periodic and troubleshooting basis. The TTL will have a high degree o f flexibility in deciding which locations are visited, the type o f review and the frequencyhiming o f visits. The main purpose o f this i s to allow site reviews to take place at strategic times between the formal supervision missions. These reviews will cover the entire range, from simple checks on progress to a small number o f targeted, international quality, forensic audits. Particular attention will be given to shortcomings in quality o f work during implementation and fiduciary risk flags. This holistic set o f supervision support services i s considered vital because recent Bank investigations have found recurring cases o f poor project-based implementation supervision and output quality due to corruption in some recent roads projects. I t has also been noted that increased frequency o f audits can have a preventative effect, indicating that Sub-projects “being under the spotlight” has a positive impact.

A second set o f functions relate to the Bank’s stated enhanced disclosure functions, primarily:

1. Summarizing key data for the TTL /ACI for internal use and for public consumption. Materials for external dissemination will include al l those items highlighted in the ACAP and any others that the TTL determines with government counterparts. As a part o f this work the experts will establish an independently maintained and publicly accessible website, with key project implementation information to facilitate public oversight. They will also assess possibilities o f direct collaboration with local media groups. Preparation o f external information will be done in consultation with the External Affairs (EXT) team in the WBOJ. Different possible methods for information dissemination will be assessed on behalf o f the TTL/ACI. Internal reports will include information regarding suspected problems and cases.

2. Disclosing proiect information to c iv i l society and encouraging civ i l society interest in the proiect. The EST will work closely with the TTL, the A C I and the EXT team, to design disclosure and networking processes related to the project. Beyond simple dissemination of information, these processes should contain opportunities for c iv i l society to give feedback and pose questions to the TTL and project management. This work will include the design o f possible supervisiodmonitoring activities that can be carried out by c iv i l society in relation

110

to the project. I t i s necessary to provide access to reports and other data to key civ i l society groups through newsletters and other dissemination o f reports. T o this end the experts will develop a l i s t o f interested c iv i l society groups along with suggestions on how to foster improved information dissemination to them. As mentioned above, they will help the project to access media networks, particularly radio and print media, and encourage investigative journalism. They will also develop and implement strategies to develop linkages, with civ i l society, including mechanisms to encourage civ i l society organizations as voluntary monitoring bodies, and the issuance o f contracts for specific monitoring services. The experts will also channel feedback from meetings with civ i l society back to the WB and PMU.

The EST will also assist the WBOJ, particularly the A C I and EXT in:

1. Designing Complaint Handling processes to strengthen the Bank’s own systems and to the extent possible link with and support the office o f the Inspectorate General (IG) o f MPW. The EST will develop a system for the Bank to receive, classify and prioritize complaints from any source for suspected fraud and corruption at any stage o f the project. The system must ensure fast referrals o f cases and transfer o f information to the BPWKPK, and close tracking and processing o f cases o f suspected fraud and corruption in the selected projects. The system should provide wide and open access to complainants, including beneficiaries o f projects, c iv i l society and public: contact information for the system will be widely publicized in al l project locations. Standard operating procedures will be developed for handling complaints. These will include data entry monitoring to help ensure that it is entered correctly and in a timely fashion. The EST will prepare periodic reports for Bank management (TTL, ACI) with copies to BPK and K P K and help to monitor the status o f the complaints referred to external agencies. Linkages to the system in the office o f the IG should be encouraged in order to emphasize the importance o f the IG in handling incoming the complaints.

2. Designing mechanisms for coordination with institutions. The EST will help the Bank to coordinate with B P K and KPK. They will provide access to working papers, as requested, to enable B P K to endorse or certify reports and forward them to KPK. The External Monitoring Team will not investigate or prosecute cases, but it will provide the Bank’s INT (Department o f Institutional Integrity) section and the BPWKPK with information related to suspected corruption cases. The experts will ensure that al l evidence o f corruption or fraud found during reviews will be diligently documented or recorded in other media, for possible later use by the INT and/or the IG, BPWKPK. The EST will also accommodate participation o f INT, IG, BPK and K P K team members in reviews where requested and appropriate. The EST will also help the Bank to prepare materials that can promote harmonization with other donors in relation to anticorruption measures.

