C10RTULT"!" C71'

Report No. 1184a-IND

Indonesia: Appraisal of theSecond Urban Development ProjectSeptember 24, 1976 aw Urban Projects Department

FOR OFFICIAL USE ONLY | 2_

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties Its contents may nototherwise be disclosed without World Bank authorization

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CURRENCY EQUIVALENTS

US$1 = Rupiahs (Rp) 415Rp 100 = US$0.241Rp 1 million = US$2,410

UNITS AND EQUIVALENTS

1 meter (m) = 39.37 inches (in)

1 kilometer (ki2) = 0.62 miles (mi)1 square meter (m ) = 10.8 square feet (sq ft)1 centimeter (cml = 0.39 inches (in)1 square centimeter (cm ) = 0.155 square inches (sq in)1 hectare (ha) = 10,000 square meters or

2 2.47 acres (ac)1 square kilometer (km ) = 0.386 square miles (sq mi)1 liter (1) = 1.057 quarts liquid or

0.26 US gallons or (gal)0.908 quarts dry

1 liter per capita (1/cd) = 0.26 US gallons (gcd)3 per capita

I cubic meter (m ) = 35.3 cubic feet (cu ft)

ABBREVIATIONS AND ACRONYMS

BAPPENAS = National Planning AgencyCipta Karya = Directorate General of Housing, Building,

Planning, and Urban Development in theMinistry of Public Works and Electric Power

DKI = Special Provincial Government of JakartaGOI = Government of Indonesia

IGGI = Inter-Governmental Group for IndonesiaINPRES = National Program for Local Civil WorksIPEDA = National Urban Property TaxKIP = Kampung Inprovement ProgramNMB = National Mortgage Bank

NUDC = National Urban Development CorporationRepelita I = First Five-Year Development Plan (1969-74)Repelita II = Second Five-Year Development Plan (1974-79)

The Indonesia Fiscal Year runs from April 1 to March 31

FOR OFFICIAL USE ONLYINDONESIA

APPRAISAL OF THE SECOND URBAN DEVELOPMENT PROJECT

TABLE OF CONTENTS

Page No.

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

I. INTRODUCTION ..................................... 1

II. BACKGROUND ................ e. 2

A. National Urbanization Trends ................. 2B. Urbanization Trends in Jakarta ............... 3

C. Urbanization Trends in Surabaya ............. . 6

D. Institutional Development .................... 8

III. THE PROJECT ...... ................................ 9

A. Objectives .......................... 9

B. Main Components .............. * ............... 10

C. Detailed Description . ...... ......... 11

IV. PROJECT COSTS, FINANCING AND EXECUTION ............ 15

A. Cost Estimates ............................... 15

B. Financing ... ................................. 17

C. Project Execution ....... ..................... 21

D. Supervision . .................................. 25

V. ORGANIZATIONAL AND MANAGEMENT ....... ............. 25

A. Project Organization ............ ............. 25

B. Monitoring and Surveys ...... ................. 26

VI. PROJECT JUSTIFICATION ............. ............... 26

VII. AGREEMENTS REACHED AND RECOMMENDATIONS .. ........ 29

This document has a restricted distribution and may be sd by recipients only in the performanceof their official duties. Its contents may n1 otbtwe" be diclaosd without World Bank authorization.

ANNEXES

1. Urban Background - Jakarta

2. Infrastructure Design Standards and Cost Estimates

3. Provision of Sanitary Pit Privy

4. Health and Nutrition Programs

5. Technical Assistance

6. Institutional Arrangements

7. Municipal Budget Data

8. Disbursement Schedule

9. Economic Evaluation

CHART

IBRD 16135 Implementation Schedule

MAPS

IBRD 10709R2 Jakarta Land Use

IBRD 10728R2 Kampung Improvement Program - JakartaLocation of Kampungs for 1976/77

IBRD 12209 Kampung Improvement Program - SurabayaLocation of Substandard Areas

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

SUMMARY AND CONCLUSIONS

i. The proposed project is the second Bank financed urban developmentproject in Indonesia. It is designed to provide assistance to the Governmentin its Kampung Improvement Programs (KIP) which are aimed at raising the livingconditions of the urban poor by improving their access to basic services. Ina three year period, the project would expand the on-going KIP program inJakarta and extend coverage to Surabaya the second largest city in Indonesia.Bank assistance provided for this project would help Government in initiatinga national KIP program based on the experience of the first urban project.

ii. Indonesia, with a 1976 population of approximately 135 million, isthe fifth most populous country in the world. Some 19% of the populationresides in urban areas. The population of Indonesia as a whole continues togrow at a rate of 2.5% per year, while the urban population is increasing ata rate of 4% per year, and growth in three of the large cities--Jakarta,Surabaya and Pontianak--has been even faster. With a rapidly increasingpopulation, thousands of peasants are migrating into urban centers seekingemployment and social opportunities, but none of the cities is prepared tocope with the influx. The new migrants tend to settle in already crowdedareas of the cities or form new squatter settlements which lack adequatehousing or public services. Prior to the establishment of the KIP program,little was done to improve the living conditions of the people in these areasbecause the programs proposed (e.g., Government sponsored housing projects)were often designed to standards which were beyond the means of the populationthey intended to serve.

iii. During Repelita I, the First Five-Year Development Plan (1969-74),the Provincial Government of Jakarta (DKI) inaugurated a program to improvethe physical infrastructure in some of the worst kampungs in Jakarta. Theprogram attempts to deal with the minimum infrastructure needs of largenumbers of urban poor at a reasonable cost. The KIP represents the lowestlevel of investment in this direction as it upgrades community infrastructurein low-income areas thereby encouraging the residents themselves to upgradetheir dwellings as improvements are made in their environment. The size andscope of the program has been enlarged substantially during Repelita II, theSecond Five-Year Development Plan (1974-79). The program in Jakarta for thefirst two years of Repelita II was partially financed with Bank assistance.The Municipal Government of Surabaya has also been carrying out a somewhatsimilar program financed primarily from transfers to the city from the CentralGovernment, but on a very small scale and of a limited scope. The proposedproject would provide technical and financial support for an additional threeyears (1976-79) in Jakarta and would support the development of a more compre-hensive program in Surabaya that is expected to serve as the basis of aNational Kampung Improvement Program.

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iv. The project would help finance upgrading over three years of 3,000hectares of densely populated low-income areas in Jakarta and an estimated374 ha in Surabaya. The project in both Jakarta and Surabaya includes:(a) civil works for provision of paved footpaths, roads, drainage, watersupply, sanitation, primary schools and small health clinics; (b) a pilotprogram to train community health workers in preventive medicine and basicnutrition; and (c) technical assistance in project design, supervision,monitoring and evaluation. The actual improvements in a kampung are deter-mined on the basis of an overall budget allocation, the level of existinginfrastructure in the kampung, and the relative priority in a given areaamong the different items of infrastructure.

v. The total project would cost an estimated $101 million, includ-ing contingencies and is comprised of $89.7 million for the Jakarta KIP,$7.5 million for the Surabaya KIP and $4.1 million for technical assist-ance. The project costs include $5.5 million for land acquisition. Thedirect and indirect foreign exchange costs are estimated at about 27% oftotal cost. Cost estimates for KIP in Jakarta are based on detailed surveysand preliminary engineering designs for the first year of the program, andon bids from the first project. Cost estimates for the Surabaya KIP arebased on preliminary designs of the first year of the program.

vi. The physical infrastructure works of the Jakarta KIP will continueto be designed and executed by the KIP Project Unit in the DKI. A similarproject unit will be set up by the Municipal Government of Surabaya for theexecution of the works in Surabaya. The health training programs will be theresponsibility of the respective City Health Offices. Technical assistancein project design, supervision, monitoring and evaluation will be providedthrough Cipta Karya (the Directorate General of Housing, Building and Plan-ning), which is responsible for developing the overall national policy forkampung improvement.

vii. Contracts for civil works will be awarded after local competitivebidding in accordance with Bank Guidelines for Procurement. Foreign con-tractors are not likely to be interested in bidding on KIP works because ofthe difficulty of working in densely inhabited kampungs, the labor-intensivenature of the works and the large number of small contracts of short duration.Furniture and equipment for schools and clinics will be procured by local com-petitive bidding. Contracts acceptable to the Bank for certain civil worksand consultants' services amounting to a total of US$20 million are expectedto be placed prior to Loan signing, and retroactive financing is estimatedto amount to about $3.5 million.

viii. The project would result in improved living conditions for over20% of Jakarta's current population, or about 1.2 million people, and about9.5% of Surabaya's population or about 200,000 people. It would providebetter health standards for kampung residents in Jakarta and Surabaya byinvestments in sanitation and community health services. The economic rate

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of return for the Jakarta component is estimated at 54% and for the Surabaya

component at over 100%.

ix. The project is suitable for a Bank loan of $52.5 million for a term

of 20 years including a grace period of four and one half years.

z

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

I. INTRODUCTION

1.01 The Government of Indonesia (GOI) is seeking a second Bank loanfor urban development to help finance a project consisting of a three-yearKampung Improvement Program 1/ (KIP) in Jakarta, a similar but much smallerprogram of kampung improvement in the city of Surabaya, and technical assist-ance. The project was prepared by the Government with assistance from Bankmissions.

1.02 The Jakarta component of the proposed project follows the JakartaUrban Development Project in Indonesia (Loan 1040-IND) under which two years(FY1974-75 and FY1975-76) of an on-going Kampung Improvement Program in thatcity were financed. Under the first project, the area of land improvedannually through the program was approximately doubled from previous years to1,000 ha per year. The proposed project maintains this rate of improvement.The Surabaya component will be the first KIP project outside the Jakarta area,and is expected to form the basis of a National KIP program being establishedby the Government.

Experience Under the First Urban Project

1.03 The Jakarta Urban Development Project was the first slum upgradingproject financed by the Bank and it has served as the model for developing theother slum upgrading projects which have been presented to the Executive Direc-tors to date. Apart from being the first such project, the distinguishingfeature of the Jakarta KIP program remains its scale. With a level of effortthat now provides improvements to 1,000 ha per year benefiting approximately450,000 persons annually, Jakarta is the first major city which, with Bankassistance, has been able to mount a long term program at a level sufficientto catch up with need within a reasonable period of time.

1.04 The first project laid out a strategy for dealing with the shelterneeds of the urban poor that involved not only KIP, but also sites and ser-vices development on vacant land to reduce the pressure for squatting. Italso provided support for the newly established National Urban DevelopmentCorporation (NUDC) and the National Mortgage Bank (NMB).

1.05 Execution of the KIP component of the first project has been verysatisfactory in all respects except for difficulties in land acquisition (afunction under the responsibility of the five sub-mayors in Jakarta) which

1/ Kampung in this context refers to a low income urban community.

has delayed construction of school-; a.Lid clinics. Except for the schools andclinics of which roughly half were comDleted by January 1976, the KIP workswere completed on time and witn a cOSL a of 5 percent which has beenre-allocated to expand the number of hectares upgraded. The remaining schoolsand clinics are expected to be comple-ed by Ap:m-. 7

1.06 The sites and services component of the first project was a newactivity for the Government, handled by the newly created National UrbanDevelopment Corporation. This component is approximately a year behindschedule due to delay in hiring suitable staff and completing detailedengineering designs. These difficulties now appear to be resolved.

1.07 This report is based on the findings of the appraisal mission con-sisting of Messrs. A. Stone, A. Pellegrini, I. Sud, S. Basta and N. Hanna(Bank) and R. Ramani and I. Ifekwunigwe (Consultants) which visted Indonesiain January/February 1976. Assistance in the economic evaluation was providedby Mrs. Suzanne Henneman (Urban Assistant).

II. BACKGROUND

A. National Urbanization Trends

2.01 With a population of approximately 135 million (1976), Indonesiais the fifth most populous country in the world. In terms of land area itis thirteenth. Nearly two-thirds of Indonesia's population, however, isconcentrated in the islands of Java, Madura and Bali which represent 7% ofthe land area. In these areas, where natural conditions are favorable foragriculture, population density has reached a level higher than in Bangladesh,the Mekong Delta or the Central Plain of Thailand. Table 1 in Annex 1 showsthe population distribution by region and province and the average annualgrowth rate between the 1961 and the 1971 census. Where density is highest(7,944 persons/sq km in Jakarta), population annual growth rate is alsohighest (4.6% between 1961 and 1971) or more than twice the national averagefor those years.

2.02 According to the 1971 census, about 18% of the population residedin urban areas, i.e., cities with population of more than 5,000 inhabitants.Jakarta alone accounted for more than 22% of the total urban population; andthe island of Java for 67% of total urban population and 64% of rural popu-lation. The high density in rural areas of Java has created intense pressureson available agricultural land and consequently pushed landless farmers andunskilled labor into the major urban centers faster than the latter have beencapable of absorbing them efficiently. While the population of Indonesiaincreased by 22% between the census of 1961 and that of 1971, urban populationincreased by 44%. Urban growth in the same period, however, has been mostrapid in the large cities, notably Jakarta (57%) and Surabaya (49%).

2.03 The main characteristics of the Indonesian employment situationcan be derived from available survey data, although no great precision shouldbe ascribed to the estimates. The overall unemployment rates for the agri-cultural labor force for the country as a whole indicated that unemploymentwas 4.4% in the busy season and 8.8% in the slack period. An Urban Unemploy-ment Survey of 1972 reported rates of 7.5 to 12% unemployment in the threemajor cities of Java. These data do not reveal the widespread extent ofunderemployment and marginally productive employment.

2.04 Some idea of the extent of poverty can be obtained by comparingaverage per capita expenditure with the cost of a minimum nutritional in-take (minimum consumption for an adequate diet as recommended by FAO/WHO).Roughly 55% of the urban population of Indonesia or about 14 million peoplehave been estimated to be living below this standard. (In Java over 60% ofthe urban population fall below this line.)

2.05 Little is known about access to urban services in cities otherthan Jakarta. It is estimated, however, that of the total urban population,about 31% have access to piped water.

2.06 The urban population served by sewerage systems is very small.Bandung is the only city in the country with a water borne sewerage system.Human wastes are mainly discharged into septic tanks, latrines, surfacedrainage, ditches, or directly into streams and rivers, and constitute ahealth hazard especially for water supplies.

2.07 Cholera, typhoid, dysentery, and parasite diseases transmittedby water are endemic to Indonesia. Many cases of paratyphoid and infectioushepatitis are reported from Java and Sumatera. In 1974, Indonesia had thehighest number of both reported cases and deaths from cholera in the world.In addition, infant mortality and malnutrition especially in the semi-urbanareas, is extremely high. The national figure for infant mortality is around126 deaths per 1,000 live births, but in some of the slums of Jakarta andSurabaya this rises to nearly 200 deaths per 1,000, and around half of allchildren between the ages of 0 to 5 years show signs of growth stunting andmalnutrition. Population per physician is about 27,000 (1971) compared to4,800 for India and 2,700 for the Philippines. In education, the nationalaverage school enrollment rate is about 55% for the primary school age groupand 11% for the secondary school age group. The adult literacy rate (forthose 10 years of age and over) is about 79% for urban and 55 for rural areas.

B. Urbanization Trends in Jakarta

Historical Background

2.08 Jakarta is the largest city and capital of Indonesia. Situatedon somewhat marshy land along the northwestern coast of Java, it functionsas the commercial and administrative hub of the Indonesian archipelago, its

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role since settlement by the Dutch East India Company in 1619. With apresent population of close to 6 mil-lior and annual average per capita GDPof about $160 (1971), the city is one o° the largest and poorest in the world.Physically the city spreads over 560 km (Map 10709R2). The urbanizedarea of Jakarta was approximately 12,000 ha in 1969 and is estimated tobe about 17,000 ha at present. Since 1964 it has been administered as aspecial district with the status of a province. This status gives it anadvantage over other municipalities in its taxing powers and in greateraccessibility to financial and technical resources of the Central Government.

2.09 Jakarta is cut into sections by five roughly parallel rivers whichare subject to frequent flooding. During Dutch rule, a system of canals wasconstructed to reduce the problems of flooding and epidemics. An extensivesystem of urban railways was also developed. By 1920, inter-city rail linesconnected Jakarta with Tangerang in the West, Serpong and the Sunda straitsin the southwest, Bogor and Bandung in the south, and Bekasi and Cirebon inthe East. These rail lines and the roads paralleling them have been majoraxes for urban development.

Population and Employment

2.10 The first great influx of rural migrants into Jakarta occurredduring the transition from Dutch rule between 1949-50, when the populationof the city increased by 70% from 0.82 million to 1.43 million during the twoyear period. In 1971, the national census recorded the population as 4.58million, an increase of 57.8% over a decade. Based on census figures, therate of growth for Jakarta was 4.6% per annum between 1961 and 1971, 2.1%due to natural increase and 2.5% due to migration. The Jakarta City Govern-ment (DKI) has estimated that the present rate of population growth is evenhigher, 5.7% per year. Both figures are significantly higher than the esti-mate of 4.0% per year that was used in preparing the current city MasterPlan. While the DKI estimate of 5.7% seems high, it tends to confirm theindication that the rate of growth is at least the same as between 1961 and1971 despite the adoption of a "closed city" policy 1/ in 1971 to discouragefurther migration.

2.11 The economic attractiveness of migrating to Jakarta in search ofemployment is evident from the disparity between the average per capitaGDP in the capital city and other provinces: in 1971, it was double thatof other regions, or US$160 compared to US$80. Employment opportunities,whether real or perceived, coupled with rural population pressures, seemlikely to perpetuate the migration trend toward urban centers. While accel-eration of the much needed rural development program and the transmigrationprogram for resettling the rural poor in sparsely populated outer islandshold some promise, their impact are likely to be marginal and the problemsof urban poverty and growth which already plague Jakarta will remain.

1/ Under this policy new migrants are discouraged from moving to thecity by requiring that they have a job before arrival and that theydeposit with the local head-man sufficient funds to pay for transporthome if they are not employed six months after arrival.

2.12 If current trends continue, by 1986 DKI Jakarta would grow by3 million persons or by more than 50%. This rate of population increasecalls for a corresponding increase in the number of jobs. In 1971, the rateof unemployment was estimated at approximately 12% with almost half the totalunemployed below 24 years of age. While specific figures of unemploymentmust be used with great caution because of definitional difficulties, theextent of the employment problem is indicated by reports that almost half ofthe population in Jakarta is engaged in informal service sector activitiesthat include occupations such as becak drivers, hawkers, vendors, and pettyretail traders.

Availability of Urban Services

2.13 The poorest residents of the city generally live in outer kampungs,away from the surfaced roads and footpaths, along the railway lines of theinner city, and around the main markets. Many of them are recent migrantsand live in tents and shacks alongside the more permanent homes of earlier

settlers.

2.14 A 1969 survey of Jakarta housing conditions demonstrated the poorquality of Jakarta's housing: 65% had no private toilet facilities, 80% hadno electricity, and 90% had no piped water connection . Permanent houseswith solid walls, cement floors, and tile roofs constituted 24% of the totalhousing stock; temporary houses of bamboo matting walls, earthen floors, andthatch roofs comprised 44%; and semi-permanent structures having some combi-nation of temporary and permanent materials accounted for the balance (32%).

2.15 The existing housing and infrastructure is grossly inadequate,and a massive urban development effort is needed to meet immediate require-ments and to absorb the large population growth of up to 10 million personsthat may occur in the next two decades. Several sectors require immediateattention. The water distribution system has deteriorated to the point whereofficials contend that an increase in pressure would increase leakage ratherthan supply. Some excess capacity is available at the pumping stations butdistribution lines need to be replaced and new lines constructed. More than50% of the population relies on groundwater wells, which are often contaminatedby fecal material and increasing salinity due to depletion of the fresh wateraquifer. Approximately 30% of the households in Jakarta depend solely onwater vendors for their supply at prices five times greater than the chargesfor piped water. Jakarta has no water-borne sewer system. Even houses havingpiped water flush sanitary wastes into septic tanks or more frequently intoopen ditches along the roadside. Much of the population, however, has no al-ternative other than to use the drainage canals for bathing, laundering anddefecation. In response to this situation, the Government has initiated anational "Water Supply and Sanitation Sector Study" which is now being com-pleted under the sponsorship of the WHO/IBRD cooperative program. This studyis developing a list of priority projects in water supply and sanitationfor the next five years. In addition, a UNDP-financed project to developan immediate program for sanitation in Jakarta has just been completed whichrecommends continued focus on provision of pit latrines and septic tanksthrough the Kampung Improvement Program.

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2.16 Other badly neglected services include garbage collection and sur-face water drainage. Most of the city's uncollected garbage (estimated ina World Health Organization Study as 30% of the daily load) ends up in canalsand rivers and along the roadside where it clogs drainage channels and causesextensive flooding during the rainy season. Flood waters then sweep theraw sewage and garbage out of the ditches and canals back into the kampungs.In the dry season when there is insufficient flow to drain off wastes, theydecay in exposed areas and pose a serious health hazard for the community.Surface water drainage is inadequate and large sections of the city aresubject to flooding during the wet season.

Kampung Improvement

2.17 During Repelita I, the Government's First Five-Year DevelopmentPlan (1969-74), the Jakarta Provincial Government (DKI) began a program ofupgrading the physical infrastructure in kampungs. This Kampung ImprovementProgram (KIP) evolved from the Central Government program (INPRES) that sup-ports both rural and urban works by distributing funds on a per capita basisto local government districts for infrastructure improvements. From 1969-74,DKI upgraded about 2,400 ha or about 20% of its 1969 urbanized area. TheJakarta Urban Development Project (Loan 1040-IND) was the first urban loan toIndonesia and assisted with finance for two years of the KIP program--1974-75and 1975-76. This project increased the standards and scope of the programand covered 1,980 ha benefiting approximately 890,000 people at a cost ofabout $40 per capita or approximately $215 per family. The impact of the KIPon Jakarta is clearly shown by the following figures:

Urbanized area (1969) - 12,000 hectaresArea in kampungs (1969) - 7,200 " (60%)Area improved 1969-1974 - 2,400 " (20%)Area improved 1974-1976 - 1,980 " (16.5%)Areas to be improved 1976-1979 - 3,000 " (25%)

Total Improved (by 1979) 7,380 " (61.5%)

C. Urbanization Trends in Surabaya

2.18 Surabaya is the second largest city in Indonesia and the majorport for East Java, Madura and South Kalimantan. During the Dutch periodits port of Tanjung Perak was the foremost port in Indonesia. However, fol-lowing independence this position has been taken by Tanjung Priok, Jakarta.

2.19 In recent years Surabaya has regained some of its past status as aport and commercial city and as a consequence its population has grown froma little over 1,000,000 in 1961 to approximately 1.7 million permanent, andover 400,000 temporary, residents in 1975. This is a rate of growth of ap-proximately 4.5% per year. Many of the migrants have clustered in the centerof the city exacerbating the pressure on the already over-strained system ofmunicipal services, especially water supply.

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2.20 Surabaya's population of approximately 2.1 million is concentratedin the eleven old kecamatans (sub-districts) that formed the city before an ex-pansion of its boundaries in 1965. This expansion involved the annexation offive rural kecamatans that effectively tripled the area of the city. The oldarea holds 85% of the population although it comprises only 23% of the areaof the present city. Only nine kelurahans (locality) have a population den-sity of over 400 persons per hectare and six more have densities of over 300persons per hectare. However, in individual kampungs within the central area,which serve as the receiving ground for temporary migrants especially fromEast Java and Madura, the density is much greater, up to 1,000 persons perhectare.

2.21 Unlike most other large cities in Indonesia, Surabaya has a strongindustrial base. This is reflected in the increase in its Gross DomesticProduct from Rp 57.6 billion ($0.14 billion) in 1969 to Rp 104.4 billion($0.25 billion) in 1974. Also during that period household median monthlyincome increased from approximately Rp 6,000 per month ($176/year) to aboutRp 17,000 ($498/year).

