Project Completion Report

PCR: INO 29446

Metropolitan Bogor, Tangerang and Bekasi Urban Development (Sector) Project (Loan 1511-INO) in Indonesia October 2005

CURRENCY EQUIVALENTS

Currency Unit – rupiah (Rp)

At Appraisal At Project Completion (31 October 1996) (30 September 2003)

Rp1.00 = $.00043 $.00011 $1.00 = Rp2.327 Rp90001

ABBREVIATIONS ADB − Asian Development Bank APBD − Anggaran Pembangunan dan Belanjar Daerah (local

development and expenditure budget) BAPEDAL − Badan Pengendalian Dampak Lingkungan

(local government environmental agency) BAPPENAS − Badan Perencanaan Pembangunan Nasional

(national development planning agency) BCR − benefit cost ratio BME − benefit monitoring evaluation BOTABEK − Bogor, Tangerang and Bekasi CBUIM − Capacity Building for Urban Infrastructure Management DED − detailed engineering design DGHS − Directorate General of Human Settlements DGURD − Directorate General of Urban and Rural Development DPRD − Dewan Perwakilan Rakyat Daerah (local parliaments) EA − executing agency EIA − environmental impact assessment EIRR − economic internal rate of return EOCC − economic opportunity cost of capital FIRR − financial internal rate of return IA − implementing agency IEE − initial environmental examination IPLT − sludge processing plant FDS − final disposal sites FRAP − financial recovery action plan IUIDP − integrated urban infrastructure development program KIP − kampung improvement program LIDAP − local institutional development action plan MCK − mandi-cuci-kakus (bathing-washing-toilet) MIIP − market infrastructure improvement program MOHA − Ministry of Home Affairs MOHARA − Ministry of Home and Regional Affairs MPW − Ministry of Public Works MSRD − Ministry of Settlements and Regional Development

1 During project implementation, particularly during the peak of the fiscal crisis in 1997–98, the exchange rate fluctuated substantially. In 1999 it rose to Rp16,000 for $1.00; in 1999 it came back to Rp10,000, and since 2002 it is below Rp10,000.

O&M − operation and maintenance NPV − net present value PCR − project completion report PDAM − Perusahaan Daerah Air Minum

(local government water supply enterprise) PIU − project implementation unit PMU − project management unit PSP − private sector participation RIAP − revenue improvement action plan SLA − subsidiary loan agreement SPAR − subproject appraisal report SWM − solid waste management TPA − Tempat Pembuangan Akhir (final solid waste disposal site) UDP − urban development project UFW − unaccounted for water

GLOSSARY

Dinas – service departments within provincial or district (kota and kabupaten) administrations

Kabupaten – regency or district; administrative subdivision of a province, predominantly rural

Kampung – rural or urban villages; poor human settlement or “informal settlement” (in the context of the Project)

Kecamatan – subdistrict Kota – municipality or urban district; administrative subdivision of a

province, predominantly urban (city) Kotamadya – municipality

NOTES

(i) The fiscal year (FY) of the Government ends on 31 December.

(ii) In this report, "$" refers to US dollars.

CONTENTS

Page BASIC DATA ii

MAP vii

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 2 A. Relevance of Design and Formulation 2 B. Project Outputs 2 C. Project Costs 4 D. Disbursements 5 E. Project Schedule 5 F. Implementation Arrangements 5 G. Conditions and Covenants 6 H. Related Technical Assistance 6 I. Consultant Recruitment and Procurement 6 J. Performance of Consultants, Contractors, and Suppliers 6 K. Performance of the Borrower and the Executing Agency 7 L. Performance of the Asian Development Bank 8

III. EVALUATION OF PERFORMANCE 9 A. Relevance 9 B. Efficacy in Achievement of Purpose 9 C. Efficiency in Achievement of Outputs and Purpose 11 D. Preliminary Assessment of Sustainability 13 E. Environmental, Sociocultural, and Other Impacts 13

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 15 A. Overall Assessment 15 B. Lessons 15 C. Recommendations 16

APPENDIXES 1. Project Framework 17 2. Status of Completion of Project Components 21 3. Allocation of Infrastructure Project Investments by Local Government and Subsector 28 4. Project Cost By Component 30 5. Implementation Schedule 31 6. Organizational Arrangement for Project Implementation 33 7. Status of Compliance with Loan Covenants 34 8. Project Benefits and Impacts 44 9. Financial Performance of Local Governments 46 10. Financial and Economic Analysis 47

ii

BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

Indonesia 1511-INO Metropolitan Bogor, Tangerang and Bekasi Urban Development (Sector) Republic of Indonesia Directorate General of Urban and Rural Development (DGURD) in the Ministry of Settlements and Regional Development (MSRD)1 $80 million PCR:INO 890

B. Loan Data 1. Appraisal – Date Started – Date Completed

2. Loan Negotiations – Date Started – Date Completed

3. Date of Board Approval

4. Date of Loan Agreement

5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions

6. Closing Date – In Loan Agreement – Actual – Number of Extensions

7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years)

8. Terms of Relending – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

9. Loan Cancellations a. 16 July 1998 b. 24 September 1999 c. 6 October 2000 d. 11 November 2003 e. 4 March 2004

19 August 1996 20 September 1996

18 November 1996 20 November 1996

19 December 1996

10 January 1997

10 April 1997 13 March 1997 1

30 September 2002 4 March 2004 1

Variable 25 5

11.5%2 per annum 20 (maximum) 5 (maximum) local governments and water supply enterprises

$17.0 million $6.0 million $4.9 million $8.0 million $4.4 million

1 Formerly Directorate General of Human Settlements (Ministry of Public Works). 2 Includes commitment charge of 0.75% per annum.

iii

10. Disbursements a. Dates Initial Disbursement

13 May 1997

Final Disbursement

4 March 2004

Time Interval

81 months

Effective Date

13 March 1997

Closing Date Original: 30 September 2002 Actual: 30 September 2003

Time Interval

80 months (from actual closing date) 68 months (from original closing date)

b. Amount ($ million) Category or Subloan

Original

Allocation

Last Revised

Allocation Amount

Canceled

Net Amount

Available

Amount

Disbursed

Undisbursed

Balance Civil Works 33.30 17.92 15.38 17.92 17.92 0.0 Equipment and Materials

17.90 8.37 9.53 8.37 8.37 0.0

IDC Urban Dev. (Sector) Project

14.40 6.11 8.29 6.11 6.11 0.0

Consulting Services

14.40 7.29 7.11 7.29 7.29 0.0

Total 80.00 39.69 40.31 39.69 39.69 0.0

IDC = interest during construction. 11. Local Costs (Financed) - Amount ($ million) 17.02 - Percent of Local Costs 51.57 - Percent of Total Cost 42.88 C. Project Data

1. Project Cost ($ million) Cost Appraisal Estimate Actual

Foreign Exchange Cost 65.0 22.98 Local Currency Cost 163.0 51.59 Total 228.0 74.57

iv

2. Financing Plan ($ million)

Appraisal Estimate Actual Cost

Foreign Exchange

Local Currency

Total Foreign Exchange

Local Currency

Total

Implementation Costs Borrower Financed Central Government 0.00 13.00 13.00 0.00 6.15 6.15 Provincial & Local Governments 0.00 70.00 70.00 0.00 21.92 21.92 PDAMs 0.00 8.00 8.00 0.00 5.45 5.45 Private Sector and Communities 18.00 39.00 57.00 0.00 1.36 1.36 Subtotal 18.00 130.00 148.00 0.00 34.88 34.88 ADB Financed 47.00 33.00 80.00 22.98 16.71 39.69 Total 65.00 163.00 228.00 22.98 51.59 74.57IDC Costs Borrower Financed 0.00 0.0 0.00 0.00 0.00 0.00 ADB Financed 14.40 0.0 14.40 6.11 0.00 6.11 Total 14.40 0.0 14.40 6.11 0.00 6.11ADB = Asian Development Bank, IDC = interest during construction, PDAMs = local government water supply enterprises.

3. Cost Breakdown by Project Component – Project Loan ($ million)

Appraisal Estimated Actual Component

Foreign

Exchange

Local

Currency

Total Foreign

Exchange

Local

Currency

Total

A. Institutional Development 1. Consulting Services 1.80 5.00 6.80 1.64 5.65 7.29 2. Incremental Administrationa 0.00 7.50 7.50 0.00 0.00 0.00 Subtotal 1.80 12.50 14.30 1.64 5.65 7.29 B. Subprojectsb 1. Water Supply 22.00 49.90 71.90 1.23 9.18 10.41 2. Roads and Bridges 18.20 53.60 71.80 4.41 21.90 26.31 3. Drainage 2.50 11.30 13.80 0.76 3.98 4.74 4. Solid Waste 4.10 9.10 13.20 0.40 4.86 5.26 5. Sanitation 1.10 3.00 4.10 0.07 1.22 1.29 6. KIP/MIIP 0.20 5.30 5.50 0.07 0.89 0.96 7. Bus Terminals 0.70 3.30 4.00 0.52 3.31 3.83 Subtotal 48.80 135.50 184.30 7.46 45.34 52.80 C. Equipment and Materials 0.00 0.00 0.00 7.77 0.60 8.37 D. Incremental O&Mc 0.00 15.00 15.00 0.00 0.00 0.00 E. Interest During Construction 14.40 0.00 14.40 6.11 0.00 6.11 Total 65.00 163.00 228.00 22.98 51.59 74.57 KIP = kampung improvement program; MIIP = market infrastructure improvement program; O&M = operation & maintenance. a At appraisal, includes staff honorarium, per diem, travel, office equipment, and related expenses. b At appraisal, includes land, civil works, equipment and materials, and detailed design. c On project facilities for one year after construction. d At appraisal, includes duties and taxes of about $20 million.

v

4. Project Schedule Item Appraisal Estimate Actual Date of Contract with Consultants: 1. Preparation of Subproject Appraisal Report January 1996 23 October 1997 2. Detailed Engineering Design and Construction Supervision, Kabupaten Bogor

October 1996 16 January 1999

3. Detailed Engineering Design and Construction Supervision, Kota Tangerang

October 1996 16 January 1999

4. Detailed Engineering Design and Construction Supervision, Kabupaten Tangerang

October 1996 16 January 1999

5. Detailed Engineering Design and Construction Supervision, Kota Bekasi

October 1996 16 January 1999

6. Detailed Engineering Design and Construction Supervision, Kabupaten Bekasi

October 1996 16 February 1999

7. Detailed Engineering Design and Construction Supervision, Urban Road

October 1996 15 February 1999

8. Overall Project Implementation Support April 1997 22 March 1999 9. Advisory Services to DGURD for Privatization April 1997 25 March 1999 10. Technical Assistance for KIP, Tribina April 1997 22 November 1999 11. Preparation of BME and PCR April 1997 12 March 2001 12. Unaccounted For Water Reduction, PDAM April 1997 04 November 2002 13. Financial Management Assistance to PDAM April 1997 05 November 2002 Completion of Detailed Engineering Designs and Construction Supervision: 1. Kabupaten Bogor March 2001 30 September 2003 2. Kota Tangerang March 2001 22 September 2003 3. Kabupaten Tangerang March 2001 30 July 2003 4. Kota Bekasi March 2001 30 September 2003 5. Kabupaten Bekasi March 2001 30 September 2003 6. Urban Road March 2001 30 September 2003 Civil Works Contracts: 1. Date of Award 25 August 1997 18 October 1997 2. Completion of Work 15 September 2002 30 September 2003 Equipment and Supplies: 1. First Procurement February 1999 12 June 1999 2. Last Procurement September 2002 7 September 2003 3. Completion of Equipment Installation December 2002 31 December 2004 BME = benefit monitoring evaluation; DGURD = Directorate General of Urban and Rural Development; KIP = kampung improvement program; PCR = project completion report; PDAM = local government water supply enterprise.

vi

5. Project Performance Report Ratings

Ratings Implementation Period

Development Objectives

Implementation Progress

From 30 November 1998 to 31 August 1999 Satisfactory Satisfactory From 30 September 1999 to 31 August 2000 Satisfactory Partly Satisfactory From 30 September 2000 to 31 October 2000 Satisfactory Satisfactory From 01 November 2000 to 30 November 2000 Satisfactory Partly Satisfactory From 31 December 2000 to 31 January 2001 Satisfactory Unsatisfactory From 28 February 2001 to 30 April 2001 Satisfactory Partly Satisfactory From 01 May 2001 to 31 May 2001 Satisfactory Unsatisfactory From 30 June 2001 to 31 July 2001 Satisfactory Partly Satisfactory From 31 August 2001 to 31 December 2004 Satisfactory Satisfactory D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Members a

Fact-Finding 7–31 May 1996 10 250 b,c,e,f,g,h,i,j,k,m Appraisal 19 August–20 September 1996 8 256 a,b,e,h,m,n,o,p Inception 12–17 June 1997 2 12 e,p Review 16–22 November 1999 2 14 e,p Midterm 8–17 November 2000 3 29 e,p Review 10–19 September 2001 1 9 e Review 17–26 April 2002 1 12 e Review 17–25 February 2003 1 9 e Special Loan Administration 10–18 November 2003 2 14 d,q Subtotal during project implementation

30 605 l,q,r

Project Completion Reviewb 11–17 April 2005 3 21 a a = director, b = chief, Indonesia Resident Mission, c = manager, d = principal project specialist, e = senior urban

development officer/senior urban management specialist, f = senior programs officer, g = senior financial analyst, h = senior economist, i = senior project implementation specialist, j = counsel, k = programs officer, l = housing and urban development specialist, m = consultant/institutional development specialist, n = consultant/water supply specialist, o = consultant/transportation specialist, p = consultant/institutional development specialist, q = assistant project analyst, r = consultant/financial/economic analyst.

b The Project completion report was prepared by Florian Steinberg (Housing and Urban Development Specialist//Mission Leader), Mila Pampolina (Assistant Project Analyst), and Poppy Lestari (Financial/Economic Analyst/Staff Consultant).

Balaraja

Tangerang

Serpong

BekasiCikarang

Parung

LeuwiliangCimanggu

Ciampea

Bogor

Cibinong

Depok

Citeureup

Cileungsi

Jonggol

To CirebonTigaraksa

Ciputat

KABUPATENBEKASI

DKIJAKARTA

KABUPATENBOGOR

KABUPATENTANGERANG

J a v a S e a

Cikarang R

iver

Bek

asi R

iver

Cileungsi

River

Cik

eas

Rive

rCil

iwun

g

Riv

er

Cis

adan

e R

iverL

ontar River

Cisadane R

iver

BanjirCanal

0 5 10 15 20 25

Kilometers

Project Area River

National Capital Provincial Boundary

Town Local Government Boundary

Major Road International Boundary

Railway Boundaries are not necessarily authoritative.

JAKARTA

To B

andung

To Rangkasbitung

TIMOR-LESTE

MALAYSIA

BRUNEIDARUSSALAM

I N D O N E S I A

SULAWESIKALIMANTAN

SUMATRA

SERAM

HALMAHERA

SUMBA

BALI

SUMBAWAJ A V A

BANGKA

BELITUNG

FLORES

TIMOR

PAPUA

10 00'So

130 00'Eo110 00'Eo

10 00'No

10 00'No

130 00'Eo110 00'Eo

0o0o

10 00'So

J a v a S e a

I N D I A N O C E A N

PACIFIC O CEAN

South China Sea

PROJECTAREA

I N D O N E S I A

METROPOLITAN BOGOR, TANGERANG ANDBEKASI URBAN DEVELOPMENT

(SECTOR) PROJECTProject Area

(as completed)

N

05-2173b RM

KotaTangerang

KotaBekasi

Kota DepokKota Depok

KotaBogor

I. PROJECT DESCRIPTION

1. The Metropolitan Bogor, Tangerang, Bekasi (Metro BOTABEK) Urban Development Sector Project (the Project)1 was designed following the approach and philosophy of the integrated urban infrastructure development program (IUIDP) in Indonesia. This approach aims to increase provision of essential urban infrastructure, develop participating local governments’ managerial capacity, introduce cost recovery principles, and establish more self-reliant revenue management. The ultimate goal is reduced dependency on budgetary support from central government. The Project was part of an Asian Development Bank (ADB) major support program to fund implementation of the Government’s IUIDP throughout Indonesia. 2. The Project shared the main objective of its predecessor, the BOTABEK Urban Development Project I (UDP),2 to overcome the shortcomings of urban infrastructure development caused by continual accelerated growth in the capital city region around Jakarta—covering the cities of Bogor, Tangerang, and Bekasi (BOTABEK).3 The urban infrastructure subsectors covered were urban roads, drainage, piped water supply, processing facilities for clean drinking water, Kampung (neighborhood) improvement, market improvement, public transportation terminals, solid waste management (SWM), and sanitation. The Project covered the Bogor district; the cities of Depok, Balaraja, Ciputat and Tigaraksa in Tangerang district; Tangerang city; and Cikarang city Bekasi district and Tambun in Bekasi city. 3. The Project’s goal was to benefit a specific number of people by component: (i) roads and bus terminals—4 million; (ii) water supply—1.4 million (0.8 million existing and 0.6 million new); (iii) sanitation—0.4 million; (iv) SWM—0.8 million beneficiaries; (v) drainage—0.7 million beneficiaries; and (vi) kampung improvement program (KIP) and market infrastructure improvement program (MIIP)—0.2 million beneficiaries. It was anticipated that some residents would benefit from several of the components while others would benefit from one only. The urban poor will benefit directly from KIP, as well as improved environmental, drainage, road conditions, and better access to scarce water resources (Appendix 1)—benefits shared by all urban residents. 4. Project objectives were (i) to increase sector management capacity of regional governments and local water companies (PDAM) of Bogor, Tangerang district, Tangerang city, and Bekasi district; and (ii) to accelerate the provision of urban infrastructure services.4 The Project consisted of the following components: (i) increased institutional capability to manage, operate, and maintain urban infrastructure, including improved revenue management; (ii)

1 ADB. 1996. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to

Indonesia for the Metropolitan Bogor, Tangerang and Bekasi Urban Development (Sector) Project. Manila. 2 ADB. 1990. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and

Technical Assistance Grant to Indonesia for the Botabek Urban Development Project. Manila. 3 The city of Depok was added in 2000 following its separation from the district of Bogor. 4 The urban infrastructure components known as “human settlement infrastructure” consisted of the following

subsectors: (i) water supply (additional production capacity, increased distribution network, customer connections to housing, public hydrant/public faucet, and non-domestic users), reservoirs, leakage decrease program; (ii) sanitation (purchase of sewage trucks; development and rehabilitation of sewerage treatment plants); (iii) solid waste management (transportation equipment; establishment and management of final disposal sites); (iv) drainage (development of new drains, rehabilitation and maintenance of existing drains); (v) urban roads (rehabilitation and construction of new roads and bridges; purchase of maintenance equipment); (vi) KIP (footpaths, neighborhood roads, drainage, water supply, and sanitary facilities like communal toilets, washing and water places); (vii) market improvement (upgrading of stalls, footpaths, drainage, and water supply); and (viii) bus terminals.