External Supervision Team Timeline

Month 0 to 4 - starting prior to SRIP being launched 0 Mobilize consultant team 0

0

Design and test indicators and supervision strategy, prepare tools (e.g. checklists) Summarize project preparation, procurement and launch materials

111

0

0

0

0

With the office o f the IG, design Complaint Handling System Prepare draft communications and networking strategy for the TTL, including mechanisms for CSO feedback (create and update l i s t o f interested CSOs) Preparation and launch o f website Design possible support and coordination strategy with IG, B P K and KPK.

Month 5 to 10 - overlapping with first cycle procurement and implementation 0

0

0

0

0

0

Continue improving and consolidating new systems Use indicators to track procurement and implementation Start routine supervisory reviews and troubleshooting reviews as requested by TTL Prepare case information for the TTL, INT, IG, BPK and KPK as appropriate. Design and test mechanisms for coordination with BPK and KPK (etc.). Fully hand over Complaint Handling System to the IG.

Month 11 to 12 - wrapping up first year 0

0

Continue improving and consolidating new systems Hand over al l other systems to Bank and/or Government o f Indonesia as appropriate

Parallel Activities

During this same period discussions will continue between the M P W the Bank, K P K and the B P K concerning the strengthening o f their respective roles in relation to Bank-assisted projects, particularly in sectors deemed vulnerable to corruption problems. These discussions will include two key areas o f concern. The first, requested by the Minister o f Finance, i s to identify means o f applying greater positive incentives within the MPW, to encourage fairer practices that will give meaningful benefits to those who do not engage in corrupt practices. The second set o f issues relates to sanctions, with particular emphasis on the strengthening o f investigations and prosecutions.

112

Gulf ofThailand

Gulf ofCarpentaria

CelebesSea

Java Sea

BandaSea

Arafura Sea

SuluSea

AndamanSea

PA C I F I CO C E A N

I N D I A N

O C E A N

1112

1314

8

67

3

54

2

1

10

9

19

20

21

22

25

26 27

15

16 17

28

23

29

30

31

24

18

I N D O N E S I A

PAPU

AN

EW G

UIN

EA

A U S T R A L I A

SINGAPORE

VIETNAM

THAILAND

MYANMARCAMBODIA

TIMOR-LESTE

BRUNEI

PHILIPPINES

MA L A Y

SI

A

Bogor

Surakarta

Malang

Dili

Amahai

Parepare

Baubau

GorontaloTernate

Tarakan

Raba

EndeWaingapu

Pematangsiantar

Balikpapan

Cilacap

Sorong

Merauke

Fakfak

Manokwari

Cirebon

Batam

JAKARTA

Medan

SurabayaBandungSemarang

Palembang

Makassar

Pontianak Samarinda

Banjarmasin

Bandar Lampung

Padang

Pekanbaru

Yogyakarta

Kupang

AmbonKendari

Palu

Manado

Denpasar Mataram

Jambi

Bengkulu

Banda Aceh

PalangkarayaJayapura

Pangkalpinang

Timika

Tanjungpinang

Serang AruIs.

KaiIs.

TanimbarIs.

Halmahera

Biak

Yapen

Morotai

Misool

Waigeo

Peleng Obi

Muna

Ceram

Buru

SULAWESISula Is.

Timor

FloresAlor

WetarMoa

Babar

Sumba

SumbawaLombok

J A V A

NatunaBesar

Anambas

Belitung

Madura

S U M A T R ABangka

Lingga

Nias

Siberut

Enggano

Simeulue

TalaudIs.

Bali

K A L I M A N T A N

Mentaw

aiIs .