Availability of Urban Services

2.22 The physical infrastructure of the city is inadequate for itsrapidly expanding population. The piped water system presently serves onlyapproximately 22% of the population. In the new kecamatans piped water israrely available. Approximately 45% of the population is supplied by watercarriers with 33% served by private shallow wells. As in Jakarta, Surabayahas no municipal sewerage system and only perhaps 50% of the population isserved by public or private septic tanks (though they are legally required)and almost all of the remainder use rivers or fishponds. Flooding is a majorproblem in many parts of the old city especially adjacent to the port and theKali Mas river. Electricity is now provided to approximately 50% of thepopulation.

2.23 At the moment several programs for expansion of municipal servicesare underway. A water supply study will be completed in 1976. In additionthe city will increase its present water supply capacity by almost 100% to10,300 ltr/second by 1981. The Karankates electricity project is scheduledfor completion in 1976 and would increase the city's generating capacityfrom 50 MW to 75 MW, although most of this new power would go to an indus-trial estate situated at Rungkhut to the south of the city.

2.24 The large population and lack of basic sanitary services has meantcontinuing health problems despite a very efficient system of vaccinationsfor common diseases. Leading causes of death are pneumonia, infancy diseases,malnutrition in children, bronchitis, rheumatic fever and gastrointestinalepidemics. The infant mortality rate remains high (130 per 1,000 live births)and about half of all children in kampungs suffer varying symptoms of mal-nutrition. A program of school health care is only able to cover 25% ofthe schools, mostly due to a lack of personnel, especially school nurses.Puskesmas (health clinics) are now in every kecamatan, except one, but these

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serve a much larger area in Surabaya than in middle-sized cities of Indonesiaor from 100,000 to 200,000 persons on the average compared to 20,000 to 50,000persons in other cities. The national standard is one health center for 30,000to 50,000 persons. Mobile health teams are being used and health education,nutrition, and family planning programs pursued. However, lack of manpowerand funds have meant that such programs have had only a limited success.

2.25 The education level in Surabaya appears to be lower than that ofthe other medium-sized cities in Indonesia, a partial consequence of its largemigrant population. Only 73% of the adult population is literate and only45% of the population has completed primary school.

Kampung Improvement Program

2.26 Surabaya already has an embryonic program for kampung improvementin the W.R. Supratman Program. To date, however, this program has beenlimited in scope mostly to isolated road or drainage projects within kampungs.In 1974-75 a total of Rp 166 million ($0.4 million) 1/ was expended under theprogram of which 48% was contributed by people in the community. The commun-ity share is generally one-sixth in manpower, one third in materials, and onehalf in money. Other works in kampungs have been financed out cf INPRESKotamadya funds, which are allocated to cities (Kotamadya's) cn a per capitabasis, and special central Government (INPRES) programs for Education andHealth.

D. Institutional Development

2.27 The major urban intiative of the Second Five-Year DevelopmentPlan (1974-79) is the formation of the National Urban Development Corporation(NUDC) established under the first urban project. The NUDC will buy urbanland throughout the country to develop and resell for specific residential,commercial, or industrial uses. Establishing a government corporation toundertake such projects offers the advantage of combining government seedcapital and authorization to borrow from both public and private sources todevelop facilities neglected by the private construction sector. Initially,the GOI has capitalized NUDC with about $2.5 million. This amount willbe augmented annually according to requirements of the work program to beprepared in consultation with technical advisers provided under the proposedproject. It is expected that most of the government funds allocated forhousing development during Repelita II (about $60 million) will be chan-neled through NUDC. The NUDC is still very much in the formative stages ofdevelopment and is in the process of finalizing its five year developmentplan with the assistance of consultants financed by the Bank. While not yetfully staffed, it has acquired a core of highly qualified senior staff.Other consultants financed under the first urban loan are preparing

1/ The total includes funds budgeted under both the "W.R. Supratman" and"Village People Development" programs which are distinct but similarprograms of kampung improvement in Surabaya.

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feasibility studies for urban projects in eight secondary cities of Indonesiawhich should form the major share of the NUDC development program during theremainder of Repelita II. These feasibility studies involve comprehensivekampung improvement and sites and services projects.

2.28 The preparation of the kampung improvement program in Surabaya,which as the first major kampung improvement program outside Jakarta is ex-pected to set the stage for a national program, stimulated considerable dis-cussion and analysis within the Government of the appropriate institutionalresponsibilities for KIP (para 5.02). As a result, Cipta Karya (The Direc-torate General of Housing, Building, Planning and Urban Development) withinthe Ministry of Public Works and Electric Power has now been given respon-sibility for developing a national KIP program. This directorate has longbeen responsible for assisting cities in preparing physical development plans,and preparing sector plans for water and sanitation, and has also been actingas secretariat to the Ministerial level National Housing Authority. CiptaKarya is also responsible for overall planning and technical coordinationof plans produced by individual cities of the Jabotabek (Jakarta, Bogor,Tangerang, and Bekasi) metropolitan area. In this capacity Cipta Karya isassessing alternative physical development plans and infrastructure invest-ments in the metropolitan area which covers the provinces of DKI Jakarta andWest Java.

2.29 A National Mortage Bank (NMB) was established in 1975 through thefirst urban project by restructuring the existing Bank Tebungan Negara asa mortgage institution. Up to the present, Indonesia has had no mortgagesystem, and long term loans have not been available for housing development.Consequently, the housing construction industry has lacked the financialresources necessary for growth. The GOI has initially committed about$7.5 million as equity capital for the NMB, and sources of long termfinance are being investigated. Technical assistance to the mortgage bankwas provided under Loan 1040-IND.

2.30 The NMB has begun the process of staff reorganization necessaryto permit it to function as a mortage bank. The areas of most immediateconcern are (i) developing a realistic package of long term finance, and(ii) establishing secure mortgage instruments. It is as yet too early tojudge the impact that the NMB will have on housing finance in Indonesia.

III. THE PROJECT

A. Objectives

3.01 The proposed loan would continue Bank support provided under theUrban Development Project (Loan 1040-IND) to directly improve the wellbeing of the low-income urban population in Indonesia by improvements in

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their physical environment. Based on the experience gained in implementationof the first urban project, this loan would provide financial and technicalsupport for the Kampung Improvement Program (KIP) in Jakarta for another threeyears including an increased emphasis on elements improving sanitation and abroadening of the coverage of the program to include a pilot health program.The project would also provide support for a new comprehensive program ofkampung improvements in Surabaya aimed at the poorest kampungs, while alsosupporting the present Supratman program. The project would benefit directlyabout 1.2 million low-income residents in Jakarta and about 200,000 low-incomeresidents in Surabaya. Technical assistance provided under the project wouldsupport project design and execution in both Jakarta and Surabaya; kampungeligibility studies, improvements in the property tax system and metropolitanplanning in Jakarta; strengthening of NUDC's management; preparation of urbandevelopment projects for medium size cities; and monitoring and evaluation.

3.02 The project would support the Government's efforts to deal with theminimum infrastructure needs of large numbers of urban poor at a reasonablecost. The KIP represents the lowest level of investment in this direction asit upgrades services to the existing housing stock in low-income areas andleaves the residents themselves to upgrade their dwellings as improvements aremade in their environment. The urban strategy adopted by the Government alsoinvolves a parallel effort in sites and services and low-income housing. Theselatter programs however, are relatively new efforts for which project prepara-tion has only recently begun. The institutional arrangements under this pro-ject in which the National Government will promote the first comprehensive KIPprogram in a city outside Jakarta, will serve as a model for a national KIPprogram. The projecL will also initiate pilot programs for community basedhealth services -L the kampungs to promote preventive as well as curativemedicine.

B. Main Components

3.03 To achieve the above objectives, the project comprises:

(a) Kampung Improvement Program: Jakarta. Provision of basicurban infrastructure including water supply, human wastedisposal, drainage, footpaths, and roads to 3,000 ha ofdensely settled neighborhoods to benefit directly about1.2 million low-income residents. Primary schools andhealth clinics will be provided in the neighborhoods anda pilot program of community health and nutrition will beundertaken;

(b) Supratman Program: Surabaya. Physical improvements inthe items of infrastructure selected by the kampung re-sidents as the high priority items and for which theresidents contribute voluntarily in cash or in kindabout 50% of the cost of the works;

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(c) Modified Supratman Program: Surabaya. Physical infrastruc-ture improvements similar to those in Jakarta will be made inat least 374 ha of densely settled very low-income neighbor-hoods, which require a more comprehensive program of servicesthan would be available through the existing Supratman Pro-gram. This component would also provide benefits to thelowest income neighborhoods that otherwise might not be ableto participate in the Supratman Program. Primary schools andhealth clinics will be provided and a pilot program will beundertaken to train 100 volunteer community health workersdrawn from the kampungs;

(d) Technical Assistance. Assistance will be provided to CiptaKarya for project preparation and execution of KIP in Jakartaand Surabaya, for kampung eligibility studies and for programm-ing of general infrastructure investments in Jakarta and itssurrounding areas. Funds will also be provided to support theGovernment property tax improvement program, to provide managementassistance to NUDC, for monitoring and evaluation of the projectin both Jakarta and Surabaya, and for feasibility studies ofurban development projects in medium size Indonesian cities.

C. Detailed Description

Kampung Improvement Program: Jakarta

3.04 The project will continue to support over the next three years(1976-79) Jakarta's program for upgrading high density kampungs and pro-viding the population with basic services. Under the first project, im-provements have been made over a period of two years (1974-76) on 1,980 hacovering about 16.5% of the urbanized area of Jakarta. The KIP for the nextthree years would upgrade an additional 3,000 ha representing roughly 25% ofthe 1969 urbanized area. Map 10728R2 identifies kampungs to be upgradedin 1976-77. The items to be financed by proceeds of the loan include foot-paths, secondary roads, surface drainage ditches, water supply systems andpublic standpipes, individual toilets, mainly pit privies and some communitytoilets, garbage collection facilities and trucks, elementary schools, andcommunity health facilities. Residents of each kampung participate in theplanning process through local representatives and help in determiningpriority improvements to be made within a framework of established designobjectives.

3.05 Functional standards for the different items of infrastructure andthe procedures for allocating budgeted funds to the different items have beendefined in agreement with the project authorities (Annex 2). The level ofservice for these items is not fixed rigidly for each kampung but is derivedfrom the functional standards and the allocation procedure. This more flexibleapproach will lead to a closer match between the specific needs of each kampungand the facilities provided. It is based on the favorable experience of thefirst project in which the KIP unit demonstrated its ability to handle more

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sophisticated design procedures. Assurances were obtained from the Governmentduring negotiations that the functional standards and the allocation procedurewill not be changed without prior approval of the Bank.

3.06 Experience since 1974 has suggested several desirable modificationsin service level that have been incorporated into the functional standards.Among these modifications are:

(a) the use of individual pit privies where feasible in placeof communal facilities, because of difficulties in acquiringland, and lack of public acceptance of communal facilities(Annex 3);

(b) different standards for the sensity of public water taps inthe different parts of Jakarta depending upon the existingconditions (Annex 2);

(c) increased provision of footpaths and a corresponding reductionin vehicular roads to provide sanitary access to a larger numberof houses without increasing costs and to maintain servicelevels in keeping with the low incomes of families inkampungs (Annex 2).

3.07 Design work for the 1,000 ha in the first year program has alreadybeen completed. Based on these the following estimates have been made ofthe various components of the KIP in Jakarta for the entire three-yearprogram:

(a) About 575 km of footpaths;

(b) About 120 km of paved roads;

(c) An estimated 75 km primary drainage canal;

(d) Extension of the water supply distribution system andprovision of public standpipes to supply about 601/capita/day;

(e) Materials for individual or small commtnal pit privies to beconstructed by the residents themselves under the generaldirection of trained technicians;

(f) Concrete garbage bins, hand carts and 9 garbage trucksfor collection and disposal of solid waste;

(g) Construction of 90 primary schools in the kampungs to raisethe school enrollment to the same level as the rest ofJakarta, and provision of equipment for the schools;

(h) Construction of 45 health clinics (Puskesmas) in kampungsnot presently served by district clinics, 30 health offices(Pos Keshatans) for the use of community health workers

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in the pilot health/nutrition program, and provision ofthe necessary medical and office equipment.

3.08 In addition to the infrastructure improvements in the kampungsand the provision of schools and clinics, the project would include apilot program of community health services. Community health workers wouldbe trained in such services as maternal and child health, communicabledisease control, nutrition, (child weighing, vitamin A megadose prophylaxisand nutrition education), some vaccinations, family planning, environmentalhealth, minor curative services and referrals. After training, the healthworkers would be assigned to a few selected kampungs and their performanceand impact on the community would be monitored over 2-3 years. Dependingon the results of the evaluation, the health program could be modified and/orexpanded in its coverage. Details of the health program are given in Annex 4.Total cost of the KIP program in Jakarta amounts to $59 per capita (1976prices) or $312 per family.

Kampung Improvement Program: Surabaya

3.09 In Surabaya, the project would support a two-pronged approach tokampung improvement. It would support an increase in the present SupratmanProgram under which the Municipal Government matches the contributions incash or kind of the kampung residents for improvements of particular items ofinfrastructure scattered throughout the city. The project would increase theGovernment's support of the program from the present planned level of $750,000over the three year project period to $1.25 million, making the total SupratmanProgram $2.5 million over three years. In addition, the project would alsosupport the start of a Modified Supratman Program, which would be a comprehen-sive program of kampung improvement along the lines of the Jakarta KIP. Thisprogram would cover the lowest income kampungs which the Government feels maynot otherwise be able to participate in the Supratman Program, and also wouldinclude upgrading to minimum standards of the basic items of infrastructure.

3.10 The project involves upgrading infrastructure and basic amenities inat least 374 ha of densely populated kampungs (which cover about 5% of urban-ized area) and would directly benefit about 9.5% of the total population ofthe city. Map 12209 shows substandard areas and identifies kampungs to beupgraded in the first year. As in the Jakarta KIP, the program in Surabayawill provide paved footpaths, vehicular roads, water supply, human waste dis-posal, drainage and solid waste disposal facilities. In addition, the projectwould provide 15 primary schools, 5 health clinics (Puskesmas), 3 healthoffices (Pos Kesehatans) and the necessary equipment for these facilities.The Pos Kesehatans will be used by the community health workers to be trainedas a part of the project (para 3.09).

3.11 Functional design standards for the different infrastructure itemswhich the program will aim to achieve have been defined (Annex 2). Becausethe Surabaya program is only starting, these have been set initially atapproximately the same level as the average for the Jakarta KIP. As expe-rience is gained and the design process in Surbaya is improved, the standards

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will be made more flexible in line with the priority needs of individualkampungs. The detailed designs for the Surabaya kampungs in the first-yearprogram have not yet been completed and therefore, a breakdown of the proj-ect components is not available. However, overall levels of investment perdwelling have been specified as in the case of Jakarta. Expenditures inSurabaya would be lower because of the greater existing infrastructure inkampungs in Surabaya and because of somewhat lower unit costs of civilworks.

3.12 In addition to the infrastructure improvements, the project inSurabaya includes a pilot program of training 100 volunteer community healthworkers to be drawn from the kampungs. These community workers will pro-vide the residents with basic health, hygiene, family planning and nutri-tion education, and will provide referrals for immunization, vaccinationand malnutrition to the health clinics. The health program would establisha core of community workers through which further programs can be developed.Details of the training program are given in Annex 4. Total costs of theKIP program in Surabaya amount to approximately $29 per capita or $150 perfamily.

Technical Assistance

3.13 The project provides the following technical assistance:

(a) consultants' services for Cipta Karya for (i) assistanceto the KIP project units in Jakarta and Surabaya in thedesign of the works; (ii) supervision of project imple-mentation; (iii) training of the project units in en-gineering and accounting; and (iv) evaluation of thekampungs to be included in the program;

(b) consultantsw services from local institutions for pro-ject monitoring and evaluation;

(c) two advisers, for a period of two years, to assistCipta Karya in its responsibilities for overall plan-ning in the Jabotabek area, to evaluate alternativeeconomic and physical growth strategies for the Jakartametropolitan area and to assist in investment planningfor the region;

(d) one expert in municipal taxation for a period of oneyear to assist in developing procedures for implementingimprovements to the IPEDA tax; one expert in propertyvaluation to assist in valuing property in Jakarta andin training valuers; and training in surveying andvaluation;

(e) six man years of management advisory services to theNational Urban Development Corporation (NUDC) to assistin planning its nationwide sites and services and low

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cost housing program, and to provide expertise in finan-cial planning, engineering management and urban architec-tural/planning to assist in supervision of project fea-sibility studies and project implementation; and

(f) consultants' services for conducting feasibilitystudies of urban development projects in medium-size Indonesian cities.

3.14 In order to assist project design work in Surabaya pending approvalof the Bank loan, Cipta Karya has retained the services of engineering andaccounting consultants for a period of 4 months. Retroactive financing isrecommended for these services.

3.15 During negotiations assurances were obtained that the consultantsto be employed would be acceptable to the Bank and would be retained on termsand conditions satisfactory to it. Terms of reference for the two advisers onregional planning and the experts in municipal taxation and property valuationwere discussed upon during negotiations. Annex 5 contains details of technicalassistance to be provided under the project.

IV. PROJECT COSTS, FINANCING AND EXECUTION

A. Cost Estimates

4.01 The project cost is estimated at Rp 42,980 million ($104.8 million),with an estimated foreign exchange component of Rp 11,522 million ($28.0 mil-lion) or about 27%. Cost estimates are detailed in Annex 2 and summarizedbelow:

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ProJect Cost EstimatesForeign

-Pp Million --------- -------- US$ Million-------- ExchangeAs % of

Local Foreign Total Local Foreign Total TotalA . XAMPUNC IPROVENENI PROGRAM: JAKARIFA

1. Land for Schodis and Clinica 1,950 - 1,950 4.75 - 4.75 -

2. Civil Works

(a) Roads and Bridges 5,385 1,695 6,780 12.40 IL.15 16.55(b) Footpaths and Bridges 1,910 1,635 6,545 12.09 14.D9 16.DO(c) Drainage Canals 1,420 670 1,890 3.415 1 11 4.6D(d) Water Supply 14,560 1,520 6.080 11.10 3.70 14.80(e) Human Waste Disposal 1.330 440 1,770 3.20 1.19 4.30(f) Solid Waste Disposal 225 85 310 o.6& 9.15 9.75(g) Schools and Health Clinics 2,195 91±0 3,135 5.35 2.30 7.65

Sub-total (2) 19,725 6,785 26,510 48.10 16.55 64.65 25.3

3. Furniture and Equipment for Schoolsand Clinics 355 120 1475 9.85 0.30 1.15 26.0

L. Garbage Trucks 8 77 85 0.02 9.18 D.23 9D.5

5. Health Programs

(a) Training Cost 110 - 110 0.27 - 0.27(b) Equipment and Supplies 40 50 90 0.11 3.12 0.23

Sub-total (5) 150 50 200 0.38 9.12 0.50 25.0

Sub-total (1.2.3.415) 22,8 5 7,032 29,220 51±.10 177.1 71.25Price Escalation 5.7140 1,810 7.550 14.00 14.43 18,40

Total KIP Jakarta 27,928 8,842 36,770 68.10 21.55 89.65...... ..... ...... ..... ...... .... ... ----- 24;0)

B. KAMPUNG IMPROVEMENT PROGRAM: SURABAYA

1. Land for Schools and Clinics 315 - 315 0.75 - 0.75

2. Civil Works (Supratman Program) 780 245 1,925 1.93 3.69 2.50 25.0

3. Civil Works (Mtodified Supratman Program)

(a) Roeds and Bridges 511 157 628 1.15 0.140 1.55(b) Footpaths and Bridges 248 83 331 o.60 0.29 9.80(c) Drainage Canals 280 93 373 0.70 0.29 0.90(d) Water Supply 53 18 71 0.12 0.03 9.15(e) Human Waste Disposal 53 18 71 0.16 0.914 3.20(f) Solid Waste Disposal 67 23 90 0.17 0.32 0.20(g) Schools and Health Clinics 292 123 415 D.70 0.30 1.00

Sub-total (2) 1,1465 5114 1,979 3.60 1.29 14.83 25.0

1L. Furniture and Equipment for Schoolsand Clinics 48 23 71 0.15 0.05 0.20

5. Garbage Vehicles - 40 410 - 0.19 9.19 190.0

6. Health Program

(a) Training Coat 6 - 6 0.01 - 0.01b) Equipment and Supplies 3 3 6 0.01 0.01 0.02

Sub-total (5) 9 3 12 0.02 0.01 0.33 33.3

Sub-total (1+2+3+4+5) 2,617 825 3,442 6.142 1.96 8.38Price Escalation 4143 140 583 1.08 3.34 1.42

Total KIP Surabaya 3.060 965 4,025 7.50 2.30 9.80.__....... ....... ...... ........ .... ... _,== ===

C. TECHNICAL ASSISTANCE

1. KIP Design and Supervision 115 675 820 0.35 1.65 2.00

2. Monitoring and Evaluation 80 - Bo D.20 - 0.20

3. Management Assistance to NUDC La 185 225 ).10 0.145 0.55

14. Jakarta Metropolitan Planning 20 120 11±0 0.05 0.30 0.35

5. Property Tax 20 100 120 0.05 0.25 1.30'

6. Feasibility Studies 125 1410 535 0.30 1.93 1.30

Sub-total (1.2.314.5.6) 143 1,1h90 1,920 1.05 3.65 14.73 77.6Price Escalation 40 225 265 9.10 0.55 _.65

Total Technical Assistance 7' 1,715 2,185 1.15 4.2' 5.35 78.5

PROJECT COST SUMMARY

Base cost '8,40 ',3h7 34,582 41,g- 7.7R )

Price Escalation f7.2l 9.1 8,398 15.18 5.25 2D.4?

Grand Total 31 ,1498 11,522 142,98o 756'5 27.2' 1114.8 ' 9.7

September 26

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4.02 Cost estimates for the Kampung Improvement Program in Jakarta arebased on preliminary engineering designs for the 1976-77 program, usingJanuary 1976 price levels. Cost estimates for the Kampung Improvement Programin Surabaya are based on the experience from Jakarta, although it is possiblethat costs in Surabaya would be lower in which case any cost savings would beapplied to expanding the coverage. Price escalation assumed for civil worksis based on an estimated inflation rate of 20% in 1976, 15% in 1977 and 1978and 12% in 1979. No physical contingencies have been included because thedesign of the works is controlled by an overall per dwelling budget limitation.Assurances were obtained during negotiations that any cost overruns for KIPconstruction would be borne by the concerned local government. Any savingsrealized will be used to expand coverage of the program.

B. Financing

4.03 Of total estimated project costs, about 50% would be financedwith proceeds from the proposed Bank loan of $52.5 million to cover theforeign exchange component of $28.0 million and some 32% of local currencycosts. The balance, $52.3 million (Rp 21.4 billion) would be financed by:DKI Rp 18.6 billion ($45.3 million); Kotamadya Surabaya Rp 1.9 billion ($4.7million); community contributions Rp 0.5 billion ($1.2 million); and GOI Rp0.5 billion ($1.1 million). The contributions of the DKI and the KotamadyaSurabaya would flow from their normal budgetary resources; the GOI contribu-tion would be for technical assistance provided for the project to Cipta Karyaand NUDC. The financing plan is summarized in the table below.

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------------------US$ Million---------------------Estimated Kotamadya

Project Component Cost DKI % Surabaya % GOI % Bank %

A. KIP Jakarta

Land 4.8 4.8 100 - - - - - -

Civil Works 82.7 40.0 48.5 - - - - 42.7 51.5Furniture, Equipment 1.2 0.1 5 - - - - 1.1 95

Vehicles 0.3 0.3 100 - - - - - -Health Programs

Training 0.3 0.3 100 - - - - - -Equipment & Supplies 0.2 0.1 50 - - - - 0.1 50

Subtotal 89.5 45.6 43.9

B. KIP Surabaya

Land 0.8 - - 0.8 100 -- -

Civil Works 8.9* - - 3.8 42.6 - - 3.8 42.6

Furniture, Equipment 0.2 - - 0.01 5 - - 0.2 95

Vehicles 0.1 - - 0.1 100 - - - -

Health ProgramsTraining 0.02 - - 0.02 100 - - - -

Equipment & Supplies 0.02 - - 0.01 50 - - 0.01 95

Subtotal 10.04* 4.74 4.01

C. Technical Assistance 5.4 - - - - 1.1 20 4.3 80

Total 104.8 45.6 43.5 4.7 4.4 1.1 1.0 52.5 50.0

*including community contribution of $1.25 million in the Supratman Program.