2

participation of civil society and the private sector in providing urban infrastructure; and (iii) accelerated service provision in the subsectors mentioned above. 5. By project end in September 2003, 90.7% of the planned investment had materialized and 92.5% of physical works were completed. KIP, MIIP, sanitation, and SWM components were 100% completed. Only the water supply component was incomplete, mainly affecting the installment of house connections.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

6. The Project was formulated prior to the 1997/1998 Asian economic crisis, which provoked substantial revisions and loan cancellation (50%), and is a follow-up to the earlier Botabek Urban Development Project.5 In addition, the sluggish market and poor regulatory environment reduced private sector motivation to participate in urban infrastructure. Weaknesses in project management were accentuated by institutional reorganization after the introduction of regional autonomy. The status of completion of project components is in Appendix 2 and a synopsis of the allocation of funds by districts and by subsectors is in Appendix 3. Appraisal targets were revised based on actual demands. B. Project Outputs

7. Bogor spent 10.74% of total infrastructure project costs, Depok 26.68%, Tangerang district 8.89%, Tangerang city 25.32%, Bekasi district 12.28%, and Bekasi city 16.09%. In terms of subsector coverage, urban roads had the highest share (40%) of total project costs, while KIP (2%) and MIIP (less than 1%) were the least costly subsectors. The 1997 Asian financial crisis affected project implementation and resulted in shortages of counterpart funding in district governments and other implementing agencies.6 Despite these difficulties, physical construction components were largely completed in accordance with revised targets (Appendix 3). An overview of the Project costs is in paras. 16 and 17.

1. Water Supply

8. The Project’s water supply component has contributed to a rise in service level to targeted beneficiaries from 20% to 37.8%, while the appraisal target was 54%. Although the required water supply facilities and infrastructure were constructed, house connections fell short of targets. Until September 2003, house connections numbered 41,786 units while the (revised) subproject appraisal report (SPAR) target was 70,021 units. Installment of new nondomestic connections reached 453 units—less than a third of the 1,525 unit appraisal target. Physical monitoring of the water supply infrastructure indicated that the appraisal target of 630 liters per second (lps) was achieved, and reservoirs met the 8,700 cubic meters (m3) target. Installment of main network covers the appraisal target of 21 km, and local distributors exceeded the target of 238km by 10km. Installation of reticulation pipes, however, amounts only to 484 km, substantially less than the 1,075 km appraisal target. The reasons for these deviations are related to (i) low consumer purchasing capacity because of the economic crisis, (ii) lack of in-depth demand analysis, and (iii) different water resource conditions of the districts involved. 5 ADB. 1990. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and

Technical Assistance Grant to the Republic of Indonesia for the Botabek Urban Development Project. Manila. 6 The immediate impact of this was to reduce project funding through loan cancellation of about 50% from 1998 to

2002 in response to the Government’s economic difficulties following the 1997/1998 economic crisis.

3

Bogor and Depok have ample groundwater resources, so many water consumers rely on ground wells. This makes it difficult for the formal water supply system to sell water to consumers. Neither Bekasi nor Tangerang have ground water resources, so local water companies have greater business potential.

2. Sanitation

9. The Project has financed construction of two wastewater treatment plants in Karawaci (Tangerang city) and Sumur Batu (Bekasi city). In addition, a rehabilitation program of existing treatment plants covered two units as envisaged at appraisal: Sepatan (Tangerang district) and Kalimulya (Depok). At appraisal, 16 units of sewage trucks were planned for purchase, but only nine units were actually purchased—e.g., one unit in Bekasi city, one unit in Bekasi district, four units in Tangerang city, and three units in Tangerang district. The shortfall has been explained by cost increases and lack of counterpart funding—the remaining seven units were to be funded by the routine budget of Tangerang district (four units) and Tangerang city (three units). The level of sanitation services has increased, but only about 1,703,334 people are served, far short of the 2,445,500 target.

3. Solid Waste Management 10. The Project has financed four final disposal sites (FDS) in accordance with appraisal targets. These FDS are in Tangerang district (Pasir Muncang), Tangerang city (Jatiwaringin), Bekasi district (Burangkeng), and Bekasi city (Sumur Batu). In addition, the Project supported the rehabilitation and enlargement of three existing FDS, as planned at appraisal, in Bogor (Pondok Rajeg), Depok (Cipayung), and Tangerang city (Rawa Kucing). Among the FDS developed or rehabilitated, only five are operational: Pondok Rajeg, Cipayung, Rawa Kucing, Burangkeng, and Sumur Batu. The existing FDS did not apply the sanitary landfill system and resorted to the conventional open dumping system or controlled landfill system.7 FDS Jatiwaringin (Tangerang city) and FDS Pasir Muncang (Tangerang district) are idle because of unresolved operational issues. Solid waste transportation target purchases were made: 19 arm-roll trucks, 29 dump trucks, and 98 container units. The Project contributed to an improved level of solid waste collection, but open or controlled dumping has much greater negative environmental impacts than sanitary landfills. The total number of people served is about 2,372,795, short of the target 3,408,845.

4. Drainage

11. The Project improved drainage facilities along the targeted 117.47 km. These drainage facilities can reduce flooding of 71 hectares (ha), compared to the appraisal target of 168.25 ha. The shortfall could not be achieved as the system covered rather small-scale drainage problems, and the root causes of flooding would only have been eliminated with much larger scale drainage efforts. There is an absence of community participation in adequate operation and maintenance (O&M) programs to ensure the cleanliness and maintenance of drains, which tend to be clogged with garbage and other solids.

7 Tangerang city reports that the choice of FDS locations was unsuitable—the local government reported substantial

ground water intrusion, although the Project did not establish a monitoring system for these environmental conditions.

4

5. Urban Roads

12. The Project funded new road construction, and the enhancement and rehabilitation of 265.24 km of roads, in accordance with the SPAR revision and supplementary plan. The urban road sector reduced the level of congestion and traffic jams, and increased driving speed and actual road capacity. There has been a significant increase in road performance and survey results show that some roads have exceeded sector targets. Road capacity increased threefold to 1,778,634 (pcu/h) from the pre-project level of 590,331 pcu/h. Average driving speed improved from 18.3 kilometers per hour (km/h) to 27.7 km/h.

6. Kampung Improvement Program

13. KIP helped upgrade 40 kampungs over 453 ha, substantially above the 263 ha target. Improvement works included environmental roads, footpaths, drainage, water supply facilities, communal sanitary and laundry facilities (MCK), and solid waste facilities. The low standard of KIP works (e.g., the poor state of footpaths), low unit prices (Rp8,000,000/ha), and serious maintenance problems reflect insufficient investment and unsatisfactory supervision of construction works. There is hardly any trace of KIP in some areas, while in others it has improved cleanliness, tidiness, and environmental health, as well as enhancing the economic well-being of kampung residents. KIP projects were among the first to be implemented after the Asian financial crisis and represent a low-cost approach to selected basic infrastructure needs.

7. Market Infrastructure Improvement

14. MIIP comprises 10 market units measuring 7.26 ha, in accordance with appraisal targets. The fairly modest scope of works covered footpaths, drainage facilities, water supply facilities, sanitation, and solid waste facilities. The MIIP sector has increased the cleanliness and environmental quality of markets, contributing to public health in general. MIIP also made the market environment more customer-friendly, producing higher income opportunities for traders.

8. Bus Terminals

15. A major bus terminal in Tangerang city was funded and began operations in 2004, after a long delay in obtaining an operational license. There has been steady progress since Tangerang Bus Terminal’s soft opening, and the terminal is operating successfully—it is not only refinancing itself but is creating additional income for Tangerang city. In other project districts and cities, there have been insurmountable problems with land acquisition, and no other bus terminal project has been carried out. C. Project Costs

16. Actual project costs totaled $74.6 million equivalent or 32% of the original appraisal estimate (as shown in page iv of project data). The 2001 loan restructuring reduced the overall investment by 67%. Actual foreign exchange costs were $22.7 million (35% of appraisal estimate) and local currency costs were $52 million (32% of appraisal estimate). 17. Actual ADB financing was $39.7 million (49.6% of the $80 million loan). Exchange rate fluctuation and inadequate counterpart funding resulted in the cancellation of $40.3 million (50.4%) as part of the portfolio restructuring response to the Government’s budget difficulties in 1998 and thereafter (Appendix 4).

5

Table 1: Financing Plan ($ million)

Appraisal Estimate % of Actual Change from Appraisal

Item Foreign Local Total Total Foreign Local Total Foreign Local Total Borrower-financed

18.0 130.0 148.0 65 0.0 34.98 35.9 (18.0) (95.1) (113.1)

% of change (73) (76) ADB-financed 47.0 33.0 80.0 35 22.7 17.0 39.7 (24.3) (15.0) (40.3) % of change (52) (48) (50) Total 65.0 163.0 228.0 100 22.7 51.90 74.6 (111.10) (153.4) % of change (68) (67)

ADB = Asian Development Bank. Source: ADB Loan Financial Information System; Final Report by Advisory Consultant for Project Implementation. D. Disbursements

18. ADB financing was $39.7 million, including interest during construction (49.6% of the $80 million loan). The 1997/1998 Asian financial crisis made the original disbursement schedule very unrealistic. Fifty-five percent of the loan was cancelled from March to October 2000 because of changes in location, volume, and type of investments required. The Government’s contributions to the Project were much lower than appraisal estimates. E. Project Schedule

19. The Project was originally scheduled to start on 10 April 1997 and end on 30 September 2002. However, since many construction activities were not finished, the Project was extended to 30 September 2003 (Appendix 5). Some construction work was delayed even further because of late approval notices from ADB and contractors’ weak performance, and had to be funded through other sources. Private sector participation (PSP) in water supply in Bogor and Depok never materialized. F. Implementation Arrangements

20. The then Directorate General of Human Settlements (DGHS)8 of the then Ministry of Public Works (MPW) was the Project’s lead executing agency (EA). BOTABEK local authorities and water companies (PDAM) were the implementing agencies (IAs). DGHS oversaw project management and coordinated the input of other central government agencies. The Directorate General for Roads (MPW) was responsible for urban roads and bridges. The Directorate General for Water Resources Development (MPW) was in charge of urban flood control and bulk water supply. The Directorate General for Public Administration and Regional Autonomy of the then Ministry of Home Affairs (MOHA) was responsible for assisting districts with institutional development—covering urban management, local revenue improvement, and urban finance. These agencies were represented in the urban development coordination team chaired by the national development planning agency (BAPPENAS), which is responsible for general urban and regional policies and strategies. DGHS reorganization did not have a negative effect on project implementation. However, decentralization caused difficulties at local levels, as agencies were uncertain about their new responsibilities.

8 DGHS later became the Directorate General of Urban Development under the then Ministry of Settlements and

Regional Development (MSRD). Since 2004 it is again called Ministry of Public Works.

6

21. A project management unit (PMU) and local project implementation units (PIUs) were established to provide project management, technical support, and coordination (Appendix 6). DGHS, MPW, and MOHA jointly oversaw the Project. DGHS recruited consultants for overall project preparation, management support, and training. PMUs recruited consultants for project implementation, technical training, and detailed design and supervision. PIUs undertook construction management and prequalification; procured equipment, materials and civil works; administered contracts; and exercised quality control and sector project management. G. Conditions and Covenants

22. Most covenants under the Loan Agreement were complied with (Appendix 7). Deviations include occasional withdrawals from the loan account prior to full approval of initial environmental examination/environmental impact assessments (IEE/EIAs), start of construction works before final ADB approval, deficient technical standards, nonavailability of central government assistance to fund certain components, changes to local government structure after devolution, and resistance from neighboring residents and civil society groups against solid waste deposit sites. ADB made frequent observations on the low level of compliance to loan withdrawals before IEE/EIA approval. H. Related Technical Assistance

23. The Project was supported by 13 consulting contracts covering preparation of SPARs, detailed engineering design, management advisory, monitoring and evaluation, unaccounted-for-water reduction, and financial management assistance. Consultants’ performance in advising PMU and PIU staff was generally satisfactory, skill transfer from consultants to implementing agencies was not fully satisfactory, and the level of local government staff participation was low. Physical infrastructure quality was generally good, with the exception of sanitation, KIP, and MIIP. The overall quality of technical assistance was satisfactory. I. Consultant Recruitment and Procurement

24. The recruitment process followed ADB's Guidelines on the Use of Consultants, and procurement was carried out in accordance with ADB's Guidelines on Procurement. However, in some cases, ADB’s objection to technical details, or the complex work requirements and lack of clear internal government procedures resulted in approval and implementation delays. J. Performance of Consultants, Contractors, and Suppliers

25. The performance of consultants, contractors, and suppliers was as follows:

(i) SPAR project preparation was generally satisfactory. However, some targets were overoptimistic because of lack of real demand assessment (e.g., PDAM water). External factors caused some revisions during implementation.

(ii) Detailed engineering design (DED) TA and construction supervision in the six cities and districts (Kota/Kabupaten) was satisfactory. There are few poor quality structures—sewerage treatment plants (IPLT) in Kalimulya (Depok) and Sepatan (Tangerang district). Physical works delays were minimal, caused by lack of coordination or field conditions (e.g., crossing between toll road and drainage infrastructure in Bekasi city).

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(iii) Consulting services supported project implementation; assisted the EA, PMU, and PIUs; and provided training. This was an essential project input and is rated satisfactory.

(iv) Project consultants made a significant effort to provide advisory on PSP to regional governments, but they were unable to establish consensus and commitment about the required public agenda. Their input is rated partially satisfactory.

(v) Financial management assistance consultants worked with four PDAMs (Bogor district, Tangerang district, Tangerang city, and Bekasi district) to improve financial management capacity and sustainability through enhanced technical and financial efficiency—as part of a business development plan. While the consultants’ proposals were technically sound, PDAM management left much to be desired and requires remedial actions. Therefore, the results are rated partially satisfactory.

(vi) The unaccounted for water (UFW) consultant worked with four PDAMs (Bogor district, Tangerang district, Tangerang city, and Bekasi district) to help them identify leakage causes, determine leakage prevention methods, and implement UFW programs in pilot projects. The work of the UFW consultants, however, began late (November 2001), and much is to be accomplished after the life of the Project.9 The results are rated partially satisfactory.

(vii) Most contractors’ work was good quality but a small proportion was substandard—e.g., the crossing of the toll road intersection with the drainage network in Bekasi city could not be completed as scheduled because of the contractor’s incapacity. In general, the performance of contractors and suppliers involved is rated satisfactory. Flaws in project performance are more due to weaknesses in government oversight and monitoring—both PMU and PIUs.