105°

15°

0° 0°

120°

120°

135°

INDONESIA

This map was produced by the Map Design Unit of The World Bank.The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 200 400

KILOMETERS

600

IBRD 34582

JUN

E 2006

D.I. ACEHNORTH SUMATRARIAUWEST SUMATRAJAMBIBENGKULUSOUTH SUMATRALAMPUNGBANGKA-BELITUNGBANTEN

123456789

10

11121314151617181920

WEST JAVACENTRAL JAVAD.I. YOGYAKARTAEAST JAVABALIWEST NUSA TENGGARAEAST NUSA TENGGARATIMORWEST KALIMANTANCENTRAL KALIMANTAN

SOUTH KALIMANTANEAST KALIMANTANNORTH SULAWESIGORONTALONORTH SULAWESISOUTH SULAWESISOUTHEAST SULAWESINORTH MALUKUMALUKUWEST IRIAN JAYAPAPUA

2122232425262728293031

PROVINCES:

INDONESIA

STRATEGIC ROADSINFRASTRUCTURE PROJECT

PROJECT PROVINCES8

MAIN ROADS

SELECTED CITIES AND TOWNS

PROVINCE CAPITALS

NATIONAL CAPITAL

PROVINCE BOUNDARIES

INTERNATIONAL BOUNDARIES

For detail, seeIBRD 34583

For detail, seeIBRD 34584

For detail, seeIBRD 34585

For detail, seeIBRD 34586

For detail, seeIBRD 34587

For detail, seeIBRD 34588

D.Kerinci

S e l a t B e r h a l a

S e l a t Me n t a w

a i

J A M B I

R I A U

W E S T

S U M AT R A

BE

NG

KU

L U

S O U T H

S U M A T R A

1°

2°

3°

104°103°102°

1°

2°

3°

104°103°

INDONESIA

STRATEGIC ROADS INFRASTRUCTURE PROJECTJAMBI

0 10 20 30 Kilometers

MAIN ROADS

LINK NUMBERS

PORTS

DISTRICT (KECAMATAN) CAPITALS

KABUPATEN CAPITALS

PROVINCE CAPITAL

KABUPATEN BOUNDARIES

PROVINCE BOUNDARIES

011-3

IBRD 34583

JUN

E 2006

To Sijunjung

To Padangaro

To Painan

To Lubuklinggau

To Palembang

To Rengat

031-2

031-1

021-2

033-1

031-3

021-1

021-3029-0

028-0

030-0

006-3

006-2

007-1

008-0

010-1

009-1

026-0009-2

007-2

010-2

012-2

012-1

014-1

014-2

024-1

024-2

024-3

014-3019-0

020-0

018-0015-0

016-0

017-0

025-0

027-2

027-1

013-0

013-0

011-3

011-2

011-1

005-0

004-0

006-1006-1

002-2

023-0

003-0

001032-K3

032-K2 032-K4

002

022-1022-2

033-3

033-2

Bts. Sumbar

Junction/Rt.Ikil

Tn.TumbuhBts.Sumbar

Tanjung

RB.Bujang

P.Tamiyang

MuarateboSP.NiamSei Bengkal

S.Ruan

Muaratembesi

Sp.Mersam

Lb.Kambing

Bts.Riau

Bts.Sumbar

Siulakderas

SUNGAIPENUH

Sanggaran Agung

Junjun

Lempur

Sei Manau

Sp.P.Rengas

Ma.Siau

DusuntuoJangkat

Batang Asai

Sei Salak

Pemenang

Kr.BenangAir Hitang

Pauh

Sorolangun

Sp.Pelawan

Bts.Sumsel

Durian Luncuk

S.Bahar Tempino

Pal X

K.Mandalo

Sp.Tuan

Sp.Lagam

Pmt.Lumut

Merlung

Muarasabak

Simpang

Nipah Panjang

Suakkandis

Tl.Duku

Pudak

Sp.Kenali

Sp.Gelam

Bts.Sumsel

Bts.Sumsel

Peta Ling/Bts.Sumsel

BANGKO

Rt.Panjang

MUARABUNGO

KUALATUNGKAL

JAMBI

Lokpon

MUARABULIAN

This map was produced by the Map Design Unit of The World Bank.The boundaries, colors, denominations and any other information shownon this map do not imply, on the part of The World Bank Group, anyjudgment on the legal status of any territory, or any endorsement oracceptance of such boundaries.