4.04 The Borrower, GOI, will pass all the proceeds of the proposed Bankloan, except for the technical assistance expenditures, through subsidiaryloan agreements acceptable to the Bank to DKI and Kotamadya Surabaya fortheir respective KIP works. The completion of such agreements is a conditionof effectiveness of the proposed loan. The financial arrangements will be asfollows:

(a) DKI. Of the proposed Bank loan of $52.5 million equivalent,about $44.2 million will be relent to DKI to finance 51.5% ofthe civil works construction, and 100% of the CIF cost ofimported or 95% of ex-factory costs of locally procuredfurniture and equipment for schools and clinics. The sub-sidiary loan will bear an interest rate one-fourth of onepercent greater than the interest rate of the Bank loan tothe Government to cover the commitment fee, repayable over20 years, including a four and one-half years period ofgrace for principal and interest. The balance of the fundsrequired for the KIP ($45.3 million) and the Health Program($0.4 million) will be provided from DKI's budgetary resources;

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(b) Kotamadya Surabaya. Of the proposed Bank loan, about US$4.0million will be relent to Kotamadya Surabaya to finance 43% ofthe civil works construction, and 100% of the CIF costs ofimported or 95% of exfactory cost of locally procured furni-ture and equipment for schools and clinics. The subsidiaryloan will bear an interest rate one-fourth of one percentgreater than the interest rate of the Bank loan to theGovernment, repayable over 20 years, including a four andone half year period of grace for principal and interest.The balance of the funds required for the KIP ($4.7 million)and the Health Program ($0.03 million) will be provided fromthe Kotamadya's budgetary resources;

(c) Technical Assistance. The proposed loan would provide $3.3million of the total $5.4 million for technical assistance tocover 100% of the foreign exchange component and 75% of localexpenditures. These funds would be provided under (i) abudgetary transfer from the Central Government to Cipta Karya($4.3 million) and to the national urban property tax (IPEDA)office ($0.4 million); and (ii) in the form of equity fromthe Central Government to NUDC ($0.7 million). The averageman-month cost of technical assistance is estimated to beapproximately $5,800.

Impact on Government

4.05 The DKI and Surabaya Government will face the financial burden ofrepaying GOI over a 17-year period an amount equivalent to the on-lentproceeds of the proposed Loan. In addition, the DKI must repay that portionof the previous urban loan which financed KIP works in Jakarta. This burdenis substantial because the KIP program generates no direct cash return. TheGOI has considered the possibility of imposing a betterment tax on residentsof the improved kampungs. However, since no such tax is currently levied inhigher income neighborhoods where urban services are provided routinely, theGovernment has taken the view that to institute a special tax on KIP benefi-ciaries would be inequitable.

4.06 The argument for cost recovery from low-income beneficiariesthrough such a betterment tax or other means, rests on the desire toassure efficiency in the use of capital resources i.e., not provide anincentive to overutilize capital, and also on the need to provide suffi-cient financial resources to mount a program at a scale sufficient to meetexpanding demand. (On equity grounds, redistribution of income through pro-vision of minimum services to the poor is easily justified). The concernwith efficient use of capital has been addressed by the Government throughan explicit focus on the standards employed with an aim to keeping theseat a minimum level consistent with achieving the health and productivityobjectives of the project. The ability of the Government to sustain theprogram at the desired scale of operation is not in question since the

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Jakarta KIP program is the unique example that can be pointed to as havingachieved this goal. It must also be noted that cost recovery from bene-ficiaries would require a massive effort in cadastral survey and in clarifi-cation and registration of ownership arrangements for each of the approxi-mately 75,000 families benefiting annually from the program. Such an effortis beyond the current administrative capacity of the DKI although it would beclearly desirable. Finally, collection would have to be spread over time, andin many instances the cost of collection would exceed the revenues generated.

4.07 One effect of the project is to increase property values. Pastexperience shows that improvements to community infrastructure also en-courage families to invest in upgrading their own houses thereby furtherincreasing the value of their property. This would ultimately be reflectedin higher property tax revenues. Thus one answer to the question of how togenerate revenues for repayment appears to be to increase general property taxrevenues. In Jakarta, property tax revenues amount to only approximately 4%of total city revenues. In Surabaya, property tax revenues have averagedbetween 6-10% of total revenues. Most other cities of the world outside ofIndonesia draw much more heavily of this source, with typical percentageslying between one fifth and one half of total revenue.

4.08 The Government recognizes that property taxes represent an import-ant source of revenue and has instituted a program to improve the propertytax (IPEDA) system. A property tax study financed under an IDA technicalassistance credit provided specific recommendations for structural reformof the IPEDA tax system that involved converting from the existing indexsystem to a market value system. The Government generally accepted the re-commendations of that study, but felt that it would have to proceed at itsown pace with implementation. Since that time the Government has made severalincremental adjustments to the index system which move it in the directionof having the index values correspond with market values. These include,periodically reclassifying areas into different "value" zones as physicalconditions in the areas change; making periodic adjustments to the coeffi-cients used to determine the level of tax; updating the land value map toprovide reference information on property values in different parts of thecity and increasing the collection rate from about 50% in 1970 to 73% in 1975.

4.09 As a result of the Government's efforts to improve the propertytax system, between 1970 and 1975 revenues from the IPEDA tax in both Jakartaand Surabaya have increased at an average rate of about 50% per year, or over15% per year in real terms, i.e., after allowing for inflation and populationincreases. Because of the importance of maintaining real growth in propertytax revenues, assurances were obtained during negotiations that the Governmentwill continue to make improvements in their property tax collections, and wouldattempt to maintain the 15% real annual increase in property tax collectionsachieved in the past five years. This represents a realistic tax performanceand will also be sufficient for the increase in revenue during the period tomore than cover debt service for KIP loans in both cities (Annex 7). TechnicalAssistance provided under the project will assist the Government in implemen-ting improvements to the TPEDA assessment system and provide training insurveys and property valuation for IPEDA staff.

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4.10 In Surabaya, the traditions of finance associated with KIP workshave developed somewhat differently from those in Jakarta. Under the existingProject Supratman Program in Surabaya, residents of kampungs provide 50% ofproject costs in labor, materials or money. Available budget data indicatesthat contributions amounting to approximately 30% of total costs have in factbeen received from residents. As in Jakarta, maintenance of canals and infra-structure is accomplished through community self-help labor under the directionof the local headman (Lurah) and consumption charges for water received fromcommunal taps are paid to an operator stationed at the tap. These existingprocedures for collecting funds from kampung residents in Surabaya will becontinued under the Supratman Program. The Government will monitor the expe-rience from this approach and compare it with the fully government supportedModified Supratman Program. It is expected that the experience from Surabayawill serve as a model for establishing cost recovery procedures in otherIndonesian cities.

C. Project Execution

Kampung Selection: Jakarta

4.11 In 1969 the DKI Government conducted a survey of all kampungs inJakarta and developed a master list of kampungs that would be upgraded underthe Kampung Improvement Program through 1979 when the program was to havecome to an end. Between 1969 and 1979, however, population in Jakarta willhave increased by over 2.3 million persons. Assuming that 70% of this incre-ment occurs in kampung areas, a minimum of 4,000 ha of new kampung area willhave been formed during that period. Also, by 1980, the annual growth in newkampung formation will be approximately 700 ha per year. The 1969 masterlist, therefore is quite out of date.

4.12 The high rate of growth in new kampung area since 1972, arguesstrongly for a reconsideration of the list of eligible kampungs. Furthermore,some kampungs upgraded prior to 1974, which includes many of the poorest andhighest density areas of the city, were upgraded to significantly lower stand-ards in comparison with the program as it now operates. These kampungs shouldbe considered for re-upgrading on a case-by-case basis.

4.13 Agreement was reached during negotiations, that:

(a) only kampungs with a density of not less than about 50dwelling units per ha (270 persons) will be eligible forBank financing; and

(b) the list of eligible kampungs will be expanded to includekampungs upgraded prior to 1974-75 that would be eligiblefor "re-upgrading"; and would also include other highdensity kampungs in the city that for one reason or anotherare not considered eligible under the existing list ofkampungs but which would be eligible if the criteriaadopted in 1969 were reapplied.

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4.14 Technical assistance (para 3.12) provided under the project willassist the DKI in developing and implementing revised criteria for deter-mination of kampung eligibility.

Kampung Selection: Surabaya

4.15 A ranking procedure acceptable to the Bank for selecting kampungsbased on criteria of income, density, extent of existing service and othershas been established in Surabaya.

Construction

4.16 As in the first project, the KIP Unit in DKI would continue to beresponsible for the execution of the project in Jakarta. It would prepareand let all civil works contracts for the program based on engineering doneby the DKI Public Works Department. A similar project unit would be estab-lished in Surabaya for project execution, Establishment in Surabaya of sucha project unit satisfactory to the Bank will be a condition of disbursementfor the Surabaya component. The project implementation schedule is set outin Chart 16135. An estimated $20 million of civil works contracts coveringall KIP works, except schools and health clinics, for the first year of theprogram in Jakarta would have been awarded by September 1976. This isnecessary to carry out the construction before the start of the wet seasonin January and in order to maintain continuity of works.

Health Program

4.17 Tkh- City Health Office in Jakarta and Surabaya will be responsiblefor the imp amentation of their respective health programs. A special train-ing team cowp-irg a doctor, a public health nurse, a midwife and headedby a coordJ-la*C- will be established in the Training Division of Jakarta'sCity Health Cft ce to assume direct responsibility for training the communityhealth workers. Supervision of the work of the various health centers willbe undertaken by a team of six full-time supervisors. In Surabaya, theexisting structure of the City Health Office would be able to handle the pilothealth training program included in the project.

Procurement

4.18 All prospective builders for civil works contracts must be re-gistered with DKI (for Jakarta) or the Kotamadya (for Surabaya) and classi-fied according to their experience, financial standing and performance onsimilar works. The nature and size of the work determines which classifi-cation of contractors may bid on a particular contract. This form of pre-qualification is well established in Indonesia and is satisfactory. Pro-curement for civil works and vehicles will be done on the following basis:

(a) The civil works contracts will be awarded on thebasis of competitive bidding following local advertis-ing in accordance with the Bank's Guidelines for Pro-curement. Foreign contractors are not likely to be

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interested in bidding on KIP civil works becauseof the difficulty of working in densely inhabitedkampungs, the need for close relationships with theresidents and local officials, the labor-intensivenature of the works and the large number of smallcontracts of short duration. The program has beenin existence for six years, and while the foreigncontracting community has been well represented inIndonesia and nearby Malaysia, no interest in theseworks has been expressed;

(b) Furniture and equipment for schools and clinics($1.4 million) will be procured by competitive biddinglocally advertized.

Promotion of Local Construction Industry

4.19 The project is expected to make a significant contribution to thedevelopment of small and medium size contractors in Jakarta and Surabaya.The DKI presently has 129 contractors of various classifications and fordifferent types of works registered for KIP works. Of these, 35 to 40contractors would generally be awarded works in any one year. The size ofthe contracts typically varies from $25,000 to $600,000. The performanceof the contractors has improved as a result of the past two years of KIPworks financed under the first project, as is evident from the upgrading inthe classification of some 20 contractors in this period, and from the com-petition in bidding which has led to costs below original estimates. It isclear that the project itself provides an opportunity for small local con-tractors to develop their capabilities by participating in the program.

Disbursement

4.20 Disbursement of the Bank loan would be made against the following:

(a) 50% of all civil works expenditures against certificatesof expenditures certified by Cipta Karya and the super-visory consultants;

(b) 100% of CIF expenditures or 95% of ex factory expendituresfor furniture, and equipment for schools and health clinics;and

(c) 100% of foreign expenditures and 75% of local expendituresfor consultant services.

Documentation for contracts over $300,000, including contract documents,analysis of bids by consultants and recommendations for award would be sentto the Bank prior to submission of applications for disbursement. Documenta-tion for contracts costing less than $300,000 would be retained by the KIPunit and available for inspection during supervision missions. Supervisoryconsultants would review bids and bidding procedures for all procurement.

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4.21 The estimated summary schedule of Bank disbursements is shown inAnnex 8 based on a three-year project implementation period. In order topermit completion of most construction work prior to onset of the rainyseason, the Government requested approval to begin advance contracting forkampung work scheduled in FY76-77 1/. Approval of retroacting financingis recommended for works contracted for after the departure of the appraisalmission from Indonesia and for which payments to contractors are made priorto loan signing. This retroactive financing is expected to amount to approx-imately $3.5 million (6.6% of the total proposed loan of $52.5 million). Thevalue of works contracted in advance would total approximately $20 million.

4.22 Retroactive financing is also recommended for technical assistanceused for project design in Surabaya from April 1, 1976 up to an amount of$50,000.

Accounts and Auditing

4.23 Separate project accounts would be maintained for the KIP worksby DKI and Kotamadya Surabaya. DKI has already established satisfactoryprocedures for this in the first project which would continue to be used. Allproject expenditures, including civil works, health, vehicles, and monitoringand evaluation, would be made from a single KIP account. The project expendi-tures would be accounted for separately by category as well as by each fiscalyear. Each project account would be audited annually by independent auditorsacceptable to the Bank. The accountant provided in the technical assistanceto Cipta Karya will work with the Surabaya project unit to assist in the es-tablishment of acceptable project accounting procedures. Assurances wereobtained from the Government during negotiations that the annually auditedrecords of project accounts in DKI and the Kotamadya would be submittedto the Bank no later than four months following the close of the fiscal years.Assurances were also obtained from the Government during negotiations thatquarterly progress reports will be prepared by the supervising consultantsand submitted to the Bank reporting on, inter alia, the physical, contractualand financial progress of the project.

Operations and Maintenance

4.24 Maintenance of project infrastructure and vehicles would be theresponsibility of DKI and the Kotamadya. Community residents organized bylocal leaders (RWs) would maintain any communal kampung sanitary facilitiesand drains. It would be the responsibility of the Lurah (sub-district chief)to see that garbage is collected and deposited in the neighborhood collectionbins for removal by the Sanitation Department.

1/ The Indonesia fiscal year begins April 1.

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D. Supervision

4.25 Supervision of the project on the part of the government will bethe responsibility of Cipta Karya. Consultants will be appointed to adviseand assist Cipta Karya in this task. Supervision by Bank staff will requireapproximately 15 man-weeks of field effort per year for three years. Forevery man-week in the field approximately two man-weeks of office work inWashington would be required.

V. ORGANIZATION AND MANAGEMENT

A. Project Organization

5.01 The overall responsibility for project implementation, coordination,and administration will rest with Cipta Karya in the Ministry of Public Works.Within each city the KIP will be planned and executed by a special unit inthe municipal administration.

5.02 The responsibility for the development and coordination of thenational KIP program in Indonesia was originally to have been NUDC's. NUDCwould have exercised this responsibility in addition to its role in developingsites and services and conventional low and moderate income housing. Based onthe experience gained in the first year of operation of the NUDC, the Govern-ment has decided that kampung improvement would be more appropriately adminis-tered by Cipta Karya in the Ministry of Public Works. The purpose of thisshift in operational responsibility is to consolidate within NUDC those shel-ter functions which most readily lend themselves to solution under a corporateinstitutional structure, and to shift to Cipta Karya those functions which theGovernment views as being more appropriately handled by a government agency.Cost recovery in sites and services and conventional housing for example, canbe directly achieved through sales of lots as is done in the case of privatedevelopers. In kampung improvement programs, which involve extension of urbanservices such as roads, footpaths, drainage, and public water taps to alreadybuilt up areas, direct cost recovery from beneficiaries is much more difficultto achieve. These urban services are normally provided through local govern-ments, and the promotion of KIP programs in the cities of Indonesia was feltto be more appropriately handled by a government agency.

5.03 Overall national housing policy will continue to be the responsibi-lity of the National Housing Authority, with Cipta Karya serving asSecretariat of the Authority. Responsibility for preparing integratedshelter programs for individual cities will lie with the city, which willreceive technical assistance and guidance from Cipta Karya. Cipta Karya'snew responsibility complements its previous role in assisting cities inpreparing overall physical development plans, and in preparing individualsector plans for water and sanitation.

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5.04 The KIP unit within the DKI administration prepared the three-yearprogram for that city included in the project. The unit has a staff ofabout 40 professionals and is responsible for selecting kampungs to be im-proved, determining appropriate improvements in accordance with establishedstandards, awarding civil works contracts, supervising the work of contrac-tors, and coordinating the inputs from various DKI departments, such asEducation, Health and Sanitation. The KIP unit performed its responsibilitiesunder the first loan in an efficient and professional manner. In Surabaya,a KIP unit similar to the one in Jakarta is being established (Annex 6)with a separate steering committee responsible directly to the Mayor.

B. Monitoring and Surveys

5.05 A series of base line and follow up surveys have been initiated bythe DKI Government. These are to serve as evaluation and monitoring toolsfor the project in addition to defining populations and inputs to futureprojects. They are essentially divided into two components. The firstdeals with the monitoring and definitions of the social, economic and phy-sical characteristics of populations in both improved and non-improvedkampungs, and the second deals with the monitoring of the health status ofthese populations as well as their immediate environment.

VI. PROJECT JUSTIFICATION

6.01 With the city of Jakarta growing by a quarter of a million personsper year, with the vast majority of the city unserviced, and with the verylow average income levels that exist in the city, the Government realizedthat a strategy had to be adopted that was designed to meet the needs ofthe largest number of persons at a very low level of cost. It is in thiscontext that the KIP program involving the extension of minimum serviceshas evolved. Similar situations exist in every large city of Indonesia andthe Government has now started the process of spreading the program to othercities. An effort parallel to the kampung improvement program, that involvesdevelopment of sites and services has also been adopted by the Governmentand will require longer to build up to capacity, but is expected to accountfor a major part of national urban development expenditures within a veryshort time.

6.02 The project will provide improved living conditions for over 20%of Jakarta's current population, or about 1.2 million people, and about 9.5%of Surabaya's population or 200,000 people. In the densely crowded, un-serviced urban kampungs of Indonesia, open spaces and canals are the chiefplaces for disposal of human waste. Standing stagnant water, lack of foot-paths and lack of a safe supply of drinking water are ever present healthhazards contributing to high levels of mortality and debilitating disease.Productivity, which is directly related to health, is correspondingly low.Project investments in community and individual human waste disposal facili-ties, improved storm drainage channels, community health centers, and a less

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contaminated water supply will result in better health and living conditionsfor Jakarta and Surabaya residents. With this infrastructure and the com-:;'nementary provision of health/nutrition programs and educational facilities,_--sic labor productivity is expected to be increased. An indicative analysisthat attempts to directly relate the investments in the health and environ-mental sanitation components to increased productivity is found in Annex 9,along with a similar analysis relating education investments to productivityincreases.

6.03 The economic justification of the project has been establishedby determining (i) that the proposed development option is the best amongfeasible alternatives and (ii) that the rate of return in comparison tothe "without" the project situation is sufficiently high.

Choice Among Alternatives

6.04 In the context of the KIP, the development options that must beconsidered primarily involve variations in the levels of standards for ser-vices. The standards proposed in the project for both Jakarta and Surabaya,have evolved through experience gained from past kampung improvement worksin Jakarta. Available data does not permit a quantitative comparison of thecosts and benefits of different levels of services, but the experience ob-tained over the years does point to modifications in past standards. Stand-ards for both water supply and human waste disposal, for example, are higherin the proposed project than in the first urban project in line with a moreexplicit focus on health and environmental sanitation. Per capita expendi-tures in water supply and human waste disposal have approximately doubledfrom $6.4 and $1.2 respectively to $11.9 and $3.2. While this expenditure isstill relatively low, the additional funds will permit provision of a moreelaborate reticulation system, in addition to public standpipes, which wouldpermit individual hookups for residents who could afford to pay for suchconnections. This level of service will significantly increase the availabil-ity of water to kampungs residents, and reduce reliance on the worst of theindividual wells many of which are dangerously contaminated. Provision ofindividual pit privies where feasible, rather than large communal facilitiesshould markedly increase the use of sanitary facilities in place of opencanals and drainage ditches.

6.05 The unit costs of other components have not changed significantlyfrom the first urban project (Annex 2, Table 3) but the emphasis has changedin some cases. Standards for internal circulation have shifted through greaterprovision of footpaths and a corresponding reduction in vehicular roads.Standards for educational and health facilities are substantially the sameas in previous years. With kampung schools operating four shifts per day(offering less than 2 hours instruction), the DKI has estimated that in 1976as many as 100,000 children in Jakarta could not enter schools because of lackof space. These shortages have led to a drop in school participation ratesover the last decade and have prompted a warning in a recent ILO report aboutthe future quality of the labor force and the need for immediate measures topromote school participation at the primary level, as well as encourage non-formal education. The burden of the shortages in Surabaya as well as Jakarta

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falls most heavily in kampung areas, and seriously constrains access to basiceducation and training to low-income families. The educational facilitieswill provide spaces for over 52,000 school children over three years to bringenrollment in kampungs up from the current level of about 40% of eligiblechildren to the citywide average of roughly 75%, and will reduce the numberof shifts in kampung schools that are upgraded from four to two. The healthand nutrition components will complement the water and sanitary facilitiescomponents in addressing the health problems of Jakarta which are among themost serious in the world. In addition, a pilot scheme will test theeffectiveness of a preventive health care approach that focuses especiallyon health and nutrition education. The impact of all investments, i.e., inboth infrastructure and services will be recorded by the monitoring surveys(para 5.05).

Economic Return

6.06 The calculation of a quantitative estimate of the economic rateof return is based upon the assumption that benefits can be measured atleast approximately, through changes in the market values of property inthe project areas. While there are certain project benefits, especiallythose that are health related, that may be only indirectly reflected inproperty values, such values are believed to provide a useful indicatorof the minimum economic value of project outputs.

6.07 The values used as a measure of benefits are based upon differ-ences in observed market prices between improved and unimproved propertyin similar locations. Land value information was obtained by selectingrepresentative kampungs in the North, South, East, West and central partsof each city, and by asking the Lurahs and Chamats (the local kampung head-men who have the responsibility for recording data on sales of property) toprovide such information on lots with different locational characteristics.While the informal nature of these surveys suggests that precise values mustbe treated with some caution, nevertheless, analysis based on the data pro-vides a valid measure of the general level of the economic return.

6.08 Project cost estimates used in the economic analysis include allconstruction, site preparation, infrastructure, and operating and mainte-nance costs. In addition, physical contingencies, administration and tech-nical assistance for engineering were included. Costs of schools, clinicsand health programs were omitted from this analysis following normal prac-tice (Annex 9, para 3). Adjustments were made to project inputs to eliminatetaxes and duties.

6.09 With these assumptions, the economic rate of return for theJakarta component is 54% and the Surabaya component is over 100%. A sensi-tivity analysis for a 20% reduction in benefits results in returns of 26%and 94% for Jakarta and Surabaya respectively. When labor is shadow pricedat 50% to reflect opportunity costs the returns are 67% for Jakarta, andover 100% again for Surabaya. The Net Present Value (NPV) of the Jakartacomponent at a discount rate of 15% is $21.5 million and the NPV of theSurabaya component is $5.2 million (Annex 9). An independent analysis focus-ing on the productivity aspects of the investments in water supply, human

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waste disposal, footpaths with drainage ditches, health clinics and healthprograms 1/ indicates that a minimum increase in productivity of only 6% inJakarta and less than 3% in Surabaya would justify these components of theproject with a rate of return of 15% (Annex 9). A similar analysis of theeducation component indicates that an increase in lifetime earnings of 12%would justify the educational expenditures.