K. Performance of the Borrower and the Executing Agency

26. The Project began during the Asian financial crisis, which reduced the Government’s capacity to release required counterpart funds and resulted in a delay of almost a year. The fiscal situation improved in 2000 and substantial progress was recorded by end of the Project in September 2003 and when preparing the EA’s project completion report (PCR) in 2005. 27. The main obstacles of the Project were (i) land acquisition problems, (ii) lack of private sector involvement because of the Asian financial crisis, and (iii) doubts over decentralization and administrative reform. The EA tried to comply with all the loan covenants and followed up on recommendations in ADB’s aide memoires, such as (i) coordinating and monitoring project implementation, which involved districts and cities as well as consultants; (ii) encouraging districts and cities to accelerate project implementation; (iii) suggesting solutions to technical or administrative problems; (iv) supporting participating districts and cities operate completed infrastructure components; and (v) O&M activities, as agreed during project appraisal. However, requests for clarification on resettlement (see para. 53) and repeated reminders concerning the EIAs, particularly for final disposal sites of solid waste (see para. 60), remained unanswered.

9 According to the EA’s final report, UFW losses decreased slightly from 1996 to 2002: Bogor (3%), Tangerang

district (17%), Tangerang city (38%), and Bekasi city and district (18%).

8

28. Technical and managerial supervision was problematic, because of the complexity of a multi-sector project. Flaws were identified in (i) some technical standards applied in KIP and MIIP, (ii) application of EIA,10 (iii) implementing revenue improvement action plans (RIAPs), and (iii) local institutional development action plans (LIDAPs). The absence of PDAM business plans and inconsistent revenue practices undermined better achievements in water supply, sanitation, and waste management sector. Given the EA’s strong commitment and effort to fully implement the Project, its overall performance is rated satisfactory. L. Performance of the Asian Development Bank

29. As indicated in para. 6, the Project evolved from the earlier Botabek Urban Development Project. Due to the availability of consulting services under the Botabek Urban Development Project, no separate project preparation technical assistance (PPTA) was provided. The Project was consistent with ADB’s and the Government’s strategy, and the substantive issues have been addressed. However, as is evident from the under-performance in revenue improvement and institutional action planning (see paras. 35 and 36) and the lack of private sector participation (see para. 38), these aspects of the Project have not been adequately prepared, and existing assistance did not produce the desired success. 30. ADB conducted various review missions during project implementation (see Basic Data) related to the work of the EA, PMU, and PIUs, followed by site visits to project locations. The objectives of review missions were to check (i) project progress and implementation of action plans; (ii) status of implementation of loan covenants; (iii) audited financial reports; (iv) feasibility of private sector involvement; (v) status of cooperation between the Government and private sector; (vi) benefit monitoring evaluation (BME); (vii) quality of project implementation supervision, including civil works; (viii) availability and timeliness of counterpart funding; (ix) progress of capacity building, including O&M; and (x) progress in implementing infrastructure components. 31. The EA and participating local governments consider ADB’s role in achieving the Project objectives (as stated in the report and recommendation of the President, loan agreement, and loan covenants) as substantial. ADB has been very concerned about the threat of environmental pollution.11 During every review, ADB provided recommendations and time-bound action plans aiming at improved project implementation. ADB has shown a very strong concern for transparency of tender processes. ADB’s implementation inputs have contributed to increased local government management capacity.

10 Although the Project adopted a community-based approach, the extent of consultation with project-affected

communities or groups was less than satisfactory in some subprojects where residents voiced their protest and anger over the choice of locations and demanded compensation for the bad smell caused by unsanitary landfill methods. While the Loan Agreement provides comprehensive coverage of environmental assessment and review of subproject EIAs (Schedule 5, para. 20), the provision requiring all IEEs/EIAs to be submitted to ADB for review appeared impractical.

11 This is evident in the findings of at least three ADB review missions (back-to-office reports dated 22 July 1997, 12 August 1998, and 1 Oct 2001) where the mission stressed the need for the Government to screen all investments for environmental impacts, prepare an IEE or EIA for those with significant adverse environmental impacts, secure the respective EIA commission's approval of the EA report, and submit the IEE/EIA along with the subproject appraisal reports to ADB for review. For example, the back-to-office report dated 1 October 2001 reported that summary project appraisal reports with potential significant environmental impacts had been approved, tendered, and contracted without the necessary environmental clearance certificates—environmental impact assessments (AMDALS), which include sanitary landfills, sludge treatment plants, major roads, bus terminal, and water supply components. Even assuming that this poor level of noncompliance (as assessed in 2001) improved, compliance with the IEE/EIA requirement still appears underreported under para. 20, Schedule 5 of the Loan Agreement.

9

32. The EA observed shortcomings in ADB performance, such as the limited duration of supervision missions, and slow response to approval notifications, which has contributed to delays in subproject implementation. Approval processing should not exceed 2 weeks, according to the Project agreement, but approvals were delayed because of failure to comply with ADB guidelines, and funding for several districts and cities was late. The reasons for noncompliance were not clear to the local governments. ADB missions seemingly did not have enough time to discuss financial and economic issues with the EA and IAs. Given ADB’s strong concern for good governance and achievement of project objectives, its overall performance is rated satisfactory.

III. EVALUATION OF PERFORMANCE A. Relevance

33. The Project budget was substantially cut in 2001, so it operated with substantially less resources during the final implementation phase, and project ambitions were inevitably compromised. This was exacerbated by the lack of PSP contributions. The Project’s relevance for the BOTABEK residents and economy was therefore reduced and, in some areas, the investment was not sufficient to create any of the expected impacts. However, the 2001 project fund cancellation was part of the loan readjustment following the Asian financial crisis that led to a shortage of counterpart funding, which ADB could not compensate due to rigid cost-sharing formula rules. The Project is still rated as relevant as it contributes to meeting the Government’s priority needs in the sector. B. Efficacy in Achievement of Purpose

34. The Project’s immediate objectives were to (i) increase the capacity and capability of provincial and local government agencies to implement, operate, and manage the new project-funded facilities; and (ii) improve the level of service of IUIDP subsectors in the area, comprising 13 cities and towns with a projected population of 6.7 million in 2002. Data available indicates that the effects of the Project have supported these objectives. Given the constrained circumstances of the implementation of this Project, it is assessed as efficacious.

1. Integrated Urban Development and Improvement of Urban Infrastructure

35. The Project has contributed to an improvement in the overall condition of BOTABEK infrastructure and services (para. 7). The complexity of managing an “integrated” process of multi-sector components and many institutional partners has been a daunting task. The IUIDP approach was implemented successfully prior to regional autonomy and decentralization. After regional autonomy was introduced, the Project—like many similar UDPs—continued to rely heavily on support from central government. While local government management capacity increased under the Project, RIAP and LIDAP implementation proved to be too demanding and suffered from standardization; it was gradually abandoned because of the fiscal situation after the Asian financial crisis. Medium-term development plans, which formed the operational backbone of the IUIDP approach, were no longer updated annually, as envisaged by the IUIDP “rolling plan” approach.

2. Training and Institutional Strengthening

36. Local government staff participated in numerous training courses organized by the consultants, covering project planning, appraisal, and implementation. Training opportunities

10

under the Project were enhanced by other projects like the ADB-funded Capacity Building in Urban Infrastructure Management (CBUIM)12 Project. Institutional strengthening—through the temporary establishment of PMU and PIUs—contributed to efficient project implementation without undermining existing government agencies. Support for project implementation guidelines and local regulations strengthened the institutional capacity of the sectors in general. The intended LIDAP process (para. 28) suffered because of the Asian financial crisis and radical administrative reform. LIDAP’s value as a structured and systematic approach to institutional strengthening has been shown in many pre-crisis UDPs. Many other institutional reform proposals were perceived to be only consultant-driven, and they failed to promote ownership of the institution-strengthening agenda.

3. Participatory Development

37. The Project design referenced community involvement, but there has been very limited actual involvement for community participation during implementation, except in KIP. Some subsector activities caused community concern and triggered community consultations, e.g., road construction cases and solid waste final disposal sites where project-affected residents voiced their protest and anger over the choice of locations, and demanded compensation for the bad smell caused by unsanitary landfill methods. Local government participation in the formulation of revenue enhancement (RIAP) and institutional strengthening (LIDAP) was hampered by the perception that these methodologies were conceived by central government and are consultant-driven. Therefore, there was much less ownership in the formulation and implementation of RIAP and LIDAP than the multi-year IUIDP investment plans.

4. Private Sector Participation

38. The participation of the private sector was not emphasized enough in the Project design or during training, so the Project’s PSP component did not perform well. The Project did not support local governments adequately in terms of feasibility studies, commercial and risk evaluation procedures, and standard contracts. The PDAMs have done little to exploit PSP opportunities, and there seems to have been uncertainty about the authority of tariff-setting under PSP—a debate that is aggravated in an environment where increased service tariffs can become political issues. Reform of the national water sector regulatory system as a precondition for successful PSP was beyond the scope of the Project. PSP under the Project was unsatisfactory. The Government expected that PSP would constitute about 25% of investment in urban infrastructure areas such as water supply, sanitation, and SWM, and would help introduce consistent cost recovery practices. To date, PSP has underperformed and efforts have been limited to (i) installment of reticulation networks and water supply house connections in (a part of) Bogor, (ii) installment of water supply connections in (a part of) Depok, and (iii) IPLT management of Karawaci in Tangerang city.

5. Project Benefits 39. The reduced budget limited project achievements to 70%—as of September 2003, the Project closing date. Activities in water supply, sanitation and SWM were not completed yet (and could not be funded anymore under the Project), whereas drainage and MIIP had a 100% completion rate, KIP over-performed, and the bus terminal was not finished by the Project 12 ADB. 1997. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Republic of Indonesia for Capacity Building in Urban Infrastructure Management Project. Manila.

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closing date.13 The total number of beneficiaries for each subcomponent is summarized in Table 2. Sector and district data on project beneficiaries (Appendix 8) demonstrates a large variation in achievement rates across all subsectors. Bogor, Depok, and Tangerang city experienced low performance in the water supply components, while Tangerang district, Bekasi district, and Bekasi city achieved targets of 100% or more for the same subsector. Revised estimates in general were too optimistic, given the reduced budget and institutional constraints.

Table 2: Project Benefits

Number of Beneficiaries Appraisal Estimate Actual as of Achievement Component Original Revision 30 Sept. 03 (%) Water supply 609,080 380,145 228,825 60.19 Sanitation 2,787,645 2,445,500 1,703,334 69.65 Solid waste 2,515,159 3,408,845 2,372,795 69.61 Drainage 146,201 7,803 7,803 100.00 Urban roads – – – – KIP 39,664 34,374 52,232 151.95 MIIP 15,568 12,156 12,156 100.00 Bus terminals 3,299 – 3,299 100.00 Total 6,116,616 6,288,823 4,380,444 69.65

KIP = kampung improvement program; MIIP = market infrastructure improvement program. Source: Ministry of Public Works.

C. Efficiency in Achievement of Outputs and Purpose

1. Financial Performance

40. Project objectives included improved financial management of participating districts and PDAMs: (i) improved revenue collection results, (ii) increased O&M expenditure, (iii) regular review of tariffs of PDAMs and other revenue-earning services, and (iv) increased cost recovery for operational and O&M components. The Project was “efficient” as it managed to achieve the majority of the planned outputs in accordance with the reduced investment. 41. The Project’s main tool for achieving financial performance targets were revenue-enhancing activities as specified by the RIAP, which was chosen from the IUIDP menu of previous projects. While RIAPs have shown some positive results in IUIDP-type projects, the Project suffered from the Asian financial crisis, which caused tax and user fee collection to under-perform. This prompted all participating local governments to abandon the RIAP approach, and regressed to relying on central government transfers instead of funding their own development initiatives. This challenges the decentralization policies and objectives of the 2001 administrative reform in Law 22 (regional administration) and Law 25 (fiscal balance), both issued in 1999, which provided the foundation for autonomous local expenditure management and decision-making. Appendix 9 summarizes participating districts’ financial performance. 42. PDAMs’ financial performance has been generally satisfactory, except in Tangerang district, which requested excessive connection costs (Appendix 10).14 It was weighed down by low UFW reduction results and performed poorly in overcoming this problem. The number of subscribers to PDAM services in the BOTABEK region varies substantially between water-rich 13 The new Tangerang bus terminal was completed in November 2003 and has been operational ever since. 14 Revenue generating projects (i.e., water supply, SWM, wastewater treatment) and non-revenue generating but

economically relevant projects (e.g., roads) were financially reevaluated. Assumptions were based on information provided by districts, PDAMs, and the Government’s BME and PCR.

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districts where many households still maintain bore wells as their prime source of water (e.g., Bogor) and other districts with little groundwater resources where many households rely on PDAM services. PDAMs (upon instigation of local parliaments) remain hesitant to implement a consistent policy of gradual tariff increases, in accordance with advice from ADB and other development partners. PDAMs continue to provide substandard services that fail to motivate client payments, resulting in low revenues, which, in turn, lead to poor service quality.15 43. The sanitation and wastewater subsector’s average cost recovery is under 45% since the fees charged for sludge disposal are remarkably low. Financial analysis shows that efficiency would only be achieved at an average cost recovery ration above 60% (Appendix 10), so all districts are actually subsidizing the desludging services. 44. The SWM subsector continues to be subsidized with a cost recovery ratio under 40% (Appendix 10). It appears that many residential areas are not connected to municipal solid waste collection, and receive SWM services from local, informal waste collectors who use the typically low fees for subsistence. The low revenue position of major solid waste deposal sites suggests that disposal by municipal or private operators is undercharged or sometimes not charged at all. 45. The interregional bus terminal in Tangerang that came into operation in November 2003, after project closing, is a very successful revenue-generating operation. 2004 data shows that it is able to sustain its operational costs and contribute to loan repayment. It is expected that this terminal will reach full revenue-generating capacity once all commercial stalls and service facilities are in operation, and the terminal is used by all subregional bus operators.

2. Economic Performance

46. The economic internal rate of return (EIRR) for the water sector shows very positive results: Tangerang city (33.4%), Tangerang district (19.9%), Bogor (20.5%), and Bekasi districts (28.5%) (Appendix 10). These EIRRs are all above the ADB’s 12% economic opportunity cost of capital (EOCC) benchmark, and demonstrate the investments’ positive economic contribution. 47. The drainage subsector shows relatively high costs. The analysis reveals that the economic benefits of flood-free areas could be higher if a larger reference area had received drainage services (Appendix 10). 48. The roads subsector is largely successful since the NPV and EIRRs are acceptable, with the exception of a road in Balaraja in Tangerang district, which is underutilized because of its location. 49. KIP and MIIP subsectors were not assessed due to their very limited investment share. However, KIP is the only subsector that over-performed in terms of number of beneficiaries and can be considered an investment with important social and economic benefits due to improved health and sanitary conditions for residents and surrounding neighborhoods. Similar conclusions can be drawn for MIIP, as an increase in market clientele is a tangible economic efficiency. The economic performance of the subsectors assessed is “efficient.”

15 A phenomenon known as the “low-level equilibrium trap.”

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D. Preliminary Assessment of Sustainability 50. The sustainability of project subsector components varies according to their nature and managerial approaches. It appears that sustainability issues, particularly related to O&M,16 were assessed during project reviews but many suggestions for far-reaching structural measures were not followed through. For the main investment sectors, i.e. roads and water, as well as for the bus terminal, the overall assessment is that sustainability is likely: (i) Water supply: The keen interest of participating local governments combined with existing investments and plans for future expansion make sustainability most likely; (ii) Sanitation: More technical and financial sustainability problems need to be addressed as part of local government O&M plans. If adequate O&M is not undertaken, some investments are at risk of rapid deterioration, and sustainability is less likely; (iii) Solid waste management: The failure to introduce sanitary landfill technologies as standard operating procedure characterizes all final disposal sites developed under the Project. Existing capacity problems of some sites indicate their limited life span. Thus, there are serious financial and environmental problems that must be addressed. Sustainability is less likely; (iv) Drainage: This subsector requires more community involvement in maintenance to become sustainable. So far, there seems to be no effort in regular management and maintenance of these facilities. Sustainability is less likely; (v) Urban roads: This subsector is covered by regular maintenance budgets and receives relatively high attention from local governments. This suggests that local governments will invest further in the maintenance and expansion of the existing road system and sustainability of this sector is most likely; (vi) KIP: Kampung improvement has come a long way from a favored public works sector to be just a sideline of urban infrastructure development under this project. Extremely low investment levels and the absence of organized community maintenance have contributed to an overall decay in KIP infrastructure. Residents expect that the Government will provide improvements under another KIP generation; (vii) MIIP: As in the case of KIP, the standards of market improvements have been low and despite the positive economic impacts of MIPP for the markets covered, there seems little prospect to expect user participation in maintenance and upkeep. Thus, it can be expected sustainability if these investments are less likely but will rather require a new generation of investment in markets; and (viii) Bus terminals: Bus terminals have very good potential as revenue earners and will become a major impetus for spatial development. This suggests that these are most likely sustainable once established and operational. The overall sustainabililty of the Project is rated “less likely.” E. Environmental, Sociocultural, and Other Impacts

51. The Project’s environmental impact is considered generally satisfactory, but environmental management needs some improvement. The environmental impacts for each sector are as follows: (i) Water supply: No negative environmental impact was reported since the scope and volume of activities was limited. The water quality management activities of several regions such as Bogor district and Bekasi city are a positive effort to manage environmental impacts. The UFW action plans are a step in the right direction, even if performance is still low. The environmental management of this subsector is rated satisfactory; (ii) Sanitation: Environmental management of the sanitation sector can be rated satisfactory for Depok city and Tangerang district. Bekasi city is less satisfactory due to a lack of awareness building and would need adequate tariff structures that allow environmental management improvements; (iii) Solid waste management: Only Depok city, Tangerang city, and Tangerang district can be rated as partially satisfactory in the operation of SWM disposal sites, but they fail 16 The lack of O&M remains a perennial issue of concern despite specific training that included performance-oriented

maintenance management. Budgets for O&M tend to be insufficient, O&M is not seen as a priority, and optional community-assisted O&M approaches are not explored or applied.