13. PALMERAH22.90 km. - Betterment

I N D I A N

O C E A N

S e l a t

Ba

ng

ka

BENGKULU

S O U T H

S U M A T R A

J A M B I

L A M P U N G

105°104°103° 106° 107°

2°

3°

4°

5°

105°104°103° 106° 107°

2°

3°

4°

5°

INDONESIA

STRATEGIC ROADS INFRASTRUCTURE PROJECTSOUTH SUMATRA

IBRD 34584

JUN

E 2006

0 100 Kilometers50

MAIN ROADS

AIRPORTS

PORTS

DISTRICT (KECAMATAN) CAPITALS

KABUPATEN CAPITALS

PROVINCE CAPITAL

KABUPATEN BOUNDARIES

PROVINCE BOUNDARIES

To Jambi

To Bangko

To Curup

To Manna

To Liwa

To Kota Bumi

To Bujung Tenuk

SUNGAILIAT

Pangkalpinang

SEKAYU

LUBUKLINGGAU

LAHAT

MUARAENIM

BATURAJA

KAYUAGUNG

PALEMBANG

Ka.Mapur

Belinyu

Lumut Bedukang

Pudingbesar

PudinggebagKelapa

Ibul

JebusParitiga

Tj.Gudang

Plb.KayuarangMentok

Tj.Kelian

Katis

PuputNamang

Payung

LampurSungaiselan

KobaAirbara

Toboali

Tj.Siapiapi

MarianaPlaju

Penyandingan

CelikahMeranjat

Sp.Indralaya

Betung

Sungai LilinBanyu Lincir

PeninggalanPauh

BabatMangunjaya

KarangdopoSorolangun

Bts.Jambi

NapalicinP.Kidak

TabatinggiTrawas

Maur

Tugumulyo

Sp.PeriukMa.Beliti

Belalan

Tebingtinggi

Jalinteng S.NagaTanjungraya

Tl.Padang

Pd.Tepung

Bts.Bengkulu

Pagar Alam

TanjungsaktiBts.Bengkulu

Sp.Airdingin Sugihwaras

Sp.Mioh

BayurLb.Dalam

Sp.CampangP.Beringin

Bts.BengkuluUjanmas

Sp.Haji Ma.Dua

Sp.Sender

Kotabatu

Sp.Martapura

Kota baruMartapura

KurunganNyawa

GumawangPetanggan

Pematang-PanggangRasuan/

KepuhTransOku

Belimbing Prabumulih

Beringin

TANJUNGPANDAN

Tj.Kelayang

Perawas

Membalong

This map was produced by theMap Design Unit of The World Bank.The boundaries, colors, denominationsand any other information shown onthis map do not imply, on the part ofThe World Bank Group, any judgmenton the legal status of any territory, orany endorsement or acceptance ofsuch boundaries.