6.10 The high rates of return reflect the relative scarcity of servicedland in Jakarta and Surabaya and the very high value that residents place onthese services. While the supporting data is not precise, there is no doubtthat property value increases after development are large and dramatic re-lative to the cost of the services. The KIP works are publicly providedservices, and in the past their expansion has been held back because offinancial constraints. The increase in property value, and the high rateof return is an indication that demand has risen much faster than the supplyof these services, that there is a great value in their provision and thatfurther investments in this sector should receive high priority.

VII. AGREEMENTS REACHED AND RECOMMENDATIONS

7.01 The following are the main conditions on which agreement wasreached before and during negotiations:

1. Conditions Related to Jakarta Component

Assurance was given by GOI during negotiations that:

(a) DKI would execute the Kampung Improvement Programin Jakarta according to design standards acceptableto the Bank (para 3.05);

(b) consultants will be employed for project designand supervision, technical assistance and for

monitoring and evaluation, on terms and conditionsacceptable to the Bank (para 3.13 (a));

(c) an adequate number of full-time supervisors will beappointed for supervision of the work of the varioushealth centers included in the project (para 4.17);

(d) project accounts in DKI would be duly maintained andaudited annually separate from other operations (para 4.23);

1/ i.e., all items except schools, roads and bridges, monitoring andevaluation and technical assistance for Jakarta Metropolitan Planning.

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(e) any cost overruns for the project in Jakarta would beborne by DKI (para 4.04);

Agreement was reached with GOI on the following principalpoints:

(f) the Government will continue to make improvements inthe property tax collections in Jakarta between 1976-77and 1978-79 following the practice of the past five yearsin which more than 15% per year real increase in propertytaxes was achieved (para 4.09);

(g) that only kampungs with a density of not less than about50 dwelling units per ha (270 persons) will be eligiblefor Bank financing and that kampungs included in theproject for the years 77-78 and 78-79 will be drawn froma new list of kampungs eligible for improvement thatwill include kampungs upgraded prior to 74-75 and otherhigh density kampungs that are not now consideredeligible (para 4.13).

2. Conditions Related to the Surabaya Component

Assurance was given by GOI during negotiations that:

(h) Kotamadya Surabaya would execute the Kampung ImprovementProgram in Surabaya according to functional design stand-ards and procedures acceptable to the Bank (para 3.10);

(i) the City Government will provide sufficient funds fromits own sources to complete the project works (para 4.04);

(j) KIP project accounts would be duly maintained and auditedannually separate from other operations of the municipalGovernment (para 4.23);

Agreement was reached with GOI that:

(k) the Government will continue to make improvements in theproperty tax collections in Surabaya between 1976-77 and1978-79 following the practice of the past five years inwhich more than 15% per year real increase in propertytaxes was achieved (para 4.08);

As a condition of disbursement of the Surabaya component:

(1) the Municipal Government of Surabaya will have establisheda separate KIP unit that will have been responsible forplanning and implementation of works financed under theproject; and a head of this unit will be appointed (para4.16).

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7.02 The completion of subsidiary loan agreements between the Borrowerand DKI and the Municipal Government of Surabaya, respectively would be acl.>dition of loan effectiveness (para 4.04).

7.03 Recommendations. The proposed project is suitable for a Bank loantotalling $52.5 million including approximately $3.5 million of retroactivefinancing.

ANNEX 1Page 1

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

Jakarta: Urban Background

A. Land Use

1. The area that is now Jakarta was a small trading port named SundaKalapa at the time of the initial Portuguese contact in the early 16thcentury. In 1619, the Dutch overran the city and established a port at themouth of the Ciliwung River. From this area, with two centers at the oldtown (Kota) and the port area (Pasar Ikan), the fortress city renamedBatavia grew inland towards the south along the Cilliwung. The old centerwas subject to flooding and recurring epidemics as the harbor silted up inthe 18th and early 19th century. To avoid the flooding, the Dutch builtgovernment buildings on slightly higher land to the South, an area that isnow the center of the city, Merdeka Square and the new port of Tanjung Priokwas constructed to the northeast as a replacement for the badly siltedold port.

2. A system of canals was constructed to reduce the problems offlooding and disease epidemics, and an extensive system of urban railwaysdeveloped. By 1920, intercity rail lines connected Jakarta with Tanggerangin the west, Serpong and the Sund straits in the southwest Bogor and Bandungin the South, and Bekasi and Cirebon in the east. These rail lines and theroads paralleling them have been major axes for development.

3. Until che mid-1950s the expansion of the city, with the exception ofTanjung Priok fort, has been constantly toward the south where the floodingwas less and the climate slightly cooler. Kebayoran Baru, a satellite townfor upper-income residents, was built from 1950 to 1965 and now accommodatesabout 175,000 people. To connect Kebayoran with the city, Jalan Thamrin andJalan General Sudirman were widened to six-lane highways to form a secondmajor north-south axis to the traditional route from the Kota to Banteng toKramat Raya and Jatinegara. In the late 1950s and early 1960s imposing mon-uments, government buildings, hotels and the large sports complex were builtto give Jakarta a modern appearance. The employment which these major pro-jects created attracted many new workers to the city. The population grewrapidly in the 1950s largely due to the unrest of the Revolution and immed-iate post-Independence period of the early 1950s and the immigration stimu-lated by rebellions by Sumatra and Sulawesi in 1958. This increase continuedin the 1960s due to the massive investments pumped into the capital city.

4. The north to south direction of city growth was modified in thelate 1960s by the construction of a four-lane ring road. This road providesthe only rapid east-west link across the city with the exception of the

ANNEX 1Page 2

Ancol road in the north. The effect of its construction has been toprovide an opportunity for industrial development in the east, and tostimulate the development of residential areas in an east-west directionbetween the new road and the existing city.

5. The 1965-1985 Jakarta Master Plan, designed in the early 1960swith UN aid and enacted by the DKI Jakarta Regional Council in 1967,emphasized the growth potential to the east and west along with contin-ued expansion to the south. Most of the new industrial development proposedis in the east, and much of the new residential area is in the west. Agreenbelt, 4 to 5 km wide, is proposed to circle the city, with extentionsnorth and south along natural features such as river valleys. There are majorquestions regarding the feasibility or desirability of attempting to locateindustrial development on one side of the city and residential areas on theother which need to be examined before making further decisions about majorsector investments.

B. Demography

Population of Jakarta City

6. The best sources of data on the demography of Jakarta are the1961 and the 1971 national census. They indicate a substantial growth duringthe decade of 2,906,000 to 4,576,000 persons, an increase of 57.7% over thedecade. The latter figure probably underestimates the total population byapproximately 500,000 because it did not include persons who had lived in thecapital for less than three months 1/. Thus, the population of Jakarta in1972 was approximately 5,000,000 persons (Table 1).

7. The rate of growth for Jakarta between 1961 and 1971 was 4.6% peryear, 21% for natural increase and 2.5% due to migration. The correspondingoverall rate for Indonesia as a whole was 2.0%. The growth rates for majorcities of Indonesia is shown in Table 2 and for the regions or the countryin Table 3. The Jakarta city government (DKI) has estimated that the presentrate of growth is even higher than that shown in the tables--5.7% per year,2.4% for natural growth and 3.3% due to migration 2/. While this rate seemshigh, it does help to confirm the indications that this rate of growth isat least the same as the past decade despite the introduction of a family

1/ Dr. Sam Suharto, Director, Data Processing Center, Biro Pusat Statistik(Central Bureau of Statistics).

2/ Kantor Census dan Statistik, DKI Jakarta.

ANNEX 1Page 3

planning program and the adoption of a closed city policy in 1971 to dis-courage further migration by providing a strict registration procedure formigrants. Actual growth has been much higher than the DKI estimate of 4.0%per year used in preparing the City Master Plan 1965-1985.

8. The closed city policy has shown since its introduction littleimpact on population figures. Under this policy, migrants show certifi-cation from an employer that a job is ready for them or from a school thatthey have been properly enrolled. In addition, they must report a specificdwelling in which they will stay. Finally, they must deposit money for areturn ticket with the RT (official in charge of 20 to 30 families). Ifthey do not have a job after six months they will be returned to their homevillage.

9. With or without a closed city policy the rate of migration toJakarta remains substantial due in part to the huge disparity in householdincome between Jakarta and its primary sources of migrants, West Java andCentral Java. Using per capita income figures for 1969 and assuming anaverage household size of five persons, based on census figures discussedin more detail later, the annual income for a Jakarta household wasRp 197,195 while that of a household in Central Java was Rp 92,080 and thatof a household in West Java was Rp 88,100 1/.

10. A study of migration over the past decade by Professor Nathan Keifetzof Harvard University for the Department of Manpower and the DKI Jakarta indi-cates a steady rapid increase of migration at a rate of 89,200 persons peryear 2/. Two-thirds of this total or 57,200 persons per year are between theages of 15 and 29. An estimate by the Biro Pusat statistik sets the annualrate of population increase due to migration at 99,600 persons annually.These figures indicate that approximately one-third of the total populationincrease over the past decade has been due to migration. These are conserva-tive estimates that are lower than those of the DKI government describedearlier.

11. The growth of the city has been at a rapid, but rather regular pacesince 1920 except for the depression and war years and two other periodsof extreme dislocation: the revolutionary period of 1948 and 1950 and therevolts in Sumatra and Sulawesi in 1958 and 1959. In the-latter periodthe population grew by 1,00,000 persons within a one-year period. Thusit has been estimated on the basis of past growth that the populationof Jakarta will reach at least 7,000,000 in 1981 and 8,850,000 persons in1986.

1/ Kantor Census dan Statistik, DKI Jakarta

2/ Nathan Keifetz, Migrants into Jakarta, 1961 to 1971 (Unpublished) (1972)

ANNEX IPage 4

12. The national government is taking steps to reduce migration throughan extensive rural development program, a program of regional government aidto secondary cities and a program of transmigration from Java to the outerislands.

Population Projection for Metropolitan Jakarta

13. A population projection cannot be made with any certainty for theJakarta Metropolitan area because its physical boundaries have not beenagreed by various planning units. Therefore, using the 1971 census figuresit is necessary to include all of the three districts bordering Jakarta-Tanggerang, Bekasi, and Bogor. Except for Bogor, the cities included aresmall traditional centers serving surrounding agricultural lands. Bogor,with a population of over 200,000 has an independent economic base as atourist center.

14. Industrial growth along the new road to Bogor, spurred by the build-ing of the Indonesian Pentagon, and along the road to Tanggerang will stimu-late population growth south and west of Jakarta. Given these trends andtaking a median of the rates of growth for these areas over the past decade,a rate of growth of 3.8% per year until 1986 seems a reasonable estimate.Thus the population of the metropolitan area outside of Jakarta City wouldreach 4,565,000 in 1981 and 5,039,000 in 1986. The population for the entireJakarta Metropolitan area would reach 11,740,000 in 1981 and 14,020,800 in1986 (Table 1).

Household Formation

15. For the purpose of determining housing demand, this estimate oftotal population increase must be translated into an increase in the totalnumber of new households that will need housing. Using a straight lineprojection that reflects current population trends and assuming a householdsize of approximately 5.3 persons as in the 1971 National Census figuresfor Jakarta, there would be approximately 409,000 new households by 1981 oran average of 51,000 new households annually. These households will haveto be served by existing municipal and community facilities or an expansionof those facilities.

Projected Unplanned Expansion of Jakarta's Urban Areas

16. Good statistics on the micro distribution and movements of popu-lation within Jakarta are not available. However, the DKI Census Officecompiles returns from the lurahs (district chiefs) on the registrationof incoming and outgoing residents in their kelurahans (districts). Thesegive a rough guide, but should be treated with caution, due to the under-registration of new residents. A mapping of these statistics reveals thatthe new urban kampungs of the city are the chief recipients of Jakarta'spopulation growth. They receive not only the incoming migrants, but alsosome of the households moving out from the densely populated inner kam-pungs.

ANNEX 1Page 5

17. These new kampungs cover about 35% of the urbanized area of thecity but accept about 70% of the population growth. Moreover, averagehouseholds size is smaller than in the areas housing middle- and upper-income groups. Thus more households are formed and more area absorbed thanfor comparative growth elsewhere in the city. The newly forming kampungs

2have an average plot size of 170 m , coi2pared with a density of 515 personsper ha and an average plot size of 87 m in improved kampungs which lielargely within the inner city. By 1980 kampung areas will be expanding atthe rate of approximately 700 ha per year.

C. Access to Basic Services

Water Supply and Sewage Disposal

18. City services are badly strained to service existing areas. Accord-ing to 1968-1969 Jakarta Household survey, about 11 percent have piped waterinside residential plots while 19 percent depend on bought water from vendors.Table 4 shows the types of toilet facilities typically found in Jakarta.Table 4 also gives percentages of households dependent on different types ofdrinking water, based on 1971 census data. About 46 percent of householdshave private (inside the plot)water supply. Combining both private andpublic water supply facilities, piped water is used by 45 percent of Jakarta.A further 18 percent use common wells. Available data on the geographicaldistribution of water supply facilities in Jakarta by 1973 indicates thatNorth Jakarta has the highest percentage (98 percent) of households dependenton water bought from vendors, and that Central Jakarta has the highestpercentage (19 percent) of households who own piped water facilities.

19. Continued reliance on ground-water in Jakarta appears to be a doubt-ful long-term policy, given the decreasing yield and increasing pollutionfrom sea water. The network of water mains was laid down between 40 and100 years ago. Much of the piping needs to be renewed and the yearly budgetof the municipal water company is split between renewal works and extensionof service. There are areas in the north and east of the city where safewater near the surface is not obtainable, and water mains are not accessible.Residents in these areas pay vendors from 5 to 44 times the rate for pipedwater 1/. Those who must use the vendors services are among the poorestresidents of the city.

1/ At 1973, the rate for mains water was about Rp 10 per cubic meter comparedto Rp 20 per can of water from hawkers, which amount to Rp 440 per cubicmeter, PCD report, Kampung Improvement Program, 1973, Annex 4, page 7.

ANNEX IPage 6

20. At present, the city has no municipal sewerage system. Table 4indicates that 32 percent of households rely on private pit privy or septictanks of which the majority are substandard. Lowest income households oftendefecate in canals, communal pools or in their backyards. Frequently thosewith some toilet arrangements have their effluent piped directly intostreams and canals. Forty seven percent of households have no flushingarrangements for the toilet faciltiies they use.

21. With the increasing growth of the city, the discharge of untreatedsewage into the ground is producing water pollution problems. As indicatedin Table 4, almost 65 percent of the city water supply is derived from wells.In many places, shallow wells have high coli counts and in some areas in thenorth of the city the deeper level supplies are being affected.

Garbage Collection

22. The problem of clogging and pollution of the canals by garbageis serious. Administration and organization, more than financial costs,appear to be the problem in resolving the garbage collection and disposalproblem in Jakarta. According to an estimate in 1970 by NEDECO, one millioncubic meters of garbage is left for "wild disposal" in canals and ditches 1/;about one third of the rubbish is left uncollected.

D. Household Income-Expenditure Patterns

23. The 1968-69 Jakarta Survey of Income Expenditures and HouseholdConditions conducted by the GOI Bureau of Census and Statistics is the onlysource for income and expenditure distributions. However, it is flawed by(a) gross understatement of income in kind, especially housing and cars andother transportation allowances; (b) failure to include income from secondjobs and secondary wage earners; (c) lack of consideration of one personhouseholds; and (d) mathematical errors in compiling raw data. Despitethese problems this survey is the best place to start an analysis.

24. To update the survey a 4.0% net annual growth rate for net percapita income in Jakarta has been assumed based upon a 9.0-9.5% annualgrowth rate in real income and a 4.5-5.0% annual growth rate in population.The annual rate of growth of the Gross Domestic Product for Jakarta for theperiod 1967-70 is as follows:

1/ NEDECO Consultants, Preliminary Survey and Recommendations, 1970.

ANNEX 1Page 7

Gross Domestic Increase inProduct (adjusted % Annual Per Capitato 1966 prices) Increase Income

1967 29,473,300 - -1968 31,637,400 7.3 3.51969 34,346,400 8.6 2.31970 37,481,200 9.1 6.4

Source: Kantor Census Dan Statistik, DKI Jakarta

25. The median household income in 1969 has been estimated by theGovernment as about Rp 10,000 per month. This figure is slightly lowerthan the average monthly household expenditures of Rp 10,147.

26. The survey figures grossly understate household incomes becauseof the failure to count transients; secondary wage earners; income in kinds;and income from second jobs. These omissions were exaggerated by droppingfrom the survey persons who earned more than Rp 100,000 per month. Finally,5-10% of the total households were dropped from the sample because theirexpenditures exceeded their monthly income by more than 20%.

Transients

27. The income distribution may underestimate the number of persons atthe very lowest levels (below Rp 5,000 per month) because it does not takedirect consideration of the large number of migrants (now at least 2% of thetotal population of the city annually) many of whom pick up garbage or getonly the most menial jobs. This group should continue to exist in about thesame proportions for the foreseeable future.

Secondary Wage Earners and Second Jobs

28. The 1968-69 Survey indicates that 24.2 % of all households havesecondary wage earners. However, other indications are that as many as50% of the households have secondary wage earners, especially in the lowerincome categories below Rp 10,000 per month. Many wives and children earnRp 2,000-3,000 per month working in the pasar. In addition many primarywage earners have second and third jobs. The survey did not list the numberof such persons though it attempted to count such income. However, second-ary wage information is difficult to obtain in any country and Biro PusatStatistik has acknowleged that the survey probably failed to measure a largeportion of household income.

Income In Kind

29. Income in kind is very difficult to measure unless it is givenas part of an easily translatable monthly equivalent, such as rice or sugar.

ANNEX 1Page 8

Census Bureau officials have acknowledged that it is extremely difficultto value and count payments in kind and that it is quite possible thatsuch payments are understated by 10-15%. Housing expenses and transporta-tion expenditures were definitely understated but there is no way to checkthis easily. If these payments are indeed understated by that amount itwould make a major change in income and expenditure distribution. The In-dustrial Survey of Jakarta completed in 1970 showed that the value of wagesin kind, although varying greatly as a share of total earnings in differentindustrial sectors, was commonly from 20-25% 1/. For lower grade workersthe share would be higher. In some industries it is as high as 50% of totalincome. The lowest government worker earning about Rp 6,000-7,000 per monthwith a wife and four children receives about 35% of his total income inkind 2/.

30. Between 1969 and 1973 the Jakarta Price Index increased approxi-mately 90%. Assuming conservatively that the median income in 1969 wasRp 10,000 per month, and assuming that wages in nominal terms increased at15% per year between 1969 and 1973 the median income in 1973 would beapproximately Rp 17,800. Table 4 shows the estimated income distributionbased upon the 1968-69 survey that corresponds to these assumptions aboutincome growth. Projections are also made to 1976.

1/ Biro Pusat Statistik, Survey Perusahaan Industri (Survey of Industries),1970.

2/ Department of Manpower, Study of Wages ad Salaries in Preparationfor the Second Five-Year Plan, 1972.

ANNEX 1Table 1

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

Jakarta Population Growth

Jakarta DKI JakartaYear Metropolitan Population /2

Area /1

1920 300,000 (C)

1930 500,000 (C)

1941 1544,000

1951 1 ,661 ,ooo

1961 5,763,400 2,907,000 (C)

1971 8,142,200 4,576,ooo (C)

1976 /3 5,730,000

1981 11,7h0,000 7,175,000

1ir986 14,020,800 8,981,oo0

1991 11 ,247,000

(C) Years in which an official census was taken

/1 Includes DKI Jakarta, Bekasi, Bogor, Tangerang;Source: Biro Pusat Statistik, 1971 Census

/2 Source: Kantor Census Dan Statistik. DKI Jakarta

/3 Population projections for 1971 and subsequent years are based onstraight line projection of annual rate of increase of 4.6%, forDKI and 3.8% for Jakarta Metropolitan Area.

ANNEX 1Table 2

INDONESIA

SECOND URBAN DEVELOPHE7N1 PROJECT

Population Increases For Cities Of 150,0)0 PopulationOr MIore - 1961 - 1971

- 96 City asPopulation Change Percentage Province/

('O00) 1961- of Population Island1971 of Province

1961 1971 1961 1971

DKI Jakarta/ 2,906.5 h.576.o 57.5 100 10- __Surabaya 1.307.9 1,556.3 149.14 4.6 6.1 East JavaBandlng 972.6 1,201.7 24.6 5.5 5.6 West JavaSemarang 503.2 6146.6 28.5 2.7 3.0 Central Java

iMedan 479.1 635.6 32.7 9.6 9.6 North SumatraPalembang/2 475.0 583.0 23.7 9.8 16.9 South Sumatra

Ujung Pandang/3 384.2 134.8 18.2 7.5 8.14 South Sulawesi

(Makassar)

Malang 3141.5 )122.14 23.7 1.6 1.7 I•ast Java

Surakarta (Solo) 367.6 14114.3 12.7 2.0 1.9 Central JavaJogjakarta/1 312.7 3142.3 9.4 13.9 13.7 __

Ban-.armasin 2114.1 281.7 31.6 114.5 16.6 South KalimantanPontianak 150.2 217.6 1414.9 9.4 10.8 West Kalimantan

Tanjung KarangL2 133.9 199.0 148.6 2.8 7.2 Lanoung (Sumatra)Padang 1143.7 196.3 36.6 6.2 7.0 West. Sumatra

Bogor 1514.1 195.9 27.1 0.9 0.9 West, Java

Kediri 158.9 178.9 12.6 D.7 9.7 East JavaCirebon 158.3 178.5 12.8 0.9 0-.8 West Java

(over)Menado/4 129.9 169.7 30.6 6.5 9.9 North Sulawesi

Jambi 113.1 158.6 140.2 114.9 15.- Jambi (Sumatra)

/1 Indicates province has same name as city75 In 1961 the present provinces of South Sumatra, Bengkulu and

Lampung were one province./3 In 1961 the present provinces of South and Southeast, Sulawpsi were one province.75 In 1961 the present provinces of North and Central Sulawesi were one province.

Source: Miro Pusat Statistik, 1971 National Census.