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in the management of FDS environmental impact. Bogor district, Bekasi district, and Bekasi city were less satisfactory since (a) heavy equipment was damaged or quantity was insufficient, (b) environmental management following EIA guidelines was not implemented (Bekasi city and Bekasi district), and (c) locations were unsuitable and EIA documents, prepared in conjunction with SPARs, were not approved by EIA commissions; (iv) Drainage: Environmental management can be rated satisfactory, except for the case of the Kalimalang Crossing drainage channel (crossing the Bekasi toll road), which caused significant disturbance and damage to the toll road; (v) Urban roads and bus terminals: Environmental management of urban road development and the transport terminal can be rated satisfactory. Implementation of road building projects and the Tangerang bus terminal was performed with adequate consultation and community involvement, and did not cause major environmental disruption. Implementation of these activities caused positive impacts to local economic growth and area development; (vi) KIP and MIIP: These investments have produced positive environmental impacts and results must be considered satisfactory. However, both are at risk due to poor O&M. 52. The Project’s social impacts are substantial since it represents a momentum of change in participating cities’ social and cultural life. All relevant stakeholders have accepted the Project without significant requests for changes, which indicates that local behavior and sociocultural values were largely in agreement with the main project objectives. However, there have been instances of community rejection of solid waste disposal sites, and occasionally there was a lack of community consultation. 53. Land acquisition—a local government responsibility—has been largely limited to final waste disposal sites, sewerage treatment plants, all new roads, some road improvements, and the Tangerang bus terminal. ADB’s mission reports (10–19 September; 12–17 June 1997; 21–27 July 1998) state the need for major land acquisition for roads and drainage subprojects, escalating land prices, local governments’ lack of land acquisition funds, and project delays caused by land acquisition issues. The ADB mission reminded the Government in 1997 of the need to prepare resettlement for subprojects that entail land acquisition. The ADB mission’s aide memoire (September 2001) requests the PMU to prepare a consolidated report on land acquisition status with an assessment and resolution strategy. However, it appears that the EA has not submitted such resettlement plans and there are no details on involuntary resettlement. 54. No gender-disaggregated data or participatory benefit data is available to quantify the Project benefits for women and children. However, it can be assumed that improved and more accessible water supply, wastewater and sanitation services, drainage, and SWM will benefit women and children in their residential environment. Field visits during ADB’s PCR mission confirmed that women received substantial benefits from improved household environments, particularly through KIP, SWM, and MIIP. 55. One of the Project goals was to contribute to economic growth and improve living standards in the BOTABEK region. Actual economic growth increased by 26.1% from 1998 to 2001, according to the EA’s PCR. New job creation increased significantly between 1998 and 2001 and it is assumed that the Project has contributed directly or indirectly. Overall, environmental and socio cultural impacts are rated as “moderate.”

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IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

56. Based on a review of its relevance, efficacy, efficiency, sustainability, and environmental, sociocultural, and other impacts, the Project is rated as successful. B. Lessons Learned

57. The late establishment of PMUs and PIUs affected project start-up. Delayed preparation of the SPAR document and DED took much longer than expected and resulted in program revisions and fund reallocations. There was some inconsistency in defining realistic project targets, which could have been avoided with a more stringent project appraisal. Centralized and consultant-driven project monitoring did not sufficiently track all aspects of this multi-sector and multi-stakeholder project. While important adjustments (e.g., loan cancellations) were made, shortcomings in the field of institutional strengthening and revenue generation were never addressed. 58. Land acquisition problems frequently affected project implementation and caused delays, which could have been avoided with more foresight during project preparation. Despite ADB’s repeated insistence on resettlement plans, neither the individual PIUs nor the PMU submitted them. It seems that, despite flagging the absence of agreed resettlement plans, no further enforcement actions were taken by PIUs or the PMU. 59. Delays in ADB approvals are attributed to the late provision of supportive data and information by the EA or IAs. Late approvals contributed to implementation delays. ADB and the EA did not establish a mechanism for mutual clarification of cases under dispute; ADB took unilateral decisions. Electronic data transfer and more direct communication with ADB and/or the resident mission could have enhanced communication and helped reduce approval time. 60. The introduction of regional autonomy had a strong influence on project implementation, especially the delayed allocation of local development funds. Staff rotation, particularly local project managers, resulted in lack of continuity, loss of experienced personnel, and delays. Subprojects that relied on inter-institutional cooperation faced many obstacles and bottlenecks. Staff rotation issues can only be solved if the EA has the political will to implement projects without major disruptions due to staff transfer. 61. Private investors’ behavior was strongly influenced by the absence of adequate and clear guidelines, regulatory frameworks, and standards. Where these were in place, the private sector was forthcoming but, in general, its role was much smaller than anticipated. The private sector is still not ready to invest in the water supply sector, except in the context of real estate developments where investment can be charged directly to customers. PSP promotional activities can only be successful if complementary activities (e.g., policy dialogue) and the development of regulatory framework are accomplished. 62. The EIA was not used as a guide for environmental safeguards, which will impact subprojects’ environmental sustainability. Environmental considerations were low on the priority list for service operators or facility owners. Inadequate procedures, inappropriate technologies, or environmental hazards were regularly discussed and documented during ADB PCR missions. However, few adjustments were made despite repeated reminders. EIAs need to be

16

implemented in a more rigorous fashion with full involvement of local government environmental agencies (BAPEDAL). There was no defined institutional arrangement for subproject screening or EA review and approval—critical for this project, which is expected to appraise a huge number of subprojects covering different sectors/subsectors. 63. The shortage of adequate O&M funds will have a negative influence on the Project life expectancy and the sustainability of infrastructure investments. The effectiveness of O&M capacity building for service providers was limited, and local governments were unable to overcome internal adverse attitudes within their own ranks and were unwilling to increase their own capacity. The covenants should have stressed more firmly the need for adequate O&M funding. Increased technical support for O&M needs to be considered as part of project design. 64. Local and central government must adopt cost recovery and sustainability as guiding principles for infrastructure investments. Many governments still perceive infrastructure investments as a central government responsibility and there is a general lack of awareness about the financial and institutional sustainability of such investments. In terms of institutional strengthening, local governments need well-planned capacity building action plans related to project implementation management and O&M. 65. The supply of low quality machinery with an unreasonably short life span should have been prevented by proper quality specifications in the bidding documents. Tender documents must be more specific in terms of minimum quality standards. C. Recommendations

1. Project Related

66. PSP should play a more prominent role in future urban infrastructure projects. Successful PSP should be disseminated more widely, and form part of PDAMs’ financial recovery action plans. MPW promotion of PSP should be enhanced and coordinated in the framework of ADB’s new PSP Development Facility for Urban Infrastructure in Indonesia, currently under preparation. ADB should support the Government in TA requests from PDAMs, and offer an incentive system of rewards and sanctions for compliance with financial targets. 67. As a follow-up to the Project, MPW should conduct O&M training within the next 2 years related to facilities at risk, and agree with relevant IAs on a program of support that includes environmental risk mitigation. EIAs need to be implemented more rigorously, with the full involvement of BAPEDALs.

2. General

68. The Project provides important lessons for similar integrated urban development projects, which are expected to (i) support remunerative subprojects of urban infrastructure, easing the burden on central government budgets; and (ii) stimulate a quantum leap in PSP in the sector. Indonesia is in urgent need for more infrastructure investment as its population is growing rapidly, and the Government is looking at means to finance the new requirements. Thus, the Project has helped prepare the ground for a likely increased urban sector lending for Indonesia, and provides important lessons for challenges ahead.

Appendix 1 17

MSm

PROJECT FRAMEWORK

Design Summary Performance Indicators/Targets Monitoring Mechanisms Assumptions and Risks

Impact

1. Improve the living conditions, public health standards, urban environment, and economic opportunities for BOTABEK urban residents.

2. Improve the institutional capacity and

capability of provincial and local governments to provide services in a market-responsive, and financially and environmentally sustainable manner.

3. Help the Government achieve its urban

policies for REPELITA VI, aimed at improving urban environments to national standards through the Integrated Urban Infrastructure Development Program (IUIDP)

1. The Project is estimated to directly benefit the following people (by component): (i) roads and bus terminals—4 million, (ii) water supply—1.4 million (0.8 million existing and 0.6 million new), (iii) sanitation—0.4 million, (iv) solid waste—0.8 million, (v) drainage—0.7 million, and (vi) kampung improvement program (KIP) and market infrastructure improvement program (MIIP)—0.2 million. Urban poor will receive direct benefits from KIP.

2. Some residents will benefit from

several components while others may benefit from one only. The urban poor will benefit through improved environmental, drainage, and road conditions, and less competition for scarce water resources—benefits shared by all urban residents.

1. Socioeconomic surveys, completed as part of (i) midterm investment programs, (ii) prior to implementation, (iii) midterm review, and (iv) project completion report (PCR).

2. Capacity building, institutional

strengthening, and human resource development/training needs identified to determine project impact (i) prior to implementation, as part of the medium term development plans (PJMs), (ii) at appraisal, (iii) midterm update, and (iv) PCR.

1. The executing agency and other central government agencies will coordinate and support the project management unit (PMU), project implementation units (PIUs), and overall project implementation—including timely and effective capacity building.

2. PMU will be established, staffed,

and funded in a timely manner. PIUs, supported by PMU and project consultants, will complete the detailed design and construction supervision within budget and as scheduled.

3. Provincial and local government

agencies will provide about 35% of the subproject investments. The central government will provide its contribution in a timely manner.

4. Local government agencies will

increase taxes, tariffs, and user fees for various components to recover the costs of operation and maintenance (O&M) and service. The water supply enterprises (PDAMs) will recover the cost of O&M, depreciation, and interest or debt service. Increased charges will be fairly applied and affordable to all users.

5. PMU and PIUs will establish

permanent public participation and education program to encourage clients to pay and support the Project.

18 Appendix 1

Design Summary Performance Indicators/Targets Monitoring Mechanisms Assumptions and Risks

Outcome 1. To increase the capacity and capability

of provincial and local government agencies to implement the Project and to operate and manage the new project facilities.

2. To improve the level of service of IUIDP

facilities in the project area, comprising 13 cities and towns with a projected population of 6.7 million in 2002.

1. Strengthen the existing PMU and

PIUs, as scheduled.

2. Recruit consultants for subproject preparation, management, and institutional development support.

3. Procure and install the required

equipment and materials, and construct civil works (scheduled for completion by 2002).

1. Quarterly project progress reports, incorporating institutional aspects.

2. Review missions. 3. Pre-implementation, midterm, and

PCR survey. 4. Submission of completed annual

plans and subproject appraisals for ADB review.

5. Consulting agreements submitted to ADB for review.

6. Procurement contracts submitted to ADB for review.

7. Disbursement of loan funds.

1. Timely establishment of PIUs, commitment of staff and funding, and recruitment of consulting services in accordance with agreed programs and schedules.

2. Commitment of local funding to the

Project—from local, provincial, and central government—including loans through subsidiary loan agreements (SLAs) and grants through budgetary provisions.

Outputs 1. Project development, implementation,

management, and institutional development support, through several consultancies, central, provincial, municipal, and district government agencies: a. subproject preparation, design, and

supervision; b. financial management, planning, and

budgeting; c. urban planning and land use; d. project planning and management; e. water supply enterprise

management; f. operation and management of

infrastructure components; g. reduction of unaccounted for water

(UFW); h. preventive maintenance of

equipment and civil works; i. revenue base expansion, cost

recovery, and tariff/user fee reform; j. public participation and information

campaign; k. environmental management; l. benefit monitoring and reporting; and m. training program improvement and

specific training.

1. Directly involve or make staff in the

following agencies responsible for the Project: Directorate General of Human Settlements, Ministry of Home Affairs, Urban Roads Directorate of the Directorate General for Roads, Ministry of Finance, national development planning agency (BAPPENAS) and its provincial counterparts, PMU, PIUs, municipalities, districts, and cities.

2. Reduce UFW by at least 20%. 3. Increase water supply operational

efficiency to 100 connections/staff. 4. Increase tariffs, user fees, and taxes

for urban services as projected and agreed.

5. Community organizations will carry

out construction and operation of KIP and MIIP.

6. Ensure private sector participation in

the provision of water supply, solid waste management, and environmental sanitation services particularly in the larger cities.

1. Quarterly project progress reports. 2. Review missions. 3. Pre-implementation, midterm, and

PCR surveys. 4. Submission of completed subproject

appraisal reports for ADB review. 5. Consulting agreements submitted to

ADB for review. 6. Disbursement of loan funds.

1. Timely establishment of PMU and PIUs, commitment of staff and funding, and recruitment of consulting services in accordance with agreed programs and schedules.

2. Commitment of local project

funding from local, provincial, and central governments, including grants and loans (through SLAs).

3. Participation in and support of

training programs will be provided by PMU and PIUs.

4. Local government agencies will

strengthen departments and organization, as recommended by the capacity building consultants.

5. Provincial and local governments

will commit staff and related budgets to establish PMU and PIUs.

Appendix 1 19

Design Summary Performance Indicators/Targets Monitoring Mechanisms Assumptions and Risks

2. Construction and operational improvements to IUIDP infrastructure facilities:

a. water supply b. roads and bridges c. drainage d. solid waste e. sanitation f. KIP and MIIP g. bus terminal

1. Upon project completion in 2002, the following levels of service will have been achieved: - 20–25% of the urban areas

population - improved traffic flow, reduced travel

time, and vehicle damage - elimination of localized recurring

flooding - 50–60% of the urban areas

population - 60–70% of the urban areas

population - provision of improved public water,

laundry and sanitation facilities, solid waste and wastewater disposal facilities, drainage and access for low-income kampungs (neighborhoods)

2. Improved water quality and increased duration of water supplies.

3. Enhanced levels of operational capacity of solid waste, sanitation, drainage, roads, and KIP and MIIP facilities, resulting in more hygienic conditions.

1. Project monitoring reports 2. PCRs 3. Benefit monitoring reports 4. Environmental indicators

- open dumping - clogged drains - burning - odor control

5. Public health indicators - reduced visits to hospitals - reduced complaints

6. Socioeconomic indicators - household water tariffs - solid waste collection fees - septic tank clean-out fees - travel time between cities and

towns 7. Financial indicators

- PDAMS: tariffs, profitability, internal surpluses

- Municipalities and districts: tariffs, taxes, internal surpluses.

1. Timely provision of local government funds, central government loan funds and grants.

2. Completion of land acquisition in advance of subproject implementation.

3. Adequate support and training of PMU and PIU staff will be provided.

4. The outlined cost recovery and financial management improvements will be carried out.

5. PMU and PIUs will be established and funded as required/agreed, by provincial and local governments.

Activities 1. Consulting services and training:

a. Prepare annual plans and component appraisal for inclusion in the Project.

b. Prepare detailed engineering designs and contract document.

c. Conduct contract bidding and procurement.

d. Implement construction. e. Supervise construction and

procurement. f. Improve operational and

management capability. g. Support private sector investments. h. Improve water resources

arrangement.

$13.4 million 100 person-months (international) 1,900 person-months (domestic)

1. Annual progress reports 2. Quarterly project progress reports 3. Appraisal of selected subprojects 4. Detailed design report 5. Implementation schedules and plans 6. Construction and procurement

progress reports 7. Disbursement/reimbursements of

ADB loan funds 8. Review missions 9. Subproject completion reports 10. PCRs 11. Annual work plans

1. The executing and implementing

agencies will appoint institutional support consultants in a timely manner.

2. PMU will recruit consultants for capacity building, construction supervision, and training in a timely manner.

3. PMU will carry out contract bidding and award in a timely manner.

4. Local, provincial, and central governments will provide counterpart funds and disperse ADB loan funds in a timely manner.

5. PMU and PIUs will establish permanent public participation and

20 Appendix 1

Design Summary Performance Indicators/Targets Monitoring Mechanisms Assumptions and Risks

i. Monitor and follow up. 2. Infrastructure 3. Land acquisition 4. Incremental O&M 5. Incremental administration 6. Interest during construction 7. Total cost 8. Loan

$152.7 million $25.0 million $15.0 million $7.5 million $14.4 million $228.0 million $80.0 million

education program to encourage willingness to pay and support the Project.