14. PALEMBANG WESTERNRING ROAD

8.45 km. - Betterment

S e l a t S u n d a

J a v a

S e a

I N D I A N

O C E A N

SOUTH SUMATRA

L A M P U N G

BENGKULU

106°105°104°103°

104° 105° 106°

6°

5°

4°4°

5°

6°

0 20 40 60 Kilometers

IBRD 34585

JUN

E 2006

See inset

INDONESIA

STRATEGIC ROADS INFRASTRUCTURE PROJECTLAMPUNG

MAIN ROADS

LINK NUMBERS

PORTS

AIRPORTS

DISTRICT (KECAMATAN) CAPITALS

KABUPATEN CAPITALS

PROVINCE CAPITAL

KABUPATEN BOUNDARIES

PROVINCE BOUNDARIES

011-3

To Manna

To Baturaja

To Palembang

ToKalianda

ToBergen

ToMetro

ToKotabumi

Branti

063-0062-2

075-0

062-1074-0

073-1 073-2

072-0

062-1

085-0

071-2

071-1 081-0

046-0

013-2

065-0045-0

082-0

013-1

064-0

042-0

003-0

004-0

047-0

005-0

048-0

070-0

083-0

984-0

011-0007-0

012-0

096-0

006-0

091-0

090-0

010-0010-0

087-0

008-0

009-1

009-2

061-1

062-1

053-0

088-0

026-3

028-0

029-0

028-0

026-0025-0

030-1

030-2

026-2

089-0

093-0024-0

027-0

051-0

079-0

086-0

023-0

025-0

076-0

095-0

076-0077-0

092-0

049-0

050-0052-0

044-0002-0 040-0

094-0

015-0080-2

043-0

017-0

014-0 038-0039-0

019-0

018-0

019-0

036-1

036-2

018-0

056-0

056-0

055-0

080-1001-2

031-0

022-3 058-0066-0

037-0

020-0

069-0

035-0

034-0

068-0

054-0033-0

057-0

041-0

031-K

059-1K

001-1K

023-K

001-2 080-1K

055-0

021-K

022-2K

022-1K

BANDARLAMPUNG

KALIANDA

METRO

LIWA

KOTABUMI

Sp.PematangWiralaga

MesujiPmt.Panggang

Sp.Msj.B

Sp.Msj.DMesuji E

Sp.Asahan

Sp.Gd.Ajibaru

Sp.Penawar Gd.Ajibaru

Rawajitu

Gd.Aji

TeladasSp.Unit VII

Sp.Tl.Randu

Manggala

ParjamaPanarangan

Bj.Tenuk

GunungbatinDy.Murni

Bd.Abung

Sp.Tujak

Sp.Kotabumi

KelapaTujuh

Tbg.Besar

Bdr.Jaya

Sp.Kotabumi

Ajikagungan

Bukitkemuning

Pubung Tambak

Sukabumi

KruiSp.Gn.Kemala

Pugungtampak

Kotabatu

Bts.Bengkulu

Biha

Bengkunat

SanggiWonosobo

Kota-Agung

Sp.KuripanPutihdoh

Jt.Ringin Napal

Pd.Cermin

Wates

KedondongPardasukaSukamara

R.TijangPringsewu

SukoharjoBd.Baru

Tl.Padang

Tekat

Air NaninganUlubeluSuoh

Padangratu

Tl.Jukung Wates

Gn.SugihKt.Gjh. R.Raya

Gd.Dlm.Hd.Mulyo

TeginenengKibang

Branti

Gd.TatakanSp.Tj.Karang

Hanura

SukabumiKm.10.30

Babatan

Umbulbayur Kt.Dalam

Sp.KaliandaPalas

Blambangan

GayamKetapang

Bakauhuni

Kunir

Asahan

Jabung

Tj.Aji

Wana Sp.Kemuning

Lb.Maringgai

Sp.SribawonoSribawonoPg.Raharjo

Bergen

BumijawaSukadana

Tj.Kari

PurbalinggaRaman Utara

Sp.Mataram

Mandala

Seputih SurabayaKasui

Banjit Gn.Labuhan

Sp.Bjt.

Sp.IV

Giham

BlambanganumpuSp.W.Tuba

Bts.Sumsel

SrirejekiPakuanratu

SerupaindahTajab

Negara Ratu

Ketapang

BANDAR LAMPUNG

Sp.Tj.Karang

Hanura

Sukabumi

Pl.Panjang

Tl.Betung Sp.Tiga

Sp.Pugung

Sp.Slt.Agung

Jatimulyo

Bernung

This map was produced by the Map Design Unit of The World Bank.The boundaries, colors, denominations and any other information shownon this map do not imply, on the part of The World Bank Group, anyjudgment on the legal status of any territory, or any endorsement oracceptance of such boundaries.