INDOffESIA

SECOND URBAN DEIVELOPMEN'T PROJECT

Population Annual Growth Rate and Population Density, byRegion and Province (in thousands)

Growth Hate DensityRegion C6nsus 1930 Census 1961 Census 1971 (per cent) (persons/ki) Urban 1971 Rural 1971

1. D.C.I. Jakarta 811 2,907 4,576 4.6 7,944 4,51462. West Java 10,586 17,615 21,633 2.1 414O 2,683 18,938

C. Central Java 13,706 18,1,07 21,877 1.7 63)4 2,345 19,52014. D.I. Jogjakarta 1,559 2,241 2,490 1.1 793 1406 2,0825. East Java 15,o56 21,82-3 25,527 1.6 5-39 3,6914 21 ,81 h

Total Java and Madura 141,718 62,993 76,102 1.9 565 13,6714 62,354

h. South Sumatra 1,378 2,773 3,141414 2.2 33 928 2,5107. Lampung 361 1 ,668 2,777 5.2 82 273 2,503h. Uangkuliu 323 1406 519 2.5 25 61 4589. Jainbi 2145 7141 1 ,006 293 713

1u. Riau 1h93 1 ,235 1,o142 3.1 16 218 1 ,42311. West Sumatra 1,910 2,319 2,793 1.9 42 1479 2,31312. North Sumatra 2,5141 l1,965 6,623 2.9 94 1,136 5,148513. Aceh 1,003 1,629 210(9 2.1 314 169 1,839

Tot+-l Suimatra 8,255 15,739 20,813 2.8 38 3,557 17,21414

1Hi. West Kalimantan 802 1,581 2,020 2.5 13 223 1,79715. Central Kalimantan 203 497 70( 3.5 4 87 61516. South Kalimantan 835 1 ,1473 1,699 1 .1 49 453 1,214617. East Kalimantan 329 551 7314 2.9 14 286 4145

Tot,al Kalimantan 2,169 14,101 5,152 2.3 9 1,049 14,,103

18. North Sulawesi 7148 1,351 1,718 2.8 71 335 1,38319. Central Sulawesi 390 652 91 4 2.8 10 52 8622 0. South Sulawesi 2,657 4,517 5,189 1 .14 63 9141 4,23921. South-East Sutlawesi 1436 559 7114 2.5 22 145 669

Total Sulawesi 14,232 7,079 8,535 1.9 37 1,373 7,153

22. Bali 1 ,101 1,783 2,120 1.8 377 208 1,91223. West Nuisa Ternggara 1,016 1 ,808 2,202 2.0 101 179 2,02524. East Nusa Tenggara 1, 3143 1,967 2,295 1.6 147 129 2,166 -

Total Nuisa Tenggara 3,1461 5,558 6,617 1.8 87 516 6,103 25. aI altika 579 790 1,089 2.5 13 1145 9145>6>. Wiest lirian 179 758 923 2.0 2 151 NA

Toltal Indonesia 60,593 97,0(19 119,232 20,1465 97,902

;o;ic:: Itonthly Statistical [f3illetin, September 1972, Central Bureau of Statistics

ANNEX 1Table 4

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

Types of Toilet Facilities in Jakarta

Total NumberFlush % of Households of Households

Own 29.9 252,o65Comnmon 17.7 119,6o1Public 5.6 47,298

Total Flush 53.2 448,964

Non Flush

Own 5.3 44,850Common 1L.2 119,559Public 13.8 116,538Other 13.5 114,271

Total Non-Flush 46.8 395,218

TOTAL 100.0 844,182

Source: Biro Pusat Statistik, 1971 Census Sample for Jakarta

Type of Water Facilities in Jakarta

% of Households

Piped Water 10.5Private Well 24.8Common Well 41.5Carried Water 19.3Other 3.9

Source: Biro Pusat Statistik, 1968-1969 Jakarta Survey

ANTEX 1Table 5

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

Drnloym-nt in JiKarta (P- Sectar), 1971(

(in umuber of jobs)

Emplovmc,ct Sector Modern Skills Traditional Total

Governm.ent 130,000 130,000

Services 105,000 225,000 330,000

-Cownerce 65,000 255,000 320,000

Transport 45,000 95,000 140,000

Manufacture 120,000 - 120,000

Construction 30,000 60,000 90,000

Agriculture 10,000 35,000 45,000

Mining 5,000 5,000

Finance, Insurence,Real Estate,Business Services 35,000 35,000

Other . - 4 ° 4Q,000 80.000

Total 585,000 710,000 1,295,000

Source: Liro Pusat Statistik, 1971 Population Census.

/1 -t,lqoyment, da-a is for the jurisdiction o.f DKI Jakarta only.

ANNEX 1Table 6

RNDOB'ISTA

SECOND URBAN DEVELOPME1T PROJECT

Jakarta Hocuseholdl TnCo)_e 'Distribution

Lncoln2 Group April(RP/month) 1973 1976 j

o 5,oco Z 4.4 31

5,0oo - lo,)ooo 16.4; 2.0

10.003 - 15,000 16.6 7.4

15s000 -'20,000 /3 20.8 11.9

20,000 - 25,o00 L 13.3 13.0

2,5000 - 30,000 3 7.7 13.0

30,000 - 35,000 oo 6.0 11.0

over 35,000/ 1.8 39.0

Median Income 21,000 30,000(Rp/month)

/1 Based on assumed increase of 15% per year growth in nominal incom'e.

L2 In making annual adjustments it was assummed that 80% of the populationin this group had incomes above Rp 3,000.

L In making annual adjustments it was assumed that 75% of the populationin each grcup had incomes in ule loi-:er 60' of the total category (i.e.,ft 15,000-18,0O00j Jp 20,000-23,000, etc.).

Source: Extrapolations from GOI Biro Pusat Statistik, 1968-69, Jakarta.Survey of Income Expenditures and ilousehold Conditions.

ANNEX 2Page i

INDONESIA

SECOND URBAN DEVEOLOPMENT PROJECT

INFRASTRUCTURE DESIGN STANDARDS AND COST ESTIMATES

A. Kampung Improvement Program: Jakarta

1. In the two-year KIP financed under the first project, standardsfor different project components were specified on an areawide basis.This procedure was satisfactory for kampungs with similar density patterns,but was not appropriate where the physical characteristics of the kampungsdiffered significantly. In addition, while the kampungs upgraded in thefirst project included kampungs in the worst physical condition with littleor no existing infrastructure, the kampungs proposed for the next three yearscontain some existing infrastructure which needs to be considered in definingphysical standards for the different components. Therefore, an importantchange in the project standards proposed in this project is to specify func-tional standards rather than areawide standards and to specify investmentsto cover the shortfall in the provision of the major basic services (access,water, drainage, human waste, solid waste,) between the existing infrastruc-ture and the functionally defined standards. A comparison of the standardsused in the first project with those proposed for the second projet is givenin Table 1.

2. In the first project, uniformity in total investment levels, that isexisting investment plus KIP investment in the different kampungs was achievedby specification of areawide standards combine with population densities fal-ling within a narrow range. However, with the worst and the densest kampungshaving been covered in the first project, the kampungs to be included in thesecond project are of lower density (although still over 300 persons per hec-tare), and the density varies considerably. The uniformity in the levels oftotal investment will be maintained by specifying a uniform investment perdwelling, that is, value of existing services plus KIP investments. As aresult, investment per unit of area will be higher in general in the denserpoorer kampungs. Because of the budget limitations, in the first year'sprogram of the project, it is estimated that 80 percent of the functionallydefined standards will be attainable.

3. Cost estimates have been prepared by the KIP Project Unit in theDKI based in the actual experience from the 1975-76 program now being com-pleted. Details of cost estimates for the different items of the programare given in Table 2, and a comparison of the allocation among the differentitems in the first project and the allocation resulting from the new designprocedures is given in Table 3.

ANNEX 2Page 2

Roads and Footpaths

4. The functional standards for paved roads would be that no dwellingis more than 100 m away from a one-way road or more than 300 mi from a two-way road. Three different road designs will be used depending on the natureof the traffic to be carried:

Right-of-Way Paved Surface Typical Base 1/ Traffic

6 m 4 m 20/20/5 2/ Heavy loads prohibited.Limited ROW available.

8 m 4 m 20/20/5 Heavy loads prohibited.Provision for futurepavement widening.

10 m 6 m 15/15/10/5 Heavy loads permitted.

The first two designs are based on the Telford system which is common practicein Indonesia. The third design for heavy loads will include a 40-cm base ofsand and broken and graded stones. All roads will have a 1 m concrete drainon either side.

5. Functional standards for footpaths will be to provide footpathaccess to within 20 m of all dwellings not situated on a paved road. The foot-paths will have a 3 m right-of-way, a 1.5 m wide 6 cm concrete pavement laidon a 10 cm sand layer and concrete drainages on both sides.

Drainage Canals

6. Flooding during the rainy season is a serious problem in mostkampungs and particularly in the kampungs located in North Jakarta. Exten-sive drainage works are therefore an essential part of the improvement pro-gram. Secondary drainage is included in the road and footpath design by pro-viding drainways and is included in the roadworks cost. The secondary drainsflow into open primary drains which will be constructed in each kampung.The primary drains in turn flow into the city's main drainage canals. Thecitywide drainage network, however, is totally inadequate for the presentneeds of Jakarta having been designed originally for a city of 600,000. Ateam of consultants from the Netherlands has prepared a master plan for drain-

1/ Actual bus-base thickness will vary according to soil strength.

2/ Sand/broken stone/binder course surface - all in cm.

ANNEX 2Page 3

age and flood control, but because of budgetary constraints there is littlelikelihood of its implementation during Repelita II. Therefore, any improve-ments in the drainage of the kampungs will be constrained by the capacity ofthe main canals for the near future. About 25.5 km of primary open drainswill be constructed in the first year of the project.

Water Supply

7. Availability of potable water supply is a high priority among re-sidents in both improved and unimproved kampungs. In the absence of an ade-quate water supply, residents of many kampungs are forced to buy water fromvendors at prices which are more than four times the price of the city watersupply. The project will provide connection of kampungs to the main citynetwork, and deep tube-wells will be provided in kampungs where it is costeffective and technically feasibile to do so.

8. The water supply distribution system will be enlarged over that inthe first project to provide possibilities of individual connections wherethere is sufficient demand for such connections. The first project providedfor a unfirom standard of one public hydrant to serve an area of 4 ha. How-ever, the existing water supply conditions, and therefore the need for publicwater supply in the kampungs vary considerably primarily depending on theavailability of good shallow ground water. Thus, the uniform standards ofwater supply provided under the first project resulted in either an under-provision or an over-provision of public standpipes. In the present project,standards for public standpipes have been defined for the different parts ofJakarta (Table 1). In addition, the design engineer will be responsibleultimately to determine whether any further variation in the standard iswarranted for a particular kampung.

9. Extension of water supply to the kampungs will mean some reductionin the service available elsewhere if a commensurate increase in the produc-tion capacity is not undertaken. The demand from the public hydrants in thekampungs is estimated as 20 lcd and from private connections as 50 lcd. Incomparison, average consumption for for Jakarta is estimated at about 80 lcd.Where feasible, deep wells will be constructed to augment the local supply.In the first year of the project, two deep wells each with a productioncapacity of 200 1/sec will be constructed. In addition, a new filtration andpumping plant along the Sunter river with a capacity of 5,000 1/sec is scheduledfor completion by 1981, with a first phase capacity of 1,000 1/sec to be avail-able by 1978. Any short-run reduction in service to presently serviced areasthat occurs in favor of the poor residents of the kampungs is considered to beconsistent with the objectives of the project in assisting the urban poor.

Sanitation Facilities

10. Infrastructure facilities for human waste disposal in the projectwill include sanitary pit privies the type of which will be governed by the

ANNEX 2Page 4

local conditions. MCK units (communal washing and toilet facilities) provided

under the earlier KIP Program are disfavored over the pit privies because ofdifficulty in acquiring land and because of difficulties in obtaining socialacceptance of the communal toilet facilties. The proposed pit privy schemeis aimed at solving the problem at the individual family level rather than at

the community level. Under the scheme, pit privies will be installed one foreach household or multiple households depending on the population density,land availability and characteristics. The problem areas of the kampungswhere the pit privy installation may pose serious public health problems will

be identified and viable alternatives will be explored including the possi-bility of providing smaller size community toilets serving a few families.It is anticipated that except for the Northern region in Jakarta, the pro-

posed pit privy program would be readily applicable to most of the kampungsin the other regions. Details pertaining to the above scheme are outlined

in Annex 3.

11. In order to establish guidelines and stipulate realistic standardsregarding the pit privy design, a pilot research program will be initiatedin the Jakarta region for a ten-month to one-year period, beginning March1976. Major attention will be focused on public health factors relating to

biological as well as chemical pollution orginating from the pits. The in-vestigation will study in detail the influence of various parameters such aspopulation density, type of water supply in the area, soil characteristics,hydrological and topographical features etc. upon the nature of the pit privy

scheme. In the absence of any rational standards governing the design of

pit privies in Indonesia, the above mentioned research program is consideredto be crucial to the success of the proposed waste disposal scheme for thekampungs. It is anticipated that the results of this research program willbe applied to other Indonesian cities that will have urban developmentprograms in future.

Garbage Disposal

12. The system of solid waste disposal in the city is inadequate. TheCity Sanitation Department, which is responsible for garbage collection, doesnot have a sufficient number of vehicles to be able to remove all of thegarbage. Moreover, a proper system of garbage collection and disposal doesnot exist. It is estimated that as much as 35% of the garbage remains un-

collected. The uncollected garbage is often dumped in the canals where itcontributes to the flooding.

13. While the solid waste disposal problem is a citywide problem whichrequires a major initiative, the project would attempt to alleviate thisproblem in the kampungs to be used in the project. A provision will be madefor concrete garbage boxes as in the first project to serve as central garbage

collection points. Hand carts will be provided for transporting the garbagefrom individual dwellings to the boxes and 9 garbage trucks will be includedto remove garbage from the collection points to the city dump.

ANNEX 2Page 5

Schools

12. Primary school attendance in Jakarta is presently estimated to be75% of the eligible children. However, attendance levels in the unimprovedkampungs are under 40%. Shortage of schools is a critical constraint facingthe education authorities. The project would provide sufficient schools andthe necessary equipment in the kampungs to be upgraded with the aim of rais-ing primary school attendance level in these areas to the average level forJakarta. In addition, the project will help reduce the existing number ofshifts per school from four to two. To this end the project will provide 30schools per year (90 total) and the necessary equipment. Each school willbe able to accommodate at least 500 students on a double-shift basis. Thesiting of the new schools will be generally within walking distance of theschool children, but the exact locations of the schools, as well as theirultimate class size, cannot be decided until an inventory of land avail-ability is completed and purchases are made. In many cases, it is antici-pated that multi-storied schools will be preferred to single story schoolsbecause of the land problem and classroom sizes will conform to existingIndonesian norms of 40 to 42 children per class, with a 2 shift system inoperation.

15. Engineers and architects of the KIP units in both Jakarta andSurabaya have presented for approval of the Bank final plans for the dif-ferent types of school building! in each kampung based on exisiting costestimates of around Rp 50,000/m for cons ruction costs and equipment.Buildings sill not occupy more than 690 m (8 classroors), and the cost ofland per m will range from Rp 8,000/ m to Rp 15,000/mr

Health Clinics

16. Because of the severe health and malnutrition problems existingin Jakarta and Surabaya, the shortage of physicians and nurses in Governmentservice, and the expenses incurred in building and operating large healthclinics which do not function as a preventive tool in reducing malnutritionand disease, the project will include the construction of small 2 room health"posts" in various kampungs, and the training of primary health workersfor the kampungs to staff them. The health workers will be responsiblefor the collection of health statistics for monitoring purposes, and forfirst aid treatment including education in hygiene, nutrition and familyplanning (Annex 4). The health costs will be under the supervision of thelarger puskesmas (clinics) present at the su1district level. Each healthpost will occupy a total area of around 60 m and will cost around Rp 2.5 mil-lion to build and equip. Thirty will be built. In addition, it will alsobe necessary to build around 15 of the larger clinics in order to meet mini-mum health coverage standards, and these will cost around Rp 16,000,000 tobuild and they will occupy an area of 300 m . They will be composed of sixrooms and will be staffed by one physician and four to six medical workersincluding an administrative and statistical assistant.

ANNEX 2Page 6

17. For Surabaya, three health posts (Pos Keshatans) and five healthclinics (Puskesmas) will be built. The Pos Keshatans will be used for theuse of 100 community health workers which would be trained as a part of theproject (Annex 4).

B. Kampung Improvement Program: Surabaya

18. The design standards and procedures to be used in the Surabayaproject will be similar to those which have evolved from the Jakarta project.However, since the Surabaya project is the first Bank investment at a rela-tively modest scale in kampung improvements works of this nature, in thefirst year the emphasis will be to continue the existing design proceduresand focus instead on the organizational aspects. For the second and thirdyears, as the authority gains some experience, design and implementationtechniques which have been proven to be successful from the Jakarta expe-rience, will be introduced. In the first year, the design of the projectwill be controlled by setting an overall limit on investment per capita. Inaddition, as in Jakarta an effort will be made to provide low-cost individualsanitary facilities rather than community facilities.

18. The estimated costs of the program in Surabaya over the 3-yearperiod are summarized in Table 3.

AN,NEX 2Table 1

INDONESIA

SECONDJ URBAN DE=EYMENT PROJECT

Kampung Improvement Design Standards

Standards in Standards Planned inProject Item the First Project the Second Project*

Roads 75 /i/ha of paved roads. All duellings 100 m maximumrfrom a one-way road and 300 mfrom a two-way road.

Footpaths 132 m/ha of paved footpath. Paved footpaths to within 20 m of everydwelling not located on a road.

Drainage Secondary drainage along Secondary drainage along roadsroads and footpaths and and footpaths and primaryprimary drains as drains as required.required.

Water Connection to city main Connection to city main supply or tube-supply or tube-wells as wells as appropriate. Public standpipesappropriate. Public provided on basis of a minimum of 1 perstandpiDes provided on 5 ha in North; 1 per 20 ha in Southbasis of 1 per L ha. and East; 1 per 8 ha in West; and

1 per 3 ha in Central Jakarta.Individual connections where feasible.

Human Waste One public toilet with For each dwelling one toiletDisposal 12-seat capacity and with pit privies where feasible;

washing facilities to otherwise one toilet forserve an area of 11 ha. multiple dwellings dependingProvision of 4 vacuum on local conditions.trucks.

Solid Waste One garbage box to serve One garbage box to serve aboutDisposal 65 dwellings; one garbage 65 dwellings; one garbage truck

truck per 150,000 per 150,000 population (Jakarta)population. and one tractor with 4 trailers

per 40,000 population (Surabaja).

Schools Provision of 98 primary Provision of 90 primary schoolsschools in the two-year in the three-year program inprogram. Jakarta to raise attendance level

from 40% to 75%; 15 primaryschools in Surabaya to cover 60%of the school age children in thekampungs.

Health Clinics Provision of 42 health Provision of 45 health clinicsclinics (Puskesmas) in the (Puskesmas) and 30 health officestwo-year program. (Pos Keshatans) in the three-year

program in Jakarta; 5 Puskesmasand 3 Pos Keshatans in the Surabayaprogram.

ANNEX 2Table 2

INDO,ESIA

SECO0 URBAN DEVELOPMENT PIOJECT

Cost Estimates: Jakarta Kampung Irmrovement Program(January 1976 Prices)

Project Area: 1 ,OCO ha per year 1976-1979

fIRST YEAR PROGRAMAverage

Quantity Unit Price TotalProject Item and Unit Rp Rp Killion

A. Vehicular Roads 41,000 m 55,hoo 2,260

B. Footpaths 191,OO m 11,400 2,180

C. Drainage Canals 25,500 n 24,400 630

D. Water Supply - - 2,030

E. Human waste' Disposal (Pit Privies) 38,000 15,500 590

F. Solid Waste Disposal - - 130

Total Base Cost for Physical Improvements (Rp 7,825,000/ha) 7,825

G. Schools and Clinics

Schools 30 52 million /1 1,560Health Clinics (Puskesmas) 15 17.5 million /1 260Health Office (Pos Keshatans) /2 30 3.0 million /1 90

Total Base Cost for Physical Infrastructure 9,735

H. Health Programs 80

Expected Price Escalation/3 975

Total for First Year KIP Jakarta 10,790

SECOND YEAR PROGRAM

Base Cost for Physical Improvement of 1,000 ha 7,825

Schools (30) and Clinics (15) /i 1,820

Health Programs 60

Expected Price Escalation/3 2 ,555

Total for Seeond Year KIP Jakarta 12,260

ANNEX 2Table 2 (Con'd)

THIRD YEAR PROGRAM

Base Cost for Physical Improvement of 1,000 ha 7,825

Schools (30) and C_inics (15) 1,820

Health Programs 60

Expected Price Escalation 13 ,020

Total for Third Year KIP Jakarta 13,725

GRAND TOTAL FOR 3-YEAR PROGRAM 36,775

/1 Including land cost which is estimated to be on the averageRp 20 million per school, Rp 3 million per Puskesmas, andRp o.65 million per Pos Kesehatans and furniture and equipment costmestimated at Rp 3.7 millicn per school, Rp 2.8 million per Puskemas,and Rp 0.5 million per Pos Kesehatans.

/2 The Pos Kesehatans are to be constructed in the first year only.

/3 Prices for civil works are assumed to increase by 20% for CY76,15% for CY77 and 78, and 12% for CY79; and 10% per year fortechnical assistance.

ANNEX 2tabTh 3

INDN SIA

SECOND URBAN DEVELOPIENT PROJECT

Comparison of Allocation to Various Infrastructure Components

in the First and the Second Projects

First Project Second Project/LPer Ha /1 Per Ha /2

Infrastructure Item (Rp'0007 % of Total (Rp '00G7 % of Total

Circulationa) Paved Roads 2,470 4u 2,260 25h) Fno+n+,-,hs 1,185 19 2,180 24

Drainage 670 11 630 7

Water Supply 335 5 2,030 23

Human Waste Disposal 230 4 590 7

Solid Waste Disposal 55 130 1

Schools and Clinics __ 1,260 20 1,170 13

Total 6,205 8,990

/1 In June 197h Prices

/2 In Januarv 1976 Prices. Price increase for KIP between June 1974and January 1976 has been 18 percent.

/3 Excluding the Pos Kesehatans.

/ Standards provided in the table for the second project representexpected averages for the entire program. For specific kampungs,allocations are derived after taking into consideration existingfacilities and relative priorities in the kampung itself.

ANNEX 2Table 1

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

Cost Estimates: Surabaya Kampung Improvement Program

FIRST YEAR PROGRAMRo Million

Based Cost for Physical Improvements of 67 ha /1 267

Schools (3), Puskesmas (1) and Pos Kesehatans (3) 12 173

Expected Price Escalation 440

Total for First Year KIP Surabaya 500

SECOND YEAR PROGRAM

Base Cost for Physical Improvement of 119 ha /1 510

Schools (6) and Puskesmas (2) /2 314

Health Training Program 12

Expected Price Escalation 164

Total for Second Year KIP Surabaya 1,000

THIRD YEAR PROGRAM

Base Cost for Physical Improvement of 188 ha /1 807

Schools (6) and Puskesmas (2) /2 314

Expected Price Escalation 379

Total for Third Year KIP Surabaya 1,500

GRAND TOTAL FOR 3-YEAR PROGRAM 3,000

/1 Based on an estimate of Rp 4.3 million Der ha in Surabaya in thefirst year's program. Estimate is based on preliminary engineering.

/2 Includes land cost estimated at Rp 2) million per school;Rp 3 million per PuskesmTas; and Rp 0.3 million per Pos Kesehatan.Also includes furniture and equipment costs estimated at Rp 3.7 millionper school, Rp 2.8 million per Puskesmas and Rp 0.5 million perPos Kesehatan.

ANNEX 3Page 1

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

PROVISION OF SANITARY PIT PRIVY

1. The proposed human waste disposal program is aimed at providingsingle family type pit latrines in the kampungs in contrast to the communaltype MCK units (washing, bathing and toilet facilities) installed in theearlier KIP programs. Put simply the MCKs have not been used. The majorproblems with the MCK installations include their inconvenient location,lack of required land space, lack of sufficient number of units and lack ofproper maintenance.

2. The proposed pit privy is essentially a pour-flush, water-seal sys-tem, the contents of which discharge into a soil pit located underneath oraway from the plate. Waste treatment is accomplished via anaerobic andaerobic bacterial decomposition of the fecal organics which are transformedinto inodorous, stable end products. For a family of six to seven persons,a pit volume of about 2 cubic meters will be required for a five-year lifeperiod.

3. Preliminary studies indicate that the pit privy scheme is viablefrom the viewpoints of its immediate adaptability in most of the kampungs,social acceptability and economic feasibility. The scheme can be success-fully implemented using local materials and local labor (self-help).

Pit Privy Requirements

4. An in-depth survey will be carried out in the kampungs by the RT's,RW's and the Lurahs to establish the actual number of pit privies required.Where land space is a problem, multiple family units combining two to fivefamilies will be considered and their exact number ascertained during thesurvey (multiple family units are already in the satisfactory use in denselypopulated kampungs). The final list of the pit privy requirements based onLurah's estimates as well as technical and financial considerations will becompiled by the KIP unit of DKI.

5. A tentative estimate of the total number of pit privies includedin 1976-77 KIP program is about 25,000 for all the Jakarta regions. Theresults from an on-going detailed survey will help establish the actualrequirements of single dwelling and multiple dwelling type pit privies.