6. Private sector will provide part of the water supply, solid waste, and sanitation components.

Appendix 2 21

STATUS OF COMPLETION OF PROJECT COMPONENTS

Table A2.1: Metrobotabek No. Item SPAR

(Revision) SPAR

(Supplement) Actual Percentage

Achieved 1. Water supply - WTP l/sec 630 50 680 100 - Reservoir m3 8,700 750 9,450 100 - Transmission pipe km 21 0 21 100 - Distribution pipe km 238 0 248 104 - Reticulation km 1,075 0 485 45 - House connection unit 64,521 5,500 41,786 60 - nondomestic connection unit 1,585 0 368 23 2. Sanitation - IPLT unit 4 0 4 100 - Vacuum truck unit 16 0 9 56 - Submersible pumps unit 4 0 4 100 3. Solid waste - TPA ha 34 2 32 90 - Transfer depo unit 0 0 0 0 - Dump truck unit 29 0 30 103 - Arm roll truck unit 19 0 16 84 - Container unit 98 0 181 83 - Bulldozer unit 3 2 4 80 - Loader unit 3 1 2 50 - Composter unit 0 0 0 0 - Excavator unit 3 2 3 60 - Light truck unit 0 0 0 0 - Mini truck Unit 2 2 0 0 4. Drainage - Civil works km 116 2 117 100 5. Urban roads - Civil works km 251 15 265 100 6. KIP - Number of locations unit 50 0 40 80 - Area ha 263 0 453 172 7. MIIP - Number of locations unit 10 0 10 100 - Area ha 49 0 49 100 8. Bus terminal - Number of locations unit 2 0 2 100 - Area ha 0 0 0 0

IPLT = sludge treatment plant; KIP = Kampung Improvement Program; MIIP = market infrastructure improvement program; TPA = final disposal site; WTP = water cleaning plant. Sources: Ministry of Public Works and local government in the Botabek region.

22 Appendix 2

Table A2.2: Bogor District

No. Item SPAR (Revision)

SPAR (Supplement)

Actual Percentage Achieved

1. Water supply - WTP l/sec 200 0 200 100 - Reservoir m3 2,000 0 2,000 100 - Transmission pipe km 5.57 0 5.57 100 - Distribution pipe km 32.50 0 32.50 100 - Reticulation km 332.48 0 332.48 13 - House connection unit 18,332 0 18,332 26 - nondomestic connection unit 639 0 639 5 2. Sanitation - IPLT unit 0 0 0 0 - Vacuum truck unit 0 0 0 0 - Submersible pumps unit 0 0 0 0 3. Solid waste - TPA ha 1 0 1 100 - Transfer depo unit 0 0 0 0 - Dump truck unit 5 0 5 100 - Arm roll truck unit 2 0 2 100 - Container unit 10 0 10 100 - Bulldozer unit 0 0 0 0 - Loader unit 1 0 1 100 - Composter unit 0 0 0 0 - Excavator unit 0 0 0 0 4. Drainage - Civil works km 19.54 0 19.54 100 5. Urban roads - Civil works km 9.75 0 9.75 100 6. KIP - Number of locations unit 2 0 2 100 - Area ha 36.25 0 26.25 100 7. MIIP - Number of locations unit 0 0 0 0 - Area ha 0 0 0 0 8. Bus terminal - Number of locations unit 0 0 0 0 - Area ha 0 0 0 0

IPLT = sludge treatment plant; KIP = Kampung Improvement Program; MIIP = market infrastructure improvement program; TPA = final disposal site; WTP = water cleaning plant. Sources: Ministry of Public Works and Kabupaten Bogor.

Appendix 2 23

Table A2.3: Depok City

No. Item SPAR (Revision)

SPAR (Supplement)

Actual Percentage Achieved

1. Water supply - WTP l/sec 200 0 200 100 - Reservoir m3 2,200 0 2,200 100 - Transmission pipe km 0.77 0 0.77 100 - Distribution pipe km 34.34 0 9.70 28 - Reticulation km 342.66 0 113.00 33 - House connection unit 13,300 0 1,454 11 - nondomestic connection unit 766 0 190 25 2. Sanitation - IPLT unit 1 0 1 100 - Vacuum truck unit 0 0 0 0 - Submersible pumps unit 0 0 0 0 3. Solid waste - TPA ha 4.8 0 4.8 100 - Transfer depo unit 0 0 0 0 - Dump truck unit 2 0 5 250 - Arm roll truck unit 3 0 2 67 - Container unit 18 0 10 56 - Bulldozer unit 1 0 1 100 - Loader unit 1 1 1 0 - Composter unit 0 0 0 0 - Excavator unit 0 1 0 0 4. Drainage - Civil works km 5.73 0 5.73 100 5. Urban roads - Civil works km 42.67 0.53 43.19 100 6. KIP - Number of locations unit 4 0 4 100 - Area ha 49.10 0 48.96 100 7. MIIP - Number of locations unit 1 0 1 100 - Area ha 1.26 0 1.26 100 8. Bus terminal - Number of locations unit 0 0 0 0 - Area ha 0 0 0 0

IPLT = sludge treatment plant; KIP = Kampung Improvement Program; MIIP = market infrastructure improvement program; TPA = final disposal site; WTP = water cleaning plant. Sources: Ministry of Public Works and Kota Depok.

24 Appendix 2

Table A2.4: Tangerang District

No. Item SPAR (Revision)

SPAR (Supplement)

Actual Percentage Achieved

1. Water supply - WTP l/sec - Reservoir m3 1,000 0 1,000 100 - Transmission pipe km 3.12 0 3.22 103 - Distribution pipe km 45.58 0 44.94 99 - Reticulation km 38.44 0 39.01 101 - House connection unit 5,039 0 5,239 104 - nondomestic connection unit 60 0 0 0 2. Sanitation - IPLT unit 1 0 1 100 - Vacuum truck unit 7 0 3 43 - Submersible pumps unit 0 0 0 0 3. Solid waste - TPA ha 4.0 0 4.8 120 - Transfer depo unit 0 0 0 0 - Dump truck unit 7 0 5 71 - Arm roll truck unit 4 0 2 50 - Container unit 19 0 10 53 - Bulldozer unit 1 0 1 100 - Loader unit 1 1 0 0 - Composter unit 0 0 0 0 - Excavator unit 0 1 0 0 - Light truck unit 0 0 0 0 - Mini truck unit 2 2 0 0 4. Drainage - Civil works km 5.28 0 5.28 100 5. Urban roads - Civil works km 48.19 6.61 48.19 88 6. KIP - Number of locations unit 2 0 2 100 - Area ha 20.00 0 20.00 100 7. MIIP - Number of locations unit 0 0 0 0 - Area ha 0 0 0 0 8. Bus terminal - Number of locations unit 1 0 1 100 - Area ha 0 0 0 0

IPLT = sludge treatment plant; KIP = Kampung Improvement Program; MIIP = market infrastructure improvement program; TPA = final disposal site; WTP = water cleaning plant. Sources: Ministry of Public Works and Kabupaten Tangerang.

Appendix 2 25

Table A2.5: Tangerang City

No. Item SPAR (Revision)

SPAR (Supplement)

Actual Percentage Achieved

1. Water supply - WTP l/sec 80 50 130 100 - Reservoir m3 1,000 750 1,750 100 - Transmission pipe km 6.89 0 6.89 100 - Distribution pipe km 27.46 0 64.20 234 - Reticulation km 132.21 0 0 0 - House connection unit 2,500 5,500 2,964 37 - nondomestic connection unit 60 0 0 0 2. Sanitation - IPLT unit 1 0 1 100 - Vacuum truck unit 7 0 4 57 - Submersible pumps unit 4 0 4 100 3. Solid waste - TPA ha 10.0 0 10.0 100 - Transfer depo unit 0 0 0 0 - Dump truck unit 4 0 4 100 - Arm roll truck unit 0 0 0 0 - Container unit 9 0 9 100 - Bulldozer unit 1 0 1 100 - Loader unit 0 0 0 0 - Composter unit 0 0 0 0 - Excavator unit 1 0 1 100 - Light truck unit 0 0 0 0 - Mini truck unit 0 0 0 0 4. Drainage - Civil works km 40.28 0 40.28 100 5. Urban roads - Civil works km 66.63 0 66.63 100 6. KIP - Number of locations unit 25 0 15 60 - Area ha 39.00 0 229.00 587 7. MIIP - Number of locations unit 8 0 8 100 - Area ha 45.00 0 45.00 100 8. Bus terminal - Number of locations unit 1 0 1 100 - Area ha 0 0 0 0

IPLT = sludge treatment plant; KIP = Kampung Improvement Program; MIIP = market infrastructure improvement program; TPA = final disposal site; WTP = water cleaning plant. Sources: Ministry of Public Works and Kota Tangerang.

26 Appendix 2

Table A2.6: Bekasi District

No. Item SPAR (Revision)

SPAR (Supplement)

Actual Percentage Achieved

1. Water supply - WTP l/sec 50 0 50 100 - Reservoir m3 2,000 0 2,000 100 - Transmission pipe km 0.10 0 0.10 100 - Distribution pipe km 67.89 0 66.34 98 - Reticulation km 103.00 0 117.40 114 - House connection unit 9,350 0 11,505 123 - nondomestic connection unit 0 0 0 0 2. Sanitation - IPLT unit 0 0 0 0 - Vacuum truck unit 1 0 1 100 - Submersible pumps unit 0 0 0 0 3. Solid waste - TPA ha 10.0 0 7.6 76 - Transfer depo unit 0 0 0 0 - Dump truck unit 3 0 3 100 - Arm roll truck unit 7 0 7 0 - Container unit 23 0 23 100 - Bulldozer unit 0 1 1 100 - Loader unit 0 0 0 0 - Composter unit 0 0 0 0 - Excavator unit 1 0 1 100 - Light truck unit 0 0 0 0 - Mini truck unit 0 0 0 0 4. Drainage - Civil works km 23.49 0 23.49 100 5. Urban roads - Civil works km 49.30 6.18 55.38 100 6. KIP - Number of locations unit 11 0 11 100 - Area ha 91.00 0 91.00 100 7. MIIP - Number of locations unit 1 0 1 100 - Area ha 3.00 0 3.00 100 8. Bus terminal - Number of locations unit 0 0 0 0 - Area ha 0 0 0 0

IPLT = sludge treatment plant; KIP = Kampung Improvement Program; MIIP = market infrastructure improvement program; TPA = final disposal site; WTP = water cleaning plant. Sources: Ministry of Public Works and Kabupaten Bekasi.

Appendix 2 27

Table A2.7: Bekasi City

No. Item SPAR (Revision)

SPAR (Supplement)

Actual Percentage Achieved

1. Water supply - WTP l/sec 100 0 100 100 - Reservoir m3 500 0 500 100 - Transmission pipe km 4.80 0 4.80 100 - Distribution pipe km 30.17 0 30.17 100 - Reticulation km 126.02 0 171.40 136 - House connection unit 16,000 0 15,931 100 - nondomestic connection unit 60 0 148 247 2. Sanitation - IPLT unit 1 0 1 100 - Vacuum truck unit 1 0 1 100 - Submersible pumps unit 0 0 0 0 3. Solid waste - TPA ha 4.0 1.9 4.0 68 - Transfer depo unit 0 0 0 0 - Dump truck unit 8 0 8 100 - Arm roll truck unit 3 0 3 100 - Container unit 19 0 19 100 - Bulldozer unit 0 1 0 0 - Loader unit 1 0 1 100 - Composter unit 0 0 0 0 - Excavator unit 1 0 1 100 - Light truck unit 0 0 0 0 - Mini truck unit 0 0 0 0 4. Drainage - Civil works km 21.63 1.51 23.14 100 5. Urban roads - Civil works km 34.24 1.40 42.10 118 6. KIP - Number of locations unit 6 0 6 100 - Area ha 27.41 0 27.41 100 7. MIIP - Number of locations unit 0 0 0 0 - Area ha 0 0 0 0 8. Bus terminal - Number of locations unit 0 0 0 0 - Area ha 0 0 0 0

IPLT = sludge treatment plant; KIP = Kampung Improvement Program; MIIP = market infrastructure improvement program; TPA = final disposal site; WTP = water cleaning plant. Sources: Ministry of Public Works and Kota Bekasi.

28 Appendix 3

ALLOCATION OF INFRASTRUCTURE PROJECT INVESTMENTS BY LOCAL GOVERNMENT AND SUBSECTOR

Of the total infrastructure project cost of Rp714.22 billion, Depok City obtained Rp190.67 billion (26.7%); Tangerang City: Rp180.82 billion (25.3%), Bekasi City: Rp114.85 billion (16.1%), Bekasi District: Rp87.68 billion (12.3%), Bogor District: Rp76.74 billion (10.7%), and Tangerang District: Rp63.46 billion (8.9%)—Table A3. In terms of sectoral distribution, urban roads had the largest share (40.2%) and market infrastructure improvement program (MIIP) had the lowest (0.7%). Table A3, and Figures A3.1 and A3.2 present project cost by subsector.

Table A4: Project Cost of Infrastructure (Rp million)

Sector Bogor District

Depok City

Tangerang District

Tangerang City

Bekasi District Bekasi City Total

Water supply 57,189 56,957 21,085 41,911 25,590 26,538 229,269 Sanitation 0 1,037 2,358 7,211 209 3,713 14,527 Solid waste 3,863 13,036 14,887 18,887 14,694 22,984 88,351 Drainage 3,715 3,719 1,893 11,319 5,419 27,884 53,948 Urban roads 11,229 114,582 20,184 71,093 37,810 32,106 287,004 KIP 743 1,097 593 2,176 3,878 748 9,234 MIIP 244 2,459 1,352 81 879 5,015 Bus terminal 26,873 26,873 Total 76,738 190,671 63,458 180,821 87,680 114,852 714,220

Share of Total Project Cost (%)

Water supply 8.0 8.0 3.0 5.9 3.6 3.7 32.1 Sanitation 0.0 0.1 0.3 1.0 0.0 0.5 2.0 Solid waste 0.5 1.8 2.1 2.6 2.1 3.2 12.4 Drainage 0.5 0.5 0.3 1.6 0.8 3.9 7.6 Urban roads 1.6 16.0 2.8 10.0 5.3 4.5 40.2 KIP 0.1 0.2 0.1 0.3 0.5 0.1 1.3 MIIP 0.0 0.0 0.3 0.2 0.0 0.1 0.7 Bus terminal 0.0 0.0 0.0 3.8 0.0 0.0 3.8 Total 10.7 26.7 8.9 25.3 12.3 16.1 100.0 Source: Government of Indonesia. 2003. Project Completion Report. Jakarta.

Appendix 3 29

Figure A3.1: Allocation of Project Cost, by District and Subsector

0

50,000

100,000

150,000

200,000

250,000

DistrictBogor

Depok City DistrictTangerang

TangerangCity

DistrictBekasi

Bekasi City

Rp

mill

ion

Bus Terminal

MIIP

KIP

Urban Roads

Drainage

Solid Waste

Sanitation

Water Supply

Figure A3.2: Allocation of Project Cost, by Subsector

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

WaterSupply

Sanitation SolidWaste

Drainage UrbanRoads

KIP MIIP BusTerminal

Rp

mill

ion

30 Appendix 4

PROJECT COST BY COMPONENT ($ million)

Component Foreign Local Total Foreign Locald Total Foreign Local Total Foreign Local Total Foreign Local Total Foreign Local Total

A. Institutional Development1. Consulting Services 1.80 5.00 6.80 1.80 4.00 5.80 0.00 1.00 1.00 1.64 5.65 7.29 0.00 0.00 0.00 1.64 5.65 7.292. Incremental Administrationa 0.00 7.50 7.50 0.00 0.00 0.00 0.00 7.50 7.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Subtotal 1.80 12.50 14.30 1.80 4.00 5.80 0.00 8.50 8.50 1.64 5.65 7.29 0.00 0.00 0.00 1.64 5.65 7.29B. Subprojectsb

1. Water Supply 22.00 49.90 71.90 7.52 7.08 14.60 0.00 57.30 57.30 1.23 1.23 2.46 0.00 7.95 7.95 1.23 9.18 10.412. Roads and Bridges 18.20 53.60 71.80 15.30 14.40 29.70 0.00 42.10 42.10 4.41 6.28 10.69 0.00 15.62 15.62 4.41 21.90 26.313. Drainage 2.50 11.30 13.80 3.71 3.49 7.20 0.00 6.60 6.60 0.76 1.17 1.93 0.00 2.81 2.81 0.76 3.98 4.744. Solid Waste 4.10 9.10 13.20 2.58 2.43 5.00 0.00 8.20 8.20 0.40 0.61 1.01 0.00 4.25 4.25 0.40 4.86 5.265. Sanitation 1.10 3.00 4.10 0.46 0.44 0.90 0.00 3.20 3.20 0.07 0.20 0.27 0.00 1.02 1.02 0.07 1.22 1.296. KIP / MIIP 0.20 5.30 5.50 0.10 0.10 0.20 0.00 5.30 5.30 0.07 0.20 0.27 0.00 0.69 0.69 0.07 0.89 0.967. Bus Terminals 0.70 3.30 4.00 1.13 1.07 2.20 0.00 1.80 1.80 0.52 0.77 1.29 0.00 2.54 2.54 0.52 3.31 3.83

Subtotal 48.80 135.50 184.30 30.80 29.00 59.80 0.00 124.50 124.50 7.46 10.46 17.92 0.00 34.88 34.88 7.46 45.34 52.80

C. Equipment and Materials 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 7.77 0.60 8.37 0.00 0.00 0.00 7.77 0.60 8.37D. Incremental O&Mc 0.00 15.00 15.00 0.00 0.00 0.00 0.00 15.00 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00E. Interest During Construction 14.40 0.00 14.40 14.40 0.00 14.40 0.00 0.00 0.00 6.11 0.00 6.11 0.00 0.00 0.00 6.11 0.00 6.11

Total 65.00 163.00 228.00 47.00 33.00 80.00 0.00 148.00 148.00 22.98 16.71 39.69 0.00 34.88 34.88 22.98 51.59 74.57

Total Project Cost (Actual)Total Project Cost Government Financing

Appraisal ActualADB Financing ADB Financing Government Financing

a Staff honorarium, per diem, travel, office equipment and related expenses. b Each component includes land, civil works, equipment and materials and detailed design. c On project facilities for one year after construction. d Includes duties and taxes of about $20.0 million. KIP = Kampung Improvement Project; MIIP = Market Infrastructure Improvement Project; O&M = operation and maintenance. Source: Ministry of Public Works; Asian Development Bank.