12. BANDAR LAMPUNG BYPASS18.10 km. - Capex

I N D I A N O C E A N

J a v a S e a

W E S T J A V A

L A M P U N G

( S U M AT R A )

B A N T E N

CENTRAL

JAVA

106° 107° 108°

106° 107° 108°

6°

7°

6°

7°

IBRD 34586

JUN

E 2006

INDONESIA

STRATEGIC ROADS INFRASTRUCTURE PROJECTBANTEN AND WEST JAVA MAIN ROADS

LINK NUMBERS

PORTS

AIRPORTS

DISTRICT (KECAMATAN) CAPITALS

KABUPATEN CAPITALS

PROVINCE CAPITAL

NATIONAL CAPITAL

KABUPATEN BOUNDARIES

PROVINCE BOUNDARIES

011-3

0 100 Kilometers50

001-0

002-0003-0

029-0082-0

026-1

026-2

027-1 027-2

028-0030-0

031-0

032-0

033-0

093-0

115-0

099-0

034-0 035-0

087-0

119-0037-1037-3

037-2

040-0

039-0

041-1105-0

041-2

042-0

044-0038-1

038-2128-0

129-0

043-0016-0

015-0

071-0031-0 014

104

101

102103

104

100098

091

095-2092

095-1

045-0 017-0

046-1

046-2

131-0

052-0

054-0

051-0

050-0 056-0

118-0

118-0

121-0

106-0074

070

023-0

025-0

109-0

012-0

011-0

010-0073-0

072-0009-0

108-0

076-0077-0

008-0

080-0

007-0

006-0

097-0

005

079-0

094-0

107-0

078-0

019-0

020-0

075-0

124-0

013-0

066-0

067-0110-0

065-0

068-0

068-9

111-0 112-0

064-0

060-0058-0

057-0

061-0

062-0

063-0

081-1

081-2

047-0

084-0

048-0

This map was produced by the Map Design Unit of The World Bank.The boundaries, colors, denominations and any other information shownon this map do not imply, on the part of The World Bank Group, anyjudgment on the legal status of any territory, or any endorsement oracceptance of such boundaries.