Design Criteria

6. Since public health factors related to the pit privy scheme shouldbe given paramount consideration, a pilot research program spanning a ten-month to one-year period wil be initiated to study the same. In the absence

ANNEX 3Page 2

of any existing guidelines governing pit privy design in .ndonesia, majorefforts will be devoted to establish rational design criteria based on theresults of the research study. Two types of standards, namely, public healthstandards (dealing with the location of the pits with respect to the sourceof water supply, buildings and other nearby pits) and functional standards(dealing with the design aspects of the pit itself as a sewage disposaldevice) will be stipulated to satisfactorily carry out the pit privy schemein the kampungs.

Technical Feasibility

7e The proposed pit privy scheme is readily adopted to several kampungsin the east, west , central and south regions of Jakarta. Caution will haveto be exercised in carrying out the scheme in the northern region where thesoil is friable (alluvium type), and high ground water conditions are en-countered within the top 1 meter of the surface. Alternate disposal methods(elevated septic tanks discharging effluents to drains, for example) will beconsidered under such circumstances, Tlt is recognized that the technicalaspects of the pit privy scheme must incorporate a certain degree of flexi-bility to suit local conditions. To this end, the 1976-77 KIP program willserve as a pilot in establishing a "sound" privy program that can cope withvarious problems encountered in the five Jakarta regions. The major typesof pit privy installations suitable to the Jakarta area are schematicallyshown in Figure 2.

Imolementation

8. Community participation is a vital element for the successful imple-mentation of the pit privy scheme. The self-help movement within each com-munity will be stressed in organizing voluntary labor. Sanitarians will beemployed to provide detailed instructions in design, construction and opera-tion of the pit privies, as well as in the public health aspects of the entireprogram. They will be assisted in the field by foremen. It is estimated that30 sanitarians and 60 foremen will be needed to carry out the privy scheme inthe kampungs included in the 1976-77 KIP program. The Metropolitan HealthDepartment will play a major role in recruiting and training the sanitariansand foremen. A routine monitoring and evaluation program will also be under-taken by the Health Department with the cooperation of the KIP staff.Figure 2 provides a schematic representation of the various elements involvedin the proposed pit privy scheme.

Cost Estimates

9. The unit cost of a pit privy will be in the range of Rp 18,000 toRp 27,000, as illustrated in Table 2. Utilization of local labor (self-help)in pit excavation and installation of the Latrine enclosure at the family's

ANNEX 3

Page 3

expense will result in a total savings of Rp 7,500 1/. It is thus estimated

that the actual unit cost to the project unit of the pit privy will varybetween Rp 10,500 and Rp 19,500 depending on the location of pit. Assumingequal distribution of the pit privy types illustrated in Table 2, the average

unit cost of a pit privy can be estimated to be Rp 15,000 for the Jakarta

region.

10. The total cost 2/ of the pit privy scheme including the supervisorypersonnel is shown below for the three year KIP programs.

1976-77 KIP Program Rp 470,000,000 US$1,146,000

3/

1977-78 KIP Program Rp 515,000,000 US$1,256,000-;:

1978-79 KIP Program Rp 564,500,000 US$1,376,0003/

1/ A family privy scheme is being carried out on a small scale level by the

Indonesian Government in major cities. According to this scheme which isfinanced by INPRES, Jakarta residents receive family type latrines at therate of 3,000 installations per year. Floor slabs are provided free tothe families that donate labor to install the latrine.

2/ Includes 30 sanitarians and 60 foremen who will provide technical guidance

and assistance in the privy scheme.

3/ A 10 percent increase in physical infrastructrual costs is assumed.

ANNEX 3Table 1

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

Tentative Design Criteria for a Sanitary Pit Privy L(for a family of six)

Pit Service Per Capita Effective RecommendedType Life Sludge /2 Volume Pit Depth

Years Accumulation-lit/year lit m

4 (min) 1200-2050

Dry Pit a 5 1500-25508 50-85 2400-4010 1.5 - 4

10 3000-5125

4 (min) 1000-1320

Wet Pit A 5 1200-1650

8 40-55 2000-2650 2.5 - 3

10 2400-3300

/1 Figures based on data from WHO Monograph Series (#39).

/2 Assumed Rate of Excreta Production = 1 lit/capita/day.

/3 Does not penetrate the groundwater table.

/4 Penetrates the groundwater table.

A:TEE 3

TMDO .(IESIA Table 2

SECOND URBAiT DEVELO=JP4T PROJECT

Typical Unit Cost of Pit Privies(For a Family of Six)

Pit Located Under the Seat Pit Located Away from the Seat

Item Cost in Item Cost in1976, Rp. 1976, Rp.

Excavation work 1500 Excavation work 2400

/a Pit Lining (External) 3000 /a Pit LiniLng (external) 3000

/b Pit Cover 2300

/e Floor Slab Unit wTith) 5000 /c Venting 1800Water-Seal Boil )

Clay Pipe 1500/f Mound (for drainage) 1000

/d Floor Slab Foundation 2500< Latrine Floor 1500

/e Floor Slab Unit with) 5000/h Enclosure 6000 Water-Seal Bowl

/f Mound (for drainage) 1000

/ Latrine Floor 1500

/h Enclosure 6000

Total Cost 18000 27000

Savings/J 7500 7500

Actual Cost 10500 19500

Size of Pit= 90cm x 90cm x 2 to 3m

/a Made of 25cm thick brick wall, 50 to 60cm deep75 Made of 10cm thick concrete slab7J 3 meter long, 10cm 0 PVC pipe used7d Made of 25cm thick brick wall, 30 to 40cm deep7e Pre-cost concrete slabs (reinforced with bamboo frame) used7f Paved with soil-cement7g Brick Floor (lm x lm size)7n Bamboo matting and thatch roof used7T Labor in pit excavation, and enlosure provided at

family's expense.

ANNEX 3.Figure I

FIGURE 1: i APPLICABLE PIT PRIVY TYPES FOR JAKARTA REGION

BAMBOO ENCLOSURE

5 = CO NCR ETE WITH

.BAMBOO REINFORCEMENT

30-50 CM.

l BRICK LAID WITH MORTAR

!= r o80-90 CM.

CASE 1 CASE 2

PIT PRIVY IN STABLE SOILS WITH PIT PRIVY IN STABLE SOILS WITH

LOW GROUNDWATER TABLE PIT OUTSIDE THE ENCLOSURE

f ~~~~~~t

CLOSE JOINTED . /TIGHT-JOINTEDBRICK & MORTAR, BRICKWORK

BAMBOO MATENVELOPE --- 1 1 F LOOSE-JOINTEDBRICKWORK

A B

CASE 3 CASE 4

PIT PRIVY IN STABLE SOILS WITH PIT PRIVY IN POROUS ALLUVIUM SOILSHIGH GROUNDWATER TABLE A) WITH FINE GRAINED SOIL ENVELOPE

AND BAMBOO LINING

B) WITH BRICKWORK LINING

I World Bank-16134

ANNEX 3Figure 2

DETAILS OF SANITARY PIT PRIVY SCHEMEFOR KAMPUNGS IN JAKARTA REGION

Organized Campaignsin the Community

Regarding the Privy Scheme

Participation by RTsRWs, Lurahs, Sanitarians

Local Sanitary Surveys(to establish needs

of privies)

RTs, RWs and Lurahs

Selection of Pit Sites Designand Type of Pit Criteria

Family's ParticipationSanitarians Guidance

Related to Technical andPublic Health Factors

Materials Needs

List Prepared by LurahChecked by KIP

1Materials Supply

Tendering ScheduleKIP Supervision

Pit Privy Construction DesignStandards

Self-Help MovementTraining in Construction 1

Schemes (foremen & sanitarians)KIP Supervision

Monitoring andEvaluation Programs

Public Health Factors(Metropolitan Health Dept.)

KIP Surveys

World Bank-16131

ANNEX 4

Page 1

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

HEALTH/NUTRITION PROGRAMS

A. Jakarta

1. There is a hospital bed for every 870 persons in Jakarta (accep-table standards are 1 to 1,000 population) and in 1973, there were 27 healthcenters and 30 health subcenters. There is a doctor for every 3,086 inhabi-tants in the city. However, coverage of the population with health servicesis very low due to the people's lack of awareness of health needs and serv-ices, difficulties in accessibility to health facilities, lack of outreachservices, and lack of emphasis on preventative health. There is a chronicshortage of essential supplies, for instance, vaccines against diphtheria,whooping cough, tetanus and poliomyelitis; and the high cost places thembeyond the reach of those people who need them most. Furthermore, some ofthe few health centers available are under-utilized partly due to difficultaccessibility, lack of awareness of health needs and services, and socio-cultural barriers existing in the facilities. There is also too much relianceon hospital-based health services, and a lack of the infrastructure necessaryfor outreach.

2. As a result of some of the above-mentioned factors, in additionto the extremely poor environmental sanitation, the patterns of disease areas follows: a rapid spread of communicable diseases, such as tuberculosisand cholera (250-300 cases/week reported); common childhood diseases likemeasles, often complicated by pneumonia; vector-borne diseases like malariaand typhus flourish; water and food-borne diseases; typhoid and dysenteries,are rampant; and parasitic infestations with ascaris, hookworm, and trichurisabound in about 80% of the inhabitants. The prevalence of malnutrition,especially in young children and mothers, is extremely high with protein-caloric malnutrition (PCM) found in 40-45% of children below five years;evidence of irreversible eye damage due to Vitamin A deficiency in 10% ofthe child population in some surveys; and anaemia in as many as 30% of adultmales; 50% of the children and 85-92% of childbearing women. The food in-take is very low at about 1,200 calories per person per day and 27 gm ofprotein per person per day, compared with the respective figures for theUnited States of 3,200 calories and 70 gm of protein. All these lead tohigh infant mortality rate in the kampungs estimated at 160/1,000 to200/1,000 live births and crude death rate of 15/1,000 population.

ANNEX 4Page 2

Objectives of the Health/Nutrition Programs

3. The main objectives of the programs are:

(a) to increase the coverage of the population with health andnutrition services, by actively taking these services out tothe people in their communities and homes;

(b) to involve the community in the planning, operation andfinancing of their health program;

(c) to shift the emphasis from curative to preventative andpromotive health activities through health and nutritioneducation;

(d) to provide a community-based integrated service whose maincomponents are maternal and child health, communicable diseasecontrol, nutrition, family planning, envirorLmental health,minor curative services and referral.

4. The "Health Pyramid" in Jakarta is relatively top-heavy in thatthere are hospitals down to the regional level and there is a main healthcenter or subcenter in each of the Districts (Kelurahan). Below this level,there is no organized health activity. There is thus the need for an exten-sion of services into the community and strengthening of the base of thepyramid.

National Hospital Republic of Indonesia

Provincial hospital Province

?egiorial Hospital Regior

Main Health Centr'r District (Kecamatan)(Puskesmas) Pop. 30D),vY)

Small Health Subdistrict (Kelurahan)Subcen'ter (Pop. P 39,WO)(Piskesmas)

Communityv H{e ath WorkersHealth Post, /Village (P2zkun WarCa(Pos Krsha'. or T.W)I POP 3,03

ANNEX 4Page 3

5. As mentioned previously, one health post (Pos Kesehatan) in eachcommunity (Rukun Warga or RW) of about 3,000 people is planned. These willserve as satellites for the health subcenters and as a base for health andnutrition activities in the community. It will be a simple two-room facility,one room for the health activities in general and the other for a young childcenter (Karang Bahta), which will focus on nutrition, disease prevention andeducation of pre-school children. It is not feasible to have a health post ineach of over 1,000 RWs in Jakarta. Therefore, a pilot demonstration projectis planned in 30 RWs in such a way that it lends itself to evaluation of thehealth and nutrition component, per se:

(a) 10 RWs in the "already improved" kampungs - Pop. about 30,000;

(b) 10 RWs in the "will be improved" kampungs - Pop. about 30,000;

(c) 10 RWs in the " never be improved" kampungs - Pop. about 30,000.

The total population of the pilot project area will be 90-100,000, of whomabout 9-10,000 will be young children. The choice of one health post forevery 3,000 population is consistent with U.N. recommendations.

6. One of the major activites in the Pos Kesehatan will be runningthe Young Child Center. The activities will include:

(a) to improve the nutritional condition of the young children bybringing them to the center two to three times a week, andfeeding them nutritionally-balanced meals, prepared from locallyavailable foods. As part of this exercise, mothers will beinvolved in meal preparation, so as to give them a lesson inbetter nutrition;

(b) to identify children suffering from Grade III PCM and referthem to hospitals or health centers for treatment;

(c) to prevent blindess due to Vitamin A deficiency by oraladministration of megadoses of the vitamin every six months;

(d) to prevent infectious diseases by an active immunizationprogram;

(e) to teach the children and their mothers basic environmentalsanitation and personal hygiene.

7. The absolute shortage of health facilities and trained personnel andthe socio-cultural barriers that lead to under-utilization call for a newcadre of personnel. These are low-cost multi-purpose community-based healthworkers, who will be chosen from the community by the community and trainedin the Local Health Centers to deliver integrated services. They will usethe Health Post as their operational base, but will spend most of their time

ANNEX 4Page 4

in the community and home visiting. There will be 12 health workers for eachof the 30 Health Posts, making a total of 360 and there will thus be onehealth worker to every 500 persons. There will be two shifts of duty from07.00 - 14.00 hours and 14.00 - 22.00 hours with somebody "on call" for therest of the night. They will be paid a token honoraria of Rp 7,500 (US$18)per month, but it is hoped that at the end of the two year program, thecommunity will fund their operating costs via a health "insurance" contribu-tion of Rp 50 to 100 per month per family.

8. The community health workers will deliver the following services:

(a) Basic Health Services. Counseling on health, minor curativeand first aid and emergency services, immunization, registra-tion of births and deaths, collection of data on diseases,referral to the health center;

(b) Maternal and Child Health Services. Counseling on child healthand child rearing, immunizations, prenatal and postnatalservices, midwifery services for complicated cases;

(c) Nutritional Services. Nutrition counseling and education,curative services for patients with malnutrition, monitoring ofthe nutritional status of the "at risk" groups using weightcharts, breast feeding promotion, counseling in infant weaningusing low-cost locally avialable high-protein multi-mixes, anddemonstration low-cost home gardens;

(d) Family Planning Services. Family planning information andmotivation, dispensing, under supervision, of desired con-traceptive methods possible in the home or health post, referralto the health center for the more complicated procedures, follow-up of acceptors, and continuing review of non-acceptors;

(e) Environmental Health Services. Environmental sanitationinformation, personal hygiene information; advice and assistancewith latrine construction, and advice on methods of renderingdrinking water safe.

9. The community health workers will usually have had nine years ofeducation and will undergo basic training for two months with a refreshercourse starting 4 to 6 months after they have been in the field. The trainingwill be conducted in batches of 12 students at six health subcenters at a time.The curriculum wil be constructed by the City Health Department, based onthe expected functions outlined above. A training team comprising a doctor,a nurse and a midwife headed by a training coordinator at the City HealthDepartment Headquarters will be responsible for the training of the trainersand the coordination and supervision of the training in each health subcenter.The community health workers will be given a procedure manual after success-fully completing the training to act as a guide to actions to be taken in

ANNEX 4

Page 5

any given situation as well as a "certificate" and uniform. There will beegular weekly supervision by the health subcenter and once every two weeks

by the regional health office and once a month by the City Health Department.Six full-time supervisors will be appointed for the Project.

10. Health and Nutrition Surveys are being undertaken in Jakarta toprovide the baseline data for evaluation as well as suggesting sensitiveindicators and realistic targets for evaluation. Subsequent re-surveyswill be undertaken in order to evaluate the impact of the pilot project.

11. During discussions, assurances were obtained from the Chief ofthe City Health Department, Jakarta, that:

(a) the project as outlined was consistent with the nationalhealth policy of the Goverment of Indonesia. This pointwas also verified at meetings with the Secretary Generaland the different Director Generals of the DepartmentKesehatan, Ministry of Health;

(b) the Ministry of Health would give the project its fullsupport, especially with respect to professional personnel.This was also verified with the officials of the Ministry ofHealth, listed above;

(c) the City Health Department will administer it as a specialproject and have full accountability for it;

(d) the City Health Department will provide the facilities andpersonnel required for the implementation of the project,as stipulated in the proposal;

(e) the necessary liaison and cooperation with the local governmentand community organizations of the project sites will befostered by the City Health Department;

(f) the items on the recurrent expenditure, such as vaccines,for which external assistance is sought, will effectivelybe taken over by the community health fund after two years,collaborating with the City Health Department.

B. Surabaya

12. Due to the shortage of sufficient trained health personnel and

facilities in the City Health Office, the nutrition-health component willfocus initially on two main components:

(a) the training of 100 community health workers (volunteers)to be drawn from the kampungs;

ANNEX 4Page 6

(b) the construction of three primary health "offices"(Pos Kesehatans) in three kampungs which will be linkedto existing larger polyclinics (Puskesmas).

13. The training of the 100 community health workers who will serve apopulation of roughly 50,000 is aimed at establishing a base in the kampungsfor the collection of (i) health-nutrition statistics, (ii) the educationand follow-up of vulnerable families, (iii) referrals to polyclinics and hos-pitals, (iv) weighing of all children, (v) immunization and vaccinationreferrals, (vi) training the community in sanitation, hygiene, and nutrition,(vii) family planning, and (viii) maintaining a profile on the course andorigin of communicable diseases originating in the kampungs. During subse-quent years, specific targets for the elimination of certain diseases and,malnutrition will be added to the program. At this stage, however, it isfirst essential to establish a "core" of community workers, through whichprograms can be built upon. The community health workers (CHWs) will re-ceive payments only during the training period. Subsequent to that, theywill be paid in "cash or kind" by the population they serve in accordancewith existing Indonesia practices (and experience in other areas).

14. The training of each CHW will take approximately 25 days at a costof 1,666 Rp/CHW/day (approximately US$4), to include transportation, meals,payment to instructors, honoraria to trainees, and materials. They will betrained in batches of 20 at the City Health lecture room. The curriculumwill follow the enclosed outline:

- Government policy on health;

-Role of polyclinics and Pos Kesehatans;

- Maternal and child health (including nutrition);

- Family Planning methods and record keeping;

- Family welfare and hygiene;

- Home economics (cooking of nutritious meals);

- Epidemiology of disease;

- Environmental sanitation and health;

- Communication to and from the people;

ANNEX 4Page 7

15. The total cost of this training component will come to Rp 4 million(approximately $10,000) and a further Rp 5.7 million are earmarked for theprovision of materials and mass media communication sessions. The CHWs willbe distributed among the eight kampungs of the KIP project. Their impactwill be compared in the kampungs with the primary health "offices" to thekampungs without these office-clinics. In addition, "control" data will beobtained from kampungs without CHWs (improved and non-improved) of the samesocio-economic background. Data will be simple indices, such as infant/childmortality, hemoglobin, weight for height of children 1-5 years. Laboratorycharges, drugs, publications, and processing expenses will bring this datacollection component to Rp 2.5 million ($6,000 approximately).

ANNEX 5Page 1

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

TECHNICAL ASSISTANCE

1. Technical assistance provided under the project is intended tostrengthen the capabilities of government agencies in their responsibilitiesto develop finance and supervise kampung improvement programs. Assistancewill also be provided to the National Urban Development corporation toassist it in implementing its program of sites and services and low-costhousing. The technical assistance provided to Cipta Karya will be directlyrelated to the design and execution of the KIP works in Jakarta and Surabaya,and it is expected that the experience from these cities would be valuablein developing similar programs in other cities in Indonesia. Assistance wouldbe provided in the following areas:

(man-years)To Cipta Karya for:

A. Project Design and Supervision 1/

Engineering 17.0Accounting 6.5

B. Kampung Selection Criteria, Evaluation andMonitoring

Economic Analysis 3.0Surveys Funds for local institutions

C. Jakarta Metropolitan Planning 4.0

D. Feasibility studies for urban Funds for consultants' servicesdevelopment projects

To GOI IPEDA Office for:

E. Property Tax Improvement

Tax Expert, Property Tax/Valuer/Instructor 3.0Training and Fellowships

To NUDC for:

F. Management Assistance 6.0

Total man-years 39.5

1/ Includes both local and foreign consultants.

ANNEX 5Page 2

Project Design and Supervision

2. Engineering. Assistance will be provided through Cipta Karya tothe KIP project units in Jakarta and Surabaya in the design of the civilworks, tender preparation and construction supervision. One engineer wouldbe provided full-time to each unit to assist in the design and detailedengineering of the infrastructure facilities. One engineer would assist in

.ities in tender preparation, construction scheduling and bid evaluation.Another engineer would be responsible for contract supervision and certifi-cation of completed works as required under the loan. A senior engineerwould head the team on a part-time basis for which a total of one man-yearas been allocated. It is expected that the engineers would have had prior

experience in design and construction of low-cost roads, drainage works,water supply and sanitation facilities. Experience with labor-intensivemethods of construction would be required of at least some members of theteam.

3. Accounting. A full-time accounting consultant will be retainedto assist the two KIP units in establishing an accounting system to monitorand record expenditures on the different project components and from dif-ferent project sources. The consultant will establish procedures for paymentof contractors' bills and auditing procedures for the project accounts satis-factory to the Bank. The consultant should be a CPA with experience inaccounting of government or public sector organizations. Provision hasalso been made for the services of a senior accounting consultant on apart-time basis as necessary.

Kampung Selection Criteria, Evaluation and Monitoring

4. Economic Analysis. Provision has been made for an economist towork full-time with the Jakarta KIP Unit to develop methods for evaluatingthe feasibility and appropriateness of upgrading different kampungs. Speci-fically, analysis will focus on the economic feasibility of upgrading newkampungs that have formed since the start of the KIP program, and otherkampungs which are not currently eligible, but which might be eligible ifthe criteria used previously were now applied. An assessment will be madeof the impact of kampung upgrading on demand for other services, especiallytransport, water and sanitation. The economist would have had experiencein project evaluation and regional economics. The economist would also haveoverall responsiblity for technical aspects of the monitoring and surveysincluded in the project.

5. Evaluation and Monitoring. One or more local institutions willbe engaged to undertake a socio-economic evaluation of the kampungs improvedunder the program in both Jakarta and Surabaya. A sample of improved andunimproved kampungs would be monitored over 2-3 years to determine the effectsof the program on population, employment, income, health, social welfare andthe attitude of the population towards different types of improvement. De-tailed surveys will be conducted for this purpose. It is expected that surveyteams from the local universities could be engaged for this purpose. The

ANNEX 5Page 3

Airlangga University in Surabaya has already been actively involved in thekampung selection surveys and is particularly well equipped to do this work.The evaluation teams would include expertise in economics, sociology, publichealth and statistics.

Jakarta Regional Planning

6. As the population and economic activities of Jakarta continue to ex-pand beyond its present administrative boundaries, it has become apparent thatthe development of Jakarta should be closely coordinated with that of its sur-rounding areas. To this end, Directorate of City and Regional Planning ofCipta Karya has initiated studies to consider the growth strategies for theregion and the implication for local and central government investments in theregion. Cipta Karya has considerable expertise in the physical planningaspect of regional planning, but it lacks the necessary economic expertise toevaluate the economic implications of alternative strategies. The projectprovides for two advisers in regional economics for a period of two years toassist Cipta Karya in its regional planning activities.

7. The advisers will work with a team of engineers and planners fromCipta Karya to review current sector plans and investment programs for theJakarta region. They will examine the alternative growth strategies andstructure plans for the region for their investment implications. As appro-priate, implementation mechanisms would be formulated including: infra-structure placement, incentives and taxes. The advisers would endeavorto develop counterpart expertise capable of developing similar programs forother cities.

Property Tax Improvement

8. The project will provide an expert in municipal taxation for oneman-year to assist the Government in implementing reforms in the nationalIPEDA property tax system. A property valuer/instructor will also be re-tained for a two-year period to train the government staff, through on thejob training and seminars, and to develop systems and procedures for conti-nuous property valuation in Jakarta.