Appendix 5 31

IMPLEMENTATION SCHEDULE As Appraised and Revised

30 September 2003

ActivityA. Establishment of implementation units 1. Establishment of PUCF and LUCFs

2. Establishment of PMU

3. Establishment of PIUs

B. Provision of consulting services and training 1. Project management support a. Management advice to central Government

b. Management advice to provincial and local governments

c. Benefit monitoring evaluation and completion reports 2. Preparation, design and supervision a. Subproject appraisal

b. Detailed engineering design

c. Feasibility studies

d. Construction supervision

3. Capacity building support to local government a. Preparation and implementation of LIDAPs and RIAPs O&M training changed to (UFW and FMA)

b. PDAM support (UFW, FMA)

c. Private sector participation

1999 2000 20051996 1997 1998 2001 2002 2003

32 Appendix 5

Activity 1999 2000 20051996 1997 1998 2001 2002 2003 4. Capacity building support to central Government Water resource management study (not implemented)C. Construction of infrastructure subprojects 1. Bogor district

2. Tangerang municipality

3. Tangerang district

4. Bekasi district

5. Bekasi municipality

6. Depok municipality

D. Tripartite review benchmarks 1. Inception ∇ •2. Semi-annual review/spring cleaning ∇ ∇ ∇ • ∇ ∇ ∇ ∇ • ∇ • ∇

3. First year and midterm reviews ∇ • ∇ • • • •4. Project completion review

CP = corporate plan; LIDAP = local institutional development action plan; LUCF = local urban development coordination forum;

PDAM = water supply enterprise; PIU = project implementation unit; PMU = project management unit; PUCF = provincial urban

development coordination forum; RIAP = revenue improvement action plan; UFW = unaccounted for water. Legend: ∇

AppraisalRevisedActual

Appendix 6 33

ORGANIZATIONAL ARRANGEMENT FOR PROJECT IMPLEMENTATION

INVESTOR

MPW/MSRD BAPPENAS MOHA MOF

DGHS

EXECUTING AGENCY

National IUIDP Coordination Committee

Governor of West Java and Bantem Governor of DKI

Jakarta

PKPS

SEKWILDA I

ASDA II ASDA III

ASDA I

DINAS TARKIN

Provincial BAPPEDA

Provincial IUIDP Coordinating Committee

PMU

Regent Mayor

SEKWILDA II

ASDA II ASDA III

ASDA I Water Company

Public Works Roads Dept.

Sanitation Dept.

Market Dept.

Housing Dept.

Building Dept. Irrigation

Dept.

PIU

PRIVATE SECTOR PROJECT PROJECT SECTORAL

NAT’L.PROJECT

BAPPEDA of City/District

Explanation: : : line of administrative order : line of technical coordination : line of coordination : structural unit : line of reporting : coordination forum : Non-structural work unit

PROJECT PROJECT PROJECT PROJECT PROJECT PROJECT

BAPPENAS - National Development Planning Agency DGHS - Directorate General of Human Settlement, MPW DKI - Special Region of Capital City (of Jakarta) MOF - Ministry of Finance MOHA - Ministry of Home Affairs MPW - Ministry of Public Works IUIDP - Integrated Urban Infrastructure Development Program SEKWILDAI - Secretariat of Regional Offices (at Province level) MSRD - Ministry of Settlements and Regional Development BAPPEDA - Local/Regional Development Planning Office PMU - Project Management Unit ASDA I/II/III - District/City Secretariat PIU - Project Implementation Unit SEKWILDA II - Secretariat of Regional Office (at District/City level)

34 Appendix 7

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Covenant

Reference in Loan

Agreement

Status of Compliance No withdrawal may be made from the Loan Account for items of expenditure under a subproject (i) if such subproject does not meet the criteria agreed between the Borrower and ADB; (ii) if the environmental assessment procedures required in para. 20 of Schedule 5 to this Loan Agreement have not been complied with, or (iii) for items of expenditure to be financed under a subsidiary loan agreement, until such subsidiary loan agreement, satisfactory to ADB, shall have been concluded and furnished to ADB.

Article 3, Section 3.03 (b)

Partly complied with. IEE/EIA for 18 programs have been approved by local/provincial environmental agency. IEE/EIA being prepared for approval for the only program with adverse environmental impact. Four out of eight SLAs have been approved; the other four were replaced by DAU or PAD. Two new SLA have been approved.

The Borrower shall make available and shall cause DGRD and the project implementing agencies concerned, to make available, the funds, facilities, services, land and other resources required, in addition to the proceeds of the Loan, for the carrying out of the Project and for the O&M of the Project.

Article 4, Section 4.02

Partly complied with. Shortage of local government funds contributed to delays and cancellation of parts of the Project.

Competent and qualified consultants and contractors shall be employed in carrying out the Project.

Article 4, Section 4.03 (a)

Complied with.

The Project shall be carried out in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to the Borrower and ADB. The Borrower shall furnish ADB such plans, design standards specifications and work schedules.

Article 4, Section 4.03 (b)

Complied with.

The Borrower shall ensure that the activities of its departments and agencies are conducted and coordinated in accordance with sound administrative policies and procedures.

Article 4, Section 4.04

Partly complied with. Some construction started before ADB approval was received.

The Borrower shall make arrangements for insurance of the Project's facilities.

Article 4, Section 4.05 (a)

Complied with.

The Borrower shall maintain records and accounts to identify the goods and services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use in the Project, to record the progress of the Project and to reflect the operation of Project facilities.

Article 4, Section 4.06 (a)

Complied with.

The Borrower shall furnish ADB all reports and information concerning (i) the Loan, and the expenditure of the proceeds and maintenance of the services; (ii) the goods and services and other items or expenditure financed out of the proceeds of the Loan; (iii) the Project; (iv) any Subproject; (v) the agencies of the Borrower responsible for carrying out the Project and operation of the Project facilities; (vi)

Article IV, Section 4.07 (a)

Complied with.

Appendix 7 35

Covenant

Reference in Loan

Agreement

Status of Compliance financial and economic condition in the territory of the Borrower and the international balance-of-payments position of the Borrower; and (vii) any other matters relating to the purposes of the Loan. DGURD shall furnish to ADB consolidated quarterly reports on the carrying out of the project and on the operation and management of the Project facilities. Such consolidated reports shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter.

Article IV, Section 4.07 (b)

Complied with.

Promptly after physical completion of the Project, and not later than 3 months thereafter, DGURD shall prepare and furnish to ADB a report on the execution and initial operation of the Project, including its cost, performance by the Borrower of its obligations under the Loan Agreement and the accomplishment of the purposes of the Loan.

Article IV, Section 4.07 (c)

Complied with.

The Borrower shall ensure that the Project facilities are operated, maintained and repaired in accordance with sound administrative, financial, engineering, environmental, urban development, public utilities and maintenance and operational practices.

Article IV, Section 4.09

Partially complied with. Some facilities have not been completed yet, such as: (i) Balaraja reservoir (Kab. Tangerang) is not equipped with generator set; (ii) Pasir Muncang TPA (Kab. Tangerang) is not equipped with leachete circulation pump; and (iii) transmission and distribution network for Ciledug reservoir (Kota Tangerang) has not been developed.

BAPPENAS shall provide policy coordination among MSRI, MOHARA, MOF, and other relevant government agencies.

Schedule 5, para. 1

Complied with.

DGURD shall be the Project Executing Agency, responsible for overall technical supervision, management, and monitoring of the Project and shall ensure that the Project Implementing Agencies perform their respective roles in an adequate manner.

Schedule 5, para. 2

Complied with.

DGURD shall be (i) responsible for monitoring Project implementation, including services, in coordination with BAPPENAS; (ii) responsible for the coordination and approval, jointly with the relevant national government agencies and BAPPEDA I, of the SPARs; and (iii) oversee and prepare all Project related accounting and auditing activities and monitor

Schedule 5, para. 3

Complied with.

36 Appendix 7

Covenant

Reference in Loan

Agreement

Status of Compliance disbursements of proceeds of the Loan. The DGPARA and DGRD within MOHARA shall assist with the overall administrative and institutional development direction for the provincial government of West Java and the local governments. DGPARA shall oversee the institutional development of PDAMs and other local enterprises.

Schedule 5, para. 4

Complied with. Special services for RIAP and LIDAP consultancies were adjusted to accommodate new needs like financial management assistance to PDAM and reduction of UFW for PDAM.

PUCF shall be established in the province of West Java within 1 month of the Effective Date to provide guidance on policy and institutional development and overall coordination for appraisal of Subprojects. The PUCF shall be chaired by the head of BAPPEDA 1 of the province of West Java.

Schedule 5, para. 5 (a)

Complied with.

The BAPPEDA 1 of the province of West Java shall provide guidance, assistance, and coordination to the local governments with respect to Subproject planning, programming, and budgeting.

Schedule 5, para. 5 (b)

Complied with.

The SETWILDA of the province of West Java shall be responsible for monitoring the LIDAPs and RIAPs under the Project.

Schedule 5, para. 5 (c)

Complied with. Special services for RIAP and LIDAP consultancies were adjusted to accommodate new needs such as financial management assistance to PDAM, and reduction of UFW for PDAM following national standard for local government autonomy.

A PMU shall be established in the province of West Java within 1 month of the Effective Date. Under the guidance of DGRD, the PMU shall (i) prepare overall Project implementation plan and consolidated annual work plan, (ii) assist local governments and PDAMs to prepare SPARs as required, (iii) advise on terms of reference for consultants to the local governments and PDAMs, (iv) oversee institutional financial development of the local governments and PDAMs, (iv) facilitate Project coordination, vertically and horizontally, (vi) assist local governments and PDAMs with procurement, (vii) organize BME activities, and (viii) undertake preparation of the Project completion report.

Schedule 5, para. 5 (d)

Complied with.

A LUCF shall be established within 1 month of the Effective Date or such later date as shall be agreed by the Borrower and ADB, in each local government, and shall be chaired by the head of the relevant BAPPEDA II (local planning board). LUCFs shall be responsible for overall coordination of the preparation and implementation of the Subproject in their

Schedule 5, para. 6 (a)

Complied with.

Appendix 7 37

Covenant

Reference in Loan

Agreement

Status of Compliance respective areas. Each local government shall establish and maintain a PIU within DPUK with an adequate number of suitably qualified staff. PIUs shall prepare SPARs and the various plans required under the Project, and assist in the preparation of feasibility studies and Project designs.

Schedule 5, para. 6 (b)

Complied with. Not all PIUs are under the DPUK, such as PIU Kota Depok, Kab. Tangerang, Kab. Bogor, and Kota Bekasi, which are under BAPPEDA II and PIU Kota Tangerang.

Each local government shall appoint qualified Project managers within the relevant local government agencies and PDAMs to implement respective Project investments, including procurement activities and construction supervision.

Schedule 5, para. 6 (c)

Complied with.

The BAPPEDA II of each local government shall be responsible for Subproject planning, programming, and budgeting.

Schedule 5, para. 6 (d)

Complied with.

The SETWILDAS of each local government shall be responsible for the implementation of the respective RIAPs/LIDAPs under the Project.

Schedule 5, para. 6 (e)

Not complied with. RIAP and LIDAP technical assistance will not be implemented. These were changed to FMA and UFW to PDAMs, under Dinas Tarkim West Java Province.

Subprojects shall be identified and selected in accordance with the agreed criteria to include the following: (i) technical design standards, requiring each investment to be technically viable and employ appropriate technology; (ii) economic standards, requiring non-revenue-generating investments to be economically viable; and (iii) financial standards requiring revenue-generating to be financially viable. Subprojects shall be designed to be within the financial capability of the local governments and PDAMs. The debt service for each local government and PDAMs shall not be less than 1.5 and 1.3, respectively.

Schedule 5, para. 7

Complied with. ADB criteria used in the preparation of revised/new SPAR.

A FIRR shall be calculated in constant prices for investments in the water supply and bus terminal components. If the FIRR is less than 7% for any investment, an EIRR or a socioeconomic justification shall be prepared for such an investment. EIRRs shall also be calculated for all investments in the roads and bridges, drainage, kampung improvement, and market infrastructure improvement components estimated to cost more than $400,000 equivalent each; for such investments, the EIRR shall not be less than the economic cost of capital of the Borrower. Estimated costs and revenues per unit of service of potential investments in the solid waste and sanitation components shall be compared to

Schedule 5, para. 8

Complied with. ADB criteria used in the preparation of revised/new SPAR.

38 Appendix 7

Covenant

Reference in Loan

Agreement

Status of Compliance facilitate privatization and selection. Each local government shall prepare a five-year indicative program of investments, supported by RIAPs/LIDAPs/CPs. Based on the indicative program, each local government and PDAM shall prepare an annual work plan comprising (i) all investments determined to be feasible for implementation during the forthcoming year, and (ii) all investments determined to require further consideration during the forthcoming year. The annual work plan shall be provided by each local government and PDAM to the PMU and then to DGURD, for review and approval, and forwarded to ADB for review.

Schedule 5, para. 9

Complied with. RIAPs and LIDAPs changed to FMA and UFW reduction assistance to PDAMs.

Each local government and PDAM shall update its respective annual work plan and provide this to PMU and then to DGURD.

Schedule 5, para. 10

Complied with. Annual report plans were accommodated in revised SPAR (October 2002).

LIDAPs, RIAPs, and CPs shall be updated from time to time as required to confirm their institutional feasibility. Subprojects requiring particular institutional provisions, such as for improved operations (solid waste), water loss reduction (water supply) or tariff increases, the updated LIDAPs, RIAPs and CPs shall be reviewed and approved by the LUCF and PUCF.

Schedule 5, para. 11

Complied with. LIDAP and RIAP were changed to FMA and UFW reduction for PDAM.

On the basis of the annual work plan, the relevant BAPPEDA II shall prepare the Subproject for the review of the relevant Bupati (Mayor) through the LUCF. If a feasibility study is required, it shall be conducted by consultants for the local government or PDAM under the guidance of DPUK. The terms of reference of the feasibility study shall be provided to DPUK for review, and progress reports shall be provided for information. The report of the feasibility study shall be provided to DPUK for its review.

Schedule 5, para. 12

Complied with.

If a Subproject is considered suitable for further processing, the PUCF team shall help (i) make any adjustment required, (ii) finalize cost estimates, financial plan and implementation arrangements and justification, and (iii) prepare the SPAR (full SPAR for Subprojects estimated to cost more than $10 million equivalent and a summary SPAR for other Subprojects). The SPAR shall be submitted in parallel to the LUCF and the PUCF. After approval from the LUCF and the PUCF, the SPAR shall be forwarded to DGURD for review and approval. After approval by DGURD, full SPARs shall be sent to be Bank for review and approval and summary SPARs shall be sent to ADB for review.

Schedule 5, para. 13

Complied with.

Appendix 7 39

Covenant

Reference in Loan

Agreement

Status of Compliance Each of the Subprojects shall be implemented using appropriate technology that promotes economic and efficient delivery of services in accordance with the needs of the beneficiaries and their capacity to carry out the necessary O&M. The local governments shall implement a program to monitor discharges and to enforce applicable regulations against polluters in the sanitation and solid waste components. A community-based approach shall be used for the kampung improvement and market infrastructure improvement components.

Schedule 5, para. 14

Complied with. O&M have been realized. Increase of retribution through the implementation of local government regulation (perda) on tariff has been performed by local governments under the approval of the local legislative.

The Borrower shall ensure that (i) the special account and the expenditures liquidated under the SOE procedures are audited, and (ii) the opinion of the auditors relating thereto is included in the auditor’s reports required pursuant to Section 4.06 (b) of the Loan Agreement.

Schedule 5, para. 14 (c)

Complied with.