10. CILEGON-PASAURAN (Sec. 1)17.10 km. - Betterment

6. CIANJUR RING RD.7.5 km. - New Road

1. KARAWANG BYPASS11.47 km. - New Road

5. KARANGAMPEL-CIREBON28.51 km. - Betterment

16.SOEKARNO HATTA BANDUNG11.25 km. - Betterment

BANDUNG

SERANGJAKARTA

CIREBON

INDRAMA

MAJALENGKA

KUNINGAN

SUMEDANG

GARUT

TASIKMALAYA CIAMIS

CIANJUR

BOGOR

BEKASI

KARAWANG

SUBANGPURWAKARTA

SUKABUMI

PANDEGLANG

RANGKASBITUNG

MerakBojonegoro

Cilegon

Pasauran

Labuhan

Sp.Labuhan

Saketi

Palima

Cikande

Sp.Bitung

CurugSerpong Ciputat

CibuburCileungsi

JatiasihP.Gede

Bts.DKI

KreoCiledug

TANGERANG

Sumur Cibaliung

Ma.BinaungeunSimpang

BayahCibareno

Cikotok

P.ManukGn.Madur Cisolok

Sp.Kr.Hawu

Pel.Ratu

Bagbagan

Cikembang

Cibadak

Warungbanten

GajrugMuara

Ciawi

CiteureupCibinong

CimanggisSawangan

Parung

Cigelung

Jampangtengah

Cikembar

Selaiambe

Tj.Pura

Batujaya

Cikampek

Jatisari

Pamanukan

JanggaLohbener

JatibarangKarangampel

CigasongPalimanan

Losari

SumberKadipatenCijelag

Cikamurang

SancaCagak

Sp.Purwakarta

SadangJatiluhur

BojongpucungPD

Larang

CileunyiWr.Kalde

Wado

Cikijing

Ciracas

Oleced

CibingbinBintaraharja

Bts.JatengBanjar

AncolRajapolah

Malangbong

Nagreg

CimaungMalabar

Rancabali

Pangalengan

Sukanegara

Jampangkulon

SuradeUj.Genteng

Tegalbuleud

Sagaranten

Agrabinta

Cidaun

Sindangbarang Rancabuaya

Sp.Cikajang

Cipatujah

Kelapagenep

Cimerak

PangandaranCilauteureun

Anyer Kidul

J a v a S e a

I N D I A N O C E A N

C E N T R A L J A V A

W E S T

J A V A

E A S T

J A V A

D.I.YOGYAKARTA

IBRD 34587

JUN

E 2006

INDONESIA

STRATEGIC ROADS INFRASTRUCTURE PROJECTCENTRAL JAVA

0 50 Kilometers

MAIN ROADS

PORTS

AIRPORTS

TOWNS

KABUPATEN CAPITALS

PROVINCE CAPITALS

KABUPATEN BOUNDARIES

PROVINCE BOUNDARIES

To Cirebon

To Banjar

To Pacitan

To Bj.Negoro

To Tuban

8°

110°

7°

8°

109° 111°

110°109° 111°

7°

This map was produced by theMap Design Unit of The World Bank.The boundaries, colors, denominationsand any other information shown onthis map do not imply, on the part ofThe World Bank Group, any judgmenton the legal status of any territory, orany endorsement or acceptance ofsuch boundaries.