National Urban Development Corporation (NUDC)

9. Technical assistance will be provided to the NUDC to cover thesecond phase of management advisory services, the first phase of which wasprovided for under the first urban loan. The management and technicaladvisors would assist, and train the staff of NUDC over a one year period inareas of program planning, financing and engineering supervision. Six advi-sors with expertise in low-income housing policy, urban/housing economics,financial analysis, civil engineering, architecture/planning, and civil worksquantity surveying would be provided. The consultants would assist in:

ANNEX 5Page 4

formulation of a long term project and programinvestment plan;

preparation and review of financial plans;

implementation of operating procedures and budgetarycontrols;

supervision of project feasibility studies;

supervision of project implementation;

estate management;

training of NUDC personnel.

Feasibility Studies

10. To assist the Government in preparing urban development projects inselected medium-size cities of Indonesia, funds would be provided for retainingconsultants' services for the same. The Government has tentatively identifiedseven cities for this purpose to include: Denpasar, Pontianak, Banjirmasin,Padang, Pelemhang, Malang and Samarinda. The total estimated cost ofconsultants' services will be $1.3 million.

ANNEX 6Page 1

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

INSTITUTIONAL ARRANGEMENTS

1. This Annex describes the current government administrative struc-ture related to the project. The GOI has established a National UrbanDevelopment Corporation (NUDC) and a National Mortgage Bank (NMB) to handlea national program of sites and services development and other housing andinfrastructure programs. Although ultimate responsibility for national urbanpolicies rests with the National Economic Planning Agency (BAPPENAS), it isCipta Karya 1/ which prepares general urban policy recommendations withguidance from the National Housing Authority, and subsequently coordinatesthe implementation of BAPPENAS approved policies.

A. National Level

National Housing Authority

2. Broad guidelines pursuant to establishing national housing policyoriginate with the National Housing Authority. This body, consisting largelyof Cabinet Ministers, is chaired by the Minister for Economic, Monetary andIndustrial Affairs, one of two super-Ministers who share supervisory responsi-bility over several ministries and report directy to the President. Membersof the Authority include: the Vice-Chairman of BAPPENAS; the Minister ofPublic Works; the Minister of Finance; the Minister of the Interior; theMinister of Social Affairs; the Minister of Health; the Minister of Indus-tries, Labor and Transmigration; and the Governor of the Bank of Indonesia.The executive Secretary of the Authority is the Director-General of CiptaKarya, and the staff at Cipta Karya constitutes the Secretariat of theAuthority.

Cipta Karya

3. Cipta Karya is the principal agency at the national level respon-sible for developing housing programs responsive to guidance from the NationalHousing Authority. Within the Directorate-General of Cipta Karya there are

1/ Cipta Karya is the Directorate-General in the Ministry of PublicWorks and Electric Power responsible for housing, building, urbanand regional planning, and sanitation, building and materialsresearch.

ANNEX 6Page 2

five divisions, each responsible for different aspects of housing and itsrelated services. The divisions are: People's Housing, Planning; Sanita-tion; and Building Materials Research. Cipta Karya assists provincial andmuncipal government agencies involved in public works infrastructure, hous-ing programs, and regional planning by providing technical advice. Ofapproximately 2,900 persons employed by Cipta Karya, some 200 have universitydegrees in civil engineering or architecture. The present Director-Generalis a senior engineer who has successfully organized and executed severalurban programs. The division of People's Housing will take over from theNUDC responsibility for planning and coordinating a National program of'-.mpung improvement.

National Urban Development Corporation (NUDC)

4. To undertake the acquisition and development of urban land prima-rily to benefit middle and low-income families on a sound commercial basis,the Central Government establised in 1974, a National Urban DevelopmentCorporation (NUDC). From time to time the NUDC may establish branch officeoperations in cities that do not have real estate development agencies capa-ble of planning and executing projects. The NUDC has authority to buy landand hold title with the right of administration, right of building and rightof use. This land will be developed for sale or rental as residential,commercial or industrial sites.

5. As its charter indicates, the NUDC will be responsible for executingurban projects in the fields of housing and physical infrastructure consistentwith Government policy directives. To fulfill its obligations, the NUDC willprepare project plans, organize project financing, execute or supervise theimplementation of projects, and administer and regulate the sale of leasingof developed land and housing. The Corporation is structured as a finan-cially autonomous agency empowered to borrow in the private market, as wellas receive foreign investment capital in order to finance its projects.During Repelita II, GOI plans to provide Rp 24 billion ($60 million) forhousing, most of which would be channeled through NUDC. The working capitalwould be increased with profits from project undertakings, loans and grantsfrom domestic and foreign sources, and the sale of NUDC bonds. Sources ofincome to NUDC will be revenue from the administration, sale and/or rentalof the land, housing, and infrastructure it develops. Net profits of theNUDC will be utilized largely to expand the general corporation budget.

6. Because the NUDC is organized as a perum, administration policydirection for the NUDC will come from the Minister of Public Works throughthe Directorate-General of Cipta Karya. On behalf of the Minister, aBoard of Supervisors consisting of three members oversees NUDC operations;one of these supervisors is the Director-General of Cipta Karya. The NUDCwill be controlled by a Board of Directors headed by a Managing Directorassisted by the Director for Planning and Programming, a Director for

ANNEX 6Page 3

Finance and Administration, a Director for Construction, and a Directorfor Estate Management. Detailed staff functions and operating proceduresare being developed with technical assistance provided to the ManagingDirector as part of the Loan (1040-IND) and further support will be pro-vided under the second project.

B. Provincial Level

7. The project will be executed in Jakarta and in Surabaya where thelocal government will be responsible for the Kampung Improvement Program(KIP). Operational responsibility will rest with the Manager of the KIPunit in each city. The KIP Program Manager will be responsible for super-vising the selection of kampungs, planning contracting, accounting, evaluationand long-term development of the kampungs based on ultimate land use potentialand desired infrastructure standards. Technical assistance for engineering andaccounting expertise will be provided to the KIP offices from the consultantsattached to Cipta Karya. Program accounts will be kept separately from otherprovincial accounts.

Present KIP Operational Procedures

8. An acceptable procedure has been already established in Jakartaand in Surabaya for ranking the kampungs after they have been determined tobe eligible, and selecting the specific kampungs to be improved each year.Proposals for priority working of specific kampungs can be generated fromthe community level and proposed by the local Lurah or Camat (districtofficers) to the five mayors (Walikota) who pass them to the City PlanningBoard. Individual kampungs are then evaluated and improvement programsinitiated. The following sequence which has been established in Jakartawill serve as a model, with suitable modifications for Surabaya.

9. In August, the DKI City Planning Department (Tatakota) is instructedto commence the preparation of a planning inventory of socio-economic andphysical conditions in kampungs which have been selected as suitable for im-provement. This inventory is prepared from information given by the Lurahand Camat supplemented by spot checks in the field. The results of the sur-vey are presented in tabular form and also visually on a 1:2000 Scale Map.Based on this information the KIP unit, in conjunction with Tatakota, pre-pares a rough plan for future development of the kampungs, and an outlineplan for immediate improvements to agreed planning and design standards.This outline plan is discussed in a planning session usually held in Octoberwith the Camat and other leaders under the chairmanship of the Project Managerof KIP Unit. Agreement is reached on road lines, footpaths, water points,possible school sites, and also on the number of houses which need to becut or removed to make way for roads or schools. Following the successfulconclusion of the planning session, the KIP unit instruct Tatakota to pre-pare a topographic survey of the kampung which is carried out from existingplans, aerial photographs and field surveys, whilst the camat makes prelimi-nary arrangements for release of the land and for housing the people who will

ANNEX 6Page 4

be dispossessed. The KIP unit consults other Departments of DKI at allstages of development of the plan, under the general guidance of DKIDeputy Governor responsible for coordination. The project preparationwork is carried out by KIP unit staff who have been drawn originally fromother DKI departments and are now consolidated into the KIP unit. Therehave been considerable advantages in building up the project unit in thisway especially in the reduction of coordination problems with other depart-ments and the minimization of the management problem of delegation ofresponsibility for specific works. Following the preparation of the topo-graphic survey, the KIP unit prepares the project work including preliminarycosting in each kampung and submits it to another planning session with thecamat where it is approved with or without changes. The locally approvedplans and cost estimates are submitted to the Governor of DKI for approvalby decree in November of each year. After the Governor has issued a decree,the KIP unit begins the preparation of detailed design and tender documents,a budget allocation for the next financial year is requested, camat beginsto obtain clearance of rights of way for roads, canals and footpaths, andthe DKI Public Works Department (DPO) survey elevations in the kampungs.

10. From December onwards, the KIP unit prepares detailed engineeringdesigns based on the topographic survey prepared by Tatakota and existingelevations surveyed by DPU. Tender documents are drawn up consisting ofdrawings, bills of quantities, specification and outline form of contractand once DKI budget has been approved (generally at the end of March) con-tractors from a DKI prequalification list are invited to bid on a competi-tive basis. The content of a contract generally covers a variety of workincluding roads, footpaths, water supply and buildings. Previously, problemswith synchronization of activity had occurred when separate contracts werelet for specific works only. The contracts are awarded by the projectmanager of the KIP unit and generally take up to one year to complete in-cluding the work guarantee period. Supervisor of the works is split betweenthe Camat who is designated the site manager and is responsible for smoothingout problems caused by the works and the KIP unit whose staff acts astechnical assistants to the Camat controlling quality and the cost of theworks. Contractors prepare the bills for payment against work done whichis initially checked by camat's staff. The bills are passed then to KIPunit where further checks are carried out by senior engineers and adminis-trators who also monitor construction and program expenditures. After finalchecking by the project manager, authorization for payment is passed to theDKI Directorate of Finance which makes the actual payment to the contractor.On an approximately monthly basis these bills will be passed to Cipta Karyafor reimbursement under the proposed IBRD Loan.

Community Organization

11. In Indonesia, the traditional (adat) community structure is alliedwith the governmental structure and, as such, is potentially the most effec-tive means of executing and monitoring the project at a local level. Govern-ment administration in DKI has five mayoral districts: the city is divided

ANNEX 6Page 5

into 27 Kecamatans, each headed by a Camat (district chief) and 227 Kelurahans,each headed by a Lurah (sub-district chief). Camats and Lurahs are appointedto their offices by the Governor. Each Kelurahan has between 50,000 and45,000 people who are subdivided into two levels of community groups. An RWcontains about 150 families and an RT, the smallest unit, averages about 30families. Each RT and RW is headed by a man who lives in the group; he isnot a civil servant, but works at some other occupation. The functions of theRT and RW, as representatives of their communities, are to organize coopera-tive community efforts to build local roads, footpaths and drainage, to organizegarbage disposal and to organize festivities. As government representatives,they are charged with registering incoming and outgoing residents and visitors,reporting to the Lurah on community activities and keeping peace in the area.The Lurah has a small staff to collect statistical information for the Govern-ment from the RWs and RTs in his area. He is involved with infrastructre,community services and Kampung Improvement Programs being built in this area.

The Kampung Committee

12. Under the present program arrangement in Jakarta, committees at thekampung level are directly involved in planning, execution and maintenance ofKIP works executed in each kampung. There is an organization at the kampunglevel which organizes self-help labor and collects money for kampung main-tenance work and distributes money to help residents displaced by KIP. TheKampung Committees are composed of the Lurah's staff, the Vice-Lurah, RWsand RTs, all of whom live in the kampungs. Their function is to establishthe priorities for improvement reflecting the views of the kampung residents.They respond to official proposals concerning the balance of social and phys-ical infrastructure, location of roads, footpaths, communal sanitary facil-ities, schools and health centers, alternatives on the removal and the reloca-tion of households and collections and expenditures of compensation monies.Instructions to kampung residents on the use of the facilities and organiza-tion of maintenance would be a continuing element of their work. In caseswhere the KIP necessitates the removal of more than half a house, the Commit-tee sees that the displaced families are relocated to one of the sites andservices projects at government expense.

INDONESIASECOND URBAN DEVELOPMENT PROJECT

ORGANIZATION OF DKI JAKARTA AND KIP UNIT

D K I-Jak artaMinistry of Public Provincial GovernorWorks and Electric Council GovernaPower

Cipta Karya Auditor

Executive SecretariatI(8 Directorates and 7 Bureaus)

KIP Unit DirectoratesL _ _ _ _ Manager Local Public Mayor Local/CentralSecretary Corporations (Walikota) Agencies l . Territorial Administration Affairs

II. Public Order and Law Enforcement111. Social WelfareIV. Physical DevelopmentV. Economic AffairsDistrict Hea Sub-Local VI. Finance and Budgeting

(Camat) Agencies VII. Political Affairs

Vil. Development and SociaL ServicesI . , | - for Rural Affairs

Village Head Technical Bureaus(Lurah) Supervision ! Council Office

.11 Governor's Office111. Clerical Office

Finance IV. PersonnelLand Planning & Construction Finance V. Legal Counss lAcquisition Administration ein Supeision VAcu Supplies

AcquisitionTenderingAccountVIOrganizationandCon

-F mWorld Bank-16149

-I CY%

INDONESIASECOND URBAN DEVELOPMENT PROJECT

Organization of Kotamadya Surabaya and Proposed KIP Unit

PGovernor West Java S hr uea yhLn d

Provincial * KotamadyT Surabaya .u City Planning Board/

________* Ote _itr__ed* ietc

Planning Board - - - - - - - - - - - - -Mayoor Team Master Plan

Inspctio Comme ttee F Indur SecretariatXSocial Airs(r tes/Divisions)

* PrCity Corporations City Departments

KIP Unit *Water * Public VWorks* MVrkets Subcity Head * City Planning

Project Manager .Slaughter House (Kepala WVilayah) * Land and Houses

.Armusement Park * TaxesN . . ~~~~~~~~Transport Terminal I. *Development Supervision

i § | | l l * ~~~~~~~~~~~~Other District Head LivesousngPrmt

| Inspetion || Exection || Finance |.. Industry

l - - I _ _ * ~~~~~~~~~~~~~~~~~~~~Primary Education

l ~~~~~~~~~~~ ~ ~ ~~~~~~~~~~Village Head *Health, l l l I r 1 l ( ~~~~~~~~~~~~~~~~~~~~~~Lurah) *Other

Planning Construction Tendering

World Bank-16133

rn ;zr

-1 rn0)rt m

ANNEX 7Page 1

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

MUNICIPAL BUDGET DATA

A. Jakarta

1. In Jakarta, municipal revenues from all sources for FY75-76 areestimated to be Rp 55.7 billion representing an increase of 26% over reven-ues from the previous year. For the five years between 1970-71 and 1975-76inclusive, total municipal revenues have increased at an average annual rateof approximately 40% per year. This represents a significant increase inreal terms as total revenues have increased fivefold while the Jakarta priceindex has increased by 150% during the same period. Property tax revenues(the IPEDA tax) have grown at an even faster rate, with an average annualrate of growth of 52% since 1970. The smallest increase during the period,16%, occurred in the last year. The largest sources of local revenues aretaxes and fees on automobiles which account for about 23% and the casino taxwhich accounts for aproximately 15% of total revenue. Subsidies and sub-ventions from the central government are distributed to local goverments ona formula basis and represent roughly 40% of DKI revenues. Tables I and 2of this annex show revenues and expenditures of the DKI over a 6-year period,and Table 3 projects revenues and expenditures over a 10-year period.

B. Surabaya

2. In Surabaya total municipal revenues have grown at a compoundannual rate of 25%. As in Jakarta, IPEDA revenues which grew at a rate of55% per year grew at a faster rate than total revenues. The IPEDA accountsfor approximately 7% of total revenues and is about equal in importance togambling as a source of revenue. Tables 4 and 5 contain historical budgetdata for the years 1972-73 and 1975-76 and Table 6 projects the Surabayabudget for 10 years.

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

Revenue of the DKI Government 1970/1971 - 1975/1976(Rp million)

1970/1971 1971/1972 1972/1973 1973/1974 1974/1975 1 9 7 5 / 1 9 7 6 /2 %

r. Subsidies and Revenue Sharingfrom Central Government

1. Subsidies/1 2,062 2,654 3,371 3,720 5,947 10,537 -

2. Revenue share - fuel 428 403 544 669 570 735 -3. Revenue share - export tax 311 554 387 327 1,577 1,875 -

2,801 3,611 4,302 4,716 8,094 13,147 23.6

II. IPEDA Property Tax 134 500 724 863 1,954 2,300 -

134 500 724 863 1,954 2,300 4.2

III. Local Taxes

- Motor vehicle tax 1,013 1,565 2,342 3,020 4,751 4,845 -- Automobile transfer tax 1,809 1,849 2,435 4,372 8,528 7,900 -- Entertainment 499 619 1,003 1,285 2,010 2,200 -- Hotel, Restaurant 212 388 621 846 1,270 1,700 -- Radio 76 39 75 90 28 50 -- Foreigner - 52 383 353 434 400 -- Other 87 76 164 195 261 392 -

3,696 4,588 7,023 10,161 17,282 17,487 31.4

IV. Fees, CMarges. Retributions 142 454 1,141 2,956 1,422 1,474 -

142 454 1,141 2,956 1,422 1,474 2.6

V. Revenue from (local) Government 28 57 128 157 277 300 -owned enterprises (corporations (owned by local government), PAM, 28 57 128 157 277 300 .5Corporation for markets, slaughterhouse, building construction corp.)

VT. Special Revenues

'ottery tax 584 463 425 - - -

- 'asino tax 1,613 1,882 2,586 5,673 8,422 18,400' -

2,197 2,345 3,011 5,673 8,422 8,400 15.0

VII. Other DKI Revenues (from local 1,167 1,462 2,531 3,071 5,866 7,550 -services and fees)Local Government loans - - - - 827 5,053 -

1,167 1,462 2,531 3,071 6,693 12,603 22.7

TOTAL REVENUES 10,165 13,017 18,860 27,597 44,144 55,711 100.0

/1 Subsidy from Central Covernment to each province is based on a formula that includes area of land ' -

72I Financial data for 1975/76 are the budgeted figures.

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT,

Expenditure of the DKI Government 1970/1'?j6(Rp Million)

127221971 1971/1972 1972/1973 1973/1974 1974/1975 1975/1976 LiROUT INE BUDGET

I. DKI Government Administration 1,288.5 1,805.8 2,534.1 2.382.5 4,793.5 6,080.4

II. Government Offices 808.0 1,314.8 1,766.5 3,880.0 7,768.3 10,723.0

III. Welfare and Civil Servants 1,217.1 1,838.3 1,648.6 2,666.0 209.4 8b0.4

IV. Other Expenditure 175.6 357.1 415.5 603.4 2,042.5 4,486.3

V. Emergency Funds - 93.9 43.1 16.0 138.2 357.6

Total Routine Budget 3,489.2 5,409.9 6,407.8 9,547.9 14,951.9 22,487.7

DEVELOPMENT BUDGET

I. Infrastructure and Commu- 2,563.7 3,645.6 3,184.2 6.0o2.0 10.573.1 6A0.1nication Sector

II. Education and Social 2,745.8 3,551.7 2,93h.0 L,929.1 15.321.3 21A013.2Wplfare Sector

III. Administration/Security 775.5 866.0 638.5 2,4L8.5 7,293.7 7,192.4Sector

Total Development Budget 6,o85.0 8,063.3 6,756.7 13,419.6 33,188.1 34,677.7

TOTAL BUDGET 9,574.2 13,473.2 13.164.5 22.967.5 48,140.0 57,165.4 4

/D Fa

_1 Financial data for 1975/76 are the budgeted figures. rJ

ANNEX 7Table 3

TEN YEAR PERSPECTIVE OF DKI BUDGET ZI

BudgetExpenditure and Revenue Items 7h/75 1980/1981 1985/1986

Expenditure Routine Budget 15 43.6 /3,1O 103.5 /3,10

Expenditure Development Budget 33.2 126.6 /3, 254.6 /3?8

Debt Service -- 3.2 6.h4 L

Total Expenditure 48.2 173.h 364.5

Subsidies and Revenue Sharing 8.1 28.0 X5 56.4 from Central Government

Local Taxes, other than IPEDA 33.3 127.0 /3,4 255.h4/38

Loans/6 4.8 5.7 L 5.7

Sub-Total Revenues (other than IPEDA) 46.2 160.7 317.5

IPEDA, annual revenue 2 .0/2 12.7 /7 47.0/7

Total Revenues 48.2 173.4 364.5

/1 All figures in Rp billions, nominal value7/ Actually realized75 Inflation rate assumed 18 percent for 1976/77, than 15 percent till 1980

and 10 percent till 1985/86.A Rate of real increase in gross regional product (based on 1969-1973) is

9 percent, of which population increase account for about 5 percent./5 Assumed to grow at same rate as annual real growth of national GDP of

7 percent (based on 1969/73).A First and second IBRD loans will be completely disbursed by 1979/80;

however, we assume the continuation of KIP program with disbursementrate same as second loan.

/7 This increase includes 18-15 percent inflation rate and 5 percentpopulation increase rate. Increases in property values, assessment factorand collection rate are assumed to provide for real growth in per capita revenues ofabout 15% per year.

/8 Assumed to gradually taper down to 5 percent real increase after 1980/81.Servicing the debt of a possible third loan would start around that time.

790 Real increase in expenditure routine budget assumed to be close to regionalpopulation increase.

ANNEX 7Table 4

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

Revenues of the iurabaya Municipal Government

(Rp Million)

1972/1973 1973/1974 197h/1975 1975/1976

?EVENUES

A. Routine Revenues

Remaining from last year - - - 175.3Subsidy from Province 402.6 568.4 944.8 1,320.0City Taxes 468.3 658.o 907.6 1,013.6Fees 101.6 88.1 1L1.5 166.1Fees from Semi-Autonomous 119.8 162.6 300.3 526.8

BusinessesRevenues from City Agencies 166.3 121.8 101.1 "6.7Other fund and revenues 26.6 12.5 72.8 57.3Other transfers and borrowing 50.0 - 717.4 84.0

Total 1,335.2 1,611.4 3,225.5 3,429.5

Temporary revenues from hig&er - - 2,152.4 23004.0sourceTotal Routine Revenues 1,335.2 1,611.1 5,377.9 5,733.5

B. Development Funds

Subsidy from Province, - 30.1 - -Central Government

IPEDA/IREDA 190.3 284.3 596.2 700.0Gambling 797-0 587.2 600.0 700.0S.W.I.U 1.4 0.1 - -

Transfer from Routine Revenues - - 391.2Fees from Semi-Autonomous Bus. - - 1,0?1.2Borrowing from Development - - 110.0 137.5

Total Development Funds 988.7 901.7 1,306.2 2,949.9

C. Other 2,795.6 3,608.4 169.1 -

GRAND TOTAL REVENUES 5,119.5 6,121.5 6,853.2 8,683.4

ANNEX 7Table 5

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

Expenditures of the Surabaya Municipal Government(8p Million

1972/1973 1973/1974 1974/1975 1975/1976EXPENDITURES

A. Routine Expenditures

Wages and Salaries 1,154.1 624.3 1,054.9 1,392.2Materials - 430.2 242.0 374.4SuDporting Budget 164.1 281.1 410.0 370.3Expenses for Continuing - - 15.4 20.0

Agency OperationsOther Routine Expenditures - 415.3 221.0 322.1Pensions, Rewards, Subsidies - - 225.8 290.3Loans and Interest - - 98.5 84.0Other - - 669.5 576.2Transfers 50.0 .5 3,1h1.3 2,304.0

Total Routine Expenditures 1,368.2 1,751.4 6,078.4 5,733.5

B. Development Expenditures

1. Economic SectorInfrastructure, Communica- 443.7 617.1 480.5 707.1tions Expenditures

Economy & Production Exp. 8.4 3.1 101.9 120.2City Businesses - - - 1, 021.2

Total Economic Sector 452.1 620.2 582.h 1,858.5

2. Social Sector 61.4 93.1 161.7 260.4

3. Public Sector 319.6 66.3 78.4 831.0

Repayment of Development Loan - - 110.0 -Accountancy - - - 1, 266.1

Total Development Exp. 833.2 779.6 932.5 4,216.0

C. Other investments 3,264.9 3,609.4 285.0 -

GRAND TOTAL EXPENDITURES 5,466.3 6,140.4 7,295.9 9,949.5

ANNi6X 7Table 6

TEN YEAR PERSPECTIVE OF SURABAYA BUDGETT/1

BudgetExpenditure and Revenue Items 7h/75 1980/1981 1985/1986

Expenditure Routine Budget 2.74 1010.9634 22.0 3.