The Borrower shall ensure that all necessary budget requests are submitted and all necessary budget approvals are issued in sufficient time to avoid delays in Subproject implementation. The Borrower shall cause the provincial government of West Java and the local governments to provide their respective counterpart financing in a timely manner. The borrower shall review the provisions for the Project in the annual budgets of the participating entities and ensure that suitable adjustments are promptly made.

Schedule 5, para. 15

Partly complied with. Shortage of local government funds have contributed to delays and cancellation of parts of the Project.

SLAs shall carry standard terms and conditions acceptable to ADB, including the prevailing terms of MOF loans for urban sector projects. The Borrower shall bear the foreign exchange risk.

Schedule 5, para. 16

Complied with, but only four out of 18 SLAs have been approved. The other four were replaced by DAU or PAD.

The financing plan of a Subproject for the local governments and PDAMs shall depend upon (i) the specific investments and components that are proposed, and (ii) the financial resources of the implementing entity. All the proceeds of the Loan made available to PDAMs shall be in form of loans.

Schedule 5, para. 17 (a)

Complied with. PDAMs were provided grants except for the costs of reticulation and house connections, which were funded by PDAM and the private sector.

Grants shall be provided for (i) social and non-revenue-earning investments, including solid waste and sanitation disposal sites, and (ii) institutional development and preparation of master plans and feasibility studies. Loans shall be provided for revenue-earning investments, including water supply, solid waste, sanitation collection facilities, and bus terminal. The roads and bridges and drainage components shall be financed partly by loans and partly by grants.

Schedule 5, para. 17 (b)

Complied with. All project packages were directed based on this financing criteria.

The equity contribution of each local government and Schedule 5, Complied with.

40 Appendix 7

Covenant

Reference in Loan

Agreement

Status of Compliance PDAM in any Subproject shall range between 25–40% of the estimated cost of such subproject.

para. 17 (c ) After revised SPAR for completion work, financing contribution from local governments and PDAM is 39.1%, in accordance with the Loan Agreement.

If involuntary resettlement is required in connection with the Project, the Borrower shall ensure that the responsible agency prepares a resettlement plan, in consultation with the affected community, providing inter alia for suitable compensation and assistance in resettlement. Such resettlement plan shall be submitted to ADB for its review and approval as part of the related SPAR.

Schedule 5, para. 19

Complied with.

The Borrower shall ensure that the identification, preparation, and implementation of Subprojects reflect environmental and social concerns, and shall take steps to alleviate negative environmental or social effects. IEEs shall be prepared for all Subprojects and EIAs shall be prepared for each Subproject with a substantial adverse environmental impact. Any recommendation made in an EIA requiring mitigating measures, design changes, or monitoring systems shall be incorporated in the Subproject design. The Environmental Impact Management Commission of the provincial government of West Java or of MPW shall approve the EIAs before disbursement may be permitted. Each IEE and EIA prepared shall be promptly submitted to ADB for its review.

Schedule 5, para. 20

Partly complied with. IEE/EIA for 18 programs have been approved by local/provincial environmental agency.1

The LUCF of each local government shall meet at least twice a year. In the preparation of Subprojects, the relevant local government shall consult with concerned community leaders and ensure that community-based organizations and informal groups are encouraged to participate in the planning, construction, O&M of the Project facilities.

Schedule 5, para. 21

Complied with. Training of trainers in the local community performed although implementation is not followed by intensive monitoring from central government.

Each PIU shall develop and implement a coordinated public information campaign to enhance the beneficial impact of the Project.

Schedule 5, para. 22

Complied with.

The Borrower shall ensure that social dimensions are incorporated in the preparation of each Subproject.

Schedule 5, para. 23

Partly complied with. Public acceptance problem experienced with sanitation program (IPLT Bantar Gebang, Kota Bekasi).

1 IEE/EIA approval for 18 programs and IEE non-approval for one water supply program in Kota Bekasi should include the non-approval of EIA reports for final disposal sites (FDS) in Kota Bekasi and Kab. Bekasi cited in para 50. This is one reason why the environmental performance of these FDS was rated less satisfactory.

Appendix 7 41

Covenant

Reference in Loan

Agreement

Status of Compliance The Borrower shall ensure that the kampung improvement component shall be implemented through a community-based approach so that each participating community will plan and carry out its own improvements.

Schedule 5, para. 24

Complied with. KIP-CBD approach has enhanced community involvement.

The Borrower shall review the opportunities and proposed arrangements for private sector participation in the provision of urban services in the Project Area and facilitate partnerships between the public and private sectors in providing such services. The Borrower shall keep ADB informed of progress in accomplishing such partnership.

Schedule 5, para. 25

Complied with. PSP in water supply, solid waste, and sanitation are now in various stages of development.

The respective PDAMs shall prepare budgets and undertake responsibility for O&M of water supply systems, piped sewage collection, and treatment provided or improved under the Project, and levying and collecting water charges.

Schedule 5, para. 26 (a)

Complied with. PSP fund also used for O&M.

The local governments shall prepare budgets and undertake responsibility for O&M of the Project facilities for drainage, solid waste, sanitation, kampong improvement, market infrastructure improvement and urban roads, and levying and collecting charges, fees and tariffs.

Schedule 5, para. 26 (b)

Partly complied with. Some previously constructed drain sections not maintained.

The local governments shall encourage the relevant communities to assist with O&M of the kampung improvement and market infrastructure improvement investments provided under the Project.

Schedule 5, para. 26 (c)

Complied with. Training of trainers for local government in public campaign conducted for KIP and MIIP O&M.

The LIDAPs and RIAPs shall include the following measures: (i) steps will be taken to improve municipal accounting systems by (a) improving financial management of municipal services, including segregation of revenues and expenditures of each municipal service provided, and (b) strengthening the municipal management information system; (ii) tariffs and fees for sanitation services and solid waste will be set at levels high enough to cover the aggregate of estimated operating cost and debt service; (iii) steps will be taken to increase revenue from tariffs, property taxes and local taxes trough regular property revaluation and tariff reviews and improved collection; and (iv) encourage community and private sector participation.

Schedule 5, para. 27

Complied with. LIDAP and RIAP technical assistance changed to FMA and UFW reduction for PDAM.

42 Appendix 7

Covenant

Reference in Loan

Agreement

Status of Compliance The CPs shall include the following features: (i) statement of the corporate goal operational strategy, administrative support, financial plan management, policy on private sector participation and resource mobilization; (ii) regular reviews and adjustments of tariffs to levels high enough to cover (a) the aggregate of operation costs and either depreciation or debt service, whichever is higher and (b) at least 25% of incremental development expenditures (tariffs should be affordable to low-income consumers); (iii) improvement of bill collection efficiency, including write-offs of bad debts, and reduction of accounts receivable to not more than 3 months billings by 31 December 1998; (iv) implementation of an annual program to change UFW at a minimum of either a 20% reduction over a 5 year period from Subproject appraisal or the accomplishment of the 30% target of REPELITA VI; and (v) establishment or improvement of a properly staffed and financed leakage control division within each PDAM to implement a program of leakage reduction, meter recalibration, repairs, detection and reduction of illegal connections.

Schedule 5, para. 28

Complied with. Terms of reference revised to focus on financial management assistance to PDAMs, implemented by FMA and UFW consultants.

The Borrower shall cause all participating PDAMs to (i) introduce and maintain tariff systems that ensure full cost recovery at or above the marginal cost of water from households using large volumes of water, industrial and commercial users; and (ii) encourage low-income households to seek water connections by taking account of the capacity to pay when setting connection fees and establishing an installment system for payment of such fees.

Schedule 5, para. 29

Complied with.

The Borrower shall ensure that a comprehensive program acceptable to ADB is implemented to monitor and evaluate the technical performance and social and economic benefits of the Project.

Schedule 5, para. 30

Complied with. The consultant’s monitoring and evaluation work finalized in September 2003.

Annual reports shall be furnished to ADB through DGURD throughout the Project implementation period.

Schedule 5, para. 31

Complied with.

Appendix 7 43

Covenant

Reference in Loan

Agreement

Status of Compliance The Borrower and ADB shall actively consult each other on a regular basis regarding the progress in implementation of REPELITA VI and REPELITA VII as they apply to the urban sector. The Borrower shall keep ADB informed about finalization and implementation of the proposed Urban Policy Action Plans for REPELITA VI and REPELITA VII.

Schedule 5, para. 33

Complied with.

ADB = Asian Development Bank, BAPPEDA = provincial/local planning board, BAPPENAS = national development planning agency, BME = benefit monitoring and evaluation, CBD = community-based development, CP = corporate plans, DAU = Dana Alokasi Umum (general budgetary allocation), DGPARA = Directorate General of Public Administration and Regional Autonomy, DGRD = Directorate General for Regional Development, DGURD = Directorate General of Urban and Rural Development, DPUK = Office of Public Works, EIA = environmental impact assessment, EIRR = economic internal rate of return, FDS = final disposal site, FIRR = financial internal rate of return, FMA = financial management assistance, IEE = initial environmental examination, IPLT = sludge processing plant, LIDAP = local institutional development action plan, LUCF = local urban development coordination forum, O&M = operation and maintenance, MOF = Ministry of Finance, MOHARA = Ministry of Home and Regional Affairs, MPW = Ministry of Public Works, MSRI = Ministry of Settlement and Regional Infrastructure, PAD = Pendapatan Asli Daerah (local revenue), PDAM = local government water supply enterprise, PIU = project implementation unit, PMU = project management unit, PSP = private sector participation, PUCF = provincial urban development coordination forum, REPELITA = Rencana Pembangunan Lima Tahun (5 year development plan), RIAP = revenue improvement action plan, SETWILDA = Sekretariat Wilayah Daerah ( regional secretary), SLA = subsidiary loan agreement, SOE = statement of expenditure, SPAR = subproject appraisal report, TPA = final solid waste disposal site, UFW = unaccounted for water. Source: Asian Development Bank.

44 Appendix 8

PROJECT BENEFITS AND IMPACTS

Number of Beneficiaries

No Component Appraisal Estimate Actual Achievement

Original Revision % 1 2 3 4 5 6=5 of 4 Bogor District 1. Water supply 96,228 91,660 23,465 25.60 2. Sanitation 3. Solid waste 270,296 270,296 190,500 70.48 4. Drainage 131,000 348 348 100.00 5. Urban roads 6. KIP 3,047 3,047 3,047 100.00 7. MIIP 8. Bus terminal Depok City 1. Water supply 281,769 66,500 7,270 10.93 2. Sanitation 322,100 273,750 128,358 46.89 3. Solid waste 499,540 495,540 428,058 86.38 4. Drainage 288 120 120 100.00 5. Urban roads 6. KIP 2,946 2,946 2,746 93.21 7. MIIP 3,301 3,301 3,301 100.00 8. Bus terminal Tangerang District 1. Water supply 29,600 25,595 27,195 106.25 2. Sanitation 529,250 492,750 212,613 43.15 3. Solid waste 614,451 614,451 229,037 37.28 4. Drainage 775 490 490 100.00 5. Urban roads 6. KIP 1,050 1,050 1,050 100.00 7. MIIP 8. Bus terminal Tangerang City 1. Water supply 48,034 53,640 17,784 33.15 2. Sanitation 861,181 638,750 449,863 70.43 3. Solid waste 574,120 703,298 636,000 90.43 4. Drainage 10,532 4,471 4,471 100.00 5. Urban roads 6. KIP 21,934 21,934 39,992 182.33 7. MIIP 9,900 8,525 8,525 100.00 8. Bus terminal

Appendix 8 45

Number of Beneficiaries

No Component Appraisal Estimate Actual Achievement

Original Revision % 1 2 3 4 5 6=5 of 4 Bekasi District 1. Water supply 57,865 46,750 57,525 123.05 2. Sanitation 452,641 438,000 365,000 83.33 3. Solid waste 190,592 776,460 382,000 49.20 4. Drainage 240 807 807 100.00 5. Urban roads 6. KIP 2,147 2,147 2,147 100.00 7. MIIP 330 330 330 100.00 8. Bus terminal Bekasi City 1. Water supply 95,584 96,000 95,586 99.57 2. Sanitation 622,473 602,250 547,500 90.91 3. Solid waste 366,160 548,800 507,200 92.42 4. Drainage 3,366 1,567 1,567 100.00 5. Urban roads 6. KIP 8,540 3,250 3,250 100.00 7. MIIP 2,037 8. Bus terminal Total Metro Botabek 1. Water supply 609,080 380,145 228,825 60.19 2. Sanitation 2,787,645 2,445,500 1,703,334 69.65 3. Solid waste 2,515,159 3,408,845 2,372,795 69.61 4. Drainage 146,201 7,803 7,803 100.00 5. Urban roads 0 0 0 0.0 6. KIP 39,664 34,374 52,232 151.95 7. MIIP 15,568 12,156 12,156 100.00 8. Bus terminal 0 0 0 0.0

KIP = kampung improvement program, MIIP = market infrastructure improvement program. Source: Ministry of Public Works; Asian Development Bank.

46 Appendix 9

FINANCIAL PERFORMANCE OF LOCAL GOVERNMENTS

Summary of Local Resource Mobilization Efforts of Local Governments Average Growth Rate, FY 1996/97 – FY 2003

(Rp million)

Bogor District Depok Citya Tangerang District

Tangerang City

Bekasi District

Bekasi City

Category 1992/ 1993 prices

Current prices

1992/ 1993 prices

Current prices

1992/ 1993 prices

Current prices

1992/ 1993 prices

Current prices

1992/ 1993 prices

Current prices

1992/ 1993 prices

Current prices

A. Income 1. Local Government Income a. Local Taxes 10.8 31.5 32.2 45.5 3.1 21.6 (0.5) 17.3 4.8 22.7 4.1 22.8 b. Local Retribution (3.0) 16.4 16.3 27.9 0.0 17.9 (11.0) 5.0 (21.0) (4.7) (0.5) 17.4 c. Local Enterprise Share

Profit (5.7)

10.9

(4.6)

5.0

(33.3)

(21.3)

(10.3)

5.8

2.9

14.1

25.2

35.6

d. Other Income 29.8 33.4 (11.6) (2.8) 0.6 13.1 18.8 33.5 72.2 77.9 18.8 41.4 Subtotal (1) (7.3) 8.8 25.8 38.4 (2.8) 14.6 (2.9) 14.5 (1.6) 13.9 2.3 20.7 2. Share Taxes/Non-tax a. Property Taxes 0.2 18.3 12.2 23.5 (2.2) 15.3 5.9 24.9 (4.7) 18.9 26.8 49.5 b. Other Taxes and Non-tax 20.9 53.2 30.4 43.5 38.9 63.8 62.0 - 47.7 77.4 8.6 28.1 Subtotal (2) 8.5 34.8 21.0 33.1 9.7 29.4 23.2 45.3 14.7 41.9 24.8 47.2 Total Revenues (1) + (2) (3.1) 17.2 23.4 35.8 2.6 21.0 9.3 28.9 5.7 28.3 12.8 33.0 3. Subsidies and Grant a. Subsidies 65.4 78.6 62.5 78.8 40.4 65.6 51.2 78.3 41.6 59.1 33.7 50.3 b. Grant (25.4) (41.9) (100.0) (100.0) (100.00) (100.0) (19.2) (4.7) (100.0) (39.9) (5.5) 11.4 Subtotal (3) 23.4 38.1 56.9 72.6 19.5 40.9 15.7 36.4 10.0 28.2 36.4 60.9 Total Income 9.4 26.5 46.3 60.9 11.3 31.2 11.6 31.6 7.6 28.3 21.2 42.9

a Except for Depok City, the average growth if from FY 2000 – FY 2003. Sources: Ministry of Public Works and local governments of Botabek region.

Appendix 10 47

FINANCIAL AND ECONOMIC ANALYSIS

1. The following results of the financial analysis will compare the original and revised subproject appraisal reports (SPAR), which reflects modifications during implementation. A. Water Supply Sector 2. The weighted average cost of capital (WACC) for the PDAMs was estimated at 7%. The WACC was used in the financial analysis as the discount factor. Local government water supply investment programs had small margins above the discount factor (e.g., Bogor district and Tangerang district). The FIRRs for Tangerang city and Bekasi district are quite high since both reached the target of new household connections, and because the Tangerang water enterprise (PDAM) implemented a tariff increase in January 2003 (Table A11.1).

Table A11.1: Financial Analysis of Water Supply Component

(Rp million) Description Bogor

district Tangerang

district Tangerang

city Bekasi district

Investment

O R A

0 114,76094,771

5,891 18,612 19,097

0 32,900 27,977

25,923 54,433 46,552

FIRR O

R A

8.6% 7.9%

19.8% 1.8% 9.4%

0 9.6% 16.8%

11.6% 5.6% 14.2%

A = actual, FIRR = financial internal rate of return, O = original SPAR, R = revision SPAR, SPAR = subproject appraisal report. Source: Consultant analysis in 2003, updated during the project completion review mission.