22. AMBARAWA RING ROAD7.30 km. - New Road

9. PEJAGAN-LOSARI (Sec.1)9.43 - Betterment

+ KABUYUTAN BRIDGE0.05 km. - Bridge

7. BREBES-TEGAL BYPASS17.05 km. - New Road

18. PEMALANG BYPASS7.00 km. - Capex

17. SEMARANG-KENDAL (PBC)10.40 km. - Betterment

SEMARANG-PEKALONGAN (PBC)100 km. - Maintenance

2. SEMARANG N. RING ROAD2.23 km. - Capex

8. SEMARANG-DEMAK20.11 km. - Capex

3. DEMAK BYPASS7.00 km. - Capex

20. SEMARANG-BAWEN22.55 km. - Betterment

19. MAGELANG-KEPREKAN8.60 km. - Capex

21. BOYOLALI-KARTOSURO

15.40 km. - Capex

BLORA

KEBUMEN

KUDUS

PATI

SURAKARTAKARANGANYAR

SEMARANG

Cilapodang

Losari

Melahaju

Bangtarkawung

Bulakamba

Kubangkangkung

Djatibarang

Wangon

Balapulang

TEGAL

PURWOKERTO

Pulosari

Sukaradja

PURBOLINGGO

PEMALANG

Pajung

Mundong

Bodaskarangdjati

Pagiringan

Penggarit

Sigedang

Kadjen

Karanganjar

PEKALONGAN

BANDJARNEGARA

Lundong

Tenggalar

Karangtengah

Batur

WONOSOBO

DiengKulong

Tempuredj

PURWOREDJO

Djagalaja

Lebo

Sukoredjo

Muntung

Parakan

Sentol

TEMANGGUNG

KENDAL

Naggulan

MAGELANG

Galur

Kedungsurem

SLEMAN

Kendungwuni

BATANG

Banjuputih

BANTUL

Karanggondang

Keling

Karangsari

Taju

Kebonongan

Imagiri

Ambarawa

Pudakpajung

Kalasan

Salatiga

Ampel

Dukun

KLATEN

Wonosari

Wedung

Kedungmalang

DEMAK

Djaranmati

Kartosuro

Wurjantoro

Karangasem

PURWODADI

WONOGIRI

Wirosari

Todanan

YOGYAKARTA

Plajen

BOYOLALI

Kepek

Batretno

SRAGEN

Pohgading

Djatisrono

Banjutarung

REMBANG

Kembang

Tanggel

Ngawi

Lasem

Djipangulu

Pamotan

Podjokwatu

Sedan

Padangan-wetan

Tjepu

Kalipang

Djatirogo

CILACAP

BREBES

JEPARA

SUKOHARJO

WATES

UNGARAN

SLAWI

Duwet

Mandiraja

GombongBanyumas

Buntu

Gumilir

Adjibarang

Baturaden

RandudongkalMoga

Tuwel

Prupuk

BumiayuSalem

Sidareja

Pejagan Trengguli

Bulu

Jati

Bawen

Piyungan

Keprekan

J A V A S E A

S t r a i t o f M a d u r a

I N D I A N O C E A N

GajahmungkurReservoir

EAST JAVA

C E N T R A L

J A V A

B A L I

111° 112° 113° 114°

8°

7°

114°113°112°

7°

111°

8°

INDONESIA

STRATEGIC ROADS INFRASTRUCTURE PROJECTEAST JAVA

0 20 40 60 80 100 KILOMETERS

TOWNS

KABUPATEN CAPITALS

PROVINCE CAPITAL

KABUPATEN BOUNDARIES

PROVINCE BOUNDARIES

MAIN ROADS

PORTS

To Sukoharjoand Surakarta

To Sukoharjoand Surakarta

To Sragenand Surakarta

This map was produced by the Map Design Unit of The World Bank.The boundaries, colors, denominations and any other information shownon this map do not imply, on the part of The World Bank Group, anyjudgment on the legal status of any territory, or any endorsement oracceptance of such boundaries.

Barung Island

RajaIsland

GentengIsland

PuteranIsland

SapudiIsland

RaasIsland4. NGAWI RING ROAD

10.75 km. - New Road

11. WIDANG-LAMONGAN5.50 km. - Capex

15. PASURUAN-PILANG32.81 km. - Betterment

Meganti

SURABAYA

Kamal

BANGKALAN

SAMPANG

Ketapang

Waru

PAMEKASAN

Pademawu

Pragaan

SUMENEP

Kalianget

Batang-Batang

GRESIK

Banjaran

Tikung

LAMONGANBabat

KedamaianDriyorejo

WaruTaman

BuduranSIDOARJOCandi

Krian

PorongGempol

Bangil

Pandaan

MojosariSoako

MOJOKERTOGedek

Mojoagung

JOMBANGKertosano

Baurejo

PaciranBrondongTUBAN

SumberrejoBOJONEGORO

TanjunganomNGANJUK

Caruban

NGAWI

MADIUN

MaospatiMAGETAN

Gorang-Garer

Dolopo

PONOROGO

TRENGGALEKTULUNGAGUNG

NgunutSrengat

BLITAR

Ngadiluwih

Watulimo

Sutojayan

WlingiSumberPucung

KEDIRI

Gampengrejo

Ngurah

Pare TretesClaket

Trawas PASURUAN

Lawang

SingosariPakis

TumpangMALANG

KarangplosoBatu

Dau

PakisajiBululawang

Kepanjen

GondangLegi

Turen

LUMAJANG

Sukopuro

PROBOLINGGO

KraksaanDringu

Besuki

BONDOWOSO

JEMBER

Rambipuji

Tanggul

Kencong BalungAmbulu

Puger GentengRogojampi

BANYUWANGI

Muncar

AssembagusSitubondo

PANARUKAN

Prajekan

WonosariLeces

Tamanan

PACITANPringkuku

Glondong

Pakah

TemangkarWidang

Mantingan

Biting

Kembang

Arjosari

Nawangan

Dangka

Panggul

Jarakan

Ngantru

Kartosono

KuduPloso

Munung

Kandarigan

Pl.Rejo Pacet

Pd.ArumPd.Sari

PurwodadiPurwasari

Kejayan

TosariNangkajajar

Pilang

Kasihan

Semboro

Pd.DalemWonorejo

Grabagan

Mayang

ArjasaMaesan

Kalisat

Sumberjati

Jangkar

Bajulmati

Ketapang

SranaJajag

Bangunrejo

PasanggrahanG.Agung Tlg.Dlimo

Grajagan

Temuguruh

Bulu

Jatiraga

Ponco

PadanganCepu

Galis

Sotobar

Pakong

OmbenTorjun

Ragung

IBRD 34588

JUN

E 2006