Expenditure Development Budget 1.19 6.76/3,1 9 1 8. 3/3 ,1 0

Debt Service -- 0.39- 1 .00L9

Total Expenditure 3,93 18.11 411.38

Subsidies and Revenue Sharing from O.94 3.25 X 6543Province and Central Government

Local Taxes, other than IPEDA 2.39 9 .5 6 /3,4 19.23/3,8

Loans/ -- 1.50

Total Revenues, other than IPEDA 3.33 14.31 27.27

IPEDA, annual revenue 0.60 /2 3.80L7 14.11 /7

/1 All figures in Rp billions, nominal value.72 Actually realized.73- Inflation rate assumed 18 percent for 1976/77, then 15 percent till

1980 and 10 percent till 1985/86.A Assuming annual rate of real increase is 10 percent based on 7 percent

real growth rate in national GDP, 2 percent average national populationgrowth and 5 percent average Surabaya population growth during1961-1971 period.

/5 Assumed to grow at same rate as annual real growth of national GDP of7 percent (based on 1969-72 average).

/6 First IBRD loan to Surabaya will be completely disbursed by 1979/80;however we assume the continuation of KIP program with further loanswith disbursement rate same as first loan.

/7 This recommended gross increase include 18-15 percent inflation ratetill 1980 and 10% after, and 5 percent population increase rate.Increases in property values, assessment factor and collection ratesare assumed to provide for real growth in per capita about 15% per year.

/8 Assumed to gradually taper down to 5 percent real increase after 1980/81.E: .Servicing the debt of possible future loans would start around that time,

assumed to be similar to conditions of the first loan (9 percent interest,20 years including 3 years grace period, with annual disbursement rateof Rp 1.5 billion for 3 years).

/10 Real increase in expenditure development budget assumed to be more thanthat of routine budget. This is expected due to major investments inwater supply, sewerage, transport that are being programmed to occur inthe next decade.

ANNEX 8

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

DI3BURSEMENT SCHEDULE

IBRD Fiscal Year Cumulative Disbursementsand Quarter at End of Quarter

(US$ '000)

1976/77

December 31, 1976 7,895March 31, 1977 12,045June 30, 1977 13,350

1977/78

3eptember 30, 1977 17,210December 31, 1977 23,380March 31, 1978 28,870June 30, 1978 30,670

1978/79

September 30, 1978 35,140December 31, 1978 41,930March 31, 1979 47,50CJune 30, 1979 49,95o

1979/80

September 30, 1979 51,500December 31, 1979 52,500

May 1976

ANNEX 9Page 1

INDONESIA

SECOND URBAN DEVELOPMENT PROJECT

ECONOMIC EVALUATION

1. The economic justification of the proposed upgrading of kampungsbased on an acounting of the principal benefit and cost streams discounted

. r 17 years for each of the two locations, Surabaya and Jakarta. Benefitsare calculated using estimates of increases in property values in the im-proved kampungs. Costs include construction, engineering and supervision(technical assistance) and operations and maintenance for roads, paths,drainage, water supply, waste disposal. Following normal practice, theschools, clinics and health programs were omitted from this analysis.

2. In addition, two separate analyses were conducted to establish amore direct link between productivity and expenditures on health/environ-mental sanitation and also on schools. These additional analyses involvedanswering the following question: "What minimum percentage increase inaverage productivity would have to occur in order to justify the componentsat a 15% cut-off rate of return?" The analysis of the health/environmentalsanitation expenditures overlaps for the most part with the standard economicanalysis that employs increased property values as a measure of benefits,and is provided to offer additional insights into the productivity aspects ofthe project. The analysis of the education component is independent of theother analyses and is offered as an attempt to provide some quantificationthat would assist in judging the merits of this component. The two additionaltests, while they do not result in an estimate of a rate of return, do pro-vide a useful measure of the reasonableness of the project components.

A. Rate of Return in Using PropertyValue Increases as a Measure of Benefits

Benefit Valuation

3. The difference between the rate of increase of property values inthose kampungs that have been upgraded and in others which have not beenupgraded is a measure of the willingness of property owners to pay for thehigher levels of infrastructure and for other improvements in the upgradedkampungs. This measure includes the direct increase in the value of thesite itself due to the provision of water, sanitation, garbage collection,and access by vehicle and foot, as well as the induced increase in the valueof the structure on the site due to accelereated home improvement by residents.

ANNEX 9Page 2

Probably it does not include other project benefits on which, property ownersmay not place a market value because (1) they are imperfectly perceived, suchas increases in an individual's own labor productivity due to improved drain-age, sanitation and education facilities; (2) they are perceived as external,such as increases in the productivity of neighboring unimproved kampungs dueto better health, drainage and sanitation facilities in the improved kampungs,which also relieve poor conditions in the nearby kampungs.

Effect of KIP on Property Values

4. Information was available in both Surabaya and Jakarta on changesin sales prices of property in the year immediately following kampung improve-ment. Before and after data on lot sale prices per square meter was providedby local officials (Lurahs) for lots on main roads, on footpaths, and withoutdirect access in a total of 15 improved and 10 unimproved kampungs in East,North, and South Surabaya, including data on 6 of the 8 unimproved kampungsincluded in a priority list for the Surabaya program.

5. The increase over a year in sale price levels for lots in the sameaccess category was compared as between improved and unimproved lots and thedifference was taken as a measure of the additional increase in value due tothe infrastructure (improvement of existing paths and roads, addition ofwater, drainage, sanitation, garbage collection). For each area of the city,the average annual increases (1974-75) in prices per square meter of propertyin improved and unimproved kampungs were compared and an average net increasedue to KIP improvements for the kampungs to be upgraded was calculated, usingas weights the percent distribution of hectares to be upgraded in each area. 2The data are shown in the table below. A single average value of Rp 2,174.8/m(1975 prices) was obtained as a measure of the average increase in land valuesin the kampungs to be improved in Surabaya.

6. Comparable data on kampungs in Jakarta that have been improved duringthe years 1974-76 KIP were available. However, similarly up-to-date data onunimproved kampungs in Jakarta was not available and it was necessary insteadto use data on changes in property values in unimproved kampujngs observed inthe period 1970-72. This produced an estimate of Rp 1,771/m (1975 prices) asan estimate of the average increase in land values attributable to the project.

AINEX 9Page 3

INDONESIA

Percentage Increase in Land Values due toKampulng Improvement, Surabaya. 1974 -1975

Area. Share of ha., Percentage increase in property values for lotsSample Size* with different access characteristics

Along Roads Along Paths Inner Kampung

East (18%)

Improved (5) 130% 89% 100%Jnimproved (3) 18% 30% 25%Difference 112% 50% 75%

North (25k)

Improved (6) 135% 90% notUnimproved (4) 25% 50% avail-Difference 11 i% 40% able

South (57%)

Improved (l) 21% 30% 26%Unimproved (3) 20% 20% 15%oDifference 1% 10% 11%

Net Increase in Value:Weighted Average ofDifferences 81, 25% 26%

Distribution of Lots: 3)% 65% 5%Average lot value beforeImprovement (Ro /m2) 9,1 80 5,810 4,098

Weighted AverageNet Increase in Value

(Rp /m2) Rp 2.174.7/m2(RnD /m2

* The percentages in parentheses following the area names represent thedistribution of ha to be upgraded in each area in the eight priorityKamoungs and are the weights used to arrive at the average. Thenumbers in parentheses following "Improved" - ' tUnimproved" indicate thenumber of Karmungs for which data was provided.

,,J

2Fi g 1 14E,5Y

INDONES IA

Percentage Increase in Land Values due to

Kamoung Imnnrovempnt-. - .Tqkq Hr-

Area, Share of ha., Percentage increase in property values for lotswith different eccess ch.racteristics

Al on goads hong aths Inner K.anjuug

Le8st; (25%),

Improved 110% 62% 58%Unimpr-oved 70% 70%Difference 40%

North (25%,O)

Improved 120% 116% 58%Unimproved 70% 76%Differanco 50% 46,

South (25%)

.tmproved 150> 100% 77%UnimDroved 70% 70%Difference 80% 3J0

West (>5%)

Improved 89% 66% 57%Unimproved 70% 70% 70%Difference 19%

Net Increase in Value:

Weighted Average ofDifferences 47% 19% 0

Distribution of Lots:

Average lot value beforeImprovement (Rp /M2) 8,770 5,950 4,770

Weighted Average

Net Increase in Value(Rp /m2) Rp 1,771.0

* No r eliable data available

ANNEX 9Page 5

Calculation of Benefits

7. The average figures for net average property value changes forSurabaya and Jakarta were applied to the total net residential area (80%of total area to be developed) designated for improvement in each of the3 project years to obtain a value for the projects' benefits. These valueswere adjusted to convert 1975 prices into 1976 prices, consistent with costestimates. Benefits are assumed to accrue as a one-time increase in propertyvalues -occurring in the year following completion of improvements.

Cost Estimates

8. Capital, Operating and Maintenance Costs. In both Surabaya andJakarta, infrastructure costs (except schools and clinics), including con-struction costs plus design and supervision (technical assistance) have beenused, valued at January 1976 prices. Annual operating and maintenance costshave been expressed as a percentage of capital costs, and are assumed torecur over the 17-year life of the project. The annual costs chargeable tothe project are 2% of capital costs for roads and 1% of capital costs forfootpaths. These figures are half of those one might normally assume fortotal operation and maintenance; however, it is not correct to assess thetotal of these costs to the project but rather just those that otherwisewould not occur. Since no information is available on the maintenance costsin non-improved kampungs, it is assumed that half are due to the improvedstandards.

9. Induced Private Investment. One of the effects of the project isto stimulate further private investment by homeowners in house improvementsfollowing the upgrading of kampungs.

10. Based on experience in the Philippines, it is estimated that overa period of about 5 to 20 years, private investment amounting to 20% of infra-structure investment might be induced. Part of the benefits attributable tothe project arise from this induced private investment. For purposes of theanalysis it was assumed that 15% of the households who would eventually in-vest privately has already done so during the sampling period, and there-fore the cost stream was augmented by the resulting expenditures (amountingto 3% of infrastructure investment) to take this into acount. Additionalprivate expenditures (and additional benefits) would be expected to occurduring the period beyond one year after construction, but for simplicitythese were ignored.

11. Other Costs. The cost for relocating people and compensating themfor their lost property in cash or communal arrangements has been estimatedat 13% of the capital costs.

ANNEX 9Page 6

12. The disturbance to the kampung residents during the constructionperiod is assumed to be equal to one-half year's benefits, with a year'sbenefits taken to be 16.% of total benefits as calculated above.

13. Summary of Calculations. The costs and benefit streams associatedwith the Jakarta and Surabaya KIP programs are shown below with the resultinginternal economic rates of return.

COSTS (million Rp) BENEFITSYear Capital Op. & Maint. Relocation Private Total Increase in Prop Value

SURABAYA & Disturbance Investment

1 320 - 145 10 475 -2 572 4 259 17 852 1,1393 791 11 354 24 1,180 2,0444 - 21 - - 21 2,769

5 - 21 - 21 -

20 - 21 - 21

Internal Rate of Return: over 100%

JAKARTA

1 8,067 78 2,439 242 10,826 -

2 8,067 156 2,439 242 10,904 16,8603 8,067 237 2,439 242 10,985 16,8604 - 237 - - 237 16,860

20 - 237 - - 237

Internal Rate of Return: 54%

ANNEX 9Page 7

B. Evaluation of Health-Related Components

Increases in Time Worked and Productivity as a Measure of Benefits

14. Paving footpaths, providing drainage canals, improving watersupply and human and solid waste disposal, providing clinics and initiatinga health program in the kampungs will all directly improve the health levelsof residents. Aside from the resulting improvement in the quality of life,residents will benefit by being physically able to be more productive at workand to work more days. Both these work-related impacts of infrastructureinvestment will be reflected in higher output per workers and higher wagesearned.

15. There is no data available from earlier KIP experience on the in-creases in output of emploved kampung residents due to health-related KIPimprovements. Even if such data were available, using it as a basis forevaluating the benefits of this project would imply an under-estimation dueto the greater emphasis on health improvement in this project compared toearlier KIP investment.

16. Therefore, a very rough indication of the economic viability ofthese health-related components may be obtained by calculating the recurrentincrease in annual income (following some lapse of time necessary for healthlevels to stabilize) required to assure a 15% rate of return to the health-related cost components. The health costs haver been compared to imputedincreases in income due both to fewer work days lost for illness and toincreased productivity on the job.

17. Health-Related Cost Components. Capital, operating and maintenancecosts and technical assistance as described above (para 16) are included forall infrastructure except roads and schools, e.g., footpaths, drainage canals,water supply, human waste disposal, solid waste disposal and health clinics.The cost of garbage trucks, health programs and land for clinics, has alsobeen included. These costs account for 60% of total project costs net ofprice escalation.

18. Imputed Income Benefits. Benefits are assumed to build up in everyyear until the project's sixth year (a period chosen to reflect the project'sthree year construction period plus an assumed three-year growth in healthbenefits) after which these benefits are assumed to stabilize.

19. The results are arrived at by comparing (1) the minimum recurrentbenefit in years 1-40 sufficient to create a 15% rate of return when pairedwith the cost stream defined above. The existing median household income in

ANNEX 9Page 8

the areas to be upgraded, is about Rp 22,500 per household per month forJakarta. Since the existing total annual income in the 3,000 ha to beupgraded is about Rp 64.8 billion, a 6% increase in time worked, or alesser increase in time worked coupled with greater productivity on thejob, would be enough to justify the project's health-related components.Similarly in Surabaya, where the existing total annual income is aboutRp 10.8 million, a 2.5% increase in output would suffice. This isequivalent to about 15 days worked in Jakarta and 6 in Surabaya forpersons employed full time (250 days).

20c These increases are very modest, and in fact, benefits areexpecced to far exceed these levels. For example, analysis conducted forthe appraisal of a proposed Bank financed project in Karachi, Pakistanbased on studies of the impacts of such investments has indicated that infact, an increase of up to 25% could be expected from either the improvedproductivity or the increased work attendance which follows, health-relatedinvestments.

ANNEX 9Page 9

INDONESIA

Cost and Benefit Streams Used to EvaluateHealth Components

(Rp Million)

C 0 S T S ImputedCapital Recurrent Total Real

Year Costs Benefits

1 Surabaya 231 - 231 302 413 16 429 903 571 37 608 1784 h 66 66 2385 2706789101112 -

1314 15 _16 _17 - 66 66 270

Jakarta

1 6,116 - 6,116 -2 6,115 306 6,421 h273 6,116 612 6,728 1,2834 _ 918 918 2,5665 3,4216 3,888789

1011121314151617 918 918 3,838

ANNEX 9Page 10

C. Evaluation of Education Component: Jakarta

21. A 1974 report of the International Labor Organization (ILO) titledUrbanization and Employment in Jakarta (Working Paper No. 6, World Employ-ment Programme Research), argues that the decline in the school participa-tion rate for children below 15 years of age during the last decade inJakarta suggests a need for "immediate measures to promote school participa-tion at the primary level, as well as to encourage non-formal educationbeyond that" (pages 8 & 12).

22. The 90 new schools to be built as part of this project will eachaccommodate 585 students or 52,650 students per year who would not other-wise have received schooling. If capital (including land costs) andoperation costs over the 17-year lifetime of the buildings are combinedwith the cost of income foregone by these primary school attenders andthe cost of fees to their parents, the resulting total cost stream can becompared with an imputed benefits stream, consisting of additional earningsover the lifetime of the individuals receiving primary education. Thisbenefits strteam is calculated as the percentage increase in an estimatedaggregate 40-year income stream for all individuals leaving the school overits 17-year life, had they not received schooling (e.g., assuming lifelongemployment in the informal sector or in other very low wage occupations), re-quired to assure a 15% rate of return to the education costs mentionedabove 1/.

23. Using this very crude approach, with data from the ILO report,we find that a 12% increase in aggregate lifetime earnings of the studentsattending these schools would be sufficient to justify the project's educa-tion component and other costs incurred by families who send their childrento school.

D. Summary of Economic Analysis

24. The economic analysis is based on the assumption that benefits tothe site occupants are reflected in increased property values, which mayonly partly reflect benefits from improved health. This implies that thecalculated economic rate of return understates the real return. The returnfor the Surabaya component is over 100% and for the Jakarta component is 59%.In the supplementary exercises to relate the health and education componentsto productivity, it was found that productivity of present kampung workersin Jakarta would have to increase by about 6% (about 15 more days workedper year) to assure a 15% internal rate of return to the Jakarta health

1/ Social internal rates of return to primary schooling in the citiesof seven developing countries range from 16 to 38 percent.(Source: Cost-Benefit Analysis in Education: A Case Study ofKenya, IBRD Occasional Paper No. 14, p. 94).

ANNEX 9

Page 11

component (2.5% for Surabaya), and that productivity of the primary schoolchildren to be enrolled in the 80 new schools in Jakarta over theirworking lives would have to increase by about 12% to justify the cost ofthe education component, including childrens' earnings foregone and schoolfees paid.

ANNEX 9Page 12

INDONESIA

Cost and Benefit Streams Used in Evaluation ofJakarta Education Component

(Rp Million)

C O S T S BENEFITSEarnings/1 Fees Capital Operations Imputed Real Base Expected

Year Foregone Paid/2 Costs & Mainten. Total Benefits/3 Real Earnings/4

1 - - 1,558 - 1.559_2 29.5 142.2 1,558 78 1.8D8 34.4 286.43 59.0 284.3 1,558 156 2,357 68.7 572.84 88.5 426.5 - 234 749 133.1 859.25 . - . . 206.2 1,718.46 . . . 339.3 2,577.67 . . . 412.4 3,436.88 . * * 515.5 4,296.09 . . -. 61.6 5,155.2

10 . . . 721.7 6,314.411 . . - 824.8 6,873.612 . 927.9 7.732.813 1,331.0 5,592.014 . 1,134.1 9,451.215 . . ,237.2 1D,31).416 I . 1,30.4 11,169.617 88.5 426.5 - 23 749 1,133.5 12,02,8.818 _ - - - - 1,546,6 12,888.O19 - - - - - 1.649.7 13,747.220 - _- - - 1,752.8 1h,60D6.421-41 - - - - - 1.752.8 14.6o6.hL2 - - - - - I.718.4 14,320.043 - - - - - 1.649.7 13,747.244 - - - - - 1,546,6 12,888.045 - - - - 1,43.5 12,028.846 - _ - - - 1i34.4 11,169.647 - - - - - 1,237,2 10,310.448 - - - - - 19134.1 9,451.249 - - - - - 1,031.0 8,592.050 - - - - - 927.9 7,732.851 - - - - - 824.8 6,873.652 - - - - - 721.7 6,)14.453 - - - - - 618.6 5,155,254 - - - - - 515.5 4,296.055 - - - - - I_412.4 3,436.856 - - - - - 309.3 2,577.657 - - - - - 236.2 1,718.458 - - - - - 103.1 859.259 - - - - - 68.7 572.860 - - - - - 34.4 286.4

ANNEX 9Page 13

NOTES TO TABLE

/1 Earnings foregone are calculated as follows:

age-specific age-specific expected aggregatestudents/year x labor force x employment x annual = annualin school participation rate (as % income earnings

rate (as % of of labor per em- foregonethose not in force) ployedschool) child

(Rp 1976)

52,650 x 0.07 x 0.80 x Rp 30,000 = Rp 88.5 million

/2 Fees paid by parents are calculated as follows:

education ave. hh. aggregatestudents/year x fee as x income = annual feesin school % hh income per year paid

(Rp 1976)

52,650 x .03 x (Rp 22,500 x 12) = Rp 426.5 million

/3 Benefits are calculated as a % increase in base expected earningsrequired to offset the cost stream shown at a discount rate of 15%.

/4 Calculated on the basis of the following assumptions:

students com- average pro- average annual annualpleting grade 6 x bability of x earnings in = aggregateeach year in 90 employment, informal basenew schools ages 15-54 sector earnings of

students innew schools,had they notattendedschool

(52,640 - 6) x 0.68 x Rp 144,000 = Rp 859.2 million

This Rp 859.2 is reached in year 4 following the completion of allschools and recurs each year thereafter for each cohort in thework force for 40 years.

INDONESIASECOND URBAN DEVELOPMENT PROJECT

Implementation Schedule

Calendar Year 1976 1977 1978 1979

Quarters Q1 Q2 03 04 Q1 02 Q3 04 Q1 02 Q3 04 Q1 02

KIP Jakarta

Kampung Selection

Contract Preparation

Tenderingmm m

Construction

KIP Surabaya

Kampung Selection

Contract Preparation

Tendering

Construction _ _-

Health Program Jakarta

Selection of Trainees no

Course Preparation

Training

Community Organization -and Motivation

Refresher Course

Program Evaluation and - -Follow-up

Health Program Surabaya

Training of Volunteers -

Refresher Course

Program Evaluation andFollow-up

Technical Assistance

Design and Supervision

Kampung Evaluation

Monitoring and - -_ -Evaluation

Jakarta Metropolitan Planning I

March 1976VWorld B-nk-16135

IBRD 10709R2APRIL 1976

> -> J C7 V <7 5 e ct |~~~~~~~~~~~~~ ~ ~ ~~~ TANJUNG PRIOK c -o

tLJfURE TERPONGNGERANG 9S>kS \-_______/_-/iddle Income Families

7 / .$ f5$J 1 \ >%~~~~~~~~~~~~~~~~~~~~~~~~~~~~I NonmReideta Areas (Agriculturcal,

INDONESIA W Existing Roads

SECOND URBAN DEVELOPMENT PROJ CT -.0 \ ' Roadusto be Improved

7~~~~~~~~~~~~~7

JAKARTA LAND USE ( 4 PSNTAGON P --- roposed Roads

KE_. ~ ~ ~ ~ ~ 57- PrpseEaiwy

-''\-, ;M AL A9 Y5 A c( ¢ Ce^s~ Seo t - -J=-- Rivers or Canass

X J t ~KALIMANTAN 'u[z;' i SI'AN ' , / 25

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IBRD 10728 R2lRF M\ jo / a Se (7 0 A ;! suAY 197W Iv X, --- tDJAKARTAKALIMANTAN

SUMATERA ' BELITUNG L-

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INLDONESIA~~~~~~~~DMDI

TA.1NGPROI:-, SECOND URBAN DEVELOPMENT PROJECTKAMPUNG IMPROVEMENT PROGRAM D.K.I.

JAKARTA

KAMPUNGS IMPROVED DURING PELITA I (19569-1974) 2,400 hoIITERN/ATIOANAL ]IJfl~~1KAMPUNOS,IMPROVE IN FIRST11 URBAN D]EVELOPMENT PROJECT

GROG ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(9417)2,115 h........ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~I- KAMPUNGS,TO BE IMPROVED IN FIRST YEAR OF THiE SECONDPROJECT 19769-1977) 990 hoOK.. BOUNDARY

MAIN ROADS

------ RAILWAYS

CANALSIRIVERSI

0 1 2 3 4 5

KILOMETERS

KEBAYORAN BARU

;

IBRD-12209

MAY 1976

JAVA SEA INDONESIA

SECOND URBAN DEVELOPMENT PROJECTKAMPUNG IMPROVEMENT PROGRAM

SURABAYA

< F\0 Xt> \t 4 \ . .: | KAMPUNGS IN SUB-STANDARD PHYSICAL CONDITION

KAMPUNGS TO BE IMPROVED IN 1976/77(55ha)

ROADS

o t __ X Zj I Lt |RAILWAYS-| a..-- CITY LIMITS

CANALS AND RIVERS

C, ' J '. KARTA. .......... . . SCALE NOT AVAILABLE

w { t - . , > se, F ........................................... ....... s > ..........

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