3. The financial costs have been valued at their economic prices by applying the world price numeraire. The shadow price adjustment factors used are:

(i) foreign costs = 1.00 (ii) unskilled labor = 0.80 (iii) skilled labor = 1.00 (iv) local materials, 0.9

4. Alternative water sources comprised wells and vendor supplies. The price of water from vendors is currently Rp1000 per 20 liter bucket (or Rp500 per 20 liters sold from wells). Benefits of additional (‘incremental’) water used accrued to both new and existing users. The economic benefit was calculated based on the cost of water without and with the Project. A standard conversion factor at 0.9 was applied to all benefit calculations.1

1 Benefits were derived both for new and existing users of the water supply system. Of the total water sold, it is

estimated that, on average, 15% is ‘incremental’ or increased consumption generated by additional supply of water and 10% is ‘non-incremental’ or water supplied which displaces previous supply sources. The remainder of water (75%) represents the amount of water previously supplied to existing users of the systems. Benefits for new users (non-incremental water displacing existing sources) were first derived by comparing the new price for water with that derived from previous supply sources.

48 Appendix 10

5. The resulting economic internal rate of return (EIRR) for each PDAM is as follows: Tangerang city: 33.4%, Tangerang district: 19.9%, Bogor district: 20.5%, and Bekasi district: 28.5% (tables A11.2-11.5).2 6. The EIRRs are all above ADB’s 12% economic opportunity cost of capital (EOCC) benchmark, which demonstrates the positive economic contribution of the investments. 7. The economic project benefit was found to be different for each region, largely because the underlying differences in water supply affected potential beneficiary involvement in the Project. B. Sanitation Sector 8. Financial analysis of the original SPARs, their revision and the actual implementation data can be seen in Table A11.6. The sanitation component is financially viable with a rate of return above the WACC (of 7%) in all participating districts, except in Depok city. This exception is due to its failure to adjust tariffs by 45% in 2003. By 2005, crucial investments were needed to repair the retaining walls in the pond and to build drainage. Since revenue could not fund this, Rp220 million had to be provided from the 2005 local government budget (APBD). C. Solid Waste Sector 9. Financial analysis of the original SPARs, their revision, and the actual implementation data can be seen in Table A11.7. In general, investments in the solid waste component were not viable, except in Tangerang district. This is due to several factors: (i) low collection efficiency (below 40%); (ii) limited capacity of the final solid waste disposal site (TPA), which has only a few months of lifetime left before closure and will need further investment for an extension; and (iii) no tariff adjustments were undertaken. Tangerang city has the lowest FIRR for solid waste because the new TPA in Jatiwaringin is not in use. D. Drainage Sector 10. Economic analysis was carried out on projects costing more than $400,000. The EIRR and net present value (NPV) were calculated taking into account land price increases and the extension of flood-free areas. The calculation covered 15 years, and it included operation and maintenance (O&M) of about 0.75% of the total investment. 11. Three drainage projects cost more than Rp2 billion: (i) 6,618 meters of normalization of Cakung river (Bekasi city), (ii) 4,079 meters of normalization of Harapan Baru Canal (Bekasi city), (iii) and 4.957 meters of normalization of Bojong Koneng Canal (CBL) in Bekasi district. 12. Analysis shows that these drainage projects are not economically feasible as they have EIRRs less then 12% which is much lower than originally anticipated. This is due to smaller flood-free areas than anticipated in the original SPAR, a smaller number of beneficiaries, and higher investment costs. The Projects reduced the flood-prone area by only 5.5 hectares (ha) despite projections of 1000 ha (Cakung), 400 ha (Harapan Baru), and 175 ha (CBL). Table A11.8 presents the results of the economic analysis for the drainage components. 2 The EIRRs turn out to be rather high due to the large difference between water originating from vendors or wells

(Rp1,000 per 20 liters, or Rp50,000 per m3) and piped water (Rp1,300 per m3).

Appendix 10 49

E. Urban Roads Component 13. Urban road development provides benefit since it (i) reduces traffic jams, increasing time efficiency; (ii) increases operational cost efficiency; (iii) increases people’s mobility, especially access to regions connected by these roads; and (iv) increases land value (NJOP) along surrounding roads. 14. Economic analysis for road development is divided into three types of works:

(i) Road Improvement or enhancement alignment (for economic age of 5 years); (ii) Road widening, including additional strips (for economic age of 10 years); (iii) New road development (for economic age of 15 years or above).

15. Assumptions: routine maintenance costs are 1.5% and periodic maintenance costs are about 30% of total investment costs every 4 years as per guidelines of the Ministry of Public Works (Roads/Highways); land acquisition is not included. Economic analysis of the urban road sector covers 6 urban roads, as illustrated in Table A11.8. Table A11.10 shows the feasibility of each road component. 1. Bogor district - Cibinong 16. Jl. Nangewer-Cimandala is not economically feasible. Buses could not use the road at the time of the survey, and the use of station wagons, jeeps, and taxis was in decline (20.3% per year) due to alternative roads which had come into existence. Although average speed increased by about 3.6 km per hour (km/h) and caused vehicle operating cost savings, its value is relatively small compared to the investment costs. EIRR is far below the cut-off rate. 2. Depok city 17. Economic analysis of Jl. Karang Tengah-Limo and Jl. Margonda Raya shows that both road projects are viable, as indicated by EIRR > discount rate. Average speed increase is about 2.17 km/h (Jl. Karang Tengah-Limo) and 2.14 km/h (Jl. Margonda Raya).

3. Tangerang district, Ciputat city 18. Economic analysis carried out on two road projects in Ciputat-Tangerang (Jl. Serua-Dukuh Ciater and Jl. Kampung Utan-Pondok Betung) shows that these projects are viable, as indicated by EIRR > discount rate. Average speed increase is about 1.13 km/h (Jl. Serua-Dukuh Ciater) and about 1.53 km/h (Jl. Kampung Utan-Pondok Betung).

4. Balaraja city – Tangerang district 19. Economic analysis carried out on two road projects in Balaraja-Tangerang (Jalan Balaraja-Ceplak and Jalan Sentul-Perahu) show that Jalan Balaraja-Ceplak is viable, with an average speed increase of about 3.25 km/h. However, Jalan Sentul-Perahu is not feasible because annual vehicle numbers have fallen: (i) sedans, station wagons, jeeps and taxi (43%); (ii) minibuses and public transport (22%); and (iii) small buses (35%). Big trucks no longer use this road but small truck use has increased by 31%, motorcycles (29%), and buses (14%). Increase in time-efficiency was 4.31 km/h and vehicle operating cost efficiency is insignificant in relation to investment costs.

50 Appendix 10

5. Tangerang city 20. Economic analysis of three road projects in Tangerang (Jalan KH. Ashary, Jalan KHA. Dahlan, and Jalan Teuku Umar) shows that all roads are viable. Average speed increase is about 10.8 km/h (Jalan KH Ashary), about 3.07 km/h (Jalan KHA Dahlan), and about 2.17 km/h (Jalan Teuku Umar).

6. Bekasi district - Cikarang 21. Economic analysis of two road projects in Cikarang, Bekasi (Jalan Pilar-Sukatani [HOS Cokroaminoto] and Jalan Raya Serang) shows that both roads are viable. Average speed increase is about 5.3 km/h (Jalan Pilar-Sukatani) and about 0.6 km/h (Jalan Raya Serang-Tegal Danas). 7. Bekasi city 22. Economic analysis of three road projects in Bekasi (Jalan Kartini, Jalan Pondok Kopi-Pasar Kranji, and Jalan Kalimalang [Cut Nyak Dien]) shows that all roads are viable. Average speed increase is about 6.32 km/h (Jalan Kartini), about 0.5 km/h (Jalan Pondok Kopi-Pasar Kranji), and about 16.95 km/h (Jalan Kalimalang).

Table A11.2: PDAM Tangerang City: Economic Rate of Return

Year Water Sold (‘000) Gross Benefit Investment O&M Total Cost Net Benefit

Total Non-

Incremental 1998 500 500.00 (500.00) 1999 6,251 6,250.62 (6,250.62) 2000 577 1,018.26 8,398 856.43 9,254.55 (8,236.29) 2001 1,482 516 4,868.72 1,266 1,530.14 2,795.99 2,072.73 2002 2,076 723 6,461.98 2,799.59 2,799.59 3,662.39 2003 2,628 915 9,219.27 2,651 3,383.52 6,034.26 3,185.01 2004 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2005 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2006 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2007 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2008 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2009 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2010 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2011 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2012 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2013 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2014 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2015 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2016 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2017 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 2018 4,093 1,426 17,088.34 4,360.20 4,360.20 12,728.14 EOCC 12% EIRR 37.3% EIRR = economic internal rate of return; EOCC = economic opportunity cost of capital; O&M = operation and maintenance; PDAM = local water enterprise. Source: Tangerang city.

Appendix 10 51

Table A11.3: PDAM Tangerang District: Economic Rate of Return

Year Water Sold (‘000) Gross Benefit Investment O&M Total Cost Net Benefit

Total Non-

Incremental 1999 2000 1,958 202 1,684.02 10,408 1,419.94 11,828.23 (10,144.22) 2001 4,916 506 4,184.00 1,831 3,669.19 5,500.38 (1,316.37) 2002 8,027 827 6,951.59 1,756 5,267.31 7,023.61 (72.02) 2003 8,375 863 9,810.73 5,511.43 5,511.43 4,299.30 2004 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2005 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2006 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2007 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2008 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2009 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2010 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2011 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2012 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2013 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2014 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2015 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2016 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2017 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 2018 8,375 863 9,250.85 5,866.75 5,866.75 3,384.10 EOCC 12% EIRR 20.5% EIRR = economic internal rate of return; EOCC = economic opportunity cost of capital; O&M = operation and maintenance. Source: Tangerang district.

52 Appendix 10

Table A11.4: PDAM Bogor District: Economic Rate of Return

Year Water Sold (‘000) Gross Benefit Investment O&M Total Cost Net Benefit

Total Non-

Incremental 1999 3,484 3,483.82 (3,483.82)2000 1,667 1,668.78 27,249 1,069.96 28,319.31 (26,650.53)2001 2,512 2,348.62 7,995 1,599.41 9,594.71 (7,246.09)2002 3,640 828 6,442.08 2,449.62 2,449.62 3,992.462003 5,797 1,318 12,494.76 19,794 3,998.16 23,792.22 (11,297.46)2004 7,411 1,685 15,855.93 12,412 4,953.05 17,364.65 (1,508.72)2005 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.212006 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.212007 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.212008 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.212009 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.212010 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.212011 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.212012 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.212013 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.212014 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.212015 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.212016 9,049 2,057 19,360.2 4,953.05 4,953.05 14,407.212017 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.212018 9,049 2,057 19,360.27 4,953.05 4,953.05 14,407.21EOCC 12% EIRR 16.5%EIRR = economic internal rate of return; EOCC = economic opportunity cost of capital; O&M = operation and maintenance. Source: Bogor district.

Appendix 10 53

Table A11.5: PDAM Bekasi District : Economic Rate of Return

Year Water Sold (‘000) Gross Benefit Investment O&M Total Cost Net Benefit

Total Non-

Incremental 1999 10,285 10,284.65 (10,284.65) 2000 1,555 2,104.85 7,611 748.85 8,359.59 (6,254.73) 2001 3,618 740 6,653.82 11,927 2,335.54 14,262.47 (7,608.65) 2002 6,352 1,299 10,887.71 3,261 3,985.71 7,246.96 3,640.75 2003 9,140 1,870 15,763.77 614 6,126.24 6,740.36 9,023.41 2004 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2005 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2006 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2007 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2008 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2009 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2010 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2011 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2012 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2013 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2014 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2015 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2016 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2017 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 2018 11,183 2,287 21,309.62 9,032.05 9,032.05 12,277.57 EOCC 12% EIRR 29.2% EIRR = economic internal rate of return; EOCC = economic opportunity cost of capital; O&M = operation and maintenance. Source: Bekasi district.

54 Appendix 10

Table A11. 6: Financial Analysis of Sanitation Component (Rp million)

Description Bogor Distr.

Depok City

Tangerang Distr.

Tangerang City

Bekasi Distr.

Bekasi City

Investment

O R A

241

654 837

1,750 2,358 1,218

4,981 5,108 3,934

205 209 209

1,281 3,907 2,774

FIRR Program Feasibility

O R A

11.8%

1.4% 1.3%

Ciputat 4.1% Balaraja 12.8% Kab. 3.3% 7.1%

12% 4.5

21.8% 26.9% 17.2%

15.8% 7.1% 7.4%

A = actual, FIRR = financial internal rate of return, NPV = net present values, O = original SPAR, R = revision SPAR, SPAR = subproject appraisal report.

Source Consultant analysis 2003, updated during the project completion review mission.

Table A11.7: Financial Analysis of Solid Waste Component

(Rp million) Description Bogor

Distr. Depok

City

Tangerang Distr.

Tangerang City

Bekasi Distr.

BekasiCity

Investment (Rp million)

O R A

4,250 3,864 2,504

5,014 42,833 6,583

3,118 7,910 6,880

5,958 8,006 8,924

6,003 11,724 6,354

8,855 16,137 14,172

FIRR Program Feasibility

O R A

7.3 % 17.0% 4.2%

15.1 % 12.6% 6.8%

12.8 % 8.2% 7.8%

20.3% 19.2% -0.6%

12.8% 10.6% 3.6%

13.8% 6.9% 4.9%

FIRR = financial internal rate of return; NPV = net present value. Source Consultant analysis 2003; updated during the project completion review mission.

Table A11.8: Financial Analysis Drainage Component (Rp million)

No. Name of Canal Volume

(meter) Investment (Rp million)

Flooded Area (Ha)

Beneficiaries (No.)

EIRR (%)

I Bekasi City 1. Kali Cakung O

R A

10,000 6,618

1,136 4,145

1,000 5.5

218,000 665

21.8 2.6

2. Harapan Baru O R A

1,500 4,407

706 3,457

400 5.5

76,300 650

19.5 1.7

II Bekasi District Bojong Koneng –

CBL O R A

3,500 4,957

1,400 2,658

175 5.5

19,775 150

14.7 –

— = not available (EIRR was not derived due to very low land price), A = actual, O = original SPAR, R = revision SPAR, SPAR = subproject appraisal report. Source: Consultant analysis 2003.

Appendix 10 55

Table A11.9: Urban Road Components of Cities and Districts (Rp million)

Source: Consultant analysis 2003.

Table A11.10: Economic Analysis of Urban Road Components (Rp million)

No Name of Road Type of Works

O R A

Long (meter)

Investment (Rp million)

EIRR (%)

Bogor District 1 Jl. Nangewer –

Cimandala Betterment O 4,000 771 19.80

R A 1,630 186.64 2.15

Depok city

1 Jl. Karang Tengah – Limo

Betterment O 6,000 3,960 17.10

R A 5,050 2,279 56.16

2 Jl. Margonda Raya Widening O 5,000 4,500 20.80 R 6,000 4,500 20.79 A 2,500 4,326 33.05

Tangerang district – Ciputat city

1 Jl. Serua – Dukuh Ciater

Betterment O 5,200 614 24.7

R A 3,000 634 19.80

2 Jl. Kp Utan – Pd Betung

Betterment O 6,500 872 26.5

R A 3,750 1,717 17.31

Tangerang district – Balaraja city

1 Jl. Balaraja – Ceplak Betterment O 5,900 1,956 25.1

R A 5,000 1,225 19.56

2 Jl. Sentul - Perahu Betterment O 5,400 692 22.9 R A 5,400 1,263 9.1

No City / District Total 1. City Cibinong – District Bogor 1 lane 2. City Depok 2 lanes 3. City Ciputat – District Tangerang

City Balaraja - District Tangerang 2 lanes 2 lanes

4. City Tangerang 3 lanes 5. City Cikarang – District Bekasi 2 lanes 6. City Bekasi 3 lanes

56 Appendix 10

No Name of Road Type of Works

O R A

Long (meter)

Investment (Rp million)

EIRR (%)

Tangerang city

1 Jl. KH. Ashary Widening O 6,000 5,432 30.08

R 2,000 4,160 17.46 A 3,950 4,917.5 47.56

2 Jl. KHA. Dahlan Betterment O 3,000 490 48.6 R A 3,550 459.5 13.71

3 Jl. Teuku Umar Widening O 2,000 1,540 22.9 R

A 1,800 1,691.6 25.21 Bekasi district – Cikarang

city

1 Jl. Pilar – Sukatani (HOS Cokroaminoto)

Betterment O 5,000 655 39.50

R 869 17.63 A 11,050 6,880 26.68

2 Jl. Raya Serang –Tegal Danas

Widening O 5,000 5,683 42.90

R A 19,660 12,303 38.40

Bekasi city

1 Jl. Kartini Widening O 2,100 1,644 41.4

R A 2,470 5,103.61 26.40

2 Jl. Pd. Kopi- Pasar Kranji

Widening O 3,500 1,121 44.20

R A 3,500 1,548.18 24.46

3 Jl. Kalimalang (Cut Nyak Dien)

Widening O 6,000 1,569 45.30

R A 10,500 6,930.40 52.66

A = actual, BCR = benefit cost ratio, EIRR = economic internal rate of return, NPV = net present value, O = original SPAR, R = revision SPAR, SPAR = subproject appraisal report. Source: Consultant analysis 2003.